•the Company’s ability to recognize the expected benefits of the Business Combination; •changes in the market price of Common Shares; | • | the ability of the Company, to maintain the listing of the Common Shares on Nasdaq; |
• | future financial performance; |
• | the impact from the outcome of any known and unknown litigation; |
• | the ability of the Company to forecast and maintain an adequate rate of revenue growth and appropriately plan its expenses; |
• | expectations regarding future expenditures of the Company; |
• | the future mix of revenue and effect on gross margins of the Company; |
• | changes in interest rates, rates of inflation, carbon credit prices and trends in the markets in which we operate; |
• | the attraction and retention of qualified directors, officers, employees and key personnel; |
• | the ability of the Company to compete effectively in a competitive industry |
• | the ability to protect and enhance the Company’s corporate reputation and brand; |
• | future development activities, including, but not limited to, acquiring interests in carbon reduction projects and carbon credits and the development of software and technological applications to carbon credit projects and carbon credits; |
• | expectations concerning the relationships and actions of the Company and its affiliates with third parties; |
• | the impact from future regulatory, judicial and legislative changes in the Company’s industry |
• | the ability to locate and acquire complementary products or product candidates and integrate those into the Company’s business; |
• | future arrangements with, or investments in, other entities or associations; |
• | intense competition and competitive pressures from other companies in the industries in which the Company will operate; |
• | the volatility of the market price and liquidity or trading of the securities of the Company; and |
• | other factors detailed under the section titled “Risk Factors”, which is incorporated herein by reference. |
While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. The Company disclaim any obligation to publicly update or revise any forward-looking statement
TABLE OF CONTENTS to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this prospectus, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company. Should one or more of these risks or uncertainties materialize, or should any of the Company’s assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. It is not possible to predict or identify all such risks. Accordingly, forward-looking statements in this prospectus and in any document incorporated herein by reference should not be relied upon as representing the Company’s views as of any subsequent date, and the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These forward-looking statements are based on information available as of the date of this prospectus, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. Those statements are based upon information available to us as of the date of this prospectus and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Those statements are inherently uncertain, and investors are cautioned not to unduly rely upon those statements.
TABLE OF CONTENTS Prospectus Summary This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our Business We are a capex-light environmental asset generation company focused on high quality and high return technology-based projects. We offer investors exposure to assets such as carbon credits, a key instrument used to offset emissions of carbon dioxide from industrial activities to reduce the effects of global warming and I-RECs (International Renewable Energy Certificate), a vehicle for businesses to claim renewable energy usage and reduce their carbon footprint. Blockchain technology is used for our carbon credit generating projects to drive trust and transparency across the credit cycle. Through leveraging partnerships with market leaders, we aim to provide a turnkey solution to help companies generate, manage, and monetize environmental assets through carbon credits. The blockchain technology will be used in conjunction with our platform to track, manage and store data only. It will do so to keep an immutable record of the data. The blockchain technology will not be used to track any assets. The blockchain technology will not create a record of carbon credits. Carbon credits are tracked by third parties in traditional registries and those registries show ownership of the carbon credits. We will not use the blockchain technology to create or track any type of crypto asset, and our use of the blockchain does not involve or require the integration of any token or other crypto asset to support its functionality. Although we plan to utilize blockchain software as part of our technology capabilities, we are not a cryptocurrency company, we do not have a coin or token, and investors should not expect any type of cryptocurrency or token functionality or investments in the future. With a diverse approach to the I-REC and carbon market, we operate across three strategic domains: (1) an offset portfolio consisting of I-REC’s, nature-based, tech-based, and carbon sequestration credits for immediate sale to corporations and governments seeking to offset their most difficult-to-reduce emissions; (2) project investment, acquisitions, and industry consolidation to extend the company's reach, allowing it to become a full end-to-end solutions provider; and (3) project development, where the company serves as project manager for eligible activities such as EV charging in exchange for a percentage of generated credits. Corporate Information On November 6, 2024 (the “Closing Date”), Focus Impact Acquisition Corp., our predecessor company (“FIAC”), consummated the previously announced business combination with DevvStream pursuant to the Business Combination Agreement, dated as of September 12, 2023 (as amended by Amendment No. 1 to the Business Combination Agreement dated May 1, 2024, as further amended by Amendment No. 2 to the Business Combination Agreement dated August 10, 2024, and as further amended by Amendment No. 3 to the Business Combination Agreement dated October 29, 2024, the “Business Combination Agreement”), by and among FIAC, Focus Impact Amalco Sub Ltd. (“Amalco Sub”) and DevvStream. Pursuant to the Business Combination Agreement, on the Closing Date, (a) the Company changed its jurisdiction from the State of Delaware under the Delaware General Corporation Law to the Province of Alberta, Canada, and thereby become a company existing under the Business Corporations Act (Alberta) and changed its name to DevvStream Corp., and (b) DevvStream and Amalco Sub amalgamated to form one corporate entity (such entity, “Amalco” and such transaction, the “Amalgamation”). On November 6, 2024, the Company also issued (i) 1,694,808 common shares of New PubCo (the “Common Shares”) to certain investors pursuant to subscription agreements, dated October 29, 2024, including a subscription agreement with Helena Global Investment Opportunities I Ltd. (such agreements together, the “PIPE Agreements”) for $2,250,000 in the aggregate, and (ii) 3,249,876 Common Shares to certain investors, including Karbon-X Corp, pursuant to certain carbon credit subscription agreements dated October 29, 2024 (such agreements together, the “Carbon Subscription Agreements”) (items (i) and (ii) in the foregoing together, the “PIPE Financing”). The Carbon Subscription Agreements were executed in connection with certain Carbon Credit Purchase Agreements with DevvStream (the “Carbon Credit Purchase Agreements”),
TABLE OF CONTENTS pursuant to which DevvStream is purchasing carbon credits from certain sellers (“Carbon Credit Sellers”). The Common Shares that were issued to such Carbon Credit Sellers pursuant to the Carbon Subscription Agreements were issued to the Carbon Credit Sellers in satisfaction of the purchase price owed to them under the Carbon Credit Purchase Agreements. As previously reported, prior to the consummation of the Business Combination (as defined below), on October 29, 2024, FIAC entered into an amendment (the “Amendment to the Sponsor Side Letter Agreement”) to the side letter agreement, dated September 12, 2023, which was subsequently amended on May 1, 2024, by and among FIAC and Focus Impact Sponsor, LLC, a Delaware limited liability company (the “Sponsor”) (as amended, the “Letter Agreement”). Pursuant to the Amendment to the Sponsor Side Letter Agreement, FIAC amended the transfer restrictions included therein to enable the Sponsor to transfer on October 29, 2024 up to 5,750,000 shares of common stock of the Company (such shares of common stock that are being transferred, the “Sponsor Shares”) to (i) certain advisor parties in full or partial satisfaction of such advisor parties’ fees and expenses incurred in connection with the Business Combination with DevvStream (approximately $15.1 million of fees and expenses are being satisfied through the transfer of Sponsor Shares to advisor parties) (the “Equitization”), (ii) certain investors subscribing to PIPE Agreements (as defined below), and (iii) Helena Global Investment Opportunities I Ltd. as consideration for the execution of an equity line of credit purchase agreement, dated October 29, 2024 with FIAC and the Sponsor (the “ELOC Agreement”). On October 29, 2024, FIAC had also determined that it was advisable and in the best interest of FIAC and its stockholders to waive the transfer restrictions to which the Sponsor Shares were subject and that were included in the certain letter agreement, dated November 1, 2021, by and between FIAC and the Sponsor. Pursuant to the Amendment to the Sponsor Side Letter Agreement, at the Closing (as defined below), the Sponsor was issued Common Shares in an amount that is equal to the number of Sponsor Shares that the Sponsor agreed to transfer prior to the Closing, as described in the foregoing items (i) to (iii). Further, as previously reported prior to the Closing, FIAC entered into a contribution and exchange agreement (the “Monroe Agreement”) on October 29, 2024, pursuant to which, among other things, Crestmont Investments LLC, a Delaware limited liability company, immediately following the Closing, contributed 2,000,000 units representing 50% of the limited liability company interests in Monroe Sequestration Partners LLC (“Monroe”), a Delaware limited liability company, in exchange for 2,000,000 Common Shares, subject to the terms and conditions described in the Monroe Agreement. On May 9, 2025, Monroe signed a Collaboration Agreement with Southern Energy, a Wyoming-based clean fuels company proposing the development of a $1 billion (USD) methanol and sustainable aviation fuel (“SAF”) facility in Louisiana. The Agreement outlines a strategic partnership in which Monroe would provide permanent CO2 sequestration through its Class VI storage site, expected to be operational in 2027, while Southern Energy would capture emissions from its planned biomass-to-fuel facility, targeting production in 2028. The parties aim to generate high-quality carbon credits and support compliance with global decarbonization mandates in aviation and maritime transport industries. Our United States registered agent offices are located at 2108 N St., Suite 4254, Sacramento, California. Our corporate headquarters are located in Calgary, Alberta, Canada. Our phone number is (818) 683-2765. Our corporate website address is www.devvstream.com. Information contained on or accessible through our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only. This prospectus contains trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Recent Developments The ELOC Agreement As previously reported, on October 29, 2024, FIAC entered into that certain equity line of credit purchase agreement with Helena Global Investment Opportunities I Ltd. (“Helena”) and the Sponsor (the “ELOC Agreement”). Pursuant to the ELOC Agreement, the Company has the right to issue and to sell to Helena from time to time, as provided in the ELOC Agreement, up to $40,000,000 (the “Commitment Amount”) of
TABLE OF CONTENTS Company’s Common Shares following the closing of the Business Combination and the effectiveness of this registration statement registering the Common Shares being sold under the ELOC Agreement (the “Helena Registration Statement”), and subject to the conditions set forth therein. On March 14, 2025, the Helena Registration Statement became effective. On March 18, 2025, the Company and Helena entered into a first amendment (the “Amendment”) to ELOC Agreement. The Amendment provides the Company with greater flexibility by allowing the Investor to permit Secondary Advances, as defined in the Amendment, as well as to update references to “Common Stock” in the ELOC Agreement to “Common Shares”. Specifically, pursuant to the ELOC Agreement, the Company may require that Helena purchase Common Shares from the Company by delivering one or more advance notices to Helena setting forth, in each advance notice, the amount of the advance it is requesting, which amount many not exceed an amount equal to lesser of (i) one hundred percent (100%) of the average of the daily value traded of the Common Shares over the ten (10) trading days immediately preceding such advance notice, and (ii) eight million United States Dollars ($8,000,000). However, in no event may the number of Common Shares issuable to Helena pursuant to an advance cause the aggregate number of shares beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act) by Helena and its affiliates as a result of previous issuances and sales of Common Shares to Helena under the ELOC Agreement to exceed 9.99% of the then outstanding Common Shares (the “Beneficial Ownership Limitation”). Additionally, the Company may not affect any sales under the ELOC Agreement and Helena will have no obligation to purchase Common Shares under the ELOC Agreement to the extent (but only to the extent) that after giving effect to such purchase and sale the aggregate number of Common Shares issued under the ELOC Agreement would exceed 19.99% of the outstanding shares of Common Shares following the closing of the Business Combination Agreement (the “Exchange Cap”); provided further that, the Exchange Cap will not apply if the Company’s stockholders have approved issuances in excess of the Exchange Cap in accordance with the rules of the Nasdaq. Promptly after receipt of an advance notice (and, in any event, not later than one (1) trading day after such receipt), the Company is required to issue to Helena all the Common Shares purchased Helena pursuant to such advance. The purchase price for the Common Shares so purchased by Helena pursuant to an advance notice is the lowest intraday sale price for the Common Shares during the three (3) trading days commencing on the date of Helena’s receipt of the Common Shares relating to such advance. Because the per share purchase price that Helena will pay for Common Shares in connection with any advance notice we have elected to deliver to Helena pursuant to the ELOC Agreement will be determined by reference to the lowest intraday sale price for the Common Shares during the three (3) trading days commencing on the date of Helena’s receipt of the Common Shares relating to such advance, as of the date of this prospectus, we cannot determine the actual purchase price per share that Helena will be required to pay for any Common Shares that we may elect to sell to Helena under the ELOC Agreement and, therefore, we cannot be certain how many Common Shares, in the aggregate, we may issue and sell to Helena under the ELOC Agreement. We will control the timing and amount of any sales of Common Shares to Helena that we may elect, in our sole discretion, to effect from time to time from and after the commencement date of the ELOC Agreement and during the term of the ELOC Agreement. Actual sales of Common Shares to Helena under the ELOC Agreement will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the Common Share and determinations by us as to the appropriate sources of funding for our business and operations. Convertible Notes As previously reported, on November 13, 2024, Devvstream Corp issued (i) $3,000,000 of new 5.3% convertible notes to the Focus Impact Sponsor, and (ii) $982,150 of new 5.3% convertible notes to Focus Impact Partners (together, the “New Convertible Notes”), in exchange for the cancellation and conversion of a $3,000,000 convertible note previously issued by Focus Impact, the Focus Impact Partners Convertible Debt which totaled $637,150 and unpaid fees in the amount of $345,000 which were owed by Focus Impact to Focus Impact Partners. The New Convertible Notes have a maturity date of November 13, 2026. The principal loan amount and any accrued and unpaid interest under the New Convertible Notes are convertible into Common shares at the option of the holder at a 25% discount to the 20-day volume weighted average price of the Common Shares, subject to a floor of $0.867 per share. On March 19, 2025, Focus Impact Partners invested an additional $218,000 into the Company's 5.30% Secured Convertible Note, due November 2026, and as a result, the total amount advanced by Focus Impact Partners to the Company is currently $1,203,150. Focus Impact
TABLE OF CONTENTS Partners is owned by two of the Company’s directors, Carl Stanton, Chairman of the Boad, and Wray Thorn. The funds are expected to support the Company’s ongoing efforts to expand into energy transition markets, grow its partnerships and solidify its position as a leader in the carbon offset market. Implications of Being a Smaller Reporting Company and Emerging Growth Company We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements and reduced disclosure obligations regarding executive compensation. We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our Common Shares held by non-affiliates does not equal or exceed $250 million as of the prior June 30th, or (2) our annual revenues did not equal or exceed $100 million during such completed fiscal year and the market value of our Common Shares held by non-affiliates did not equal or exceed $700 million as of the prior June 30th/January 31st. To the extent we take advantage of any reduced disclosure obligations, it may make the comparison of our financial statements with other public companies difficult or impossible. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we are exempt from certain requirements related to executive compensation, including the requirements to hold a nonbinding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of our Chief Executive Officer to the median of the annual total compensation of all of our employees, each as required by the Investor Protection and Securities Reform Act of 2010, which is part of the Dodd-Frank Act. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act of 1933, as amended (the “Securities Act”) declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with those of another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the initial public offering of FIAC, which occurred on October 27, 2021, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. Summary of Risk Factors Investing in our securities involves risks. You should carefully consider the risks described in “Risk Factors” before making a decision to invest in our securities. If any of these risks is actualized, our business, financial condition and results of operations would likely be materially adversely affected. In such case, the trading price of our securities would likely decline, and you may lose all or part of your investment. In particular, you should consider the risk factors described under “Risk Factors” beginning on page 8. Such risks include, but are not limited to: Risks Related to our Business and Industry •We have limited operating history and financial results, which make our future results, prospects and the risks we may encounter difficult to predict. We have not generated any revenue to date. •We lack sufficient funds to achieve our planned business objectives and will need to raise substantial additional funding, which may not be available on acceptable terms, or at all, and which will cause dilution to its shareholders.
TABLE OF CONTENTS •We have incurred significant losses and expect to incur additional expenses and continuing losses for the foreseeable future, and we may not achieve or maintain profitability. •If the assumptions used to determine our market opportunity are inaccurate, our future growth rate may be affected and the potential growth of our business may be limited. • | The carbon credit market is competitive, and we expect to face increasing competition in many aspects of our business, which could cause operating results to suffer. |
• | The carbon market is an emerging market and its growth is dependent on the development of a commercialized market for carbon credits. |
• | Increased scrutiny of sustainability matters, including our completion of certain sustainability initiatives, could have an adverse effect on our business, financial condition and results of operations, result in reputational harm and negatively impact the assessments made by sustainability-focused investors when evaluating us. |
• | Our long-term success depends, in part, on properties and assets developed and managed by third-party project developers, owners and operators. |
• | Our streams are largely contract-based and the terms of such contracts may not be honored by developers or operators of a project. |
• | We may acquire future streams in which we have limited control and our interests in such streams may be subject to transfer or other related restrictions. |
• | Carbon markets, particularly the voluntary markets, are still evolving and there are no assurances that the carbon credits we purchase or generate through our investments will find a market. |
Risks Related to our Information Technology and Intellectual Property • | Failure of a key information technology system, process or site could have a material adverse effect on our business. |
• | Our inability to retain licenses to intellectual property owned by third parties may materially adversely affect our financial results and operations. |
Risks Related to Legal, Compliance and Regulations • | We may not be able to have all our projects validated through a compliance market or by an internationally recognized carbon credits standard body. |
• | Carbon pricing initiatives are based on scientific principles that are subject to debate. Failure to maintain international consensus may negatively affect the value of carbon credits. |
• | Carbon trading is heavily regulated and new legislation in the jurisdictions in which we operate may materially impact our operations. |
Risks Associated with being a Public Company Listed on the Nasdaq • | We need to improve our operational and financial systems to support its expected growth, increasingly complex business arrangements and rules governing revenue and expense recognition and any inability to do so will materially adversely affect its business and results of operations. |
• | Our failure to meet Nasdaq’s continued listing requirements could result in a delisting of our shares. On February 12, 2025, we received a notice from Nasdaq that, because the closing bid price for the Company’s common stock had fallen below $1.00 per share for 30 consecutive trading days, the Company no longer complies with the minimum bid price requirement for continued listing on the Nasdaq Capital Market. |
• | We have identified a material weakness in our internal control over financial reporting and if we are unable to remediate this material weakness we may not be able to accurately or timely report our financial condition or results of operations. |
TABLE OF CONTENTS Risks Related to Taxes •We are subject to Canadian and United States tax on its worldwide income. Risks Relating to the ELOC Agreement and Related Offering, including that: •It is not possible to predict the actual number of shares we will sell under the ELOC Agreement to Helena or the actual gross proceeds resulting from those sales. • | The issuance of Common Shares to Helena may cause substantial dilution to our existing shareholders, and the sale of such shares acquired by Helena could cause the price of our Common Shares to decline. |
• | We have broad discretion in the use of the net proceeds we receive from the sale of shares to Helena and may not use them effectively. |
• | The Common Shares being offered under the Helena Registration Statement represent a substantial percentage of our outstanding Common Shares, and the sales of such shares, or the perception that these sales could occur, could cause the market price of our Common Shares to decline significantly. |
Risks Related to Ownership of Our Securities • | The Securities being offered could occur, could cause the market price of our Common Shares to decline significantly. |
• | The market price of our securities may be volatile. |
• | An active trading market for our Common Shares may not develop. |
• | We are subject to changing laws and regulations regarding corporate governance and public disclosure that have increased both our costs and the risk of non-compliance. |
• | We may become subject to securities or class action litigation. |
• | We do not anticipate paying any cash dividends on our Common Shares in the foreseeable future. |
• | The outstanding warrants are exercisable for Common Shares, and, if exercised, would increase the number of shares eligible for future resale and would result in dilution to our stockholders. |
TABLE OF CONTENTS The Offering Securities offered by the Selling
Stockholders 26,419,091 Common Shares. including 10,855,040 shares issuable upon exercise of Sponsor Private Placement Warrants, 186,065 shares issuable upon exercise of the Other Private Placement Warrants and 4,847,924 Common Shares underlying the original principal amount of the New Convertible Notes (as defined below), assuming a conversion price of $0.867. Common Shares outstanding prior to this offering 33,461,734 (as of the date of this prospectus) Common Shares outstanding after this offering (assuming full exercise of the Warrants and the full conversion of the New Convertible Notes at an assumed conversion price of $0.867) 59,880,825 Terms of the offering The Selling Stockholders will determine when and how it will dispose of the Common Shares registered for resale under this prospectus. Use of proceeds We will not receive any proceeds from the sale of the shares by the selling stockholders. However, to the extent that the Warrants are exercised for cash, we will receive proceeds from any exercise of the Warrants up to an aggregate of approximately $17 million. We intend to use any proceeds received from the exercise of the Sponsor Private Placement Warrants for working capital and other general corporate purposes. However, no assurance can be given that the Warrants will ever be exercised, particularly to the extent the current market price for our Common Shares continues to be significantly below the exercise price of the Warrants. When the market price for our Common Shares is less than the exercise price of the Warrants, which it is at the time of this prospectus, we believe that warrant holders will be unlikely to exercise their Warrants. See “Use of Proceeds.” We will incur all costs associated with this prospectus and the registration statement of which it is a part. Risk factors Before investing in our securities, you should carefully read and consider the information set forth in “Risk Factors” beginning on page 8. Nasdaq ticker symbol Our common stock is listed on The Nasdaq Capital Market under the symbol “DEVS”. For additional information concerning the offering, see “Plan of Distribution” beginning on page [ ].
TABLE OF CONTENTS Risk Factors Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our financial statements and related notes appearing at the end of this prospectus and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our securities. If any of the events or developments described below were to occur, our business, prospects, operating results and financial condition could suffer materially, the trading price of our Common Shares could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Risks Relating to this Offering The sale of a substantial amount of our Common Shares, including resale of the Common Shares held by the Selling Stockholders in the public market could adversely affect the prevailing market price of our Common Shares. We are registering for resale 26,419,091 Common Shares, including 10,855,040 shares issuable upon exercise of Sponsor Private Placement Warrants (as defined below), 186,065 shares issuable upon exercise of the Other Private Placement Warrants and 4,847,924 Common Shares underlying the original principal amount of the New Convertible Notes (as defined below), assuming a conversion price of $0.867. In comparison, we have 33,461,734 outstanding Common Shares as of the date of this prospectus. Sales of substantial amounts of shares of our Common Shares in the public market, or the perception that such sales might occur, could adversely affect the market price of our Common Shares, and the market value of our other securities. We cannot predict if and when the Selling Stockholders may sell such shares in the public markets. Furthermore, in the future, we may issue additional Common Shares or other equity or debt securities convertible into Common Shares. Any such issuance could result in substantial dilution to our existing shareholders and could cause our share price to decline. Investors who buy shares at different times from the Selling Stockholders will likely pay different prices. The Selling Stockholders will have discretion, subject to market demand, to vary the timing, prices, and numbers of Common Shares issuable upon the exercise of the warrants sold by them pursuant to this prospectus. If and when they do elect to sell Common Shares issuable upon the exercise of the warrants, the Selling Stockholders may sell all, some or none of such shares at any time or from time to time at their discretion and at different prices. As a result, investors who purchase our securities from Selling Stockholders in this offering at different times will likely pay different prices for those securities, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value of the securities they purchase from the Selling Stockholders as a result of future sales made by Selling Stockholders to other investors at prices lower than the prices such earlier investors paid for their securities from the Selling Stockholders. The market price of our securities may be volatile. The trading price of our Common Shares may be volatile and subject to fluctuations in response to various factors, some of which are beyond our control, including the risk factors contained in this prospectus. Risks Related to the Helena ELOC It is not possible to predict the actual number shares of our Common Shares, if any, we will sell under the ELOC Agreement to Helena or the gross proceeds we will receive from such sales. We generally have the right to control the timing and amount of any sales of our Common Shares to Helena under the ELOC Agreement. Sales of our Common Shares, if any, to Helena under the ELOC Agreement will depend upon market conditions and other factors to be determined by us. Because the purchase price per share of our Common Shares to be paid by Helena will fluctuate based on the market price of the our Common Shares at the time we elect to sell our Common Shares, if any, to Helena pursuant to the ELOC Agreement, it is not possible for us to predict prior to any such sales the number of our Common Shares that we will sell to under the ELOC Agreement, the purchase price per share that Helena will
TABLE OF CONTENTS pay for our Common Shares purchased from us under Helena Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by Helena under the ELOC Agreement. The number of our Common Shares ultimately offered for resale by Helena is dependent upon the number of our Common Shares, if any, we ultimately elect to sell to Helena under the ELOC Agreement. However, even if we elect to sell our Common Shares to Helena pursuant to the ELOC Agreement, Helena may resell all, some or none of such shares at any time or from time to time in its sole discretion and at different prices. Any issuance and sale by us under the ELOC Agreement, or the resale by Helena under the Helena Registration Statement of a substantial amount of our Common Shares will cause additional dilution to our shareholders, which dilution may be substantial. The number of our Common Shares ultimately offered for sale by Helena is dependent upon the number of our Common Shares, if any, we ultimately sell to Helena under the ELOC Agreement. The sale and issuance of our Common Shares to Helena will cause dilution to our existing securityholders, and the resale of our Common Shares acquired by Helena, or the perception that such resales may occur, could cause the price of our Common Shares to decrease. The purchase price per share of our Common Shares to be paid by Helena for our Common Shares that we may elect to sell to Helena under the ELOC Agreement, if any, will fluctuate based on the market prices of our Common Shares at the time we elect to sell our Common Shares to Helena pursuant to the ELOC Agreement. Depending on market liquidity at the time, resales of such our Common Shares by Helena may cause the trading price of our Common Shares to decrease, and any such decrease could be substantial. If and when we elect to sell our Common Shares to Helena, sales of newly issued Common Shares by us to Helena will result in dilution to the interests of existing holders of our Common Shares, which dilution may be substantial. Additionally, the sale of a substantial number of our Common Shares to Helena, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. We have broad discretion in the use of the net proceeds we receive from the sale of shares to Helena and may not use them effectively. Our management will have broad discretion in the application of the proceeds we receive from Helena and you will not have the opportunity as part of your investment decision to assess whether our management is using the proceeds appropriately. Because of the number and variability of factors that will determine our use of our proceeds from Helena under the ELOC Agreement, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our Common Shares to decline. Risks Related to Our Business and Industry We have limited operating history and financial results, which make our future results, prospects and the risks we may encounter difficult to predict. We have not generated any revenue to date. We have a limited operating history upon which you can evaluate our business and prospects. We have never generated any revenue and are subject to business risks and uncertainties associated with starting a new business, including the risk that we will not achieve our financial objectives as estimated by our management. Since our formation in 2021, our operations to date have been limited primarily to organizing and staffing our company, business planning, raising capital, making carbon credits streaming project investments and signing contracts for the generation and sale of carbon credits. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the renewable energy industry. The nature of our operations is highly speculative and there is a consequent risk of loss of investment. The success of our activities will depend on management’s ability to implement its strategy and on the availability of opportunities related to carbon credit trading, stream agreements for carbon credits, and greenhouse gas emission avoidance, reduction, and sequestration programs; government regulations; commitments to reduce greenhouse gas emissions by corporations, organizations, and individuals; and general economic conditions. There is no certainty that anticipated outcomes and sustainable revenue streams will be achieved and there is no certainty that we will continue to successfully make acquisitions of carbon credits, streams, or other interests, or that
TABLE OF CONTENTS current or future carbon credits, streams, or other interests acquired by us will be profitable. In particular, our future growth and prospects will depend on our ability to expand our portfolio of investments while at the same time maintaining effective cost controls. Any failure to expand would have a material adverse effect on our business, financial condition, and results of operations. Because of the uncertainties and risks associated with these activities, we are unable to accurately and precisely predict the timing and amount of revenues, the extent of any further losses or if or when we might achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable may depress the market price of our Common Shares and could impair our ability to raise capital, expand our business, or continue our operations. If we continue to suffer losses as we have in the past, investors may not receive any return on their investment and may lose their entire investment. We have incurred significant losses and expect to incur additional expenses and continuing losses for the foreseeable future, and we may not achieve or maintain profitability. We have incurred significant operating losses. Our operating losses were $8,614,060 and $5,110,574 for the 6 months ended January 31, 2025 and 2024, respectively. We may continue to incur operating losses in the future as we expect to incur additional costs as we develop our business and expand our portfolio of investments, which may be more costly than we expect and may not result in increased revenue, profits or growth in our business. Such costs include increased overhead costs, marketing and promotion costs, general and administrative expenses and costs associated with operating as a public company. Other unanticipated costs may also arise. Our unaudited condensed consolidated interim financial statements for the six months ended January 31, 2025 and 2024 do not include any adjustments that might result from the outcome of this uncertainty and have been prepared on a basis that assumes we will continue as a going concern, as described in the notes to our unaudited condensed consolidated interim financial statements included elsewhere in this annual report. We have not yet started delivering carbon credits to any current or potential partners, making it difficult to predict our future operating results, and we believe that we will continue to incur operating losses until at least the time we begin delivering carbon credits. As a result, our losses may be larger than anticipated, and we may not achieve profitability when expected, or at all, and even if we do, we may not be able to maintain or increase profitability. We expect our operating expenses to increase as we further develop our business. We expect the rate at which we incur losses will be higher as we engage in the following activities: •researching potential carbon credit screening impact investments and project management opportunities, including conducting third-party feasibility studies as part of the project due diligence process; •providing project management services, including initial program development, validation, registry listing, any ongoing data collection, and fees charged by registries for credit issuance, transfer or retirement; | • | purchasing carbon credits generated by ongoing carbon credit streams (in cases where we have not purchased such carbon credits outright, without the need for additional consideration); |
• | attracting and retaining buyers to purchase the carbon credits, through direct sales or on carbon credit marketplaces; and |
• | increasing its general and administrative functions to support its growing operations and its responsibilities as a U.S.-listed public company. |
Because we will continue to incur the costs and expenses from these efforts before we receive any associated revenue, our losses in future periods could be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in the revenue we anticipate, which would further increase our losses. Furthermore, if our future growth and operating performance fails to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investment in acquiring customers or expanding our operations, this could have a material adverse effect on our business, financial condition and results of operations.
