Core AI Holdings, Inc F-1/A, filed Sep 15, 2020

Core AI Holdings, Inc. (CHAI)

F-1/A 2020-09-15

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Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

Title of each Class of Security being registered	Proposed Maximum Aggregate Offering Price⁽¹⁾⁽²⁾		Amount of Registration Fee⁽³⁾
Units, each consisting of one Common Share, no par value per share, and one Warrants to purchase Common Shares		-		-
Common Shares included as part of the Units ⁽⁷⁾	$	10,000,000	$	1,298
Warrants to purchase Common Shares included as part of the Units ⁽²⁾
Common Shares issuable upon exercise of the Warrants ^(3)(4)(7)	$	10,000,000	$	1,298
Representatives Warrants ⁽⁵⁾				-
Common Shares issuable upon exercise of Representative’s Warrants ⁽⁶⁾⁽⁷⁾	$	550,000	$	71.39
Total	$	20,550,000	$	2,667.39	⁽⁸⁾

(1)	Includes Common Shares to cover the exercise of the over-allotment option granted to the underwriter.

(2)	In accordance with Rule 457(i) under the Securities Act, because the Common Shares underlying the Warrants are registered hereby, no separate registration fee is required with respect to the Warrants registered hereby

(3)	The warrants are exercisable at a per share price of % of the price per Unit in this offering.

(4)	Includes common shares which may be issued upon exercise of additional warrants which may be issued upon exercise of the over-allotment option granted to the underwriter.

(5)	No additional registration fee is payable pursuant to Rule 457(g) under the Securities Act.

(6)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. The warrants, or the Representative’s Warrants, are exercisable at a per share exercise price equal to 110% of the public offering price. As estimated solely for the purpose of recalculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the Representative’s Warrants is equal to 110% of US$500,000 (which is equal to 5% of $10,000,000).

(7)	Pursuant to Rule 416 of the Securities Act, the securities being registered hereunder include such additional securities as may be issued after the date hereof as a result of share splits, share dividends or similar transactions.

(8)	Previously paid.

	Per Unit⁽¹⁾	Total
Offering price	$	$
Underwriter’s discounts and commissions⁽²⁾	$	$
Proceeds to our company before expenses⁽³⁾	$	$

⁽¹⁾	The public offering price and underwriting discount in respect of the Units corresponds to (an assumed public offering price per share of $6.00 per Unit. Each Unit consists of one common share and one warrant to purchase common shares.

⁽²⁾	We have also agreed to issue warrants to purchase common shares to the representative of the underwriters and to reimburse the representative of the underwriters for certain expenses. See “Underwriting” for additional information regarding total underwriter compensation.

⁽³⁾	The amount of offering proceeds to us presented in this table does not give effect to any exercise of the: (i) over-allotment option (if any) we have granted to the representative of the underwriters as described below and (ii) warrants being issued to the representative of the underwriters in this offering.

		Page
PROSPECTUS SUMMARY		1
THE OFFERING		6
SUMMARY FINANCIAL DATA		8
RISK FACTORS		9
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS		37
ENFORCEABILITY OF CIVIL LIABILITIES		38
USE OF PROCEEDS		39
DIVIDEND POLICY		40
CAPITALIZATION		40
DILUTION		42
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		43
BUSINESS		57
MANAGEMENT		64
EXECUTIVE COMPENSATION		69
PRINCIPAL SHAREHOLDERS		72
RELATED PARTY TRANSACTIONS		74
DESCRIPTION OF SHARE CAPITAL		75
SELECTED FINANCIAL DATA
SHARES ELIGIBLE FOR FUTURE SALE		80
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS		81
MATERIAL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS		84
UNDERWRITING		87
EXPENSES RELATING TO THIS OFFERING		90
LEGAL MATTERS		91
EXPERTS		92
WHERE YOU CAN FIND ADDITIONAL INFORMATION		92
INDEX TO FINANCIAL STATEMENTS		F-1

	●	The Company entered into an agreement with an existing arm’s-length debenture holder to amend the terms of its outstanding convertible debentures due June 28, 2020 on equivalent terms as the Convertible Debentures Offering in the amount of CDN$250,000. No finders’ fees were paid in conjunction with the Convertible Debenture Offering.

	●	On August 4, 2020, the Company completed a non-brokered private placement raising aggregate gross proceeds of $2,150,000 through the issuance of 21,500,000 units (the “August 2020 Units”) (268,750 units following the Assumed Reverse Split) at a price of $0.10 per August 2020 Unit ($8.00 CAD following the Assumed Reverse Split). 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 ($14.40 CAD following the Assumed Reverse Split) for a period of two years. The Company paid a cash commission of $24,681.60 and issued 246,816 agent options (3,085 following the Assumed Reverse Split) on the same terms as the August 2020 Warrants to certain finders (collectively, the “August 2020 Financing”).

