F-1 1 ff12021_lytustech.htm REGISTRATION STATEMENT

As filed with the Securities and Exchange Commission on March 31, 2021

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________________________

FORM F-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

_________________________________

LYTUS TECHNOLOGIES HOLDINGS PTV. LTD.
(Exact Name of Registrant as Specified in its Charter)

_________________________________

 

British Virgin Islands

 

7841

 

Not applicable

   
   

(State or Other Jurisdiction of Incorporation or Organization)

 

(Primary Standard Industrial Classification Code Number)

 

(I.R.S. Employer
Identification Number)

   

_________________________________

LYTUS TECHNOLOGIES HOLDINGS PTV. LTD.

601 Everest Grande, A Wing
Mahakali Caves Road
Andheri (East)
Mumbai, India 400 093
Tel: (284)494
-2810

_________________________________

McNAMARA CORPORATE SERVICES LIMITED
116 Main Street
P.O. Box 3342
Road Town, Tortola
British Virgin Islands
Tel: (284)494
-2810

_________________________________

Copies to:

 

M. Ali Panjwani, Esq.

Pryor Cashman LLP

7 Times Square

New York, NY 10036

Tel: (212) 421-4100

 

Darrin Ocasio, Esq.

Avital Perlman, Esq.

Sichenzia Ross Ference LLP

1185 Avenue of the Americas, 37th Floor

New York, NY 10036

Tel: (212) 930-9700

   

_________________________________

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

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

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

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

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

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

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

 

Emerging growth company    S

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

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

 

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CALCULATION OF REGISTRATION FEE

Class of Securities to be Registered

 

Amount
to be
Registered

 

Proposed
Maximum
Offering
Price
per Share

 

Proposed
Maximum
Aggregate
Offering
Price

 

Amount of
Registration
Fee

Common Shares, par value $0.01 per share(1)(2)

 

3,136,362

 

$

11.00

 

$

34,499,982

 

$

3,764

Underwriter’s Warrants(2)(3)

 

 

 

 

 

 

 

Common Shares underlying Underwriter Warrants(3)

 

136,364

 

$

13.75

 

$

1,875,005

 

$

205

Total

     

 

   

$

36,374,987

 

$

3,969

____________

(1)      Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended (the “Securities Act”). There is no current market for the securities or price at which the shares are being offered. Includes up to 409,090 common shares subject to the underwriters’ over-allotment allowance.

(2)      Pursuant to Rule 416 under the Securities Act, there is also being registered hereby such indeterminate number of additional common shares of the Registrant as may be issued or issuable because of stock splits, stock dividends, stock distributions, and similar transactions.

(3)      We have agreed to issue to the representative of the underwriters warrants to purchase the number of common shares (the “Representative Warrants”) in the aggregate equal to five percent (5%) of the shares sold at closing of the offering (excluding the over-allotment shares). The Representative Warrants will be exercisable at any time, and from time to time within four (4) years commencing from one (1) year from the closing of the offering, in whole or in part, but may not be transferred nor may the shares underlying the warrants be sold until 180 days from the effective date of the offering. The exercise price of the Representative Warrants is equal to 125% of the public offering price per share in the offering.

 

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

PRELIMINARY PROSPECTUS

 

SUBJECT TO COMPLETION 

 

DATED MARCH 31, 2021

2,727,272 common shares

LYTUS TECHNOLOGIES HOLDINGS PTV. LTD.

This is our initial public offering of common shares of Lytus Technologies Holdings PTV. LTD. We are offering 2,727,272 common shares. We expect that the initial public offering price will be between $10.00 and $12.00 per share.

No public market currently exists for our common shares. We have applied for approval for quotation on the NASDAQ Capital Market under the symbol “LYT” for the common shares we are offering. We believe that upon the completion of the offering contemplated by this prospectus, we will meet the standards for listing on the NASDAQ Capital Market.

We are an “emerging growth company” as defined in the Jumpstart Our Business Act of 2012, as amended, and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

An investment in our securities is highly speculative, involves a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. See “Risk Factors” beginning on page 10 of this prospectus.

 

Per Share

 

Total Without
Over-Allotment
Option

 

Total With
Over-Allotment
Option

Initial public offering price

 

$

11.00

 

$

29,999,992

 

$

34,499,982

Underwriting discounts and commissions(1)

 

$

0.77

 

$

2,099,999

 

$

2,414,999

Proceeds, before expenses, to us

 

$

10.23

 

$

27,899,993

 

$

32,084,983

(1)      We have also agreed to pay a non-accountable expense allowance to Aegis Capital Corp. (“Aegis”) as representative of the underwriters, of 1% of the gross proceeds received in this offering and to reimburse the underwriters for other out-of-pocket expenses related to the offering. For a description of other compensation to be received by the underwriters, see “Underwriting.”

We have granted the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to an additional 409,090 common shares on the same terms as the other common shares being purchased by the underwriters from us. For a description of the other compensation to be received by the underwriters, see “Underwriting.”

The underwriters expect to deliver the common shares against payment in U.S. dollars on or about         , 2021.

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

The date of this prospectus is March 31, 2021

Aegis Capital Corp.

 

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TABLE OF CONTENTS

Prospectus Summary

 

1

Risk Factors

 

10

Forward-Looking Statements

 

28

Use of Proceeds

 

29

Dividend Policy

 

30

Exchange Rate Information

 

31

Capitalization

 

32

Dilution

 

33

Post-Offering Ownership

 

34

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

35

Our Business

 

43

Management

 

61

Related Party Transactions

 

67

Principal Shareholders

 

68

Description of Share Capital

 

69

Shares Eligible for Future Sale

 

76

Tax Matters Applicable to U.S. Holders of Our Common Shares

 

77

Enforceability of Civil Liabilities

 

84

Determination of Offering Price

 

85

Underwriting

 

86

Legal Matters

 

92

Experts

 

92

Where You Can Find More Information

 

92

Financial Statements

 

F-1

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

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

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PROSPECTUS SUMMARY

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

Our Company

Overview

We are a growing platform services company primarily providing content streaming/telecasting services with over 8 million active users located all across India.1 Our scope of business also covers telemedicine services with local assistance through local Health Centers. Through our platform, our customers are well connected via customer premises equipment (“CPE”) devices/set top boxes (“STBs) and have access to multi-dimensional services including telemedicine service.

Our customer base and expansive market presence position us to widen our portfolio of offerings. We have been focused on adopting and implementing technologies that can change the landscape of being a conventional streaming services provider.

We intend to benefit from India’s e-commerce boom and the recent tele-medicine regulation through the acquisition of Global Health Sciences, Inc. (“GHSI”). The management of GHSI has many years of pioneering experience of the management in tele-medicine in USA, which we believe will help us create a profitable and sustainable business model with rapid growth prospects. We believe that our deep understanding and local expertise have enabled us to create solutions that address the needs and preferences of our consumers in the most comprehensive and efficient way. We possess extensive local knowledge of the markets in which we operate, which we consider to be a key component of our success.

Corporate History and Structure

Lytus Technologies Holdings PTV. Ltd. (“we”, “Lytus”, “Lytus Group”, or the “Company”) is a holding company incorporated under the laws of British Virgin Islands (“BVI”) on March 16, 2020. On March 19, 2020, we acquired all of the equity share capital of Lytus Technologies Private Limited (“Lytus India”), an Indian company. On March 31, 2020, Lytus acquired 51% of the equity shares from the present shareholders of DDC CATV Network Private Limited (“DDC”). On October 30, 2020, the Company entered into a share purchase agreement with Global Health Sciences, Inc. (“GHSI”) and the shareholder of GHSI, pursuant to which the Company acquired 75% of the equity interest in GHSI.

The following diagram illustrates our current corporate structure:

____________

1               Calculation based upon approximately 1.8 million paid home subscribers which based on industry standards translates to more than 8 million viewers on an average of 4.6 viewers per household in India. Source: United Nations, Department of Economic and Social Affairs, Population Division (2019) — Database on Household Size and Composition 2019. Available: https://population.un.org/Household/index.html#/countries/356

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While Lytus Group was restructured in 2020, DDC has been operation for more than five years. We have established a strong customer base and obtained significant market share through our acquisition of Reachnet’s customers, a long-standing cable services company in India. Reachnet is also a Multi System Operator (MSO) in the business of telecasting/streaming of broadcast channels (both owned as well as redistributed) to subscribers for a subscription charge depending upon the services and content chosen by the subscriber. Reachnet also owns and operates fiber optic cable networks with offices in various major cities across the country. These networks are used by Reachnet to offer its services to Lytus India’s subscribers. Reachnet also offers its cable network along with management personnel and subscriber management services to third party service providers for a fee. It has an extensive infrastructure and logistics set-up in various cities for provision of telecasting/streaming services to their erstwhile subscribers.

We have scaled and intend to continue to scale our platform through the pursuit of selective acquisitions. We believe our acquisitions of Lytus India and DDC have expanded our distribution capabilities and broadened our service offerings. We have aggregated customers from several service providers and other businesses by bring them on to the Lytus platform. We provide services to our customers through access to a network of 25,000 kilometers of deployed fiber and broadband infrastructure in accordance with our service agreement with our partner. Since our inception we have consistently expanded our network capabilities and offerings while growing our customer base.

Lytus India provides technology enabled customer services, which includes content streaming/telecast services. The present device/STB is being further upgraded to support the unified and integrated platform through which it shall provide multi-dimensional services such as MedTech IOT (IOT refers to the Internet of Things), etc.

DDC is a licensed MSO in the business of telecasting/streaming of broadcast channels (both owned channels as well as redistribution) to subscribers for a subscription charge depending upon the services and content chosen by the subscriber. In India the regulation does not differentiate between telecasting and streaming as long as the streaming is done in Internet Protocol television (IPTV) format. Lytus has the expertise and has plans to offer additional value-added services such as MedTech IOT, by upgrading the existing cable networks. The upgrade primarily consists of deploying FTTH GPON and changing the existing STB/CPE.

Lytus India provides streaming/telecast services to the customers we acquired from Reachnet. DDC has been providing streaming/telecast services to its customers in New Delhi region for several years and will continue to do so independently of Lytus India and Reachnet.

Along with a strong India focus, we expect to grow our international presence in regions such as Africa, Indonesia, UK, and the USA.

GHSI was formed in 2020 and had no business operations prior to our acquisition. On October 30, 2020, the Company entered into a share purchase agreement and acquired 75% of the equity interest in GHSI. After the completion of acquisition, GHSI brought into the key management team and acquired important contracts. GHSI’s telemedicine service aims to provide management and technology solutions to hospital networks, university medical schools, physician networks and individual practices in the U.S. Its proprietary delivery platform uses digital communication technologies using medical monitoring devices, video capabilities and data capture methodologies. The platform also uses AI Ecosystem Assets including Conversational Computing, Intelligent Robotic Process Automation (iRPA), and Machine Learning (ML). This platform is currently rolled out in New Jersey, Illinois, Florida and Texas with approximately 125 medical physicians using our system for approximately 3000 users via hospital and clinic networks.

In India, Lytus’ telemedicine business, through Lytus India, has commenced repurposing its existing Local Cable Operator Network infrastructure to set up Local Health Centers/diagnostic centers (LHC). There is scheduled to be one dedicated LHC for every 5000 customers and this LHC will be staffed with trained healthcare professionals. LHCs will support customers with additional patient services that cannot be remotely provided through device strategy. Typical services provided at the LHCs will include ECGs, blood and urine testing, ultrasound scans etc. The LHC network will act as an important link between patients, doctors and supporting hospital partners for better integration. The Company also intends to leverage the LHC network for pharmaceutical delivery.

Strategic Roadmap

We believe that through additional customer acquisitions, our business will expand rapidly over the next three years. Our objective is to grow profitably by building on our current strategic position to become a dominant global unified platform services company.

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The key elements of our strategy include:

•        expanding the service and product portfolio to enhance cross-selling opportunities;

•        enhancing the service platform by investing in technology;

•        expanding into new geographic markets; and

•        pursuing selective strategic partnerships and acquisitions.

We have six principles for our growth:

Operating model:    simplify and align with our customers’ needs and end markets.

Enhance customer experience:    introduce customer-centric programs and services leveraging the latest technologies such as artificial intelligence (AI) and machine learning (ML) to improve our customers’ experiences and continue to earn their business.

Service portfolio management:    adopt a more proactive approach, be agile in introducing new offerings while continuously scrutinizing the potential for returns.

Build scale:    to grow and build scale in a broad range of international markets and industry verticals within the online service platform and e-healthcare segment.

Strategic relationships:    focus on building and maintaining long-term strategic business relationships with other established players in the market to better utilize the network capabilities, reduce cost burden and generate supplementary revenue streams.

Acquisition strategy:    develop a more targeted and disciplined approach; focus on acquisitions that augment our existing online streaming portfolio.

Our Streaming Services

We have a very broad customer base (including retail and commercial customers). We offer subscription-based video services and Internet services to primarily residential customers, with prices and related charges based on the types of service selected, whether the services are sold as a “bundle” or on an individual basis, and based on the equipment necessary to receive our services. Our video customers receive a package of programming, which generally includes a device that provides an interactive electronic programming guide with parental controls, access to pay-per-view services, including video on demand (“VOD”). Customers have the option to purchase additional tiers of services, including premium channels that provide original programming, commercial-free movies, sports, and other special event entertainment programming. Almost all of the popular linear video channels and content are available in high definition.

Leading Technology-Enabled Innovation in Healthcare

Our healthcare work will focus on providing telemedicine solutions for the unmet medical needs of a large part of the Indian population. Our vision is to provide cost-efficient telemedicine services, as well as serve as an extension of the traditional healthcare system. Our unique addition to conventional telemedicine is in the form of local health centers staffed by trained nurses, both male and female, to assist the doctor to thoroughly examine the patient and administer treatment such injections as per the advice of the doctor on the video consultation.

We believe this extension of traditional healthcare services is vital because:

•        68% of Indians live in rural villages;

•        India has one doctor for every 1,445 people;

•        More than 75% of Indian doctors are based in cities or urban areas; and

•        Approximately 89% of rural Indian patients have to travel about 8 kilometers to access basic medical treatment2.