TABLE OF CONTENTS We may lack sufficient funds to achieve our planned business objectives and may seek to raise further funds through equity or debt financing or other means. An inability to access the capital or financial markets may limit our ability to fund our ongoing operations and execute our business plan to pursue investments that we may rely on for future growth. Even if we raise the maximum $40.0 million amount of financing pursuant to sales of Common Shares to Helena under the ELOC Agreement, of which there are no assurances, that will likely not be enough to satisfy our capital needs. We have had negative cash flow from operations since our inception. We will operate at a loss until we are able to realize cash flow from our investments or carbon management contracts. We may require additional financing to fund the business, business expansion, and/or negative cash flow. Our ability to arrange such financing in the future will depend, in part, upon prevailing capital market conditions, as well as our business success. There can be no assurance that we will be successful in our efforts to arrange additional financing on satisfactory terms, or at all. We cannot predict with certainty the timing or amount of any such capital requirements. If additional financing is raised by the issuance of shares from treasury, control of our company may change, and the shareholders may suffer additional dilution. If adequate funds are not available, or are not available on acceptable terms, we may not be able to operate our business at maximum potential, to expand, to take advantage of other opportunities, or otherwise remain in business. If the assumptions used to determine our market opportunity are inaccurate, our future growth rate may be affected and the potential growth of our business may be limited. Market opportunity estimates and growth strategies are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate, and as such the estimates of growth included in this annual report may prove to be inaccurate and may not be indicative of future growth. Our current investment opportunity pipeline represents an estimate by management based on potential transactions which remain under various states of non-binding proposals and negotiations. To date, we have entered into a limited number of definitive agreements and one offtake agreement. There can be no assurance that we will be able to enter into further definitive agreements for or complete the acquisition of all or any other investments identified in our opportunity pipeline, or successfully monetize any carbon credits we may acquire. Further, our estimate of the total addressable market may not prove to be accurate and, even if the estimate of market opportunity and growth strategy does prove to be accurate, we could fail to capture a significant portion, or any portion, of the available market. If demand for carbon credits does not grow as expected or develops more slowly than expected, our revenues may stagnate or decline and our business may be adversely affected. The demand for, and the market price of, carbon credits can be adversely affected by any number of factors, including the implementation of lower emission infrastructure, an increase in the number of projects generating carbon credits, invention of new technology that assists in the avoidance, reduction or sequestration of emissions, increased use of alternative fuels, a decrease in the price of conventional fossil fuels, increased use of renewable energy, and the implementation and operation of carbon pricing initiatives such as carbon taxes and emissions trading systems (“ETSs”). There can be no assurance that carbon pricing initiatives or compliance or voluntary carbon markets will continue to exist. Carbon pricing initiatives may be subject to policy and political changes and may otherwise be diminished, terminated or not renewed upon their expiration. In addition, the demand for carbon credits is driven by the social and political demand to reduce greenhouse gas emissions globally. Any decrease in such social and political demand could limit opportunities in the marketplace for carbon credits and decrease the price of carbon, which would have a material adverse effect on our business, financial condition, and results of operations. The carbon credit market is competitive, and we expect to face increasing competition in many aspects of our business, which could cause operating results to suffer. There are many organizations, companies, non-profits, governments, asset managers and individuals that are buyers of carbon credits, or rights to or interest in carbon credits, and there is currently a limited supply of carbon credits, projects to generate future carbon credits and investment opportunities in carbon credits. We expect competitors to enter the carbon credit streaming space, and that many of these competitors will be larger, more established companies with substantial financial resources, operational capabilities, and long track-records in carbon markets. We may be at a competitive disadvantage in investing in carbon projects, acquiring carbon
TABLE OF CONTENTS credits or interests in carbon credits, whether by way of purchases in carbon markets, streams, or other forms of investment, as our future competitors may have greater financial resources and technical staff. Accordingly, there can be no assurance that we will be able to compete successfully against other companies in building a portfolio of carbon credits and carbon credit-related investments. Our inability to acquire carbon credits and streams may result in a material and adverse effect on our profitability, results of operation and financial condition. The carbon market is an emerging market and its growth is dependent on the development of a commercialized market for carbon credits. From a global perspective, the market for carbon credits continues to be at a nascent stage. However, there can be no guarantee that the development of carbon markets will continue to occur at the expected rate or at all. Any such delay or failure to further develop a commercialized market could reduce demand for carbon credits or streams, which would significantly harm our expected revenues. Further, we may be unable to recover any losses or expenses incurred, or which we expect to continue to incur, in our investments in or related to carbon credits. We have identified a material weakness in our internal control over financial reporting. If we are unable to remediate this material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and the market price of our common shares. Based on an evaluation as of October 31, 2024, our management, including the Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were not effective to provide reasonable assurance because of a material weakness in our internal control over financial reporting as described below. There have been no changes during the three months ended October 31, 2024. 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 our annual or interim financial statements will not be prevented or detected in a timely manner. We did not design or maintain an effective control environment commensurate with financial reporting requirements. Specifically, we did not consistently have documented evidence of review procedures and, due to resource limitations, did not always maintain segregation of duties between preparing and reviewing analyses, and reconciliations. The above material weakness did not result in a material misstatement of our unaudited condensed consolidated financial statements or our consolidated financial statements, however, it could result in a misstatement of our account balances or disclosures that would result in a material misstatement that would not be prevented or detected. We are working to remediate the material weakness and are taking steps to strengthen our internal control over financial reporting through the continued hiring of additional appropriately skilled finance and accounting personnel with the requisite technical knowledge and skills. With the additional skilled personnel, we are taking appropriate and reasonable steps to remediate this material weakness through the implementation of appropriate segregation of duties, formalization of accounting policies and controls and retention of appropriate expertise for complex accounting transactions. We will not be able to fully remediate these control deficiencies until these steps have been completed and have been operating effectively for a sufficient period of time. Management will continue to review and make necessary changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded that these controls are operating effectively. We cannot assure you that the measures we have taken to date and those we expect to take in the future will be sufficient to remediate the material weakness we identified or avoid the identification of additional material weaknesses in the future. If the steps we take do not remediate the material weakness in a timely manner, there could continue to be a reasonable possibility that this material weakness or other control deficiencies could result in a material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis, which could in turn cause the market price of our Common Shares to decline significantly and make raising capital more difficult. If we fail to remediate our material weakness, identify future material weaknesses in our internal control over financial reporting or fail to meet the demands that will be placed upon
TABLE OF CONTENTS us as a public company, we may be unable to accurately report our financial results. If additional material weaknesses exist or are discovered in the future, and we are unable to remediate any such material weakness, our reputation, results of operations and financial condition could suffer. If we fail to retain our key personnel or if we fail to attract additional qualified personnel, we may not be able to achieve our anticipated level of growth and our business could suffer. We are dependent upon the continued availability and commitment of our key management, including Sunny Trinh, Chris Merkel, David Goertz and Bryan Went. The loss of any such members could negatively impact business operations. From time to time, we will also need to identify and retain additional skilled management and specialized technical personnel to efficiently operate the business. The number of persons experienced in carbon markets and the origination, registration, selling and trading of carbon credits is limited, and competition for such persons can be intense. In addition, the number of persons skilled in structuring streams is limited. Recruiting and retaining qualified personnel is critical to our success and there can be no assurance of such success. If we are not successful in attracting and training qualified personnel, our ability to execute our business model and growth strategy could be affected, which could have a material adverse impact on our profitability, results of operations and financial condition. Increased scrutiny of sustainability matters, including our completion of certain sustainability initiatives, could have an adverse effect on our business, financial condition and results of operations, result in reputational harm and negatively impact the assessments made by sustainability-focused investors when evaluating us. We are increasingly facing more stringent sustainability standards, policies and expectations, and expect to continue to do so as a listed company following the Closing with growing operations. Companies across all industries are facing increasing scrutiny from a variety of stakeholders, including investor advocacy groups, proxy advisory firms, certain institutional investors and lenders, investment funds and other influential investors and rating agencies, related to their sustainability and sustainability practices. We generally experience a strong sustainability emphasis among our customers, partners and competitors. Some of these stakeholders maintain standards, policies and expectations regarding environmental matters (e.g., climate change and sustainability), social matters (e.g., diversity and human rights) and corporate governance matters (e.g., taking into account employee relations when making business and investment decisions, ethical matters and the composition of the board of directors and various committees). There is no guarantee that we will be able to comply with applicable sustainability standards, policies and expectations, or that we will, from the perspective of other stakeholders and the public, appear to be complying with such sustainability standards, policies and expectations. If we do not adapt to or comply with investor or other stakeholder standards, policies, or expectations on sustainability matters as they continue to evolve, or if we are perceived to have not responded appropriately or quickly enough to growing concern for sustainability and sustainability issues, regardless of whether there is a regulatory or legal requirement to do so, we may suffer from reputational damage and our business, financial condition and/or stock price could be materially and adversely affected. While we may at times engage in or prepare voluntary sustainability initiatives and disclosures to respond to stakeholder expectations or to improve our sustainability profile, such initiatives and disclosures may be costly and may not have the desired effect. Expectations regarding our management of sustainability matters continue to evolve rapidly, in many instances due to factors that are beyond our control. For example, we may ultimately be unable to complete certain initiatives or targets, either on the timelines initially announced or at all, due to technological, cost, or other constraints, which may be within or outside of our control. Moreover, our sustainability actions or statements may be based on expectations, assumptions, or third-party information that we currently believe to be reasonable, but which may subsequently be determined to be erroneous or be subject to misinterpretation. If we fail to, or are perceived to fail to, implement certain sustainability initiatives or achieve certain sustainability objectives, we may be subject to various adverse impacts, including reputational damage and potential stakeholder engagement and/or litigation, even if such initiatives are currently voluntary. Certain market participants, including major institutional investors and capital providers, use third-party benchmarks and scores to assess companies’ sustainability profiles in making investment or voting decisions. Unfavorable sustainability ratings could lead to increased negative investor sentiment towards us or our industry and to the diversion of investment to other industries, which could negatively impact our share price as well as our access to and cost of capital. Moreover, because of the industry we are in, any of our operational or strategic efforts may be viewed as relating to our sustainability initiatives and, even if those initiatives are undertaken voluntarily, they may still be
TABLE OF CONTENTS viewed as relating to our operational and strategic efforts. This means that if we fail, or are perceived to fail, to implement certain sustainability initiatives or achieve certain sustainability objectives it could have a disproportionately negative impact on our business. Actual or perceived failure to comply with sustainability standards may detrimentally affect our business in a variety of ways. Among others, we could face challenges with procuring investments and financing, whether for general business purposes or for specific projects, and we could have difficulty attracting or retaining employees. Accordingly, failure to establish a sufficiently strong sustainability profile relative to our peers could limit our ability to generate and successfully utilize business opportunities. We also note that divergent views regarding sustainability principles are emerging in the U.S., and in particular, in U.S. state-level regulation and enforcement efforts. In the future, various U.S. regulators, state actors and other stakeholders may have views on sustainability matters, the renewable energy industry, the energy transition or our business that are unfavorable to our business or operations, or such stakeholders may seek to impose additional regulation and restrictions on us or our business. Any such events could have material adverse effects on our business, financial condition, results of operations, cash flow and prospects. We also expect there will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to sustainability matters. We may be subject to sustainability or sustainability-related regulation in multiple jurisdictions, including the U.S., and complying with these regulations in multiple jurisdictions may increase the complexity and cost of our compliance efforts. Moreover, increased regulation and increased stakeholder expectations will likely lead to increased costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Additionally, many of our customers and suppliers may be subject to similar expectations, which may augment or create additional risks, including risks that may not be known to us. Our ability to realize projects could be impaired if we fail to adhere to common sustainability standards in our industry. Moreover, such failure could result in reputational damage for us among both potential customers and investors. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects. Our due diligence process in connection with acquisitions, investments or streaming arrangements that we undertake may not reveal all relevant facts in connection with an acquisition, investment or streaming arrangement. Before making any decision, we will conduct, or have independent consultants conduct, due diligence investigations that we deem reasonable and appropriate based on the facts and circumstances applicable to each acquisition, investment, or streaming arrangement. When conducting due diligence investigations, we may be required to evaluate important and complex business, environmental, financial, tax, accounting, regulatory, technical, and legal issues. Outside consultants, legal advisors, accountants, and investment banks may be involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, when conducting due diligence investigations and making an assessment regarding an acquisition, investment or streaming arrangement, we rely on resources available, including information provided by the target of the acquisition or investment, the parties to the streaming arrangement and, in some circumstances, third party investigations. The due diligence investigations that are carried out with respect to any opportunity may not reveal or highlight all relevant facts that may be necessary. We may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt our business. As part of our business strategy, we may seek to grow by acquiring companies and/or assets or establishing joint ventures that we believe will complement our current or future business. Acquisition transactions involve inherent risks, including but not limited to: accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates; ability to achieve identified and anticipated operating and financial synergies; unanticipated costs; diversion of management attention; potential loss of our key employees or key employees of any business acquired; unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the acquisition; and decline in the value of acquired assets, companies or securities. Any one or more of these factors or other risks could cause us not to realize the anticipated benefits of an acquisition of assets or companies and could have a material adverse effect on our financial condition. We may not effectively select acquisition candidates or negotiate or finance acquisitions or
TABLE OF CONTENTS integrate the acquired businesses and their personnel or acquire assets for our business. We cannot guarantee that we can complete any acquisition we pursue on favorable terms, or that any acquisitions completed will ultimately benefit our business. Our long-term success depends, in part, on properties and assets developed and managed by third-party project developers, owners and operators. Carbon credits we receive are derived from projects that are operated by third parties. These third parties will be responsible for determining the manner in which the relevant properties are developed, operated and managed, including decisions that could expand, continue or reduce the number of carbon credits generated from a property or an asset. As a holder of streams or other interests, we may have little or no input on such matters. Our interests and those of third parties on the relevant properties or assets may not always be aligned. For example, in some cases, it may be in our best interest to advance development as rapidly as possible to maximize the receipt of near-term carbon credits, while third-party project developers, owners and operators may, in many cases, take a more cautious approach to development as they assume risk on the cost of development and operations. Our inability to control the operations of the properties or assets in which we have a stream or other interest may have a material adverse effect on our profitability, results of operation and financial condition. We may have limited access to data and disclosure regarding the operations or projects for which we are not developer, owner or operator. This limited access may restrict our ability to assess the value and performance of our operations. As a holder of streams and other non-operator interests, we do not serve as the project developer, owner or operator, and in almost all cases, we have no input into how the project is developed or the operations are conducted. As a result, we have limited access to data in the operations or to the actual projects themselves. This could affect our ability to assess the value of our streams or enhance their performance. This could also result in delays in the receipt of carbon credits we anticipate based on the stage of development of the applicable properties or assets covered by our streams. In addition, some streams may be subject to confidentiality arrangements which govern the disclosure of information regarding streams, and as such, we may not be in a position to publicly disclose non-public information with respect thereto. The limited access to data and disclosure regarding the operations of the properties or assets in which we have an interest may restrict our ability to assess the value or enhance our performance, which may have a material adverse effect on our profitability, results of operation and financial condition. Our streams are largely contract-based and the terms of such contracts may not be honored by developers or operators of a project. Streams are largely contract-based, and the terms of which may be subject to interpretation or technical defects. To the extent grantors of streams and other interests do not abide by their contractual obligations, we may be forced to take legal action to enforce our contractual rights. Further, not all project developers, owners or operators are credit worthy. Such litigation may be time consuming and costly, and there is no guarantee we will succeed. If such litigation leads to an adverse decision to us, our profitability, results of operations and financial condition could be materially adversely affected. We may acquire future streams in which we have limited control and our interests in such streams may be subject to transfer or other related restrictions. Future streams may be subject to: (i) buy-down right provisions pursuant to which an operator, developer, or property owner may buy back all or a portion of the stream; (ii) pre-emptive rights pursuant to which parties have the right of first refusal or first offer with respect to a proposed sale or assignment of the stream; or (iii) claw back rights pursuant to which the seller of a stream has the right to re-acquire the stream. Holders of these rights may exercise them such that certain streams may not be available for acquisition by us or that streams held by us may be subject to buy-back rights or first refusal rights upon a sale. Physical and transition risks arising from climate change, including risks posed by the increased frequency or severity of natural and catastrophic events and regulations or policies related to climate change, may materially adversely affect our business and operations. A natural disaster, or severe weather conditions, including in connection with climate change, or an accident that damages or otherwise adversely affects any of our current or future operations, assets, or third-party infrastructure could materially and adversely affect our business, financial condition and results of operations.
TABLE OF CONTENTS Severe floods, droughts, lightning strikes, earthquakes, extreme wind conditions, severe storms, heatwaves, wildfires, monsoons and other unfavorable weather conditions or natural disasters (including those related to climate change) could disrupt the operation of our projects and may require us to make additional expenditures to mitigate the impact of such events. The projects we enter into streaming agreements in connection with and/or otherwise invest in to generate carbon credits are subject to risks associated with natural disasters, which could result in temporary or permanent damage to, or destruction of, projects that generate carbon credits. Any such natural disasters could impact the ability of our counterparties to deliver carbon credits to us and therefore adversely affect the viability of any of our investments in such products and may result in a material and adverse effect on our profitability, results of operations and financial conditions. Various actions to mitigate our business risks associated with climate change and other natural and catastrophic events may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risk. For example, to the extent natural and catastrophic events or severe weather conditions become more frequent and intense, the availability or cost of materials may be adversely impacted and insurance and other operating costs may increase, which may increase the costs of our products and materially adversely affect our profitability, results of operations and financial condition. The threat of global economic, capital markets and credit disruptions pose risks to our business. In recent years, global economies have suffered dramatic downturns as a result of the COVID-19 pandemic, a deterioration in the credit markets and related financial crisis, and a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, inflation, ratings downgrades of certain investments and declining valuations of others. Governments in the United States and elsewhere have taken unprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financial markets. Our performance will depend on the financial health and strength of carbon credit markets and businesses or investments related to carbon credits, which in turn will be dependent on the economic conditions of the markets in which we and our customers operate. A decline in the global economy, difficulties in the financial services sector and credit markets, continuing geopolitical uncertainties and other macroeconomic factors all affect the spending behavior of potential customers. The economic uncertainty in Europe, the United States, India, China and elsewhere arising out of increased monetary inflation may adversely impact our profitability and financial condition. Additionally, a global credit and liquidity crisis could adversely impact the cost and availability of financing and our overall liquidity. Volatility of carbon credit prices could materially and adversely impact our revenues, profits, losses, cash flow and the value of our carbon credit holdings, and continued recessionary pressures could adversely impact demand for carbon credits and our related investments. Carbon markets, particularly the voluntary markets, are still evolving and there are no assurances that the carbon credits we purchase or generate through our investments will find a market. The carbon credit market, particularly the voluntary markets, have experienced a high level of price and volume volatility. There is, or there may be in the future, a lack of liquidity for the purchase or sale of carbon credits. We may not be able to purchase or sell the volume of carbon credits as desired in a timely manner, at an attractive price, or at all. The pool of potential purchasers and sellers is limited, and each transaction may require the negotiation of specific provisions. Accordingly, a purchase or sale may take several months or longer to complete. In addition, as the supply of carbon credits is limited, we may experience difficulties purchasing carbon credits. The inability to purchase and sell on a timely basis in sufficient quantities could have a material adverse effect on our business, financial condition and results of operations. We are subject to economic, political and other risks of doing business globally and in emerging markets. Our investments may be focused in a particular country, countries, or region and therefore may be susceptible to adverse market, political, regulatory and geographic events affecting that country, countries or region. A significant proportion of our short-term and medium-term opportunities are located outside of North America. Such geographic focus may also subject us and our investments to a higher degree of volatility. There is no guarantee that future political, or economic instability will not occur in countries in which we operate. The risks we may face with respect to any country where our current or future streams or investments
TABLE OF CONTENTS may be located, include unforeseen government actions, acts of god, terrorism, hostage taking, military repression, extreme fluctuations in currency exchange rates, high rates of inflation, labor unrest, the risks of war or civil unrest, expropriation and nationalization, renegotiation or nullification of existing concessions, licenses, permits and contracts, changes in taxation policies, restrictions on foreign exchange and repatriation, and changing political conditions, currency controls, export controls, and governmental regulations that favor or require the awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction or other events. Further, emerging markets are subject to different risks as compared to more developed markets. Operating a business in an emerging market can involve a greater degree of risk than operating a business in more developed markets, including, in some cases, increased political, economic and legal risks. Emerging market governments and judiciaries often exercise broad, unchecked discretion and are susceptible to abuse and corruption. Moreover, financial turmoil in any emerging market country tends to adversely affect the value of investments in all emerging market countries as investors move their money to more stable, developed markets. Financial problems or an increase in the perceived risks associated with investing in companies in emerging economies could dampen foreign investment and adversely affect local economies in which we operate. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved in, and are familiar with, investing in emerging markets. Any or all of these factors, limitations or the perception thereof could impede our activities, result in the impairment or loss of part or all of our interest in a stream or an investment, or otherwise have a material adverse effect on our valuation and the trading price of our securities. We need to improve our operational and financial systems to support our expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition and any inability to do so will materially adversely affect its business and results of operations. To manage the expected growth of our operations and increasing complexity, we will need to improve its operational and financial systems, procedures, and controls and continue to increase systems automation to reduce reliance on manual operations. Any inability to do so will affect our business and results of operations. Our systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense recognition for our operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect its relationships with its customers, cause harm to its reputation and brand and could also result in errors in its financial and other reporting. We expect that complying with these rules and regulations will substantially increase its legal and financial compliance costs and will make some activities more time-consuming and costly. These increased costs will increase our net loss and it cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements. Our Charter, together with our Bylaws, and Canadian laws and regulations applicable to the Company may adversely affect our ability to take actions that could be deemed beneficial to shareholders of the Company. As a Canadian company, we are subject to different corporate requirements than a corporation organized under the laws of the United States. Our Charter, our Bylaws and the ABCA set forth various rights and obligations that are unique to us as a Canadian company. These requirements may limit or otherwise adversely affect our ability to take actions that could be beneficial to Company shareholders. Risks Related to our Information Technology and Intellectual Property Failure of a key information technology system, process or site could have a material adverse effect on our business. We rely on our information technology (“IT”) systems to operate our business and are dependent upon the availability, capacity, reliability and security of our IT infrastructure and our ability to expand and continually update this infrastructure, to conduct daily operations. In the event that we are unable to secure our software and hardware, effectively upgrade systems and network infrastructure and take other steps to maintain or improve our systems, the operations of such systems could be interrupted or result in loss, corruption or release of confidential data. The IT systems are subject to a variety of security risks, which are growing in both complexity and frequency and could include potential breakdown, cyber phishing, invasion, virus, cyber-attack, cyber-fraud,
TABLE OF CONTENTS security breach, and destruction or interruption of its IT systems by third parties or insiders. Unauthorized access to these systems by employees or third parties could lead to corruption or exposure of confidential fiduciary or proprietary information, in a loss or theft of our financial resources, critical data and information or could result in a loss of control of our technological infrastructure or financial resources, which could have a material adverse effect on our business, financial condition, and results of operations as well as on our reputation. Although we have implemented cybersecurity protections to safeguard our data, we can provide no assurances that these protections will prevent all cybersecurity breaches. We have experienced security incidents or breaches in the past, and if we experience any future security incidents or breaches, our reputation may be harmed and we may suffer significant liabilities, any of which could have a material adverse effect on our business and results of operations. Security incidents, in particular, cyberattacks, computer malware, viruses, social engineering (including phishing attacks), ransomware attacks and hacking are becoming more prevalent. We and our third-party providers, are at risk of security incidents which may affect our investments and the customer data we and our third-party providers process. A security incident could be caused by disasters, insiders or third parties, including through inadvertent acts or omissions, negligence, or malicious acts such as hacking or the use of viruses, ransomware, or malware. In addition, third parties may use phishing, fraud or other forms of deception to induce our employees, suppliers, research partners, or other third parties with whom we do business to disclose information, or to obtain access to our IT systems, facilities, data, or confidential and proprietary information and technologies. For example, in September 2023, an unauthorized third-party gained access to one of our officer’s email accounts through a phishing attack. This cyber-attacker contacted an investor of ours via email, impersonating our officer, resulting in the investor wiring money to the cyber attacker. Upon discovering that our officer’s email account was compromised, we have worked with a third-party IT service provider to conduct a forensic audit to determine the extent of the security breach. Based on the IT service provider’s findings, we do not believe that the cyber-attacker used the access that they gained to our officer’s account to access any of our other accounts or systems. However, there can be no assurance that the IT service provider’s forensic audit has uncovered all security breaches, nor that the security policies and procedures we have adopted since discovering this security breach will be sufficient to prevent future security breaches. We may experience cybersecurity incidents and security breaches in the future. Any future security breach suffered by us or our third-party service providers or any unauthorized, accidental or unlawful access or loss of data, or the perception that any such event has occurred, could result in a disruption to our operations, litigation, an obligation to notify regulators and affected individuals, the triggering of indemnification and other contractual obligations to our customers, regulatory investigations, government fines and penalties, reputational damage, loss of sales, customers and prospects, expenses related to mitigation and remediation, and other significant costs and liabilities. In addition, we may incur significant costs and operational consequences in relation to investigating, remediating, and addressing actual or perceived security incidents, as well as the costs to comply with any notification or other obligations resulting from any such incidents. Any of the foregoing could materially affect our business, financial condition, results of operations, cash flow and prospects. If we are unable to obtain, protect or enforce our rights in proprietary technology, brands or other intellectual property, our competitive advantage, business, financial condition, results of operations, cash flow and prospects could be materially adversely affected. In the future, we may file patent applications, including provisional patent applications, for certain technologies related to our business. We may not be able to accurately predict all the countries where patent protection will ultimately be possible or desirable. If we have failed or fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. In addition, we cannot assure you that any of our patent applications will be granted or will issue as patents. The scope of patent protection could be narrowed during the application process, and accordingly we cannot assure you that the resulting patents would be of sufficient scope to provide us with any meaningful protection or commercial advantage. Furthermore, any patents that we do obtain could be challenged, invalidated or circumvented by others, and our competitors could infringe our patents; however, we cannot assure you that we will learn of all instances of infringement, and even if we become aware of infringement, we cannot assure you that we will have adequate resources to enforce our patents. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects.
TABLE OF CONTENTS Risks Related to Legal, Compliance and Regulations Our business and current and future operations are subject to liabilities and operating restrictions arising from regulatory requirements. We will be subject to regulatory requirements in multiple jurisdictions, which impose substantial compliance requirements on our operations. Our operating costs could be significantly increased in order to comply with new or more stringent regulatory standards in the jurisdictions in which we operate. We are subject to, and may be adversely affected by changes in, regulatory requirements, customs, duties and other taxes in jurisdictions in which we operate, including Canada, the United States, and African countries. The costs associated with legal compliance may be substantial. In addition, possible future laws and regulations, changes to existing laws and regulations or more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspension of projects generating carbon credits and planned operations and delays in the development of projects generating carbon credits. Moreover, these laws and regulations may allow governmental authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from environmental, health and safety impacts of the operations of projects generating carbon credits. Any failure by us or operators of projects in which we invest to comply with laws and regulators could lead to financial restatements, fines, penalties, loss, reduction or expropriation of entitlements, the imposition of additional local or foreign parties as joint venture partners with carried or other interests and other material negative impacts. Further, violations of environmental and other laws, regulations and permit requirements may also result in criminal sanctions or injunctions. Many foreign, federal, state and local environmental laws, regulations and permitting requirements will apply to projects generating carbon credits and could negatively impact our ability to generate carbon credits. Violations of these laws and permit requirements could also result in negative publicity for us, which, in turn, would have a material adverse effect on our business and results of operations. From time to time, we may be involved in litigation, regulatory actions or government investigations and inquiries, which could have an adverse impact on our profitability and financial position. We may, from time to time, be involved in various claims, legal proceedings and disputes arising in the ordinary course of business. It is difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and there can be no assurances that any such exposure will not be material. If such disputes arise and we are unable to resolve these disputes favorably, it may have a material and adverse effect on our profitability, results of operations and financial condition. Such disputes may also negatively affect our reputation and divert management’s attention from operations. It may be difficult for our stockholders to acquire jurisdiction and enforce liabilities against our assets based in international jurisdictions. Some or all of our assets, as well as certain of our directors and officers, reside outside of the United States. As a result, it may not be possible for certain stockholders to enforce their legal rights, to effect service of process upon our directors or executive officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and executive officers under United States federal securities laws. We may not be able to have all our projects validated through a compliance market or by an internationally recognized carbon credits standard body. In seeking to acquire and grow a diversified and high-quality portfolio of streams and investments in projects that generate carbon credits over the long term, our intention is to seek to have all such projects validated through a compliance market or by an internationally recognized carbon credits standard body in the voluntary market, such as the Verified Carbon Standard, a widely used greenhouse gas crediting program, administered by Verra, a nonprofit organization that operates standards in environmental and social markets. These standards organizations are meant to increase credibility in the marketplace. We may also seek to have co-benefits validated by standards such as the Climate, Community and Biodiversity Standard, which evaluates land management projects, SOCIALCARBON, an international greenhouse gas standard, or the Sustainable Development Verified Impact Standard, also administered by Verra, which is the standard for certifying the sustainable development benefits of social and environmental projects. Any actual or proposed changes to international carbon standards or verification requirements and/or the implementation of any national or international laws, treaties or regulations by governmental entities and/or any adverse changes to existing
TABLE OF CONTENTS governmental policies with respect to carbon credits (including, without limitation, any changes to nationally determined contributions under the Paris Agreement or any other national or international initiatives) may result in a material and adverse effect on our profitability, results of operation and financial condition. Carbon pricing initiatives are based on scientific principles that are subject to debate. Failure to maintain international consensus may negatively affect the value of carbon credits. Carbon pricing initiatives, such as ETSs, carbon taxes and carbon credits have arisen primarily due to relative international and scientific consensus with respect to scientific evidence indicating a correlative relationship between the rise in global temperatures and extreme weather events, on the one hand, and the rise in greenhouse gas emissions in the atmosphere, on the other hand. New technologies may arise that may diminish or eliminate the need for carbon markets. Ultimately, the price of carbon credits is determined by the cost of reducing emissions levels. If the price of credits becomes too high it will be more economical for companies to develop or invest in lower emission technologies, thereby suppressing the demand and adversely affecting the price. Regulatory risk related to changes in regulation and enforcement of ETSs can adversely affect market behavior. If fines or other penalties for non compliance are not enforced, incentives to purchase carbon credits will deteriorate, which can result in a fall in the price of carbon credits and a drop in the value of our assets. Our business may require numerous permits, licenses and other approvals from various governmental agencies, and the failure to obtain or maintain any of them, or delays in obtaining them, could materially adversely affect us. We may acquire a property or an interest in a property with the intent to generate carbon credits from activities on that property. These future activities may require licenses and permits from various governmental authorities. We cannot give any assurances that we will be able to obtain or maintain all necessary licenses and permits that may be required to carry out development of our carbon offset projects on any future properties. Carbon trading is heavily regulated and new legislation in the jurisdictions in which we operate may materially impact our operations. Carbon trading is regulated by specific jurisdictions pursuant to regional legislation or may be voluntary. When regulated (e.g., in the European Union and in the Western Climate Initiative jurisdictions), governments compel emitters to reduce their greenhouse gas emissions through technological improvements or through the purchase of carbon credits. New legislation may arise in certain compulsory jurisdictions that may render our business plan and knowledge obsolete with respect to carbon credits. With respect to the voluntary trade of carbon credits, there is a significant risk that certain voluntary purchasers of carbon credits may elect to cease the purchase of carbon credits for various reasons that are inherent to their business plans, because of changing economic, political contexts or other conditions that cannot be controlled by us. If voluntary purchasers of carbon credits elect to stop purchasing carbon credits, it could have a material adverse effect on our business, results of operations and financial condition. Risks Associated with Being a Public Company Listed on the Nasdaq The Company will need to improve its operational and financial systems to support its expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition and any inability to do so will materially adversely affect its business and results of operations. To manage the expected growth of its operations and increasing complexity, the Company will need to improve its operational and financial systems, procedures, and controls and continue to increase systems automation to reduce reliance on manual operations. Any inability to do so will affect the Company’s business and results of operations. Prior to the Closing, DevvStream’s systems, procedures and controls may not be adequate to support its complex arrangements and the rules governing revenue and expense recognition for the Company’s future operations and expected growth. Delays or problems associated with any improvement or expansion of the Company’s operational and financial systems and controls could adversely affect its relationships with its customers, cause harm to its reputation and brand and could also result in errors in its financial and other reporting. the Company expects that complying with these rules and regulations will substantially increase its legal and financial compliance costs and will make some activities more time-consuming and costly. These increased costs will increase the Company’s net loss and it cannot predict or estimate the amount or timing of additional costs it may incur to respond to these requirements.