	●	On July 28, 2020, our shareholders approved a reverse stock split of our Common Shares, with a range up to 1-for-300 with the exact amount to be determined by the board of directors in the future (the “Reverse Stock Split”). As of the date of this prospectus, the Reverse Stock Split amount has not been approved by our board and the reverse split of our Common Shares has not yet been effectuated. Such reverse split will be completed prior to the closing of the offering. For the purposes of this prospectus, we have assumed a reverse stock split of 1-for-80. Unless otherwise indicated, all Common Share amounts in this prospectus are reflected on a pre-split basis.

	●	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.

Issuer		Siyata Mobile Inc.

Securities offered by us		1,666,667 Units, each Unit consisting of one Common Share and one warrant to purchase one Common Share. Each warrant will have an exercise price of $ per share (with an exercise price no less than 100% of the public offering price of one Unit), is exercisable immediately and will expire five (5) years from the date of issuance. The Units will not be certificated or issued in stand-alone form. The Common Shares and the Warrants comprising the Units are immediately separable upon issuance and will be issued separately in this offering.

Over-allotment option		We have granted a 45-day option to the representative of the underwriters to purchase up to an additional 250,000 common shares and/or up to an additional 250,000 warrants at a price of $5.99 per Common Share and $0.01 per Warrant, respectively, less, in each case, the underwriting discounts payable by us, solely to cover over-allotments, if any

Common Shares outstanding prior to this offering		146,914,485 (1,836,431 following the Assumed Reverse Split)

Common Shares to be outstanding after this offering		3,503,098 shares (or 3,753,986 shares if the underwriters exercise their option to purchase additional Common Shares in full).

Use of proceeds		We estimate that the net proceeds to us from this offering will be approximately $10 million, or approximately $ 11.5 million if the underwriters exercise their over-allotment option to purchase additional Common Shares and Warrants in full, assuming an offering price of $ 6.00 per Unit (which is the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

		We intend to use the net proceeds of this offering primarily for general corporate purposes, including working capital, expanded sales and marketing activities, increased research and development expenditures and funding our growth strategies. See “Use of Proceeds” for additional information.

Description of the Warrants		The exercise price of the warrants is $ per share (with an exercise price no less than 100% of the public offering price of one Unit). Each warrant is exercisable for one common share, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common shares as described herein. A holder may not exercise any portion of a warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding common shares after exercise, as such percentage ownership is determined in accordance with the terms of the warrants, except that upon notice from the holder to us, the holder may waive such limitation up to a percentage, not in excess of 9.99%. Each warrant will be exercisable immediately upon issuance and will expire five years after the initial issuance date. This prospectus also relates to the offering of the Common Shares issuable upon exercise of the warrants. For more information regarding the warrants, you should carefully read the section titled “Description of Share Capital —Warrants” in this prospectus.

Representative’s Warrant		The registration statement of which this prospectus is a part also registers warrants (the “Representative’s Warrants”) to purchase 83,333 Common Shares to be issued the underwriters, as a portion of the underwriting compensation payable in connection with this offering, as well as the Common Shares issuable upon the exercise of the Representative’s Warrants. The Representative’s Warrants will be exercisable at any time, and from time to time, in whole or in part, during the four and half year period commencing 180 days following the effective date of the registration statement of which this prospectus is a part at an exercise price of $ (110% of the public offering price of the Units). Please see “Underwriting—Representative’s Warrants” for a description of these warrants.

Proposed Nasdaq Capital Market Trading Symbol and Listing		We have applied to list our Common Shares and Warrants on the Nasdaq Capital Market under the symbol “SYAT” and “SYATW” respectively. No assurance can be given that such listing will be approved or that a liquid trading market will develop for our Common Shares and Warrants.

Lock-up		We, our directors, executive officers, and shareholder who own 5% or more of our outstanding common shares have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common shares or securities convertible into common shares for a period of ninety (90) days commencing on the date of this prospectus. See “Underwriting” for additional information.

Transfer Agent, Registrar and Warrant Agent		Computershare Limited

Risk Factors		See “Risk Factors” for a discussion of risks you should carefully consider before investing in our securities.

