Core AI Holdings, Inc F-1, filed Feb 15, 2023
Core AI Holdings, Inc. (CHAI)
As filed with the U.S. Securities and Exchange Commission on February 15, 2023.
Registration Statement No. 333-[*]
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SIYATA MOBILE INC.
(Exact name of Registrant as specified in its charter)
Not
Applicable
(Translation of Registrant’s name into English)
| British Columbia (Canada) | 4812 | Not Applicable | ||
| (State
or other jurisdiction of incorporation or organization) |
(Primary
Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
1751
Richardson Street, Suite #2207
Montreal, Quebec Canada H3K-1G6
514-500-1181
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Cogency
Global Inc.
122 East 42nd Street, 18th Floor
New York, New York 10168
(800) 221-0102
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of all communications, including communications sent to agent for service, should be sent to:
Carmel,
Milazzo & Feil LLP
55 West 39th Street, 18th Floor
New York, New York 10018 USA
(646) 838-1310
Approximate date of commencement of proposed sale to 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, as amended, 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: Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated February 15, 2023.
PRELIMINARY PROSPECTUS
Up to 19,781,987 Common Shares
This prospectus relates to the resale, from time to time, by the selling shareholders named herein, or their pledgees, donees, transferees, or other successors in interest (the “Selling Shareholders”), of up to 19,781,987 of our common shares, no par value per share (the “common shares”), issuable upon the exercise of: (i) the common share purchase warrants for 18,042,857 common shares (the “New Warrants”) issued to certain of the Selling Shareholders in a private placement pursuant to Warrant Exercise Agreements dated January 18, 2023 by and between those Selling Shareholders and the Company (“Warrant Exercise Agreement(s)”) and (ii) upon the exercise of the Lind Waiver Warrants (defined herein) for 1,739,130 common shares issued to a private institutional investor under a securities purchase agreement dated October 27, 2021 (“Securities Purchase Agreement”).
We are registering the offer and sale of these securities to satisfy certain registration rights we have granted in the Warrant Exercise Agreements and the Securities Purchase Agreement. No underwriter or other person has been engaged to facilitate the sale of the common shares in this offering. The Selling Shareholders may offer all or part of the common shares for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. These securities are being registered to permit the Selling Shareholders to sell securities from time to time, in amounts, at prices and on terms determined at the time of offering. The Selling Shareholders may sell these securities through ordinary brokerage transactions, directly to market makers of our common shares or through any other means described in the section entitled “Plan of Distribution” herein. In connection with any sales of common shares offered hereunder, the Selling Shareholders, any underwriters, agents, brokers or dealers participating in such sales may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended (“Securities Act”). We do not know when or in what amounts the Selling Shareholders may offer the common shares for sale. The Selling Shareholders may sell any, all or none of the securities offered by this prospectus. All of the common shares offered by the Selling Shareholders pursuant to this prospectus will be sold by the Selling Shareholders for their respective accounts.
We will not receive any proceeds from the sale of any common shares by the Selling Shareholders. Moreover, we will not receive any proceeds received from the exercise of any New Warrants or Lind Waiver Warrants when they are exercised in a cashless manner. We will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section entitled “Plan of Distribution.”
Our common shares are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “SYTA.” The last reported sale price of one common share on the Nasdaq on February 14, 2023 was $0.1545.
We may amend or supplement this prospectus from time to time by filing amendments or supplements as required by applicable law or regulation. In addition, certain information is incorporated into, and made a part of, this prospectus You should read this entire prospectus and any amendments or supplements, plus all incorporated information carefully before you make your investment decision.
We are both an “emerging growth company” and a “foreign private issuer” as defined under the U.S. federal securities laws and, as such, may elect to comply with certain reduced public company disclosure and reporting requirements. See “Prospectus Summary — Implications of Our Being an Emerging Growth Company” and “Foreign Private Issuer Status.”
Investing in our common shares involves a high degree of risk. See “Risk Factors” beginning on page 12 of this prospectus and other risk factors contained in the documents incorporated by reference herein for a discussion of information that should be considered in connection with an investment in our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is February 15, 2023.
TABLE OF CONTENTS
i
On January 18, 2023, we entered into Warrant Exercise Agreements with fourteen existing accredited investors who exercised certain outstanding warrants (the “Existing Warrants”) to purchase up to an aggregate of 18,042,857 of the Company’s previously registered common shares (the “Exercise”). In consideration for the immediate exercise of the Existing Warrants for cash at an exercise price reduced from $0.23 to $0.20 per common share, the exercising holders received new unregistered warrants to purchase up to an aggregate of 18,042,857 common shares (equal to 100% of the common shares issued in connection with the Exercise), the New Warrants, in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The 18,042,857 common shares underlying the New Warrants are being registered in the registration statement that we have filed with the Securities and Exchange Commission (“SEC”) of which this prospectus is a part.
The New Warrants are exercisable immediately upon issuance at a cash exercise price of $0.20 per share and have a term of exercise of five years. However, the holder of the New Warrant may also effect an “alternative cashless exercise” on or after the earlier of: (i) one hundred and eighty (180) day anniversary of the initial exercise date (January 19, 2023) or (ii) the day after the effectiveness of the registration statement of which this prospectus is a part. In such event, the aggregate number of common shares issuable in such alternative cashless exercise will equal the product of (x) the aggregate number of the Company’s common shares that would be issuable upon exercise of the New Warrant in accordance with its terms if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 1.0, which would result in an effective exercise price of $0 at such time. In connection with the Exercise, pursuant to the terms of the 2,989,130 remaining unexercised warrants, the Company also reduced their exercise price from $0.23 per common share to $0.20 per common share, but all such unexercised warrants may subsequently be repriced to $0 if and when the cashless exercise price of the New Warrants is triggered.
On October 27, 2021, we entered into a securities purchase agreement with Lind Global Partners II, LP, an investment fund managed by The Lind Partners, a New York City-based institutional fund manager (“Lind”), relating to the purchase and sale of a senior secured convertible note (the “Lind Partners Note”) for gross proceeds of $6,000,000 (the “Securities Purchase Agreement”). While the Lind Partners Note was repaid in full on November 14, 2022, the Securities Purchase Agreement pursuant to which Lind Partners acquired the Lind Notes prohibited the Company from entering into any Prohibited Transactions (as defined) without Lind Partner’s prior written consent until thirty days after such time as the Lind Note had been repaid in full and/or had been converted into common shares. Because the Company issued common shares and pre-funded warrants in a registered offering and issued common share purchase warrants in a concurrent private offering, both of which closed on October 12, 2022, Lind Partners waived such Prohibited Transaction provision in consideration of participating in that offering and receiving without payment therefor common share purchase warrants in the private placement to acquire up to 1,739,130 common shares at an exercise price of $0.23 per common share (the “Lind Waiver Warrants”). Lind did not exercise any of said Lind Waiver Warrants pursuant to the Warrant Exercise Agreement. The common shares underlying the Lind Waiver Warrant have been registered in the registration statement of which this prospectus is a part.
Certain information in this prospectus is incorporated by reference to other documents filed by the Company. The information included or incorporated by reference in this prospectus also adds to, updates and changes information contained or incorporated by reference in this prospectus. If information included or incorporated by reference in this prospectus is inconsistent with the information incorporated by reference therein, then this prospectus or the information incorporated by reference in this prospectus, whichever is later dated, will apply and will supersede the information in the prospectus and the documents incorporated by reference therein. To the extent this prospectus contains summaries of the documents referred to herein, you are directed to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed or will be filed in prior registration statements or in Reports of Foreign Private Issuer on Form 6-K, or will be incorporated by reference as exhibits to the registration statement of which this prospectus forms a part, and you may obtain copies of such documents as described below in the section titled “Where You Can Find Additional Information.”
We and the Selling Shareholders have not authorized anyone to provide you with any information or to make any representations other than as contained in this prospectus or in any free writing prospectuses we have prepared. We and the Selling Shareholders take no responsibility for, and provide no assurance about the reliability of, any information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so.
The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the securities. Our business, financial condition, results of operations and prospects may have changed since that date.
Unless otherwise indicated, all references in this prospectus to “Siyata,” the “Company,” “we,” “our,” “us” or similar terms refer to Siyata Mobile Inc. and its subsidiaries.
No action is being taken in any jurisdiction outside the U.S. to permit an offering of our securities or possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the U.S. are required to inform themselves about and to observe any restrictions about this offering and the distribution of this prospectus applicable to those jurisdictions.
ii
This summary description about us and our business highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before deciding to invest in our securities. The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements included elsewhere in this prospectus. You should also carefully consider the matters discussed in the section in this prospectus entitled “Risk Factors.”
Corporate Overview
Siyata Mobile Inc. is a leading global developer of innovative cellular-based communications solutions over advanced mobile networks under the Uniden® Cellular and Siyata brands to global first responders and enterprise customers. Siyata’s three complementary product categories include rugged handheld mobile devices and in-vehicle communications solutions designed for first responders, military, enterprise customers, commercial fleet vehicles and industrial workers, and cellular amplifiers to boost the cellular signal inside homes, buildings and vehicles.
The Company develops, markets and sells a portfolio of rugged handheld Push-to-Talk over Cellular (“PoC”) smartphone devices. These rugged business-to-business (“B2B”) environments are focused on enterprise customers, first responders, construction workers, security guards, government agencies, utilities, transportation, waste management, amusement parks and mobile workers in multiple industries.
Prior to 2021, Siyata sold rugged handsets, such as the Uniden UR5 and Uniden UR7 only in international markets. In the second quarter of 2022, Siyata unveiled its next generation rugged device, the SD7. The SD7 is Siyata’s first mission critical push-to-talk device (“MCPTT”) and is also the first rugged communications solution Siyata launched in North America and is expected to launch in Europe in 2023. Subsequent to the end of the third quarter of 2022, Siyata announced the SD7+, a single platform solution that integrates PoC and bodycam functionality.
Our second product category is purpose built in-vehicle communication devices. In the fourth quarter of 2021, Siyata launched the VK7, a first-of-its-kind, patent-pending car kit with an integrated 10-watt speaker, a simple slide-in connection sleeve for the SD7, and an external antenna connection for connecting to a windshield or roof mount antenna to allow for an in-vehicle experience for the user that is similar to that from a traditional land mobile radio (“LMR”) device. The VK7 has been uniquely designed to be used with the SD7, while connecting directly into the vehicle’s power and can also connect to a Uniden cellular amplifier for better cellular connectivity. The VK7 can also be equipped with an external remote speaker microphone to ensure compliance with hands-free communication legislation.
The Uniden® UV350 4G/LTE, is a purpose built-in vehicle communication device designed specifically for professional vehicles such as trucks, vans, buses, emergency service vehicles and other enterprise vehicles. This platform is designed to facilitate replacement of the current in-vehicle, multi-device status-quo with a single device that incorporates voice, PoC, data, fleet management solutions and other Android based professional applications. The UV350 also supports Band 14 for the First Responder Network Authority, or FirstNet®, compatibility which is the U.S. First Responders 4G/LTE network with PoC capabilities that aims to replace aging LMR systems currently in use.
The aforementioned portfolio of solutions offers the benefits of PoC without any of the difficulties managing the current generation of rugged smart/feature phones and is ideally suited as a perfect upgrade from LMR used for generations. LMR has a significant number of limitations, including network incompatibility, limited coverage areas, and restricted functionality that leave a huge need for a unified network and platform. Siyata’s innovative PoC product lines are helping to service the generational shift from LMR to PoC. According to VDC Research, the LMR market is growing at a 5.9% compound annual growth rate (“CAGR”), while the PoC market is growing at a 13.6% CAGR and annual PoC shipments are expected to grow to 2.7 million in 2023.
Cellular boosters are our third product category with approximately 30 million of these devices sold globally every year. Siyata sells Uniden® cellular boosters and accessories for enterprise, first responder and consumer customers with a focus on the North America markets. Cellular communication provides a robust, secure environment not just for remote workers, in-home and in-vehicles; but also for restaurant patrons who wish to download menus; for patients at pharmacies who need to verify identity and download prescriptions; for remote workers who require strong clear cellular signals; and for first responders where connectivity literally means the difference between life and death - just to name a few examples. The vehicle vertical in this portfolio complements Siyata’s in-vehicle and rugged handheld smartphones as these sales can be bundled through the Company’s existing sales channels.
1
AT&T, our largest channel partner, represented 28.1% of our revenues in 2022. AT&T did not enter into a master services agreement with us, but rather, enters into standard purchase order forms on a per order basis. We do not obligate AT&T to fulfill any required minimum purchase orders. Our typical purchase order contracts with AT&T involve standard warranties and indemnification, insurance requirement and delivery terms.
With an estimated 17 million commercial vehicles as well as 3.5 million first responder vehicles, we view the U.S. market as our largest opportunity with, according to the U.S. Department of Transportation, an estimated total addressable market of over $17 billion. The Tier 1 cellular carriers that we work with have expressed interest in marketing and selling the UV350 as it would allow for new SIM card activations in commercial vehicles and increased average revenue per user from existing customers with corporate and first responder fleets while targeting new customers with a unique, dedicated, multi-purpose in-vehicle smartphone.
Competitive Strengths
We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:
| ● | Our innovative technology solutions and integration approach with minimal known competition. |
| ● | Our reputation and recognition achieved from our previous success in this space. |
| ● | Our experienced management team. |
| ● | Our relationships and device approvals with leading North American wireless networks. |
Growth Strategies
We intend to further grow our business by pursuing the following strategies:
| ● | Ramp up sales with our North American and global cellular carrier partners. |
| ● | Entering new customer bases and markets. |
| ● | Implementing effective resources management to improve operational efficiency and boost core competency. |
| ● | Designing new products and improving our existing products for our current and future customer base. |
Our Challenges
We face challenges, risks and uncertainties in realizing our business objectives and executing our strategies, including those relating to our ability to:
| ● | Grow our market share in the United States which is a large-scale market for us. |
| ● | Navigate in the fast-changing regulatory environment. |
| ● | Maintain and improve our relationship with leading cellular carriers and business partners. |
| ● | Recruit and retain qualified personnel. |
| ● | Manage our growth effectively and efficiently. |
| ● | Enhance our product lines in a cost-effective manner. |
Our Products
The Company develops, markets, and sells a portfolio of rugged handheld Push-to-Talk over Cellular smartphone devices. These rugged business-to-business handsets are focused on enterprise customers, first responders, construction workers, security guards, government agencies, utilities, transportation and waste management, amusement parks, and mobile workers in multiple industries.
In the second quarter of 2022, Siyata unveiled its next generation rugged device, the SD7. The SD7 is Siyata’s first mission critical push-to-talk device and is also the first rugged handset that Siyata launched in North America and is expected to launch in Europe in 2023.
2
Our second product category are purpose built in-vehicle communication devices. In the fourth quarter of 2021, Siyata launched the VK7, a first-of-its-kind, patent-pending car kit with an integrated 10-watt speaker, a simple slide-in connection sleeve for the SD7, and an external antenna input for connecting to a windshield or roof mount antenna that provides an in-vehicle experience for the user that is similar to that from a traditional land mobile radio device. The VK7 has been uniquely designed to be used with the SD7, while connecting directly into the vehicle’s power and can also connect to a Uniden® cellular amplifier for better cellular connectivity. The VK7 can also be equipped with an external remote speaker microphone to ensure compliance with hands-free communication legislation.
The Uniden® UV350 4G/LTE is a purpose built in-vehicle communication device designed specifically for professional vehicles such as trucks, vans, buses, emergency service vehicles and other enterprise vehicles. This platform is designed to facilitate the replacement of the current in-vehicle, multi-device set up with a single device that incorporates voice, PoC, data, fleet management solutions and other Android® based professional applications. The UV350 also supports Band 14 for the First Responder Network Authority, or FirstNet®, compatibility which is the U.S. First Responders’ 4G/LTE network with PoC capabilities that aims to replace aging LMR systems currently in use.
The aforementioned portfolio of solutions offers the benefits of PoC without any of the difficulties managing the current generation of rugged smart/feature phones and is ideally suited as a perfect upgrade from Land Mobile Radios. Used for generations, LMR has a significant number of limitations, including network incompatibility, limited coverage areas, and restricted functionality that leave a huge need for a unified network and platform. Siyata’s innovative PoC product lines are helping to service the generational shift from LMR to PoC. While LMR licensing activity is near historical lows, the PoC is growing at a rapid pace. According to Allied Market Research, the PoC market is expected to grow at an estimated 9.4% compound annual growth rate to approximately $6.96 billion by 2027.
Approximately 30 million cellular boosters are sold globally every year. Siyata sells Uniden® cellular boosters and accessories for enterprise, first responder and consumer customers with a focus on the North American markets. Cellular communication provides a robust, secure environment not just for remote workers, in-home and in-vehicles, but also for restaurant patrons who wish to download menus; for patients at pharmacies who need to verify identity and download prescriptions; for remote workers who require strong, clear cellular signals; and for first responders where connectivity literally means the difference between life and death. The vehicle vertical in this portfolio complements Siyata’s in-vehicle and rugged handheld smartphones as these sales can be bundled through the Company’s existing sales channels.
Our Customers and Channels
Qualifications with North American voice and data carriers began with Bell Mobility in late in the fourth quarter of 2018; at AT&T as well as at its first responder cellular network FirstNet®, in late in the second quarter of 2019; with Rogers Wireless and Verizon Wireless in the fourth quarter of 2019; and internationally with Telstra in the fourth quarter of 2021. These are major milestones for the Company following Siyata’s seven years of experience innovating in-vehicle cellular based technology, vehicle installations, software integration with various Push-to-Talk solutions and intensive carrier certifications.
Siyata’s customer base includes cellular network operators and their dealers, as well as commercial vehicle technology distributors for fleets of all sizes in the U.S., Canada, Europe, Australia, the Middle East and other international markets.
The North American Tier 1 cellular carriers that Siyata is working with have large scale distribution and sales channels. With an estimated 25 million commercial vehicles including 7.0 million first responder vehicles, the Company sees the North American market as its largest opportunity with a total addressable market over $19 billion. We believe that these Tier 1 cellular carriers have a keen interest in launching the UV350 as it allows for new SIM card activations in commercial vehicles and increased average revenue per unit from existing customers with corporate and first responder fleets while targeting new customers with a unique, dedicated, multi-purpose in-vehicle Internet of Things (“IoT”) smartphone.
In addition, our rugged handsets will ultimately be targeted to approximately 47 million enterprise task and public sector workers across North America including construction, transport and logistics, manufacturing, energy and utility, public safety and the federal government.
Recent Developments
Effects of the Covid-19 Pandemic. In 2020, the global outbreak of the COVID-19 virus spread to every country and to every state in the United States. The World Health Organization designated COVID-19 as a pandemic, and numerous countries, including the United States, declared national emergencies with respect to COVID-19. While vaccines have been approved and have been deployed in the United States, Canada and Israel, the global impact of the outbreak continues to adversely affect many industries, and different geographies continue to reflect the effects of public health restrictions in various ways. The timing and likelihood of achieving widespread global vaccination remains uncertain, and these vaccines may be less effective against new variants, potentially leading to various health restrictions such as isolation, limiting large congregations of people and even lock-downs that may continue to keep the global economy from recovering to pre-pandemic levels for a prolonged period of time.
3
The economic recovery in the United States and Canada following the initial impact of COVID-19 is underway but it has been gradual, uneven and characterized by meaningful dispersion across sectors and regions with uncertainty regarding its ultimate length and trajectory. Further, although many jurisdictions had relaxed or lifted restrictions in an effort to generate more economic activity, the risk of continued COVID-19 outbreaks remains, and certain jurisdictions have re-imposed restrictions in an effort to mitigate risks to public health, especially as more infectious variants of the virus emerge. Increasing infection rates and hospitalizations in certain geographies and a potential resulting market downturn have resulted in the COVID-19 pandemic continuing to impact our business and our results of operations, financial condition and cash flow.
We have experienced an increase of sales of our cellular boosters as more people are working remotely as a result of the COVID-19 pandemic but our overall sales during the pandemic have remained similar to its sales in 2020 during this time period with a shift towards increased sales in North America in the first responder market. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or ability to raise funds. We plan to address any ongoing concerns from the pandemic by continuing to increase our sales in North America. In addition, our cellular distribution business should remain strong during this time since more individuals will continue to work from home. In addition, we believe that our cellular booster business will remain strong as more individuals continue to work from home, requiring improved cellular reception.
Russia-Ukraine Conflict. U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and Russia’s launch of a full-scale military invasion of Ukraine in February 2022. Although the length and impact of the ongoing military conflict is highly unpredictable, the war in Ukraine has led to market disruptions, including significant volatility in commodity prices, credit, and capital markets. Additionally, Russia’s prior annexation of Crimea, the full scale military invasion in Ukraine and the recent illegal annexation of two separatist republics in the Donetsk and Luhansk regions of Ukraine have led to sanctions and other penalties being levied by the United States, the European Union, and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including the agreement by the U.S. and the EU to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional equity or debt funding. Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results.
The short- and long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time. The imposition of sanctions and Russia’s withholding of its oil and gas as an economic weapon may have an adverse effect on the economic markets generally and could impact our business, financial condition, and results of operations. The war has created disruptions in the supply chain for certain of our products which, to date, has not had a substantive impact on our operations. None of our critical raw materials are sourced from, and none of our finished products are manufactured in, the sanctioned regions. We have no operations or other projects in that region.
Investment by Lind Partners. On October 27, 2021, we entered into a securities purchase agreement relating to the purchase and sale of a senior secured convertible note (the “Lind Partners Note”) for gross proceeds of $6,000,000 (the “Purchase Agreement”) with Lind Global Partners II, LP, an investment fund managed by The Lind Partners, a New York based institutional fund manager. Proceeds were used to repay and terminate existing convertible notes, as well as to pay certain fees and costs associated with the transaction. The Purchase Agreement provides for, among other things, the issuance of both 2,142,857 warrants at a $4.00 per share exercise price (with the exercise price adjustable based on certain events such as capital raises and options issued) and a USD$7,200,000 note with a 24-month maturity, 0% annual interest rate, and a fixed conversion price of $10.00 per share (“Conversion Price”) of our common shares. We are required to make principal payments in 18 equal monthly installments commencing 180 days after funding (“Repayment”). At our discretion, the Repayments can be made in: (i) cash; (ii) common shares (after common shares are registered) (the “Repayment Shares”); or a combination of both. Repayment Shares will be priced at 90% of the average of the five lowest daily volume weighted average prices (“VWAPs”) during the 20 trading days before the issuance of the common shares (the “Repayment Price”). Further, the Lind Partners Note provides for a pricing floor of $2.00 per common share (the “Repayment Share Price Floor”) such that Repayment Shares shall be priced at 90% of the average of the five lowest daily VWAPs during the 20 trading days before the issuance of the common shares, subject to the Repayment Share Floor Price provided, however, that the Repayment Share Price Floor became inapplicable after we obtained stockholder approval as required by the Nasdaq at our Annual General Meeting of shareholders. All of the Lind warrants received as part of this financing that had not yet been exercised participated in the Warrant Exercise Agreement transaction resulting in the issuance of 1.892,857 common shares.
4
As of December 3, 2021, we incurred an event of default under the terms of the Lind Partners Note. Upon the occurrence and during the continuance of an “Event of Default”, the holder may at any time at its option: (1) declare that Interest Upon Default Amount (15%) has commenced and (2) exercise all other rights and remedies available to it under the transaction documents; provided, however, that upon the occurrence of an Event of Default described above, the holder, in its sole and absolute discretion, may: (a) from time-to-time demand that all or a portion of the outstanding principal amount be converted into common shares at the lower of (i) the then-current Conversion Price and (ii) 80% of the average of the three lowest daily Volume Weighted Average Prices during the 20 Trading Days prior to the delivery by the holder of the applicable notice of conversion or (b) exercise or otherwise enforce any one or more of the holder’s rights, powers, privileges, remedies and interests under the Lind Partners Note, the transaction documents or applicable law. No course of delay on the part of the holder shall operate as a waiver thereof or otherwise prejudice the rights of the holder. The event of default was cured on December 7, 2021 when the Company’s market capitalization increased to an amount over $20,000,000.