____________

2          World Health Day Amid Covid Crisis by Pramod N Sulikeri, Available: https://myarogya.in/general/world-health-day-amid-covid-crisis/ & Telemedicine Force Multiplier for Healthcare Delivery by Major General Ashok Kumar Singh (retd), Available: https://innohealthmagazine.com/2020/guest-column/telemedicine-healthcare-delivery/

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Tele-medicine services

Building on the Company’s strong fiber-optic network and customer base, we strive to use technology-based innovation to address the most significant unmet needs of patients and societies across rural India.

In the first phase of our journey, we are developing and delivering telehealth services in the nature of preventive healthcare using technologies such as Internet of Medical Things (IoMT) and Artificial Intelligence (AI). Our initial focus is aimed at offering basic health monitoring and digital stethoscope services with the help of our own smart devices and software systems and also last mile medicine delivery services. Further, we utilize clinical informatics for the collation of information for effective data analysis and for sharing the information with doctors/relatives/other stakeholders to help in better decision making.

With our streaming services and our devices, we intend to make it possible for the people to undertake self-health monitoring and combine the same with remote diagnosis and treatment with unique local assistance through secure patient-doctor consultation. Thereby not only reducing the number of trips to the hospital but also build an ecosystem that may turn out to be an affordable, as well as a fast, way to bridge the rural-urban health divide.

Technology Platform

In an industry where the cost of error is high, operational consistency and network dependability are critical. Information has to be accurate, and readily available. Our operations benefit from centralized decision-making and a uniform technology platform, coupled with a coordinated local presence. Our unified, scalable technology platform has been developed by our technology team, which is located in India. This technology platform covers all relevant aspects of our operations, from data management, business intelligence, traffic optimization and consumer engagement to infrastructure, logistics and payments. Data is constantly collected and analyzed to help optimize operations, make the consumer experience more personal and relevant, and enable us, selected sellers and logistics partners to make informed, real-time decisions.

Competitive Advantage

We continually enhance our access to fiber-optic network, with the goal of elevating the customer experience, enhancing reliability and sustaining future growth. Building on this capability and leveraging modern technology, we are diversifying into new growth areas to expand our business horizon.

From a traditional contact management service provider, we have evolved into a significant streaming service provider. We continue to invest in long-term growth opportunities, while simultaneously building on our core capabilities and engaging in strategic partnerships to widen our geographical presence and offerings.

We focus on customer service excellence and technological leadership to further strengthen our differentiated competitive position and enhance the customer experience.

Recent Financing

On December 30, 2020, the Company entered into an Agreement for Subscription of Debentures with an investor (the “Investor”) pursuant to which the Company shall issue to the Investor Redeemable Debentures (the “Debentures”) of Rs. 240 crores (a crore denotes ten million, approximately $33,000,000). The tenure of the Debentures shall be 12 months from the date of allotment of the Debentures, with an option to extend the period by another 4 years, for an aggregate of 5 years. The Debentures shall be redeemed at a value of Rs. 345 crores (approximately $47,600,000), with an assumed principal amount of Rs. 300 crores (approximately $41,400,000) and accumulated interest of Rs. 45 crores (approximately $6,200,000), at the end of 12 months from the issuance date. The redeemed amount shall be paid within the period of 45 days from the above due date, unless the period is extended for another 4 years, where which the revised redemption value shall be Rs. 345 crores (approximately $47,600,000) plus an additional simple interest of 15% per annum on the revised principal amount of Rs. 300 crores (approximately $41,000,000) starting from the revised principal date. The Debentures have not been issued because the transaction contemplated under the Agreement for Subscription of Debentures is still subject to the regulatory approval of the local government in India.

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Emerging Growth Company Status

As a company with less than $1.07 billion in revenue during our last fiscal year (the period March 16, 2020 (date of inception) through March 31, 2020), we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

•        being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in our SEC filings,

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

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

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

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

In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. We have elected to take advantage of the extended transition period for complying with new or revised accounting standards and acknowledge such election is irrevocable pursuant to Section 107 of the JOBS Act.

Foreign Private Issuer Status

We are a “foreign private issuer,” as defined in Rule 405 under the Securities Act and Rule 3b-4(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime.

Notes on Prospectus Presentation

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

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

•        Depending on the context, the terms “we,” “us,” “our company,” and “our” refer to Lytus Technologies Holdings PTV. Ltd., BVI company, and its consolidated subsidiaries:

•        “Lytus India” refers to Lytus Technologies Private Limited, our wholly-owned subsidiary in India.

•        “DDC” refers to DDC CATV Network Private Ltd., our majority-owned (51%) subsidiary in India.

•        “common shares” refer to our common shares, $0.01 par value per share.

•        all references to “Rs.” or “Rupee” are to the legal currency of India, and all references to “USD,” “$”, and “U.S. dollars” are to the legal currency of the United States.

•        a “crore” denotes ten million.

Unless otherwise noted, all currency figures in this filing are in U.S. dollars.

This prospectus contains translations of certain Indian rupee amounts into U.S. dollar amounts at a specified rate solely for the convenience of the reader. Unless otherwise noted, we have translated profit and loss items at an average rate of 71.09 for the period ended March 31, 2020. For balance sheet items, we have translated at a closing rate of 75.33 as of March 31, 2020. We have stated equity accounts at their historical rates. We make no representation that the Indian rupee amounts or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Indian rupee amounts, as the case may be, at any particular rate or at all. On March 31, 2021, the exchange rate was Rs.73.15 to $1.00. Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

Assuming the completion of this offering, our officers, directors, and 5% or greater shareholders will, in the aggregate, beneficially own approximately 87.4% of our outstanding common shares. Specifically, Dharmesh Pandya, our chief executive officer and director, in the aggregate, will beneficially own 78.2% following this offering, which, in turn, will allow such shareholders to exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. As a result, our officers, directors, and 5% or greater shareholders will possess substantial ability to impact our management and affairs and the outcome of matters submitted to shareholders for approval. This concentration of ownership and voting power may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their common shares as part of a sale of our company and might reduce the price of our common shares. These actions may be taken even if they are opposed by our other shareholders, including those who purchase common shares in this offering. See “Risk Factors”.

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The Offering

Common shares offered

 

2,727,272 common shares

Over-allotment Option to purchase additional common shares from us

 


We have granted the underwriters 45 days from the date of this prospectus, to purchase up to an additional 409,090 shares on the same terms as the other shares being purchased by the underwriters from us.

Common shares outstanding before this offering

 


34,146,369 common shares.

Common shares outstanding after this offering

 


36,873,641 common shares.

Use of Proceeds

 

We intend to use the proceeds from this offering for working capital and general corporate purposes, including acquiring additional assets and developing our telemedicine service. See “Use of Proceeds” for more information.

Lockup Agreements

 

Our executive officers, directors, and shareholders holding 5% or more of our common shares prior to the offering, collectively, have agreed with the underwriters not to sell, transfer. or dispose of any common shares or similar securities for a period of 90 days following the closing of this offering.

NASDAQ Trading symbol

 

We intend to apply for listing of our common shares on the NASDAQ Capital Market under the symbol “LYT”.

Risk Factors

 

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

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Summary Consolidated Financial Data

The following tables summarize our historical consolidated financial data. We have derived the historical consolidated statements of operations data for the period March 16, 2020 to March 31, 2020 from our audited consolidated financial statements, and for the period ended December 31, 2020, from our unaudited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated financial data should be read in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future, and our results for any interim period are not necessarily indicative of the results to be expected for a full fiscal year.

Consolidated Statements of Income and Comprehensive Loss Data:

 

For the period
16 March 2020
(date of inception)
through
31 March 2020
(US$)

 

For the period
ended
December 31,
2020 (US$)
(Unaudited)

Revenues

 

 

     

Operating revenue

 

$

 

29,196,196

Other operating income

 

 

 

101

Total revenues

 

 

 

29,196,298

   

 

     

Other income

 

 

     

Other income

 

 

15,759,393

 

Total income

 

 

15,759,393

 

29,196,298

   

 

     

Expenses

 

 

     

Amortization

 

 

204,086

 

8,927,417

Streaming service costs

 

 

 

16,916,480

Legal and professional expense

 

 

272,894

 

1,288,926

Staffing expense

 

 

15,777

 

235,229

Other operating expenses

 

 

8,463

 

113,471

Total expenses

 

 

501,220

 

27,659,626

   

 

     

Finance income

 

 

 

2,515

Income before income tax

 

 

15,258,173

 

1,539,186

Income tax expense

 

 

3,894,674

 

423,227

Net income after tax available to common shareholders

 

$

11,363,499

 

1,115,960

   

 

     

Attributable to:

 

 

     

Controlling interest

 

$

11,363,499

 

1,067,824

Non-controlling interest

 

 

 

48,136

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Consolidated Balance Sheet Data:

 

For the period
16 March 2020
(date of inception)
through
31 March 2020
(US$)

 

For the
period ended
December 31,
2020
(US$)
(Unaudited)

ASSETS

 

 

 

 

   

Current assets

 

 

 

 

   

Cash and cash equivalents

 

$

41,760

 

 

400,254

Other financial assets

 

 

42,038

 

 

246,438

Trade receivables

 

 

390,151

 

 

33,830,217

Other receivable

 

 

18,015,483

 

 

18,566,577

Other current assets

 

 

4,351,189

 

 

7,856,195

Total current assets

 

 

22,840,621

 

 

60,639,679

   

 

 

 

   

Non-current assets

 

 

 

 

   

Property and equipment, net

 

 

1,130,534

 

 

976,366

Intangible assets and Goodwill

 

 

59,326,290

 

 

50,476,958

Other non-current assets, net

 

 

16,472

 

 

Deferred tax assets

 

 

156,020

 

 

1,103,338

Total non-current assets

 

 

60,629,316

 

 

52,556,662

Total assets

 

$

83,469,937

 

 

113,196,341

   

 

 

 

   

LIABILITIES AND EQUITY

 

 

 

 

   

Current Liabilities

 

 

 

 

   

Borrowings

 

$

1,587,216

 

 

1,599,080

Trade payables

 

 

425,667

 

 

20,978,249

Other financial liabilities

 

 

345,924

 

 

475,970

Security deposits payable

 

 

59,807

 

 

39,677

Other current liabilities

 

 

7,375,226

 

 

13,168,777

Customer acquisition payable

 

 

29,372,718

 

 

30,271,230

Current tax liability

 

 

2,005,748

 

 

2,008,804

Total current liabilities

 

 

41,172,306

 

 

68,541,787

   

 

 

 

   

Non-current liabilities

 

 

 

 

   

Customers acquisition payable, net of current portion

 

 

29,372,718

 

 

30,271,230

Deferred tax liability

 

 

1,907,015

 

 

2,930,748

Total non-current liabilities

 

 

31,279,733

 

 

33,201,978

Total liabilities

 

 

72,452,039

 

 

101,743,766

   

 

 

 

   

Commitments and contingencies

 

 

 

 

   
   

 

 

 

   

EQUITY

 

 

 

 

   

Equity share capital

 

 

3,000

 

 

341,541

Other equity

 

 

11,056,589

 

 

11,097,209

Equity attributable to equity holders of the company

 

 

11,059,589

 

 

11,438,750

Non-controlling interest

 

 

(41,691

)

 

13826

Total equity

 

 

11,017,898

 

 

11,452,576

Total liabilities and equity

 

$

83,469,937

 

 

113,196,341

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RISK FACTORS

Investment in our securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision. The risks and uncertainties described below represent our known material risks to our business. If any of the following risks actually occurs, our business, financial condition, or results of operations could suffer. In that case, you may lose all or part of your investment. You should not invest in this offering unless you can afford to lose your entire investment.

Risks Related to Our Business and Industry

Lytus platform may not be accepted in the marketplace.

Uncertainty exists as to whether our Platform will be accepted by the market without additional widespread subscriber acceptance. Several factors may limit the market acceptance of our Platform, including the availability of alternative products and services, as well as the price of our Platform services relative to alternative products. There is a risk that subscriber acceptance will be encouraged to continue to use other products and/or methods instead of ours. We are assuming that, notwithstanding the fact that our Platform is new in the market, subscriber acceptance will elect to use our Platform because of our collective and integrated offerings.

Subscribers need to be persuaded that our Platform service is justified for the anticipated benefit, but there is no assurance that enough subscribers will be convinced to develop a successful market for our Platform.

Our revenues will be dependent upon acceptance of our Platform product by the market.

Our revenues are expected to come from our Platform. There can be no assurance that subscribers will adopt our Platform. If we are not able to market and significantly increase the number of subscribers that use our Platform, or if we are unable to charge the necessary prices, our financial condition and results of operations will be materially and adversely affected.

Defects or malfunctions in our Platform could hurt our reputation, sales, and profitability.

The acceptance of our Platform depends upon its effectiveness and reliability. Our Platform is complex and is continually being modified and improved, and as such may contain undetected defects or errors when first introduced or as new versions are released. To the extent that defects or errors cause our Platform to malfunction and our customers’ use of our Platform is interrupted, our reputation could suffer, and our potential revenues could decline or be delayed while such defects are remedied. We may also be subject to liability for the defects and malfunctions.

There can be no assurance that, despite our testing, errors will not be found in our Platform or new releases, resulting in loss of future revenues or delay in market acceptance, diversion of development resources, damage to our reputation, adverse litigation, or increased service, any of which would have a material adverse effect upon our business, operating results, and financial condition.

Our 8 million user base is based on a calculation of our 1.8 million paid home subscribers multiplied by an industry average of 4.6 users per household in India and the assumptions we used to determine these figures may not be accurate. Assumptions that may not be accurate.

Our 8 million user base is based on a calculation of our 1.8 million paid home subscribers multiplied by an industry average of 4.6 users per household in India. The conversion rate of 4.6 users per household was supported by the Database on Household Size and Composition 2019 released by the Department of Economic and Social Affairs of the United Nations.1 Our estimates of household size and the number of users are based upon historical cable industry practices for measurement of user data. For example, according to the Universe Update Report released by Broadcast Audience Research Council of India in July 20182, the number of average users per household in 2018 was 4.45. Although we believe the figures in the industry report were reasonable, there can be no assurance that the assumptions we used are accurate and therefore the number of the members per household may not necessarily equal to the number of our active users. As a result, the number of our actual active users may be less than 8 million.