TABLE OF CONTENTS The Company’s failure to meet Nasdaq’s continued listing requirements could result in a delisting of its shares. On February 12, 2025, the Company received notice from the Listing Qualifications staff of The Nasdaq Stock Market LLC (“Nasdaq”) that, because the closing bid price for the Company’s common stock had fallen below $1.00 per share for 30 consecutive trading days, the Company no longer complies with the minimum bid price requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) because the closing bid price of the Company’s common stock for the prior 30 consecutive business days was lower than the minimum bid price requirement of $1.00 per share. The Company has 180 calendar days, or by August 13, 2025, to regain compliance with the minimum bid price requirement but could be eligible for an additional 180-day compliance period. There can be no assurance that the Company will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other applicable Nasdaq listing rules. If the Company fails to satisfy Nasdaq’s continued listing requirements, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist its shares. Such a delisting would likely have a negative effect on the price of the Company’s shares and would impair your ability to sell or purchase the Company’s shares when you wish to do so. In the event of a delisting, the Company can provide no assurance that any action taken by it to restore compliance with listing requirements would allow it shares to become listed again, stabilize the market price or improve the liquidity of the Company’s shares, prevent its shares from dropping below Nasdaq’s minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements. If securities or industry analysts do not publish research or reports about the Company’s business or publish negative reports about the Company’s business, its share price and trading volume could decline. The trading market for the Company’s Common Shares will depend on the research and reports that securities or industry analysts publish about the Company or its business. the Company does not have any analyst coverage and may not obtain analyst coverage in the future. In the event the Company obtains analyst coverage, it will not have any control over such analysts. If one or more of the analysts who cover the Company downgrade its shares or change their opinion of the Company Common Shares, the share price would likely decline. If one or more of these analysts cease coverage of the Company or fail to regularly publish reports on the Company, it could lose visibility in the financial markets, which could cause its share price or trading volume to decline. Because we do not anticipate paying any cash dividends on our Common Shares in the foreseeable future, capital appreciation, if any, will be your sole source of gains and you may never receive a return on your investment. You should not rely on an investment in the Common Shares to provide dividend income. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. Investors seeking cash dividends should not purchase our Common Shares. The Company is an “emerging growth company,” and its reduced SEC reporting requirements may make its shares less attractive to investors. The Company is an “emerging growth company” as defined in the JOBS Act. The Company will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of the Business Combination, (b) in which the Company has total annual gross revenue of at least $1.235 billion or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of our common equity held by non-affiliates exceeds $700 million as of the last business day of the Company’s prior second fiscal quarter, and (ii) the date on which the Company issued more than $1.0 billion in non-convertible debt during the prior three-year period. The Company intends to take advantage of exemptions from various reporting requirements that are applicable to most other public companies, such as an exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting and reduced disclosure obligations regarding executive compensation in the Company’s periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. The Company cannot predict if investors will find its shares less attractive because it intends to rely on certain of
TABLE OF CONTENTS these exemptions and benefits under the JOBS Act. If some investors find the Company’s shares less attractive as a result, there may be a less active, liquid and/or orderly trading market for its shares and the market price and trading volume of its shares may be more volatile and decline significantly. U.S. and Canadian investors may find it difficult or impossible to effect service of process and enforce judgments against the Company, the Company directors, and the Company executive officers. The Company is incorporated under the laws of Alberta, Canada. As a result, it may be difficult for U.S. investors to realize in the United States upon judgments of courts of the United States predicated upon the civil liability provisions of the United States federal securities laws. Similarly, certain directors of the Company reside outside of Canada. Consequently, it may not be possible for Canadian investors to enforce judgments obtained in Canada against any person who resides outside of Canada, even if the party has appointed an agent for service of process. Furthermore, it may be difficult to realize upon or enforce in Canada any judgment of a court of Canada against the directors of the Company who reside outside of Canada since a substantial portion of the assets of such person may be located outside of Canada. The Company Charter, together with the Company Bylaws, and Canadian laws and regulations applicable to the Company may adversely affect the Company’s ability to take actions that could be deemed beneficial to shareholders of the Company. As a Canadian company, the Company is subject to different corporate requirements than a corporation organized under the laws of the United States. The Company Charter, the Company Bylaws and the ABCA set forth various rights and obligations that are unique to the Company as a Canadian company. These requirements may limit or otherwise adversely affect the Company’s ability to take actions that could be beneficial to shareholders of the Company. Risks Related to Taxes The Company’s ability to utilize its net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations, including losses as a result of the Business Combination. The Company has incurred and is likely to continue incurring significant tax losses, which may be limited in their usability under Canadian and other tax laws. Although the Company neither expects the Business Combination nor any of the ownership changes in the course of past financing rounds to result in a forfeiture of the Company’s Canadian tax loss attributes, the realization of future tax savings from such tax loss attributes will be limited under the Tax Act following the Amalgamation and will depend on the tax authorities’ acceptance of their continued availability and the Company’s ability to generate future taxable income in Canada against which such losses can be offset. Following the SPAC Continuance, the Company will be subject to Canadian and United States tax on its worldwide income. Following the SPAC Continuance, the Company will be deemed to be a resident of Canada for Canadian federal income tax purposes by virtue of existing under the ABCA, subject to the application of an applicable tax treaty or convention. Accordingly, subject to an applicable tax treaty or convention, the Company will be subject to Canadian taxation on its worldwide income, in accordance with the rules set forth in the Income Tax Act (Canada) (the “Tax Act”) generally applicable to corporations residing in Canada. Notwithstanding that the Company will be deemed to be a resident of Canada for Canadian federal income tax purposes, the Company will also be treated as a U.S. corporation for U.S. federal income tax purposes, pursuant to Section 7874(b) of the Code, and will be subject to U.S. federal income tax on its worldwide income. As a result, subject to an applicable tax treaty or convention, the Company will be subject to taxation both in Canada and the U.S., which could have a material adverse effect on the Company’s business, financial condition and results of operations. All shareholders and investors should consult with their own tax advisors in this regard. Dividends, if ever paid, on the Company’s Common Shares will be subject to Canadian and/or United States withholding tax. It is currently anticipated that the Company will not pay any dividends on its Common Shares in the foreseeable future. To the extent dividends are paid, dividends received by holders of the Company’s Common Shares who are not residents of the U.S. and who are residents of Canada for purposes of the Tax Act will be
TABLE OF CONTENTS subject to U.S. withholding tax. Any dividends may not qualify for a reduced rate of withholding tax under the U.S.-Canada income tax treaty (“Canada-U.S. Tax Convention”). Any U.S. withholding taxes paid by or on behalf of a resident of Canada in respect of dividends received on the Company’s Common Shares may be eligible for foreign tax credit or deduction treatment where applicable under the Tax Act. Generally, a foreign tax credit in respect of a tax paid to a particular foreign country is limited to the Canadian tax otherwise payable in respect of income sourced in that country. Dividends received on the Company’s Common Shares by a resident of Canada may not be treated as income sourced in the United States for these purposes, such that a foreign tax credit under the Tax Act may not be available. Residents of Canada should consult their own tax advisors with respect to the availability of any foreign tax credits or deductions under the Tax Act in respect of any U.S. withholding taxes applicable to dividends on the Company’s Common Shares. Dividends received by stockholders who are residents of the U.S. will not be subject to U.S. withholding tax but will be subject to Canadian withholding tax. Any dividends may not qualify for a reduced rate of withholding tax under the Canada-U.S. Tax Convention. 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. Dividends paid by us will be characterized as U.S. source income for purposes of the foreign tax credit rules under the Code. Accordingly, U.S. holders generally will not be able to claim a credit for any Canadian tax withheld unless, depending on the circumstances, they have an excess foreign tax credit limitation due to other foreign source income that is subject to a low or zero rate of foreign tax. Subject to certain limitations, a U.S. holder should 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. Dividends received by non-U.S. holders who are not residents of Canada for purposes of the Tax Act will be subject to U.S. withholding tax and will also be subject to Canadian withholding tax. These dividends may not qualify for a reduced rate of U.S. withholding tax under any income tax treaty otherwise applicable to our stockholders, subject to examination of the relevant treaty. These dividends may, however, qualify for a reduced rate of Canadian withholding tax under any income tax treaty otherwise applicable to our stockholders, subject to examination of the relevant treaty. Each holder of the Company’s Common Shares should seek tax advice, based on such stockholder’s particular facts and circumstances, from an independent tax advisor. Changes in tax laws may affect the Company and its stockholders and other investors. There can be no assurance that the Company’s Canadian and U.S. federal income tax treatment or an investment in the Company will not be modified, prospectively or retroactively, by legislative, judicial or administrative action, in a manner adverse to the Company or its stockholders or other investors.
TABLE OF CONTENTS MARKET AND INDUSTRY DATA This Registration Statement contains information concerning the market and industry in which we conduct our business. We operate in an industry in which it is difficult to obtain precise industry and market information. We have obtained market and industry data in this Registration Statement from industry publications and from surveys or studies conducted by third parties that it believes to be reliable. We cannot assure you of the accuracy and completeness of such information, and it has not independently verified the market and industry data contained in this Registration Statement or the underlying assumptions relied on therein. As a result, you should be aware that it is possible that any such market, industry and other similar data may not in fact be reliable. In addition, any such market, industry and other similar data speaks as of its original publication date (and not as of the date of this Registration Statement) and we do not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein. While we are not aware of any misstatements regarding any industry data presented in this prospectus, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the section titled “Risk Factors” in this Registration Statement.
TABLE OF CONTENTS USE OF PROCEEDS All of the Common Shares offered by the Selling Stockholders pursuant to this prospectus will be sold by the Selling Stockholders for their own account. We will not receive any of the proceeds from the resale of the Common Shares. However, to the extent that the Warrants are exercised for cash, we will receive proceeds from any exercise of the Warrants up to an aggregate of approximately $17 million. There are no assurances that the Warrants will ever be exercised, particularly to the extent the current market price for our Common Shares continues to be significantly below the exercise price of the Warrants. When the market price for our Common Shares is less than the exercise price of the Warrants, which it is at the time of this prospectus, we believe that warrant holders will be unlikely to exercise their Warrants. The proceeds from any exercise of Warrants that we receive, if any, are currently expected to be used for general corporate purposes, including working capital. Accordingly, we retain broad discretion over the use of the net proceeds from the sale of our Warrants. The precise amount and timing of the application of such proceeds will depend upon our liquidity needs and the availability and cost of other capital over which we have little or no control. As of the date hereof, we cannot specify with certainty the particular uses for the net proceeds from the exercise of Warrants. We will incur all costs associated with this prospectus and the registration statement of which it is a part. See “Plan of Distribution” for additional information.
TABLE OF CONTENTS DETERMINATION OF OFFERING PRICE We cannot currently determine the price or prices at which Common Shares may be sold by the Selling Stockholders under this prospectus. MARKET INFORMATION FOR SECURITIES AND DIVIDEND POLICY Market Information Our Common Shares and warrants are currently listed on the Nasdaq Capital Market under the symbol “DEVS”. On May 27, 2025, there were 22 holders of record of the Common Shares. Dividend Policy We have never declared or paid any dividends on our Common Shares. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Any decision to declare and pay dividends in the future will depend on, among other things, the consent of our lender(s), our results of operations, cash requirements, financial condition, contractual restrictions, funds lawfully available therefor and other factors that our board of directors may deem relevant.
TABLE OF CONTENTS MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF DEVVSTREAM Cautionary Note Regarding Forward-Looking Statements The following discussion and analysis should be read in conjunction with DevvStream’s unaudited condensed consolidated interim financial statements and related notes for the three and nine months ended April 30, 2025 and 2024 (“interim financial statements”), which have been prepared in accordance with US GAAP and are included elsewhere in this report. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those described in our other SEC filings, including those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in our Current Report on Form 8-K/A filed with the SEC on March 7, 2025. All figures are in US dollars unless otherwise noted. Unless the context otherwise requires, for the purposes of this section, “DevvStream,” “we,” “us,” “our,” or the “Company” refer to DevvStream Corp., a company existing under the Laws of the Province of Alberta, Canada, and its subsidiaries. Company Overview DevvStream is a technology-based sustainability company that advances the development and monetization of environmental assets, with an initial focus on carbon markets. The Company’s mission is to create alignment between sustainability and profitability, helping organizations achieve their climate initiatives while directly improving their financial health. With a diverse approach to the International Renewable Energy Certificate (“I-REC”) and carbon market, DevvStream operates across three strategic domains: (1) an offset portfolio consisting of I-REC’s, nature-based, tech-based, and carbon sequestration credits for immediate sale to corporations and governments seeking to offset their most difficult-to-reduce emissions; (2) project investment, acquisitions, and industry consolidation to extend the Company’s reach, allowing it to become a full end-to-end solutions provider; and (3) project development, where the Company serves as project manager for eligible activities such as EV charging in exchange for a percentage of generated credits. Company Formation and Reverse Takeover Transaction We are a company existing under the Business Corporations Act of Alberta, Canada. We were a special purpose acquisition corporation (“SPAC”) incorporated in Delaware, the United States on February 23, 2021. On September 12, 2023 (and as amended May 1, 2024, August 10, 2024, and October 29, 2024, the “Business Combination Agreement”, or “BCA”), we entered into a Business Combination Agreement with DevvStream Holdings Inc. (the “Business Combination” or the “De-SPAC Transaction”). The Business Combination was structured as an amalgamation of DevvStream Holdings Inc. (“Devv Holdings”) into a wholly owned subsidiary of the Company, following our redomiciling as an Alberta company. We were then renamed from Focus Impact Acquisition Corp. to DevvStream Corp. and continue the business of Devv Holdings following the amalgamation. It was a condition of the transaction that the securities of the Combined Company will be listed on NASDAQ. On November 6, 2024, we completed the business combination with Devv Holdings, pursuant to the BCA. In connection with the completion of the business combination, we consolidated all of our issued and outstanding common stock on a 1:0.9692 basis. All the outstanding Devv Holdings subordinate voting shares (“SVS”) were exchanged for common stock of the Company on a common conversion ratio of 0.152934 (the “Common Conversion Ratio”). All the outstanding Devv Holdings multiple voting shares (“MVS”), being the equivalent of 10 SVS, were exchanged for common stock of the Company on the basis of the Common Conversion Ratio. In addition, all of the outstanding convertible securities of Devv Holdings were exchanged for securities of the Company on the basis of the Common Conversion Ratio, with corresponding adjustments to exercise prices, and otherwise on substantially the same economic terms and conditions. Our common shares commenced trading on the NASDAQ under the new ticker symbol “DEVS” on November 7, 2024. Devv Holdings is deemed as the acquirer for accounting purposes, and therefore its assets, liabilities and operations are included in the consolidated financial statements at their historical carrying value. Our operations
TABLE OF CONTENTS are considered to be a continuance of the business and operations of Devv Holdings. Our results of operations are those of Devv Holdings, with our operations being included from November 6, 2024, the closing date of the De-SPAC Transaction, onwards. Recent Developments Change in Functional Currency Effective August 1, 2024, the Company reassessed its functional currency and the functional currency of its subsidiaries due to changes in underlying transactions, events, and conditions. As a result of this reassessment, the Company determined that its functional currency changed from the Canadian dollar (“CAD$”) to the United States dollar (“US$”) for DevvStream Holdings Inc. and its subsidiary, Devv Stream Inc. (“DESG”). The functional currency for DevvESG Streaming Finco Ltd. (“Finco”), another subsidiary of ours, remained CAD$. This change aligns with the business’s future focus and the effective date of the Focus Impact Acquisition Corp.’s Form S-4 Registration Statement with the SEC, a crucial part of the De-SPAC transaction closing. The change in functional currency was accounted for prospectively from August 1, 2024, with no impact on prior year comparative information. Upon the change in functional currency on August 1, 2024, 1,220,668 of the Company’s warrants which had strike prices denominated in CAD$ were reclassified as warrant liabilities. Determining the functional currency involved significant judgments to assess the primary economic environment in which the Company operates, including factors such as the currency of underlying transactions, the location of key operations, and the currency of expected cash flows. Upon the completion of the De-SPAC Transaction on November 6, 2024, 627,786 of the Company’s stock options which had strike prices denominated in CAD$ were reclassified as stock option liabilities, as exemptions from classification from derivative liability classification under ASC 718-10-25-14 that were previously applicable upon change in functional currency no longer apply upon the commencement of trading of the Company’s common shares on the NASDAQ. Results of Operations — Three Months Ended April 30, 2025 Comparison Against the Three Months Ended April 30, 2024 | | | | | | | Revenue | | | 10,164 | | | — | Cost of sales | | | (2,688) | | | — | Gross profit | | | 7,476 | | | — | Sales and marketing | | | 155,496 | | | 38,756 | Depreciation | | | 231 | | | 450 | General and administrative | | | 235,972 | | | 103,229 | Professional fees | | | 841,536 | | | 942,688 | Salaries and wages | | | 279,109 | | | 201,570 | Share-based compensation | | | 74,699 | | | 262,433 | Total operating expenses | | | (1,587,043) | | | (1,549,126) | Accretion and interest expense | | | (133,172) | | | (33,133) | Loss on investment in associate | | | (298,804) | | | — | Change in fair value of derivative liabilities | | | — | | | 500 | Change in fair value of convertible debt-FVTPL | | | — | | | (50,000) | Change in the fair value of warrant liabilities | | | 5,641,785 | | | — | Foreign exchange gain (loss) | | | (31,100) | | | (85,860) | Impairment of carbon credits | | | 18 | | | — | Stop-loss provision | | | (76,535) | | | — | Net income (loss) | | | 3,522,625 | | | (1,717,619) | | | | | | | |
During the three months ended April 30, 2025, we incurred a net income of $3,522,625 compared to net loss of $1,717,619 for the three months ended April 30, 2024. An analysis of the increase in net income of $5,240,244, including the major components thereof, is set forth below.
TABLE OF CONTENTS Share-based compensation During the three months ended April 30, 2025, we incurred share-based compensation of $74,699 compared to share-based compensation of $262,433 for the three months ended April 30, 2024. Share-based payments relating to the vesting of RSUs increased by $61,020. Share-based payments relating to the vesting of Options decreased by $248,754. Due to the listing of the Company on the NASDAQ on November 7, 2024 and commencement of trading of shares in the United States dollars, exemptions available under ASC 718-10-25-14 to classify stock options with strike prices in foreign currencies as equity were no longer met and all stock options outstanding were reassessed to be derivative liabilities. The fair value of the stock options upon the change in classification on November 6, 2024 was $330,090. Changes in fair value due to period end fair value remeasurements are reflected in compensation expense. Please refer to Note 12 of the interim financial statements. Professional fees During the three months ended April 30, 2025, we incurred $841,536 in professional fees, as compared to $942,688 during the three months ended April 30, 2024. The legal fees for both periods mainly related to the Business Combination. Salaries and wages During the three months ended April 30, 2025 and 2024, we incurred salaries and wages of $279,109 and $201,570, respectively, the majority of which were to officers of the Company. Sales and marketing Sales and marketing expenses for the three months ended April 30, 2025 and 2024 amounted to $155,496 and $38,756, respectively. These costs primarily related to publications, industry events and investor relations subsequent to our successful closing of the Business Combination. General and administrative General and administrative expenses for the three months ended April 30, 2025 and 2024 amounted to $235,972 and $103,229, respectively, and primarily comprised of insurance costs, filing fees and rent. The increase is primarily due to an increase in filing fees as a result of listing on the NASDAQ. Loss on investment in associate On November 6, 2024, the Company received 2,000,000 shares in Monroe Sequestration Partners, LLC (“MSP”), in connection with an agreement to acquire a stake in MSP in exchange for 2,000,000 shares of the Company that was entered into on October 28, 2024. At the time of acquisition, the 2,000,000 shares of MSP received by the Company represented 50% of MSP’s shares outstanding. During the 3 months ended April 30, 2025, the Company’s share of MSP’s loss was $298,804. Change in fair value of warrant liabilities Effective August 1, 2024, the Company reassessed its functional currency and the functional currency of its subsidiaries due to changes in underlying transactions, events, and conditions. As a result of this reassessment, the Company determined that its functional currency changed from the Canadian dollar (“CAD$”) to the United States dollar (“US$”) for DevvStream Holdings Inc. and DESG. Finco’s functional currency remained CAD$. This change aligns with the business’s future focus and the effective date of the Focus Impact Acquisition Corp.’s Form S-4 Registration Statement with the SEC, a crucial part of the De-SPAC transaction closing. The change in functional currency was accounted for prospectively from August 1, 2024, with no impact on prior year comparative information. The Company’s presentation currency is and continues to be the United States dollar. Upon the change in functional currency on August 1, 2024, 1,220,668 of the Company’s warrants which had strike prices denominated in CAD$ were reclassified as warrant liabilities with an initial value of $454,571.
TABLE OF CONTENTS On November 6, 2024, 22,699,987 warrants were issued by the Company in connection with the De-SPAC transaction. The warrants were assessed to be derivative liabilities of the Company due to certain settlement provisions of the warrants that do not meet the criteria for equity classification under Topic 815. The warrants are each exercisable at $1.52 for 0.9692 common stock, expiring on November 6, 2029. The fair value of the warrants was $7,196,286 upon issuance. During the three months ended April 30, 2025, we recognized a gain of $5,641,785 due to period end fair value remeasurement. Please refer to Note 11 of the interim financial statements. Foreign exchange loss During the three months ended April 30, 2025, we recognized a foreign exchange loss of $31,100. During the three months ended April 30, 2024, we recognized a foreign exchange loss of $85,860. The foreign exchange gains result from fluctuations in the Canadian dollar against the US dollar, as we hold cash balances and have accounts payable denominated in both Canadian and US dollars. Stop-loss provision On November 6, 2024, concurrent with the completion of the business combination, the Company issued 3,249,876 common shares in consideration for carbon credit purchase agreements. All of the agreements contain adjustment clauses whereby if the Company’s share price falls below the respective purchase prices outlined in the agreements, in the 12 to 18 months following November 6, 2024, the Company is obligated to issue additional shares to cover the shortfall. The Company has assessed that the potential liability associated with the stop-loss provision for carbon credits received as of April 30, 2025 is $1,101,248. Results of Operations — Nine Months Ended April 30, 2025 Comparison Against the Nine Months Ended April 30, 2024 | | | | | | | Revenue | | | 10,164 | | | — | Cost of sales | | | (2,688) | | | — | Gross profit | | | 7,476 | | | — | Sales and marketing | | | 832,188 | | | 365,406 | Depreciation | | | 953 | | | 1,374 | General and administrative | | | 627,377 | | | 393,231 | Professional fees | | | 6,846,934 | | | 4,263,900 | Salaries and wages | | | 823,016 | | | 617,400 | Share-based compensation | | | 190,136 | | | 1,048,750 | Total operating expenses | | | (9,320,604) | | | (6,690,061) | Accretion and interest expense | | | (378,718) | | | (35,676) | Loss on investment in associate | | | (405,654) | | | — | Change in fair value of derivative liabilities | | | 719,000 | | | (50,700) | Change in fair value of mandatory convertible debentures | | | 70,500 | | | — | Change in the fair value of warrant liabilities | | | 5,651,008 | | | — | Foreign exchange gain (loss) | | | (24,428) | | | (51,756) | Gain on settlement of debt | | | 899,015 | | | — | Impairment of carbon credits | | | (1,207,782) | | | — | Stop-loss provision | | | (1,101,248) | | | — | Net loss | | | (5,091,435) | | | (6,828,193) | | | | | | | |
During the nine months ended April 30, 2025, we incurred a net loss of $5,091,435 compared to net loss of $6,828,193 for the nine months ended April 30, 2024. An analysis of the decrease in net loss of $1,736,758, including the major components thereof, is set forth below.
TABLE OF CONTENTS Loss on investment in associate On November 6, 2024, the Company received 2,000,000 shares in Monroe Sequestration Partners, LLC (“MSP”), in connection with an agreement to acquire a stake in MSP in exchange for 2,000,000 shares of the Company that was entered into on October 28, 2024. At the time of acquisition, the 2,000,000 shares of MSP received by the Company represented 50% of MSP’s shares outstanding. During the nine months ended April 30, 2025, the Company’s share of MSP’s loss was $405,654. Share-based compensation During the nine months ended April 30, 2025, we incurred share-based compensation of $190,136 compared to share-based compensation of $1,048,750 for the nine months ended April 30, 2024. Share-based payments relating to the vesting of options decreased by $813,627 during the nine months ended April 30, 2025 compared to the nine months ended April 30, 2024. Share-based payments relating to the vesting of RSU’s decreased by $44,987. Due to the listing of the Company on the NASDAQ on November 7, 2024 and commencement of trading of shares in the United States dollars, exemptions available under ASC 718-10-25-14 to classify stock options with strike prices in foreign currencies as equity were no longer met and all stock options outstanding were reassessed to be derivative liabilities. The fair value of the stock options upon the change in classification on November 6, 2024 was $330,090. Changes in fair value due to period end fair value remeasurements are reflected in compensation expense. Please refer to Note 12 of the interim financial statements. Professional fees During the nine months ended April 30, 2025, we incurred $6,846,934 in professional fees, the majority of which relate to legal, audit and accounting fees incurred relating to the Business Combination. During the nine months ended April 30, 2024, we incurred $4,263,900 in professional fees, the majority of which relate to legal fees incurred relating to the Business Combination. Salaries and wages During the nine months ended April 30, 2025 and 2024, we incurred salaries and wages of $823,016 and $617,400 respectively, the majority of which were to officers of the Company. Sales and marketing Sales and marketing expenses for the nine months ended April 30, 2025 and 2024 amounted to $832,188 and $365,406, respectively. These costs primarily related to publications and industry events and investor relations subsequent to our successful closing of the Business Combination. General and administrative General and administrative expenses for the nine months ended April 30, 2025 and 2024 amounted to $627,377 and $393,231, respectively, and primarily comprised of insurance costs, filing fees. The increase is a result of increased filing fees relating to the Business Combination, offset by a decrease in rent costs as the Company no longer leases office space in FY 2025. Foreign exchange gain (loss) During the nine months ended April 30, 2025 and 2024, we recognized a foreign exchange loss of $24,428 and a loss of $51,756, respectively. The foreign exchange gain is the result of fluctuations in the Canadian dollar against the US dollar, as we hold cash balances and have accounts payable denominated in both Canadian and US dollars. Change in fair value of derivative liabilities and mandatory convertible debenture During the nine months ended April 30, 2025, we recognized a gain on derivative liabilities of $719,000 and a gain on mandatory convertible debentures of $70,500, respectively, related to the convertible debt financings completed in January 2024 and April 2024. Please refer to Note 9 of the interim financial statements.