If the Company issues any Equity Interests, other than Exempted Securities (as defined), for aggregate proceeds to the Company of greater than $10,000,000, excluding offering costs or other expenses, unless otherwise waived in writing by and at the discretion of Lind Partners, the Company will direct 20% of such proceeds to reduce the principal balance of the Lind Note. If the Company issues any equity interests issued, subject to certain exemptions, at an effective price per share that is less than the exercise price of the Lind Warrant then in effect or without consideration, then the exercise price of the Lind Warrants shall be reduced to a price equal to the consideration per share paid for such additional common shares. Based on this offering at $0.20 per share, the Lind Warrants were repriced to $0.20. Prior to this offering, the exercise price of the Lind Warrants was $0.23 per share. If the Company issues any equity interests, subject to certain exemptions, at an effective price per share that is less than the conversion price of the Lind Notes then in effect or without consideration, then the conversion price of the Lind Notes shall be reduced to a price equal to the consideration per share paid for such additional common shares. Due to the cashless exercise provision in the New Warrants, the exercise price of the Lind Warrants was reduced to $0.
Another Event of Default occurred on July 12, 2022 when the Company’s market capitalization fell below $20,000,000 for 10 consecutive days. Upon the occurrence of an Event of Default as described above, the holder, in its sole and absolute discretion, may: (a) from time-to-time demand that all or a portion of the outstanding principal amount be converted into common shares at the lower of: (i) the then-current Conversion Price, and (ii) 80% of the average of the three lowest daily Volume Weighted Average Prices during the 20 Trading Days prior to the delivery by the holder of the applicable notice of conversion, or (b) exercise or otherwise enforce any one or more of the holder’s rights, powers, privileges, remedies and interests under the Lind Partners Note, the transaction documents or applicable law.
The Lind Note was repaid in full on November 14, 2022. Of the total repayment of principal and interest, the Company paid Lind $8,137,702 in cash and issued Lind 13,112,255 common shares.
The Securities Purchase Agreement pursuant to which Lind Partners acquired the Lind Notes prohibits the Company from entering into any Prohibited Transactions without Lind Partner’s prior written consent, until thirty days after such time as the Lind Note has been repaid in full and/or has been converted into common shares. That agreement also provides to Lind a 10 day right of first purchase if the Company makes a public offer of its common shares. On October 9, 2022, Lind Partners entered into an agreement pursuant to which they waived such provisions in consideration of participating in the Company’s offering that closed on October 12, 2022 and receiving without payment therefor common share purchase warrants in the private placement to acquire up to 1,739,130 common shares at an exercise price of $0.23 per common share (the “Lind Waiver Warrants”). Lind did not exercise any of said Lind Waiver Warrants and did not participate in the Warrant Exercise Agreement.
Change in Accountants. On May 24, 2022, we received a letter from Davidson & Company LLP (“Davidson”) that stated that Davidson did not wish to be reappointed as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022. Davidson ceased to serve as the Company’s independent registered accounting firm as of May 24, 2022. The Company requested that Davidson respond fully to the inquiries of Friedman, LLP, the Company’s successor independent registered public accounting firm (see below), and Davidson agreed to cooperate with the Company and Friedman with respect to the transition.
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During the Company’s fiscal years ended December 31, 2021 and 2020 and the subsequent interim period through the filing of the Company’s Report of Foreign Private Issuer on Form 6-K on May 31, 2022, there were no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) with Davidson on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Davidson, would have caused Davidson to make reference to the subject matter of such disagreements in connection with its report.
Davidson’s report on the consolidated financial statements for the Company’s fiscal years ended December 31, 2021 and 2020 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that Davidson’s report for the years ended December 31, 2021 and 2020 contained an explanatory paragraph indicating that there was substantial doubt about the ability of the Company to continue as a going concern. In a separate correspondence, Davidson identified five material weaknesses in our internal controls over financial reporting.
As previously disclosed in Item 15(a) “Controls and Procedures” of the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2021, Davidson identified five material weaknesses that related to: (i) the insufficient review of inventory balances for products that are slow-moving; (ii) the insufficient review of advances to suppliers on products that are no longer selling; (iii) the insufficient controls surrounding off-site inventory tracking; (iv) the insufficient review whether product returns relate to sales recorded in the fiscal year; and (v) the insufficient review of title transfer terms to determine the period in which revenue should be recorded.
During the Company’s fiscal years ended December 31, 2021 and 2020 and the subsequent interim period through May 31, 2022, there had been no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K), except for certain material weaknesses in the Company’s internal control over financial reporting.
On May 24, 2022, management of the Company notified Friedman LLP (“Friedman”) that Friedman had been approved by the Company’s audit committee (“Audit Committee”) of the board of directors and the board of directors as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2022. Friedman LLP combined with Marcum LLP effective September 1, 2022 (“Marcum”). During the fiscal years ended December 31, 2021 and 2020 and the subsequent interim period through May 31, 2022, the Company did not consult with Friedman or Marcum with respect to: (a) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the Company’s financial statements, and no written report or oral advice was provided to the Company by Friedman or Marcum that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue, or (b) any matter that was subject to any disagreement, as defined in the United States Securities and Exchange Commission’s Regulation SK, Item 304(a)(1)(iv) and the related instructions thereto, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.
Recent Offerings. On October 10, 2022, we entered into a Securities Purchase Agreement with certain institutional investors named therein, pursuant to which we agreed to issue and sell, in a registered direct offering: (i) 15,810,000 of the Company’s common shares at $0.23 per share, (ii) 1,590,000 pre-funded warrants, at $0.22 per share with an exercise price of $0.01 per share, (“Pre-Funded Warrants”) and, (iii) in a private placement under Rule 506 of Regulation D, common share purchase warrants to acquire 17,400,000 common shares at purchase price of $0.23 per common share. Each Purchase Warrant entitled the holder to purchase one common share for a period of five years from the date of issuance (which was October 12, 2022) for an exercise price of $0.23 per share. The Securities Purchase Agreement contained customary representations and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations of the parties as well as our obligation to register the common shares underlying the Purchase Warrant by November 24, 2022. The Company registered the 17,400,000 underlying common shares on a F-1 Registration Statement (SEC File No. 333-268536 on November 22, 2022, which Registration Statement was declared effective by the SEC on December 15, 2022.
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On January 18, 2023, the Company entered into warrant exercise agreements with fourteen existing accredited investors to exercise certain outstanding warrants to purchase up to an aggregate of 18,042,857 of the Company’s common shares. The gross proceeds to the Company from the Exercise totaled approximately $3,608,571, prior to deducting warrant inducement agent fees and estimated offering expenses. In consideration for the immediate exercise of the Existing Warrants for cash, the exercising holders received new unregistered warrants to purchase up to an aggregate of 18,042,857 common shares (equal to 100% of the common shares issued in connection with the Exercise) in a private placement pursuant to Section 4(a)(2) of the Securities Act. In connection with the Exercise, the Company also agreed to reduce the exercise price of the Existing Warrants from $0.23 to $0.20 per share. The warrant exercise agreements and the New Warrants each include a beneficial ownership limitation that prevents the warrant holder from owning more than 4.99% (which may be increased to 9.99% in accordance with the terms of the New Warrants) of the Company’s outstanding common shares at any time. The New Warrants are exercisable immediately upon issuance at a cash exercise price of $0.20 per share and have a term of exercise equal to five years. However, the holder of the New Warrant may also effect an “alternative cashless exercise” on or after the earlier of: (i) one hundred and eighty (180) day anniversary of the initial exercise date (January 19, 2023) or (ii) the day after effectiveness of the registration statement of which this prospectus is a part. In such event, the aggregate number of common shares issuable in such alternative cashless exercise pursuant to any given Notice of Exercise electing to effect an alternative cashless exercise will equal the product of (x) the aggregate number of common shares that would be issuable upon exercise of the New Warrant in accordance with the terms of the New Warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 1.0, which would result in an effective exercise price of $0 at such time. In connection with the Exercise, the Company reduced the exercise price of 2,989,130 of certain of its remaining unexercised common share purchase warrants from $0.23 per common share to an exercise price of $0.20 per common share, which warrants may subsequently be repriced to $0 if the cashless exercise price of the New Warrants is triggered. However, previously issued warrants: (i) for 1,805,585 common shares that currently trade on the Nasdaq Capital Market under the symbol “SYTAW” that have an exercise price of $6.85 per share; (ii) for 1,294,500 common shares that were issued in a private transaction that have an exercise price of $11.50 per share; and (iii) for 9,999,999 common shares that were issued in a private transaction that have an exercise price of $2.30 per share are not required by their terms to be repriced.
Restatement of Financial Statements. As part of the Company’s normal quarterly reporting process for the six months ended June 30, 2022, management and the Audit Committee concluded that a material error was made related to the accounting for the Warrants entered into on January 11, 2022 and therefore were misstated in the Company’s March 31, 2022 prior period financial statements (“Prior Period Financial Statements”). There was no impact on any of the year end financial statements previously filed.
On August 15, 2022, management and the Audit Committee determined that the Company’s condensed consolidated unaudited interim financial statements for the three month period ended March 31, 2022, filed with the SEC on Form 6-K on May 17, 2022 should no longer be relied upon due to an error in the accounting treatment for the classification of the Company’s Warrants as equity rather than as a derivative liability. In addition, investors were advised that they should no longer rely upon any communications relating to these condensed consolidated unaudited interim financial statements.
The Company determined that the Warrants should be accounted for as a derivative liability in accordance with International Accounting Standards No. 32.6 and International Financial Reporting Standards (“IFRS”) No. 9 that deal with the measurement of financial assets and financial liabilities. As a result of this change, the Warrants for 9,999,999 common shares have been classified as liabilities rather than equity, the fair value of the Warrants decreased by $2.9 million, transaction costs increased by $0.96 million and the fair value loss increased by $0.96 million for the three months ended March 31, 2022.
The Company filed its restated condensed consolidated unaudited interim financial statements for the three month period ended March 31, 2022 as Exhibit 99.1 to its Form 6-K with the SEC on August 18, 2022 together with its restated Management’s Discussion and Analysis of Results of Operations and Financial Condition for the three months ended March 31, 2022.
Going Concern. Our auditor has included a “going concern” explanatory paragraph in its report on our consolidated financial statements for the fiscal year ended December 31, 2021, expressing substantial doubt about our ability to continue as an ongoing business for the next twelve months. Our consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we cannot secure the financing needed to continue as a viable business, our shareholders may lose some or all of their investment in us.
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Nasdaq Delisting Letter. On September 1, 2022, we announced that the Company had received a notification letter dated August 26, 2022 from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”), notifying the Company that it is currently not in compliance with the minimum bid price requirement set forth under Nasdaq Listing Rule 5550(a)(2), resulting from the fact that the closing bid price of the Company’s common shares was below $1.00 per share for a period of thirty consecutive business days.
Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company has a compliance period of 180 calendar days, or until February 22, 2023 (the “Compliance Period”), to regain compliance with Nasdaq’s minimum bid price requirement. If at any time during the Compliance Period, the closing bid price per share of the Company’s common shares is at least $1.00 for a minimum of ten consecutive business days, Nasdaq will provide the Company a written confirmation of compliance and the matter will be closed. The Company has requested that Nasdaq extend the Compliance Period for another 180 days and is currently considering a number of alternatives to boost its minimum bid price, which may include a reverse stock split, but has not yet reached a decision on a course of action.
Inventory Damage. On December 30, 2022, the Company was notified that there had occurred a significant infiltration of water into its warehouse premises located at 1751 Richardson, Suite 2207, Montreal, Quebec, Canada, due to a leaking water pipe in the floor above (which floor was not leased by Siyata). Upon inspection of the premises, the Company believed that there could be substantial damage to its warehoused inventory of communication devices and signal boosters, the dollar value of which was not then determinable. The Company is continuing to assess the potential damages, which will require a special inspection to determine the condition of the merchandise. Management believes that any damage is covered by its current property insurance policy and intends to file a claim with its commercial property insurer whose policy covers the selling price of damaged inventory. Because the Company stores similar inventory in another location, it does not believe that this event will result in any interruption of its sales activities, and thus future revenues should not be impacted by the water damage to the subject inventory. Only new, non-damaged, quality products will be shipped to Siyata’s customers. From a balance sheet and income statement perspective, any damaged inventory will be considered impaired and written off (expensed) on the Company’s income statement as an impairment due to the water damage, and the inventory values will be reduced on the balance sheet by the amount of the damages in the fourth quarter of 2022. Any insurance proceeds receivable will be recorded as income in the quarter (likely in 2023) when it is at least virtually certain that the proceeds to be paid by the Company’s insurer have been agreed by both parties. Under international accounting standards, insurance proceeds are accounted for as “reimbursements” and would be recognized as a separate asset (with related income) when the recovery is virtually certain.
Marketing Milestones. On October 6, 2021, Siyata Mobile completed a major milestone and entered into a working partnership with a global leading U.S. distributor (“Leading U.S. Distributor”) for its recently launched SD7 mission-critical push-to-talk ruggedized handheld device. The companies signed an addendum to their Master Service Agreement appointing the Leading U.S. Distributor as a non-exclusive SD7 marketing and distribution partner. The Leading U.S. Distributor, who is the leading global land mobile radio vendor, will be marketing the SD7 both in North America as well as in international markets, selling both directly and in partnership with us.
On May 3, 2022, we announced that our SD7 push to talk over cellular device was certified and approved for use on FirstNet®, the first high-speed, nationwide wireless broadband network dedicated to public safety.
On June 7, 2022, we announced that Verizon Communications Inc., the largest mobile cellular telephone operator in the U.S. by total retail connections, will fully integrate our rugged SD7 device into their network.
And on June 27, 2022, we announced that the SD7 rugged device first became commercially available on and will be sold through the FirstNet® network and to AT&T Inc.’s enterprise channels.
On July 13, 2022, Siyata announced Logic Wireless Europe Ltd. a leading distributor of business-critical communication solutions across the United Kingdom, Australia, New Zealand and the Pacific Islands, will introduce the Siyata SD7 rugged PoC device integrated with ChatterPTT.
On July 14, 2022, Siyata announced it is launching a new product, a Siyata High Power User Equipment antenna, in conjunction with Assured Wireless Corporation.
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On July 18, 2022, Siyata announced an agreement with Spain’s Wireless Zeta Telecomunicaciones, S.L. (“Azetti”) to offer the Company’s SD7 rugged mission-critical push-to-talk device through Azetti’s existing enterprise sales channels.
On July 26, 2022, Siyata announced its SD7 rugged mission-critical push-to-talk device is now available for customers who need the integrated industry-leading PTT solutions from TASSTA, a global MCPTT software provider and end-to-end solution for critical communications.
On July 28, 2022, Siyata announced the Company’s SD7 rugged push-to-talk over cellular devices were used to provide critical emergency communications services for the World Athletics Championships “Oregon22” summer games.
On August 30, 2022, Siyata announced that it is in the process of ramping up sales of its next-generation MCPTT SD7 device, as well as the VK7 and Rapid Kit companion devices to numerous customers across multiple verticals.
On September 8, 2022, Siyata announced that its SD7 rugged mission-critical push-to-talk device is now integrated with CrisisGo Inc.’s Panic App, giving teachers instant access to first responders with a single push of a button.
On September 22, 2022, Siyata announced that it has received a purchase order from a federal government contractor who will provide Uniden® cellular booster kits and accessories to the U.S. Navy.
On October 26, 2022, Siyata announced that its SD7+ ruggedized handset would soon be powered with Visual Labs Inc.’s innovative body camera software, eliminating the need for users to carry two separate devices (a communication device and a body camera), creating an ideal upgrade solution from legacy land mobile radio technologies or proprietary stand-alone body cameras.
On October 31, 2022, Siyata announced that it had hired telecom industry veteran Dan Leech to join the Company’s sales team.
On November 16, 2022, Siyata announced that Bell Mobility Inc., a leading wireless operator in Canada with more than 10 million subscribers and a division of Bell Canada, will launch Siyata’s rugged SD7 device onto their network in the fourth quarter 2022.
On December 6, 2022, Siyata Mobile announced that it has added DCS 2 Way Radio Ltd. doing business as RadioTrader, the UK’s and Ireland’s premier two-way radio supplier, to distribute the SD7 ruggedized, mission critical PoC device and VK7 vehicle kit accessary in the United Kingdom and Ireland.
On January 9, 2023, the Company announced that T-Mobile US, Inc. is expected to launch Siyata’s rugged SD7 device onto T-Mobile’s United States IoT network in the first quarter 2023. On January 18, 2023, the Company announced that it has received follow-on orders from an existing customer, a leading Saudi Arabian cellular carrier, for its Uniden® UV350, a 4G/LTE all-in-one in-vehicle communication device.
On January 23, 2023, the Company announced that it has received an order for its next-generation mission critical push-to-talk solution, which includes its SD7 device and related accessories, from a multi-billion-dollar, integrated resort and residential property development located in The Bahamas.
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Implications of Our Being an “Emerging Growth Company”
As a company with less than $7.5 million in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to larger public companies. In particular, as an emerging growth company, we:
| ● | may 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, or “MD&A;” |
| ● | are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives, which is commonly referred to as “compensation discussion and analysis;” |
| ● | are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; |
| ● | are not required to obtain a non-binding advisory vote from our shareholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on frequency” and “say-on-golden-parachute” votes); |
| ● | are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and chief executive officer pay ratio disclosure; |
| ● | are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act; and |
| ● | will not be required to conduct an evaluation of our internal control over financial reporting. |
Foreign Private Issuer Status
We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:
| ● | we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company; |
| ● | for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies; |
| ● | we are not required to provide the same level of disclosure on certain issues, such as executive compensation; |
| ● | we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; |
| ● | we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; and |
| ● | we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction. |
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Risk Factors Summary
Investing in our securities involves substantial financial risk. The risks described under the heading “Risk Factors” may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. We urge you to read the risk factors in full before you decide to invest in our common shares.
Corporate Information
We are organized as a corporation under the laws of British Columbia, Canada, and maintain our principal place of business at 1751 Richardson Street, Suite #2207, Montreal, Quebec Canada H3K-1G6. The registered and records office is located at 200 — 885 West Georgia Street, Vancouver, British Columbia V6C 3E8, Canada. Our telephone number is (514) 500-1181 and our website is located on the internet at https://www.siyatamobile.com. Information contained on our website does not constitute part of this prospectus.
The Company was incorporated on October 15, 1986 as Big Rock Gold Ltd. as a corporation under the Company Act of British Columbia. On April 5, 1988, the Company changed its name to International Cruiseshipcenters Corp. On June 24,1991, the Company changed its name to Riley Resources Ltd. Effective January 23, 1998, the Company consolidated its share capital on an eight-to-one basis and changed its name to International Riley Resources Ltd. Effective November 22, 2001, the Company consolidated its share capital on a five-to-one basis and changed its name to Wind River Resources Ltd. On January 3, 2008, the Company changed its name to Teslin River Resources Corp.
On July 24, 2015, Teslin River Resources Corp, completed a reverse acquisition by way of a three-cornered amalgamation, pursuant to which the Company acquired certain telecom operations of an Israel-based cellular technology company and changed its name to Siyata Mobile Inc.
On June 7, 2016, the Company acquired all of the issued and outstanding shares of Signifi Mobile Inc. (“Signifi”).
In March 2021, the Company acquired, through a wholly owned subsidiary formed by Signifi, all the outstanding units of Clear RF LLC (“Clear RF”).
The Company was registered with the TSXV under the symbol SIM, commenced trading on OTCQX under the symbol SYATF from May 11, 2017 until September 25, 2020, at which time the Company’s common shares were listed only on the Nasdaq Capital Market.
The following diagram illustrates our corporate structure as of the date of this prospectus:
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An investment in our securities involves a high degree of risk. Before investing in our common shares, you should carefully consider the risk factors set forth below. If any of such risks or uncertainties occur, our business, financial condition, and operating results could be materially and adversely affected. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may materially and adversely affect our business operations. As a result, the trading price of our common shares could decline and you could lose all or a part of your investment.
Risks Related to Our Financial Position and Capital Requirements
We have a history of operating losses and we may never achieve or maintain profitability.
We have a limited operating history and a history of losses from operations. As of December 31, 2021, we had an accumulated deficit of $62,519,412. As of September 30, 2022, we had an accumulated deficit of $71,230,357. Our existing cash and cash equivalents will be insufficient to fully fund our business plan. Our ability to achieve profitability will depend on whether we can obtain additional capital when we need it, complete the development of our technology, obtain required regulatory approvals and continue to develop arrangements with channel partners. There can be no assurance that we will ever achieve profitability.
Our independent registered public accounting firm, in its report on our financial statements for the year ended December 31, 2021, concurs with management’s representation that raises substantial doubt about our ability to continue as a going concern.
We may require additional capital to fund our business and support our growth, and our inability to generate and obtain such capital on acceptable terms, or at all, could harm our business, operating results, financial condition and prospects.
We intend to continue to make substantial investments to fund our business and support our growth. In addition, we may require additional funds to respond to business challenges, including the need to develop new features or enhance our solutions, improve our operating infrastructure or acquire or develop complementary businesses and technologies. As a result, in addition to the revenues we generate from our business, we may need to engage in additional equity or debt financings to provide the funds required for these and other business endeavors. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common shares. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain such additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely impacted. In addition, our inability to generate or obtain the financial resources needed may require us to delay, scale back, or eliminate some or all of our operations, which may have a significant adverse impact on our business, operating results and financial condition.
Our independent registered public accountants have noted that we may not survive as a going concern.
Our independent registered public accountants have included a “going concern” explanatory paragraph in its report on our consolidated financial statements for the fiscal year ended December 31, 2021, concurring with management’s representation of expressing substantial doubt about our ability to continue as an ongoing business for the next twelve months. Our consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we cannot secure the financing needed to continue as a viable business, our shareholders may lose some or all of their investment in us.
Our independent registered public accountants have identified material weaknesses in our internal controls over financial reporting in both 2020 and 2021. If we are unable to remediate these material weaknesses, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner.
In connection with the audit of our consolidated financial statements for the years ended December 31, 2021 and 2020, our independent registered public accountants identified several material weaknesses in our internal control over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
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In 2021, our independent registered public accountants identified the following material weaknesses in our internal control over financial reporting. The first material weakness related to the insufficient review of inventory balances for products which are slow-moving. The second material weakness related to the insufficient review of advances to suppliers on products that are no longer selling. The third material weakness relates to insufficient controls surrounding off-site inventory tracking. The fourth material weakness related to insufficient review whether product returns relate to sales recorded in the fiscal year. The fifth material weakness relates to insufficient review of title transfer terms to determine the period in which revenue should be recorded.
For the material weaknesses identified in our 2021 audit, we have taken steps to remediate these material weaknesses, and to further strengthen our accounting staff and internal controls, as detailed below:
| ● | On a quarterly basis, the Company now reviews inventory on hand for slow moving merchandise and reviews inventory on hand regularly. For the year ended 2021, it was determined that $4,659,648 (2020 — $1,571,649) of the inventory was impaired due to slow movement. The accessories and spare parts related to these products amounted to $839,693 in 2021 (2020 — $316,000), which was also impaired. |
| ● | The Company now reviews quantities on hand before approving purchase orders. |
| ● | As of April 1, 2022, the Company signed a lease for their own exclusive warehouse space so that outside contract warehouses will not be required. |
| ● | The Company now reviews product returns to compare and ensure that they occur in the same fiscal year. |
| ● | The Company’s controller scrutinizes all revenues earned in the period to ensure compliance with IFRS15. |
| ● | The Company’s controller and CFO in Canada coordinates full scheduling of the year end process to ensure timely close off of accounting periods. |
In 2020, our independent registered public accountants identified the following material weaknesses in our internal control over financial reporting. The first material weakness related to the lack of formal review of the customers return rights for products prior to revenue recognition. The second material weakness related to the review of receivables for the purpose of recording expected credit losses. The third material weakness related to the review of inventory and spare parts for obsolete or slow-moving products. The fourth material weakness related to the lack of formal review regarding appropriateness of classification of share issuance costs versus transaction expenses through profit and loss. The fifth material weakness related to the classification of amounts held in trust separate from cash and equivalents. The final material weakness related to the need to set a formal policy to enter all post-closing adjustments within a set time period after year end, before providing records to the auditors.