____________

1        Available at: https://population.un.org/Household/index.html#/countries/356

2        Available at: https://www.barcindia.co.in/resources/pdf/BARC%20India%20Universe%20Update%20-%202018.pdf

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Software failures, breakdowns in the operations of our servers and communications systems or the failure to implement system enhancements could harm our business.

Our success depends on the efficient and uninterrupted operation of our servers and communications systems. A failure of our network or data gathering procedures could impede services and could result in the loss of subscribers. While our operations will have disaster recovery plans in place, they might not adequately protect us. Despite any precautions we take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins, and similar events at our computer facilities could result in interruptions in the flow of data to our servers and from our servers to our clients. In addition, any failure by our computer environment to provide our required data communications capacity could result in interruptions in our service. In the event of a server failure, we could be required to transfer our client data collection operations to an alternative provider of server hosting services. Such a transfer could result in delays in our ability to deliver our products and services to our clients.

Additionally, significant delays in the planned delivery of system enhancements, improvements and inadequate performance of the systems once they are completed could damage our reputation and harm our business. Long-term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities and acts of terrorism, particularly involving cities in which we have offices, could adversely affect our businesses. Although, we plan to carry property and business interruption insurance for our business operations, our coverage might not be adequate to compensate us for all losses that may occur.

We face risks related to the storage of customers’ and their end users’ confidential and proprietary information.

Our Platform is designed to maintain the confidentiality and security of our patients’ confidential and proprietary data that are stored on our server systems, which may include sensitive personal data. However, any accidental or willful security breaches or other unauthorized access to these data could expose us to liability for the loss of such information, time-consuming and expensive litigation and other possible liabilities as well as negative publicity. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are difficult to recognize and react to. We may be unable to anticipate these techniques or implement adequate preventative or reactionary measures.

We might incur substantial expense to further develop our Platform which may never become sufficiently successful.

Our growth strategy requires the successful launch of our Platform. Although management will take necessary precaution to ensure that our Platform will, with a high degree of likelihood, achieve commercial success, there can be no assurance that this will be the case. The causes for failure of our Platform once commercialized can be numerous, including:

•        market demand for our Platform proves to be smaller than we expect; 

•        further Platform development turns out to be costlier than anticipated or takes longer; our Platform requires significant adjustment post-commercialization, rendering the Platform uneconomic or extending considerably the likely investment return period; additional regulatory requirements may increase the overall costs of the development; patent conflicts or unenforceable intellectual property rights; and physical therapists and clients may be unwilling to adopt and/or use our Platform. 

•        Compliance with changing regulations concerning corporate governance and public disclosure may result in additional expenses.

We cannot be certain that we will obtain intellectual property rights for our platform and technology and if we fail to protect our intellectual property rights, our brand and business may suffer.

We believe that our success and competitive position will depend in part on our ability to obtain and maintain intellectual property rights for our platform. Although we seek to obtain copyright or trademark protection for our intellectual property when applicable, it is possible that we may not be able to do so successfully or that the copyright or trademark we have obtained may not be sufficient to protect all of our intellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or duplicate our intellectual property or otherwise use our intellectual properties without obtaining our consent. Monitoring unauthorized use of our intellectual property is

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difficult and costly, and we cannot be certain that the steps we have taken will effectively prevent misappropriation of our intellectual properties. If we are not successful in protecting our intellectual property rights, our business and results of operations may be adversely affected.

Liability issues are inherent in the healthcare industry and insurance are expensive and difficult to obtain, we may be exposed to large lawsuits.

Our business exposes us to potential liability risks, which are inherent in the healthcare industry. While we will take precautions we deem to be appropriate to avoid liability suits against us, there can be no assurance that we will be able to avoid significant liability exposure. Liability insurance for the healthcare industry is generally expensive. We have obtained professional indemnity insurance coverage for our Platform. There can be no assurance that we will be able to maintain such coverage on acceptable terms, or that any insurance policy will provide adequate protection against potential claims. A successful liability claim brought against us may exceed any insurance coverage secured by us and could have a material adverse effect on our results or ability to continue our Platform.

We will need to increase the size of our organization and may experience difficulties in managing growth.

At present, we are a small company. We expect to experience a period of expansion in headcount, infrastructure, and overhead, and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, and integrate new managers. Our future financial performance and its ability to compete effectively will depend, in part, on its ability to manage any future growth effectively.

Dependence on key existing and future personnel

Our success will depend, to a large degree, upon the efforts and abilities of our officers and key management employees. The loss of the services of one or more of our key employees could have a material adverse effect on our operations. In addition, as our business model is implemented, we will need to recruit and retain additional management and key employees in virtually all phases of our operations. Key employees will require a strong background in our industry. We cannot assure that we will be able to successfully attract and retain key personnel.

We rely on information technology to operate our business and maintain our competitiveness, and any failure to adapt to technological developments or industry trends could harm our business.

We depend on the use of sophisticated information technology and systems, which we have customized in-house, for provision of several online services, customer relationship management, communications and administration. As our operations grow in both size and scope, we must continuously improve and upgrade our systems and infrastructure to offer our customers enhanced services, features and functionality, while maintaining the reliability and integrity of our systems and infrastructure in a cost- effective manner. Our future success also depends on our ability to upgrade our services and infrastructure ahead of rapidly evolving consumer demands while continuing to improve the performance, features and reliability of our service in response to competitive offerings.

We may not be able to maintain or replace our existing systems or introduce new technologies and systems as quickly as our competitors, in a cost-effective manner or at all. We may also be unable to devote adequate financial resources to develop or acquire new technologies and systems in the future.

We may not be able to use new technologies effectively, or we may fail to adapt our websites, transaction processing systems and network infrastructure to consumer requirements or emerging industry standards. If we face material delays in introducing new or enhanced solutions, our customers may forego the use of our services in favor of those of our competitors. Any of these events could have a material adverse effect on our operations.

Our customer devices include license software from third party vendors, as we continue to introduce new offering services. We cannot be sure that such technology licenses will be available on commercially reasonable terms, if at all.

We operate in a highly competitive industry

Although we are not aware of any other “Distance Monitored Physical Therapy Telemedicine Program” with local assistance precisely like ours, and targeting our specific population, we shall encounter competition from local, regional or national entities, some of which have superior resources or other competitive advantages in the larger

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physical therapy space. Intense competition may adversely affect our business, financial condition or results of operations. We may also experience competition from companies in the wellness space. These competitors may be larger and more highly capitalized, with greater name recognition. We will compete with such companies on brand name, quality of services, level of expertise, advertising, product and service innovation and differentiation of product and services. As a result, our ability to secure significant market share may be impeded. Although we believe our services will enable us to serve more patients than traditional physical therapy providers, if these more established offices or providers start offering similar services to ours, their name recognition or experience may enable them to capture a greater market share.

Limited product testing and operations

We have built out the technology platform and content library necessary to execute our planned business strategy. Of course, there may be other factors that prevent us from successfully marketing a product, including, but not limited to, our limited cash resources. Further, our proposed reimbursement plan and the eventual operating results could be susceptible to varying interpretations by scientists, medical personnel, regulatory personnel, statisticians and others, which may delay, limit or prevent our executing our proposed business plan.

We face substantial competition, and others may discover, develop, acquire or commercialize products before or more successfully than we do

We operate in a highly competitive environment. Our products compete with other products of competitors who may have greater clinical, research, regulatory and marketing resources than us. In addition, some of our competitors may have technical or competitive advantages for the development of technologies and processes. These resources may make it difficult for us to compete with them to successfully discover, develop and market new products.

We also depend upon our ability to recruit and retain experienced therapists

Our future revenue generation is dependent upon referrals from physicians in the communities our clinics serve, and our ability to maintain good relations with these physicians. Our therapists are the front line for generating these referrals and we are dependent on their talents and skills to successfully cultivate and maintain strong relationships with these physicians. If we cannot recruit and retain our base of experienced and clinically skilled therapists, our business may decrease, and our net operating revenues may decline.

We rely on third-party systems and service providers, and any disruption or adverse change in their businesses could have a material adverse effect on our business

We currently rely on certain third-party computer systems, service providers, and local cable operators to provide various services that we offer customers. Any interruption or deterioration in performance of these third-party systems and services could have a material adverse effect on our business.

Our success is also dependent on our ability to maintain our relationships with these third-party systems and service providers, including our technology partners. In the event our arrangements with any of these third parties are impaired or terminated, we may not be able to find an alternative source of systems support on a timely basis or on commercially reasonable terms, which could result in significant additional costs or disruptions to our business.

We rely on the value of our brand, and any failure to maintain or enhance consumer awareness of our brand could have a material adverse effect on our business, financial condition and results of operations.

We believe continued investment in our brand, “LYTUS,” and the brands of our subsidiaries, is critical to retain and expand our business. We believe that our brand is well respected and recognized in the markets where we have customers. However, we are relatively new to the Indian Ecommerce sector and may not enjoy the same brand recognition in the new areas that we launch our new businesses. We have invested in developing and promoting our brand since our inception and expect to continue to spend on maintaining our brand’s value to enable us to compete against increased spending by our competitors, as well as against emerging competitors, including search engines and meta-search engines, and to allow us to expand into new geographies and products where our brand is not well known. Our marketing costs may also increase as a result of inflation in media pricing (including search engine keywords). There is no assurance that we will be able to successfully maintain or enhance consumer awareness of our brand. Even if we are successful in our branding efforts, such efforts may not be cost-effective. If we are

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unable to maintain or enhance consumer awareness of our brand and generate demand in a cost-effective manner, it would negatively impact our ability to compete in the ecommerce sector which would have a material adverse effect on our business.

We may not be successful in implementing our growth strategies.

Our growth strategy is to enhance our service platforms by investing in technology, and expanding into new geographic markets. Our success in implementing our growth strategies are affected by:

•        our ability to increase the number of suppliers, and product offerings on our platform;

•        our ability to continue to expand our distribution channels, and market and cross-sell our services and products to facilitate the expansion of our business;

•        our ability to build or acquire the required technology;

•        the general condition of the global economy (particularly in India and markets with close proximity to India) and continued growth in demand for online services;

•        our ability to compete effectively with existing and new entrants to the Indian ecommerce industry;

•        the growth of the Internet as a medium for commerce in India; and

•        changes in our regulatory environment.

Many of these factors are beyond our control and there can be no assurance that we will succeed in implementing our strategy. Separately, our growth strategy also involves expanding into new geographic markets, which will involve additional risks.

We may not be successful in pursuing strategic partnerships and acquisitions, and future partnerships and acquisitions may not bring us anticipated benefits.

Part of our growth strategy is the pursuit of strategic partnerships and acquisitions. There can be no assurance that we will succeed in implementing this strategy as it is subject to many factors which are beyond our control, including our ability to identify, attract and successfully execute suitable acquisition opportunities and partnerships.

This strategy may also subject us to uncertainties and risks, including acquisition and financing costs, potential ongoing and unforeseen or hidden liabilities, diversion of management resources and cost of integrating acquired businesses. We could face difficulties integrating the technology of acquired businesses with our existing technology, and employees of the acquired business into various departments and ranks in our company, and it could take substantial time and effort to integrate the business processes being used in the acquired businesses with our existing business processes. Moreover, there is no assurance that such partnerships or acquisitions will achieve our intended objectives or enhance our revenue.

If we are unable to continue to identify and exploit new market opportunities, our future revenues may decline and as a result our business, financial condition and results of operations could be materially adversely affected.

As more participants enter our markets, the resulting competition often leads to lower commissions. This may result in a decrease in future revenues in a particular market even if the volume of trades we handle in that market increases. We may not be able to attract new customers or successfully enter new markets. If we are unable to continue to identify and exploit new market opportunities on a timely and cost-effective basis, our future revenues may decline and as a result our business, financial condition and results of operations could be materially adversely affected.

Difficult market conditions, economic conditions and geopolitical uncertainties could adversely affect our business in many ways by negatively impacting our future revenues in the financial markets in which we offer services, which could have a material adverse effect on our business, financial condition and results of operations.

Difficult market conditions, economic conditions, and geopolitical uncertainties have in the past adversely affected and may in the future adversely affect our business and profitability. Our business and financial services

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industry in general are directly affected by national and international economic and political conditions, broad trends in business and finance, the level and volatility of interest rates, changes in and uncertainty regarding tax laws and substantial fluctuations in the volume and price levels of securities transactions. The financial markets and the global financial services business are, by their nature, risky and volatile and are directly affected by many national and international factors that are beyond our control. Any one of these factors may cause a substantial decline in the U.S. and global financial services markets, resulting in reduced trading volume. These events could have a material adverse effect on our results and profitability. These factors include:

•        economic and political conditions in India, the U.S., Europe and elsewhere in the world,

•        concerns about terrorism, war and other armed hostilities,

•        concerns over inflation and wavering institutional and consumer confidence levels,

•        the availability of cash for investment by our dealer customers and their customers,

•        the level and volatility of interest rates and foreign currency exchange rates,

•        the level and volatility of trading in certain equity and commodity markets, and

•        currency values.

The global financial markets have experienced significant disruptions since 2008, and the United States, Europe, and other economies have experienced periods of recession. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies. Adverse economic conditions could have negative adverse effects on our business and financial conditions. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.

Employee misconduct or error could harm us by impairing our ability to attract and retain customers and subjecting us to significant legal liability and reputational harm; moreover, this type of misconduct is difficult to detect and deter and error is difficult to prevent.

Employee misconduct or error could subject us to financial losses and regulatory sanctions and could seriously harm our reputation and negatively affect our business. It is not always possible to deter employee misconduct, and the precautions taken to prevent and detect employee misconduct may not always be effective. Misconduct by employees could include engaging in improper or unauthorized transactions or activities, failing to properly supervise other employees, or improperly using confidential information. Employee errors, including mistakes in executing, recording or processing transactions for customers, could cause us to enter into transactions that customers may disavow and refuse to settle, which could expose us to the risk of material losses even if the errors are detected and the transactions are unwound or reversed. If our customers are not able to settle their transactions on a timely basis, the time in which employee errors are detected may be increased and our risk of material loss could be increased. The risk of employee error or miscommunication may be greater for products that are new or have non-standardized terms. It is not always possible to deter employee misconduct or error, and the precautions we take to detect and prevent this activity may not be effective in all cases.