TABLE OF CONTENTS Loss on settlement of debt On September 5, 2024, the Company issued 15,963 shares with a fair value of $47,904 in settlement of accounts payable in the amount of $39,527 and recognized a loss on the settlement of $8,377. In December 2024, the Company issued 412,478 shares with a fair value of $317,608 for the settlement of accounts payable in the amount of $1,225,000 and recognized a gain on the settlement of $907,392. Change in fair value of warrant liabilities Effective August 1, 2024, the Company reassessed its functional currency and the functional currency of its subsidiaries due to changes in underlying transactions, events, and conditions. As a result of this reassessment, the Company determined that its functional currency changed from the Canadian dollar (“CAD$”) to the United States dollar (“US$”) for DevvStream Holdings Inc. and DESG. Finco’s functional currency remained CAD$. This change aligns with the business’s future focus and the effective date of the Focus Impact Acquisition Corp.’s Form S-4 Registration Statement with the SEC, a crucial part of the De-SPAC transaction closing. The change in functional currency was accounted for prospectively from August 1, 2024, with no impact on prior year comparative information. The Company’s presentation currency is and continues to be the United States dollar. Upon the change in functional currency on August 1, 2024, 1,220,668 of the Company’s warrants which had strike prices denominated in CAD$ were reclassified as warrant liabilities with an initial value of $454,571. On November 6, 2024, 22,699,987 warrants were issued by the Company in connection with the De-SPAC transaction. The warrants were assessed to be derivative liabilities of the Company due to certain settlement provisions of the warrants do not meet the criteria for equity classification under Topic 815. The warrants are each exercisable at $1.52 for 0.9692 common stock, expiring on November 6, 2029. The fair value of the warrants was $7,196,286 upon issuance. As a result of above, during the nine months ended April 30, 2025, we recognized a gain of $5,651,008 due to period end fair value remeasurement. Please refer to Note 11 of the interim financial statements. Impairment of carbon credits and stop-loss provision On November 6, 2024, concurrent with the completion of the business combination, the Company issued 3,249,876 common shares in consideration for carbon credit purchase agreements. All of the agreements contain adjustment clauses whereby if the Company’s share price falls below the respective purchase prices outlined in the agreements, in the 12 to 18 months following November 6, 2024, the Company is obligated to issue additional shares to cover the shortfall. The Company has assessed that the potential liability associated with the stop-loss provision for carbon credits received as of April 30, 2025 is $1,101,248. The Company is currently in dispute with one of the vendors for which 1,200,000 shares with a fair value of $658,800 was issued. At the date of these financial statements, the vendor has not delivered the carbon credits which are due under the contract and the Company has issued a demand letter to the vendor. Management has assessed that it is improbable that these carbon credits will be received and has recorded an impairment charge of $658,800 during the nine months ended April 30, 2025. One of the carbon credit purchase agreements provides for the vendor to return the consideration shares received for cancellation in return for the carbon credits if a registration statement does not become effective within 45 days of the closing of the purchase agreement. As this deadline was not met, the vendor has triggered this clause under the agreement and is currently in negotiations with the Company to return 1,500,000 shares with a fair value of $549,000 issued under the contract in exchange for the carbon credits that were transferred to the Company. Management has assessed that it is probable that the carbon credits will be returned to the vendor and has recorded an impairment charge of $548,982 during the nine months ended April 30, 2025. Liquidity and Capital Resources We continually monitor and manage cash flow to assess the liquidity necessary to fund operations and capital projects. We manage our capital resources and adjust them to take into account changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust our capital resources, we
TABLE OF CONTENTS may, where necessary, control the amount of working capital, pursue financing or manage the timing of our capital expenditures. As of April 30, 2025, we had a working capital deficit of $16,424,876 (current assets of $1,143,608, less current liabilities of $17,568,484) and as of July 31, 2024, we had a working capital deficit of $8,362,363 (current assets of $141,905, less current liabilities of $8,504,268). Our continuing operations are dependent upon our ability to obtain debt or equity financing, of which there are no assurances, until such time that we achieve profitable operations. There can be no assurance that we will gain adequate market acceptance for our products or be able to generate sufficient gross margins to reach profitability. On October 29, 2024, we entered into a equity line of credit purchase agreement (the “ELOC Agreement”) with Helena Global Investment Opportunities I Ltd. (“Helena”). Pursuant to the ELOC Agreement, the Company has the right to issue and to sell to Helena from time to time, as provided in the ELOC Agreement, up to $40,000,000 of Company’s Common Shares, subject to the conditions set forth therein. Specifically, pursuant to the ELOC Agreement, the Company may require that Helena purchase Common Shares from the Company by delivering one or more advance notices to Helena setting forth, in each advance notice, the amount of the advance it is requesting, which amount many not exceed an amount equal to lesser of (i) one hundred percent (100%) of the average of the daily value traded of the Common Shares over the ten (10) trading days immediately preceding such advance notice, and (ii) eight million United States Dollars ($8,000,000). On March 18, 2025, the Company and Helena entered into a first amendment to ELOC Agreement, which provides the Company with greater flexibility by allowing Helena to permit Secondary Advances, as defined in the amendment, as well as to update references to “Common Stock” in the ELOC Agreement to “Common Shares”. However, in no event may the number of Common Shares issuable to Helena pursuant to an advance cause the aggregate number of shares beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act) by Helena and its affiliates as a result of previous issuances and sales of Common Shares to Helena under the ELOC Agreement to exceed 9.99% of the then outstanding Common Shares. Additionally, the Company may not affect any sales under the ELOC Agreement and Helena will have no obligation to purchase Common Shares under the ELOC Agreement to the extent (but only to the extent) that after giving effect to such purchase and sale the aggregate number of Common Shares issued under the ELOC Agreement would exceed 19.99% of the outstanding shares of Common Shares following the closing of the Business Combination Agreement (the “Exchange Cap”), provided that, the Exchange Cap will not apply if the Company’s stockholders have approved issuances in excess of the Exchange Cap in accordance with the rules of the Nasdaq. The purchase price for the Common Shares so purchased by Helena pursuant to an advance notice is the lowest intraday sale price for the Common Shares during the three (3) trading days commencing on the date of Helena’s receipt of the Common Shares relating to such advance. Because the per share purchase price that Helena will pay for Common Shares in connection with any advance notice we have elected to deliver to Helena pursuant to the ELOC Agreement will be determined by reference to the lowest intraday sale price for the Common Shares during the three (3) trading days commencing on the date of Helena’s receipt of the Common Shares relating to such advance, we cannot determine the actual purchase price per share that Helena will be required to pay for any Common Shares that we may elect to sell to Helena under the ELOC Agreement until after we deliver an advance notice and, therefore, we cannot be certain how many Common Shares, in the aggregate, we may issue and sell to Helena under the ELOC Agreement. Sales of Common Shares to Helena under the ELOC Agreement will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the Common Share and determinations by us as to the appropriate sources of funding for our business and operations. We may not be able to raise sufficient funds under the ELOC Agreement to satisfy our obligations. Since our inception, we have incurred operating losses and have experienced negative cash flows from operations. We do not anticipate that cash on hand will be adequate to satisfy our obligations in the ordinary course of business over the next 12 months. Based on this assessment, we have material uncertainties about our business that cast substantial doubt about our ability to continue as a going concern. Accordingly, our ability to continue as a going concern is dependent upon our ability to raise sufficient funds to pay ongoing operating expenditures and to meet our obligations. See further discussion related to our ability to continue as a going concern within “— Critical Accounting Policies and Estimates.” As of April 30, 2025 and July 31, 2024, we had $4,002 and $21,106 in cash, respectively. We are actively managing current cash flows until such time that we are profitable.
TABLE OF CONTENTS The chart below highlights our cash flows for the periods indicated: | | | | | | | Net cash provided by (used in):
| | | | | | | Operating activities | | | (4,763,601) | | | (1,421,362) | Investing activities | | | 1,661,645 | | | — | Financing activities | | | 3,083,417 | | | 1,039,629 | Effect of exchange rate changes on cash | | | 1,435 | | | (5,248) | (Decrease)/Increase in cash | | | (17,104) | | | (386,981) | | | | | | | |
Cash Used in Operating Activities Our net cash used in operating activities is primarily due to cash payments for operating expenses that we incur in the day-to-day operations of the business. Net cash used in operating activities for the nine months ended April 30, 2025 was $4,763,601 compared to $1,421,362 for the nine months ended April 30, 2024. The loss for the nine months ended April 30, 2025 of $5,091,435 was offset by $4,384,826 in changes in working capital items and increased by $4,056,992 in non-cash items consisting mainly of the gain on warrant liability and gain on derivative liability, and offset by the impairment loss and stop-loss provision on carbon credits. This compares to a loss of $6,828,193 for the prior period, that was offset by $4,225,710 in changes in working capital items and $1,181,121 in non-cash items consisting mainly of share-based compensation. Cash Provided by Investing Activities Net cash provided by investing activities for the nine months ended April 30, 2025 was $1,661,645, consisting of the cash assumed upon the completion of the Business Combination. Net cash provided by investing activities for the nine months ended April 30, 2024 was $nil. Cash Provided by Financing Activities We have funded our business to date from the issuance of our common stock and convertible debentures through private placements, from proceeds from the exercises of warrants, and from loans from related parties. Net cash provided by financing activities for the nine months ended April 30, 2025 was $3,083,417 compared to $1,039,629 for the nine months ended April 30, 2024. The following financing activities occurred during the nine months ended April 30, 2025: (1)
Exercise of share purchase warrants: On October 29, 2024, the Company issued 91,760 shares for the exercise of 91,760 share purchase warrants, at an exercise price of CAD$1.31 per share for gross proceeds of $86,237. (2)
Non-brokered private placement of unsecured convertible notes: | On August 19, 2024, October 18, 2024, October 28, 2024, and November 1, 2024 the Company received additional proceeds of $41,500, $6,500, $7,650 and $12,000 under the amended terms of the Focus Impact Partners convertible debenture. On March 19, 2025, the Company received proceeds of $218,000 under a new convertible debenture issued to Focus Impact Partners. Refer to Note 9 of our interim financial statements. In October 2024, the mandatory convertible debentures were converted to 146,786 shares of the Company. Refer to Note 10 of the interim financial statements. On November 6, 2024, the Company issued 1,694,808 shares to various investors for gross proceeds of $2,250,000, of which $20,000 remain receivable as of April 30, 2025. In March 2025, the Company issued 1,606,000 shares in accordance with the ELOC Agreement with Helena Global Investment Opportunities I Ltd for gross proceeds of $481,530.
TABLE OF CONTENTS Related party transactions and balances Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties may be individuals or corporate entities. A transaction is a related party transaction when there is a transfer of resources or obligations between related parties. At April 30, 2025, the Company had amounts owing and accrued liabilities of $484,911 (July 31, 2024 - $478,072) payable to directors and officers of the Company for salaries, expense reimbursements and professional fees. These amounts are non-interest bearing and have no terms of repayment. During the nine months ended April 30, 2025, the Company accrued wages and management fees of $603,417 and $159,000 (2024 - $473,923 and $118,074), respectively, to officers of the Company. During the nine months ended April 30, 2025, the Company accrued interest of $149,905 (2024 - $7,224) on convertible debentures payable to related parties. Refer to Note 9 of our interim financial statements. During the nine months ended April 30, 2025, the Company amended the terms of convertible debentures payable to Focus Impact Partners and Focus Impact Sponsor, LLC, with face values of $637,150 and $3,345,000, respectively. The convertible debentures have an amended maturity date of November 13, 2026, and the principal and interest are convertible into common stock of the Company at the option of the holder at a 25% discount to the 20-day volume weighted average price of the Company’s shares, subject to a floor of $0.867 per share. Focus Impact Partners is owned by two of the Company’s directors: Carl Stanton and Wray Thorn. During the nine months ended April 30, 2025, the Company issued a new convertible debenture payable to Focus Impact Partners with face value of $218,000. The convertible debenture has a maturity date of March 19, 2027, and the principal and interest are convertible into common stock of the Company at the option of the holder at a 25% discount to the 20-day volume weighted average price of the Company’s shares. During the nine months ended April 30, 2025, the Company issued 557,290 common shares to Focus Impact Partners in consideration for services provided to the Company pursuant to the strategic consulting agreement between the Company and Focus Impact Partners dated November 13, 2024. See, Contractual Obligations below. During the year ended July 31, 2024, the Company issued convertible debentures to Devvio Inc. (“Devio”) and Envviron SAS (“Envviron”), who are related parties to the Company. The Devvio convertible debt had a principal amount of $100,000, while the Envviron convertible debt had a principal amount of $250,000. Devvio owns in excess of 10% of the outstanding shares of the Company. Envirron is controlled by Ray Quintana, a former director of the Company who stepped down on November 7, 2024 upon completion of the Business Combination. On November 12, 2024, the maturity for the convertible debentures issued to Devvio and Envviron are extended to May 30, 2025. During the year ended July 31, 2024, the Company signed an amended strategic partnership agreement with Devvio dated November 28, 2021. Contractual Obligations Prepaid Royalties Agreement with Devvio In September 2023, we agreed to pay prepaid royalty payments to Devvio, a related party, equal to a minimum of $2,270,000, to be paid by August 1, 2025 and $1,270,000 to be paid by August 1, 2026. On July 8, 2024, we further amended the agreement such that the minimum advances extended by one year and are now due as follows: $1,000,000 by August 1, 2025, followed by $1,270,000 by August 1, 2026 and August 1, 2027. On February 16, 2024, we entered into a licensing agreement with Greenlines Technology Inc. for the use of certain technologies. We agreed to pay $42,000 within 15 days of the closing of the BCA. Such amount was paid on November 26, 2024. Commencing January 1, 2025, we must pay an annual fee of $12,000 of the first day of each calendar year for the use of the technology. The amounts due on January 1, 2025 are yet to be paid as of April 30, 2025. The Company has accrued $4,000 in connection with the annual fee payable as of April 30, 2025.
TABLE OF CONTENTS Equity line of credit (“ELOC”) fee commitment with Helena Global Investment Opportunities I Ltd (“Helena I”) On October 29, 2024, we entered into the ELOC Agreement with Helena I. Following the closing of the De-SPAC Transaction and the Helena I Registration Statement becoming effective, we are to issue to Helena I common shares equal to $125,000 divided by the greater of (i) the lowest one-day VWAP during the five trading days immediately preceding the effectiveness date of such Registration Statement and (ii) $0.75. The Company issued 166,667 shares in satisfaction of this commitment on March 17, 2025. Strategic Consulting Agreement with Focus Impact Partners, LLC (“Focus Impact Partners”) On November 13, 2024, we entered into a strategic consulting agreement with Focus Impact Partners, pursuant to which the Focus Impact Partners will provide us with certain consulting services (“Strategic Consulting Agreement”) in consideration of an annual consulting fee of $500,000, which will be payable in quarterly installments of $125,000 starting with an initial payment for the period beginning December 31, 2023. Fees due under the Strategic Consulting Agreement accrue and not be payable until (a) we have successfully raised $5,000,000 in outside debt and/or equity capital, cumulatively since the period beginning December 31, 2023 or (b) we have 2 or more consecutive quarters of positive cash flow from operations. As of April 30, 2025, neither conditions have been met. We will pay Focus Impact Partners additional consulting fees as to be mutually agreed consistent with market practice in connection with any acquisition, merger, consolidation, business combination, sale, divestiture, financing, refinancing, restructuring or other similar transaction. The Strategic Consulting Agreement has a term of three years unless terminated early with at least 120 days advance notice and will be automatically extended for successive one-year periods at the end of each year unless either party provide a written notice of its desire not to automatically extend at least 120 days prior to the end of each year during the term of the Strategic Consulting Agreement. Focus Impact Partners is owned by two of the Company’s directors: Carl Stanton and Wray Thorn. Quantitative and Qualitative Disclosures about Market Risk Our board of directors have overall responsibility for the establishment and oversight of our risk management policies on an annual basis. Management identifies and evaluates our financial risks and is charged with the responsibility of establishing controls and procedures to ensure financial risks are mitigated in accordance with the approved policies. Our financial instruments consist of cash, GST receivable, accounts payable and accrued liabilities, convertible debt. mandatory convertible debentures, warrant liabilities and derivative liabilities. The carrying value of the Company’s cash, GST receivable and accounts payable and accrued liabilities approximate their fair value due to their short terms to maturity. Our risk exposures and the impact on our financial instruments are summarized below: Credit Risk Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. Our credit risk is primarily attributable to our liquid financial assets including cash. Our financial assets are cash, trade receivable, GST receivable, corporate taxes receivable, subscription receivable, and deposit on carbon credits purchase. Our maximum exposure to credit risk, as at period end, is the carrying value of our financial assets, being $975,650 and $106,764 as of April 30, 2025 and July 31, 2024, respectively. We hold cash with major financial institutions and with a publicly traded payment processing company therefore minimizing our credit risk. Liquidity Risk Liquidity risk is the risk that we will not be able to meet financial obligations as they fall due. We manage liquidity by maintaining adequate cash balances and by raising equity and debt financings. We have no assurance that such financings will be available on favorable terms in the future. In general, we attempt to avoid exposure to liquidity risk by obtaining corporate financing through the issuance of shares. As of April 30, 2025, we had cash of $4,002 to settle current liabilities of $10,877,745 which fall due for payment within twelve months of the statement of financial position. As of July 31, 2024, we had cash of $21,106 to settle current liabilities of $7,595,974 which fall due for payment within twelve months of the statement of financial position. All of our contractual obligations are current and due within one year.
TABLE OF CONTENTS Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or value of its holdings or financial instruments. At April 30, 2025, the Company has minimal exposure to these risks. Inflation Risk We do not believe that inflation had a significant impact on our results of operations for any periods presented in our interim financial statements. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs, and our inability or failure to do so could harm our business, financial condition and results of operations. Capital Management Capital is comprised of our shareholders’ deficiency and any debt that we may issue. Our objectives when managing capital are to maintain financial strength and to protect our ability to meet ongoing liabilities, to continue as a going concern, to maintain creditworthiness and to maximize returns for our shareholders over the long term, of which there can be no assurances. Protecting the ability to pay current and future liabilities includes maintaining capital above minimum regulatory levels, current financial strength rating requirements and internally determined capital guidelines and calculated risk management levels. We manage capital structure to maximize financial flexibility by making adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. We do not presently utilize any quantitative measures to monitor our capital, but rather we rely on our management’s expertise to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given our size, is reasonable. There were no changes to our approach to capital management during the period. We are not subject to externally imposed capital requirements. Inflation Reduction Act of 2022 (the “IR Act”) On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other measures, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations. The excise tax is imposed on the repurchasing corporation and the amount of the excise tax is generally 1% of the fair market value of the stock repurchased. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The Treasury has been given authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of the excise tax. The IR Act applies only to repurchases that occur after December 31, 2022. During the second quarter of 2024, the IRS issued final regulations with respect to the timing and payment of the excise tax. Pursuant to those regulations, the Company would need to file a return and remit payment for any liability incurred during the period from January 1, 2023 to December 31, 2023 on or before October 31, 2024. For certain taxpayers affected by Hurricane Beryl, the deadline to file such returns and remit such payment has been extended to February 2025. The Company is currently evaluating its options with respect to payment of this obligation. If the Company is unable to pay its obligation in full, it will be subject to additional interest and penalties which are currently estimated at 10% interest per annum and a 5% underpayment penalty per month or portion of a month up to 25% of the total liability for any amount that is unpaid from November 1, 2024 until paid in full. Emerging Growth Company Status We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we will take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act,
TABLE OF CONTENTS reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. Smaller Reporting Company Additionally, we are a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by non-affiliates exceeds $250 million as of the last business day of our second fiscal quarter, or (ii) our annual revenue exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the last business day of our second fiscal quarter. If we continue to be a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from these certain reduced disclosure requirements that are available to smaller reporting companies. Evaluation of Disclosure of Controls and Procedures Based on an evaluation as of April 30, 2025, our management, including the Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were not effective to provide reasonable assurance because of a material weakness in our internal control over financial reporting as described below. There have been no changes during the nine months ended April 30, 2025. Material Weakness 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 our annual or interim financial statements will not be prevented or detected in a timely manner. We did not design or maintain an effective control environment commensurate with financial reporting requirements. Specifically, we did not consistently have documented evidence of review procedures and, due to resource limitations, did not always maintain segregation of duties between preparing and reviewing analyses, and reconciliations. The above material weakness did not result in a material misstatement of our unaudited condensed consolidated financial statements or our consolidated financial statements, however, it could result in a misstatement of our account balances or disclosures that would result in a material misstatement that would not be prevented or detected. Remediation Activities We are working to remediate the material weakness and are taking steps to strengthen our internal control over financial reporting through the continued hiring of additional appropriately skilled finance and accounting personnel with the requisite technical knowledge and skills. With the additional skilled personnel, we are taking appropriate and reasonable steps to remediate this material weakness through the implementation of appropriate segregation of duties, formalization of accounting policies and controls and retention of appropriate expertise for complex accounting transactions. We will not be able to fully remediate these control deficiencies until these steps have been completed and have been operating effectively for a sufficient period of time. Management will
TABLE OF CONTENTS continue to review and make necessary changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded that these controls are operating effectively. Subsequent Events Issuance of shares In May 2025, the Company issued 3,346,000 shares in accordance with the ELOC Agreement with Helena I for gross proceeds of $1,051,857. Return of carbon credits and cancellation of shares On May 6, 2025, the Company entered into an agreement with a vendor of carbon credits for the return of the 1,500,000 consideration shares received for cancellation in return for the carbon credits.
TABLE OF CONTENTS MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF DEVVSTREAM FOR THE YEAR ENDED JULY 31, 2024 AND 2023 The following discussion and analysis should be read in conjunction with the DevvStream Holdings Inc. (defined as “DevvStream” for this section) audited consolidated financial statements and related notes for the year ended July 31, 2024 and 2023 (“consolidated financial statements”), which have been prepared in accordance with US GAAP and are included elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” which is incorporated by reference into this prospectus. All figures are in US dollars unless otherwise noted. Unless the context otherwise requires, for the purposes of this section, “DevvStream,” “we,” “us,” “our,” or the “Company” refer to DevvStream Holdings Inc. and its subsidiaries. Company Overview DevvStream is a technology-based sustainability company that advances the development and monetization of environmental assets, with an initial focus on carbon markets. The Company’s mission is to create alignment between sustainability and profitability, helping organizations achieve their climate initiatives while directly improving their financial health. With a diverse approach to the International Renewable Energy Certificate (“I-REC”) and carbon market, DevvStream operates across three strategic domains: (1) an offset portfolio consisting of I-REC’s, nature-based, tech-based, and carbon sequestration credits for immediate sale to corporations and governments seeking to offset their most difficult-to-reduce emissions; (2) project investment, acquisitions, and industry consolidation to extend the Company’s reach, allowing it to become a full end-to-end solutions provider; and (3) project development, where the Company serves as project manager for eligible activities such as EV charging in exchange for a percentage of generated credits. Company Formation and Reverse Takeover Transaction We were incorporated under the British Columbia Business Corporations Act on August 13, 2021. On December 17, 2021 (and as amended on March 30, 2022, May 18, 2022, August 11, 2022 and October 24, 2022), we entered into a business combination agreement (the “Transaction Agreement”) with DevvStream Inc. (“DESG”) and DevvESG Streaming Finco Ltd. (“Finco”). The transaction closed on November 4, 2022 and constituted a reverse takeover of DevvStream by DESG. We changed our name from 1319738 B.C. Ltd. to DevvStream Holdings Inc. upon the completion of the transaction. Pursuant to the Transaction Agreement, we acquired all of the issued and outstanding Subordinate Voting Shares (“SVS”) and Multiple Voting Shares (“MVS”) of DESG by way of a three-cornered amalgamation among DevvStream, DESG and a Delaware subsidiary of DevvStream (the “Transaction”). Former SVS holders of DESG received one of our SVS for each SVS held and former MVS holders of DESG received one of our MVS for each MVS held. Pursuant to the Transaction Agreement, we and Finco were required to complete private placements for aggregate gross proceeds of $10,000,000 (the “DESG Financing” and “Finco Financing”, respectively). The DESG Financing consisted of a unit private placement for our units at a price of CAD$0.80 per unit. Each unit under the DESG Financing consisted of one SVS and one SVS purchase warrant exercisable at a price of CAD$1.50 per share for a period of 24 months from the closing date of the Transaction. The Finco Financing consisted of a special warrant private placement at a price of CAD$0.80 per special warrant. Each special warrant converted into one unit of Finco consisting of one common share and one common share purchase warrant. Each Finco common share purchase warrant entitles the holder to purchase, upon exercise thereof, one Finco common share at a price of CAD$1.50 per share for a period of 24 months from the closing date of the Transaction. In connection with the closing of the Transaction, we completed a consolidation of our shares on the basis of 28.09 pre-consolidation shares for each post-consolidation share.
TABLE OF CONTENTS DESG is deemed as the acquirer for accounting purposes, and therefore its assets, liabilities and operations are included in the consolidated financial statements at their historical carrying value. Our operations are considered to be a continuance of the business and operations of DESG from the date of its incorporation on August 27, 2021. Our results of operations are those of DESG, with our operations and Finco’s operations both being included from November 4, 2022, the closing date of the Transaction, onwards. Recent Developments Focus Impact Acquisition Corp. (“FIAC”) Business Combination On September 12, 2023 (and as amended May 1, 2024, August 10, 2024, and October 29, 2024, the “Business Combination Agreement”), we entered into a Business Combination Agreement with FIAC (the “Business Combination” or the “De-SPAC Transaction”). FIAC was a special purpose acquisition corporation focused on amplifying social impact through the pursuit of a merger or business combination with socially forward companies. The Business Combination was structured as an amalgamation of DevvStream into a wholly owned subsidiary of FIAC, following FIAC’s redomiciling as an Alberta company. FIAC would then be renamed DevvStream Corp. and continue the business of the Company following the amalgamation. It was a condition of the transaction that the securities of the Combined Company will be listed on NASDAQ. On November 6, 2024, we completed the business combination with FIAC, pursuant to the BCA. In connection with the completion of the business combination, the Company changed its jurisdiction from the State of Delaware under the Delaware General Corporation Law to the Province of Alberta, Canada, and thereby become a company existing under the Business Corporations Act (Alberta) and changed its name to DevvStream Corp., and (b) DevvStream and Amalco Sub amalgamated to form one corporate entity. DevvStream Corp’s common shares commenced trading on the NASDAQ under the new ticker symbol “DEVS” on November 7, 2024. Refer below to “Subsequent Events” for additional information related to the De-SPAC Transaction. Amended Agreement with Devvio On September 12, 2023, we amended our existing strategic partnership agreement with Devvio. As part of this amendment, we have committed to making specific payments to Devvio. We will provide a minimum advance payment of $2,270,000 by August 1, 2025, followed by $1,270,000 payment by August 1, 2026. Additionally, starting from 2027, if advance royalty payments fall below $1,000,000 in any year, Devvio has the right to terminate the agreement with us. On July 8, 2024, we further amended the agreement with Devvio, extending the minimum advances by one year. The revised due dates are as follows: $1,000,000 by August 1, 2025, followed by $1,270,000 by August 1, 2026, and August 1, 2027. Additionally, starting in calendar year 2028, if advance royalty payments fall below $1,000,000 in any year, Devvio reserves the right to terminate the Strategic Partnership Agreement. Mutual Termination of Agreement On June 26, 2024, we mutually agreed to terminate the Carbon Credit Streaming Agreement, originally executed on May 27, 2023 with BC Road Builders and Heavy Construction Association (“BC Roadbuilders”). The termination, which was effective immediately, was reached amicably and without any event of default. As part of the termination, both parties released each other from any future obligations, claims, or liabilities related to the Agreement. The termination allows DevvStream to reallocate resources to alternative initiatives that align with its strategic goals and operational priorities, thereby enhancing its ability to generate long-term shareholder value.
TABLE OF CONTENTS Results of Operations — Three Months Ended July 31, 2024 Comparison Against the Three Months Ended July 31, 2023 | | | | | | | Sales and marketing | | | 115,698 | | | 491,014 | Depreciation | | | 397 | | | 462 | General and administrative | | | 67,936 | | | 104,103 | Professional fees | | | 1,392,452 | | | 746,662 | Salaries and wages | | | 228,397 | | | 203,026 | Share-based compensation | | | 241,577 | | | 580,826 | Total operating expenses | | | (2,046,457) | | | (2,126,093) | Other income | | | — | | | 6,542 | Accretion and interest expense | | | (46,174) | | | (2,134) | Unrealized loss on derivative liabilities | | | (795,000) | | | — | Unrealized loss on mandatory convertible debentures | | | (27,500) | | | — | Foreign exchange loss | | | (55,878) | | | (23,589) | Net loss before income tax | | | (2,971,009) | | | (2,145,274) | Current income tax expense | | | (72,546) | | | — | Net loss | | | (3,043,555) | | | (2,145,274) | | | | | | | |
During the three months ended July 31, 2024, we incurred a net loss of $3,043,555 compared to net loss of $2,145,274 for the three months ended July 31, 2023. An analysis of the increase in net loss of $898,281, including the major components our results for the periods, is below. Share-based compensation During the three months ended July 31, 2024, we incurred share-based compensation of $241,577 compared to share-based compensation of $580,826 for the three months ended July 31, 2023. Share-based payments relating to the vesting of RSUs decreased by $128,496. Share-based payments relating to the vesting of options decreased by $210,753. Professional fees During the three months ended July 31, 2024, we incurred $1,392,452 in professional fees, the majority of which relate to legal fees incurred relating to the De-SPAC Transaction. During the three months ended July 31, 2023, we incurred $746,662 in professional fees relating to legal fees incurred for the Transaction, general corporate matters and consulting fees related to advisory services. Salaries and wages During the three months ended July 31, 2024 and 2023, we incurred salaries and wages of $228,397 and $203,026, respectively, the majority of which were to officers of the Company. Sales and marketing Sales and marketing expenses for the three months ended July 31, 2024 and 2023 amounted to $115,698 and $491,014, respectively. These costs primarily related to publications, industry events and investor relations subsequent to our successful listing on the Cboe Exchange and the OTCQB. General and administrative General and administrative expenses for the three months ended July 31, 2024 and 2023 amounted to $67,936 and $104,103, respectively, and primarily comprised of insurance costs, filing fees and rent. The decrease is primarily a in rent as compared to the previously comparable period.