For the material weaknesses identified in our 2020 audit, we have taken steps to remediate these material weaknesses, and to further strengthen our accounting staff and internal controls, as detailed below:
| ● | The Company now requires a formal signed distribution agreement with major customers which define the terms, including payment terms, return policy, repair policy and warranty policy. |
| ● | The Company is reviewing the credit risk of each customer and a part of the sales function has the formalized distribution agreements in place. |
| ● | On a quarterly basis, management is reviewing inventory on hand for slow moving merchandise and reviews inventory on hand regularly. |
| ● | The Company has engaged outside consultants to review purchase price adjustment valuation, impairment valuations and complex transactions to ensure compliance with IFRS standards. |
| ● | The Company has improved its internal financial reporting communication process. The Company has streamlined the communications between the Company’s Israel and Canadian-based financial reporting groups. Furthermore, the Company’s Audit Committee adopted a policy requiring the Company’s Canadian CFO to meet with the Company’s Israel-based reporting group at least twice a year to ensure that the Israel reporting group’s policies and procedures are consistent with those in Canada and that all the inventory is properly tracked and procedures for intercompany transactions must follow our existing formal standard procedures. |
| ● | The Audit Committee will ensure that at the quarterly financial meetings, there will be an agenda item to discuss policies and procedures in place in ensure internal control compliance with respect to intercompany transactions and returns so that all documentation is clear, consistent and that they are recorded in a timely manner and the pricing policy is consistent. |
To date, we have only partially remediated the material weaknesses identified in 2021 and 2020 above. We cannot be certain that other material weaknesses and control deficiencies will not be discovered in the future. If our efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately on a timely basis or help prevent fraud, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the market price of our common shares to decline.
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We began to take steps to remediate these material weaknesses and strengthen our internal control over financial reporting, including the following:
| (i) | documenting and formally assessing our accounting and financial reporting policies and procedures; and |
| (ii) | increasing the use of third-party consultants in assessing significant accounting transactions and other technical accounting and financial reporting issues, preparing accounting memoranda addressing these issues and maintaining these memoranda in our corporate records. |
While we believe that these efforts will improve our internal control over financial reporting, the implementation of these measures is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to maintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a misstatement of our accounts or disclosures that would result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis.
Risks Related to Our Business and Industry
We rely on our channel partners to generate a substantial majority of our revenues. If these channel partners fail to perform or if we cannot enter into agreements with channel partners on favorable terms, our operating results could be significantly harmed.
More than 54% and 47% of our revenues for the year ended December 31, 2021 and for the nine months ended September 30, 2022, respectively, were generated through sales by our channel partners, which are primarily wireless carriers who sell our devices through their sales channels. To the extent our channel partners are unsuccessful in selling or do not promote our products, or we are unable to obtain and retain a sufficient number of high-quality channel partners, our business and operating results could be significantly harmed. Our channel partners are wireless carriers who have direct and indirect sales channels which we are leveraging to get to their customers. Our wireless carrier channel partners currently include:
| ● | AT&T, in the United States; |
| ● | FirstNet, in the United States; |
| ● | Verizon, in the United States; |
| ● | Rogers, in Canada; and |
| ● | a leading global LMR vendor and distributor in North America and international markets. |
While these arrangements are typically long term, they generally do not contain any firm purchase volume commitments. As a result, our channel partners are not contractually obligated to purchase from us any minimum number of products. We are generally required to satisfy any and all purchase orders delivered to us within specified delivery windows, with limited exceptions (such as orders significantly in excess of forecasts). If we are unable to efficiently manage our supply and satisfy purchase orders on a timely basis to our channel partners, we may be in breach of our sales arrangements and lose potential sales. If a technical issue with any of our covered products exceeds certain present failure thresholds for the relevant performance standard or standards, the channel partner typically has the right to cease selling the product, cancel open purchase orders and levy certain monetary penalties. If our products suffer technical issues or failures following sales to our channel partners, we may be subject to significant monetary penalties and our channel partners may cease making purchase orders, which would significantly harm our business and results of operations. In addition, our channel partners retain sole discretion in which of their stocked products to offer their customers. While we may offer limited customer incentives, we generally have limited to no control over which products our channel partners decide to offer or promote, which directly impacts the number of products that our partners will purchase from us.
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In addition, our channel partners may be unsuccessful in marketing, selling and supporting our solutions. They may also market, sell and support solutions that are somewhat competitive with ours, and may devote more resources to the marketing, sales and support of such products. They may have incentives to promote our competitors’ products in lieu of our products, particularly for our bigger competitors with larger volumes of orders, more diverse product offerings and a longer relationship with our generally large-scale channel partners. As a result, our channel partners may stop selling our products completely. While we employ a small direct sales force, our channel partners have significantly larger sales teams who are not contractually obligated to promote any of our devices and often have multiple competing devices in stock to offer their customers. In addition, downstream sales by our channel partners often succeed due to attractive device prices and monthly rate plans, which we do not control. In certain cases, we may promote our own devices through customer incentives, however, there can be no assurance that any such incentives would contribute to increased purchases of our products. Further, given the impact of attractive pricing on ultimate sales, we generally must offer increased promotional funding or price reductions for our more expensive products. This promotional funding or price reductions operate to reduce our margins and significantly impact our profitability.
New sales channel partners may take several months or more to achieve significant sales. Our channel partner sales structure could subject us to lawsuits, potential liability and reputational harm if, for example, any of our channel partners misrepresents the functionality of our products or services to their customers, or violate laws or our corporate policies.
If we fail to effectively manage our existing or future sales channel partners, our channel partners fail to promote our products effectively, we are unable to meet our obligations under our sales arrangements or future agreements that we may enter into with wireless carrier customers have terms that are more favorable to the customer, our business and results of operations would be harmed.
We are materially dependent on the adoption of our solutions by both the industrial enterprise and public sector markets, and if end customers in those markets do not purchase our solutions, our revenues will be adversely impacted, and we may not be able to expand into other markets.
Our revenues have been primarily in the industrial enterprise market, and we are materially dependent on the adoption of our solutions by both the industrial enterprise and public sector markets. End customers in the public sector market may remain, for reasons outside our control, tied to Land Mobile Radio solutions or other competitive alternatives to our devices. Sales of our products to these buyers may also be delayed or limited by these competitive conditions. If our products are not widely accepted by buyers in those markets, we may not be able to expand sales of our products into new markets, and our business, results of operations and financial condition may be adversely impacted.
We participate in a competitive industry, which may become more competitive. Competitors with greater resources and significant experience in high-volume product manufacturing may be able to respond more quickly and cost-effectively than we can to new or emerging technologies and changes in customer requirements.
We face significant competition in developing and selling our solutions. Our primary competitors in the non-rugged mobile device market include LG Corporation, Apple Inc. and Samsung Electronics Co. Ltd. Our primary competitors in the rugged mobile device market include Sonim Technologies Inc., Bullitt Mobile Ltd., and Kyocera Corporation. We also face competition from large system integrators and manufacturers of private and public wireless network equipment and devices. Competitors in this space include Harris Corporation, JVC KENWOOD Corporation, a leading LMR vendor, or MSI, and Tait International Limited. Within the Cellular Booster category, we have several direct competitors, including Wilson Electronics, LLC, Nextivity, Inc. and SureCall Company.
We cannot assure you that we will be able to compete successfully against current or future competitors. Increased competition in mobile computing platforms, data capture products, or related accessories and software developments may result in price reductions, lower gross profit margins, and loss of market share, and could require increased spending on research and development, sales and marketing, and customer support. Some competitors may make strategic acquisitions or establish cooperative relationships with suppliers or companies that produce complementary products, which may create additional pressures on our competitive position in the marketplace.
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Most of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources and experience than we do. In addition, because of the higher volume of components that many of our competitors purchase from their suppliers, they are able to keep their supply costs relatively low and, as a result, may be able to recognize higher margins on their product sales than we do. Many of our competitors may also have existing relationships with the channel partners who we use to sell our products, or with our potential customers. This competition may result in reduced prices, reduced margins and longer sales cycles for our products. Our competitors may also be able to more quickly and cost-effectively respond to new or emerging technologies and changes in customer requirements. The combination of brand strength, extensive distribution channels and financial resources of the larger vendors could cause us to lose market share and could reduce our margins on our products. If any of our larger competitors were to commit greater technical, sales, marketing and other resources to our markets, our ability to compete would be adversely impacted. If we are unable to successfully compete with our competitors, our sales would suffer and as a result our financial condition will be adversely impacted.
Defects in our products could reduce demand for our products and result in a loss of sales, delay in market acceptance and injury to our reputation, which would adversely impact our business.
Complex software, as well as multiple components, displays, plastics and assemblies used in our products may contain undetected defects that are subsequently discovered at any point in the life of the product. Defects in our products may result in a loss of sales, product malfunction, delay in market acceptance and potential injuries to our customers which can harm our reputation and result in increased warranty costs.
Additionally, our software may contain undetected errors, defects or bugs. Although we have not suffered significant harm from any errors, defects or bugs to date, we may discover significant errors, defects, or bugs in the future that we may not be able to correct or correct in a timely manner. It is possible that errors, defects or bugs will be found in our existing or future software and/or hardware products and related services with the potential for delays in, or loss of market acceptance of, our products and services, diversion of our resources, injury to our reputation, increased service and warranty expenses, and payment of damages.
Further, errors, defects or bugs in our solutions could be exploited by hackers or could otherwise result in an actual or perceived breach of our information systems. Alleviating any of these problems could require significant expense and could cause interruptions, delays or cessation of our product licensing, which would reduce demand for our products and result in a loss of sales, delay in market acceptance and injure our reputation and could adversely impact our business, results of operations and financial condition.
If our business does not grow as we expect, or if we fail to manage our growth effectively, our operating results and business would suffer.
Our ability to successfully grow our business depends on a number of factors including our ability to:
| ● | accelerate the adoption of our solutions by new end customers; |
| ● | expand into new vertical markets; |
| ● | develop and deliver new products and services; |
| ● | increase awareness of the benefits that our solutions offer; and |
| ● | expand our domestic and international footprint. |
As usage of our solutions grows, we will need to continue to make investments to develop and implement new or updated solutions, software, technologies, security features and cloud-based infrastructure operations. In addition, we will need to appropriately scale our internal business systems and our services organization, including the suppliers of our products and customer support services, to serve our growing customer base. Any failure of, or delay in, these efforts could impair the performance of our solutions and reduce customer satisfaction.
Further, our growth could increase quickly and place a strain on our managerial, operational, financial and other resources, and our future operating results depend to a large extent on our ability to successfully manage our anticipated expansion and growth. To manage our growth successfully, we will need to continue to invest in sales and marketing, research and development, and general and administrative functions and other areas. We are likely to recognize the costs associated with these investments earlier than receiving some of the anticipated benefits, and the return on these investments may be lower, or may develop more slowly, than we expect, which could adversely impact our operating results.
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If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new solutions or upgrades to our existing solutions, satisfy customer requirements, maintain the quality and security of our solutions or execute on our business plan, any of which could harm our business, operating results and financial condition.
We may not be able to continue to develop solutions to address user needs effectively in an industry characterized by ongoing change and rapid technological advances.
To be successful, we must adapt to rapidly changing technological and application needs by continually improving our products, as well as introducing new products and services, to address user demands.
Our industry is characterized by:
| ● | evolving industry standards; |
| ● | frequent new product and service introductions; |
| ● | increasing demand for customized product and software solutions; |
| ● | rapid competitive developments; |
| ● | changing customer demands; and |
| ● | evolving distribution channels. |
Future success will depend on our ability to effectively and economically adapt in this evolving environment. We could incur substantial costs if we must modify our business to adapt to these changes, and may even be unable to adapt to these changes.
The markets for our devices and related accessories may not develop as quickly as we expect, or may not develop at all. Our dependence on our cellular carrier channel partners and their success in promoting Push to Talk over Cellular to their client base is key for the success of the business.
Our future success is substantially dependent upon continued adoption of devices and related accessories in the industrial enterprise and public sector markets, including the transition from LMR to Push to Talk over Cellular and LTE networks. These market developments and transitions may take longer than we expect or may not occur at all, and may not be as widespread as we expect. If the market does not develop as we expect, our business, operating results and financial condition would be significantly harmed.
Our future success is dependent on our ability to create independent brand awareness for our company and products with end customers, and our inability to achieve such brand awareness could limit our prospects.
We depend on wireless carriers to promote and distribute our products. While we intend to ramp up direct marketing and end-customer brand awareness initiatives in the future, our sales and marketing efforts have historically been predominantly focused on channel partners. To increase end-customer brand awareness, we intend to develop sales tools for key verticals within our target markets, increase usage of social media and expand product training efforts, among other things. As a result, we expect our sales and marketing expenses to increase in the future, primarily from increased sales personnel expenses, which will require us to cost-efficiently ramp up our sales and marketing capabilities and effectively target end customers. However, there can be no assurance that we will successfully increase our brand awareness or do so in a cost-efficient manner while maintaining market share within our existing sales channels. Our failure to establish stand-alone brand awareness with end customers of our products will leave us vulnerable to the marketing and selling success of others, including our channel partners, and these developments could have an adverse impact on our prospects. If we are unable to significantly increase the awareness of our brand and solutions with end customers in a cost-efficient manner, we will remain significantly dependent on our channel partners for sales of our products, and our business, financial condition and results of operations could be adversely impacted.
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We are dependent on the continued services and performance of a concentrated group of senior management and other key personnel, the loss of any of whom could adversely impact our business.
Our future success depends in large part on the continued contributions of a concentrated group of senior management and other key personnel. In particular, the leadership of key management personnel is critical to the successful management of our company, the development of our solutions and our strategic direction. We also depend on the contributions of key technical personnel. Our senior management and key personnel are all employed on an at-will basis, which means that they could terminate their employment with us at any time, for any reason and without notice. The loss of any of our key personnel could significantly delay or prevent the achievement of our development and strategic objectives and harm our business.
We compete in a rapidly evolving market, and the failure to respond quickly and effectively to changing market requirements could cause our business and operating results to decline.
The mobile device market is characterized by rapidly changing technology, changing customer needs, evolving industry standards and frequent introductions of new products and services. In order to deliver a competitive mobile device, our solutions must be capable of operating in an increasingly complex network environment. As new wireless phones are introduced and standards in the mobile device market evolve, we may be required to modify our phones and services to make them compatible with these new products and standards. Likewise, if our competitors introduce new devices and services that compete with ours, we may be required to reposition our solutions or introduce new phones and solutions in response to such competitive pressure. We may not be successful in modifying our current devices or introducing new ones in a timely or appropriately responsive manner, or at all. If we fail to address these changes successfully, our business and operating results could be significantly harmed.
If we are unable to sell our solutions into new markets, our revenues may not grow.
Any new market into which we attempt to sell our solutions may not be receptive. Our ability to penetrate new markets depends on the quality of our solutions, the continued adoption of our public safety solution by first responders, the perceived value of our solutions as a risk management tool and our ability to design our solutions to meet the demands of our customers. If the markets for our solutions do not develop as we expect, our revenues may not grow.
Our ability to successfully face these challenges depends on several factors, including increasing the awareness of our solutions and their benefits, the effectiveness of our marketing programs, the costs of our solutions, our ability to attract, retain and effectively train sales and marketing personnel, and our ability to develop relationships with wireless carriers and other partners. If we are unsuccessful in developing and marketing our solutions into new markets, new markets for our solutions might not develop or might develop more slowly than we expect, either of which would harm our revenues and growth prospects.
If we are unable to attract, integrate and retain additional qualified personnel, including top technical talent, our business could be adversely impacted.
Our future success depends in part on our ability to identify, attract, integrate and retain highly skilled technical, managerial, sales and other personnel. We face intense competition for qualified individuals from numerous other companies, including other software and technology companies, many of whom have greater financial and other resources than we do. Some of these characteristics may be more appealing to high-quality candidates than those we have to offer. In addition, new hires often require significant training and, in many cases, take significant time before they achieve full productivity. We may incur significant costs to attract and retain qualified personnel, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. Moreover, new employees may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture. If we are unable to attract, integrate and retain suitably qualified individuals who are capable of meeting our growing technical, operational and managerial requirements on a timely basis or at all, our business will be adversely impacted.
Volatility or lack of positive performance in our stock price may also affect our ability to attract and retain our key employees. Many of our senior management personnel and other key employees have become, or will soon become, vested in a substantial amount of stock or stock options. Employees may be more likely to leave us if the shares they own or the shares underlying their vested options have significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or, conversely, if the exercise prices of the options that they hold are significantly above the market price of our common shares. If we are unable to appropriately incentivize and retain our employees through equity compensation, or if we need to increase our compensation expenses in order to appropriately incentivize and retain our employees, our business, operating results and financial condition would be adversely impacted.
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A security breach or other significant disruption of our IT systems or those of our partners, suppliers or manufacturers, caused by cyberattacks or other means, could have a negative impact on our operations, sales, and operating results.
All IT systems are potentially vulnerable to damage, unauthorized access or interruption from a variety of sources, including but not limited to, cyberattacks, cyber intrusions, computer viruses, security breaches, energy blackouts, natural disasters, terrorism, sabotage, war, insider trading and telecommunication failures. A cyberattack or other significant disruption involving our IT systems or those of our outsource partners, suppliers or manufacturers could result in the unauthorized release of proprietary, confidential or sensitive information of ours or result in virus and malware installation on our devices. Such unauthorized access to, or release of, this information or other security breaches could: (i) allow others to unfairly compete with us, (ii) compromise safety or security, (iii) subject us to claims for breach of contract, tort, and other civil claims, and (iv) damage our reputation. Any or all of the foregoing could have a negative impact on our business, financial condition and results of operations.
We experience lengthy sales cycles for our products and the delay of an expected large order could result in a significant unexpected revenue shortfall.
The purchase of our products is often an enterprise-wide decision for prospective customers, which requires us to engage in sales efforts over an extended period of time and provide a significant level of education to prospective customers regarding the uses and benefits of such devices. Prospective customers, especially the wireless carriers that sell our products, often undertake a prolonged evaluation process that may take from several months to several years in certain cases. Consequently, if our forecasted sales from a specific customer are not realized, we may not be able to generate revenues from alternative sources in time to compensate for the shortfall. The loss or delay of an expected large order could also result in a significant unexpected revenue shortfall. Moreover, to the extent we enter into and deliver our products pursuant to significant contracts earlier than we expected, our operating results for subsequent periods may fall below expectations. We may spend substantial time, effort and money on our sales and marketing efforts without any assurance that our efforts will produce any sales. If we are unable to succeed in closing sales with new and existing customers, our business, operating results and financial condition will be harmed.
We have a limited history of contracting with third party manufacturers in Asia for the high-volume commercial production of our devices, and we may face manufacturing capacity constraints.
We have a limited history and experience in contracting with third party manufacturers in Asia for high-volume commercial production of our devices. Because of this limited experience, we face challenges in predicting our business and evaluating its prospects, which may result in breakdowns of our ability to timely supply our devices to our customers. s. If overall demand for our devices increases in the future, we will need to expand our third party manufacturing capacity in a cost-efficient manner. Failing to meet customer demand due to our failure to successfully address these risks and challenges could adversely impact our reputation and future sales, which would significantly harm our business, results of operations and financial condition.
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We face risks related to novel Coronavirus (COVID-19) which could significantly disrupt our research and development, operations, sales, supply chain and financial results.
Our business will be adversely impacted by the effects of the novel Coronavirus (COVID-19). In addition to global macroeconomic effects, the novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments will cause disruption to our operations, research and development, and sales activities. Our third-party manufacturers, third-party distributors, and our customers have been and will be disrupted by worker absenteeism, quarantines and restrictions on employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions. Depending on the magnitude of such effects on our activities or the operations of our third-party manufacturers and third-party distributors, the supply of our products will be delayed, which could adversely affect our business, operations and customer relationships. In addition, the Coronavirus (COVID-19) or other disease outbreak will in the short-run and may over the longer term adversely affect the economies and financial markets of many countries, resulting in an economic downturn that will affect demand for our products and impact our operating results. There can be no assurance that any decrease in sales resulting from the Coronavirus (COVID-19) will be offset by increased sales in subsequent periods. Although the magnitude of the impact of the Coronavirus (COVID-19) outbreak on our business and operations remains uncertain, the continued spread of the Coronavirus (COVID-19) or the occurrence of other epidemics and the imposition of related public health measures and travel and business restrictions will adversely impact our business, financial condition, operating results and cash flows. In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design our products in a timely manner or meet required milestones or customer commitments.
Our business has not experienced any material impact from supply chain disruptions brought about by the COVID-19 pandemic, however there is no certainty that this will continue into the future. Management is carefully monitoring the situation and is working with its partners, suppliers and manufacturers to ensure minimal impact on its business.
We rely on industry data and projections which may prove to be inaccurate.
We obtained statistical data, market data and other industry data and forecasts used in this prospectus from market research, publicly available information and industry publications. These industry data, including the vehicle communications industry, include projections that are based on a number of assumptions which have been derived from industry and government sources which we believe to be reasonable. The vehicle communications industry may not grow at the rate projected by industry data, or at all. The failure of the industry to grow as anticipated is likely to have a material adverse effect on our business and the market price of our common shares. In addition, the rapidly changing nature of the vehicle communications industry subjects any projections or estimates relating to the growth prospects or future condition of our industries to significant uncertainties. Furthermore, if any one or more of the assumptions underlying the industry data turns out to be incorrect, actual results may, and are likely to, differ from the projections based on these assumptions. While we believe that the statistical data, industry data and forecasts and market research are reliable, we have not independently verified the data.
Risks Related to our Reliance on Third Parties
As we work with multiple vendors for our components, if we fail to adequately forecast demand for our inventory and supply needs, we could incur additional costs or experience manufacturing delays, which could reduce our gross margin or cause us to delay or even lose sales.
Because our production volumes are based on a forecast of channel partner demand rather than purchase commitments from our major customers, there is a risk that our forecasts could be inaccurate and that we will be unable to sell our products at the volumes and prices we expect, which may result in excess inventory. We provide, and will continue to provide, forecasts of our demand to our third-party suppliers prior to the scheduled delivery of products to our channel partners. If we overestimate our requirements, our contract manufacturers may have excess component inventory, which could increase our costs. If we underestimate our requirements, our contract manufacturers may have inadequate component inventory, which could interrupt the manufacturing of our products and result in delays in shipments and revenues or even lost sales, or could incur unplanned overtime costs to meet our requirements, resulting in significant cost increases. For example, certain materials and components used to manufacture our products may reach end of life during any of our product’s life cycles, following which suppliers no longer provide such expired materials and components. This would require us to either source and qualify an alternative component, which could require a re-certification of the device by the wireless carriers and/or regulatory agencies, or forecast product demand for a final purchase of such materials and components that may reach end of life to ensure that we have sufficient product inventory through a product’s life cycle. If we overestimate forecasted demand, we would hold excess end-of-life materials and components resulting in increased costs. If we underestimate forecasted demand, we could experience delays in shipments and loss of revenues.
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In addition, if we underestimate our requirements and the applicable supplier becomes insolvent or is no longer able to timely supply our needs in a cost-efficient manner or at all, we may be required to acquire components, which may need to be customized for our products, from alternative suppliers, including at significantly higher costs. If we cannot source alternative suppliers and/or alternative components, we may suffer delays in shipments or lost sales. Similarly, credit constraints at our suppliers could require us to accelerate payment of our accounts payable, impacting our cash flow. Further, lead times for materials and components that we order vary significantly and depend on factors such as the specific supplier, contract terms, customization needed for any particular component and demand for each component at a given time. Any such failure to accurately forecast demand and manufacturing and supply requirements, and any need to obtain alternative supply sources, could materially harm our business, results of operations and financial condition.