Changing laws, rules and regulations and legal uncertainties, including adverse application of tax laws and regulations, may adversely affect our business and financial performance.

Our business and financial performance could be adversely affected by unfavorable changes in or interpretations of existing, or the promulgation of new, laws, rules and regulations applicable to us and our business, including those relating to the Internet and e-commerce, consumer protection and privacy. Such unfavorable changes could decrease demand for our services and products, increase costs and/or subject us to additional liabilities. For example, there may continue to be an increasing number of laws and regulations pertaining to the Internet and e-commerce, which may relate to liability for information retrieved from or transmitted over the Internet or mobile networks, user privacy, taxation and the quality of services and products sold or provided through the Internet. Furthermore, the growth and development of e-commerce may result in more stringent consumer protection laws that may impose additional burdens on online businesses generally.

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The application of various Indian and international sales, use, occupancy, value-added and other tax laws, rules and regulations to our services and products is subject to interpretation by the applicable taxing authorities. Many of the statutes and regulations that impose these taxes were established before the growth of the Internet, mobile networks and e-commerce. If such tax laws, rules and regulations are amended, new adverse laws, rules or regulations are adopted or current laws are interpreted adversely to our interests, particularly with respect to occupancy or value-added or other taxes, the results could increase our tax payments (prospectively or retrospectively) and/or subject us to penalties and, if we pass on such costs to our customers, decrease the demand for our services and products. As a result, any such changes or interpretations could have an adverse effect on our business and financial performance.

Infrastructure in India may not be upgraded in order to support higher internet penetration, which may result in additional investments and expenses for us.

According to Internet World Stats and the McKinsey Global Report on Digital India dated March 2019, Internet penetration in India was only 7.0% in 2009, but reached over 40% in 2018. There can be no assurance that Internet penetration in India will increase in the future as slowdowns or disruptions in upgrading efforts for infrastructure in India could reduce the rate of increase in the use of the Internet. As such, we may need to make additional investments in alternative distribution channels. Further, any slowdown or negative deviation in the anticipated increase in Internet penetration in India may adversely affect our business and prospects.

Our results of operations are subject to fluctuations in currency exchange rates.

As the functional currency of Lytus India, our key operating subsidiary, is the Indian Rupee, our exposure to foreign currency risk primarily arises in respect of our non-Indian Rupee-denominated trade and other receivables, trade and other payables, and cash and cash equivalents.

We may not be able to obtain additional financing, if needed, on terms that are acceptable, which could prevent us from developing or enhancing our business, taking advantage of future opportunities or responding to competitive pressure or unanticipated requirements.

Our business is dependent upon the availability of adequate funding and sufficient capital. If for any reason we need to raise additional funds, we may not be able to obtain additional financing when needed. If we cannot raise additional funds on acceptable terms, we may not be able to develop or enhance our business, take advantage of future opportunities or respond to competitive pressure or unanticipated requirements.

We may experience technology failures while developing and enhancing our software.

In order to maintain our competitive advantage, our software is under continuous development. There is risk that software failures may occur and result in service interruptions and have other unintended consequences, which could have a material adverse effect on our business, financial condition and results of operations.

Any significant disruption in service on our platform or in our computer systems, including events beyond our control, could prevent us from processing or posting transactions on our platform, reduce the attractiveness of our platform and result in a loss of borrowers or investors.

In the event of a platform outage and physical data loss, our ability to perform our servicing obligations, process applications or make products and services available on our platform would be materially and adversely affected. The satisfactory performance, reliability and availability of our platform, and our underlying network infrastructure are critical to our operations, customer service, reputation and our ability to retain existing and attract new borrowers and investors. Our operations depend on our ability to protect our systems against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts and similar events. If there is a lapse in service or damage to our facilities, we could experience interruptions in our service as well as delays and additional expense in arranging new facilities. Any interruptions or delays in our service, whether as a result of third-party error, our error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our borrowers and investors and our reputation. Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.

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We operate in a rapidly evolving business environment. If we are unable to adapt our business effectively to keep pace with these changes, our ability to succeed will be adversely affected, which could have a material adverse effect on our business, financial condition and results of operations.

The pace of change in our industry is extremely rapid. Operating in such a rapidly changing business environment involves a high degree of risk. Our ability to succeed will depend on our ability to adapt effectively to these changing market conditions. If we are unable to keep up with rapid technological changes, we may not be able to compete effectively. To remain competitive, we must continue to enhance and improve the responsiveness, functionality, accessibility and features of our proprietary software, network distribution systems and technologies. Our business environment is characterized by rapid technological changes, changes in use and customer requirements and preferences, frequent product and service introductions embodying new technologies and the emergence of new industry standards and practices that could render our existing proprietary technology and systems obsolete. Our success will depend, in part, on our ability to:

•        develop, license and defend intellectual property useful in our business,

•        enhance our existing services,

•        develop new services and technologies that address the increasingly sophisticated and varied needs of our prospective customers,

•        respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis,

•        respond to the demand for new services, products and technologies on a cost-effective and timely basis, and

•        adapt to technological advancements and changing standards to address the increasingly sophisticated requirements and varied needs of our prospective customers.

We cannot assure you that we will be able to respond in a timely manner to changing market conditions or customer requirements. The development of proprietary electronic trading technology entails significant technical, financial and business risks. Further, the adoption of new Internet, networking or telecommunications technologies may require us to devote substantial resources to modify, adapt and defend our technology. We cannot assure you that we will successfully implement new technologies or adapt our proprietary technology and transaction-processing systems to customer requirements or emerging industry standards, or that we will be able to successfully defend any challenges to any technology we develop. Any failure on our part to anticipate or respond adequately to technological advancements, customer requirements or changing industry standards, or any significant delays in the development, introduction or availability of new services, products or enhancements, could have a material adverse effect on our business, financial condition and results of operations.

We are a “controlled company” within the meaning of the Nasdaq Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

We are a “controlled company” as defined under Rule 5615(c)(1) of the Nasdaq Marketplace Rules because Mr. Dharmesh Pandya holds more than 50% of our voting power, and we expect we will continue to be a controlled company upon completion of this offering. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from the obligation to comply with certain corporate governance requirements, including:

•        the requirement that our director nominees must be selected or recommended solely by independent directors; and

•        the requirement that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

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As a result, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the Nasdaq Stock Market Rules, if we utilize such exemptions. We currently do not intend to utilize the controlled company exemptions.

Lack of liquidity or access to capital could impair our business and financial condition.

Liquidity, or ready access to funds, is essential to our business. We expend significant resources investing in our business, particularly with respect to our technology and service platforms. As a result, reduced levels of liquidity could have a significant negative effect on us. Some potential conditions that could negatively affect our liquidity include:

•        illiquid or volatile markets,

•        diminished access to debt or capital markets,

•        unforeseen cash or capital requirements, or

•        regulatory penalties or fines, or adverse legal settlements or judgments.

The capital and credit markets continue to experience varying degrees of volatility and disruption. In some cases, the markets have exerted downward pressure on availability of liquidity and credit capacity for businesses similar to ours. Without sufficient liquidity, we could be required to limit or curtail our operations or growth plans, and our business would suffer. Notwithstanding the self-funding nature of our operations, we may sometimes be required to fund timing differences arising from the delayed receipt of client funds associated with the settlement of client transactions in securities markets. These timing differences are funded either with internally generated cash flow or, if needed, with funds drawn under our revolving credit facility. We may also need access to capital in connection with the growth of our business, through acquisitions or otherwise. In the event current resources are insufficient to satisfy our needs, we may need to rely on financing sources such as bank debt. The availability of additional financing will depend on a variety of factors such as:

•        market conditions,

•        the general availability of credit,

•        the volume of trading activities,

•        the overall availability of credit to the financial services industry,

•        our credit ratings and credit capacity, and

•        the possibility that our lenders could develop a negative perception of our long- or short-term financial prospects is a result of industry- or company-specific considerations. Similarly, our access to funds may be impaired if regulatory authorities or rating organizations take negative actions against us.

Disruptions, uncertainty, or volatility in the capital and credit markets may also limit our access to capital required to operate our business. Such market conditions may limit our ability to satisfy statutory capital requirements, generate commission, fee and other market-related revenue to meet liquidity needs and access the capital necessary to grow our business. As such, we may be forced to delay raising capital, issue different types of capital than we would otherwise, less effectively deploy such capital, or bear an unattractive cost of capital, which could decrease our profitability and significantly reduce our financial flexibility.

Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments.

We may pursue further acquisitions and investments in the future. These transactions are accompanied by risks. For instance, an acquisition could have a negative effect on our financial and strategic position and reputation or the acquired business could fail to further our strategic goals. Moreover, we may not be able to successfully integrate acquired businesses into ours, and therefore we may not be able to realize the intended benefits from an acquisition. We may have a lack of experience in new markets, products or technologies brought on by the acquisition and we may have an initial dependence on unfamiliar supply or distribution partners. An acquisition may create an impairment of

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relationships with customers or suppliers of the acquired business or our advisors or suppliers. All of these and other potential risks may serve as a diversion of our management’s attention from other business concerns, and any of these factors could have a material adverse effect on our business.

We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.

We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how, or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in India, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits. Additionally, the application and interpretation of India’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in India are still evolving and are uncertain, and we cannot assure you that Indian courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected.

Our platforms and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.

Our platforms and internal systems rely on software that is highly technical and complex. In addition, our platform and internal systems depend on the ability of such software to store, retrieve, process, and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors or bugs. Errors or other design defects within the software on which we rely may result in a negative experience for customers and funding sources, delay introductions of new features or enhancements, result in errors or compromise our ability to protect customer or investor data or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in harm to our reputation, loss of customers or investors or liability for damages, any of which could adversely affect our business, results of operations and financial condition.

Our business is dependent on our ability to maintain relationships with our business partners and other third parties, and at the same time, we are subject to risks associated with our business partners and other third parties.

We currently rely on a number of business partners and other third parties in various aspects of our business. In addition, we cooperate with a number of business partners and other third parties to deliver our services to our customers. Furthermore, if third-party service providers fail to function properly, we cannot assure you that we would be able to find an alternative in a timely and cost-efficient manner, or at all. Pursuing, establishing and maintaining relationships with business partners and other third parties, as well as integrating their data and services with our system, require significant time and resources.

The smooth operation of our business also depends on the compliance by our business partners and other third parties with applicable laws and regulations. Any negative publicity about business partners and other third parties could harm our reputation. If any of the foregoing were to occur, our business and results of operations could be materially and adversely affected. Our reputation is associated with these business partners and other third parties, and if any of the foregoing were to occur, our reputation may suffer.

We face risks related to health pandemics that could impact our sales and operating results.

Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of respiratory illness caused by a novel coronavirus (COVID-19) first identified in Wuhan, Hubei Province, China. These could include disruptions or restrictions on our ability to travel and to deliver our products to our customers, as well as temporary closures of our facilities or the facilities of our customers and third-party service providers.

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Any disruption or delay of our operations and those of our suppliers or customers may adversely impact our sales and operating results. This could also add pressure on our cash flow, although the size and duration of this global pandemic are uncertain as of this prospectus. In addition, a significant outbreak of contagious diseases in the human population resulted in a widespread health crisis that could adversely affect the economies and financial markets of India and many other countries, resulting in an economic downturn that could affect demand for our products and significantly impact our operating results.

We will likely not pay dividends in the foreseeable future.

Dividend policy is subject to the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements and other factors. There is no assurance that our Board of Directors will declare dividends even if we are profitable. Under BVI law, we may only pay dividends from profits of our company, or credits standing in our Company’s share premium account, and we must be solvent before and after the dividend payment in the sense that we will be able to satisfy our liabilities as they become due in the ordinary course of business.

Risks Related to Doing Business in India

A substantial portion of our business and operations are located in India and we are subject to regulatory, economic, social and political uncertainties in India.

A substantial portion of our business and employees are located in India, and we intend to continue to develop and expand our business in India. Consequently, our financial performance and the market price of our common shares will be affected by changes in exchange rates and controls, interest rates, changes in government policies, including taxation policies, social and civil unrest and other political, social and economic developments in or affecting India.

The Government of India has exercised and continues to exercise significant influence over many aspects of the Indian economy. Since 1991, successive Indian governments have generally pursued policies of economic liberalization and financial sector reforms, including by significantly relaxing restrictions on the private sector. Nevertheless, the role of the Indian central and state governments in the Indian economy as producers, consumers and regulators has remained significant and we cannot assure you that such liberalization policies will continue. The present government, formed in May 2009, has announced policies and taken initiatives that support the continued economic liberalization policies that have been pursued by previous governments. However, the present government is a multiparty coalition and therefore there is no assurance that it will be able to generate sufficient cross-party support to implement such policies or initiatives. The rate of economic liberalization could change, and specific laws and policies affecting travel service companies, foreign investments, currency exchange rates and other matters affecting investments in India could change as well. A significant change in India’s policy of economic liberalization and deregulation or any social or political uncertainties could adversely affect business and economic conditions in India generally and our business and prospects.

As the domestic Indian market constitutes a significant source of our revenue, a slowdown in economic growth in India could cause our business to suffer.

The performance and growth of our business are necessarily dependent on economic conditions prevalent in India, which may be materially and adversely affected by political instability or regional conflicts, economic slowdown elsewhere in the world or otherwise. The Indian economy also remains largely driven by the performance of the agriculture sector, which depends on the quality of the monsoon and is difficult to predict. The Indian economy has grown significantly over the past few years. In the past, economic slowdowns in the Indian economy have harmed the ecommerce sector as customers have less disposable income for their shopping online. Any future slowdown in the Indian economy could have a material adverse effect on the demand for the travel products we sell and, as a result, on our financial condition and results of operations.

Trade deficits could also adversely affect our business and the price of our common shares. India’s trade relationships with other countries and its trade deficit, driven to a major extent by global crude oil prices, may adversely affect Indian economic conditions. If trade deficits increase or are no longer manageable because of the rise in global crude oil prices or otherwise, the Indian economy, and therefore our business, our financial performance and the price of our common shares could be adversely affected.

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India also faces major challenges in sustaining its growth, which include the need for substantial infrastructure development and improving access to healthcare and education. If India’s economic growth cannot be sustained or otherwise slows down significantly our business and prospects could be adversely affected.