TABLE OF CONTENTS Foreign exchange loss During the three months ended July 31, 2024 and 2023, we recognized a foreign exchange loss of $55,878 and $23,589, respectively. The foreign exchange loss is the result of fluctuations in the Canadian dollar against the US dollar, as we hold cash balances and have accounts payable denominated in both Canadian and US dollars. Unrealized loss on derivative liability and convertible debt During the three months ended July 31, 2024, we recognized a loss on derivative liabilities of $795,000 and a loss on mandatory convertible debentures measured at fair value through profit and loss of $27,500, respectively, related to the convertible debt financings completed during fiscal 2024. Please refer to Note 6 and Note 7 of the consolidated financial statements. Results of Operations — Year Ended July 31, 2024 Comparison Against the Year Ended July 31, 2023 | | | | | | | Sales and marketing | | | 481,104 | | | 914,409 | Depreciation | | | 1,771 | | | 1,849 | General and administrative | | | 461,167 | | | 440,509 | Professional fees | | | 5,656,352 | | | 1,994,826 | Salaries and wages | | | 845,797 | | | 777,112 | Share-based compensation | | | 1,290,327 | | | 1,838,811 | Total operating expenses | | | (8,736,518) | | | (5,967,516) | Other income | | | — | | | 10,139 | Accretion and interest expense | | | (81,850) | | | (3,040) | Unrealized loss on derivative liabilities | | | (845,700) | | | — | Unrealized loss on mandatory convertible debentures | | | (27,500) | | | — | Foreign exchange gain (loss) | | | (107,634) | | | 55,764 | Net loss before income taxes | | | (9,799,202) | | | (5,904,653) | Current income tax expense | | | (72,546) | | | — | Net loss | | | (9,871,748) | | | (5,904,653) | | | | | | | |
During the year ended July 31, 2024, we incurred a net loss of $9,871,748 compared to net loss of $5,904,653 for the year ended July 31, 2023. An analysis of the increase in net loss of $3,967,095 including the major components our results for the periods, is below. Share-based compensation During the year ended July 31, 2024, we incurred share-based compensation of $1,290,327 compared to share-based compensation of $1,838,811 for the year ended July 31, 2023. Share-based payments relating to the vesting of RSUs decreased by $438,738. Share-based payments relating to the vesting of options decreased by $86,002. We also recognized $Nil in warrant modifications during the year ended July 31, 2024, compared to $23,744 during the year ended July 31, 2023. Professional fees During the year ended July 31, 2024, we incurred $5,656,352 in professional fees, the majority of which relate to legal, audit and accounting fees incurred relating to the De-SPAC Transaction. During the year ended July 31, 2023, we incurred $1,994,826 in professional fees relating to legal fees incurred for the Transaction, general corporate matters and consulting fees related to advisory services. Legal and accounting costs of $114,930 were incurred as part of the Transaction and recorded within professional fees during the year ended July 31, 2023. Salaries and wages During the years ended July 31, 2024 and 2023, we incurred salaries and wages of $845,797 and $777,112 respectively, the majority of which were to officers of the Company.
TABLE OF CONTENTS Sales and marketing Sales and marketing expenses for the years ended July 31, 2024 and 2023 amounted to $481,104 and $914,409, respectively. These costs primarily related to publications, industry events and investor relations subsequent to our successful listing on the Cboe Exchange and the OTCQB. General and administrative General and administrative expenses for the years ended July 31, 2024 and 2023 amounted to $461,167 and $440,509, respectively, and primarily comprised of insurance costs, filing fees and rent. Foreign exchange gain (loss) During the years ended July 31, 2024 and 2023, we recognized a foreign exchange loss of $107,634 and a gain of $55,764, respectively. The foreign exchange gain is the result of fluctuations in the Canadian dollar against the US dollar, as we hold cash balances and have accounts payable denominated in both Canadian and US dollars. Unrealized loss on derivative liabilities and mandatory convertible debentures During the year ended July 31, 2024, we recognized a loss on derivative liabilities of $845,700 and a loss on mandatory convertible debentures measured at fair value through profit and loss of $27,500 related to the convertible debt financings completed during fiscal 2024. Please refer to Note 6 and Note 7 of the consolidated financial statements. Liquidity and Capital Resources We continually monitor and manage cash flow to assess the liquidity necessary to fund operations and capital projects. We manage our capital resources and adjust them to take into account changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust our capital resources, we may, where necessary, control the amount of working capital, pursue financing or manage the timing of our capital expenditures. As of July 31, 2024, we had a working capital deficit of $8,362,363 (current assets of $141,905, less current liabilities of $8,504,268) and as of July 31, 2023, we had a working capital deficit of $57,583 (current assets of $851,069, less current liabilities of $908,652). Our continuing operations are dependent upon our ability to obtain debt or equity financing until such time that we achieve profitable operations. There can be no assurance that we will gain adequate market acceptance for our products or be able to generate sufficient gross margins to reach profitability. Since our inception, we have incurred operating losses, have experienced negative cash flows from operations and have not generated revenue. We do not anticipate that cash on hand will be adequate to satisfy our obligations in the ordinary course of business over the next 12 months. Based on this assessment, we have material uncertainties about our business that cast substantial doubt about our ability to continue as a going concern. Accordingly, our ability to continue as a going concern is dependent upon our ability to raise sufficient funds to pay ongoing operating expenditures and to meet our obligations. See further discussion related to our ability to continue as a going concern within “— Critical Accounting Policies and Estimates.” As of July 31, 2024 and July 31, 2023, we had $21,106 and $489,971 in cash, respectively. We are actively managing current cash flows until such time that we are profitable. The chart below highlights our cash flows for the periods indicated: | | | | | | | Net cash provided by (used in):
| | | | | | | Operating activities | | | (1,548,947) | | | (3,408,144) | Investing activities | | | — | | | 10 | Financing activities | | | 1,109,629 | | | 301,984 | Effect of exchange rate changes on cash | | | (29,547) | | | (159,534) | (Decrease)/Increase in cash | | | (468,865) | | | (3,265,684) | | | | | | | |
TABLE OF CONTENTS Cash Used in Operating Activities Our net cash used in operating activities is primarily due to cash payments for operating expenses that we incur in the day-to-day operations of the business. Net cash used in operating activities for the year ended July 31, 2024 was $1,548,947 compared to $3,408,144 for the year ended July 31, 2023. The loss for the year ended July 31, 2024 of $9,871,748 was offset by $6,035,925 in changes in working capital items and $2,286,876 in non-cash items consisting mainly of share-based compensation. This compares to a loss of $5,904,653 for the prior year, that was offset by $662,391 in changes in working capital items and $1,834,118 in non-cash items consisting mainly of share-based compensation. Cash Provided by Investing Activities Net cash provided by investing activities for the year ended July 31, 2024 was $nil, compared to $10 in the year ended July 31, 2023. Net cash provided by investing activities for the year ended July 31, 2023 relates to the Transaction. Cash Provided by Financing Activities We have funded our business to date from the issuance of our common stock and convertible debentures through private placements, from proceeds from the exercises of warrants, and from loans with related parties. Net cash provided by financing activities for the year ended July 31, 2024 was $1,109,629 compared to $301,984 for the year ended July 31, 2023. The following financing activities occurred during the year ended July 31, 2024: (1)
Exercise of share purchase warrants: On August 4, 2023, we issued 600,000 shares for the exercise of 600,000 share purchase warrants, at an exercise price of CAD$0.20 per share for gross proceeds of $89,826. On August 22, 2023, we issued 416,667 shares for the exercise of 416,667 share purchase warrants, at an exercise price of CAD$0.20 per share for gross proceeds of $61,535. On September 22, 2023, we issued 166,666 shares for the exercise of 166,666 share purchase warrants, at an exercise price of CAD$0.20 per share for gross proceeds of $24,752. (2)
Non-brokered private placement of unsecured convertible notes: | During the year ended July 31 2024, the Company closed several tranches of convertible debenture offerings under the following terms: Devvio Tranche (Related Party Convertible Debt) On January 12, 2024, the Company closed an unsecured convertible notes offering in the principal amount of $100,000 with Devvio that will bear interest at a rate of 5.3% per annum, payable at maturity, subject to acceleration if the Company completes the De-SPAC transaction and the debentures are not converted. The maturity is November 6, 2024. The Company has the right to prepay the whole or any portion of the principal amount, and together with any accrued interest, at any time prior to the maturity date without notice or a penalty payment. Devvio is a related party to the Company through its ownership, as Devvio holds 100% of the Company’s MVS, and one of Devvio’s officers, directors and principal owners was a director of the Company during the year ended July 31, 2024. In the event the Company completes a De-SPAC transaction, the principal amount and accrued interest are convertible into SVS of the Company at the option of the lender, as follows: • | At a conversion price equal to the greater of (a) $7.65 multiplied by the common conversion ratio stipulated by the business combination agreement (the “Common Conversion Ratio”), and (b) CAD$1.03. The shares are thereafter exchanged for common shares of Combined Company at the Common Conversion Ratio. |
• | If the Company completes the De-SPAC transaction, and the convertible notes are not converted into shares, the maturity date will accelerate and the principal plus interest will become repayable within 10 days after the closing of the De-SPAC transaction. |
TABLE OF CONTENTS In the event the Company does not complete a De-SPAC transaction at the earliest of October 8, 2024 (270 days from the issuance date of the notes) and the termination of the business combination agreement with Focus Impact, the principal and accrued interest are convertible into units consisting of one SVS and half of a share purchase warrant, at the option of the lender, as follows: •At a conversion price equal to the greater of (a) the 30-day volume weighted average trading price (“VWAP”) of the shares on Cboe Canada stock exchange and (b) CAD$1.03. •Each warrant will carry the right to purchase a share with an exercise price equal to the greater of (a) a 20% premium on the 30-day VWAP and (b) the floor price of CAD$1.03. The warrants will expire 2 years after the conversion date. | The conversion price is subject to certain anti-dilution provisions. The Devvio Tranche convertible debentures were determined to be a financial instrument comprising a host debt component and a conversion feature which is an embedded derivative that required bifurcation. On initial recognition, the embedded derivative was valued first, and the residual value was assigned to the host financial debt component. The fair value of the derivative liability at issuance was estimated to be $45,000 using the Monte Carlo model. The prepayment option and the accelerated repayment condition were not separately accounted for as they were determined to be clearly and closely related to the host contract. Focus Impact Partners Convertible Debt During the year, the Company closed an unsecured convertible notes offering with Focus Impact Partners, LLC (“Focus Impact Partners”) The convertible notes were initially closed on January 12, 2024 and additional advances were added under the same offering. The total principal amount of $550,000 was received in five installments: $150,000 on November 6, 2023, $150,000 on January 9, 2024, $100,000 on March 28, 2024, $100,000 on April 19, 2024, and $50,000 on June 13, 2024. The debentures will bear interest at a rate of 5.3% per annum, payable at maturity, subject to acceleration if the Company completes the De-SPAC transaction and the debentures are not converted. The maturity date for all advances is November 6, 2024. The Company has the right to prepay the whole or any portion of the principal amount, together with any accrued interest, at any time prior to the maturity date without notice or a penalty payment. In the event the Company completes a De-SPAC transaction, the principal amount and accrued interest are convertible into SVS of the Company at the option of the lender, as follows: • | At a conversion price equal to the greater of (a) a 25% discount to the 20-day VWAP of the shares on the Cboe Exchange multiplied by the Common Conversion Ratio, and (b) $2.00 (the De-SPAC Floor Price”). |
• | The shares are thereafter exchanged for common shares of Focus Impact at the Common Conversion Ratio. |
• | If the Company completes the De-SPAC transaction, and the convertible notes are not converted into shares, the maturity date will accelerate and the principal plus interest will become repayable within 10 days after the closing of the De-SPAC transaction. |
In the event the Company does not complete a De-SPAC transaction of October 8, 2024 (270 days from the issuance date of the notes), or the termination of the business combination agreement with Focus Impact, the principal and accrued interest are convertible into units consisting of one SVS and half of a share purchase warrant, at the option of the lender, as follows: • | At a conversion price equal to the greater of (a) a 25% discount to the 20-day VWAP of the shares on the Cboe Exchange calculated on the conversion date and b) the floor price defined as the current market price on the date of announcement of the offering which was CAD$0.475. |
• | Each warrant will carry the right to purchase a share with an exercise price equal to the greater of (a) a 20% premium on the 20-day VWAP and (b) the floor price defined as the current market price on the date of announcement of the offering which was CAD $0.475. |
• | The warrants will expire 2 years after the conversion date. |
TABLE OF CONTENTS The conversion price is subject to certain anti-dilution provisions. On June 28, 2024, the Company and Focus Impact Partners agreed to amend the Focus Impact Partners Convertible Debt (“Focus Impact Partners Amendment”) such that the De-SPAC Floor Price would be amended from $2.00 to CA$0.475. On June 28, 2024, the Company received additional proceeds of $20,000 under the amended terms. The Focus Impact Partners Convertible Debt were determined to be a financial instrument comprising a host debt component and a conversion feature which is an embedded derivative that required bifurcation. On initial recognition, the embedded derivative was valued first, and the residual value was assigned to the host financial debt component. The total fair value of the derivative liabilities at the various issuance dates was estimated to be $25,800 as valued using the Monte Carlo model. The amendment had no impact on the classification of the convertible debenture and therefore, the conversion feature was considered a derivative before and after the modification. As there was no change to the host instrument cash flows as a result of this change, the 10% test was not met and therefore, there was no extinguishment of the host debt as a result of this change. As the conversion option was bifurcated before and after the modification, the change in the fair value of the conversion feature was recognized as the loss on revaluation of the derivative liabilities through the consolidated statement of operations and comprehensive loss. The prepayment option and the accelerated repayment condition were not separately accounted for as they were determined to be clearly and closely related to the host contract. Envviron Tranche (Related Party Convertible Debt) On April 23, 2024, the Company closed an unsecured convertible note offering in the principal amount of $250,000 with Envviron SAS (a company controlled by a former director of the Company) that will bear interest at a rate of 5.3% per annum, payable at maturity, subject to acceleration if the Company completes the De-SPAC transaction and the debentures are not converted (“Envviron Tranche”). The maturity is February 15, 2025. The Company has the right to prepay the whole or any portion of the principal amount, and together with any accrued interest, at any time prior to the maturity date without notice or a penalty payment. The terms of the Envviron Tranche are identical to the original Focus Impact Partners Convertible Debt. In the event the Company completes a De-SPAC transaction, the principal amount and accrued interest are convertible into SVS of the Company at the option of the lender, as follows: •At a conversion price equal to the greater of (a) the price that is a 25% discount to the 20-day VWAP of the shares on Cboe Canada stock exchange, and (b) $2.00. The shares are thereafter exchanged for common shares of Focus Impact at the Common Conversion Ratio. •If the Company completes the De-SPAC transaction, and the convertible notes are not converted into shares, the maturity date will accelerate and the principal plus interest will become repayable within 10 days after the closing of the De-SPAC transaction. | In the event the Company does not complete a De-SPAC transaction at the later of January 18, 2025 (270 days from the issuance date of the notes) and the termination of the BCA with Focus Impact (Note 1), the principal and accrued interest are convertible into units consisting of one SVS and half of a share purchase warrant, at the option of the lender, as follows: • | At a conversion price equal to the greater of (a) the price that is a 25% discount to the 20-day VWAP of the shares on Cboe Canada stock exchange and (b) CAD$0.475. |
• | Each warrant will carry the right to purchase a share with an exercise price equal to the greater of (a) a 20% premium on the 30-day VWAP and (b) the floor price of CAD$0.475. The warrants will expire 2 years after the conversion date. |
The conversion price is subject to certain anti-dilution provisions.
TABLE OF CONTENTS The Environn Tranche convertible debentures were determined to be a financial instrument comprising a host debt component and a conversion feature which is an embedded derivative that required bifurcation. On initial recognition, the embedded derivative was valued first, and the residual value was assigned to the host financial debt component. The fair value of the derivative liability at issuance was estimated to be $2,750 using the Monte Carlo model. The prepayment option and the accelerated repayment condition were not separately accounted for as they were determined to be clearly and closely related to the host contract. A continuity of the Company’s convertible debentures is as follows: | | | | Balance as at August 1, 2023 | | | $— | Issued | | | 920,000 | Fair value of embedded derivatives | | | (73,550) | Transaction costs | | | (36,484) | Accretion | | | 52,552 | Interest | | | 19,026 | Balance as at July 31, 2024 | | | $881,544 | | | | |
Below is a continuity of the embedded derivative liabilities: | | | | Balance as at August 1, 2023 | | | $— | Derivative liability component of certain issued convertible debentures | | | 73,550 | Unrealized loss on derivative liabilities | | | 845,700 | Balance as at July 31, 2024 | | | $919,250 | | | | |
In connection with the issuance of these convertible debentures, the Company incurred $40,227 in directly attributable transaction costs. $36,484 was allocated to the host financial liability, $3,743 was allocated to the embedded derivative and recorded immediately in the consolidated statement of operations as general and administrative expenses. The key inputs used in the Monte Carlo model for the derivative liabilities were as follows: | | | | | | | Probability of De-SPAC Transaction closing | | | 90% | | | 90% | Risk-free interest rate | | | 4.60% - 4.87% | | | 4.27% - 4.38% | Expected term (years) | | | 0.35 - 0.82 | | | 0.26 - 0.54 | Expected annual volatility for the Company | | | 90% - 145% | | | 85% - 112% | Expected annual volatility for Focus Impact | | | 2.5% - 5% | | | 2.5% | Common conversion ratio | | | 0.083 - 0.155 | | | 0.083 | Foreign exchange rate | | | 0.727 - 0.747 | | | 0.7242 | | | | | | | |
(3)
Mandatory convertible debentures On January 12, 2024, the Company closed a tranche of unsecured convertible notes in the principal amount of $100,000 that bear interest at the rate of 15% per annum, payable only in Company securities on the Conversion Date, or payable in cash in connection with a Liquidating Event or Event of Default. In the event the Company completes a De-SPAC transaction, the principal amount and accrued interest automatically convert into SVS of the Company as follows: •At a conversion price equal to the greater of (a) $7.65 multiplied by the Common Conversion Ratio, and (b) CAD$1.03. The shares are thereafter exchanged for common shares of Focus Impact at the Common Conversion Ratio | • | The shares are thereafter exchanged for common shares of Focus Impact at the common conversion ratio. |
TABLE OF CONTENTS In the event the Company does not complete a De-SPAC transaction by October 8, 2024 (270 days from the issuance date of the notes), the principal and accrued interest are automatically convertible into units consisting of one SVS and half of a share purchase warrant, as follows: •At a conversion price equal to the greater of (a) the 30-day VWAP of the shares on Cboe Canada stock exchange and (b) CAD$1.03. •Each warrant will carry the right to purchase a share with an exercise price equal to the greater of (a) a 20% premium on the 30-day VWAP and (b) the floor price of CAD$1.03. The warrants will expire 2 years after the conversion date. | The conversion price is subject to certain anti-dilution provisions. The mandatory convertible debentures are liability classified and initially recorded at fair value with subsequent changes in fair value being recorded in profit and loss (“FVTPL”). The initial fair value was estimated to be $100,000. As at July 31, 2024, the Company revalued the mandatory convertible debentures using a Monte Carlo Simulation and recorded a change in fair value of $27,500 in Other income as an unrealized loss on mandatory convertible debentures. In connection with the issuance of these mandatory convertible debentures, the Company incurred $7,545 in directly attributable transaction costs which were recorded immediately in the consolidated statement of profit and loss as general and administrative expenses. A continuity of the Company’s mandatory convertible debentures is as follows: | | | | Balance as at August 1, 2023 | | | $— | Issued | | | 100,000 | Unrealized loss on mandatory convertible debentures | | | 27,500 | Balance as at July 31, 2024 | | | $127,500 | | | | |
The key inputs used in the Monte Carlo model for the revaluation of the mandatory convertible debentures as at July 31, 2024 were as follows: | | | | Probability of De-SPAC Transaction closing by maturity date | | | 85% | Risk-free interest rate | | | 4.42% | Expected term (years) | | | 0.19 | Expected annual volatility for the Company | | | 92.5% | Expected annual volatility for Focus Impact | | | 2.5% | Common conversion ratio | | | 0.083 | Foreign exchange rate | | | 0.7242 | | | | |
Related party transactions and balances Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties may be individuals or corporate entities. A transaction is a related party transaction when there is a transfer of resources or obligations between related parties. Related party balances as at July 31, 2024 and 2023 At July 31, 2024, the Company had amounts owing and accrued liabilities of $478,072 (2023 - $23,534) payable to directors and officers of the Company for salaries, expense reimbursements and professional fees. These amounts are non-interest bearing and have no terms of repayment. Related party transactions during the year ended July 31, 2024 During the year ended July 31, 2024, the Company issued convertible debentures to Devvio and Envviron who are related parties to the Company (Note 6). During the year ended July 31, 2024, the Company signed an amended strategic partnership agreement with Devvio, as described in Note 13.
TABLE OF CONTENTS Related party transactions during the year ended July 31, 2023 During the year ended July 31, 2023, a related party of the Company was issued 180,000 shares from the exercise of 180,000 share purchase warrants, for proceeds of CAD$36,000 ($26,910). Contractual Obligations Prepaid Royalties Agreement with Devvio On September 12, 2023, we amended our existing strategic partnership agreement with Devvio, a related party. We committed to making specific payments to Devvio and provide a minimum advance of $1,000,000 by August 1, 2024, followed by $1,270,000 by August 1, 2025 and August 1, 2026. Additionally, starting from 2027, if advance royalty payments fall below $1,000,000 in any year, Devvio has the right to terminate the Strategic Partnership Agreement. On July 8, 2024, we further amended the agreement such that the minimum advances extended by one year and are now due as follows: $1,000,000 by August 1, 2025, followed by $1,270,000 by August 1, 2026 and August 1, 2027. Additionally starting in calendar year 2028, if advance royalty payments fall below $1,000,000 in any year, Devvio has the right to terminate the Strategic Partnership Agreement. On February 16, 2024, we entered into a licensing agreement with Greenlines Technology Inc. for the use of certain technologies. We agreed to pay $42,000 within 15 days of the closing of the BCA. Commencing January 1, 2025, we must pay an annual fee of $12,000 of the first day of each calendar year for the use of the technology. Quantitative and Qualitative Disclosures about Market Risk Our board of directors have overall responsibility for the establishment and oversight of our risk management policies on an annual basis. Management identifies and evaluates our financial risks and is charged with the responsibility of establishing controls and procedures to ensure financial risks are mitigated in accordance with the approved policies. Our financial instruments consist of cash, GST receivable, accounts payable and accrued liabilities, mandatory convertible debentures and derivative liabilities. The carrying value of the Company’s cash, GST receivable and accounts payable and accrued liabilities and convertible debentures, convertible debentures approximate their fair value due to their short terms to maturity. Our risk exposures and the impact on our financial instruments are summarized below: Credit Risk Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. Our credit risk is primarily attributable to our liquid financial assets including cash. Our financial assets are cash and GST receivable. Our maximum exposure to credit risk, as at period end, is the carrying value of our financial assets, being $106,764 and $539,379 as of July 31, 2024 and July 31, 2023, respectively. We hold cash with major financial institutions and with a publicly traded payment processing company therefore minimizing our credit risk. Liquidity Risk Liquidity risk is the risk that we will not be able to meet financial obligations as they fall due. We manage liquidity by maintaining adequate cash balances and by raising equity and debt financings. We have no assurance that such financings will be available on favorable terms in the future. In general, we attempt to avoid exposure to liquidity risk by obtaining corporate financing through the issuance of shares. As of July 31, 2024, we had cash of $21,106 to settle current contractual liabilities of $7,595,974 which are due for payment within twelve months of the statement of financial position. As of July 31, 2023, we had cash of $489,971 to settle current liabilities of $908,652 which were due for payment within twelve months of the statement of financial position. All of our contractual obligations are current and due within one year. Refer to “— Liquidity and Capital Resources” above.
TABLE OF CONTENTS Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect our income or value of holdings or financial instruments. As of July 31, 2024 and July 31, 2023, we had cash denominated in US dollars that is exposed to foreign exchange risk of $20,466 and $395,336, respectively. As of July 31, 2024 and July 31, 2023, a 10% strengthening or weakening in the Canadian dollar against the US dollar with all other variables held constant would have an unfavorable or favorable impact of approximately $2,800 and $30,000, respectively. Inflation Risk We do not believe that inflation had a significant impact on our results of operations for any periods presented in our consolidated financial statements. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs, and our inability or failure to do so could harm our business, financial condition and results of operations. Capital Management Capital is comprised of our shareholders’ equity (deficiency) and any debt that we may issue. Our objectives when managing capital are to maintain financial strength and to protect our ability to meet ongoing liabilities, to continue as a going concern, to maintain creditworthiness and to maximize returns for our shareholders over the long term. Protecting the ability to pay current and future liabilities includes maintaining capital above minimum regulatory levels, current financial strength rating requirements and internally determined capital guidelines and calculated risk management levels. We manage capital structure to maximize financial flexibility by making adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. We do not presently utilize any quantitative measures to monitor our capital, but rather we rely on our management’s expertise to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given our size, is reasonable. There were no changes to our approach to capital management during the period. We are not subject to externally imposed capital requirements. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our consolidated financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements. Valuation of derivative liabilities and mandatorily convertible debentures The estimates and judgments made in relation to the fair value of derivative liabilities and mandatory convertible debentures are subject to measurement uncertainty. The valuation techniques used to determine fair value requires inputs that involve assumptions and judgments such as the probability of the De-SPAC Transaction closing, volatility of the Company and Focus Impact’s share prices, expected life and foreign exchange rates. Such judgments and assumptions are inherently uncertain. The Company accounts for convertible debentures in accordance with ASC 470, Debt. Convertible debentures are recorded at face value less unamortized issuance costs, assuming the conversion feature does not meet the requirements for bifurcation.
TABLE OF CONTENTS If the conversion feature does not meet the requirements to be classified as equity, it is bifurcated and accounted for separately as a derivative liability under ASC 815, Derivatives and Hedging, and measured at fair value, with subsequent changes recognized in earnings. If the conversion feature meets the equity classification criteria, no separate accounting for the conversion feature is required, and the entire instrument is classified as a liability. Interest expense is recognized using the effective interest method, which includes the amortization of any debt issuance costs and discounts or premiums. Going Concern Since our inception, we have incurred operating losses, have experienced negative cash flows from operations and have not generated revenue. Accordingly, our ability to continue as a going concern is dependent upon our ability to raise sufficient funds to pay ongoing operating expenditures and to meet our obligations. Based on this assessment, we have material uncertainties about our business that cast substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not give effect to any adjustments that are required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in our financial statements. Such adjustments could be material. Stock Compensation We recognize stock compensation expense in accordance with ASC 718, Stock Compensation. In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at fair value of the share-based payment. The fair value of the options and warrants granted to employees is estimated on the grant date using the Black-Scholes option pricing model. We use a third-party valuation firm to assist in calculating the fair value of our options and warrants. This valuation model requires us to make assumptions and judgments about the variables used in the calculation, including the volatility of our common stock and assumed risk-free interest rate, expected price volatility, and expected life. Sales and Marketing We expense costs relating to advertising and promotion either as costs are incurred or the first time the advertising takes place. Salaries, Wages and Professional Fees We record an expense for salaries, wages and professional fees as these expenses are incurred. Off-Balance Sheet Arrangements We have not entered into any material off-balance sheet arrangements such as guarantee contracts, contingent interests in assets transferred to unconsolidated entities, derivative financial obligations, or with respect to any obligations under a variable interest equity arrangement. Emerging Growth Company Status The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth
TABLE OF CONTENTS companies, and our financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. We will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of this offering, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. Further, even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile. Evaluation of Disclosure of Controls and Procedures Based on an evaluation as of July 31, 2024, our management, including the Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were not effective to provide reasonable assurance because of a material weakness in our internal control over financial reporting as described below. There have been no changes during the year ended July 31, 2024. While we and our independent registered public accounting firm did not and were not required to perform an audit of our internal control over financial reporting, in connection with the audit of our 2024 consolidated financial statements, we identified control deficiencies in the design and operation of our internal control over financial reporting that constituted a material weakness. Material Weakness 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 our annual or interim financial statements will not be prevented or detected in a timely manner. We did not design or maintain an effective control environment commensurate with financial reporting requirements. Specifically, we did not consistently have documented evidence of review procedures and, due to resource limitations, did not always maintain segregation of duties between preparing and reviewing analyses, and reconciliations. The above material weakness did not result in a material misstatement of our consolidated financial statements, however, it could result in a misstatement of our account balances or disclosures that would result in a material misstatement that would not be prevented or detected. Remediation Activities We are working to remediate the material weakness and are taking steps to strengthen our internal control over financial reporting through the continued hiring of additional appropriately skilled finance and accounting personnel with the requisite technical knowledge and skills. With the additional skilled personnel, we are taking appropriate and reasonable steps to remediate this material weakness through the implementation of appropriate segregation of duties, formalization of accounting policies and controls and retention of appropriate expertise for complex accounting transactions. We will not be able to fully remediate these control deficiencies until these steps have been completed and have been operating effectively for a sufficient period of time. Management will continue to review and make necessary changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.