Our dependence on third-party suppliers for key components of our products could delay shipment of our products and reduce our sales.
We depend on certain suppliers for the delivery of components used in the assembly of our products. Our reliance on third-party suppliers creates risks related to our potential inability to obtain an adequate supply of components and reduced control over pricing and timing of delivery of components. In particular, we have little to no control over the prices at which our suppliers sell materials and components to us. Certain supplies of our components are available only from a single source or limited sources and we may not be able to diversify sources in a timely manner. We have experienced shortages in the past that have negatively impacted our results of operations and may experience such shortages in the future.
We also do not have long-term supply agreements with any of our suppliers. Our current contracts with certain suppliers may be cancelled or not extended by such suppliers and, therefore, do not afford us with sufficient protection against a reduction or interruption in supplies. Moreover, in the event any of these suppliers breach their contracts with us, our legal remedies associated with such a breach may be insufficient to compensate us for any damages we may suffer.
Any interruption of supply for any material components of our products, or inability to obtain required components from our third-party suppliers, could significantly delay the production and shipment of our products and harm our revenues, profitability and financial condition.
Because we rely on a small number of channel partners/customers for a large portion of our revenue, the loss of any of these customers would have a material adverse effect on our operating results and cash flows.
For our fiscal year ended December 31, 2021 and for the nine months ended September 30, 2022, we derived 46% and 47% respectively, of our revenue from five customers/channel partners. Any termination of a business relationship with, or a significant sustained reduction in business from, one or more of these channel partners/customers could have a material adverse effect on our operating results and cash flows.
If dedicated public safety LTE networks are not deployed at the rate we anticipate or at all, demand for our solutions may not grow as expected.
A key part of our strategy is to further expand the use of our solutions over dedicated LTE networks in the public safety market. If the deployment of dedicated LTE networks is delayed or such networks are not adopted at the rate we anticipate, demand for our solutions may not develop as we anticipate, which would have a negative effect on our revenues.
The application development ecosystem supporting our devices and related accessories is new and evolving.
The application development ecosystem supporting our devices and related accessories is new and evolving. Specifically, the number of application developers in the ecosystem supporting our devices and accessories is small. If the market or the application development ecosystem does not develop, timely or at all, demand for our products may be limited, and our business and results of operations will be significantly harmed.
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Failure of our suppliers, subcontractors, distributors, resellers, and representatives to use acceptable legal or ethical business practices, or to fail for any other reason, could negatively impact our business.
We do not control the labor and other business practices of our suppliers, subcontractors, distributors, resellers and third-party sales representatives “TPSRs”), and cannot provide assurance that they will operate in compliance with applicable rules, and regulations regarding working conditions, employment practices, environmental compliance, anti-corruption, and trademark a copyright and patent licensing. If one of our suppliers, subcontractors, distributors, resellers, or TPSRs violates labor or other laws or implements labor or other business practices that are regarded as unethical or illegal, the shipment of finished products to us could be interrupted, orders could be cancelled, relationships could be terminated, and our reputation could be damaged. If one of our suppliers or subcontractors fails to procure the necessary license rights to trademarks, copyrights or patents, legal action could be taken against us that could impact the saleability of our products and expose us to financial obligations to a third party. Any of these events could have a negative impact on our sales and results of operations.
Moreover, any failure of our suppliers, subcontractors, distributors, resellers and TPSRs, for any reason, including bankruptcy or other business disruption, could disrupt our supply or distribution efforts and could have a negative impact on our sales and results of operations.
Our products are subject to risks associated with sourcing and manufacturing.
We do not own or operate any of the manufacturing facilities for our products and rely on a concentrated number of independent suppliers to manufacture all of the products we sell. For our business to be successful, our suppliers must provide us with quality products in substantial quantities, in compliance with regulatory requirements, at acceptable costs and on a timely basis. Our ability to obtain a sufficient selection or volume of merchandise on a timely basis at competitive prices could suffer as a result of any deterioration or change in our supplier relationships or events that adversely affect our suppliers.
There can be no assurance we will be able to detect, prevent or fix all defects that may affect our products manufactured by our suppliers. Failure to detect, prevent or fix defects, or the occurrence of real or perceived quality or safety problems or material defects in our current and future products, could result in a variety of consequences, including a greater number of product returns than expected from customers and our wholesale partners, litigation, product recalls and credit, warranty or other claims, among others, which could harm our brand, results of operations and financial condition. Such problems could hurt our brand image, which is critical to maintaining and expanding our business. Any negative publicity or lawsuits filed against us related to the perceived quality and safety of our products could harm our brand and decrease demand for our products.
If one or more of our significant suppliers were to sever their relationship with us or significantly alter the terms of our relationship, including due to changes in applicable trade policies, we may not be able to obtain replacement products in a timely manner, which could have a material adverse effect on our business, results of operations and financial condition.
In addition, if any of our primary suppliers fail to make timely shipments, do not meet our quality standards or otherwise fail to deliver us product in accordance with our plans, there could be a material adverse effect on our results of operations.
Our contractors and suppliers buy raw materials and are subject to wage rates that are oftentimes regulated by the governments of the countries in which our products are manufactured. The raw materials used to manufacture our products are subject to availability constraints and price volatility. There could be a significant disruption in the supply of raw materials from current sources or, in the event of a disruption, our suppliers might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price or at all. Our business is dependent upon the ability of our unaffiliated suppliers to locate, train, employ and retain adequate personnel. Our unaffiliated suppliers have experienced, and may continue to experience in the future, unexpected increases in work wages, whether government-mandated or otherwise. Our suppliers may increase their pricing if their raw materials become more expensive. Our suppliers may pass the increase in sourcing costs to us through price increases, thereby impacting our margins. Material changes in the pricing practices of our suppliers could negatively impact our profitability.
In addition, we cannot be certain that our unaffiliated suppliers will be able to fill our orders in a timely manner. If we experience significant increases in demand, or reductions in the availability of materials, or need to replace an existing supplier, there can be no assurance additional supplies of raw materials or additional manufacturing capacity will be available when required on terms acceptable to us, or at all, or that any supplier would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new manufacturing or sources of materials, we may encounter delays in production and added costs as a result of the time it takes to train suppliers in our methods, products, quality control standards and labor, health and safety standards. Any delays, interruption or increased costs in labor or wages, or the supply of materials or manufacture of our products, could have an adverse effect on our ability to meet wholesale customer and consumer demand for our products and result in lower revenue and net income both in the short and long term.
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Events that adversely impact our suppliers could impair our ability to obtain adequate and timely supplies. Such events include, among others, difficulties or problems associated with our suppliers’ business, the financial instability and labor problems of suppliers, merchandise quality and safety issues, natural or man-made disasters, inclement weather conditions, war, acts of terrorism and other political instability, economic conditions, pandemics, transportation delays and shipment issues. Our suppliers may be forced to reduce their production, shut down their operations or file for bankruptcy. Our suppliers may consolidate, increasing their market power. The occurrence of one or more of these events could impact our ability to get products to our customers, result in disruptions to our operations, increase our costs and decrease our profitability.
Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control, including:
| ● | increased shipping costs; |
| ● | the imposition of additional import or trade restrictions; |
| ● | legal or economic restrictions on overseas suppliers’ ability to produce and deliver products; |
| ● | increased custom duties and tariffs; |
| ● | unforeseen delays in customs clearance of goods; |
| ● | more restrictive quotas; |
| ● | loss of a most favored nation trading status; |
| ● | currency exchange rates; |
| ● | transportation delays; |
| ● | port of entry issues; and |
| ● | foreign government regulations, political instability and economic uncertainties in the countries from which we or our suppliers source our products. |
Our sourcing operations may also be hurt by health concerns regarding the outbreak of viruses, widespread illness, infectious diseases, contagions and the occurrence of unforeseen epidemics (including the outbreak of the Coronavirus and its potential impact on our financial results) in countries in which our merchandise is produced. Moreover, negative press or reports about internationally manufactured products may sway public opinion, and thus customer confidence, away from our products. Furthermore, changes in U.S. trade policies, including new restrictions, tariffs or other changes could lead to additional costs, delays in shipments, embargos and other uncertainties that could negatively impact our relationships with our international suppliers and materially adversely affect our business. These and other issues affecting our international suppliers or internationally manufactured merchandise could have a material adverse effect on our business, results of operations and financial condition.
In addition, some of our suppliers may not have the capacity to supply us with sufficient merchandise to keep pace with our growth plans, especially if we need significantly greater amounts of inventory. In such cases, our ability to pursue our growth strategy will depend in part upon our ability to develop new supplier relationships.
The nature of our business may result in undesirable press coverage or other negative publicity, which would adversely impact our brand identity, future sales and results of operations.
Our solutions are used to assist law enforcement and other public safety personnel in situations involving public safety. The incidents in which our solutions are deployed may involve injury, loss of life and other negative outcomes, and such events are likely to receive negative publicity. Such negative publicity could have an adverse impact on new sales or renewals or expansions of coverage areas by existing customers, which would adversely impact our financial results and business.
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Changes in the availability of federal funding to support local public safety or other public sector efforts could impact our opportunities with public sector end customers.
Many of our public sector end customers rely to some extent on funds from the U.S. federal government in order to purchase and pay for our solutions. Any reduction in federal funding for local public safety or other public sector efforts could result in our end customers having less access to funds required to continue, renew, expand or pay for our solutions. For example, any future U.S. government shutdowns, could result in delayed public safety spending or re-allocation of funding into other areas of public safety. If federal funding is reduced or eliminated and our end customers cannot find alternative sources of funding to purchase our solutions, our business will be harmed.
Economic uncertainties or downturns, or political changes, could limit the availability of funds available to our customers and potential customers, which could significantly adversely impact our business.
Current or future economic uncertainties or downturns could adversely impact our business and operating results. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, political deadlock, natural catastrophes, warfare and terrorist attacks in North America, Europe, the Asia Pacific region or elsewhere, could cause a decrease in funds available to our customers and potential customers and negatively affect the growth rate of our business.
These economic conditions may make it extremely difficult for our customers and us to forecast and plan future budgetary decisions or business activities accurately, and they could cause our customers to re-evaluate their decisions to purchase our solutions, which could delay and lengthen our sales cycles or result in cancellations of planned purchases. Furthermore, during challenging economic times or as a result of political changes, our customers may tighten their budgets and face constraints in gaining timely access to sufficient funding or other credit, which could result in an impairment of their ability to make timely payments to us. In turn, we may be required to increase our allowance for doubtful accounts, which would adversely impact our financial results.
We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry, or the impact of political changes. If the economic conditions of the general economy or industries in which we operate worsen from present levels, or if recent political changes result in less funding being available to purchase our solutions, our business, operating results and financial condition could be adversely impacted.
Natural or man-made disasters and other similar events may significantly disrupt our business, and negatively impact our operating results and financial condition.
Any of our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, tornadoes, hurricanes, wildfires, floods, nuclear disasters, acts of terrorism or other criminal activities, infectious disease outbreaks, and power outages, which may render it difficult or impossible for us to operate our business for some period of time. Our facilities would likely be costly to repair or replace, and any such efforts would likely require substantial time. Any disruptions in our operations could negatively impact our business and operating results, and harm our reputation. In addition, we may not carry business insurance or may not carry sufficient business insurance to compensate for losses that may occur. Any such losses or damages could have a significant adverse impact on our business, operating results and financial condition. In addition, the facilities of significant vendors may be harmed or rendered inoperable by such natural or man-made disasters, which may cause disruptions, difficulties or significant adverse impact on our business.
We are exposed to risks associated with strategic acquisitions and investments.
We may consider strategic acquisitions of companies with complementary technologies or intellectual property in the future. Acquisitions hold special challenges in terms of successful integration of technologies, products, services and employees. We may not realize the anticipated benefits of these acquisitions or the benefits of any other acquisitions we have completed or may complete in the future, and we may not be able to incorporate any acquired services, products or technologies with our existing operations, or integrate personnel from the acquired businesses, in which case our business could be harmed.
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Acquisitions and other strategic decisions involve numerous risks, including:
| ● | problems integrating and divesting the operations, technologies, personnel, services or products over geographically disparate locations; |
| ● | unanticipated costs, taxes, litigation and other contingent liabilities; |
| ● | continued liability for discontinued businesses and pre-closing activities of divested businesses or certain post-closing liabilities which we may agree to assume as part of the transaction in which a particular business is divested; |
| ● | adverse impacts on existing business relationships with suppliers and customers; |
| ● | cannibalization of revenues as customers may seek multi-product discounts; |
| ● | risks associated with entering into markets in which we have no, or limited, prior experience; |
| ● | incurrence of significant restructuring charges if acquired products or technologies are unsuccessful; |
| ● | significant diversion of management’s attention from our core business and diversion of key employees’ time and resources; |
| ● | licensing, indemnity or other conflicts between existing businesses and acquired businesses; |
| ● | inability to retain key customers, distributors, suppliers, vendors and other business relations of the acquired business; and |
| ● | potential loss of our key employees or the key employees of an acquired organization or as a result of discontinued businesses. |
Financing for future acquisitions may not be available on favorable terms, or at all. If we identify an appropriate acquisition candidate for any of our businesses, we may not be able to negotiate the terms of the acquisition successfully, finance the acquisition or integrate the acquired business, products, service offerings, technologies or employees into our existing business and operations. Future acquisitions and divestitures may not be well-received by the investment community, which may cause the value of our stock to fall. We cannot ensure that we will be able to identify or complete any acquisition, divestiture or discontinued business in the future.
If we acquire businesses, new products, service offerings or technologies in the future, we may incur significant acquisition-related costs. In addition, we may be required to amortize significant amounts of finite-lived intangible assets and we may record significant amounts of goodwill or indefinite-lived intangible assets that would be subject to testing for impairment. We have in the past and may in the future be required to write off all or part of the intangible assets or goodwill associated with these investments that could harm our operating results. If we consummate one or more significant future acquisitions in which the consideration consists of stock or other securities, our existing stockholders’ ownership could be significantly diluted. If we were to proceed with one or more significant future acquisitions in which the consideration included cash, we could be required to use a substantial portion of our cash and investments. Acquisitions could also cause operating margins to fall depending on the businesses acquired.
Our strategic investments may involve joint development, joint marketing, or entry into new business ventures, or new technology licensing. Any joint development efforts may not result in the successful introduction of any new products or services by us or a third party, and any joint marketing efforts may not result in increased demand for our products or services. Further, any current or future strategic acquisitions and investments by us may not allow us to enter and compete effectively in new markets or enhance our business in our existing markets and we may have to impair the carrying amount of our investments.
We could be adversely impacted by changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters.
International financial reporting standards and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our businesses, including, but not limited to, revenue recognition, asset impairment, inventories, customer rebates and other customer consideration, tax matters, and litigation and other contingent liabilities are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change our reported or expected financial performance or financial condition. New accounting guidance may also require systems and other changes that could increase our operating costs and/or change our financial statements. For example, implementing future accounting guidance related to revenue, accounting for leases and other areas could require us to make significant changes to our accounting systems and result in adverse changes to our financial statements.
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Risks Related to Government Regulation
The impact of potential changes in customs, tariffs, and trade policies in the United States and the potential corresponding actions by other countries, including trade initiatives announced by the U.S. presidential administration against China, in which we do business could adversely impact our financial performance.
The U.S. government has made proposals that are intended to address trade imbalances, which include encouraging increased production in the United States. These proposals could result in increased customs duties and tariffs, and the renegotiation of some U.S. trade agreements. We import a significant percentage of our products into the United States, and an increase in customs duties and tariffs with respect to these imports could negatively impact our financial performance. If such customs duties and tariffs are implemented, it also may cause U.S. trading partners to take actions with respect to U.S. imports or U.S. investment activities in their respective countries. Any potential changes in trade policies in the United States and the potential corresponding actions by other countries in which we do business could adversely impact our financial performance. Given the level of uncertainty over which provisions will be enacted, we cannot predict with certainty the impact of the proposals.
For example, in 2018, the U.S. presidential administration and Chinese government imposed significant tariffs on exports between the two countries. This evolving policy dispute between China and the United States is likely to have significant impact on the industries in which we participate, directly and indirectly, and no assurance can be given that any individual customer or significant groups of companies or a particular industry, will not be adversely impacted by any governmental actions taken by either China or the United States. In addition, our mobile phones are manufactured at a third party contractor’s facility in Shenzhen, China, which could result in significant additional costs to us when shipping our products to various customers in the United States. It is not possible to predict with any certainty the outcome of the trade dispute between the United States and China, and prolonged or increased tariffs on imports from China to the United States would adversely impact our business, results of operations and financial condition.
In 2020, a Phase One trade agreement was signed imposing specific targets for Chinese purchases of various exports from the United States. These ambitious commitments specified numerical targets in U.S. goods and services exports to China for increases of $77 billion in 2020 and $123 billion in 2021 from the 2017 baseline. The Phase One agreement also imposed numerous tariffs on a variety of goods including but not limited to imports from China along with steel and aluminum imports from across the world, creating an upward pressure on prices in the United States. These tariffs currently impact over $350 billion of imports and exports and increase consumer costs by roughly $51 billion annually based on 2021 import levels. The uncertainty of the Phase One deal, unilaterally imposed in 2020 and substantially still in effect today, lie in their conditions. For instance, Section 301 enables the president to impose tariffs or quotas wherever the United States Trade Representative (the “USTR”) finds that other nations are engaging in unfair trade practices and Section 232 allows the president to impose trade barriers if the Department of Commerce finds that imports threaten U.S. national security. The Company will be unable to pre-empt decisions of this nature, and as such, the risks and consequences which accompany them.
In 2021, the U.S. presidential administration signed Executive Order 14017 into order, assessing vulnerabilities in four priority product areas: semiconductors, large capacity batteries, critical minerals and materials, and pharmaceuticals and active pharmaceutical ingredients. Executive Order 14017 established an interagency Supply Chain Trade Task Force led by USTR. This task force was directed to identify foreign trade practices that the U.S. deemed unfair or otherwise determined to cause erosion to U.S. critical supply chains. The impact and decisions of this task force may cause consequential action from other trading partners, potentially impacting the Company’s financial performance.
Later in 2021 and into 2022, the US Administration replaced the Section 232 tariffs on steel and aluminum imports from the EU with a tariff rate quota system (“TRQ”), replaced the Section 232 tariffs on steel imports from Japan with a TRQ (the Section 232 aluminum imports from Japan are still in effect) and, as of March 2022, replaced the Section 232 tariffs on steel and aluminum imports from the UK with a TRQ. To date, the U.S. Administration has kept in place all of the Section 301 tariffs on Chinese imports, which might influence importers to shift away from China and reorganize supply chains or otherwise cause decreased trade altogether — both imports and exports — raising prices and reducing options for consumers and businesses in the U.S. While a number of exclusions and extensions to these tariffs exist and evolve within the current administration, retaliatory actions by other nations remain a possibility.
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As of May 2022, five nations have levied retaliatory tariffs up to 70 percent on approximately $73.2 billion of U.S. exports of which China represented 25%. The Biden Administration has to-date retained the Section 301 tariffs on over $300 billion worth of imports from China, which were initially imposed in four different tranches throughout 2018 by the Trump Administration. Based on 2021 data, U.S. consumers paid $48 billion in Section 301 tariffs to import goods from China. According to a study by the American Action Forum, more than half of the amount paid on these tariffs were for Census-defined industrial supplies and/or capital goods that U.S. firms use as inputs in their production processes. Removing the tariffs would lower input costs for U.S. firms, allowing them to lower prices, expand output, increase investment, and ultimately be more competitive in domestic and international markets.
We are subject to anti-corruption, anti-bribery, anti-money laundering, economic sanctions, export control, and similar laws. Non-compliance with such laws can subject us to criminal or civil liability and harm our business, revenues, financial condition and results of operations.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. Section 201, the U.S. Travel Act, and other anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. As we increase our international presence, we may engage with distributors and third-party intermediaries to market our solutions and to obtain necessary permits, licenses, and other regulatory approvals in countries outside the United States and Canada. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities in countries outside the United States and Canada. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize such activities.
The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. In particular, the United States prohibits U.S. persons from engaging with individuals and entities identified as “Specially Designated Nationals,” such as terrorists and narcotics traffickers. These prohibitions are administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). OFAC rules prohibit U.S. persons from engaging in, or facilitating a foreign person’s engagement in, transactions with or relating to the prohibited individual, entity or country, and require the blocking of assets in which the individual, entity or country has an interest. Blocked assets (e.g., property or bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Other countries in which we operate, including Canada and the United Kingdom, also maintain economic and financial sanctions regimes.
Some of our solutions, including software updates and third-party accessories, may be subject to U.S. export control laws, including the Export Administration Regulations; however, the vast majority of our products are non-U.S.-origin items, developed and manufactured outside of the United States, and therefore not subject to these laws. For third-party accessories, we rely on manufacturers to supply the appropriate export control classification numbers that determine our obligations under these laws.
We cannot assure you that our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. As we increase our international presence, our risks under these laws, rules, and regulations may increase. Further, any change in the applicability or enforcement of these laws, rules, and regulations could adversely impact our business operations and financial results.
Detecting, investigating and resolving actual or alleged violations can require a significant diversion of time, resources, and attention from senior management. In addition, noncompliance with anti-corruption, anti-bribery, anti-money laundering, or economic sanctions laws, rules, and regulations could subject us to whistle blower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, revenues, financial condition, and results of operations would be significantly harmed. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, financial condition and results of operations.
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We are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations.
Our operations and the products we sell are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations. Compliance with such existing or future laws and regulations could subject us to future costs or liabilities, impact our production capabilities, constrict our ability to sell, expand or acquire facilities, restrict what solutions we can offer and generally impact our financial performance. Our products are designed for use in potentially explosive or hazardous environments. If our product design fails for any reason in such environments, we may be subject to product liabilities and future costs. In addition, some of these laws are environmental and relate to the use, disposal, remediation, emission and discharge of, and exposure to hazardous substances. These laws often impose liability and can require parties to fund remedial studies or actions regardless of fault. Environmental laws have tended to become more stringent over time and any new obligations under these laws could have a negative impact on our operations or financial performance.
Laws focused on the energy efficiency of electronic products and accessories, recycling of both electronic products and packaging, reducing or eliminating certain hazardous substances in electronic products, and the transportation of batteries continue to expand significantly. Laws pertaining to accessibility features of electronic products, standardization of connectors and power supplies, the transportation of lithium-ion batteries, and other aspects are also proliferating. There are also demanding and rapidly changing laws around the globe related to issues such as product safety, radio interference, radio frequency radiation exposure, medical related functionality, and consumer and social mandates pertaining to use of wireless or electronic equipment. These laws, and changes to these laws, could have a substantial impact on whether we can offer certain products, solutions, and services, and on what capabilities and characteristics our products or services can or must include.
These laws and regulations impact our products and could negatively impact our ability to sell products competitively. In addition, we anticipate that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products, increasing energy efficiency and providing additional accessibility.
Changes in laws and regulations concerning the use of telecommunication bandwidth could increase our costs and adversely impact our business.
Our business depends on our ability to sell devices that use telecommunication bandwidth allocated to licensed and unlicensed wireless services, and that use of that bandwidth is subject to laws and regulations that are subject to change over time. Changes in the permitted uses of telecommunication bandwidth, reallocation of such bandwidth to different uses, and new or increased regulation of the capabilities, importation, and use of devices that depend on such bandwidth could increase our costs, require costly modifications to our products before they are sold, or limit our ability to sell those products into our target markets. In addition, we are subject to regulatory requirements for certification and testing of our products before they can be marketed or sold. Those requirements may be onerous and expensive. Changes to those requirements could result in significant additional costs and could adversely impact our ability to bring new products to market in a timely fashion.