The ecommerce business in India is susceptible to extraneous events such as terrorist attacks and other acts of violence, which may result in a reduction in online transaction volumes impacting our business profitability.

Terrorist attacks and other acts of violence or war involving India or other neighboring countries may adversely affect the Indian markets and the worldwide financial markets. In addition, any deterioration in international relations between India and other countries may result in concerns regarding regional stability which could adversely affect the price of our common shares. The occurrence of any of these events may result in a loss of business confidence and have an adverse effect on our business and financial performance.

Natural calamities could have a negative impact on the Indian economy and cause our business to suffer.

India has experienced natural calamities such as earthquakes, tsunamis, floods, and drought in the past few years. The extent and severity of these natural disasters determines their impact on the Indian economy. Substantially all of our operations and employees are located in India and there can be no assurance that we will not be affected by natural disasters in the future. The occurrence of any of these disasters may result in a loss of business confidence and have an adverse effect on our business and financial performance.

Restrictions on foreign investment in India may prevent us from making future acquisitions or investments in India, which may adversely affect our results of operations, financial condition and financial performance.

India regulates ownership of Indian companies by foreigners, although some restrictions on foreign investment have been relaxed in recent years. These regulations and restrictions may apply to acquisitions by us or our affiliates, including Lytus India and affiliates which are not resident in India, of shares in Indian companies or the provision of funding by us or any other entity to Indian companies within our group. For example, under its consolidated foreign direct investment policy, the Government of India has set out additional requirements for foreign investments in India, including requirements with respect to downstream investments by Indian companies owned or controlled by foreign entities and the transfer of ownership or control of Indian companies in sectors with caps on foreign investment from resident Indian persons or entities to foreigners. These requirements, which currently include restrictions on valuations and sources of funding for such investments and may include prior approval from the Foreign Investment Promotion Board, may adversely affect our ability to make investments in India, including through LYTUS India. There can be no assurance that we will be able to obtain any required approvals for future acquisitions or investments in India, or that we will be able to obtain such approvals on satisfactory terms.

Our business and activities are regulated by The Competition Act, 2002.

The Competition Act, 2002, as amended, or the Competition Act, several provisions of which have recently come into force, seeks to prevent practices that could have an appreciable adverse effect on competition. Under the Competition Act, any arrangement, understanding or action between enterprises, whether formal or informal, which causes or is likely to cause an appreciable adverse effect on competition, is void and will be subject to substantial penalties. Any agreement that directly or indirectly determines purchase or sale prices, limits or controls production, or creates market sharing by way of geographical area or number of customers in the market is presumed to have an appreciable adverse effect on competition. Provisions relating to the regulations of certain acquisitions, mergers or amalgamations which have an appreciable adverse effect on competition are not yet in force. Such provisions could, if brought into force in the future, be applicable to us.

The effect of the Competition Act on the business environment in India is unclear. If we or any member of our group, including Lytus India, are affected, directly or indirectly, by the application or interpretation of any provision of the Competition Act or any enforcement proceedings initiated by the Competition Commission of India or any adverse publicity that may be generated due to scrutiny or prosecution by the Competition Commission of India, our business and financial performance may be materially and adversely affected.

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Risks Related to this Offering and Ownership of our Common Shares

Prior to this offering, we had no public market for our common shares and you may not be able to resell our common shares at or above the price you paid, or at all.

Prior to this offering, there was no public market for our common shares. We cannot assure you that an active public market for our common shares will develop or that the market price of our common shares will not decline below the public offering price. The public offering price of our common shares may not be indicative of prices that will prevail in the trading market following the offering.

If we are unable to comply with certain conditions, our common shares may not trade on the NASDAQ Capital Market.

If we are unable to meet initial listing requirements for listing of our securities on NASDAQ, our shares may not trade on the NASDAQ Capital Market. In addition, we have relied on an exemption to the blue sky registration requirements afforded to “covered securities.” Securities listed on the NASDAQ Capital Market are “covered securities.” If we are unable to meet the final conditions for listing, then we will not be able to rely on the covered securities exemption to blue sky registration requirements and we would need to register the offering in each state in which we planned to sell common shares. Consequently, we will not complete this offering until we have met the final conditions.

If our financial condition deteriorates as a NASDAQ listed company, we may not meet continued listing standards on the NASDAQ Capital Market.

We have applied for listing of our securities on the NASDAQ Capital Market. The NASDAQ Capital Market requires companies to fulfil specific requirements in order for their shares to continue to be listed. If our common shares are listed on the NASDAQ Capital Market but are delisted from the NASDAQ Capital Market at some later date, our shareholders could find it difficult to sell our common shares. In addition, if our common shares are delisted from the NASDAQ Capital Market at some later date, we may apply to have our common shares quoted on the Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The Bulletin Board and the “pink sheets” are generally considered to be less efficient markets than the NASDAQ Capital Market. In addition, if our common shares are not so listed or are delisted at some later date, our common shares may be subject to the “penny stock” regulations. These rules impose additional sales practice requirements on broker-dealers who sell low-priced securities to persons other than established customers and institutional accredited investors and require the delivery of a disclosure schedule explaining the nature and risks of the penny stock market. As a result, the ability or willingness of broker-dealers to sell or make a market in our common shares might decline. If our common shares are not so listed or are delisted from the NASDAQ Capital Market at some later date or become subject to the penny stock regulations, it is likely that the price of our common shares would decline and that our shareholders would find it difficult to sell their common shares. In addition, we have relied on an exemption to the blue sky registration requirements afforded to “covered securities.” Securities listed on the NASDAQ Capital Market are “covered securities.” If we are unable to meet the final conditions for listing, then we will not be able to rely on the “covered securities” exemption to blue sky registration requirements and we would need to register the offering in each state in which we planned to sell common shares. Consequently, we will not complete this offering until we have met the final conditions.

If a limited number of participants in this offering purchase a significant percentage of the offering, the effective public float may be smaller than anticipated and the price of our common shares may be volatile.

As a company conducting a relatively small public offering, we are subject to the risk that a small number of investors will purchase a high percentage of the offering. If this were to happen, investors could find our common shares to be more volatile than they might otherwise anticipate. Companies that experience such volatility in their stock price may be more likely to be the subject of securities litigation. In addition, if a large portion of our public float were to be held by a few investors, smaller investors may find it more difficult to sell their common shares.

We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you with the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.

We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue

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quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime. As a foreign private issuer, we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.

Common shares eligible for future sale may adversely affect the market price of our common shares, as the future sale of a substantial amount of outstanding common shares in the public marketplace could reduce the price of our common shares.

The market price of our common shares could decline as a result of sales of substantial amounts of our common shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our common shares. An aggregate of 34,146,369 common shares are outstanding before the consummation of this offering and 36,873,641 common shares will be outstanding immediately after this offering (which does not include 409,090 common shares that the underwriters may purchase form us to cover over-allotments). All of the common shares sold in the offering will be freely transferable without restriction or further registration under the Securities Act. The remaining common shares will be “restricted securities” as defined in Rule 144. These shares may be sold in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act.

You will experience immediate and substantial dilution.

The initial public offering price of our common shares is expected to be substantially higher than the pro forma net tangible book value per share of our common shares. Assuming the completion of the offering, if you purchase common shares in this offering, you will incur immediate dilution of approximately $11.31 per share in the pro forma net tangible book value per share from the price per share that you pay for the common shares. Accordingly, if you purchase common shares in this offering, you will incur immediate and substantial dilution of your investment. See “Dilution.”

We have not finally determined the uses of the proceeds from this offering, and we may use the proceeds in ways with which you may not agree.

While we have identified the priorities to which we expect to put the proceeds of this offering, our management will have considerable discretion in the application of the net proceeds received by us. Specifically, we intend to use the net proceeds from this offering for research and development and additional hiring, sales and marketing, working capital, and general corporate purposes. We have reserved the right to re-allocate funds currently allocated to that purpose to our general working capital. If that were to happen, then our management would have discretion over even more of the net proceeds to be received by our company in this offering. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our efforts to achieve profitability or increase our stock price. The net proceeds from this offering may be placed in investments that do not produce profit or increase value. See “Use of Proceeds.”

Our officers, directors and principal shareholders own a significant percentage of our common shares and will be able to exert significant control over matters subject to shareholder approval.

Assuming the completion of this offering, our officers, directors, and 5% or greater shareholders will, in the aggregate, beneficially own approximately 87.4% of our outstanding common shares. Specifically, Dharmesh Pandya, our chief executive officer and director, in the aggregate, will beneficially own 78.2% following this offering, which, in turn, will allow such shareholders to exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. As a result, our officers, directors, and 5% or greater shareholders will possess substantial ability to impact our management and affairs and the outcome of matters submitted to shareholders for approval.  This concentration of ownership and voting power may also discourage, delay

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or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their common shares as part of a sale of our company and might reduce the price of our common shares. These actions may be taken even if they are opposed by our other shareholders, including those who purchase common shares in this offering. See “Principal Shareholders.”

We will incur increased costs and become subject to additional regulations and requirements as a result of becoming a newly public company, and our management will be required to devote substantial time to new compliance matters, which could lower our profits or make it more difficult to run our business.

As a newly public company, we will incur significant legal, accounting, and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements and costs of recruiting and retaining non-executive directors. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the Securities and Exchange Commission, or the SEC, and NASDAQ. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. Our management will need to devote a substantial amount of time to ensure that we comply with all of these requirements. These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common shares, fines, sanctions and other regulatory action and potentially civil litigation.

There may not be an active trading market for our common shares, which may cause shares of our common shares to trade at a discount from the initial offering price and make it difficult to sell the common shares you purchase.

Prior to this offering, there has not been a public trading market for our common shares. It is possible that after this offering an active trading market will not develop or continue or, if developed, that any market will be sustained which would make it difficult for you to sell your common shares at an attractive price or at all. The initial public offering price per share will be determined by agreement among us and the representatives of the underwriters, and may not be indicative of the price at which common shares will trade in the public market after this offering. The market price of our stock may decline below the initial offering price and you may not be able to sell your common shares at or above the price you paid in this offering, or at all.

The market price of common shares may be volatile, which could cause the value of your investment to decline.

Even if a trading market develops, the market price of our common shares may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could reduce the market price of our common shares in spite of our operating performance. In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about our industry in or individual scandals, and in response the market price of our common shares could decrease significantly. You may be unable to resell your common shares of at or above the initial public offering price. In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, or at all.

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Future sales, or the perception of future sales, by us or our existing shareholders in the public market following this offering could cause the market price for our common shares to decline.

The sale of substantial amounts of common shares in the public market, or the perception that such sales could occur could harm the prevailing market price of our common shares. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Upon completion of this offering we will have a total of 36,873,641 common shares outstanding (which does not include 409,090 common shares that the underwriters may purchase form us to cover over-allotments). Of the outstanding common shares, the 2,727,272 common shares sold or issued in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, or Securities Act, except that any common shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act, may be sold only in compliance with the limitations described in “Common Shares Eligible for Future Sale.” All remaining common shares, which are currently held by our existing shareholders, may be sold in the public market in the future subject to the lock-up agreements and the restrictions contained in Rule 144 under the Securities Act. If any existing shareholders sell a substantial amount of common shares, the prevailing market price for our common shares could be adversely affected. Our executive officers, directors and certain of our existing shareholders will sign lock-up agreements with the underwriters that will, subject to certain customary exceptions, restrict the sale of our common shares and certain other securities held by them for 90 days following the date of this prospectus. The underwriters may, in their sole discretion and at any time without notice, release all or any portion of the common shares subject to any such lock-up agreements. As restrictions on resale end, the market price of our common shares could drop significantly if the holders of our restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our common shares or other securities.

As the rights of shareholders under BVI law differ from those under U.S. law, you may have fewer protections as a shareholder.

Our corporate affairs will be governed by our Memorandum and Articles of Association, the BVI Business Companies Act, 2004, as amended (the “BVI Act”), and the common law of the BVI. The rights of shareholders to take legal action against our directors, actions by minority shareholders, and the fiduciary responsibilities of our directors under BVI law are governed by the BVI Act and the common law of the BVI. The common law of the BVI is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from the common law of England and the wider Commonwealth, which has persuasive, but not binding, authority on a court in the BVI. The rights of our shareholders and the fiduciary responsibilities of our directors under BVI law are largely codified in the BVI Act but are potentially not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the BVI has a less developed body of securities laws as compared to the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law. As a result of all of the above, holders of our common shares may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than they would as shareholders of a U.S. company.

BVI companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests.

Shareholders of BVI companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. Shareholders of a BVI company could, however, bring a derivative action in the BVI courts, and there is a clear statutory right to commence such derivative claims under Section 184C of the BVI Act. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights of shareholders of a BVI company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. The BVI courts are also unlikely to recognize or enforce against us judgments of courts in the United States based on certain liability provisions of U.S. securities law; and to impose liabilities against us, in original actions brought in the BVI, based on certain liability provisions of U.S. securities laws that are penal in nature. There is no statutory recognition in the BVI of judgments obtained in the United States, although the courts of the BVI will generally recognize and enforce the non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. The BVI Act offers some limited protection of minority shareholders. The principal protection under statutory law is that shareholders

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may apply to the BVI court for an order directing the company or its director(s) to comply with, or restraining the company or a director from engaging in conduct that contravenes, the BVI Act or the company’s Memorandum and Articles of Association. Under the BVI Act, the minority shareholders have a statutory right to bring a derivative action in the name of and on behalf of the company in circumstances where a company has a cause of action against its directors. This remedy is available at the discretion of the BVI court. A shareholder may also bring an action against the company for breach of duty owed to him as a member. A shareholder who considers that the affairs of the company have been, are being or likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, likely to be oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity, may apply to the BVI court for an order to remedy the situation.

There are common law rights for the protection of shareholders that may be invoked, largely dependent on English company law. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company’s affairs by the majority or the Board of Directors. However, every shareholder is entitled to have the affairs of the company conducted properly according to BVI law and the constituent documents of the company. As such, if those who control the company have persistently disregarded the requirements of company law or the provisions of the company’s Memorandum and Articles of Association, then the courts may grant relief. Generally, the areas in which the courts will intervene are the following: (1) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority; (2) acts that constitute fraud on the minority where the wrongdoers control the company; (3) acts that infringe or are about to infringe on the personal rights of the shareholders, such as the right to vote; and (4) where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders. This means that even if shareholders were to sue us successfully, they may not be able to recover anything to make up for the losses suffered.