TABLE OF CONTENTS Subsequent Events Convertible Debt Focus Impact Partners On August 19, 2024, October 18, 2024, October 28, 2024, and November 1, 2024, the Company received additional proceeds of $41,500, $6,500, $7,650 and $12,000, from Focus Impact Partners, under the same terms as the Focus Impact Partners Convertible Debt. On November 13, 2024, Devvstream Corp issued (i) $3,000,000 of new 5.3% convertible notes to the Focus Impact Sponsor, and (ii) $982,150 of new 5.3% convertible notes to Focus Impact Partners (together, the “New Convertible Notes”), in exchange for the cancellation and conversion of a $3,000,000 convertible note previously issued by Focus Impact, the Focus Impact Partners Convertible Debt which totaled $637,150 and unpaid fees in the amount of $345,000 which were owed by Focus Impact to Focus Impact Partners. The New Convertible Notes have a maturity date of November 13, 2026. The principal loan amount and any accrued and unpaid interest under the New Convertible Notes are convertible into DevvStream Corp. common shares at the option of the holder at a 25% discount to the 20-day volume weighted average price of the DevvStream Corp. shares, subject to a floor of $0.867 per share. In connection with the New Convertible Notes, the Company agreed (i) to grant the Secured Parties a first ranking security interest in all of the carbon credits and similar environmental assets held by the Company, presently existing or hereafter created or acquired, and (ii) to execute and deliver to the Secured Parties a security agreement evidencing the Secured Parties’ security interest (the “Security Agreement”). On December 18, 2024, the Company executed and delivered to the Secured Parties the Security Agreement. Devvio and Environ On November 12, 2024, the Company amended the Devvio Tranche and the Environn Tranche convertible debentures by extending the maturity date to May 30, 2025. Conversion of Mandatory Convertible Debentures On October 28, 2024, the Company issued 146,786 shares upon the conversion of the mandatorily convertible debt. The warrants have not yet been issued as of the date of these financial statements. Warrant Exercises On October 29, 2024 the Company issued 600,000 shares for the exercise of 600,000 share purchase warrants, at an exercise price of CAD$0.20 per share. De-SPAC Transaction On November 6, 2024, the Company completed a business combination with Focus Impact (referred to as the “De-SPAC” transaction). Upon the completion of the business combination, Focus Impact was renamed DevvStream Corp. In conjunction with the closing of the De-SPAC, each of the DevvStream Holdings Inc. outstanding securities was exchanged for DevvStream Corp. securities on a 1 to 0.152934 basis and each of Focus Impact’s outstanding securities were converted into DevvStream Corp. securities on a 1 to 0.9692 basis. The former shareholders of DevvStream Holding Inc. and Focus Impact received 11,768,884 and 5,159,200 shares of DevvStream Corp., respectively. As such, immediately following the share exchange, former shareholders of DevvStream Holdings Inc. held the majority of the outstanding shares of the Combined Company (DevvStream Corp.), thereby resulting in the De-SPAC transaction being accounted for as a reverse merger of Focus Impact by DevvStream Holdings Inc. In conjunction with the transaction, DevvStream Corp. also issued the following securities: •22,699,984 warrants to the former shareholders of Focus Impact. Each warrant was initially exercisable into 0.9692 shares of DevvStream Corp at $11.86 until November 6, 2029, may be redeemed at the option of the Company and can be exercised on a cashless basis. These warrants contain a clause such that upon a successful business combination, the exercise price will be adjusted based on a specified formula as outlined in the warrant agreement. On December 6, 2024, DevvStream Corp. issued a notice under the warrant agreement notifying the warrant holders that the exercise price was adjusted to $1.52 per share of DevvStream Corp.;
TABLE OF CONTENTS •199,064 warrants to the former shareholders of the DevvStream Holdings Inc. which are exercisable at CA$1.31 until October 7, 2026; •586,497 options to the former shareholders of the DevvStream Holdings Inc. which have exercise prices between CA$5.23 and CA$7.26 and expiry dates ranging from January 17, 2028 to February 6, 2033; and | • | 1,177,296 RSU’s to the former shareholders of the DevvStream Holdings Inc. |
As of the date of this report, the Company is in the process of gathering additional information to finalize the accounting for this acquisition, including the fair value of the assets acquired and liabilities assumed. The Company expects to provide a detailed acquisition note in its financial statements for the quarter ended January 31, 2025. Shares Issued for Settlement of Payables On September 5, 2024, the Company issued 104,379 shares to a consultant in settlement of accounts payable of $39,527 (CA$55,050). During October 2024, the Company reached agreements with various vendors to settle approximately $5,900,000 of outstanding payables in exchange for shares of DevvStream Corp. as part of the closing of the business combination with Focus Impact. Concurrent with the closing of the De-SPAC Transaction, 1,187,538 DevvStream Corp. shares were issued in relation to the settlement of accounts payable. On December 27, 2024, DevvStream Corp. issued 412,478 common shares to certain service providers as consideration for services provided. Shares issued for Carbon Credit Purchases Between October 17, 2024 and October 28, 2024, the Company entered into multiple agreements to acquire carbon credits in return for DevvStream Corp shares once the De-SPAC Transaction was completed. On November 6, 2024, concurrent with the completion of the business combination, DevvStream Corp issued 3,249,876 common shares in consideration for these agreements. The agreements contain a mechanism whereby if the Company’s share price drops below 80%-90% of the respective purchase prices outlined in the agreements, in the next 12 to 18 months, the Company is obligated to issue additional shares to cover the shortfall. Acquisition of Monroe Sequestration Partners (“MSP”) On October 28, 2024, the Company entered into an agreement to acquire a 50% stake in MSPPIP in exchange for 2,000,000 shares of DevvStream Corp., to be issued upon the completion of the De-SPAC transaction. On November 6, 2024, concurrent with the completion of the business combination, DevvStream Corp issued the 2,000,000 common shares in consideration for 50% interest in MSP. PIPE Financing On October 29, 2024, Focus Impact entered into subscription agreements with various investors (“PIPE Shares”). The investors committed to purchase shares of Devvstream Corp. contingent upon the closing of the De-SPAC transaction. If the closing did not occur as expected, Focus Impact was required to return the subscription funds advanced. As part of this arrangement, the Focus Impact Sponsor transferred their Focus Impact Class A shares (“Sponsor Shares”) to the investors in advance of the De-SPAC transaction, representing a portion of the shares subscribed. As compensation, the Focus Impact Sponsor received replacement shares upon the closing of the De-SPAC transaction for an equal amount. The investors subscribed for a total of $2,250,000 and received 1,547,000 Sponsor Shares prior to the De-SPAC closing. On November 6, upon the closing of the De-SPAC, DevvStream Corp. issued an additional 194,808 PIPE Shares to the investors, which were the remaining shares not previously advanced, and 1,500,000 replacement shares to the Focus Impact Sponsor. Strategic Consulting Agreement On November 13, 2024, DevvStream Corp. entered into a strategic consulting agreement with Focus Impact Partners, pursuant to which the Focus Impact Partners will provide DevvStream Corp. with certain consulting services ( “Strategic Consulting Agreement”) in consideration of an annual consulting fee of $500,000, which
TABLE OF CONTENTS will be payable in quarterly installments of $125,000 starting with an initial payment for the period beginning December 31, 2023. Fees due under the Strategic Consulting Agreement shall accrue and not be payable until (a) DevvStream Corp. has successfully raised $5,000,000 in outside debt and/or equity capital, cumulatively since the period beginning December 31, 2023 or (b) DevvStream Corp. has 2 or more consecutive quarters of positive cash flow from operations. DevvStream Corp. will pay the Focus Impact Partners additional consulting fees as to be mutually agreed consistent with market practice in connection with any acquisition, merger, consolidation, business combination, sale, divestiture, financing, refinancing, restructuring or other similar transaction. In connection with signing of the Strategic Consulting Agreement, DevvStream Corp. issued 557,290 common shares. The Strategic Consulting Agreement has a term of three years unless terminated early with at least 120 days advance notice and will be automatically extended for successive one year periods at the end of each year unless either party provide a written notice of its desire not to automatically extend at least 120 days prior to the end of each year during the term of the Strategic Consulting Agreement. Equity Line of Credit Purchase (“ELOC”) Agreement On October 29, 2024, Focus Impact entered into the ELOC Agreement with Helena Global Investment Opportunities I Ltd (“Helena I”). Under the ELOC Agreement, DevvStream Corp. will have the right to issue and to sell to Helena I from time to time, up to $40,000,000 of DevvStream Corp. common shares following the closing of the De-SPAC Transaction and the effectiveness of the registration statement registering the DevvStream Corp. common shares being sold under the ELOC Agreement (the “Helena I Registration Statement”). As a commitment fee in connection with the execution of the ELOC Agreement, the Focus Impact Sponsor transferred 515,889 Sponsor Shares of Focus Impact to Helena I. As compensation, the Focus Impact Sponsor received 500,000 replacement shares of DevvStream Corp. upon closing of the De-SPAC transaction. Following the closing of the De-SPAC Transaction and the Helena I Registration Statement becoming effective, DevvStream Corp. will issue to Helena I common shares equal to $125,000 divided by the greater of (i) the lowest one-day VWAP during the five trading days immediately preceding the effectiveness date of such Registration Statement and (ii) $0.75. NASDAQ Listing On February 12, 2025, DevvStream Corp. received a notice from the Listing Qualifications staff of The Nasdaq Stock Market LLC (“Nasdaq”) that, because the closing bid price for the Company’s common stock had fallen below $1.00 per share for 30 consecutive trading days, the Company no longer complies with the minimum bid price requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) because the closing bid price of the Company’s common stock for the prior 30 consecutive business days was lower than the minimum bid price requirement of $1.00 per share. The Company has 180 calendar days, or by August 13, 2025, to regain compliance with the minimum bid price requirement but could be eligible for an additional 180-day compliance period.
TABLE OF CONTENTS MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF DEVVSTREAM FOR THE YEAR ENDED DECEMBER 31, 2023 AND 2022 The following discussion and analysis should be read in conjunction with the Focus Impact Acquisition Corp. (defined as “FIAC” for this section) audited consolidated financial statements and related notes for the year ended December 31, 2023 and 2022 (“consolidated financial statements”), which have been prepared in accordance with US GAAP and are included elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” which is incorporated by reference into this prospectus. All figures are in US dollars unless otherwise noted. Unless the context otherwise requires, for the purposes of this section, “FIAC,” “we,” “us,” “our,” or the “Company” refer to Focus Impact Acquisition Corp. FIAC Overview FIAC, a blank check company, was incorporated on February 23, 2021 as a Delaware corporation and formed for the purpose of effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Initial Business Combination”). FIAC’s sponsor was Focus Impact Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for FIAC’s initial public offering was declared effective on October 27, 2021. On November 1, 2021, FIAC consummated its initial public offering (the “Initial Public Offering”) of 23,000,000 Units, including the full exercise of the underwriters’ over-allotment option to purchase 3,000,000 units, at a purchase price of $10.00 per Unit. For additional historical background on FIAC and Sponsor, please see Note 1 to FIAC’s audited financial statements filed herewith for the fiscal years ended December 31, 2023 and 2022. Results of Operations As of December 31, 2023, FIAC had not commenced any operations. All activity for the period from February 23, 2021 (inception) through December 31, 2023 relates to FIAC’s formation and the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective Initial Business Combination. As of December 31, 2023, FIAC had neither engaged in any operations nor generated any revenues to date. The only revenues generated prior to year-end 2023 consisted of non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering. For the year ended December 31, 2023, FIAC had net income of $23,947 resulting from the change in fair value of warrants of $681,000, warrant transaction costs of $309,534, interest income from operating account of $14,786 and trust earnings of $5,350,288, partially offset by provision for income taxes of $1,111,731 and operating costs of $5,219,930. For the year ended December 31, 2022, FIAC had net income of $11,635,200 resulting from the change in fair value of warrants of $10,669,000, interest income from operating account of $7,413 and trust earnings of $3,433,975, partially offset by provision for income taxes of $645,442 and operating costs of $1,829,746. Contractual Obligations As of year-end 2023 FIAC had no long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities. Administrative Services Agreement FIAC agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Initial Business Combination, FIAC ceased paying these monthly fees. Registration and Stockholder Rights The holders of the founder shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans and upon
TABLE OF CONTENTS conversion of the founder shares) will be entitled to registration rights pursuant to a registration rights and stockholder agreement to be signed prior to the consummation of the Initial Public Offering, requiring FIAC to register such securities for resale (in the case of the founder shares, only after conversion to the Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that FIAC register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the Initial Business Combination and rights to require FIAC to register for resale such securities pursuant to Rule 415 under the Securities Act. Underwriter Agreement The underwriters were entitled to a deferred underwriting fee of approximately $0.376 per unit sold in the Initial Public Offering, or $8,650,000 in the aggregate (including the commission related to the underwriters’ exercise of the over-allotment option) upon the completion of the Company’s Initial Business Combination. In the third quarter 2023, the underwriters waived any right to receive the deferred underwriting fee and will therefore receive no additional underwriting fee in connection with the Closing of the Business Combination. As a result, the Company recognized $309,534 of income and $8,340,466 was recorded to accumulated deficit in relation to the reduction of the deferred underwriting fee. As of December 31, 2023 and 2022, the deferred underwriting fee is $0 and $8,650,000, respectively. To account for the waiver of the deferred underwriting fee, the Company analogized to the SEC staff’s guidance on accounting for reducing a liability for “trailing fees”. Upon the waiver of the deferred underwriter fee, the Company reduced the deferred underwriting fee liability to $0 and reversed the previously recorded cost of issuing the instruments in the Initial Public Offering, which included recognizing a contra-expense of $309,534, which is the amount previously allocated to liability classified warrants and expensed upon the Initial Public Offering, and reduced the accumulated deficit and increased income available to Class B common stock by $8,650,000, which was previously allocated to the Class A common stock subject to redemption and accretion recognized at the Initial Public Offering date. Critical Accounting Estimates Warrants Warrants issued in connection with the Initial Public Offering and Private Placement were accounted for in accordance with the guidance contained in FASB ASC 815 “Derivatives and Hedging” whereby under that provision the warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, FIAC classified the warrant instrument as a liability at fair value. This liability required re-measurement at each balance sheet date until the warrants are exercised or expire, and any change in fair value must be recognized in FIAC’s statement of operations. The fair value of warrants was estimated using an internal valuation model. FIAC’s valuation model utilized inputs such as assumed share prices, volatility, discount factors and other assumptions and may not be reflective of the price at which they can be settled. Such warrant classification is also subject to re-evaluation at each reporting period. Inflation FIAC does not believe that inflation had a material impact on FIAC’s business, revenues or operating results during the period presented.
TABLE OF CONTENTS BUSINESS Results could differ materially from the results discussed in the forward-looking statements as a result of certain of the risks set forth herein. We assume no obligation to update any forward-looking statements contained herein. Overview We are a capex-light environmental asset generation company focused on high quality and high return technology-based projects. We offer investors exposure to assets such as carbon credits, a key instrument used to offset emissions of carbon dioxide from industrial activities to reduce the effects of global warming and I-RECs (International Renewable Energy Certificate), a vehicle for businesses to claim renewable energy usage and reduce their carbon footprint. Blockchain technology will be used for our carbon credit generating projects to drive trust and transparency across the credit cycle. Through leveraging partnerships with market leaders, we aim to provide a turnkey solution to help companies generate, manage, and monetize environmental assets through carbon credits. The blockchain technology will be used in conjunction with our platform to track, manage, and store data only. It will do so to keep an immutable record of the data. The blockchain technology will not be used to track any assets. The blockchain technology will not create a record of carbon credits. Carbon credits are tracked by third parties in traditional registries and those registries show ownership of the carbon credits. We will not use the blockchain technology to create or track any type of crypto asset, and our use of the blockchain does not involve or require the integration of any token or other crypto asset to support its functionality. With a diverse approach to the I-REC and carbon market, we operate across three strategic domains: (1) an offset portfolio consisting of I-REC’s, nature-based, tech-based, and carbon sequestration credits for immediate sale to corporations and governments seeking to offset their most difficult-to-reduce emissions; (2) project investment, acquisitions, and industry consolidation to extend the company's reach, allowing it to become a full end-to-end solutions provider; and (3) project development, where the company serves as project manager for eligible activities such as EV charging in exchange for a percentage of generated credits. History of DevvStream DevvStream Inc., our wholly-owned operating subsidiary, was incorporated in Delaware on August 27, 2021, under the name “18798 Corp.” On October 7, 2021, 18798 Corp. changed its name to “DevvESG Streaming Inc.”, and on February 1, 2022, subsequently changed its name to “DevvStream Inc.” DevvStream Inc. was formed to operate as a sustainability principled, technology-based, impact-investing company focused on high quality and high return carbon credit generating projects. On November 4, 2022, DevvStream Inc. completed a business combination transaction (the “2022 Business Combination”) with 1319738 B.C. Ltd., 1338292 B.C. Ltd., Devv Subco Inc., and DevvESG Streaming Finco Ltd., pursuant to which 1319738 B.C. Ltd., acquired all of the issued and outstanding securities of DevvStream Inc. by way of a three-cornered merger. In connection with the 2022 Business Combination, 1319738 B.C. Ltd. changed its name to “DevvStream Holdings Inc.” Upon closing of the 2022 Business Combination, DevvStream Inc. became a wholly owned subsidiary of DevvStream, and the business of DevvStream Inc. became the business of DevvStream. On January 17, 2023, DevvStream’s subordinate voting shares were listed and posted for trading on the NEO Exchange (now known as CBOE). The Company is no longer listed on the CBOE. On September 12, 2023, DevvStream entered into the Initial Business Combination Agreement. Our Industry and Market Opportunity Overview of Carbon Credits Carbon credits—each equal to one metric ton of carbon dioxide removed or avoided—are designed to help organizations advance decarbonization efforts by funding environmentally-conscious projects. Carbon credits are generated in two ways: (i) nature-based solutions; and (ii) technology-based solutions. They can be traded directly between companies, organizations and countries, or on exchanges where carbon credits are sold and purchased. Companies or individuals may use carbon markets to compensate for their greenhouse gas emissions by purchasing carbon credits from an entity that removes or reduces their greenhouse gas emissions. Carbon markets exist around the world in many different forms, although they can generally be divided into mandatory (compliance) markets and voluntary markets.
TABLE OF CONTENTS Nature-based Solutions vs. Technology-based Solutions Nature-based solutions include the protection, restoration, and management of natural ecosystems and currently make up the majority of the carbon credit market. Technology-based solutions leverage innovative technology to further avoid or reduce carbon emissions and include examples such as energy efficiency, fuel switching and methane avoidance. Recent studies done by American University shows that nature-based solutions will only contribute 20% of the carbon reductions needed to meet our global net zero goals. The other 80% needs to come from technology, which is where we plan to target. Accordingly, our business model focuses on generating carbon credits through efficient, repeatable, and scalable technology-based solutions. Compliance Markets vs. Voluntary Markets Compliance markets are created and regulated by government bodies and are usually set up as cap-and-trade emission trading schemes. In compliance markets, corporations buy and sell compliance carbon offsets to comply with the cap or limit imposed on their emissions by the government. Compliance markets are usually tied to a specific jurisdiction—for example, the European Union Emissions Trading System (“ETS”) is only applicable to entities domiciled in the European Union. Voluntary markets, on the other hand, are traditionally set up by independent non-governmental organizations or various types of private consortia. In voluntary markets, carbon credits can be generated from projects including but not limited to, improved energy efficiency, forestry and land use, renewable energy, agriculture, transportation, household devices, biomass and biogas facilities, waste disposal, carbon capture, utilization and storage (“CCS/CCUS”), wetland restoration and other industrial projects. Voluntary markets set rules frameworks for sellers and buyers to trade offsets under a public registry. In voluntary markets, organizations choose to voluntarily offset emissions that otherwise would not be possible, or very expensive, by purchasing carbon emission reductions. Demand for voluntary carbon offsets is driven by companies seeking to address pressure from customers and investors to reduce their carbon footprint, as well as entities that purchase offsets before emissions reductions are required by regulation. In voluntary markets, a carbon credit represents one ton of carbon dioxide (“tCO2”) or the carbon dioxide equivalent (“tCO2e”) of another greenhouse gas (based on the amount of heat it traps in the atmosphere) that is prevented from entering or being absorbed from the atmosphere. Every 4.60 tCO2e removed from the atmosphere is the equivalent of removing one average passenger vehicle for a year. Our Business Model Overview of Streaming A carbon credit stream is a flexible, customizable financing alternative that allows developers, aggregators, and/or owners of projects which require substantial capital to bring projects to fruition, advancing the transition to a low-carbon future. Similar financing structures, including streams and royalties, have been used extensively in the music, publishing, pharmaceutical, franchising and precious and base metals sectors to provide an alternative to traditional sources of capital at an attractive cost. In a stream agreement, the holder makes an upfront payment in exchange for the right to purchase all, a fixed percentage of, or a specified amount of the subject of the stream at a pre-agreed upon price or a percentage of a reference price for the term of the agreement, which is typically for a long term. A carbon credit stream is a contractual agreement whereby the stream purchaser makes an upfront payment (in the form of cash, shares, or other consideration) in return for the right to receive all, or a portion of, the future carbon credits generated by a project or an asset over the term of the agreement. An additional payment may be paid per carbon credit to the project or asset developer or owner when the carbon credits are delivered to the stream purchaser or when the carbon credits are sold by the stream purchaser. Benefits of streams to the project developer or asset owner include an upfront payment and annual income over the project life. The developer or owner may use the upfront payment to fund project development on existing or new project activities, verification of carbon credits or for general corporate purposes. Revenue Streams Our business model is focused on two forms of carbon credit generation activity. The two activity types, which we call our “direct investment model” and our “project management model,” can be distinguished based on whether a partner or we lead the development and maintenance of the offset project. On partner-led contracts
TABLE OF CONTENTS under our direct investment model, the partner will manage all costs to develop and manage initial and ongoing program management, while we receive a share of the credits generated. On our led contracts under our project management model, we will bear the costs of generating and certifying the carbon credits for those projects. This includes contract development, validation, registry listing, any ongoing data collection and fees charged by registries for credit issuance, transfer or retirement. In either model, stream interests (which are not typically working interests in a property or an asset) are established through a contract between the holder and the property or asset owner. While subsequent payments beyond the initial deployment of capital is a common function of typical royalty agreements, the majority of the agreements that we intend to put in place will allow us to own a portion of the future carbon credits outright without additional consideration (although there may be costs associated with managing the project or program depending on our involvement during the term of the contract). We plan to use third-party greenhouse gas project evaluation and quantification studies as part of their project due diligence process in selecting projects. Third-party studies provide confirmation that the project aligns to offset criteria including ISO140640-2 and CCPs, reducing the risk of not meeting these after the offset project is completed. It also provides an estimate of carbon credits generated and the expected crediting period, according to selected quantification methodologies. The studies also identify potential risks which may prevent the generation of high-quality credits related to offset quality criteria, such as clear ownership, additionality, permanence and leakage. The third-party consultant used is based on experience and expertise in the carbon market that is tied to the specific project that is being evaluated. In certain cases, once we select a project, we may assist the owner with implementation of the carbon offset project, including feasibility studies, registration, validation, and verification, all of which may be too costly and complex for an owner to do on its own. In this case, we will maintain a controlling interest in the offset project, the quality of the credits generated, and the issuance and trading timing and format. Given the collective experience of our management team and our Board, we believe we are ideally positioned to select projects and provide stream or royalty financing to those projects which will benefit from this financing structure. We plan to continue to enhance the Company’s position in the International Renewable Energy Certificate (I-REC) market, following its recent approval to the Evident Registry and key agreements that expand its portfolio of renewable energy attributes. These strategic developments position the Company to capitalize on the growing demand for I-RECs, offering organizations verifiable solutions to meet sustainability and clean energy goals. Together, we believe these agreements support our planned strategy of becoming a leading global aggregator and trader of I-RECs. By leveraging the Evident Registry’s global infrastructure, the Company plans to ensure full transparency, traceability, and credibility of its renewable energy attributes. Additionally, these transactions diversify our Company’s revenue streams, enabling the monetization of both carbon offsets and energy attribute certificates in parallel, positioning the Company as a key player in the environmental asset market. Impact Investment Our purpose is to generate positive, measurable social and environmental impact alongside attractive returns for stakeholders. We intend to achieve this through the provision of innovative capital solutions for projects that demonstrably advance the transition to a low-carbon future, with a particular focus on projects with Co-Benefits (as defined below) in alliance with principles of sustainability. This focus begins at the identification of potential investments. Due to the nature of our business, capital will necessarily be deployed to projects that combat climate change. For us, however, while every carbon credit represents one ton of CO2e in the atmosphere, not every carbon credit is equal in its contribution to a sustainable future. Management will seek, wherever possible, investments that make a sustainable impact beyond the removal, avoidance or sequestering of greenhouse gas emissions. The Company’s sustainable investment screen, through our analysis, will ensure the consideration of factors that may augment the sustainable impact of our capital beyond advancing climate action, while also ensuring attractive financial returns. Additional considerations may take the form of protecting endangered species, improving the lives of people in under-developed nations, providing measurable tangible benefits to the communities in the project area, or other activities which advance sustainable development (“Co-Benefits”). It is our belief that by focusing on these goals, the carbon credits we expect to receive will attract a premium, which should increase the financial returns to shareholders. Given the
TABLE OF CONTENTS decades long relationships that are expected to result from carbon streams, we believe it is important to partner with developers and project operators who share our goal to be instrumental in the transition to a sustainable, low-carbon economy. Our choice of investments will meet the highest environmental integrity criteria such as ISO141064-2, the CCPs, SDGs, as well as additional environmental integrity criteria, on an activity-by-activity basis. Accordingly, we anticipate that most, if not all, of our projects will have additional social, environmental, and economic co-benefits in addition to their carbon reduction or removal potential. We aim to deliver long-term cash flow growth through the monetization of its carbon credit portfolio through direct sales to third-party buyers, or on carbon credit marketplaces. We plan to make investments in a broad range of projects that generate carbon credits. In addition to the more common nature-based projects, we plan to also invest in a broad range of projects covering most carbon-mitigation activities, including renewable and non-renewable energy generation, energy and fuel efficiency, avoidance of the emission of potent gases such as hydrofluorocarbons and sulfur hexafluoride, waste handling and disposal and potentially CCS/CCUS. Project Management We plan to act as a carbon project manager controlling all major aspects of carbon credit generation within a project, again providing a long-term contractual revenue stream with minimal operating requirements. Our project management model is designed to help generate streams of revenue for other companies, municipalities and other organizations through the technology-focused generation of carbon credits. In this role, we would partner with entities that reduce energy consumption or greenhouse gas emissions and provide turnkey services allowing these entities to generate and monetize the associated carbon credits, in exchange for a portion of those credits. Since the process of generating carbon credits is very complicated and tedious, most of these companies do not have the expertise or resources to do it. As a result, we plan to be able to fill this role of generating carbon credits on their behalf at no cost to the companies. Instead, we will typically aim to retain approximately 25% of the carbon credit stream generated. The majority of investments needed are the costs to register, validate, verify and certify the carbon credits generated from the projects and typically is less than $150,000 per project. Project Assessment In order to assess our project pipeline to choose the best opportunities, we have developed a Project Assessment Tool. The tool is designed to undertake an efficient and reliable initial assessment of potential project opportunities, whether within our pipeline or for third-party projects, to decide which project opportunities to move forward with. First, the tool performs a project assessment using weighted categories covering commercial, technical, financial, and legal aspects of each project and provides a systematic and methodical process to mitigate the investment risk for every opportunity. In connection with any assessment, we also utilize third-party consultants where necessary to properly assess specific risk and feasibility factors associated with a prospective project. Third-party feasibility studies provide confirmation that carbon credits can be generated along with giving us a more exact estimate of the number of expected credits. The studies also highlight any potential risk of not being able to generate credits. Devvio Blockchain Pursuant to the Devvio Agreement, Devvio provides us with access to its proprietary blockchain, DevvX, which we intend to use in conjunction with our platform to store all relevant data related to the generation of carbon credits, including project design documents, quantification methodologies, validation and verification reports and project/program specific data. The DevvX blockchain is currently fully developed and functional to store all relevant data for our needs. By using DevvX in the future, we believe we will be able to provide full provenance, additional trust and transparency in every carbon credit generated, thus improving their quality. Verification and Validation We have engaged leading offset developers and greenhouse gas accounting firms to assist with establishing the strategic approach to maximize revenue potential while minimizing risk, determining appropriate voluntary carbon credit methodologies and developing voluntary offset projects leveraging existing greenhouse gas quantification methodologies for projects. These methodologies are internationally recognized. All our projects
TABLE OF CONTENTS are intended to meet or exceed the requirements set out by companies seeking to offset their corporate emissions by purchasing carbon credits. These requirements include a clear description of any environmental claims, a conservative baseline of carbon credits generated, demonstration of all additionality barriers (including financial barriers), no leakage, permanence and third-party verification. Registries set the project design, implementation, monitoring and reporting criteria against which a project’s carbon offsetting activities and/or environmental and social benefits can be verified. In voluntary markets, a number of standards have emerged with the intent to increase credibility in the marketplace. Some of the more commonly used and internationally recognized standards include the Verified Carbon Standard Program by Verra, Gold Standard, Global Carbon Council and ACR. One of the major roles of registries is to develop and/or publish greenhouse gas quantification methodologies. The methodology(ies) applied during the initial project design stage will directly influence the projected greenhouse gas emission reductions and/or removals generated by the project during the project crediting period. The project developer/owner is responsible for, among other things, selecting the applicable methodology, engaging in the registration process with the applicable standard organization, and leading in the annual verification process that ensures the continued generation of credits over the crediting period of the project. Xpansiv Relationship We plan to use Xpansiv DataSystems Inc. (“Xpansiv”)’s trading platform, the premier global marketplace for sustainability-inclusive products. Xpansiv has the largest marketplace for environmental credits and has had the largest number of carbon credit transactions globally, with over one billion environmental credits having been processed through Xpansiv. Xpansiv acts as an efficient channel to offer high quality carbon credits to buyers and is expected to provide liquidity for our portfolio of carbon credits. Additionally, Xpansiv’s CBL Market and Environmental Management Account allow us to manage its credits held on multiple registries from one convenient location, including the sale of credits to partners. It is anticipated that a portion of our carbon credit buyers will come through Xpansiv. Examples of Our Current Projects and Programs The following is a brief summary of our active projects and programs: EV Charging Project We have an EV charging project in development that targets operators and owners of EV charging stations and networks within North America. After an intensive analysis of the marketplace, we remain focused on high-value states based on grid emissions for optimal carbon credit returns. We continue to build key partnerships within the industry with access to 2000 charging stations. Revenue from this project is expected in 2025. Contribution and Exchange Agreement with Crestmont Investments LLC On October 28, 2024, DevvStream entered into a Contribution and Exchange Agreement (the “C&E Agreement”) with Crestmont Investments LLC (“Crestmont”) and FIAC. Pursuant to the C&E Agreement, immediately following the closing of the business combination, Crestmont contributed 2,000,000 units of its interests in Monroe Sequestration Partners LLC (“MSP”) to DevvStream in exchange for 2,000,000 newly issued Common Shares. This transaction aligns with our strategic initiative to expand our portfolio of high-quality carbon sequestration assets, providing the Company with increased access to scalable, verifiable, and high-integrity carbon credits. The acquisition of an equity interest in MSP enhances our ability to generate long-term revenue from carbon credit markets and fortifies its competitive positioning as a leader in sustainability-focused investments. The C&E Agreement also establishes a structured framework for value realization, including stock liquidity mechanisms for Crestmont, while reinforcing our commitment to delivering shareholder value through accretive transactions and market-driven growth strategies. Recent Carbon Credit Transactions and Strategic Partnerships As part of our ongoing strategy to expand our portfolio of verified carbon credits and strengthen its position in the environmental asset market, we entered into a series of agreements with key counterparties. These agreements are expected to enhance our access to high-integrity carbon credits, bolster revenue potential, and support long-term growth through strategic asset acquisitions.