We are subject to a wide range of privacy and data security laws, regulations and other legal obligations.
Personal privacy and information security are significant issues in the United States and the other jurisdictions in which we operate or make our products and applications available. The legislative and regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, including the U.S. Federal Trade Commission (“FTC”), and various state, local and foreign agencies. We may collect personally identifiable information (“PII”) and other data from our customers. We use this information to provide services to our customers and to support, expand and improve our business. We may also share customers’ PII with third parties as allowed by applicable law and agreements and authorized by the customer or as described in our privacy policy.
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The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, transfer, use and storage of PII. In the United States, the FTC and many state attorneys general are applying federal and state consumer protection laws as imposing standards for the online collection, use and dissemination of data. Many foreign countries and governmental bodies, including Canada, the European Union and other relevant jurisdictions, have laws and regulations concerning the collection and use of PII obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, Internet Protocol, or IP, addresses. Within the European Union, legislators have adopted the General Data Protection Regulation, or GDPR, effective May 2018 which may impose additional obligations and risk upon our business, and which may increase substantially the penalties to which we could be subject in the event of any non-compliance. We may incur substantial expense in complying with the obligations imposed by the governments of the foreign jurisdictions in which we do business or seek to do business and we may be required to make significant changes in our business operations, all of which may adversely impact our revenues and our business overall.
Although we are working to comply with those federal, state, and foreign laws and regulations, industry standards, contractual obligations and other legal obligations that apply to us, those laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations, our practices or the features of our products or applications. At state level, lawmakers continue to pass new laws concerning privacy and data security. Particularly notable in this regard is the California Consumer Privacy Act (“CCPA”), which became effective on January 1, 2020. The CCPA will introduce significant new disclosure obligations and provide California consumers with significant new privacy rights. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspected security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of PII or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse impact on our reputation and business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely impact our business.
We also expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. New laws, amendments to or re-interpretations of existing laws and regulations, industry standards, contractual obligations and other obligations may require us to incur additional costs and restrict our business operations. Such laws and regulations may require companies to implement privacy and security policies, permit users to access, correct and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals’ consent to use PII for certain purposes. In addition, a foreign government could require that any PII collected in a country not be disseminated outside of that country, and we are not currently equipped to comply with such a requirement.
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Risks Related to Our Intellectual Property
If we are unable to successfully protect our intellectual property, our competitive position may be harmed.
Our ability to compete is heavily affected by our ability to protect our intellectual property. We rely on a combination of patent licenses, confidentiality procedures and contractual provisions to protect our proprietary rights. We also enter, and plan to continue to enter, into confidentiality, invention assignment or license agreements with our employees, consultants and other parties with whom we contract, and control access to and distribution of our software, documentation and other proprietary information. The steps we take to protect our intellectual property may be inadequate, and it is possible that some or all of our confidentiality agreements will not be honored and certain contractual provisions may not be enforceable. Existing trade secret, trademark and copyright laws offer only limited protection. Unauthorized parties may attempt to copy aspects of our products or obtain and use information which we regard as proprietary. Policing unauthorized use of our products is difficult, time consuming and costly, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. We cannot assure you that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology, the effect of either of which would harm our competitive position in the market. Furthermore, disputes can arise with our strategic partners, customers or others concerning the ownership of intellectual property.
Others may claim that we infringe on their intellectual property rights, which may result in costly and time-consuming litigation and could delay or otherwise impair the development and commercialization of our products.
In recent years, there has been a significant increase in litigation in the United States involving patents and other intellectual property rights, and because our products are comprised of complex technology, we could, in the future, be involved in or impacted by assertions, including both requests to take licenses and litigation, regarding infringement of patent and other intellectual property rights of third parties. Third parties have asserted, and in the future may assert, intellectual property infringement claims against us and against our channel partners, end customers and suppliers. For example, we have been approached by Wilson Electronics about potential infringement of several of their patents involving cellphone boosters. Many of these assertions are brought by non-practicing entities whose principal business model is to secure patent licensing revenues from product manufacturing or sales companies. Claims for alleged infringement and any resulting lawsuit, if successful, could subject us to significant liability for damages and invalidation of our intellectual property rights. Defending any such claims, with or without merit, including pursuant to indemnity obligations, could be time consuming, expensive, cause product shipment delays or require us to enter into a royalty or licensing agreement, any of which could delay the development and commercialization of our products or reduce our margins. If we are unable to obtain a required license, our ability to sell or use certain products may be impaired. In addition, if we fail to obtain a license, or if the terms of the license are burdensome to us, our operations could be significantly harmed.
Our use of open source software could subject us to possible litigation or otherwise impair the development of our products.
A portion of our technologies incorporates open source software, including open source operating systems such as Android, and we expect to continue to incorporate open source software into our platform in the future. Few of the licenses applicable to open source software have been interpreted by courts, and their application to the open source software integrated into our proprietary technology platform may be uncertain. If we fail to comply with these licenses, then pursuant to the terms of these licenses, we may be subject to certain requirements, including requirements that we make available the source code for our software that incorporates the open source software. We cannot assure you that we have not incorporated open source software in our software in a manner that is inconsistent with the terms of the applicable licenses or our current policies and procedures. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could incur significant legal expenses defending against such allegations. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our technology platform.
With respect to open source operating systems, if third parties cease continued development of such operating systems or restrict our access to such operating system, our business and financial results could be adversely impacted. We are dependent on third parties’ continued development of operating systems, software application ecosystem infrastructures, and such third parties’ approval of our implementations of their operating and system and associated applications. If such parties cease to continue development or support of such operating systems or restrict our access to such operating systems, we would be required to change our strategy for our devices. As a result, our financial results could be negatively impacted because a resulting shift away from the operating systems we currently use, and the associated applications ecosystem could be costly and difficult.
Our inability to obtain and maintain any third-party license required to develop new products and product enhancements could seriously harm our business, financial condition and results of operations.
From time to time, we are required to license technology from third parties to develop new products or product enhancements. Third-party licenses may not be available to us on commercially reasonable terms, or at all. If we fail to renew any intellectual property license agreements on commercially reasonable terms, or any such license agreements otherwise expire or terminate, we may not be able to use the patents and technologies of these third parties in our products, which are critical to our success. We cannot assure you that we will be able to effectively control the level of licensing and royalty fees paid to third parties, and significant increase in such fees could have a significant and adverse impact on our future profitability. Seeking alternative patents and technologies may be difficult and time-consuming, and we may not be successful in finding alternative technologies or incorporating them into our products. Our inability to obtain any third-party license necessary to develop new products or product enhancements could require us to obtain substitute technology of lower quality or performance standards, or at greater cost, which could seriously harm our business, financial condition and results of operations.
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Risks relating to our locations in Israel and Canada and our international operations
Conditions in Israel could materially and adversely affect our business.
A number of our officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries or territories, as well as terrorist acts committed within Israel by hostile elements. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. During the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. In December 2008 and January 2009 there was an escalation in violence among Israel, Hamas, the Palestinian Authority and other groups, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missiles being fired from the Gaza Strip into Southern Israel. During November 2012 and from July through August 2014, Israel was engaged in an armed conflict with a militia group and political party who controls the Gaza Strip, which resulted in missiles being fired from the Gaza Strip into Southern Israel, as well as at areas more centrally located near Tel Aviv and at areas surrounding Jerusalem. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. This pattern of activity erupts from time to time with varying degrees of intensity and for varying periods of time and typically ends with a cease fire until hostilities flare up again.
Since February 2011, Egypt has experienced political turbulence and an increase in terrorist activity in the Sinai Peninsula. Such political turbulence and violence may damage peaceful and diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countries in the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflict in Syria has escalated and chemical weapons have been used in the region. Foreign actors have intervened and may continue to intervene in Syria. This instability and any intervention may lead to deterioration of the political and economic relationships that exist between the State of Israel and some of these countries and may lead to additional conflicts in the region. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Iran also has a strong influence among extremist groups in the region, including Hamas in Gaza, Hezbollah in Lebanon and various rebel militia groups in Syria. These situations have escalated at various points in recent years and may escalate in the future to more violent events, which may affect Israel and us. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.
Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.
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Notwithstanding such boycotts, in August 2020, an agreement for the normalization of relations between Israel and the United Arab Emirates (the “UAE”) was reached and in September 2020 the Abraham Accords Peace Treaty was signed at the White House. The Accords officially established diplomatic relations between Israel and the UAE. This was shortly followed by an agreement for the normalization of ties between Israel and the Kingdom of Bahrain, which was signed in a Joint Communique between Israel and Bahrain in Manama, Bahrain in November 2020. In December 2020, Israel and Morocco established full diplomatic relations. And in January 2021, Sudan acceded to the Abraham Accords during the visit of then-U.S. Treasury Secretary Steven Mnuchin to Khartoum. These agreements have led to other trade and military alliances between Israel and neighboring Arab countries.
In addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial condition and results of operations.
It may be difficult to enforce a U.S. judgment against us, our officers and directors named in our annual report on Form 20-F in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors.
Not all of our directors or officers are residents of the United States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Additionally, Israeli courts might not enforce judgments obtained in the United States against us or our non-U.S. directors and executive officers, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.
Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought. For more information, see “Enforceability of Civil Liabilities.”
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Because we are a corporation incorporated in British Columbia and some of our directors and officers are resident in Canada, it may be difficult for investors in the United States to enforce civil liabilities against us based solely upon the federal securities laws of the United States. Similarly, it may be difficult for Canadian investors to enforce civil liabilities against our directors and officers residing outside of Canada.
We are a corporation incorporated under the laws of British Columbia with our principal place of business in Montreal, Canada. Some of our directors and officers or other experts named herein are residents of Canada and all or a substantial portion of our assets and those of such persons are located outside the United States. Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon us or our directors or officers who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States predicated upon civil liabilities under the Securities Act. Investors should not assume that Canadian courts: (1) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or blue-sky laws of any state within the United States or (2) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue-sky laws.
Similarly, some of our directors and officers are residents of countries other than Canada and all or a substantial portion of the assets of such persons are located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these non-Canadian residents. In addition, it may not be possible for Canadian investors to collect from these non-Canadian residents’ judgments obtained in courts in Canada predicated on the civil liability provisions of securities legislation of certain of the provinces and territories of Canada. It may also be difficult for Canadian investors to succeed in a lawsuit in the United States, based solely on violations of Canadian securities laws.
We have operations in China, which exposes us to risks inherent in doing business there.
We use multiple third-party suppliers and manufacturers based primarily in China. With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future. Furthermore, pursuant to Chinese labor laws, employers in China are subject to various requirements when signing labor contracts, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. Our results of operations will be materially and adversely affected if the labor costs of our third-party suppliers and manufacturers increase significantly. In addition, we and our manufacturers and suppliers may not be able to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China.
Operating in China exposes us to political, legal and economic risks. In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable. Our ability to utilize parties that operate in China may be adversely affected by changes in U.S. and Chinese laws and regulations such as those related to, among other things, taxation, import and export tariffs, environmental regulations, land use rights, intellectual property, currency controls, network security, employee benefits, hygiene supervision and other matters. In addition, we may not obtain or retain the requisite legal permits to continue utilizing third-parties that operate in China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits. In addition, Chinese trade regulations are in a state of flux, and we may potentially become subject to other forms of taxation, tariffs and duties in China. Furthermore, the third parties we rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition and results of operations could be materially and adversely affected.
In addition, in 2022, there have been outbreaks of the Omicron variant of the COVID-19 in Hong Kong and other cities in Mainland China resulting in central and local government ordered lock downs restricting employees from their offices and factories, travel restrictions, mandatory COVID-19 tests, quarantine requirements and/or closure of office buildings and facilities. Although our operations have not been materially and negatively impacted by such outbreaks in 2022, the government authorities may issue new orders of lock-downs, office closures, travel and transportation restrictions in China due to the resurgence of the COVID-19 and outbreak of new variants, which could have material negative impact to our business and financial conditions.
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Operating outside of the United States presents specific risks to our business, and we have substantial operations outside of the United States.
Most of our employee base and operations are located outside the United States, primarily in Canada and Israel. Most of our software development, third-party contract manufacturing, and product assembly operations are conducted outside the United States.
Risks associated with operations outside the United States include:
| ● | effectively managing and overseeing operations that are distant and remote from corporate headquarters may be difficult and may impose increased operating costs; |
| ● | fluctuating foreign currency rates could restrict sales, increase costs of purchasing, and impact collection of receivables outside of the United States; |
| ● | volatility in foreign credit markets may affect the financial well-being of our customers and suppliers; |
| ● | violations of anti-corruption laws, including the Foreign Corrupt Practices Act and the U.K. Bribery Act could result in large fines and penalties; |
| ● | violations of privacy and data security laws could result in large fines and penalties; and |
| ● | tax disputes with foreign taxing authorities, and any resultant taxation in foreign jurisdictions associated with operations in such jurisdictions, including with respect to transfer pricing practices associated with such operations. |
Foreign currency fluctuations may reduce our competitiveness and sales in foreign markets.
The relative change in currency values creates fluctuations in product pricing for international customers. These changes in foreign end-customer costs may result in lost orders and reduce the competitiveness of our products in certain foreign markets. These changes may also negatively impact the financial condition of some foreign customers and reduce or eliminate their future orders of our products. We also face adverse changes in, or uncertainty of, local business laws or practices, including the following:
| ● | foreign governments may impose burdensome tariffs, quotas, taxes, trade barriers, or capital flow restrictions; |
| ● | restrictions on the export or import of technology may reduce or eliminate the ability to sell in or purchase from certain markets; |
| ● | political and economic instability, including deterioration of political relations between the United States and other countries, may reduce demand for our solutions or put our non-U.S. assets at risk; |
| ● | potentially limited intellectual property protection in certain countries may limit recourse against infringing on our solutions or cause us to refrain from selling in certain geographic territories; |
| ● | staffing may be difficult along with higher turnover at international operations; |
| ● | a government-controlled exchange rate and limitations on the convertibility of currencies, including the Chinese yuan; |
| ● | transportation delays and customs related delays that may affect production and distribution of our products; and |
| ● | integration and enforcement of laws vary significantly among jurisdictions and may change significantly over time. |
Our failure to manage any of these risks successfully could harm our international operations and adversely impact our business, operating results and financial condition.
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Risks Related to Ownership of Our Securities
The New Warrants and the Lind Waiver Warrants are speculative in nature.
The New Warrants and the Lind Waiver Warrants owned by the Selling Shareholders do not confer any rights of common share ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire common shares at a fixed price for a limited period of time. Specifically, commencing on the date of issuance, holders of the New Warrants and the Lind Waiver Warrants may exercise their right to acquire the common shares and pay an exercise price of $0.20 per share (unless the cashless exercise option is exercised, in; which case the exercise price would be effectively $0), prior to five years from the date of issuance, after which date any unexercised warrants will expire and have no further value. As of February 14, 2023, the closing price of one common share on the Nasdaq was $0.1545, making the New Warrants and the Lind Waiver Warrants “out-of-the-money” if exercised at $0.20 per common share (but not if they are cashless exercised at an exercise price of $0 per share). As long as the New Warrants and the Lind Waiver Warrants remain out-of-the-money, it is unlikely that a significant number of them will be exercised. We cannot assure you that the price of our common shares will ever exceed the $0.20 per share exercise price of the New Warrants and the Lind Waiver Warrants.
Holders of the New Warrants and the Lind Waiver Warrants will have no rights as a common shareholder until they acquire our common shares.
Until holders of the New Warrants and the Lind Waiver Warrants acquire common shares upon exercise of those warrants, the holders will have no rights with respect to the common shares issuable upon exercise of those warrants. Upon exercise of those warrants, the holder will be entitled to exercise the rights of a common shareholder as to the security exercised only as to matters for which the record date occurs after the exercise.
There is no public market for the New Warrants and the Lind Waiver Warrants.
There is no established public trading market for the New Warrants and the Lind Waiver Warrants and we do not expect a market to develop. In addition, we do not intend to apply to list the New Warrants and the Lind Waiver Warrants on any national securities exchange or other nationally recognized trading system, including The Nasdaq Capital Market. Without an active trading market, the liquidity of the New Warrants and the Lind Waiver Warrants will be limited.
We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above the price you paid for your shares.
The trading price of our common shares is likely to be volatile and subject to wide price fluctuations in response to various factors, including:
| ● | market conditions in the broader stock market in general, or in our industry in particular; |
| ● | actual or anticipated fluctuations in our quarterly financial and operating results; |
| ● | introduction of new products and services by us or our competitors; |
| ● | sales, or anticipated sales, of large blocks of our stock; |
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| ● | issuance of new or changed securities analysts’ reports or recommendations; |
| ● | failure of industry or securities analysts to maintain coverage of our Company, changes in financial estimates by any industry or securities analysts that follow our Company, or our failure to meet such estimates; |
| ● | additions or departures of key personnel; |
| ● | regulatory or political developments; |
| ● | changes in accounting principles or methodologies; |
| ● | acquisitions by us or by our competitors; |
| ● | litigation and governmental investigations; and |
| ● | economic, political and geopolitical conditions or events. |
These and other factors may cause the market price and demand for our common shares to fluctuate substantially, which may limit or prevent investors from readily selling their common shares and may otherwise negatively affect the liquidity of our common shares. If the market price of our common shares after this offering does not exceed the price you paid, you may not realize any return on your investment in us and may lose some or all of your investment. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have often instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.
We could lose our listing on the Nasdaq Capital Market if the closing bid price of our common shares does not return to above $1.00 for ten consecutive days during the 180 days ending February 22, 2023. The loss of the Nasdaq listing would make our common shares significantly less liquid and would affect their value.
On September 1, 2022, we announced that the Company had received a notification letter dated August 26, 2022 from the Listing Qualifications Department of The Nasdaq Stock Market LLC, notifying the Company that it is currently not in compliance with the minimum bid price requirement set forth under Nasdaq Listing Rule 5550(a)(2), resulting from the fact that the closing bid price of the Company’s common shares was below $1.00 per share for a period of thirty consecutive business days.
Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company has a compliance period of 180 calendar days, or until February 22, 2023, to regain compliance with Nasdaq’s minimum bid price requirement. If at any time during the Compliance Period, the closing bid price per share of the Company’s common shares is at least $1.00 for a minimum of ten consecutive business days, Nasdaq will provide the Company a written confirmation of compliance and the matter will be closed. The Company has requested that Nasdaq grant it a 180 day extension of the compliance period and is currently considering a number of alternatives to boost its minimum bid price, which may include a reverse stock split, but has not yet reached a decision on a course of action. We will continue to monitor the closing bid price of our common shares and seek to regain compliance with the Minimum Bid Price Requirement within the allotted compliance period; however, there can be no assurance that we will regain compliance with the Minimum Bid Requirement or that if we do appeal a subsequent delisting determination, that such appeal would be successful.
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If the common shares are not listed on Nasdaq at any time after this offering, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; |
| ● | reduced liquidity; |
| ● | a determination that the common shares are a “penny stock” which will require brokers trading in our shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for the common shares; |
| ● | a limited amount of news and analyst coverage for our Company; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
Upon delisting from the Nasdaq Capital Market, our common shares would be traded over-the-counter inter-dealer quotation system, more commonly known as the OTC. OTC transactions involve risks in addition to those associated with transactions in securities traded on the securities exchanges, such as the Nasdaq Capital Market (“Exchange-listed Stocks”). Many OTC stocks trade less frequently and in smaller volumes than Exchange-listed Stocks. Accordingly, our stock would be less liquid than it would be otherwise. Also, the values of OTC stocks are often more volatile than Exchange-listed Stocks. Additionally, institutional investors are usually prohibited from investing in OTC stocks, and it might be more challenging to raise capital when needed.
In addition, if our common shares are delisted, your ability to transfer or sell your common shares may be limited and the value of those securities will be materially adversely affected.
If our common shares become subject to the penny stock rules, it may be more difficult to sell our common shares.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The OTC Bulletin Board does not meet such requirements and if the price of our common shares is less than $5.00 and our common shares are no longer listed on a national securities exchange such as Nasdaq, our stock may be deemed a penny stock. The penny stock rules require a broker-dealer, at least two business days prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver to the customer a standardized risk disclosure document containing specified information and to obtain from the customer a signed and dated acknowledgment of receipt of that document. In addition, the penny stock rules require that prior to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive: (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common shares, and therefore shareholders may have difficulty selling their shares.
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We will require additional capital to fund our business and support our growth, and our inability to generate and obtain such capital on acceptable terms, or at all, could harm our business, operating results, financial condition and prospects.
We intend to continue to make substantial investments to fund our business and support our growth. In addition, we may require additional funds to respond to business challenges, including the need to develop new features or enhance our solutions, improve our operating infrastructure or acquire or develop complementary businesses and technologies. As a result, in addition to the revenues we generate from our business, we may need to engage in additional equity or debt financings to provide the funds required for these and other business endeavors. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common shares. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain such additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely impacted. In addition, our inability to generate or obtain the financial resources needed may require us to delay, scale back, or eliminate some or all of our operations, which may have a significant adverse impact on our business, operating results and financial condition.
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. We must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 20-F filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts.
During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common shares could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
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Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer.
Nasdaq Listing Rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to, and we may follow home country practice in lieu of the above requirements, or we may choose to comply with the above requirement within one year of listing. The corporate governance practice in our home country does not require a majority of our board to consist of independent directors. Thus, although a director must act in the best interests of the Company, it is possible that fewer board members will be exercising independent judgment and the level of board oversight on the management of our company may decrease as a result. In addition, Nasdaq Listing Rules also require foreign private issuers to have a compensation committee, a nominating/corporate governance committee composed entirely of independent directors, and an audit committee with a minimum of three members. We, as a foreign private issuer, are not subject to these requirements. Nasdaq Listing Rules may require shareholder approval for certain corporate matters, such as requiring that shareholders be given the opportunity to vote on all equity compensation plans and material revisions to those plans, and certain common share issuances. We intend to comply with the requirements of Nasdaq Listing Rules in determining whether shareholder approval is required on such matters and to appoint a nominating and corporate governance committee. We may, however, consider following home country practice in lieu of the requirements under Nasdaq Listing Rules with respect to certain corporate governance standards which may afford less protection to investors.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. In the future, we would lose our foreign private issuer status if (i) more than 50% of our outstanding voting securities are owned by U.S. residents and (ii) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.
We will continue to incur significant increased costs as a result of operating as a public company in the United States, and our management will be required to devote substantial time to new compliance initiatives.
As a public company in the United States, we incur significant legal, accounting and other expenses. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, which requires, among other things, that we file with the SEC annual and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and Nasdaq to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), was enacted. There are significant corporate governance and executive-compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas. Recent legislation permits emerging growth companies to implement many of these requirements over a longer period and up to five years from the pricing of our public offering. We intend to take advantage of this new legislation, but cannot assure you that we will not be required to implement these requirements sooner than planned and thereby incur unexpected expenses. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.
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The rules and regulations applicable to public companies substantially increase our legal and financial compliance costs and make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. The increased costs will decrease our net income or increase our consolidated net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements 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 executive officers.
Our executive officers and directors, and their affiliated entities, along with our two other largest stockholders, own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval
As of the date of this prospectus, our executive officers and directors, together with entities affiliated with such individuals, along with our two other largest stockholders, beneficially own approximately 31.6% of our common shares. Accordingly, these stockholders may, as a practical matter, continue to be able to control the election of a majority of our directors and the determination of all corporate actions. This concentration of ownership could delay or prevent a change in control of the Company.
The exercise of the outstanding warrants may further dilute the common shares and adversely impact the price of our common shares.