The laws of the BVI may provide less protection for minority shareholders than those under U.S. law, so minority shareholders may have less recourse than they would under U.S. law if the shareholders are dissatisfied with the conduct of our affairs.

Under the laws of the BVI, the rights of minority shareholders are protected by provisions of the BVI Act dealing with shareholder remedies and other remedies available under common law (in tort or contractual remedies). The principal protection under statutory law is that shareholders may bring an action to enforce the constitutional documents of the company (i.e. the Memorandum and Articles of Association) as shareholders are entitled to have the affairs of the company conducted in accordance with the BVI Act and the Memorandum and Articles of Association of the company. A shareholder may also bring an action under statute if he feels that the affairs of the company have been or will be carried out in a manner that is unfairly prejudicial or discriminating or oppressive to him. The BVI Act also provides for certain other protections for minority shareholders, including in respect of investigation of the company and inspection of the company books and records. There are also common law rights for the protection of shareholders that may be invoked, largely dependent on English common law, since the common law of the BVI for business companies is limited.

As a company incorporated in the British Virgin Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq Stock Market corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq Stock Market corporate governance listing standards.

As an exempted British Virgin Islands company to be listed on the Nasdaq Capital Market, we are subject to the Nasdaq Stock Market corporate governance listing standards. However, the Nasdaq Stock Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the British Virgin Islands, which is our home country, may differ significantly from the Nasdaq Stock Market corporate governance listing standards. We may elect to rely on home country practice to be exempted from the corporate governance requirements. As a result, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq Stock Market corporate governance listing standards applicable to U.S. domestic issuers.

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We may not be able to pay any dividends on our common shares in the future due to BVI law.

Under BVI law, we may only pay dividends to our shareholders if the value of our assets exceeds our liabilities and we are able to pay our debts as they become due. We cannot give any assurance that we will declare dividends of any amounts, at any rate or at all in the future. Future dividends, if any, will be at the discretion of our Board of Directors, and will depend upon our results of operations, cash flows, financial condition, payment to us of cash dividends by our subsidiaries, capital needs, future prospects and other factors that our directors may deem appropriate.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth company” (1) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (2) we will be exempt from any rules that may be adopted by the PCAOB requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, (3) we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (4) we will not be required to hold nonbinding advisory votes on executive compensation or shareholder approval of any golden parachute payments not previously approved. We currently intend to take advantage of the reduced disclosure requirements regarding executive compensation. If we remain an “emerging growth company” after fiscal 2018, we may take advantage of other exemptions, including the exemptions from the advisory vote requirements and executive compensation disclosures under the Dodd-Frank Wall Street Reform and Customer Protection Act, or the Dodd-Frank Act, and the exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, meaning that the company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We may remain an “emerging growth company” until the fiscal year-end following the fifth anniversary of the completion of this initial public offering, though we may cease to be an “emerging growth company” earlier under certain circumstances, including (1) if we become a large accelerated filer, (2) if our gross revenue exceeds $1.07 billion in any fiscal year or (3) if we issue more than $1.0 billion in non-convertible notes in any three year period. The exact implications of the JOBS Act are still subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find our common shares less attractive if we rely on the exemptions and relief granted by the JOBS Act. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our stock price may decline and/or become more volatile.

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FORWARD-LOOKING STATEMENTS

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

Examples of forward-looking statements include:

•        the timing of the development of future services,

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

•        the development of future company-owned call centers,

•        statements regarding the capabilities of our business operations,

•        statements of expected future economic performance,

•        statements regarding competition in our market, and

•        assumptions underlying statements regarding us or our business.

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

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of our 2,727,272 common shares in this offering will be approximately $27.5 million, after deducting the underwriting discounts and commissions and the estimated offering expenses payable by us (including the offering expenses that have been committed to be paid).

The principal purposes of this Offering are to obtain additional capital to support our operations, establish a public market for our common shares and facilitate our future access to the public capital markets. We intend to use the net proceeds received from this Offering for the following:

•        An aggregate of $15 million for the acquisition of customers (ownership of approximately 1.8 million customers) and 51% of the shares in a licensed cable company.

•        $8 million for general corporate purposes, primarily related to our precursor initiatives for the launch of our offerings in the telemedicine space.

•        $4.5 million for future development of assets, mainly the upgrade of our streaming devices, purchase and development of software applications for telemedicine services, purchasing of health monitoring devices and memory capacity for third party marketplace (Android market-place) and software applications.

We shall continue to provide streaming services to the existing approximately 1.8 million subscribers using an upgraded device that provides the additional facilities, such as internet services and availability of our proprietary operating system to augment our Lytus platform, through already installed fiber network and infrastructure to approximately 1.8 million households. This streaming segment generated approximately $15 million for the period March 16, 2020 (date of inception) through March 31, 2020. This will be used for our operating expenses.

We shall also utilize the surplus cash proceeds for commercializing new “Internet of Medical Things” solutions and product extensions and potentially pursue targeted acquisitions. We may use a portion of the net proceeds from this offering and our existing cash and cash equivalents to in-license, acquire or invest in complementary business, technologies, products or assets. However, we have no current plans, commitments or obligations to do so.

We have not yet determined the amount of net proceeds to be used specifically for any of the foregoing purposes. Accordingly, we will retain broad discretion over the use of these proceeds.

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DIVIDEND POLICY

The holders of our common shares are entitled to dividends out of funds legally available when and as declared by our Board of Directors subject to the BVI Act. Our Board has never declared a dividend and does not anticipate declaring a dividend in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

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

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EXCHANGE RATE INFORMATION

Our business is conducted in India, and the financial records of our Indian subsidiaries are maintained in Indian rupees, its functional currency. However, we use the U.S. dollar as our reporting currency; therefore, periodic reports made to shareholders will include current period amounts translated into U.S. dollars using the then-current exchange rates. Our financial statements have been translated into U.S. dollars in accordance with Accounting Standards Codification (“ASC”) 830-10, “Foreign Currency Matters.” We have translated our asset and liability accounts using the exchange rate in effect at the balance sheet date. We translated our statements of operations using the average exchange rate for the period. We reported the resulting translation adjustments under other comprehensive income/loss. Unless otherwise noted, we have translated profit and loss items at an average rate of 71.09 for the period ended March 31, 2020 and for the balance sheet items we have translated at closing rate as on March 31, 2020 which is 75.33.

We make no representation that any Rupee or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Rupee, as the case may be, at any particular rate, or at all. On March 31, 2021, the exchange rate was Rs.73.15 to $1.00. We do not currently engage in currency hedging transactions.

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CAPITALIZATION

The following table sets forth our cash and our capitalization as of December 31, 2020:

•        On an actual basis; and

•        On a pro forma basis to give effect to the sale of 2,727,272 common shares by us in this offering at the assumed initial public offering price of $11.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and to reflect the application of the proceeds after deducting the estimated 7% underwriting discounts and commissions, 1% non-accountable expense allowance and estimated offering expenses payable by us.

The pro forma information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the public offering price of our common shares and other terms of this offering determined at pricing. You should read this capitalization table together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information included elsewhere in this prospectus.

 

As of December 31, 2020

   

Historical (unaudited)

 

Pro Forma
As Adjusted

Cash and Cash Equivalents

 

$

100,254

 

$

27,575,247

Non-Current Liabilities

 

 

   

 

 

Customer Acquisition Payable

 

 

30,271,230

 

 

30,271,230

Deferred Tax Liability

 

 

2,930,748

 

 

2,930,748

Total Non-Current Liabilities

 

$

33,201,978

 

$

33,201,978

Equity

 

 

   

 

 

Equity Share Capital

 

 

341,464

 

 

368,736

Other Equity

 

 

11,097,286

 

 

38,545,006

Total Lytus Equity

 

 

11,438,750

 

 

38,913,743

Noncontrolling interest

 

 

13,826

 

 

13,826

Total Equity

 

 

11,452,576

 

 

38,927,569

Total Capitalization

 

$

44,654,554

 

$

72,129,547

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DILUTION

If you invest in our common shares in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per common share and the pro forma net tangible book value per common share immediately after this offering.

As of December 31, 2020 we had a historical net tangible book value (deficit) of $(39,024,383), or $(1.14) per common share based on 34,146,369 common shares outstanding at December 31, 2020. Our historical net tangible book value per share is the amount of our total tangible assets less our total liabilities at December 31, 2020, divided by the number of common shares outstanding at December 31, 2020.

Dilution results from the fact that the per common share initial public offering price is substantially in excess of the book value per common share attributable to the existing shareholders for our presently outstanding common shares. After giving effect to our issuance and sale of 2,727,272 common shares in this offering at an assumed initial public offering price of $11.00 per share, the midpoint of the estimated offering price range set forth on the cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, the pro forma as adjusted net tangible book value as of December 31, 2020 would have been $(11,549,390), or $(0.31) per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $0.83 per share to existing stockholders and immediate dilution of $11.31 per share to new investors purchasing common shares in this offering.

The following table illustrates the estimated net tangible book value per share after this offering and the per share dilution to persons purchasing common shares in this offering based on the foregoing offering assumptions:

     

Post-
Offering(1)

Assumed offering price per common share

 

 

 

 

 

$

11.00

 

Net tangible book value per common share as of December 31, 2020

 

$

(1.14

)

 

 

 

 

Increase in net tangible book value per common share attributable to investors participating in this offering

 

$

0.83

 

 

 

 

 

Pro forma net tangible book value per common share immediately after this offering

 

 

 

 

 

$

(0.31

)

Dilution per common share to investors participating in this offering

 

 

 

 

 

$

11.31

 

A $1.00 increase (decrease) in the assumed public offering price of $11.00 per share would increase (decrease) the pro forma net tangible book value per share by approximately $0.06 and the dilution in pro forma net tangible book value per share to investors participating in this offering by $0.94 per share, assuming that the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions, non-accountable expense allowance, and offering expenses payable by us.

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POST-OFFERING OWNERSHIP

The following charts illustrate our pro forma proportionate ownership, upon completion of this offering by present shareholders and investors in this offering, compared to the relative amounts paid by each. The charts reflect payment by present shareholders as of the date the consideration was received and by investors in this offering at the assumed initial public offering price of $11.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, without deduction of estimated underwriting discounts and commissions, non-accountable expense allowance, and our estimated offering expenses. The charts further assume no changes in net tangible book value other than those resulting from the offering.

 

Common Shares
Purchased

 

Total Consideration

 

Average
Price
Per Share

   

Amount

 

Percent

 

Amount

 

Percent

 

Existing shareholders

 

34,146,369

 

92.60

%

 

$

11,438,750

 

27.60

%

 

$

0.33

New investors

 

2,727,272

 

7.40

%

 

 

29,999,992

 

72.40

%

 

 

11.00

Total

 

36,873,641

 

100.00

%

 

$

41,438,742

 

100.00

%

 

$

1.12

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS

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

The preparation of financial statements in conformity with these accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis, we review our estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates or other forward-looking statements under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations. Our actual results may differ materially as a result of many factors, including those set forth under the headings entitled “Forward-Looking Statements” and “Risk Factors”.

Overview

We are a growing platform services company primarily providing content streaming/telecasting services with over 8 million active users located all across India.3 On our Lytus platform, we provide a wide range of streaming services and telemedicine services with local assistance through local Health Centers. Through our platform, our customers are well connected via CPE devices/STBs and have access to multi-dimensional services including telemedicine service we place to offer in the future.

Our strong customer base and expansive market presence position us to widen our portfolio of offerings. We have been focused on adopting and implementing technologies that can change the landscape of being a conventional streaming services provider. Partnering with those who share our passion, we strive to provide India’s semi-urban, urban population with unmatched services across the tele-healthcare.

We intend to benefit from India’s e-commerce boom and the recent tele-medicine regulation through the acquisition of GHSI. The management of GHSI has many years of pioneering experience of the management in telemedicine in USA, which we believe will help us create a profitable and sustainable business model with rapid growth prospects. We believe that our deep understanding and local expertise have enabled us to create solutions that address the needs and preferences of our consumers in the most comprehensive and efficient way. We possess extensive local knowledge of the logistics and payment landscapes in the markets in which we operate, which we consider to be a key component of our success.

Key Factors For Our Performance

The following factors are the principal factors that have affected and will continue to affect our business, financial condition, results of operations and prospects.

•        Number of Subscribers: our revenue growth and long-term profitability are affected by our ability to increase our subscriber base because we derive a substantial portion of our revenue from streaming services and via client contracts that provide subscribers access to our Lytus platform in exchange for a contractual based monthly fee. Revenue is driven primarily by the number of subscribers, the number of services contracted for by a subscriber and the contractually negotiated prices of our services and online content that is specific to that particular subscriber. We believe that increasing our subscriber base is an integral objective that will provide us with the ability to continually innovate our services and support initiatives that will enhance subscriber experiences and lead to increasing or maintaining our existing annual net dollar retention rate. The number of the subscribers as at the end of March 31, 2020 is approximately 1.8 million (as of March 31, 2020 is 1,812,894).

____________

3          Calculation based upon approximately 1.8 million paid home subscribers which based on industry standards translates to more than 8 million viewers on an average of 4.6 viewers per household in India. Source: United Nations, Department of Economic and Social Affairs, Population Division (2019) — Database on Household Size and Composition 2019. Available: https://population.un.org/Household/index.html#/countries/356

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•        Cluster of customized online content: the Lytus platform provides an opportunity to customize the online content to meet the needs of that particular subscriber. We plan to form partnership with other companies to develop our telemedicine business and entertainment and education online content. Revenues arising from this segment will be driven primarily by the customizable content formats aligned with the customer satisfaction. We believe that increasing our current subscriber utilization rate is a key objective in order for our subscribers to realize tangible healthcare savings with our service.