TABLE OF CONTENTS Karbon-X Agreement We entered into a Carbon Credit Purchase Agreement with Karbon-X Corp., under which we agreed to acquire various verified carbon credits valued at approximately $1.14 million. Paytech Ipixuna Agreement The Company entered into a Carbon Credit Purchase Agreement with Paytech Intermediação Ltda., securing the acquisition of 1,200,000 carbon credits from the Ipixuna REDD+ Project. This agreement includes a stop-loss mechanism to protect both parties against fluctuations in carbon credit and share prices, ensuring a fair exchange valuation. CDSA State of Acre Agreement We have also entered into a Carbon Credit Purchase Agreement with Von Bohlen & Halbach Cie. FZ LLC (VBH), with consenting of Companhia de Desenvolvimento de Serviços Ambientais do Acre (CDSA) for the acquisition of 500,000 carbon credits. This agreement includes a stop-loss mechanism to protect both parties against fluctuations in carbon credit and share prices, ensuring a fair exchange valuation. Expansion into the International Renewable Energy Certificate (I-REC) Market and Strategic Agreements As part of our expansion, we have entered into an exclusive agreement with Sogod Energy Inc. (SEI), granting the Company the sole right to trade renewable energy attributes, including I-RECs and associated carbon attributes, from the Sogod Renewable Energy Plant in the Philippines. Under this agreement, we will manage the certification and monetization of these attributes while SEI retains up to 60% of the I-REC value as part of its compensation structure. This agreement aligns with our strategy to secure long-term, high-quality renewable energy credits, providing a scalable pipeline for trading in international markets. Marmota Joint Venture In January 2023, we launched Marmota, a joint venture between us and 1824400 Alberta Limited. Brian Storseth, a former member of Canada’s Parliament and owner of iPolitics and Wellington Dupont, a North American public affairs firm with offices in Washington, D.C. and Ottawa, is the controlling shareholder of 18244000 Alberta Limited. We hold a 10% equity stake in the joint venture. Marmota’s primary focus is the implementation of large-scale, technology-based decarbonization projects that generate revenue directly from carbon markets. Marmota seeks to enable organizations and governments at every level—municipal, provincial, and federal—to meet their sustainability objectives, generate high-value technology-based carbon credits, facilitate their participation in voluntary carbon markets, and help establish or expand their compliance market programs. Marmota has begun discussions with multiple Canadian municipalities for carbon projects to result in the production of carbon credits. Marmota is actively seeking similar engagements across Canada with organizations in both the public and private sector. Our Competition and Competitive Advantage We face competition from other organizations, companies, non-profits, governments, asset managers and individuals that are, or may be, in the process of offering similar services. Some of our current and potential competitors have longer operating histories, significantly greater financial, marketing and other resources than us. Given the increasing focus on carbon projects, the industry is highly competitive and rapidly evolving, and we expect the level of competition to continue to increase. See “Risk Factors — Risks Related to Our Business and Industry — The carbon credit market is competitive, and we expect to face increasing competition in many aspects of our business, which could cause operating results to suffer” for more information. Our current and potential competitors consist primarily of other organizations with a focus on carbon markets and the origination, registration, selling and trading of carbon credits. There is an increasing number of companies and organizations providing financing solutions and development expertise for carbon projects.
TABLE OF CONTENTS Our management believes the following factors and competitive advantages differentiate us from other companies providing similar services: Focus on Technology-based Solutions to Climate Change Our key focus is on technology-based solutions to climate change, while the majority of our competitors focus on nature-based solutions. As discussed above, nature-based solutions involve conserving, restoring or better managing natural ecosystems to remove carbon dioxide from the atmosphere, whereas technology-based solutions involve innovations that focus on the development of new technology and the use of such technology to reduce emissions or remove carbon-dioxide from the atmosphere. A recent study estimates that nature-based solutions could contribute about 20% of mitigation needed between now and 2050 to keep global warning below two degrees Celsius, whereas the remaining 80% would have to come from other solutions including technology-based solutions. Accordingly, we believe that the market opportunities for technology-based solutions is significantly larger than that of nature-based solutions. By focusing on technology-based projects to generate carbon credits, we are able to offer multiple advantages over nature-based solutions. These advantages include: •More accurate quantification due to the verifiable measurement of environmental benefits; •Quicker implementation compared to nature-based projects; | • | Easier replication or scalability than nature-based projects; |
• | Often more financially efficient than nature-based projects due to lower costs; |
• | More predictable and consistent results than nature-based projects; and |
• | Alignment with many of the United Nations’ SDGs. |
Use of Devvio’s Proprietary Blockchain As discussed above, we will use Devvio’s proprietary blockchain with our platform to store the data from carbon credit projects that we develop. We believe this will provide more transparency and improved trust with respect to the provenance of the carbon credits we generate, which we believe will increase the quality and value of our carbon credits, as compared to those generated or acquired by many of our competitors. Devvio Agreement We entered into the Devvio Agreement on November 28, 2021, pursuant to which we became Devvio’s principal business partner for project financing for Devvio’s clients in connection with acquiring rights to greenhouse gas emission or climate change related credits or offsets. Pursuant to the Devvio Agreement, Devvio granted us a worldwide, non-exclusive, non-transferable, non-sublicensable, right and license (the “License”) to exclusively use, access, and otherwise utilize Devvio’s blockchain (as described below) in connection with our business, and to process, manipulate, copy, aggregate or otherwise use any data created, owned, produced or provided by us and compiled by or through the Devvio Platform, as reasonably required for our needs or our client’s needs. We pay royalties to Devvio equal to 5% of all sales revenue for transactions that use the Devvio blockchain and, pursuant to the Devvio Agreement, we prepaid $2,000,000 towards these royalties. Further, in July 2024, we agreed to additional prepaid royalty payments of a minimum of $1,000,000 by August 1, 2025 and $1,270,000 by August 1, 2026 and 2027. As of the date of this annual report, we are pre-revenue and no royalty payments (other than prepaid royalties) have been incurred or paid. During the term of the Devvio Agreement and while we actively maintain client data on the Devvio blockchain, in the event that Devvio is approached, becomes aware of, or has any opportunity to pursue a potential referral initiating from the Devvio blockchain that is based in or materially connected to North America which we could support, then Devvio shall promptly but in any event within five (5) business days of becoming aware of such opportunity notify us in writing of such opportunity and grant us the exclusive right of first refusal to pursue, negotiate and/or engage such opportunity (the “ROFR”). Under the ROFR, we have a period of 10 business days to inform Devvio in writing of our intention to exercise the ROFR. If we fail to exercise the ROFR, Devvio will have the right to pursue such opportunity independently of us and our ROFR will expire for such opportunity.
TABLE OF CONTENTS Additionally, during the term of the Devvio Agreement, in the event that Devvio is approached, becomes aware of, or has any opportunity to pursue a potential referral initiating from the Devvio blockchain, which we could support, then we will have the right to participate in a pro-rata share of 20% of the economics in any such opportunity amongst other streaming entities using the Devvio Platform who are geographical exclusive partners with Devvio, each of which getting an equal share. Our pro-rata participation rights to such opportunity will be a minimum of 4% of such economics. During the term of the Devvio Agreement, in the event that we exercise a ROFR (each, a “Devvio Accepted Platform Opportunity”), Devvio will have the right to participate in 40% of the economics in any such Devvio Accepted Platform Opportunity, 20% of which will be available to Devvio and 20% of which will be available to the other platform partners on a pro-rata basis. The term of the Devvio Agreement will continue perpetually unless an event of termination set out below occurs: (1)
at any time immediately upon notice by one party if the other party is in material breach of the agreement and such material breach is not remedied within forty-five days following notice from the terminating party to the breaching party setting out the reasonable particulars of such breach; (2)
starting from 2028, if advance royalty payments fall below $1,000,000 in any year; | (3)
| immediately by either party if the other party is dissolved, has its existence terminated, has a receiver appointed over all or any material part of its property, has an assignment made for the benefit of its creditors, has a petition in bankruptcy made by it or against it, has commenced by or against it any proceedings under any bankruptcy or insolvency laws or any laws relating to the relief of debtors, readjustment of indebtedness or composition or extension of indebtedness, in each case where it is not being contested in good faith by such other party; |
(4)
| upon a minimum of thirty days’ prior written notice by Devvio to us in the event that we fail to actively conduct our Streaming Business (as defined in the Devvio Agreement) for a period of at least six (6) months; |
(5)
| by either party upon written notice to the other party in the event of a direct or indirect change of control of such other party without the prior written consent of the first party; or |
(6)
| as otherwise mutually agreed in writing by the parties. |
Government Regulation We operate in an industry that is subject to many established environmental regulations. Greenhouse gas emissions are subject to environmental laws and regulations in the various jurisdictions in which our partners and customers have operations. In the normal course of business, our customers and partners may be involved in legal proceedings under various environmental laws across the globe relating to greenhouse gas emissions or remediation with respect to various environmental risks. Our current and potential partners’ operations are within jurisdictions that have, or are developing, regulatory regimes governing emissions of greenhouse gasses, including carbon dioxide. These include existing coverage under the European Union Emission Trading System, the California cap-and-trade scheme, India’s Performance, Achieve and Trade scheme, South Africa’s Trade Exposure and Greenhouse Gas Benchmark Regulations, the Tokyo Cap-and-Trade Program, China’s Emission Trading Scheme and any potential expansions of these policies or related policies. In addition, the U.S. Environmental Protection Agency requires mandatory reporting of greenhouse gas emissions and is regulating greenhouse gas emissions for new constructions and major modifications to existing facilities. Growing public concern regarding greenhouse gas emissions may result in more international, national or regional requirements to reduce or mitigate the effects of such greenhouse gas emissions. We cannot predict how, or the extent to which, such regulation may affect our customers and partners, and ultimately help or harm our business. Such changes may include regulation regarding the pricing of greenhouse gas emissions or other climate change regulations. It is difficult to estimate the likelihood of such regulations coming into effect, or predict the potential impact they may have on our customers. Potential consequences of new obligations could include increased technology, transportation, material and administrative costs, and may require us to make additional investments to our customers and their operations. We cannot determine at this time if the costs of compliance with these regulations will be material to our business or operations. Any failure by us to comply
TABLE OF CONTENTS with any requirements of such regulations could subject us to potentially significant liabilities, monetary damages and fines or suspensions. Although we have not incurred, and do not currently anticipate, any material liabilities in connection with such regulations, we may be required to make expenditures related to such regulation in the future. Trademarks and Licenses We have a variety of intangible assets as is typical for businesses such as ours. The DevvStream brand has been applied for as a registered trademark in the United States and other countries. Pursuant to the Devvio Agreement, Devvio granted us the License to use, access, and otherwise utilize the Devvio blockchain, and to process, manipulate, copy, aggregate or otherwise use any data created, owned, produced or provided by us and compiled by or through the Devvio blockchain, as reasonably required for our needs or our client’s needs. We have trademark rights in our logo and other identifiers of our services and products. Further, we hold copyrights on our website and will register copyrights when we believe that the benefits to our business are justified. Our management consistently evaluates the importance of obtaining intellectual property protection for our brands, applications and protocols and maintaining trade secrets. When applicable to and merited by our business, we will seek to obtain, license and enforce patents, protect our proprietary information and maintain trade secret protection without infringing the proprietary rights of third parties. We will also make use of trade secrets, proprietary unpatented information and trademarks to protect our technology and enhance our competitive position. We cannot assure you that any patent which we may be issued in the future will protect our intellectual property rights or provide us with any competitive advantage. While there is no active litigation involving any of our intellectual property rights and we have not received any notices of patent infringement, we may be required to enforce or defend our intellectual property rights against third parties in the future. See “Risk Factors—Risks Related to our Information Technology and Intellectual Property” for additional information regarding these and other risks related to our intellectual property portfolio and their potential effect on us. Specialized Skills and Knowledge A number of aspects of our business require specialized skills and knowledge. Our management has specialized skills and knowledge in the areas of carbon markets and the origination, registration, selling and trading of carbon credits. The number of persons experienced in carbon markets and the origination, registration, selling and trading of carbon credits is limited, and competition for such persons can be intense. In addition, the number of persons skilled in structuring streams is limited. Recruiting and retaining qualified personnel is critical to our success and there can be no assurance of such success. A majority of carbon credit developers focus almost entirely on nature-based projects. As a result, their expertise are mostly in areas of botany, forestry and biology. Our management team has acquired specialized skills and knowledge in the areas of carbon markets and the origination, registration, selling and trading of carbon credits through years of experience. Our CEO, Sunny Trinh, has over 25 years of experience working in technology, corporate social responsibility, sustainability and carbon markets. Employees As of the date of this registration statement we have a total of five full-time employees and five independent contractors. Legal Proceedings We have not been, are not currently a party to, nor are we aware of, any legal proceeding or claim which, in the opinion of management, is likely to materially adversely affect our business or financial results or condition.
TABLE OF CONTENTS From time to time, we may be subject to various claims, lawsuits and other legal and administrative proceedings that may arise in the ordinary course of business. Some of these claims, lawsuits and other proceedings may range in complexity and result in substantial uncertainty; it is possible that they may result in damages, fines, penalties, non-monetary sanctions or relief. Available Information Our website is https://devvstream.com. On our website we make available at no cost our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished as soon as reasonably practicable after we electronically file such material with, or furnish them to, the United States Securities and Exchange Commission (“SEC”). The information contained on our website is not a part of this annual report on Form 10-K.
TABLE OF CONTENTS MANAGEMENT Directors and Executive Officers The following sets forth certain information concerning our directors and executive officers: | | | | | | | Executive Officers:
| | | | | | | Sunny Trinh | | | 54 | | | Chief Executive Officer | David Goertz | | | 46 | | | Chief Financial Officer | Chris Merkel | | | 58 | | | Chief Operating Officer | Non-Employee Directors(1):
| | | | | | | Wray Thorn | | | 53 | | | Director | Carl Stanton | | | 57 | | | Director | Michael Max Bühler | | | 51 | | | Director | Stephen Kukucha | | | 57 | | | Director | Jamila Piracci | | | 52 | | | Director | | | | | | | |
(1)
Thomas G. Anderson and Ray Quintana were appointed to the Board in connection with the consummation of the Transactions and resigned from the Board on November 7, 2024. Information regarding the executive officers, key employees, and directors is set forth below: Executive Officers Mr. Sunny Trinh serves as Chief Executive Officer of the Company. Mr. Trinh has served as Chief Executive Officer of DevvStream for the past two years and brings over 25 years of experience in the technology sector and directly in developing new verticals in sustainability and carbon markets. Mr. Trinh also served as the Chief Digital Alchemist for Devvio, where he utilized their blockchain technology to develop solutions and new business models in the sustainability and carbon markets. Prior to DevvStream, Mr. Trinh led innovation as the vice president of Strategic Partnerships and Ecosystem at Avnet Inc. (AVT: NASDAQ). He was also the chief operating officer for Jooster and vice president of sales for Arrow Electronics (ARW: NYSE) where he led the design team for a Corvette driven by a quadriplegic. Mr. Trinh also co-founded and served as Chief Executive Officer for 9:Fish Surfboards and was an adjunct professor for California Lutheran University’s master’s in business administration program, where he started the school’s technology tract. He also holds a patent on electronic accessories for cell phones. Mr. Trinh received his bachelor’s degree and master’s degree in engineering from Harvey Mudd College and his master’s in business administration from California Lutheran University. Mr. David Goertz serves as the Chief Financial Officer of the Company. Mr. Goertz has served as the Chief Financial Officer of DevvStream since November 2022. Mr. Goertz is a partner with Dale Matheson Carr-Hilton Labonte, LLP Chartered Professional Accountants, where he has worked since 2005 and became a partner in 2011. Mr. Goertz provides accounting, assurance, taxation and business advisory services to private and public companies, not-for-profit organizations and incorporate professionals. Mr. Goertz has an extensive background in public company operations, restructurings, acquisitions and initial public offerings. Mr. Goertz also has a specialized knowledge of the manufacturing, mining, real estate and technology industries. Mr. Goertz received his bachelor’s degree from the University of Victoria and has been a Chartered Professional Accountant since 2004. Mr. Chris Merkel serves as the Chief Operating Officer of the Company. Mr. Merkel has served as the Chief Operating Officer of DevvStream since December 2021. Prior to joining DevvStream, Mr. Merkel spent 24 years managing strategic customers, growing technical services verticals and held sales leadership roles at Avnet (AVT: NASDAQ) and Arrow Electronics (ARW:NYSE). He has engaged with companies at every stage, from pre-funded startups to global enterprises in markets such as the internet-of-things, consumer, industrial and medical. Mr. Merkel spent five years with Sierra Pacific Industries in a general sales and operations management role. Mr. Merkel has over 30 years of sales, operations and general management experience successfully managing diverse teams and projects.
TABLE OF CONTENTS Non-Employee Directors Mr. Wray Thorn serves as a director of the Company. Mr. Thorn is a Partner and Co-Founder of Focus Impact Partners, LLC. He also serves as the Chief Investment Officer and a director of Focus Impact BH3 Acquisition Company, a special purpose acquisition corporation (Nasdaq: BHAC). Mr. Thorn is also the Founder and Chief Executive of Clear Heights Capital and a Board Member of Skipper Pets, Inc. Previously, Mr. Thorn was Managing Director and Chief Investment Officer - Private Investments at Two Sigma Investments, where he architected and led the firm’s private equity (Sightway Capital), venture capital (Two Sigma Ventures) and impact (Two Sigma Impact) investment businesses and was a leader in the creation of Hamilton Insurance Group and the incubation of Two Sigma’s insurance technology activities. With approximately three decades of experience as a chief investment officer, investment leader and lead director, Mr. Thorn has firsthand knowledge of investment firm leadership, private investing company value creation, asset allocation strategy and practice and risk management frameworks. Mr. Thorn has built and led businesses to source, structure, finance and make private investments, to allocate and risk manage capital across private investment strategies and to help companies, organizations and executives realize their growth and development objectives. Mr. Thorn has also been at the forefront of proactive impact investing and applying data and technology to innovate private investing. Mr. Thorn also serves as Co-Chair of the Board of Youth, INC, as Vice Chair of the Board and Chair of the Investment Committee for Futures and Options, as a grant monitor and event committee chair for Hour Children, and as an Associate of the Harvard College Fund. Mr. Carl Stanton serves as a director of the Company. Mr. Stanton is a Partner and Co-Founder of Focus Impact Partners, LLC and currently serves as the Chief Executive Officer. He also serves as the Chief Executive Officer and a director of Focus Impact BH3 Acquisition Company, a special purpose acquisition corporation (Nasdaq: BHAC). Mr. Stanton brings nearly three decades of experience in leading companies across transformative Private Equity/Alternative Asset management with a proven track record in creating shareholder value. Mr. Stanton has unique knowledge and skills across all facets of Asset Management. He is a team builder and has managed and co-led two Alternative Asset Management firms totaling over $4.5 billion AUM, and has delivered best-in-class investment performance results along with colleagues over multiple funds. He has advised CEOs, CFOs, and boards of directors of multiple companies and spread managerial, financial, and strategic best practices with demonstrated expertise in value creation strategies including revenue growth strategies, industry transformation, cost control, supply chain management, and technology best practices. Mr. Stanton has also served as Board Member to more than 15 portfolio companies across Industrial Products & Services, Transportation & Logistics and Consumer industries; including his current role as a Board Member of Skipper Pets, Inc. Mr. Michael Max Bühler serves as a director of the Company. Mr. Bühler is a member of various international committees, including the T20/G20 Task Force on Infrastructure Investment and the OECD Blue Dot Network. Mr. Bühler is actively involved in the formation of a data cooperative for the construction industry and sits on the board of the International Resilience and Sustainability (inRES) Partnership, supporting Botswana’s digital transformation. Currently, Mr. Bühler is a Professor of Construction Business Management at the University of Applied Sciences in Constance, Germany, with research interests in infrastructure planning and global challenges. Previously, he led initiatives at the World Economic Forum and worked with Deloitte in Vancouver. He also held roles at Bilfinger Berger in North America. He has over 25 years of experience in construction and real estate. Mr. Bühler has a PhD in civil engineering and an MBA with finance and accounting specialization. Mr. Stephen Kukucha serves as a director of the Company. Mr. Kukucha is a partner at PacBridge Partners with over twenty years of experience in clean technology, renewable power, investing and their intersection with public policy. At PacBridge Capital Partners, he specializes in providing early stage and growth capital to companies seeking to take disruptive technologies and build scalable businesses. PacBridge is based in Hong Kong and Vancouver and invests in opportunities globally, with a particular focus in Asia and North America. As well, Stephen also serves as a Senior Advisor to Fort Capital Partners, focusing on origination of M&A, capital raising and advisory transactions. Prior to his current roles, Mr. Kukucha practiced law and was in a leadership position at Ballard Power Systems - leading their global External Affairs group (including emerging market business development in Asia). Following Ballard, Mr. Kukucha founded both a renewable power company and a strategic advisory firm. Mr. Kukucha also served as Chief Executive Officer and a director of CERO Technologies from April 2023 to June 2024, and as a director of Sustainable Development Technology Canada (SDTC) from March 2021 to May 2024. Mr. Kukucha has a Bachelor of Arts from the University of
TABLE OF CONTENTS British Columbia and a Bachelor of Laws from the University of New Brunswick and graduated from the ICD-Rotman, Directors Education Program and became a member of the Institute of Corporate Directors, ICD.D. Ms. Jamila Piracci serves as a director of the Company. Ms. Piracci is the Founder of Roos Innovations, a financial services and commodities consultancy firm. She also serves on the boards of the Futures Industry Association and Fiùtur Information Exchange Inc., and is a member of the advisory board of Itegriti Corporation. Prior to becoming a consultant, Ms. Piracci led the National Futures Association’s regulatory program from 2011 to 2019, overseeing swap dealers under the Dodd-Frank Act, including creating NFA’s program. Ms. Piracci previously worked at the Federal Reserve Bank of New York, where she was an attorney with a primary focus on orderly liquidation authority and resolution planning under the Dodd-Frank Act, as well as on market and other developments pertaining to OTC derivatives. Ms. Piracci also spent nearly a decade advising a range of OTC derivatives market participants, including dealer banks, investment managers, and energy firms. In addition, she was an Assistant General Counsel at the International Swaps and Derivatives Association, where she chaired working groups developing market documentation and best practices primarily in the credit derivatives area. Ms. Piracci received her J.D. from Cornell Law School and MBA from the S.C. Johnson Graduate School of Management at Cornell University. Ms. Piracci earned her B.A. from Harvard-Radcliffe College at Harvard University. Family Relationships There are no family relationships among any of our executive officers or directors. Independence of Board of Directors Nasdaq listing standards require that a majority of our Board be independent. An “independent director” is defined generally as a person that, in the opinion of the Board, has no material relationship with the listed company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). Our Board has determined that Michael Max Bühler, Stephen Kukucha and Jamila Piracci are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present. Committees of the Board of Directors The Board will have the authority to appoint committees to perform certain management and administration functions. The Board has a standing audit committee, compensation committee, and nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by the Board. The charters for each of these committees are available on our website. Audit Committee The audit committee of the Board consists of Michael Max Bühler, Stephen Kukucha and Jamila Piracci. The Board has determined that each proposed member is independent under the Nasdaq listing standards and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (“Exchange Act”). The chairperson of the audit committee is Michael Max Bühler. Michael Max Bühler qualifies as an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K and each member of the audit committee possess financial sophistication, as defined under the rules of Nasdaq.
TABLE OF CONTENTS The primary purpose of the audit committee is to discharge the responsibilities of the Board with respect to our accounting, financial, and other reporting and internal control practices and to oversee our independent registered accounting firm. Specific responsibilities of our audit committee include: •selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements; •helping to ensure the independence and performance of the independent registered public accounting firm; | • | discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results; |
• | developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; |
• | reviewing policies on risk assessment and risk management; |
• | reviewing related party transactions; |
• | obtaining and reviewing a report by the independent registered public accounting firm at least annually that describes our internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law; and |
• | approving (or, as permitted, pre-approving) all audit and all permissible non-audit service to be performed by the independent registered public accounting firm. |
Compensation Committee The compensation committee of the Board consist of Jamila Piracci, Stephen Kukucha and Michael Max Bühler. The Board has determined each proposed member is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The chairperson of the compensation committee is expected to be Jamila Piracci. The primary purpose of the compensation committee is to discharge the responsibilities of the board of directors to oversee its compensation policies, plans and programs and to review and determine the compensation to be paid to its executive officers, directors and other senior management, as appropriate. Specific responsibilities of the compensation committee include: • | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
• | reviewing and approving the compensation of our other executive officers; |
• | reviewing and recommending to the Board the compensation of our directors; |
• | reviewing our executive compensation policies and plans; |
• | reviewing and approving, or recommending that the Board approve, incentive compensation and equity plans, severance agreements, change-of-control protections and any other compensatory arrangements for our executive officers and other senior management, as appropriate; |
• | administering our incentive compensation equity-based incentive plans; |
• | selecting independent compensation consultants and assessing whether there are any conflicts of interest with any of the committee’s compensation advisors; |
• | assisting management in complying with our proxy statement and annual report disclosure requirements; |
• | if required, producing a report on executive compensation to be included in our annual proxy statement; |
• | reviewing and establishing general policies relating to compensation and benefits of our employees; and |
• | reviewing our overall compensation philosophy. |
TABLE OF CONTENTS Nominating and Corporate Governance Committee The nominating and corporate governance committee of the Board consists of Stephen Kukucha, Jamila Piracci and Michael Max Bühler. The Board has determined each proposed member is independent under Nasdaq listing standards. The chairperson of the nominating and corporate governance committee is expected to be Stephen Kukucha. Specific responsibilities of the nominating and corporate governance committee include: •identifying, evaluating and selecting, or recommending that the Board approves, nominees for election to the Board; •evaluating the performance of the Board and of individual directors; | • | reviewing developments in corporate governance practices; |
• | evaluating the adequacy of our corporate governance practices and reporting; |
• | reviewing management succession plans; and |
• | developing and making recommendations to the Board regarding corporate governance guidelines and matters. |
Code of Business Conduct and Ethics We adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. We intend to disclose any amendments to the Code of Business Conduct and Ethics, or any waivers of its requirements, on our website to the extent required by the applicable rules and exchange requirements. Information contained on or accessible through such website is not a part of this prospectus, and the inclusion of the website address in this prospectus is an inactive textual reference only. The full text of the Code of Business Conduct and Ethics is included as Exhibit 14.1 to this Registration Statement and incorporated herein by reference. Compensation Committee Interlocks and Insider Participation None of our executive officers serve, or have served during the last year, as a member of the board of directors, compensation committee, or other board committee performing equivalent functions of any other entity that has one or more executive officers serving as one of our directors or on either company’s compensation committee.
TABLE OF CONTENTS EXECUTIVE COMPENSATION Unless the context otherwise requires, any reference in this section of this prospectus to “DevvStream,” “we,” “us” or “our” refers to DevvStream Holdings Inc. prior to the consummation of the Business Combination and to the Combined Company and its consolidated subsidiaries following the Business Combination. As an “emerging growth company,” we have opted to comply with the executive compensation disclosure rules applicable to “emerging growth companies” and “smaller reporting companies” as such terms are defined in the Securities Act and the Exchange Act, and the rules promulgated thereunder. Summary Compensation Table The following table presents information regarding the compensation paid by DevvStream to Sunny Trinh, our Chief Executive Officer, Chief Merkel, our former Chief Operating Officer, and Bryan Went, our Chief Revenue Officer, during the fiscal years ended July 31, 2024 and July 31, 2023. We refer to these individuals as our “named executive officers.” | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sunny Trinh
Chief Executive Officer
| | | 2024 | | | 250,000 | | | — | | | 522,526 | | | — | | | — | | | — | | | — | | | 772,526 | | 2023 | | | 250,000 | | | — | | | 906,863 | | | — | | | — | | | — | | | — | | | 1,156,863 | Chris Merkel
Chief Operating Officer
| | | 2024 | | | 180,000 | | | — | | | 19,291 | | | — | | | — | | | — | | | — | | | 199,291 | | 2023 | | | 180,000 | | | — | | | 32,062 | | | — | | | — | | | — | | | — | | | 212,062 | Bryan Went
Former Chief Revenue Officer
| | | 2024 | | | 180,000 | | | — | | | 31,099 | | | — | | | — | | | — | | | — | | | 211,099 | | 2023 | | | 180,000 | | | — | | | 54,720 | | | — | | | — | | | — | | | — | | | 234,720 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Narrative to the Summary Compensation Table 2024 Annual Base Salary We pay our named executive officers a base salary to compensate them for services rendered to DevvStream. The base salary payable to our named executive officers is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. Equity Compensation We have granted stock options to our employees, including our named executive officers, under the Equity Incentive Plan in order to attract and retain them, as well as to align their interests with the interests of our shareholders. Equity awards are granted to executives and employees taking into account a number of factors, including the amount and term of awards previously granted, base salary and bonuses and competitive factors. In connection with the Closing of the Business Combination, each outstanding option (whether vested or unvested) to purchase shares of DevvStream (each, a “Company Option”) granted under DevvStream’s 2022 Equity Incentive Plan, as amended and restated from time to time, and DevvStream’s 2022 Non-Qualified Stock Option Plan (together, the “Company Equity Incentive Plans”) and each restricted stock unit representing the right to receive payment in Company Shares, granted under a restricted stock unit award agreement (each, a “Company RSU”) issued and outstanding immediately prior to the Closing was cancelled and converted into an option to purchase a number of New PubCo Common Shares (“Converted Options”) and New PubCo restricted stock units (“Converted RSUs”), respectively, in an amount equal to the Company Shares underlying such Company Option or Company RSU, respectively, multiplied by the Common Conversion Ratio (and, for Company Options, at an adjusted exercise price equal to the exercise price for such Company Option immediately prior to the Effective Time divided by the Common Conversion Ratio). In connection with the Business Combination, the FIAC stockholders approved the DevvStream Corp. 2024 Equity Incentive Plan as may be amended, restated or modified from time to time, (the “Equity Incentive Plan”). A summary of the Equity Incentive Plan is set forth below. A copy of the full text of the Equity Incentive Plan is attached hereto as Exhibit 10.4 and is incorporated herein by reference.