As of February 15, 2023, we had 62,911,417 common shares issued and outstanding and, if all of the warrants are exercised for the common shares to be sold by the Selling Shareholders are sold in this offering, we will have an additional 19,781,987 common shares outstanding for a total of 83,943,404 common shares issued and outstanding. The Company has other outstanding unexercised warrants and agents’ options to purchase 14,031,591 common shares as of February 15, 2023 that expire between June 30, 2024 and March 8, 2027. If the holders of our free trading shares wanted to sell these shares, there might not be enough purchasers to maintain the market price of our common shares on the date of such sales. Any such sales, or the fear of such sales, could substantially decrease the market price of our common shares and the value of your investment. A decline in the price of shares of our common shares might impede our ability to raise capital through the issuance of additional common shares or other equity securities.
The market for our common shares may not provide investors with adequate liquidity.
Liquidity of the market for our common shares depends on a number of factors, including our financial condition and operating results, the number of holders of our common shares, the market for similar securities and the interest of securities dealers in making a market in the securities. We cannot predict the extent to which investor interest in the Company will maintain a trading market in our common shares, or how liquid that market will be. If an active market is not maintained, investors may have difficulty selling common shares that they hold.
Since we do not expect to pay any cash dividends for the foreseeable future, investors in this offering may be forced to sell their stock in order to obtain a return on their investment.
We do not anticipate declaring or paying in the foreseeable future any cash dividends on our capital stock. Instead, we plan to retain any earnings to finance our operations and growth plans discussed elsewhere or incorporated by reference in this prospectus. Accordingly, investors must rely on sales of their common shares after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common shares.
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If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our Company. If no securities or industry analysts commence coverage of our Company, the trading price for our securities would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavourable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our securities could decrease, which might cause our stock price and trading volume to decline.
A possible “short squeeze” due to a sudden increase in demand of our common shares that largely exceeds supply may lead to price volatility in our common shares.
Investors may purchase our common shares to hedge existing exposure in our common shares or to speculate on the price of our common shares. Speculation on the price of our common shares may involve long and short exposures. To the extent aggregate short exposure exceeds the number of our common shares available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our common shares for delivery to lenders of our common shares. Those repurchases may in turn, dramatically increase the price of our common shares until investors with short exposure are able to purchase additional common shares to cover their short position. This is often referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in our common shares that are not directly correlated to the performance or prospects of our common shares and once investors purchase the common shares necessary to cover their short position the price of our common shares may decline.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds from the cash exercise of the New Warrants, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds will be used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from the cash exercise of the New Warrants, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We currently intend to use the net proceeds from the cash exercise of the New Warrants to expand marketing and brand enhancement related to our products, to fund our ongoing research and development activities, for personnel development and training and for resource management software development. Our expected use of net proceeds from the cash exercise of the New Warrants represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including the commercial success of our systems and the costs of our research and development activities, as well as the amount of cash used in our operations. As a result, our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering.
The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or other similar expressions in this prospectus. These statements are likely to address our growth strategy, financial results and product and development programs. You must carefully consider any such statements and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
| ● | the size and growth potential of the markets for our products, and our ability to serve those markets; |
| ● | the rate and degree of market acceptance of our products; |
| ● | our ability to expand our sales organization to address effectively existing and new markets that we intend to target; |
| ● | impact from future regulatory, judicial, and legislative changes or developments in the U.S. and foreign countries; |
| ● | our ability to compete effectively in a competitive industry; |
| ● | our ability to obtain funding for our operations; |
| ● | our ability to attract collaborators and strategic partnerships; |
| ● | our ability to continue to meet the Nasdaq requirements; |
| ● | our ability to meet our other financial operating objectives; |
| ● | the availability of qualified employees for our business operations; |
| ● | general business and economic conditions; |
| ● | our ability to meet our financial obligations as they become due; |
| ● | positive cash flows and financial viability of our operations and new business opportunities; |
| ● | ability to secure intellectual property rights over our proprietary products or enter into license agreements to secure the legal use of certain patents an intellectual property; |
| ● | our ability to be successful in new markets; |
| ● | our ability to avoid infringement of intellectual property rights; and |
| ● | the positive cash flows and financial viability of our operations and new business opportunities |
We describe certain material risks, uncertainties, and assumptions that could affect our business, including our financial condition and results of operations, under “Risk Factors.” We base our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events, changes in assumptions, or otherwise.
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ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated under the laws of British Columbia. Some of our directors and officers, and some of the experts named in this prospectus, are residents of Canada, Israel or otherwise reside outside of the United States, and all or a substantial portion of their assets, and all or a substantial portion of our assets, are located outside of the United States. We have appointed an agent for service of process in the United States, but it may be difficult for shareholders who reside in the United States to effect service within the United States upon those directors, officers and experts who are not residents of the United States. It may also be difficult for shareholders who reside in the United States to realize in the United States upon judgments of courts of the United States predicated upon our civil liability and the civil liability of our directors, officers and experts under the United States federal securities laws. Furthermore, because substantially all of our assets and substantially all of our directors and officers are located outside the United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible within the United States. There can be no assurance that U.S. investors will be able to enforce against us, members of our board of directors, officers or certain experts named herein who are residents of Canada, Israel or other countries outside the United States, any judgments in civil and commercial matters, including judgments under the federal securities laws.
Service of process upon directors and officers who reside in Israel may be difficult to obtain within the United States. Furthermore, because substantially all of our assets and substantially all of our Israeli directors and officers are located outside the United States, any judgment obtained in the United States against us or any of our Israeli directors and officers may not be collectible within the United States.
We have been informed by our legal counsel in Israel, Naschitz, Brandes, Amir & Co., Advocates, that it may be difficult to assert U.S. securities laws claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact which can be a time-consuming and costly process. Matters of procedure will also be governed by Israeli law.
Subject to specified time limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter which is non- appealable, provided that, among other things:
| ● | the judgment was rendered by a court of competent jurisdiction, according to the laws of the state in which the judgment is given; |
| ● | the judgment is enforceable according to the laws of Israel and according to the law of the foreign state in which the relief was granted; and |
| ● | the judgment is not contrary to public policy of Israel. |
Even if such conditions are met, an Israeli court may not declare a foreign civil judgment enforceable if:
| ● | the prevailing law of the foreign state in which the judgment is rendered does not allow for the enforcement of judgments of Israeli courts (subject to exceptional cases); |
| ● | the defendant did not have a reasonable opportunity to be heard and to present his or her evidence, in the opinion of the Israeli court; |
| ● | the enforcement of the civil liabilities set forth in the judgment is likely to impair the security or sovereignty of Israel; |
| ● | the judgment was obtained by fraud; |
| ● | the judgment was rendered by a court not competent to render it according to the rules of private international law prevailing in Israel; |
| ● | the judgment conflicts with any other valid judgment in the same matter between the same parties; or |
| ● | an action between the same parties in the same matter was pending in any Israeli court or tribunal at the time at which the lawsuit was instituted in the foreign court. |
If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.
Further, we are organized under the laws of British Columbia, Canada. Service of process upon us and upon certain of our directors and officers and the experts named in this prospectus, who reside outside the U.S., may be difficult to obtain within the U.S. Furthermore, because a substantial amount of our assets and certain of our directors and officers are located outside the U.S., any judgment obtained in the U.S. against us or any of our directors and officers may not be collectible within the U.S.
We have also been advised by Canadian legal counsel that there is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based on the U.S. federal securities laws or “blue sky” laws of any state within the United States and as to the enforceability in Canadian courts of judgments of U.S. courts obtained in actions based on the civil liability provisions of the U.S. federal securities laws or any such state securities or blue sky laws. Therefore, it may not be possible to enforce those judgments against us, certain of our directors and officers, or the experts named in this prospectus. See “Risk Factors - It may be difficult to enforce a U.S. judgment against us, our officers and directors named in our annual report on Form 20-F in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors.”
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The following table sets forth our capitalization as of September 30, 2022 on: (i) an actual basis; (ii) on a pro forma basis to reflect:; (A) the issuance of 18,042,857 registered common shares by the Company at $0 per share pursuant to the Exercise, (B) the issuance of 1,739,130 Lind Waiver Warrants to Lind at an assumed exercise price of $0 per common share, and (C) the issuance of shares to repay the balance of the promissory note, all as of February 15, 2023; and (iii) on a pro forma as adjusted basis to reflect: (A) the exercise of all of the 1,250,000 common share warrants that are outstanding at an exercise price of $0 per share (which shares were registered in a previous offering and may be exercised by the Selling Shareholders); (B) the issuance of 18,042,857 common shares registered in this offering by the Company at an exercise price of $0 per share pursuant to the Exercise, and (C) the issuance of 1,739,130 common shares issuable upon the exercise of the Lind Waiver Warrants at an exercise price of $0 per common share, all as of February 15, 2023.
| Actual As of September 30, 2022 | Pro Forma | Pro-Forma as Adjusted | ||||||||||
| Cash and cash equivalents | $ | 1,619,742 | $ | 8,457,815 | $ | 8,393,492 | ||||||
| Warrant Liability(2), (5) | $ | 1,529,166 | $ | 4,568,051 | $ | 1,239,892 | ||||||
| Lease Obligations (short and long term) | $ | 830,930 | $ | 830,930 | $ | 830,930 | ||||||
| Total liabilities not included in capitalization | $ | 2,360,096 | $ | 5,398,981 | $ | 2,070,822 | ||||||
| Total Outstanding Long-Term Debt | $ | 631,729 | $ | 0 | $ | 0 | ||||||
| Stockholders’ Equity | ||||||||||||
| Common shares, no par value: unlimited shares authorized; 17,071,028 shares actual; 62,911,417 shares pro forma(1),(3),(5); 83,943,404 pro-forma as adjusted | $ | 69,997,293 | $ | 76,899,905 | $ | 80,475,343 | ||||||
| Reserves | $ | 13,175,439 | $ | 13,175,439 | $ | 13,175,439 | ||||||
| Accumulated Other Comprehensive Income (loss) | $ | (177,367 | ) | $ | (177,367 | ) | $ | (177,367 | ) | |||
| Shareholders’ Deficit(4) | $ | (71,230,357 | ) | $ | (75,860,331 | ) | $ | (76,171,933 | ) | |||
| Total Shareholders’ Equity(1),(2),(3) | $ | 11,765,008 | $ | 14,037,646 | $ | 17,301,482 | ||||||
| Total Capitalization | $ | 12,396,737 | $ | 14,037,646 | $ | 17,301,482 | ||||||
| (1) | The number of shares of our common shares to be outstanding after this offering is based on 83,943,404 common shares outstanding as of February 15, 2023. That number assumes the sale of all 19,781,987 common shares by the Selling Shareholders in this offering and excludes: |
| ● | 1,506,138 common shares issuable upon the exercise of stock options outstanding under our 2016 Stock Option Plan as amended, with a weighted-average exercise price of $3.53 per share; |
| ● | 3,165,000 common shares issuable upon the exercise of restricted share units outstanding under the 2016 Stock Option Plan, as amended; |
| ● | 10,725,482 common shares reserved for future issuance under our 2016 Stock Option Plan; and |
| ● | 15,281,591 common shares issuable upon the exercise of outstanding warrants with a weighted average exercise price of $3.54 per share, |
| (2) | Warrant Liability: A valuation report to determine the fair value of the Lind Waiver Warrants and of that were issued in the Company’s public offering that closed on October 12, 2022 (“Prior Offering”) indicated a fair value of $1,810,400 for the New Warrants and a fair value of the Lind Waiver Warrants of $180,900. |
| (3) | Share Capital: The residual value method was utilized to allocate the total proceeds of the issuance of the Company’s securities in the Prior Offering. The residual value allocated to the share capital was $1,953,300 and $357,399 to share issuance costs (included in share capital amount) with the excess of $371,986 allocated to transaction costs as an expense. |
| (4) | Shareholders’ Deficit: The share issuance costs of the Prior Offering were bi-furcated proportionally based on the fair value of the warrants and of the share capital, which was estimated by management as $371,986 to shareholders’ deficit from the warrants and $357,399 allocated to the share issuance costs from the share capital. |
| (5) | The residual value method is utilized to allocate the total proceeds of the issuance for in the Prior Offering. |
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If you invest in our common shares in this offering, your ownership interest will increase immediately to the extent of the difference between the public offering price per common share and the as adjusted net tangible book value per common share immediately after this offering.
Our net tangible book value as of September 30, 2022 before this offering, which has been adjusted for the issuance of 10,397,532 common shares to repay $1,200,000 of face value principal of the Lind promissory note, the issuance of 15,810,000 common shares in the Prior Offering, the issuance of 1,590,000 pre-funded warrants that were exercised into common shares, the issuance of 1,739,130 Lind Waiver Warrants, the issuance of 18,042,857 common shares pursuant to the Exercise at $0.20 per share, was approximately $9,800,991, or approximately $0.156 per share. Our net tangible book value is the amount of our total tangible assets less our total liabilities. Net tangible book value per share represents net tangible book value divided by the 62,911,417 common shares outstanding before this offering (as adjusted above) as of September 30, 2022.
For illustrative purposes, after giving effect to: (i) the exercise of all of the outstanding New Warrants by the Selling Stockholders at the exercise price of $0 per share which would result in gross proceeds to us of $0; (ii) assuming that all of such exercised 19,781,987 common shares were sold by the Selling Shareholders in this offering (the proceeds of which would not be received by the Company), and, our pro-forma net tangible book value as of September 30, 2022 after this offering would be approximately $9,800,991, or approximately $0.156 per share. Pro-forma as adjusted net tangible book value per share represents net tangible book value divided by the 83,943,404 common shares outstanding after this offering (as adjusted above) as of September 30, 2022. This represents an immediate increase in net tangible book value of $0.00 per share to existing stockholders and immediate increase in net tangible book value of $0.156 per share to investors purchasing our common shares in this offering at the assumed public offering price.
The following table illustrates the dilution described in the paragraph above on a per-share basis:
| Net tangible book value per as of September 30, 2022 | $ | 0.33 | ||
| Net tangible book value on a pro-forma basis per share before this offering | $ | 0.156 | ||
| Net tangible book value per share as of September 30, 2022 (as adjusted above) after this offering | $ | 0.156 | ||
| Decrease in net tangible book value per share attributable to this offering | $ | (0.00 | ) | |
| Assumed public offering price per share(1) | $ | - | ||
| Net tangible book value per share as of September 30, 2022 (as adjusted above) after this offering(1) | $ | 0.156 | ||
| Increase per share to new investors purchasing common shares in this offering | $ | 0.156 |
| (1) | The number of common shares to be outstanding after this offering is based on 83,943,404 common shares outstanding as of February 15, 2023. That number assumes the sale of all 19,781,987 common shares by the Selling Shareholders in this offering and the sale of all previously registered 1,250,000 common shares by the Selling Shareholders and excludes: |
| ● | 1,506,138 common shares issuable upon the exercise of stock options outstanding under our 2016 Stock Option Plan as amended, with a weighted-average exercise price of $3.53 per share; |
| ● | 3,165,000 common shares issuable upon the exercise of restricted share units outstanding under the 2016 Stock Option Plan, as amended; |
| ● | 10,725,482 common shares reserved for future issuance under our 2016 Stock Option Plan; and |
| ● | 15,281,591 common shares issuable upon the exercise of outstanding warrants with a weighted average exercise price of $3.54 per share. |
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The exercise price for the common shares underlying the New Warrants is $0.20 per share unless the holder of the New Warrant elects to effect an “alternative cashless exercise” on or after the earlier of: (i) one hundred and eighty (180) day anniversary of the initial exercise date (January 19, 2023) or (ii) the day after the effectiveness of the registration statement of which this prospectus is a part. Based upon an assumed exercise price of $0.00 per share, we will not receive any proceeds from the cashless exercise of the New Warrants. We will incur estimated expenses of $64,323 in this offering for, among other things, our legal and accounting expenses and for registering the common shares covered by this prospectus. The Selling Shareholders will be liable for any brokerage commissions and/or similar charges incurred in connection with the sale of their common shares covered hereby.
MARKET INFORMATION FOR SECURITIES AND DIVIDEND POLICY
Market Information
Our common shares and listed warrants currently trade on Nasdaq under the symbols “SYTA” and “SYTAW,” respectively. The New Warrants were issued in private placement and are not listed for trading on the Nasdaq or any other trading platform. As of February 15, 2023, there were approximately 39 holders of record of our common shares and 1 holder of record of our listed warrants. The closing price of one common share on the Nasdaq on February 14, 2023 was $0.1545.
Dividend Policy
We have never declared or paid any dividends on our common shares. We currently intend to retain any future earnings to fund business development and growth, and we do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant.
DETERMINATION OF OFFERING PRICE
The exercise price for the common shares underlying the New Warrants is $0.20 per share unless the holder of the New Warrant elects to effect an “alternative cashless exercise” on or after the earlier of: (i) one hundred and eighty (180) day anniversary of the initial exercise date (January 19, 2023) or (ii) the day after the effectiveness of the registration statement of which this prospectus is a part. We cannot currently determine the price or prices at which common shares may be sold by the Selling Shareholders under this prospectus.
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This prospectus covers the possible resale by the Selling Shareholders identified in the table below of up to 19,781,987 common shares issuable upon the exercise of the New Warrants and the Lind Waiver Warrants. Certain of the Selling Shareholders acquired the New Warrants in a private placement pursuant to the Warrant Exercise Agreements on January 19, 2023 and Lind acquired the Lind Waiver Warrants pursuant to the Securities Purchase Agreement on October 12, 2022. We are filing the registration statement on Form F-1, of which this prospectus is a part. After the exercise of their New Warrants and/or of the Lind Waiver Warrants, in whole or in part, the Selling Shareholders may sell some, all or none of their common shares. We do not know how long the Selling Shareholders will hold the New Warrants or the Lind Waiver Warrants, whether any Selling Shareholders will exercise the New Warrants or the Lind Waiver Warrants, and upon such exercise, how long such Selling Shareholders will hold the common shares before selling them, and we currently have no agreements, arrangements or understandings with the Selling Shareholders regarding the sale of any of the common shares.
The following table presents information regarding the Selling Shareholders and the common shares that each may offer and sell from time to time under this prospectus. The table is prepared based on information supplied to us by the Selling Shareholders, and reflects their respective holdings as of February 15, 2023, unless otherwise noted in the footnotes to the table. Beneficial ownership is determined in accordance with the rules of the SEC, and thus represents voting or investment power with respect to our securities. Under such rules, beneficial ownership includes any common shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days after the date of this table, including the New Warrants and the Lind Waiver Warrants. To our knowledge and subject to applicable community property rules, except as otherwise set forth below, the persons and entities named in the table have sole voting and sole investment power with respect to all equity interests beneficially owned. The percentage of shares beneficially owned before and after the offering is based on 83,943,404 our common shares actually outstanding as of February 15, 2023 plus the total of the common shares subject to the New Warrants and the Lind Waiver Warrants.