•        Net Surplus Rate (NSR): net surplus rate arising from streaming service is a supplemental measure of our organic revenue growth. We believe that NSR is an important metric that provides insight into the long-term value and stability of our service platform and our ability to retain and grow revenue from our existing subscribers. Revenues from streaming service has a consistent subscription levels with marginally insubstantial attrition rate. In particular, our contract with Reachnet has factored-in the context of NSR, wherein, for a limited purpose, it is the net cash available with the Company, in respect of provision of streaming services to subscribers, after adjusting the operational costs for streaming services. Per the contract, the Company has engaged the service provider (Reachnet) for streaming services and the NSR relates to the net amount available with the Company, after adjusting the service fee towards the above-mentioned service provider. From the net amount available, the Company shall incur expenditures for enabling multi-dimensional services and providing technology platform to subscribers. The NSR is 39% of net revenue received by the Company.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS).

Revenue

We derive substantially all of our revenue from usage-based fees earned from customers subscribing to our streaming/telecasting, content management services and other products. Generally, customers enter into 12-month contracts and are invoiced monthly in advance based on usage.

Cost of Revenue

Cost of revenue consists primarily of streaming service fees paid to the licensed service provider, through which we have an exclusive access to fiber optic network, bandwidth capacity, network operators, data center colocation, etc. We have a long-term and an exclusive arrangement with licensed service operators. We provide streaming services utilizing the services and accessing the infrastructure and network capacity of licensed service providers.

Liquidity and Capital Resources

Our projected cash needs and projected sources of liquidity depend upon, among other things, our actual results, and the timing and amount of our expenditures. As we continue to grow our subscriber base, we expect an initial funding period to grow new products as well as negative working capital impacts from the timing of device-related cash flows when we provide the devices to customers pursuant to equipment installment plans.

Off-balance Sheet Arrangements

Under SEC regulations, we are required to disclose off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have:

•        Any obligation under certain guarantee contracts,

•        Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets,

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•        Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in shareholder equity in our statement of financial position,

•        Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

•        We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.

•        We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to the allowance for doubtful accounts, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, and valuation of deferred tax assets.

We base our estimates on historical experience and on various other assumptions that we believed to be 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. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions4.

Results of Operations

Revenue

We derive substantially all of our revenue from usage-based fees earned from customers subscribing to our streaming, content management services and other products. Generally, customers enter into 12-month contracts and are invoiced monthly in advance based on usage.

Lytus Technologies Private Limited (“Lytus India”), our wholly-own subsidiary in India, did not have significant operations during the fiscal year ended March 31, 2019.

For the 9 months ended December 31, 2020, Lytus Group had an income of approximately $29 million.

____________

4          Under IFRS 1, the Group is required to make estimates and assumptions in presentation and preparation of the financial statements for the period 16 March 2020 (date of inception) throughout 31 March 2020.

Key estimates considered in preparation of the financial statement that were not required under the previous GAAP are listed below:

•        Fair Valuation of financial instruments carried at Fair Value Through Profit or Loss (“FVTPL”) and/ or Fair Value Through Other Comprehensive Income (“FVOCI”). See Note 1 on Financial Instruments on page F-7 – 19 for additional discussion on FVTPL and FVOCI.

•        Impairment of financial assets based on the expected credit loss model.

•        Determination of the discounted value for financial instruments carried at amortized cost.

          Previous GAAP figures of subsidiaries have been reclassified/regrouped to confirm the presentation requirements under IFRS.

          As such there are no material differences or impact due to transition from Indian GAAP to IFRS and hence restated summaries of equity and profit & loss not given for subsidiaries.

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Other Income/Application of IFRS 15

We had other income of $15.7 million for the period March 16, 2020 (date of inception) through March 31, 2020.5 We anticipate that the customer base we acquired from Reachnet will translate into approximately $40 million in gross revenue without considering additional product offerings by the Company for the fiscal year ending March 31, 2021. While the contractual subscription fee accrued from April 1, 2019, the timing of the consummation and the delay on account of COVID-19, the contractual subscription fee was effective from March 26, 2020. Accordingly, the contractual subscription fee was recognized as “Other Income” and was further adjusted with the Streaming Service Fee of $24.9 million paid to the vendor for the continuing service in the period ended March 31, 2020.

The Company intends to continue growing its subscriber base through strategic identified acquisitions and partnerships. It also intends to grow its revenue base through increased offerings in the Telemedicine space.

Cost of Revenue

Cost of revenue consists primarily of streaming service fees paid to the licensed service provider, through which we have an exclusive access to fiber optic network, bandwidth capacity, network operators, data center co-location, etc. We have a long-term and an exclusive arrangement with licensed service operators. We provide streaming services utilizing the services and accessing the infrastructure and network capacity of licensed service providers.

Operating Expenses

For the period March 16, 2020 (date of inception) through March 31, 2020, the most significant components of operating expenses are staffing expense, which was $15,777, consisting of salaries, benefits and bonuses. In addition, during the period March 16, 2020 through March 31, 2020, we incurred legal and professional expenses of $272,894, amortization costs of $204,086 and other operating expenses of $8,463.

Following the completion of this offering, we expect to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and increased expenses for insurance, investor relations, and professional services. We expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future. Although these expenses may fluctuate as a percentage of our total revenue from period to period, over the long term, we expect general and administrative expense to gradually decline as a percentage of revenue as we scale our business.

During the 9 months ended December 31, 2020, the Company had incurred an operating expenditure of approximately $28 million and the most significant components of operating expenses are streaming services of $17 million and amortization of intangible assets of $9 million.

Income Taxes

Our income tax consists of the following as of March 31, 2020: $3,894,674 as our income tax expenses, including current tax of $1,987,659 and deferred tax of $1,907,015.

Deferred tax related to the translations of foreign operations of Lytus India from INR to USD has been calculated at the rate of the jurisdiction in which a subsidiary situated, i.e. in India (at the rate of 25.17%).

During the 9 months period ended December 31, 2020, our current tax was $3,055 and deferred tax was $420,171.

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5          Other income of approximately $15 million is presented on the basis that all conditions have been satisfied as of March 26, 2020, to consummate closing of the Group’s acquisition agreement with Reachnet Cable Services Pvt. Ltd. (“Reachnet”) in which the Group acquired the customers and corresponding revenues.

           The Group has acquired approximately 1.8 million subscriber connections from a licensed streaming company (Reachnet), through the Agreements dated June 21, 2019 and December 6, 2019, and the income entitlement rights from April 1, 2019, for a consideration of $59 million. On March 26, 2020, the arrangement was consummated when pre-conditions were waived by mutual consent. The net surplus remaining with the Group is approximately $15 million. Considering that the acquired customers were integrated into the Group’s normal course of business on March 26, 2020, the revenue arising therefrom is recognized as “other income”. Effective April 1, 2020 and thereafter, the income arising from the said contracts would be recognized as “Operating Revenue” and the customers would be billed directly by the Group.

           The Group is free to appoint any licensed service provider for provision of streaming services. There is no binding or lock-in arrangement for providing streaming services to subscribers through Reachnet. The agreement contemplates only acquisition of subscriber base and is not an agreement to acquire or purchase the business of Reachnet. The Group has ensured adequate safeguard to secure acquired customer contracts through non-compete clause and non-solicitation of subscribers clause. In respect of streaming services, Lytus India has outsourced the provision of streaming services to Reachnet in the capacity of a service provider. Going forward, with respect of non-streaming services (such as MedTech IOT), these services would be billed directly by the Company and costs and revenue would not be shared with Reachnet.

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Going Concern, Liquidity and Capital Resources

Note on Going Concern:

Impact of COVID-19 on operations

The COVID-19 crisis has had a significant impact on the economy of India. While the pandemic, has increased the demand for streaming and telemedicine services globally, there continue to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the ultimate spread of the virus, the severity of the disease, the duration of the lockdowns and further actions that may be taken by governmental authorities around the world to contain the virus or to treat its impact. The pandemic has particularly impacted the working capital, cash flow and the timing of receipt of significant receivables and payables of the Company. These restrictions have also severely impacted the mobility of the Company’s staff and resources and its access to banks and customer worksites, impairing its normal operations. The lockdown in India is strict with limited domestic travel. Local travel within a city was not allowed, either. Therefore we have had limited access to various cities, such as Hyderabad, where our customers reside. Many offices were closed and banks were severely affected. As a result of the lockdown policy in India, we also have had restricted access to banking services, Subscriber Management System (SMS) report, prior to settlement, and service providers certifying the adequacy of the fiber held by Reachnet. Moreover, in India most of the collections by local cable operators are still in cash and these have been affected/delayed due to lockdown. On September 18, 2020, the restriction under Section 144 of the Code of Criminal Procedure was also passed, prohibiting movement and gathering of people, except for listed emergency and non-emergency services.

The intermittent inability to process accounts receivables and receive cash payments has resulted in liquidity issues and impacted the operations of both the Company and Reachnet. However, the Company, in collaboration with Reachnet’s management, has taken necessary steps, including communicating with all relevant commercial partners, seeking deferral of its payment obligations where possible, to mitigate the impact of COVID-19 on the Company’s liquidity. While COVID-19 restrictions were partially relaxed in December 2020, with the spike in the number of case in Maharashtra in March 2021, the imposition of further lockdown restrictions could be expected.

On February 5, 2021, Lytus India and Reachnet entered into the Third Supplemental Agreement to the original subscriber acquisition agreement dated June 20, 2019, pursuant to which the parties have agreed to, on a good faith basis, settle payments before March 31, 2021 upon completion of the third party’s systems and operational review of Reachnet and its subscribers. The commercial terms to the agreement remain intact and are not subject to any contingency. Given the uncertainty with respect to another potential lockdown caused by a recent COVID-19 resurgence in India, the parties have also agreed that setting off the amounts due, can be an option, if required. On March 31, 2021, the third party’s review of Reachnet and its subscribers was further extended for two months due to the ongoing COVID-19 pandemic and re-lockdown measures taken by the government of Maharashtra, India.

There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the economy of India, U.S. and international markets and, as such, the extent of the business disruption and the related financial impact cannot be reasonably estimated at this time.

Negative working capital and Cash Flow

The Company currently has negative working capital and cash flow aggravated by the COVID-19 lockdown. In particular, it has increased the difficulty in collecting cash from operating offices and customers located in different parts of the country on a timely basis, many of which are currently under total lockdown.

The Company has negative cash used in operating activities to the extent of $700 as of March 31, 2020 and $431,000 for the 9 months period ending December 31, 2020. Upon ending of the COVID-19 lockdown, the Company expects to be able to carry out its operations in the normal course of business and generate a minimum of INR130 ($1.9) from its approximately 1.8 million customer connections per month, as prescribed by the Telecom Regulatory Authority of India guidelines. This would enable the Company to improve its cash position significantly.

The Company further believes that in the coming 12 months, upon the ending of COVID-19 lockdown restrictions, cash flow from operating activities should improve for the following reasons:

•        Monthly subscription fees paid by our customers will be billed and collected at the beginning of each month in advance;

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•        The contracted operating expense for the streaming business is 61%, ensuring a confirmed net surplus of revenue for the Company.

•        Additional product offerings to customers such as our telemedicine business are expected to generate additional cash flow for the Company.

To further mitigate the impact of the current negative working capital and cash flow, the Company has also taken additional precautionary steps by approaching financial institutions and credit partners in India to create and avail credit lines and bridge financing against the company’s future cash flows;

Large Payment Obligation by the Company

On March 31, 2020, under the terms of its Customer Acquisition Agreement with Reachnet, the Company is obligated to make payments to Reachnet. This amount represents the largest payment obligation of the Company and is payable in four equal installments (25% each) on or before July 31, 2020 (or at a mutually agreeable date upon the ending of the COVID-19 lockdown restrictions), March 31, 2021, March 31, 2022 and March 31, 2023, respectively. Per the agreement, the July 31, 2020 payment has not been paid and will be paid at a mutually agreed date after the COVID-19 restrictions have been lifted. Further revision was made to the payment terms and, pending review of subscribers data, the Company has agreed to complete its payment obligations on or before March 31, 2021 and if not, shall have an option to offset the same with the balances receivables with the same entity. Please refer to Note 23 on Business Combination of our consolidated financial statements.

Under the terms of the agreement with Reachnet, the Company was also scheduled to receive ‘Other Receivables’ due of approximately $15 million from Reachnet for the period of April 1, 2019 through March 31, 2020, as reflected in its books of accounts, and $29 million for the 9 months period ended December 31, 2020. The COVID-19 lockdown has delayed the settlement of this accounts receivable under its contract with Reachnet. The Company expects that this settlement will be implemented as soon as possible, upon the relaxation of COVID-19 restrictions in India. Upon such settlement and upon resumption of normal operations, the company expects to have sufficient available cash to be able to meet its current liabilities associated with the business. Please refer to the section below in this note on Other Income/Application of IFRS 15.

Furthermore, the Company is contemplating discussions with Reachnet’s Management to consider modifying its agreement with Reachnet by offering Reachnet stock in lieu of its current payment obligations. This modification, if implemented, should help substantially mitigate cash liquidity requirements for the Company.

Based on the above, we believe that upon lifting of the COVID-19 lockdown restrictions in India, the Company’s available potential cash balances should be sufficient to meet its requirements to carry out its operations effectively. After this offering, the Company may decide to enhance its liquidity position or increase its cash reserve for future investments through additional capital and finance funding.

Note on Liquidity and Capital Resources:

The principal amount of our debt as of March 31, 2020 was $1,587,216 and for the period ended December 31, 2020 was $1,597,777. Our business does not require significant cash to fund principal and interest payments on our debt.

Our projected cash needs and projected sources of liquidity depend upon, among other things, our actual results, and the timing and amount of our expenditures. As we continue to grow our subscriber base, we expect an initial funding period to grow new products as well as negative working capital impacts from the timing of device-related cash flows when we provide the devices to customers pursuant to equipment installment plans.

In order to establish our customer base, the Group has acquired customers from Reachnet Cable Services Private Limited (“Reachnet”), through an Agreement to Acquire Customers dated June 21, 2019, and the income entitlement rights from April 1, 2019, for a consideration of approximately $59 million. This amount is payable in four equal installments (25% each) on or before July 31, 2020 (or at a mutually agreeable date upon the ending of the COVID-19 lockdown restrictions), March 31, 2021, March 31, 2022 and March 31, 2023, respectively. Further revision was made to the payment terms and, pending review of subscribers data, the Company has agreed to complete its payment obligations on or before March 31, 2021 and if not, shall have an option to offset the same with the balances receivables with the same entity.

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Our net cash position as of March 31, 2020 and December 31, 2020 was impacted by the lockdown imposed on account of the COVID-19 pandemic.