TABLE OF CONTENTS Pension Plan Benefits We do not have any pension plans for our directors, officers or employees. Perquisites and Other Personal Benefits We determine perquisites on a case-by-case basis and will provide a perquisite to a named executive officer when we believe it is necessary to attract or retain the named executive officer. We did not provide any perquisites or personal benefits to our named executive officers not otherwise made available to our other employees in 2024. Employment Agreements On November 6, 2024, in connection with the consummation of the Business Combination, we entered into employment agreements with Bryan Went, Chris Merkel, and Sunny Trinh (collectively, the “Executives”). We refer to the employment agreements herein collectively as the “Employment Agreements.” The Employment Agreements provide for a three-year initial term with automatic renewals for additional one-year periods unless either the applicable Executive or the Company gives written notice of non-renewal at least 90 days prior to the expiration of the then-current initial term or renewal term. The Employment Agreements provide for initial annualized base salary of $250,000 for Mr. Trinh and $180,000 for Mr. Went and $205,000 for Mr. Merkel, which will be reviewed by the Board annually, based on personal and corporate achievements and the overall financial performance of the Company. While employed under the Employment Agreements, the Executives are eligible for certain additional benefits, including reimbursement of reasonable travel and other business-related expenses and participation in the Company’s benefit plans or programs. The Employment Agreements provide that upon a resignation by the applicable Executive for Good Reason or upon a termination by us without Cause (each as defined in the Employment Agreement), the Executive shall be entitled to receive 12 months of continued base salary payments (the “Severance Amount”), subject to the Executives execution and non-revocation of a release of claims. Further, the Employment Agreements provide that upon a resignation by the applicable Executive for Good Reason (as defined in the Employment Agreement) or upon a termination by us without Cause, in either case, within 12 months following a Corporate Transaction (as defined in the Equity Incentive Plan), the Executive shall be entitled to receive the following payments or benefits: (i) the Severance Amount (as defined in the Employment Agreement), (ii) immediate vesting of any of the Company equity awards that vest solely based on continued service that are held by the Executive and (iii) immediate vesting of any the Company equity awards that were subject to performance-based vesting and held by the Executive based on the greater of (x) target level of performance and (y) our actual performance, measured as of the date of termination as determined by the Committee (as defined in the Equity Incentive Plan), subject to the Executives execution and non-revocation of a release of claims. The Employment Agreements also contain certain restrictive covenants, including provisions that require the Executive to assign their rights to intellectual property to us and create restrictions, with certain limitations, on the Executives competing with us, soliciting any employees or individual service providers of, or soliciting or inducing any customers, clients, suppliers or licensees of the Company. These restrictions are generally intended to apply during the term and any renewal term and, subject to applicable state laws, for the twelve-month period following the Executive’s termination of employment. The description of the Employment Agreements herein is qualified in its entirety by reference to the full text of the Employment Agreements, which are attached hereto as Exhibits 10.17, 10.18, and 10.19 incorporated by reference herein. Director Compensation We have not historically maintained a formal non-employee director compensation program but have made stock and option grants to non-employee directors when determined appropriate. Additionally, we provide reimbursement to our non-employee directors for their reasonable expenses incurred in attending meetings of our board of directors and its committees.
TABLE OF CONTENTS The Board, or a committee thereof, will determine the annual compensation to be paid to the members of the Board. In April 2024, the compensation committee of our board of directors approved additional cash compensation of $3,000 per month for the period from April 2023 to April 2024, or $36,000 in the aggregate, to be paid to each of Mr. Bühler, Mr. Kukucha and Ms. Piracci following the consummation of the Business Combination. We intend to approve and implement a compensation program for our non-employee directors, to be effective in connection with the consummation of the Business Combination. Summary of the Equity Incentive Plan The following paragraphs provide a summary of the principal features of the Equity Incentive Plan and its operation. However, this summary is not a complete description of all of the provisions of the Equity Incentive Plan and is qualified in its entirety by the specific language of the Equity Incentive Plan. A copy of the Equity Incentive Plan is attached as Exhibit 10.4 and is incorporated herein by reference. Purposes. The purposes of the Equity Incentive Plan are to align the interests of eligible participants with our stockholders by providing incentive compensation tied to our performance and to advance our interests and increase stockholder value by attracting, retaining and motivating personnel. These incentives will be provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other awards as the administrator of the Equity Incentive Plan may determine. Shares Available. The maximum number of our Common Shares that may be issued under the Equity Incentive Plan is 1,900,000 shares. The number of our Common Shares reserved for issuance under the Equity Incentive Plan will automatically increase on the first business day of each fiscal year of the Company, beginning with Our fiscal year following the fiscal year of the Effective Date, by a number equal to the lesser of (1) five percent (5%) of the number of our Common Shares outstanding on the last day of the immediately preceding fiscal year of the Company, calculated on a fully diluted basis, or (2) such lesser number of our Common Shares as determined by the our Board. Shares issued under the Equity Incentive Plan will be authorized but unissued or reacquired our Common Shares. Shares subject to awards granted under the Equity Incentive Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under the Equity Incentive Plan. Additionally, shares issued pursuant to awards under the Equity Incentive Plan that the Company repurchases or that are forfeited, as well as shares used to pay the exercise price of an award or to satisfy the tax withholding obligations to an award, will become available for future grant under the Equity Incentive Plan. Plan Administration. Our Board, or a duly authorized committee of Our Board, will administer the Equity Incentive Plan (as applicable, the “administrator”). The administrator may delegate to one or more of our officers the authority to (1) designate employees (other than officers) to receive specified awards, and (2) determine the number of shares subject to such awards. The administrator has the authority to determine the terms of awards, including recipients, the exercise, purchase or strike price of awards, if any, the number of shares subject to each award, the fair market value of our Common Share, the vesting schedule applicable to the awards, including any vesting acceleration, and the form of consideration, if any, payable upon exercise or settlement of the award and the terms of the award agreements for use under the Equity Incentive Plan. In addition, subject to the terms of the Equity Incentive Plan, the administrator also has the power to modify outstanding awards under the Equity Incentive Plan, including the authority to reduce the exercise price (or strike price) of any outstanding option or stock appreciation right, cancel and re-grant any outstanding option or stock appreciation right in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any materially adversely affected participant. Eligibility. Any employee, officer, non-employee director, or any person who is a consultant or other personal service provider of our Board or any of its affiliates is eligible to participate in the Equity Incentive Plan, at the administrator’s discretion. In its determination of eligible participants, the administrator may consider any and all factors it considers relevant or appropriate, and designation of a participant in any year does not require the administrator to designate that person to receive an award in any other year. Following the Closing, we expect to have seven non-employee directors, and as of the date of this prospectus, we expect our subsidiaries to have approximately twelve employees and two consultants, in each case, that will be eligible to participate in the Equity Incentive Plan.
TABLE OF CONTENTS Types of Awards. The Equity Incentive Plan provides for the grant of ISOs, nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based awards and other awards (collectively, “awards”). ISOs may be granted only to employees of the Company, employees of a “parent corporation” of our employees of a “subsidiary corporation” of ours (as such terms are defined in Sections 424(c) and (f) of the Code). All other awards may be granted to our employees, officers, non-employee directors and consultants and the employees and consultants of our affiliates. Stock Options. A stock option granted under the Equity Incentive Plan entitles a participant to purchase a specified number of our Common Shares during a specified term at an exercise price. ISOs and NSOs are granted pursuant to stock option agreements adopted by the administrator. The administrator determines the exercise price for a stock option, within the terms and conditions of the Equity Incentive Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of our Common Share on the date of grant. Options granted under the Equity Incentive Plan vest at the rate specified in the stock option agreement as determined by the administrator. The administrator determines the term of stock options granted under the Equity Incentive Plan, up to a maximum of 10 years. Unless the terms of an optionholder’s stock option agreement provide otherwise, if an optionholder’s service relationship with The Company, or any of its affiliates, ceases for any reason other than disability, death or cause, the optionholder may generally exercise any vested options for a period of three months following the cessation of service. The option term may be extended in the event that either an exercise of the option or an immediate sale of shares acquired upon exercise of the option following such a termination of service is prohibited by applicable securities laws or Our insider trading policy, provided that an option term may not be extended beyond 10 years (or such shorter option term, as set forth in the applicable stock option agreement). If an optionholder’s service relationship with our any of its affiliates ceases due to disability or death, or an optionholder dies within a certain period following cessation of service, the optionholder or a beneficiary may generally exercise any vested options for a period of 12 months. In the event of a termination for cause, options generally terminate immediately upon such termination. In no event may an option be exercised beyond the expiration of its term. Acceptable consideration for the purchase of Common Shares issued upon the exercise of a stock option will be determined by the administrator and set forth in the applicable option grant agreements and may include (1) cash, check, bank draft or money order, (2) a broker-assisted cashless exercise, (3) the tender of shares of Common Shares previously owned by the optionholder, (4) a net exercise of the option if it is an NSO and (5) other legal consideration approved by the administrator. Tax Limitations on ISOs. The aggregate fair market value, determined at the time of grant, of our Common Shares with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will be treated as NSOs. No ISOs may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of Our total combined voting power or that of any of Our or subsidiary corporations, unless (1) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and (2) the term of the ISO does not exceed five years from the date of grant. Stock Appreciation Rights. A stock appreciation right (“SAR”) granted under the Equity Incentive Plan entitles a participant to the right to receive, upon exercise or other payment of the SAR, an amount in cash, our Common Shares or a combination of both, equal to the product of (a) the excess of (1) the fair market value of one our Common Share on the date of exercise or payment of the SAR, over (2) the strike price of such SAR, and (b) the number of our Common Shares as to which such SAR is exercised or paid. Stock appreciation rights are granted pursuant to SAR grant agreements adopted by the administrator. The administrator determines the strike price for a SAR, which generally cannot be less than 100% of the fair market value of Common Shares on the date of grant. A SAR granted under the Equity Incentive Plan vests at the rate specified in the SAR agreement as determined by the administrator. The administrator determines the term of SARs granted under the Equity Incentive Plan, up to a maximum of 10 years. Unless the terms of a participant’s SAR agreement provide otherwise, if a participant’s service relationship with any of our affiliates ceases for any reason other than cause, disability or death, the participant may generally exercise any vested SAR for a period of three months following the cessation of service. The SAR term may be further extended in the event that exercise of the SAR following such a termination of service is prohibited by
TABLE OF CONTENTS applicable securities laws, provided that a SAR term may not be extended beyond 10 years (or such shorter option term, as set forth in the applicable stock option agreement). If a participant’s service relationship with our any of its affiliates, ceases due to disability or death, or a participant dies within a certain period following cessation of service, the participant or a beneficiary may generally exercise any vested SAR for a period of 12 months in the event of disability or death. In the event of a termination for cause, SARs generally terminate immediately upon such termination. In no event may a SAR be exercised beyond the expiration of its term. Restricted Stock Awards. A restricted stock award granted under the Equity Incentive Plan is a grant of a specified number of our Common Shares to a participant, subject to vesting restrictions as specified in the award. Restricted stock awards may be granted in consideration for cash, check, bank draft or money order, services rendered to our its affiliates or any other form of legal consideration. our Common Shares acquired under a restricted stock award may, but need not, be subject to a share repurchase option in Our favor in accordance with a vesting schedule to be determined by the administrator. A restricted stock award may be transferred only upon such terms and conditions as set by the administrator. Except as otherwise provided in the applicable award agreement, restricted stock awards that have not vested may be forfeited or repurchased by us upon the participant’s cessation of continuous service for any reason. Restricted Stock Unit Awards. A restricted stock unit (an “RSU”) granted under the Equity Incentive Plan provides a participant with to the right to receive, upon vesting and settlement of the restricted stock unit, one our Common Share per vested unit, or an amount in cash equal to the fair market value of one share, as determined by the administrator. Restricted stock unit awards are granted pursuant to RSU award agreements adopted by the administrator. Restricted stock unit awards may be granted in consideration for any form of legal consideration. Additionally, dividend equivalents may be credited in respect of shares covered by a RSU award. Except as otherwise provided in the applicable award agreement, RSUs that have not vested will be forfeited upon the participant’s cessation of continuous service for any reason. Performance Awards. The Equity Incentive Plan permits the grant of performance-based stock and cash awards. The administrator can structure such awards so that the stock or cash will be issued or paid pursuant to such award only following the achievement of certain pre-established performance goals during a designated performance period. Performance awards that are settled in cash or other property are not required to be valued in whole or in part by reference to, or otherwise based on, our Common Shares. The performance goals may be based on any measure of performance selected by the administrator. The administrator may establish performance goals on a company-wide basis, with respect to one or more business units, divisions, affiliates or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Other Awards. The administrator may grant other awards based in whole or in part by reference to our Common Shares. The administrator will set the number of shares under the award and all other terms and conditions of such awards. Non-Transferability of Awards. Except as provided in the applicable award agreement, the Equity Incentive Plan generally will not allow for the transfer of awards other than, in the case of options and SARs, by will or the laws of descent and distribution, and only the recipient of an award may exercise an award during his or her lifetime. If the administrator makes an award transferable, such award will contain such additional terms and conditions as the administrator deems appropriate. Dissolution or Liquidation. Unless otherwise provided in the award agreements, if there is a proposed liquidation or dissolution of the Company, all awards, to the extent that they have not been previously exercised or vested, will terminate immediately before the consummation of such event. However, our Board may determine to cause some or all awards to become fully vested or exercisable before the dissolution or liquidation. Corporate Transaction. In the event of a corporate transaction, the our Board may take any one or more of the following actions in respect of outstanding awards, as determined by the our Board in its sole discretion and without participant consent: (i) cancel such awards in exchange for an amount of cash or securities, where in the case of stock options and stock appreciation rights, the value of such amount will be equal to the in-the-money spread value of such awards; (ii) provide for the assumption or substitution of such awards with new awards that will substantially preserve the applicable terms of any affected awards previously granted under the Equity Incentive Plan; (iii) modify the terms of such awards to add events, conditions or circumstances (including
TABLE OF CONTENTS termination of employment or service within a specified period after a corporate transaction) upon which the vesting of such awards will accelerate; (iv) deem any performance conditions satisfied at target, maximum or actual performance through closing or provide for the performance conditions to continue after closing or (v) provide that for a period of at least 20 days prior to the corporate transaction, any stock options or stock appreciation rights that would not otherwise become exercisable prior to the corporate transaction will be exercisable and that any stock options or stock appreciation rights not exercised prior to the consummation of the corporate transaction will terminate after the closing. Under the Equity Incentive Plan, a corporate transaction is generally the consummation of (1) a sale or other disposition of all or substantially all of Our assets, (2) a sale or other disposition of at least 50% of the total combined voting power of Our outstanding securities, (3) a merger, consolidation or similar transaction following which ours not the surviving entity, (4) a merger, consolidation or similar transaction following which the Company is the surviving entity but (x) the shares of Common Shares outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction or (y) the securities possessing more than 50% of the total combined voting power of our outstanding securities are transferred to a person or persons different from those who held such securities prior to such merger or (5) a complete liquidation or dissolution of the Company. Forfeiture and Clawback. Awards will be subject to any clawback policy the Company required to adopt pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as is otherwise required by applicable laws. The administrator also may specify in an award agreement that the participant’s rights, payments and benefits with respect to an award will be subject to reduction, cancellation, forfeiture, recoupment, reimbursement, or reacquisition upon the occurrence of certain specified events. The administrator may require a participant to forfeit or return to the Company reimburse us for all or a portion of the award and any amounts paid under the award in order to comply with any clawback policy of the Company as described in the first sentence of this paragraph or with applicable laws. Amendment or Termination. The Equity Incentive Plan will become effective upon the later to occur of (a) its adoption by the FIAC Board or (b) the Closing date, and will continue in effect until terminated by the administrator in accordance with its terms. However, no incentive stock options may be granted after the ten-year anniversary of the earlier of the adoption of the Equity Incentive Plan. In addition, the administrator will have the authority to amend, suspend, or terminate the Equity Incentive Plan or any part of the Equity Incentive Plan, at any time and for any reason, but such action generally may not materially impair the rights of any participant without his or her written consent. No awards may be granted under the Equity Incentive Plan while it is suspended or after it is terminated. The administrator has the authority to, subject to the consent of any participant whose award is materially impaired, reduce the exercise price (or strike price) of any outstanding options or SARs, cancel any outstanding options or SARs and grant substitution awards in the form of options, SARs, restricted stock, RSUs or other awards, cash and/or other valuable consideration; or take other actions that are treated as a repricing under generally accepted accounting principles. Summary of U.S. Federal Income Tax Consequences The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the Equity Incentive Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the income tax laws of any municipality, state or non-U.S. jurisdiction in which the participant may reside. As a result, tax consequences for any particular participant may vary based on individual circumstances. This summary is not intended as tax advice to participants, and participants should consult their own tax advisors. Incentive Stock Options A participant generally recognizes no taxable income for ordinary income tax purposes as a result of the grant or exercise of an option that qualifies as an incentive stock option under Section 422 of the Code. If a participant exercises the option and then later sells or otherwise disposes of the shares acquired through the exercise of the option after both the two-year anniversary of the date the option was granted and the one-year anniversary of the date of exercise of the option, the participant will recognize a capital gain or loss equal to the difference between the sale price of the shares and the exercise price.
TABLE OF CONTENTS However, if the participant disposes of such shares either on or before the two-year anniversary of the date of grant or on or before the one-year anniversary of the date of exercise of the option (a “disqualifying disposition”), any gain up to the excess of the fair market value of the shares on the date of exercise over the exercise price generally will be taxed as ordinary income, unless the shares are disposed of in a transaction in which the participant would not recognize a gain (such as a gift). Any gain in excess of that amount will be a capital gain. If a loss is recognized with respect to the share disposition, there will be no ordinary income, and such loss will be a capital loss. For purposes of the alternative minimum tax, the difference between the option exercise price and the fair market value of the shares on the date of exercise of the option is treated as an adjustment item in computing the participant’s alternative minimum taxable income in the year of exercise (unless the shares are disposed of in the same year as the option exercise). In addition, special alternative minimum tax rules may apply to certain subsequent disqualifying dispositions of the shares or provide certain basis adjustments or tax credits. Nonstatutory Stock Options A participant generally recognizes no taxable income for ordinary income tax purposes as a result of the grant of such an option. However, upon exercising the option, the participant generally recognizes ordinary income equal to the amount that the fair market value of the shares on such date exceeds the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale or other disposition of the shares acquired by the exercise of a nonstatutory stock option, any gain or loss (based on the difference between the sale price and the fair market value on the exercise date) will be taxed as capital gain or loss. Stock Appreciation Rights In general, no taxable income for ordinary income tax purposes is reportable when a stock appreciation right is granted to a participant. Upon exercise, the participant generally will recognize ordinary income in an amount equal to the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss. Restricted Stock Awards A participant acquiring shares of restricted stock generally will recognize ordinary income equal to the fair market value of the shares on the vesting date. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The participant, pursuant to Section 83(b) of the Code, may elect to accelerate the ordinary income tax event to the date of acquisition of the shares by filing an election with the IRS generally no later than thirty days after the date the shares are acquired. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss. Restricted Stock Units and Performance Awards There generally are no immediate tax consequences of receiving an award of restricted stock units or a performance award. A participant who is granted restricted stock units or performance awards generally will be required to recognize ordinary income in an amount equal to the fair market value of shares issued to such participant at the time of settlement of the award upon vesting. If the participant is an employee, generally such ordinary income is subject to income tax withholding and certain employment tax withholdings. Any additional gain or loss recognized upon any later disposition of any shares received would be capital gain or loss. Section 409A Section 409A of the Code (“Section 409A”) provides certain requirements for non-qualified deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards with a deferral feature granted under the Equity Incentive Plan to a participant subject to U.S. income tax will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is
TABLE OF CONTENTS actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with the requirements of Section 409A, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. Tax Effect for the Company Generally we will be entitled to a tax deduction in connection with an award under the Equity Incentive Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option) except to the extent such deduction is limited by applicable provisions of the Code. Special rules limit the deductibility of compensation paid to our Chief executive officer and certain “covered employees” as determined under Section 162(m) of the Code and applicable guidance. Under Section 162(m) of the Code, the annual compensation paid to any of these specified individuals will be deductible only to the extent that it does not exceed $1,000,000. THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND OURWITH RESPECT TO AWARDS UNDER THE EQUITY INCENTIVE PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH, OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR NON-U.S. JURISDICTION IN WHICH THE PARTICIPANT MAY RESIDE. Plan Benefits The number of awards that an employee, officer, director, or consultant may receive under the Equity Incentive Plan is in the discretion of the administrator and therefore cannot be determined in advance. Rule 10b5-1 Sales Plans Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell Common Shares on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from them. The director or executive officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information, subject to compliance with the terms of our insider trading policy. Emerging Growth Company Status We are an “emerging growth company,” as defined in the JOBS Act. As an emerging growth company, we are exempt from certain requirements related to executive compensation, including the requirements to hold a nonbinding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of its chief executive officer to the median of the annual total compensation of all of its employees, each as required by the Investor Protection and Securities Reform Act of 2010, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
TABLE OF CONTENTS CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS The Company adopted a formal written policy effective upon the consummation of the Business Combination providing that persons meeting the definition of “Related Person” under Item 404(a) of Regulation S-K, such as the Company’s executive officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of our capital stock and any member of the immediate family of any of the foregoing persons, are not permitted to enter into a related party transaction with the Company without the approval of our audit committee, subject to the exceptions described below. A related party transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which the Company was or is to be a participant in which the amount involves exceeds $120,000 in the aggregate, and in which a related party had or will have a direct or indirect material interest. Transactions involving compensation for services provided to us as an employee or director and certain other transactions are not covered by this policy. Under the policy, the audit committee will review information that it deems reasonably necessary to enable the Company to identify any existing or potential related person transactions and to effectuate the terms of the policy. In addition, under the Code of Conduct, employees and directors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. Pre-Business Combination Related Party Transactions Class B Common Stock In March 2021, the Sponsor acquired 7,187,500 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.003 per share. The number of Founder Shares issued was determined based on the expectation that such Founder Shares would represent 20% of the outstanding shares upon completion of the FIAC IPO. The per share purchase price of the Founder Shares was determined by dividing the amount of cash contributed to FIAC by the aggregate number of Founder Shares issued. In October 2021, the Sponsor surrendered 1,437,500 Founder Shares resulting in the Sponsor holding 5,750,000 Founder Shares. On December 21, 2023, the Sponsor converted 5,000,000 shares of Class B Common Stock into Class A Common Stock pursuant to the FIAC Charter, resulting in the Sponsor holding 750,000 shares of Class B Common Stock. The Founder Shares will automatically convert into shares of Class A Common Stock upon consummation of the Business Combination at the Reverse Split Factor, subject to certain adjustments. In the Sponsor Side Letter, Sponsor agreed to forfeit an additional 575,000 Founder Shares upon consummation of the Business Combination, which shares will be automatically cancelled for no consideration therefor. Additionally, pursuant to the Sponsor Side Letter, Sponsor waived any right to adjustment or other anti-dilution protections with respect to the rate at which the Founder Shares convert into other shares of FIAC Common Stock or New PubCo Common Shares. The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of the initial business combination; or (B) subsequent to the initial business combination, (x) if the closing price of the FIAC’s Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading-day period commencing at least 150 days after the initial business combination, or (y) the date on which FIAC completes a liquidation, merger, stock exchange or other similar transaction that results in all of FIAC’s stockholders having the right to exchange their Public Shares for cash, securities or other property. Private Placement Warrants Simultaneously with the closing of the FIAC IPO, the Sponsor, pursuant to a written agreement, purchased 11,200,000 Private Placement Warrants for a purchase price of $1.00 per warrant in the Private Placement. Each Private Placement Warrant entitles the holder to purchase one share of Class A Common Stock at $11.50 per share. The Private Placement Warrants (including the Class A Common Stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder. Promissory Notes No compensation of any kind, including finder’s and consulting fees, will be paid to the Sponsor, officers and directors or any of their respective affiliates, for services rendered prior to or in connection with the
TABLE OF CONTENTS completion of an initial business combination. However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to our sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf. Prior to the closing of our IPO, the Sponsor agreed to loan us up to $300,000 to be used for a portion of the expenses of our IPO. The loan was repaid upon the closing of our IPO out of the offering proceeds not held in the Trust Account. In addition, in order to finance transaction costs in connection with an intended initial business combination, the Sponsor or an affiliate of the Sponsor or certain of FIAC’s officers and directors may, but are not obligated to, loan FIAC funds as may be required (the “Working Capital Loans”). If FIAC completes an initial business combination, FIAC would repay such loaned amounts out of the proceeds of the Trust Account released to FIAC. Otherwise, such loans would be repaid only out of funds held outside the Trust Account. In the event that the initial business combination does not close, FIAC may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. On May 9, 2023, FIAC issued the Promissory Note to the Sponsor, and the Sponsor funded the initial principal amount of $487,500. On August 1, 2023, FIAC drew $162,500 pursuant to the Promissory Note, which funds FIAC deposited into the Trust Account for its public stockholders. These deposits enabled FIAC to extend the Termination Date from August 1, 2023 to September 1, 2023. On September 1, 2023, FIAC drew $162,500 pursuant to the Promissory Note, which funds FIAC deposited into the Trust Account for its public stockholders. This deposit enabled FIAC to extend the Termination Date from September 1, 2023 to October 1, 2023. On October 1, 2023, FIAC drew $162,500 pursuant to the Promissory Note, which funds FIAC deposited into the Trust Account for its public stockholders. This deposit enabled FIAC to extend the Termination Date from October 1, 2023 to November 1, 2023. On November 1, 2023, FIAC drew $162,500 pursuant to the Promissory Note, which funds FIAC deposited into the Trust Account for its public stockholders. This deposit enabled FIAC to extend the Termination Date from November 1, 2023 to December 1, 2023. On November 30, 2023, FIAC drew $162,500 pursuant to the promissory note underlying the Second Sponsor Working Capital Loan, which funds FIAC deposited into the Trust Account for its public stockholders. This deposit enabled FIAC to extend the Termination Date from December 1, 2023 to January 1, 2024. In connection with the Second Extension Meeting, FIAC’s Sponsor agreed that if the Second Extension Proposal was approved, the Sponsor would deposit into the Trust Account the lesser of (a) $120,000 and (b) $0.06 per share of Class A Common Stock that was not redeemed in connection with the Second Extension Meeting. Because the Second Extension Proposal was approved, the Sponsor deposited $103,055 into the Trust Account, and the Termination Date was extended to April 1, 2024 (unless further extended). These extensions were permitted under the FIAC Charter and provided FIAC with additional time to complete its initial business combination. We also drew $50,000, $100,000, $187,500 and $25,000 in September 2023, October 2023, November 2023 and December 2023, respectively, pursuant to the Promissory Note for working capital. On December 1, 2023, FIAC issued a promissory note underlying the Second Sponsor Working Capital Loan to the Sponsor. On the same date, the Sponsor funded an initial principal amount of $170,000. Further, in December 2023, we withdrew $205,000 pursuant to the Second Promissory Note for working capital. Office Space, Secretarial and Administrative Services FIAC agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support provided to FIAC. Upon completion of the Business Combination, we ceased paying these monthly fees. For the three months ended March 31, 2024 and 2023, FIAC incurred $30,000 in administrative support fees. No amounts have been paid for the administrative fee. At March 31, 2024 and December 31, 2023, $270,000 and $240,000 was reported on the condensed balance sheets under due to related party for this fee, respectively.
TABLE OF CONTENTS Sponsor Side Letter In connection with signing the Initial Business Combination Agreement, FIAC and the Sponsor entered into the Sponsor Side Letter, pursuant to which the Sponsor agreed to forfeit (i) 10% of its Class B Common Stock effective as of the consummation of the SPAC Continuance at the Closing of the Proposed Transactions and (ii) with the Sponsor’s consent, up to 30% of its Class B Common Stock and/or warrants in connection with financing or non-redemption arrangements, if any, entered into prior to consummation of the Business Combination if any, negotiated by the Effective Date. Pursuant to the Sponsor Side Letter, the Sponsor also agreed to (1) certain transfer restrictions with respect to FIAC securities, lock-up restrictions (terminating upon the earlier of: (A) 360 days after the Closing Date, (B) a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of New PubCo’s stockholders having the right to exchange their equity for cash, securities or other property or (C) subsequent to the Closing Date, the closing price of the New PubCo Common Shares equaling or exceeding $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing at least 150 days after the Closing) and (2) to vote any FIAC Common Stock held by it in favor of the Business Combination Agreement, the Arrangement Resolution and the Proposed Transactions, and provided customary representations and warranties and covenants related to the foregoing. Other Relationships We have entered into employment arrangements with members of our management team, as described in the section titled “Executive Compensation.” Amended and Restated Registration Rights Agreement At the Closing of the Business Combination, FIAC, the Sponsor, and the Legacy DevvStream Holders entered into Registration Rights Agreement, pursuant to which, among other things, the Legacy DevvStream Holders and the Sponsor were granted customary registration rights with respect to shares of the Company. In addition, we have entered into a stockholder rights agreement pursuant to which the Sponsor is entitled to nominate three individuals for election to our board of directors.
TABLE OF CONTENTS SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information regarding the beneficial ownership of the Company’s Common Shares as of May 30, 2025: •each person known by the Company to be the beneficial owner of more than 5% of the Company’s issued and outstanding common shares; | |
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