| Selling Shareholder | Shares
Beneficially Owned Before this Offering(1) |
Percentage of
Outstanding Shares Beneficially Owned Before this Offering |
Shares
to be Sold in this Offering |
Shares
Beneficially Owned After this Offering |
Percentage of
Outstanding Shares Beneficially Owned After this Offering(1) |
|||||||||||||||
| Anson Investments Master Fund LP(2) | 2,212,500 | 2.6 | % | 1,800,000 | 412,500 | 0.5 | % | |||||||||||||
| Armistice Capital Master Fund Ltd(3) | 4,865,000 | 5.8 | % | 3,915,000 | 950,000 | 1.1 | % | |||||||||||||
| Bigger
Capital Fund, LP(4) |
1,487,500 | 1.8 | % | 1,100,000 | 387,500 | 0.5 | % | |||||||||||||
| District 2 Capital Fund LP(5) | 1,487,500 | 1.8 | % | 1,100,000 | 387,500 | 0.5 | % | |||||||||||||
| CVI Investments, Inc.(6) | 2,150,000 | 2.6 | % | 400,000 | 1,750,000 | 2.1 | % | |||||||||||||
| Funicular Funds, LP(7) | 700,000 | 0.8 | % | 700,000 | 0 | 0.0 | % | |||||||||||||
| Hudson Bay Master Fund Ltd.(8) | 2,605,000 | 3.1 | % | 1,735,000 | 870,000 | 1.0 | % | |||||||||||||
| KBB Asset Management LLC(9) | 500,000 | 0.6 | % | 500,000 | 0 | 0.0 | % | |||||||||||||
| L1 Capital Global Opportunities Master Fund(10) | 1,580,000 | 1.9 | % | 1,225,000 | 355,000 | 0.4 | % | |||||||||||||
| Selling Shareholder | Shares
Beneficially Owned Before this Offering(1) |
Percentage of
Outstanding Shares Beneficially Owned Before this Offering |
Shares
to be Sold in this Offering |
Shares
Beneficially Owned After this Offering |
Percentage of
Outstanding Shares Beneficially Owned After this Offering(1) |
|||||||||||||||
| Lind Global Macro Fund, LP(11) | 1,297,500 | 1.5 | % | 862,500 | 435,000 | 0.5 | % | |||||||||||||
| Lind Global Fund II, LP(12) | 4,929,487 | 5.9 | % | 2,755,357 | 2,174,130 | 2.6 | % | |||||||||||||
| S.H.N. Financial Investments Ltd.(13) | 800,000 | 1.0 | % | 600,000 | 200,000 | 0.2 | % | |||||||||||||
| Walleye Opportunities Master Fund Ltd.(14) | 1,000,000 | 1.2 | % | 1,000,000 | 0 | 0.0 | % | |||||||||||||
| Warberg WF X LP(15) | 350,000 | 0.4 | % | 350,000 | 0 | 0.0 | % | |||||||||||||
| * | Represents beneficial ownership of less than one percent. |
| (1) | Includes the shares underlying the New Warrants, the Lind Waiver Warrants for Lind as well as the warrants for 1,250,000 previously registered common shares held by the same Selling Shareholders as if all New Warrants, Lind Waiver Warrants and prior warrants have been exercised. Assumes all common shares offered hereby by the Selling Shareholders and the previously registered common shares are sold and that the Selling Shareholders buy or sell no additional common shares prior to the completion of this offering. |
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| (2) | Consists of (i) 412,500 common shares, and (ii) 1,800,000 common shares issuable upon the exercise of New Warrants. Anson Advisors Inc. and Anson Funds Management LP, the Co-Investment Advisers of Anson Investments Master Fund LP (“AIMF”) hold voting and dispositive power over the common shares held and to be held by Anson. Bruce Winson is the managing member of Anson Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these Common Shares except to the extent of their pecuniary interest therein. The principal business address of Anson is Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
| (3) | Consists of (i) 950,000 common shares issuable upon the exercise of warrants with an exercise price of $2.30 per share, and (ii) 3,915,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (the “Master Fund”), and may be deemed to be indirectly beneficially owned by: (i) Armistice Capital, LLC (“Armistice Capital”), as the investment manager of the Master Fund, and (ii) Steven Boyd, as the Managing Member of Armistice Capital. Armistice Capital and Steven Boyd disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. The address of the Master Fund is c/o Armistice Capital, LLC, 510 Madison Avenue, 7th Floor, New York, New York 10022. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 9.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 9.99% beneficial ownership limitation. |
| (4) | Consists of (i) 387,500 common shares issuable upon the exercise of warrants with an exercise price of $2.30 per share, and (ii) 1,100,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by Bigger Capital Fund LP, a Delaware limited partnership (the “Capital Fund”), and may be deemed to be indirectly beneficially owned by: (i) Bigger Capital Fund GP, LLC (“Bigger GP”), as the investment manager of the Capital Fund; and (ii) Michael Bigger, as the Managing Member of Bigger GP. Bigger GP and Michael Bigger disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. The address of the Capital Fund is c/o Bigger Capital Fund LP, 11700 W Charleston Blvd, 170-659, Las Vegas, Nevada 89135. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
| (5) | Consists of (i) 387,500 common shares issuable upon the exercise of warrants with an exercise price of $2.30 per share, and (ii) 1,100,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by District 2 Capital Fund LP, a New York limited partnership (“District 2”), and may be deemed to be indirectly beneficially owned by: (i) District 2 GP LLC (“District 2 GP”), as the general partner of the Capital Fund; and (ii) Michael Bigger, as the Managing Member of District 2 GP. District 2 GP and Michael Bigger disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. The address of District 2 is c/o District 2 Capital Fund LP, 14 Wall Street, 2nd Floor, Huntington, New York 11743. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
| (6) | Consists of (i) 1,750,000 common shares issuable upon the exercise of warrants with an exercise price of $2.30 per share, and (ii) 400,000 common shares issuable upon the exercise of New Warrants. Heights Capital Management, Inc., the authorized agent of CVI Investments, Inc., a Cayman Islands company (“CVI”), has discretionary authority to vote and dispose of the shares held by CVI and may be deemed to be the beneficial owner of these shares. Martin Kobinger, in his capacity as Investment Manager of Heights Capital Management, Inc., may also be deemed to have investment discretion and voting power over the shares held by CVI. Mr. Kobinger disclaims any such beneficial ownership of the shares. CVI Investments, Inc. is affiliated with one or more FINRA members, none of whom are currently expected to participate in the sale of shares of Common Stock pursuant to the prospectus contained in the Registration Statement of the common shares to be purchased and sold by CVI in this offering. The address of Heights Capital Management, Inc. is 101 California Street, Suite 3250, San Francisco, CA 94111. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
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| (7) | Consists of 700,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by Funicular Funds, LP. Funicular Funds, LP, a Delaware limited partnership, and Jacob Ma-Weaver may be deemed to be the beneficial owners of the common shares. Mr. Ma-Weaver has voting and dispositive power over the shares of common stock held by Funicular Funds, LP as a result of being the managing member of Cable Car Capital LLC, which is the general partner of Funicular Funds, LP. The business address of the selling shareholder is 2261 Market Street #4307, San Francisco, California 94114. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
| (8) | Consists of (i) 870,000 common shares issuable upon the exercise of warrants with an exercise price of $2.30 per share, and (ii) 1,735,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by Hudson Bay Master Fund Ltd., a Cayman Islands exempted company. Hudson Bay Capital Management LP, the investment manager of Hudson Bay Master Fund Ltd., has voting and investment power over these securities. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Each of Hudson Bay Master Fund Ltd. and Sander Gerber disclaims beneficial ownership over these securities. The address of Hudson Bay Capital Management L.P. is 28 Havemeyer Place, 2nd Floor, Greenwich, CT 06830. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 9.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 9.99% beneficial ownership limitation. |
| (9) | Consists of 500,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by KBB Asset Management LLC, a Delaware limited liability company (“KBB”), and may be deemed to be indirectly beneficially owned by Steve Segal, the Managing Member of KBB, who has voting and dispositive control over the shares. Mr. Segal disclaims beneficial ownership of the securities except to the extent of his respective pecuniary interests therein. The address of the KBB is c/o KBB Asset Management LLC, 47 Calle Del Sur, Palm Coast, Florida 32137. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
| (10) | Consists of (i) 355,000 common shares issuable upon the exercise of warrants with an exercise price of $2.30 per share, and (ii) 1,225,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by L1 Capital Global Opportunities Master Fund, a Cayman Islands exempted company (the “L1 Fund”). David Feldman, the portfolio manager of L1 Capital Global Opportunities Master Fund, has voting and investment power over these securities. Mr. Feldman disclaims beneficial ownership over these securities. The address of L1 Capital Global Opportunities Master Fund is 161A Shedden Road, 1 Artillery Court, PO Box 10085, Grand Cayman KY1-1001, Cayman Islands. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
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| (11) | Consists of (i) 862,500 common shares issuable upon the exercise of New Warrants, and (ii) 435,000 common shares issuable upon the exercise of warrants with an exercise price of $2.30 per share. The shares will be directly held by Lind Global Macro Fund LP, a Delaware limited partnership (the “Macro Fund”), and may be deemed to be indirectly beneficially owned by: (i) Lind Global Partners LLC (“LGP”), as the general partner of the Macro Fund; (ii) The Lind Partners LLC, the manager of LGP (“Lind”), and (iii) Jeff Easton, as the General Partner of Lind. Lind, LGP and Jeff Easton disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. The address of the Macro Fund is c/o Lind Global Macro Fund LP, 444 Madison Avenue, 41st Floor, New York, New York 10022. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 9.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 9.99% beneficial ownership limitation. |
| (12) | Consists of (i) 2,755,357 common shares issuable upon the exercise of New Warrants, (ii) 1,739,130 common shares issuable upon exercise of warrants issued in connection with a Waiver between Siyata and Lind, and (iii) 435,000 common shares issuable upon the exercise of warrants with an exercise price of $2.30 per share. The shares are directly held by Lind Global Fund II, LP, a Delaware limited partnership (the “Global Fund”), and may be deemed to be indirectly beneficially owned by: (i) Lind Global Partners II LLC (“Lind”), as the general partner of the Global Fund; (ii) The Lind Partners, LLC, the manager of Lind; and (iii) Jeff Easton, as the General Partner of The Lind Partners LLC. The Lind Partners, LLC, Lind and Jeff Easton disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. The address of the Master Fund is c/o Lind Global Fund II, LP, 444 Madison Avenue, 41st Floor, New York, New York 10022. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 9.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 9.99% beneficial ownership limitation. |
| (13) | Consists of (i) 200,000 common shares issuable upon the exercise of warrants with an exercise price of $2.30 per share, and (ii) 600,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by S.H.N. Financial Investments Ltd., an Israeli corporation (“S.H.N.”), and may be deemed to be indirectly beneficially owned by Mr. Hadar Shamir and Mr. Nir Shamir who each own 50% of the company and have shared voting and dispositive power over the common shares. Mr. Hadar Shamir and Mr. Nir Shamir disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. The address of S.H.N. is c/o S.H.N. Financial Investments Ltd., 3 Arik Einstein Street, Herzilya, Israel. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
| (14) | Consists of 1,000,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by Walleye Opportunities Master Fund Ltd., a Cayman Islands exempted company (the “Master Fund”), and may be deemed to be indirectly beneficially owned by: (i) Walleye Capital LLC (“Walleye Capital”), as the investment manager of the Master Fund, and (ii) William England, the person having voting or investment control over Walleye Capital. Walleye Capital LLC and Mr. England disclaim beneficial ownership of the securities. The address of the Master Fund is c/o Walleye Opportunities Master Fund Ltd., 2800 Niagara Lane North, Plymouth, Minnesota 55447. Walleye Capital LLC, is the general partner of Walleye Trading LLC, a broker-dealer. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
| (15) | Consists of 350,000 common shares issuable upon the exercise of New Warrants. The shares will be directly held by Warberg WF X LP, a Delaware limited partnership (the “Warberg Fund”), and may be deemed to be indirectly beneficially owned by: (i) Warberg Asset Management LLC (“WAM”), as the investment manager of the Warberg Fund, and (ii) Daniel Warsh and Jonathan Blumberg, as the Managers of WAM. WAM and Messr. Warsh and Blumberg disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. The address of the Warberg Fund is c/o Warberg WF X LP, 716 Oak Street, Winnetka, Illinois 60093. The New Warrants held by this Selling Shareholder are subject to a beneficial ownership limitation of 4.99%, which does not permit the Selling Shareholder to exercise that portion of the New Warrants that would result in the Selling Shareholder and its affiliates owning, after exercise, a number of common shares in excess of the beneficial ownership limitation. The amounts and percentages in the table do not give effect to the 4.99% beneficial ownership limitation. |
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The Selling Shareholders, which shall include donees, pledgees, transferees or other successors-in-interest selling common shares received after the date of this prospectus from a Selling Shareholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their common shares on any stock exchange, market or trading facility on which the common shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The Selling Shareholders may use any one or more of the following methods when disposing of common shares or interests therein:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block trades in which the broker-dealer will attempt to sell the common shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its own account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately negotiated transactions; |
| ● | short sales effected after the date the registration statement of which this prospectus is a part is declared effective by the SEC; |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| ● | through agreements between broker-dealers and the Selling Shareholders to sell a specified number of such shares at a stipulated price per share; |
| ● | a combination of any such methods of sale; and |
| ● | any other method permitted by applicable law. |
The Selling Shareholders may, from time to time, pledge or grant a security interest in some or all of the common shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the common shares, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b) or other applicable provision of the Securities Act amending the list of Selling Shareholders to include the pledgee, transferee or other successors in interest as Selling Shareholders under this prospectus. The Selling Shareholders also may transfer the common shares in other circumstances, in which case the pledgees, transferees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our common shares, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common shares in the course of hedging the positions they assume. The Selling Shareholders may also sell common shares short and deliver these securities to close out their short positions, or loan or pledge the common shares to broker-dealers that in turn may sell these securities. The Selling Shareholders may also enter into options or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to each such broker-dealer or other financial institution of common shares offered by this prospectus, which common shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
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The aggregate proceeds to the Selling Shareholders from the sale of the common shares offered by them will be the purchase price of the common shares less discounts or commissions, if any. Each of the Selling Shareholders reserves the right to accept and, together with its agents from time to time, to reject, in whole or in part, any proposed purchase of common shares to be made directly or through agents. We will not receive any of the proceeds from this offering. However, we will receive the proceeds from the exercise of the New Warrants by the Selling Shareholders who exercise such warrants for cash but will not receive any proceeds from any cashless exercises.
The Selling Shareholders also may resell all or a portion of the common shares in open market transactions in reliance upon Rule 144 under the Securities Act so long as they meet the criteria and conform to the requirements of that rule.
The Selling Shareholders and any underwriters, broker-dealers or agents that participate in the sale of the common shares may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the common shares may be underwriting discounts and commissions under the Securities Act. Selling Shareholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
To the extent required, the common shares to be sold, the names of the Selling Shareholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, and any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable, the common shares may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common shares may not be sold unless the shares have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with. All such requirements are the responsibility of the Selling Shareholders.
We have advised the Selling Shareholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of common shares in the market and to the activities of the Selling Shareholders and their affiliates. In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the Selling Shareholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The Selling Shareholders may indemnify any broker-dealer that participates in transactions involving the sale of the common shares against certain liabilities, including liabilities arising under the Securities Act.
We have agreed with the Selling Shareholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (i) such time as all of the common shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement, or (ii) the date on which all of the common shares may be sold without restriction pursuant to Rule 144 of the Securities Act.
We will pay all expenses of the registration of the common shares, including, without limitation, SEC filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that each Selling Shareholder will pay all underwriting discounts and selling commissions, if any, and any legal expenses incurred by it. We may indemnify the Selling Shareholders against certain liabilities, including some liabilities under the Securities Act, in accordance with the agreements with the Selling Shareholders, or the selling shareholders may be entitled to contribution.
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The following description of our common shares and provisions of our corporate articles and notice of articles are summaries and do not purport to be complete. Reference is made to our corporate articles and notice of articles, copies of which are filed as an exhibit to the registration statement of which this prospectus is a part (and which is referred to in this section as the “articles”).
Our common shares were listed on the Nasdaq Capital Market and currently trade under the symbols “SYTA.”
All of our issued and outstanding common shares are fully paid and non-assessable. Unless the board of directors determine otherwise, each holder of our common shares will not receive a certificate in respect of such common shares. Our shareholders who are non-residents of British Columbia may freely hold and vote their common shares.
We are authorized to issue an unlimited amount of common shares with no par value per share. Subject to the provisions of the Business Corporations Act (British Columbia) (“Business Corporations Act”),our articles and applicable securities laws, the directors have general and unconditional authority to allot, grant options over or otherwise deal with any unissued shares to such persons, at such times and on such terms and conditions as they may decide. The directors may refuse to accept any application for shares, and may accept any application in whole or in part, for any reason or for no reason.
Certain legal matters with respect to Canadian law and with respect to the validity of the offered securities under the law of British Columbia, Canada, will be passed upon for us by our Canadian legal counsel Cassels Brock & Blackwell LLP. Certain legal matters with respect to New York law and U.S. federal securities law will be passed upon for us by Carmel, Milazzo & Feil LLP, New York, New York.
The consolidated financial statements of the Company incorporated in this prospectus by reference to our Annual Report on Form 20-F for the year ended December 31, 2021 have been audited by Davidson & Company LLP, an independent registered public accounting firm, as set forth in their reports, which are incorporated herein by reference. Such consolidated financial statements have been so incorporated by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the “short-swing profits” reporting and liability provisions contained in Section 16 of the Exchange Act and related Exchange Act rules. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
You may access the documents that we file with the SEC at the SEC’s website at www.sec.gov. Copies of certain information filed by us with the SEC are also available on our website at www.siyatamobile.com. Information contained in or accessible through our website does not constitute a part of this prospectus and is not incorporated by reference in this prospectus.
This prospectus is part of a registration statement on Form F-1 we filed with the SEC. This prospectus does not contain all of the information set forth in the registration statement and the exhibits to the registration statement. For further information with respect to us and the securities that are being offered under this prospectus, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. You should rely only on the information contained in this prospectus or incorporated by reference in prospectus. We have not authorized anyone else to provide you with different information.
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INCORPORATION OF DOCUMENTS BY REFERENCE
We file annual and special reports and other information with the SEC (File Number 001-39557). These filings contain important information which does not appear in this prospectus. The SEC allows us to “incorporate by reference” information into this prospectus, which means that we can disclose important information to you by referring you to other documents which we have filed or will file with the SEC. The information incorporated by reference is considered to be part of this prospectus, and information in documents that we file later with the SEC will automatically update and supersede information in this prospectus. We incorporate by reference into this prospectus the documents listed below and any future filings made by us with the SEC under Section 13(a), 13(c), 15(d) of the Exchange Act, except for information “furnished” to the SEC that is not deemed filed and not incorporated by reference into this prospectus (unless otherwise indicated below), until the termination of the offering of securities described in the applicable prospectus supplement or post-effective amendment:
| ● | our Annual Report on Form 20-F for the fiscal year ended on December 31, 2021, filed with the SEC on April 28, 2022 (the “Form 20-F”); |
| ● | our Report of Foreign Private Issuer on Form 6-K furnished to the SEC on April 29, 2022, May 3, 2022, May 17, 2022, May 26, 2022, May 31, 2022, May 31, 2022, June 7, 2022, June 27, 2022, July 6, 2022, July 13, 2022, July 14, 2022, July 18, 2022, July 26, 2022, July 28, 2022, August 1, 2022, August 19, 2022, August 19, 2022, August 19, 2022, August 30, 2022, September 1, 2022, September 8, 2022, September 22, 2022, September 23, 2022; October 12, 2022; October 13, 2022; October 19, 2022; October 26, 2022, October 31, 2022, November 09, 2022, November 10, 2022, November 14, 2022, November 15, 2022, November 16, 2022, December 6, 2022, December 30, 2022, January 9, 2023, January 18, 2023, January 19, 2023, January 23, 2023; |
| ● | the description of our securities registered under Section 12 of the Exchange Act contained in the Form 8-A12B, as filed with the SEC on September 24, 2020, including any amendment or report filed for the purpose of updating such description; and |
| ● | any future filings made with the SEC under Section 13(a), 13(c) or 15(d) of the Exchange Act. |
In addition, any reports on Form 6-K submitted to the SEC by the registrant pursuant to the Exchange Act after the date of the initial registration statement and prior to effectiveness of the registration statement that we specifically identify in such forms as being incorporated by reference into the registration statement of which this prospectus forms a part and all subsequent Annual Reports on Form 20-F filed after the effective date of this registration statement and prior to the termination of this offering and any reports on Form 6-K subsequently submitted to the SEC, or portions thereof that we specifically identify in such forms as being incorporated by reference into the registration statement of which this prospectus forms a part, shall be considered to be incorporated into this prospectus by reference and shall be considered a part of this prospectus from the date of filing or submission of such documents.
You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus as well as the information we previously filed with the SEC and incorporated by reference, is accurate as of the dates on the front cover of those documents only. Our business, financial condition and results of operations and prospects may have changed since those dates. Certain statements in and portions of this prospectus update and replace information in the above listed documents incorporated by reference. Likewise, statements in or portions of a future document incorporated by reference in this prospectus may update and replace statements in and portions of this prospectus or the above listed documents.
We will provide you without charge, upon your written or oral request, a copy of any of the documents incorporated by reference in this prospectus, other than exhibits to such documents which are not specifically incorporated by reference into such documents. Please direct your written or telephone requests to Siyata Mobile Inc., Attn: Chief Financial Officer, 1751 Richardson Street, Suite #2207, Montreal, Quebec Canada H3K-1G6; telephone: 514-500-1181. You may also obtain information about us by visiting our website at https://www.siyatamobile.com. The information contained on or accessible through our website is not incorporated by reference and is not part of this prospectus.
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Up to 19,781,987 Common Shares
Prospectus
February 15, 2023
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 6. Indemnification of Directors and Officers.
Section 160 of the Business Corporation Act authorizes companies to indemnify past and present directors, officers and certain other individuals for the liabilities incurred in connection with their services as such (including costs, expenses and settlement payments) unless such individual did not act honestly and in good faith with a view to the best interests of the company and, in the case of a proceeding other than a civil proceeding, if such individual did not have reasonable grounds for believing his or her conduct was lawful. In the case of a suit by or on behalf of the corporation, a court must approve the indemnification.
Our articles provide that we shall indemnify directors and officers to the extent required or permitted by law.
We have entered into agreements with our directors and certain officers (each an “Indemnitee” under such agreements) to indemnify the Indemnitee, to the fullest extent permitted by law and subject to certain limitations, against all liabilities, costs, charges and expenses reasonably incurred by an Indemnitee in an action or proceeding to which the Indemnitee was made a party by reason of the Indemnitee being an officer or director of (i) our company or (ii) an organization of which our company is a shareholder or creditor if the Indemnitee serves such organization at our request.
We maintain insurance policies relating to certain liabilities that our directors and officers may incur in such capacity.
Item 7. Recent sales of unregistered securities.
During the past three years, we have issued the following securities. We believe that each of the following issuances was exempt from registration under the Securities Act pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering or in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions. No underwriters were involved in these issuances of securities.
On January 18, 2023, we entered into Warrant Exercise Agreements with fourteen existing accredited investors who exercised certain outstanding warrants (the “Existing Warrants”) to purchase up to an aggregate of 18,042,857 of the Company’s previously registered common shares (the “Exercise”). In consideration for the immediate exercise of the Existing Warrants for cash at an exercise price reduced from $0.23 to $0.20 per common share, the exercising holders received new unregistered warrants to purchase up to an aggregate of 18,042,857 common shares
On October 12, 2022, the Company issued 17,400,000 common stock purchase warrants to a number of accredited institutional investors in conjunction with a direct registered offering.
On October 28, 2021 received gross cash of $1,027,500 USD from the exercise of 150,000 warrants at $6.85 USD, and on October 29, 2021 received gross cash of $380,202 USD from the exercise of 55,504 warrants at $6.85 USD.
On July 29, 2022, a consultant exercised 30,000 restricted share units to acquire 30,000 shares of the Company.
On July 14, 2022 the Company issued 60,000 shares to a supplier as part of their contractual agreement.
From May 3, 2022 through November 14, 2022, the Company issued a total of 13,112,25 shares as compensation for the repayment of the principal balance of the outstanding promissory note.
On April 11, 2022, the Company issued 155,000 shares to consultants of the Company as part of their contractual agreements.
On March 30, 2022, the Company issued 138,958 shares as partial compensation of the future purchase consideration owed to the former holders of the units of Clear RF, LLC.
On July 21, 2021, the Company issued 5,000 common shares as part of the contractual obligations owed to one of its suppliers. This transaction was recorded to share capital in the amount of $36,050 (based on the market value on the date of issuance of $7.21 per share).
Upon the Acquisition of Clear Rf on March 31 2021, the Company issued 23,949 common shares to the vendors of ClearRF equal to $194,985.
During the month of February 2021, the Company received multiple tradeable warrant exercises for total proceeds of $609,041 on the redemption of a total of 88,911 tradeable warrants at an exercise price of $6.85 for each common share.
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The Company issued in February 2021, the 40,000 shares to be issued for services rendered at a value of $560,000.
On December 31, 2020, the Company completed a private placement financing (the “December 2020 Offering”) with certain Israeli and Canadian investors, to purchase 129,450 December 2020 Units at a purchase price of US$100.00 per December 2020 Unit, for aggregate gross proceeds of US$12,945,000. Each December 2020 Unit consisted of ten Common Shares and ten December 2020 Warrants. Each December 2020 Warrant entitles the holder to acquire one Common Share at an exercise price of US$11.50 per Common Share for a period of 42 months. The Company retained Orion Underwriting and Issuances Ltd. to serve as its placement agent with respect to the Israeli investors participating in the December 2020 Offering. Commissions were issued totalling US$652,250 and 64,752 broker warrants on the same terms as the December 2020 Warrants.
On December 14, 2020, the Company issued 85,659 common shares to various suppliers as required under contractual obligations valued at $710,970.
During the month of November 2020, the Company issued 170,000 common shares at $5.99 per share to the underwriter of the initial public offering as a result of the underwriter exercising its over-allotment option, for gross proceeds of $1,018,300 less share issuance costs of $81,464 for net proceeds of $936,836.
On September 29, 2020, the Company completed a private placement financing (the “IPO uplisting Offering”) with certain investors, to purchase 2,100,000 Units at a purchase price of US$6.00 per Unit, for aggregate gross proceeds of US$12,600,000. Each Unit consisted of one Common Shares and one Warrant. Each Warrant entitles the holder to acquire one Common Share at an exercise price of US$6.85 per Common Share for a period of 60 months. These warrants are tradeable under the symbol SYTAW. The Company retained Maxim Group LLC to serve as its placement agent in this Offering.
On August 4, 2020, the Company completed a non-brokered private placement raising aggregate gross proceeds of $2,150,000CAD through the issuance of 21,500,000 units (148,276 post-Reverse Split) (the “August 2020 Units”) at a price of $0.10 CAD per August 2020 Unit. Each August 2020 Unit consisted of one common share in the capital of the Company and one-half of one common share purchase warrant (each, a “August 2020 Warrant”). Each whole August 2020 Warrant is exercisable at a price of $0.18 CAD ($26.10 CAD after the reverse split) for a period of two years. The Company paid a cash commission of $24,681.60 CAD and issued 246,816 broker warrants on the same terms as the August 2020 Warrants to certain finders. The purchasers of the August 2020 Units consisted of a group of accredited investors.
On June 24, 2020, one of the convertible debenture holders, converted $75,000 CAD of face value debentures at $0.45CAD per share into 166,666 shares of the Company.
On June 23, 2020 the Company consummated a new debenture private placement of $1,580,000 CAD with a 10% coupon with a maturity of June 22, 2021. The investors consisted of a group of accredited investors, including Accel Telecom, Ltd. purchasing $1,330,000 Units (9,172 units after the reverse split).
On December 23, 2019, Siyata consummated a brokered private placement financing raising $7,866,000.00 CAD through the issuance of 7,866,000 unsecured 12% per annum convertible debentures (the “Convertible Debentures”) maturing on December 23, 2021 at a price of $1.00 CAD (the “Issue Price”) per Convertible Debenture, with each $1,000 CAD of Convertible Debenture will be convertible into 2,222 common shares (15.3 after the reverse split) in the capital of the Company representing approximately $0.45 CAD ($65,25 CAD after the reverse split) per Common Share, subject to adjustment in certain events. The purchasers of the Convertible Debentures consisted of a group of accredited investors.
On December 23, 2019, the Company issued 481,928 (3,324 after the reverse split) common shares as compensation to the agents’ in connection to the issuance of the convertible debentures.
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Item 8. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this registration statement:
| * | Previously filed. |
| # | Filed herewith. |
| + | To be filed upon amendment. |
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Item 9. Undertakings.