We expect to utilize free cash flow, cash on hand, and availability under our credit facilities, as well as future refinancing transactions to further extend the maturities of our obligations. The timing and terms of any refinancing transactions will be subject to market conditions among other considerations. Additionally, we may, from time to time, and depending on market conditions and other factors, use cash on hand and the proceeds from securities offerings or other borrowings to retire our debt through open market purchases, privately negotiated purchases, tender offers or redemption provisions. We believe we have sufficient liquidity from cash on hand, free cash flow and Lytus’ access to the capital markets to fund our projected cash needs.

We continue to evaluate the deployment of our cash on hand and anticipated future free cash flow including to invest in our business growth and other strategic opportunities, including mergers and acquisitions as well as stock repurchases and dividends.

As possible acquisitions, swaps or dispositions arise, we actively review them against our objectives including, among other considerations, improving the operational efficiency, geographic clustering of assets, product development or technology capabilities of our business and achieving appropriate return targets, and we may participate to the extent we believe these possibilities present attractive opportunities. However, there can be no assurance that we will actually complete any acquisitions, dispositions or system swaps, or that any such transactions will be material to our operations or results.

Intangible Assets and Goodwill

During the period ended March 31, 2020, Lytus has acquired a subscriber base of more than 8 million (i.e. 1.84 million household connections) for a consideration of $59,216,654, consisting the consideration of acquiring each customer at a price of approximately $27 and indirect tax (GST) additionally charged at a rate of 18%. Having regard with the timing of the consummation (also discussed in the Revenue note above), the legal enforceable right for subscriber acquisition was effective from March 26, 2020. Accordingly, the amortization expense on the customer acquisition costs is $204,086 for the period ended March 31, 2020 and is $8,927,343 for the 9 months period ended December 31, 2020.

The acquisition of customers was valued on an arms-length basis by valuation expert and the valuations were conducted as per the discounted free cash flow method (see Schedule 1 of the Valuation Report attached hereto as Exhibit 99.5). We have also carried out valuation using the Subscriber’s Multiple method (see Schedule 2 of the Valuation Report). The result was further validated using the independent comparable method.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

As discussed above, the Company has acquired customers from Reachnet pursuant to an Agreement to Acquire Customers dated June 21, 2019 and the income entitlement rights for a consideration of approximately $59 million. This amount is payable in four equal installments (25% each) on or before July 31, 2020 (or at a mutually agreeable date upon the ending of the COVID-19 lockdown restrictions), March 31, 2021, March 31, 2022 and March 31, 2023, respectively. Further revision was made to the payment terms and, pending review of subscribers data, the Company has agreed to complete its payment obligations on or before March 31, 2021 and if not, shall have an option to offset the same with the balances receivables with the same entity.

The Company has also acquired 100% equity interest of Lytus India and 51% equity interest of DDC. For the acquisition of DDC, the Company currently has an outstanding obligation of $265,410.

Off-balance Sheet Arrangements

Under SEC regulations, we are required to disclose off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have:

•        Any obligation under certain guarantee contracts,

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•        Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets,

•        Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in shareholder equity in our statement of financial position, and

•        Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Quantitative and Qualitative Disclosures about Market Risk

Substantially all of our operations are within India and the United States, and we are exposed to market risks in the ordinary course of our business, including the effects of foreign currency fluctuations, interest rate changes and inflation. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.

Foreign Currency Exchange Rate Risk

As a result of our international operations, primarily in India and the United States, we are exposed to currency translation impacts. Our reporting currency is the U.S. dollar. The functional currency of the Company is the U.S. dollar and the functional currency of Lytus India and DDC, which generate the majority of our revenue, is the Indian Rupees (“INR”). The financial statements of our subsidiaries whose functional currency is the INR are translated to U.S. dollars using period end rates of exchange for assets and liabilities, average rate of exchange for revenue and expenses and cash flows, and at historical exchange rates for equity. As a result, as the Rupee depreciates or appreciates against the U.S. dollar, our revenue presented in U.S. dollars, as well as our Dollar-Based Net Expansion Rate, will be negatively or positively affected. Constant Currency Dollar-Based Net Expansion Rate is calculated using fixed exchange rates to remove the impact of foreign currency translations.

As a result of foreign currency translations, which are a non-cash adjustment, we reported foreign currency translation reserves of subsidiaries of $306,910, net of tax.

Interest Rate Sensitivity

Cash and short-term investments were held primarily in bank and time deposits. The fair value of our cash and short-term investments would not be significantly affected by either an increase or decrease in interest rates due mainly to the short-term nature of these instruments.

Inflation

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Consolidated Financial Statements and Supplementary Data

The consolidated financial statements begin on page F-1.

Interim Consolidated Financial Statements

The interim consolidated financial statements begins on Page F-37.

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OUR BUSINESS

Overview

We are a growing platform services company and currently have 8 million active users located all across India.6 Our business model comprises of primarily (a) distribution of linear content streaming/telecasting services and (b) development of technology products, namely, telemedicine. On the basis of approximately 1.8 million subscriber connections, we have subscriber strength of more than 8 million active customers. As per the Michael Bauer Research7, updated as on December 31, 2019, the average households’ size in India is 4.6 people per household.

Our strength is in our capability to leverage our technology platform for a competitive advantage and to be engaged in developing customer-inspired products and on-demand content, which significantly alters the way that consumers and businesses operate in the MedTech and Wellness industry. Our objective is to reinvent the customer experience and be engaged in disruptive innovation in online content management.

Lytus platform provides our customers with a one-stop site with the access to all of the services provided by us. We believe our strong customer service, access to an extensive fiber optic network infrastructure, and significant market presence position us as a service provider of choice and provide us with momentum in offering our online products. Our business model is based on shared core competencies and capabilities, with our subscriber base as our biggest asset. We intend to benefit from India’s e-commerce boom and the recent tele-medicine regulation through the acquisition of Global Health Sciences, Inc. (“GHSI”). The management of GHSI has many years of pioneering experience of the management in tele-medicine in USA, which we believe will help us create a profitable and sustainable business model with rapid growth prospects. We believe our deep outstanding and local expertise have enabled us to create solutions that address the needs and preferences of our consumers in the most comprehensive and efficient way. We possess extensive local knowledge of the markets in which we operate, which we consider to be a key component of our success.

Corporate History

Lytus Technologies Holdings PTV. Ltd. (“we”, “Lytus”, “Lytus Group”, the “Group”, or the “Company”) is a holding company incorporated under the laws of British Virgin Islands (“BVI”) on March 16, 2020.

On March 19, 2020, the Company, Lytus Technologies Private Limited (“Lytus India”), Mr. Nimish Pandya, our CEO’s brother, and Mr. Girish Podar, the shareholders of Lytus India, entered into a share purchase agreement, pursuant to which the Company acquired 15,000 shares, representing all of the equity share capital of Lytus India for a purchase price of Rs.150,000 (approximately $2,000).

On February 21, 2020, Lituus Technologies Limited (“LTL”), a BVI company, DDC CATV Network Private Limited (“DDC”), and all of the shareholders of DDC (the “DDC Shareholders”) entered into a share purchase agreement, pursuant to which LTL acquired 4,900 shares, representing 49% of the outstanding equity share capital of DDC for an aggregated purchase price of Rs.19,208,000 (approximately $255,000).

On February 21, 2020, LTL, DDC and DDC Shareholders entered into a share subscription agreement, pursuant to which LTL has option to subscribe 900,000 shares fully convertible preference shares, representing 100% of the fully convertible preference shares of DDC for an aggregated purchase price of Rs. 90,000,000 (approximately $1,200,000). On February 26, 2020, DDC and DDC Shareholders entered into another share purchase agreement with Mr. Jagjit Singh Kohli, a director of the Company, pursuant to which Mr. Kohli acquired 200 shares, representing 2% of the equity share capital of DDC for an aggregated purchase price of Rs.784,000 (approximately $10,400).

On March 20, 2020, LTL and Mr. Kohli respectively entered into an assignment of contract with the Company and transferred all of their respective equity interest in DDC to the Company for no consideration. Such transfer was completed on March 31, 2020, resulting in the Company’s owning of 51% of the equity interest in DDC. The Company has the option to purchase 900,000 fully convertible preference shares of DDC for Rs. 90,000,000, subject to the increase of the authorized share capital of DDC, the approval of the Reserve Bank of India and other Indian company law requirements.

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6          Calculation based upon approximately 1.8 million paid home subscribers which based on industry standards translates to more than 8 million viewers on an average of 4.6 viewers per household in India. Source: United Nations, Department of Economic and Social Affairs, Population Division (2019) — Database on Household Size and Composition 2019. Available: https://population.un.org/Household/index.html#/countries/356

7          https://www.arcgis.com/home/item.html?id=6cf22970ea8c4b338a196879397a76e4

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The acquisition of Lytus India was from a related party, Nimish Pandya, the brother of our CEO, Dharmesh Pandya. In addition, the acquisition of the majority of DDC’s equity involved our CEO, Dharmesh Pandya, who was then also the CEO of LTL, and Jagjit Singh Kohli, who was later appointed as our director on April 1, 2020.

On October 30, 2020, the Company entered into a share purchase agreement with Global Health Sciences, Inc. (“GHSI”) and the shareholder of GHSI, pursuant to which the Company acquired 75% of the equity interest in GHSI. GHSI was formed in 2020 and had no business operations prior to our acquisition. The Company will conduct its telemedicine business in the U.S. through GHSI.

The following diagram illustrates our current corporate structure:

While Lytus Group was restructured in 2020, DDC has been operation for five years. We have established a strong customer base and obtained significant market share through our acquisition of the customers of Reachnet, a long-standing cable services company in India. Reachnet is a licensed Multi System Operator (MSO) in the business of telecasting/streaming of broadcast channels (both owned as well as redistributed) to subscribers for a subscription charge depending upon the services and content chosen by the subscriber. Reachnet also owns and operates fiber optic cable networks with offices across the country in various major cities. These networks are used by Reachnet to offer its services to Lytus India’s subscribers. Reachnet also offers its cable network along with management personnel and subscriber management services to third party service providers for a fee. It has an extensive infrastructure and logistic set-up in various cities for provision of telecasting/streaming services to their erstwhile subscribers. We have acquired all of the customers of Reachnet, who are primarily located in the following metros in India: Mumbai, Hyderabad, Calcutta, New Delhi and Allahabad. We are not bound to have service agreement with Reachnet for exclusive provision of streaming service and can always enter with an independent service provider for the provision for streaming services to our subscribers.

We have scaled and intend to continue to scale our platform through the pursuit of selective acquisitions. We believe our acquisitions of Lytus India and DDC have expanded our distribution capabilities and broadened our service offerings. We have aggregated customers from several service providers and other businesses by bring them on to the Lytus platform. We provide services to our customers through access to a network of 25,000 kilometers of deployed fiber and broadband infrastructure in accordance with our service agreement with our partner. Since our inception we have consistently expanded our network capabilities and offerings while growing our customer base.

Lytus India provides technology enabled customer services, which includes streaming and content services. The present device is being further upgraded to support the unified and integrated platform through which it shall provide multi-dimensional services such as MedTech IOT (IOT refers to the Internet of Things), etc.

DDC is a licensed Multi System Operator (MSO) in the business of telecasting/streaming of broadcast channels (both owned channels as well as redistribution) to subscribers for a subscription charge depending upon the services and content chosen by the subscriber. In India the regulation does not differentiate between telecasting and streaming as long as the streaming is done in IPTV format. Lytus has the expertise and has plans to offer additional value added services such as MedTech IOT, by upgrading the existing cable networks. The upgrade primarily consists of deploying FTTH GPON and changing the existing STB/CPE.

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Lytus India provides streaming services to the customers we acquired from Reachnet. DDC has been providing streaming services to its customers in New Delhi region for over three years and will continue to do so independently of Lytus India and Reachnet

Along with a strong India focus, we expect to grow our international presence in regions such as Africa, Indonesia, UK, and the USA.

GHSI was formed in 2020 and had no business operations prior to our acquisition. On October 30, 2020, the Company entered into a share purchase agreement and acquired 75% of the equity interest in GHSI. After the completion of acquisition, GHSI brought into the key management team and acquired important contracts. GHSI’s telemedicine service aims to provide management and technology solutions to hospital networks, university medical schools, physician networks and individual practices in the U.S. Its proprietary delivery platform uses digital communication technologies using medical monitoring devices, video capabilities and data capture methodologies. The platform also uses AI Ecosystem Assets including Conversational Computing, Intelligent Robotic Process Automation (iRPA), and Machine Learning (ML). This platform is currently rolled out in New Jersey, Illinois, Florida and Texas with approximately 125 medical physicians using our system for approximately 3000 users via hospital and clinic networks.

In India, Lytus’ telemedicine business, through Lytus India, has commenced repurposing its existing Local Cable Operator Network infrastructure to set up Local Health Centers/diagnostic centers (LHC). There is scheduled to be one dedicated LHC for every 5000 customers and this LHC will be staffed with trained healthcare professionals. LHCs will support customers with additional patient services that cannot be remotely provided through device strategy. Typical services provided at the LHCs will include ECGs, blood and urine testing, ultrasound scans etc. The LHC network will act as an important link between patients, doctors and supporting hospital partners for better integration. The Company also intends to leverage the LHC network for pharmaceutical delivery.

Our Integrated Service Matrix

Our objective is to expand the business by offering additional online services to our captive users so that we can become a one-stop shop for all of our customers’ online requirements. We believe that the current poor internet penetration in the Indian market presents a tremendous opportunity for the Company to provide online services to the many underserved geographic areas in India.

Strategic Roadmap

Technology continues to be a strong driver of change for our industry. We realized that our future growth strategy was pivoted around how we leverage technology to enhance consumer experience, with limited infrastructure. We invested in deep-rooted technologies to develop greater scale and speed in our approaches to content production and distribution, centralization, automation, and portfolio rationalization.

In addition, we believe that through additional customer acquisitions, our business will expand rapidly over the next three years. Our objective is to grow profitably by building on our current strategic position to become a dominant global platform services company.

The key elements of our strategy include:

•        expanding the service and product portfolio to enhance cross-selling opportunities;

•        enhancing the service platform by investing in technology;

•        expanding into new geographic markets; and