The undersigned registrant hereby undertakes:
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
| (2) | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
| (5) | That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (6) | To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering. |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Montreal, Quebec, Canada, on this 15th day of February, 2023.
| SIYATA MOBILE INC. | ||
| By: | /s/ Marc Seelenfreund | |
| Marc Seelenfreund | ||
| Chief Executive Officer and Director | ||
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Marc Seelenfreund or Gerald Bernstein as his true and lawful attorney-in-fact and agent, with the full power of substitution, for him and in his name, place or stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462 promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| /s/ Marc Seelenfreund | Chief Executive Officer and Director | February 15, 2023 | ||
| Marc Seelenfreund | (Principal Executive Officer) | |||
| /s/ Gerald Bernstein | Chief Financial Officer | February 15, 2023 | ||
| Gerald Bernstein | (Principal Accounting and Financial Officer) | |||
| /s/ Peter Goldstein | Chairman | February 15, 2023 | ||
| Peter Goldstein | ||||
| /s/ Michael Kron | Director | February 15, 2023 | ||
| Michael Kron | ||||
| /s/ Lourdes Felix | Director | February 15, 2023 | ||
| Lourdes Felix | ||||
| /s/ Stephen Ospalak | Director | February 15, 2023 | ||
| Stephen Ospalak |
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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933 as amended, the undersigned, the duly authorized representative in the United States of America of Siyata Mobile Inc., has signed this registration statement on February 15, 2023.
| Authorized U.S. Representative | ||
| /s/ Colleen A. De Vries | ||
| Name: | Colleen A. De Vries | |
| Title: | Senior Vice-President on behalf of Cogency Global Inc. | |
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Exhibit 4.5
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON SHARE PURCHASE WARRANT
SIYATA MOBILE INC.
| Warrant Shares: 1,739,130 | Initial Exercise Date: October 12, 2022 |
THIS COMMON SHARE PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Lind Global Fund II LPor its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on October 12, 2027 (the “Termination Date”) but not thereafter, to subscribe for and purchase from SIYATA MOBILE INC., a company incorporated under the laws of British Columbia (the “Company”), up to 1,739,130 of the Company’s common shares without par value (as subject to adjustment hereunder, the “Warrant Shares”). The purchase price of one Common Share under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated October 10, 2022, among the Company and the purchasers signatory thereto.
a) “Convertible Securities” means any shares or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any Common Shares.
b) “Event Market Price” means, with respect to any Share Combination Event Date, the quotient determined by dividing (x) the sum of the VWAP of the Common Shares for each of the five (5) lowest Trading Days during the twenty (20) consecutive Trading Day period ending and including the Trading Day immediately preceding the sixteenth (16th) Trading Day after such Share Combination Event Date, divided by (y) five (5). All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
c) “Options” means any rights, warrants or options to subscribe for or purchase Common Shares or Convertible Securities
Section 2. Exercise.
a) Exercise of Warrant. Subject to the provisions of Section 2(e) herein, exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver to the Company the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver to the Holder any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 4:00 p.m. (New York City time) on the Trading Date prior to the Initial Exercise Date, which may be delivered at any time after the time of execution of the Purchase Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per share of a share of the Common Shares under this Warrant shall be $0.23, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. If at any time after the four month anniversary of the Closing Date, there is no effective registration statement registering, or no current prospectus available for the resale of the Warrant Shares by the Holder then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
| (A) = | as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Shares on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day; |
| (B) = | the Exercise Price of this Warrant, as adjusted hereunder; and |
| (X) = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
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If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed or quoted on a Trading Market, the bid price of the Common Shares for the time in question (or the nearest preceding date) on the Trading Market on which the Common Shares are then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Share for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Share is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Share are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Share so reported, or (d) in all other cases, the fair market value of a share of Common Share as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies:
(a) if the Common Shares are then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Share for such date (or the nearest preceding date) on the Trading Market on which the Common Share is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Share is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Share is then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of Common Share so reported, or (d) in all other cases, the fair market value of Common Share as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
| d) | Mechanics of Exercise. |
| i. | Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Shares on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the third Trading Day after such Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Shares as in effect on the date of delivery of the Notice of Exercise. |
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| ii. | Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. |
| iii. | Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise. |
| iv. | Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, Common Shares to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of Common Shares that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of this Warrant to purchase Common Shares with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Common Shares upon exercise of the Warrant as required pursuant to the terms hereof. |
| v. | No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share. |
| vi. | Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares. |
| vii. | Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof. |
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e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of Common Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Common Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Common Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Share Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding Common Shares, a Holder may rely on the number of outstanding Common Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of Common Shares outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of Common Shares then outstanding. In any case, the number of outstanding Common Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding Common Shares was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of the Common Shares outstanding immediately after giving effect to the issuance of Common Shares issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Shares outstanding immediately after giving effect to the issuance of Common Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Shares or any other equity or equity equivalent securities payable in Common Shares (which, for avoidance of doubt, shall not include any Common Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Common Shares into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding Common Shares into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Shares any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Common Shares (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Common Shares outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Adjustment Upon Issuance of Common Shares. If and whenever on or after the Closing Date, the Company grants issues or sells (or enters into any agreement to grant, issue or sell), or in accordance with this Section 2 is deemed to have granted, issued or sold, any Common Shares (including the issuance or sale of Common Shares owned or held by or for the account of the Company, but excluding any Exempt Issuances, granted issued or sold or deemed to have been granted issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such granting, issuance or sale or deemed granting issuance or sale (such Exercise Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Exercise Price and the New Issuance Price under this Section 2(b)), the following shall be applicable:
| (i) | Issuance of Options. If the Company in any manner grants, issues or sells any Options (or enters into any agreement to grant, issue or sell) and the lowest price per share for which one Common Share is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such Common Share shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 2(b)(i), the “lowest price per share for which one Common Share is at any time issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one Common Share upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one Common Share is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Shares or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms of or upon the actual issuance of such Common Shares upon conversion, exercise or exchange of such Convertible Securities. |
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| (ii) | Issuance of Convertible Securities. If the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Convertible Securities and the lowest price per share for which one Common Share is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such Common Share shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale (or the time of execution of such agreement to issue or sell, as applicable) of such Convertible Securities for such price per share. For the purposes of this Section 2(b)(ii), the “lowest price per share for which one Common Share is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one Common Share upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one Common Share is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of such Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Shares upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of such issuance or sale. |
| (iii) | Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Shares increases or decreases at any time (other than proportional changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security (including, without limitation, any Option or Convertible Security that was outstanding as of the Closing Date) are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Shares deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect. |
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| (iv) | Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”, and such Option and/or Convertible Security and/or Adjustment Right, the “Secondary Securities” and together with the Primary Security, each a “Unit”), together comprising one integrated transaction, the aggregate consideration per Common Share with respect to such Primary Security shall be deemed to be the lower of (x) the purchase price of such Unit, (y) if such Primary Security is an Option and/or Convertible Security, the lowest price per share for which one Common Share is at any time issuable upon the exercise or conversion of the Primary Security in accordance with Sections 2(b)(i) or 2(b)(ii) above and (z) the lowest VWAP of the Common Shares on any Trading Day during the five (5) Trading Day period (the “Adjustment Period”) immediately following the public announcement of such Dilutive Issuance (for the avoidance of doubt, if such public announcement is released prior to the opening of the principal Trading Market of the Common Shares on a Trading Day, such Trading Day shall be the first Trading Day in such five Trading Day period and if this Warrant is exercised, on any given Exercise Date during any such Adjustment Period, solely with respect to such portion of this Warrant converted on such applicable Exercise Date, such applicable Adjustment Period shall be deemed to have ended on, and included, the Trading Day immediately prior to such Exercise Date). If any Common Shares, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any Common Shares, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any Common Shares, Options or Convertible Securities are issued to the owners of the non- surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Shares, Options or Convertible Securities (as the case may be). The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company. |
| (v) | Record Date. If the Company takes a record of the holders of Common Shares for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Shares, Options or in Convertible Securities or (B) to subscribe for or purchase Common Shares, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the Common Shares deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be). |
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(c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Share Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Shares (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Common Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Common Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Shares, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of Common Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Shares are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Common Shares as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
e) Share Combination Event Adjustment If at any time and from time to time on or after the Issuance Date there occurs any share split, share dividend, share combination recapitalization or other similar transaction involving the Ordinary Shares (each, a “Share Combination Event”, and such date thereof, the “Share Combination Event Date”) and the Event Market Price is less than the Exercise Price then in effect (after giving effect to the adjustment in clause 2(a) above), then on the sixteenth (16th) Trading Day immediately following such Share Combination Event , the Exercise Price then in effect on such sixteenth (16th) Trading Day (after giving effect to the adjustment in clause 2(b) above) shall be reduced (but in no event increased) to the Event Market Price. For the avoidance of doubt, if the adjustment in the immediately preceding sentence would otherwise result in an increase in the Exercise Price hereunder, no adjustment shall be made, and if this Warrant is exercised, on any given Exercise Date during any such sixteen (16) Trading Days immediately following such Share Combination Event (the “Share Combination Adjustment Period”), solely with respect to such portion of this Warrant exercised on such applicable Exercise Date, such applicable Share Combination Adjustment Period shall be deemed to have ended on, and included, the Trading Day immediately prior to such Exercise Date and the Event Market Price on such applicable Exercise Date will be the quotient determined by dividing (x) the sum of the five (5) lowest VWAPs of the Ordinary Shares starting five (5) Trading Days immediately prior to the Share Combination Event Date and ending on, and including the Trading Day immediately prior to such Exercise Date, divided by (y) five (5).
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f) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Shares, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Shares or any compulsory share exchange pursuant to which the Common Shares is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding Common Shares (not including any Common Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of Common Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of Common Shares for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of the Common Share in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, the Holder shall only be entitled to receive from the Company or any Successor Entity, as of the date of consummation of such Fundamental Transaction, the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Shares of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Shares are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Share of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Shares will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the highest VWAP during the period beginning on the Trading Day immediately preceding the announcement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to this Section 3(e) and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds (or such other consideration) within the later of (i) five Business Days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the Common Shares acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the Common Shares pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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g) Calculations. All calculations under this Section 3 shall be made by the Company to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number Common Shares deemed to be issued and outstanding as of a given date shall be the sum of the number Common Shares (excluding treasury shares, if any) issued and outstanding.
h) Notice to Holder.
| i. | Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment. |
| ii. | Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Shares, (C) the Company shall authorize the granting to all holders of the Common Shares rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Shares, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Shares is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Shares of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Shares of record shall be entitled to exchange their shares of the Common Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Report of Foreign Issuer on Form 6-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein. |
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Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of the Purchase Agreement.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.
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b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Shares a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Shares may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its articles of association or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
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e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, or e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at Siyata Mobile Inc., 1001 Lenoir St Suite A-414, Montreal, Quebec H4C 2Z6, Canada, Attention: Gerald Bernstein, Chief Financial Officer, email address: gerry@siyata.net, or such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Report of Foreign Private Issuer on Form 6-K.
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i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Shares or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Reserved.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
o) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company, on the one hand, and the Holder or the beneficial owner of this Warrant, on the other hand.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| SIYATA MOBILE INC. | |||
| By | /s/ Gerald Bernstein | ||
| Name: | Gerald Bernstein | ||
| Title: | Chief Financial Officer | ||
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NOTICE OF EXERCISE
TO: SIYATA MOBILE INC.
(1) The undersigned hereby elects to purchase ________________Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] [if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
| Name of Investing Entity: | |
| Signature of Authorized Signatory of Investing Entity: |
|
| Name of Authorized Signatory: | |
| Title of Authorized Signatory: | |
| Date: |
[SIGNATURE OF HOLDER]
| Name of Investing Entity: _________________________________________________________________________ |
| Signature of Authorized Signatory of Investing Entity: ___________________________________________________ |
| Name of Authorized Signatory: _____________________________________________________________________ |
| Title of Authorized Signatory: ______________________________________________________________________ |
| Date: _________________________________________________________________________________________ |
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: | |
| (Please Print) | |
| Address: | |
| (Please Print) | |
| Phone Number: | |
|
Email Address: |
| Dated: __________________,______ | ||
| Holder’s | Signature: | |
| _____________________ | ||
| Holder’s Address: ____________________ | ||
Exhibit 5.1
February 15, 2023
Siyata Mobile Inc.
1751 Richardson Street, Suite #2207
Montreal, Quebec H3K 1G6
| Re: | Siyata Mobile Inc. – Form F-1 Registration Statement |
We have acted as Canadian legal counsel to Siyata Mobile Inc., a British Columbia corporation (the “Company”), in connection with the Company’s Registration Statement on Form F-1 (the “Registration Statement”) with the United States Securities and Exchange Commission (the “Commission”) including a related preliminary prospectus filed with the Registration Statement (the “Prospectus”), covering the proposed offering (the “Offering”) for resale to certain purchasers of up to 19,781,987 common shares in the capital of the Company (each, a “Common Share”, and the Common Shares sold pursuant to the Offering, the “Shares”) by the shareholders who own such Shares (each, a “Selling Shareholder”).
Certain of the Selling Shareholders acquired the Shares by exercising Common Share purchase warrants (each, a “Purchase Warrant”) which were issued by the Company to the Selling Shareholders (i) in a private placement pursuant to warrant exercise agreements (the “Warrant Exercise Agreements”) dated January 18, 2023, and (ii) upon the exercise of certain warrants (the “Lind Waiver Warrants”) under a securities purchase agreement (the “Securities Purchase Agreement”) made with Lind Global Partners II, LP dated October 27, 2021.
In connection with this opinion, we have reviewed and relied upon the Warrant Exercise Agreements, the Securities Purchase Agreement, the Company’s Notice of Articles, the Company’s Articles, the Prospectus, records of the Company’s corporate proceedings in connection with the Offering, the Purchase Warrant, the Lind Waiver Warrants, and such other documents, records, certificates, memoranda, and other instruments as we deem necessary as a basis for this opinion. With respect to the foregoing documents, we have assumed: (i) the authenticity of all records, documents, and instruments submitted to us as originals; (ii) the genuineness of all signatures on all agreements, instruments, and other documents submitted to us; (iii) the legal capacity and authority of all persons or entities (other than the Company) executing all agreements, instruments, or other documents submitted to us; (iv) the authenticity and the conformity to the originals of all records, documents, and instruments submitted to us as copies; (v) that the statements contained in the certificates and comparable documents of public officials, officers, and representatives of the Company and other persons on which we have relied for purposes of this opinion are true and correct; and (vi) the due authorization, execution, and delivery of all agreements, instruments, and other documents by all parties thereto (other than the due authorization, execution, and delivery of each such agreement, instrument, and document by the Company). We have also obtained from officers of the Company certificates as to certain factual matters and, insofar as this opinion is based on matters of fact, we have relied on such certificates without independent investigation.
Our opinion is limited to laws of the Province of British Columbia and the federal laws of Canada applicable therein, including all applicable provisions of the British Columbia Business Corporations Act. We have not considered, and have not expressed any opinion with regard to, or as to the effect of, any other law, rule, or regulation applicable to the Company. In particular, we express no opinion as to any laws of the United States, including any United States federal securities laws.
Based upon the foregoing and in reliance thereon, and subject to the qualifications and limitations set forth herein, we are of the opinion that when the Shares are issued and sold in the manner and under the terms described in the Purchase Warrant and Lind Waiver Warrant, such Shares will be validly issued, fully paid, and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the United States Securities Act of 1933, as amended, or the rules and regulations of the Commission.
This opinion is furnished in accordance with the requirements of Regulation S-K, Item 601(b)(5), and is not to be used, circulated, quoted, or otherwise relied upon for any other purpose. This opinion is rendered solely in connection with the registration of the Warrant Shares for resale by the Selling Shareholders under the Registration Statement. This opinion is limited to the specific issues addressed herein, and no opinion may be inferred or implied beyond that expressly stated herein. We disclaim any obligation to advise you of facts, circumstances, events, or developments that hereafter may be brought to our attention and that may alter, affect, or modify the opinion expressed herein after the date hereof.
Yours truly,
Cassels Brock & Blackwell LLP
Exhibit 5.2
February 15, 2023
Siyata Mobile Inc.
1751 Richardson Street, Suite #2207
Montreal, Quebec Canada H3K-1G6
Re: Siyata Mobile Inc. - Registration Statement on Form F-1
Ladies and Gentlemen:
We have acted as United States counsel to Siyata Mobile Inc., a company incorporated under the laws of the Province of British Columbia, Canada (the “Company”), in connection with the filing of a registration statement on Form F-1, as amended (the “Registration Statement”) (File No. 333-[*]), under the Securities Act of 1933, as amended (the “Securities Act”). The Registration Statement relates to the resale, from time to time, by the selling shareholders named therein, or their pledgees, donees, transferees, or other successors in interest (the “Selling Shareholders”), of up to 19,781,987 of our common shares, no par value per share (the “Common Shares”), issuable upon the exercise of the common share purchase warrants (the “New Warrants”) issued to certain of the Selling Shareholders in a private placement (“Private Placement”) pursuant to the Warrant Exercise Agreements dated January 18, 2023 by and between the Selling Shareholders and the Company (“Warrant Exercise Agreement(s)”) and warrants issued to Lind Global Partners II LP (the “Lind Waiver Warrants”) under a securities purchase agreement dated October 27, 2021 (“Securities Purchase Agreement”).
In rendering the opinions set forth below, we have assumed that: (i) all information contained in all documents reviewed by us is true and correct; (ii) all signatures on all documents examined by us are genuine; (iii) all documents submitted to us as originals are authentic and all documents submitted to us as copies conform to the authentic originals of such documents; (iv) each natural person signing any document reviewed by us had the legal capacity to do so; and (v) the certificates representing the Common Shares will be duly executed and delivered.
We have also assumed that: (i) the Company has been duly incorporated, and is validly existing and in good standing; (ii) the Company has requisite legal status and legal capacity under the laws of the jurisdiction of its incorporation; (iii) the Company has complied and will comply with all aspects of the laws of the jurisdiction of its incorporation, in connection with the transactions contemplated by, and the performance of its obligations under the Warrant Exercise Agreement, the Securities Purchase Agreement, the New Warrants and the Lind Waiver Warrants; (iv) the Company has the corporate power and authority to execute, deliver and perform all its respective obligations under the Warrant Exercise Agreement, Securities Purchase Agreement, the New Warrants and the Lind Waiver Warrants; (v) the Common Shares have been duly authorized by all requisite corporate action on the part of the Company; (vi) all questions concerning the construction, validity, enforcement and interpretation of the Warrant Exercise Agreement, the Securities Purchase Agreement, the New Warrants and the Lind Waiver Warrants shall be governed by the internal laws of the State of New York, without regard to the principles of conflicts of law thereof; (vii) service of process will be effected in the manner and pursuant to the methods set forth in the said Warrant Exercise Agreement and the Securities Purchase Agreement, respectively; (viii) that the said agreements noted above are enforceable under the laws of the Company’s jurisdiction of incorporation; and (ix) at the time of exercise of the New Warrants and the Lind Waiver Warrants, a sufficient number of Common Shares have been reserved by the Company’s board of directors or a duly authorized committee thereof and will be authorized and available for issuance and that the consideration for the issuance and sale of the Common Shares in connection with the exercise of the New Warrants and the Lind Waiver Warrants is in an amount that is valid under the laws of the Company’s jurisdiction of incorporation.
In connection with this matter, we have examined the Registration Statement, including the exhibits thereto, the Warrant Exercise Agreement, the Securities Purchase Agreement, the New Warrants, the Lind Waiver Warrants, the Company’s articles of association, resolutions of the Board of Directors, certificates of authorized officers of the Company, certificates of government officials and such other documents, corporate records, and instruments and have examined such laws and regulations as we have deemed necessary for purposes of rendering the opinions set forth herein.
In connection with our opinions expressed below, we have assumed that, (i) at or prior to the time of the issuance and delivery of any of the Common Shares there will not have occurred any change in the law or the facts affecting the validity of the Common Shares, any change in actions of the Board of Directors or the Company’s shareholders, or any amendments to the articles of association, and (ii) at the time of the offer, issuance and sale of any Common Shares no stop order suspending the Registration Statement’s effectiveness will have been issued and remain in effect, and that the Registration Statement will not have been modified or rescinded. We also have assumed that the issuance and delivery of the Common Shares subsequent to the date hereof and the compliance by the Company with the terms of such New Warrants or Lind Waiver Warrants will not result in a violation of the articles of association or any provision of any instrument or agreement then binding upon the Company or any restriction imposed by any court or governmental body then having jurisdiction over the Company.
We are members of the Bar of the State of New York. We do not hold ourselves out as being conversant with, or expressing any opinion with respect to, the laws of any jurisdiction other than the federal laws of the United States of America and the laws of the State of New York. Accordingly, the opinions expressed herein are expressly limited to the federal laws of the United States of America and the laws of the States of New York. In particular, we do not purport to pass on any matter governed by the laws of Canada or of the Province of British Columbia. Because the New Warrants and the Lind Waiver Warrants contain provisions stating that they are to be governed by the laws of the State of New York, we are rendering this opinion as to New York law.
Based upon and subject to and limited by the foregoing, we are of the opinion that when the New Warrants and the Lind Waiver Warrants are properly exercised and paid for and the Common Shares are issued, sold and delivered in the manner and for the consideration stated in the Warrant Exercise Agreement, the Securities Purchase Agreement, the Registration Statement, the New Warrants and the Lind Waiver Warrants, and in accordance with the resolutions adopted by the Company’s Board of Directors, such Common Shares will be validly issued pursuant to the terms of the New Warrants and the Lind Waiver Warrants.
Our opinion set forth above with respect to the validity or binding effect of any security or obligation may be limited by: (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, marshaling, moratorium or other similar laws affecting the enforcement generally of the rights and remedies of creditors and secured parties or the obligations of debtors; (ii) general principles of equity (whether considered in a proceeding in equity or at law), including but not limited to principles limiting the availability of specific performance or injunctive relief, and concepts of materiality, reasonableness, good faith and fair dealing; (iii) the possible unenforceability under certain circumstances of provisions providing for indemnification, contribution, exculpation, release or waiver that may be contrary to public policy or violative of federal or state securities laws, rules or regulations; and (iv) the effect of course of dealing, course of performance, oral agreements or the like that would modify the terms of an agreement or the respective rights or obligations of the parties under an agreement.
This opinion letter speaks only as of the date hereof and we assume no obligation to update or supplement this opinion letter if any applicable laws change after the date of this opinion letter or if we become aware after the date of this opinion letter of any facts, whether existing before or arising after the date hereof, that might change the opinions expressed above.
This opinion letter is furnished in connection with the filing by the Company of the Registration Statement on Form F-1 and may not be relied upon for any other purpose without our prior written consent in each instance. Further, no portion of this letter may be quoted, circulated or referred to in any other document for any other purpose without our prior written consent.
We hereby consent to the filing of this opinion as Exhibit 5.2 to the Registration Statement and to the use of our name as it appears under the caption “Legal Matters” in the prospectus. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder. This opinion is expressed as of the date hereof unless otherwise expressly stated, and we disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or of any subsequent changes in applicable laws.
| Very truly yours, | |
| /s/ Carmel, Milazzo & Feil LLP | |
| Carmel, Milazzo & Feil LLP |
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT.
Siyata Mobile Inc.
List of subsidiaries
| Name of Subsidiary | Place of Incorporation | Ownership | ||
| Queensgate Resources Corp. | British Columbia, Canada | 100% | ||
| Queensgate Resources US Inc. | Nevada, USA | 100% | ||
| Siyata Mobile (Canada) Inc. | British Columbia, Canada | 100% | ||
| Siyata Mobile Israel Ltd. | Israel | 100% | ||
| Signifi Mobile Inc. | Quebec, Canada | 100% | ||
| ClearRF Nevada Inc. | Nevada, USA | 100% |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form F-1 of our report dated March 31, 2022, relating to the consolidated financial statements of Siyata Mobile Inc., which is part of this Registration Statement.
We also consent to the reference to us under the caption “Experts” in the Registration Statement.
| /s/ DAVIDSON & COMPANY LLP | |
| Vancouver, Canada | Chartered Professional Accountants |
| February 15, 2023 |