	As of December 31, 2019 (in thousands)			As of December 31, 2018 (in thousands)
Net sales	$	13,020		$	14,221
Gross Margin	$	3,287		$	2,059
Income (loss) from operations	$	(8,712	)	$	(10,080	)
Income (loss) from continuing operations	$	(10,160	)	$	(11,528	)
Net income (loss)	$	(10,160	)	$	(11,528	)
Net loss per share	$	(0.09	)	$	(0.12	)
Capital; including the formula used for any adjustments to dividends declared;	$	11,044		$	9,030
Dividends declared per share in both the currency of the financial statements and the host country currency		-			-
Weighted Average number of shares outstanding (1)		114,600,365			95,366,432

	As of December 31, 2019 (in thousands)			As of December 31, 2018 (in thousands)
Cash	$	3,465		$	2,420
Current Assets	$	10,986		$	9,219
Intangible Assets	$	9,446		$	8,511
Other Assets	$	579		$	54
Total Assets	$	21,011		$	17,784
Working Capital	$	6,705		$	4,565
Bank loan	$	42			-
Current Liabilities (excluding current portion of long-term debt)	$	2,860		$	4,619
Long term debt/convertible debt (including current portion)	$	6,832		$	4,135
Total liabilities	$	9,966		$	8,754
Shareholders’ Equity	$	11,044		$	9,030
Share Capital 125,247,819⁽²⁾ common shares	$	37,346		$	27,638
Reserves⁽²⁾	$	6,603		$	3,751
Accumulated other comprehensive income (losses)	$	(125	)	$	260
Deficit	$	(32,780	)	$	(22,619	)

	●	a limited availability for market quotations for our securities;

	●	reduced liquidity with respect to our securities;

	●	a determination that our Common Share is a “penny stock,” which will require brokers trading in our Common Share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Common Share;

	●	limited amount of news and analyst coverage; and

	●	a decreased ability to issue additional securities or obtain additional financing in the future.

	●	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.

	●	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.

		Use of Net Proceeds Approximately in US$ 1,000
Working Capital 50%		$
Growth Strategies 10%		$
Research and Development 20%		$
Sales and Marketing 20%		$

	●	on an actual as-reported basis;
	●	on a pro forma basis to reflect the Company on June 23, 2020 entering into a new debenture private placement of $1,580,000 with a 12% coupon with a maturity of June 22, 2021 (“June 2020 Private Placement Financing” ); and on August 4, 2020, concluding a non-brokered private placement raising aggregate gross proceeds of $2,150,000 CAD through the issuance of 21,500,000 units (268,750 units after taking into account the 1-for-80 assumed reverse stock split) (the “August 2020 Private Placement Financing”).
	●	on a pro forma as adjusted basis to reflect the issuance and sale of the Units by us in this offering at the initial public offering price of $6.00 USD per Unit, the midpoint of the range set forth on the cover page of this prospectus, after deducting the estimated discounts, non-accountable expense allowance and the estimated offering expenses payable by us.

	As Reported (in thousands of Canadian $)			Pro Forma as Adjusted for June 2020 Private Placement Financing and August 2020 Private Placement Financing⁽¹⁾ (in thousands of Canadian $)			Pro Forma as Adjusted for IPO (in thousands of Canadian $)⁽²⁾

Cash and cash equivalents
Total Outstanding Long-Term Debt⁽³⁾	$	7,085		$	7,301		$	7,301
Stockholders’ Equity
Common shares, no par value: unlimited shares authorized; 125,247,819 shares, actual, 146,914,485 shares, as adjusted ⁽⁴⁾		125,247,819			146,914,485			280,247,845
Preferred shares, no par value, unlimited shares authorized, 0 shares actual 0 shares, as adjusted
Additional paid-in-capital	$	37,346		$	39,866		$	53,167
Reserves⁽⁵⁾	$	6,603		$	6,603		$	6,603
Accumulated Other Comprehensive Income (loss)	$	(125	)	$	(125	)		(125	)
Shareholders’ Deficit	$	(32,780	)	$	(32,780	)	$	(32,780	)
Total Shareholders’ Equity	$	11,044		$	13,564		$	26,865
Total Capitalization

⁽¹⁾	Such amount includes the Company’s June 2020 Private Placement Financing and August 2020 Private Placement Financing.
⁽²⁾	Such amount includes the Company’s June 2020 Private Placement Financing and August 2020 Private Placement Financing as well as the IPO listing of $10,000,000 USD (13,330,000 CDN $).
⁽³⁾	As of December 31, 2019, the convertible debenture due June 28, 2020 was $1,364,055. This convertible debenture due June 28, 2020 was repaid with the proceeds of the new convertible debenture on June 23, 2020 of $1,580,000. Thus on a proforma basis after taking into account both the June 2020 convertible debenture redemption as well as the new convertible debenture issued on June 23, 2020, the net increase in the pro-forma long term debts are $215,945.
⁽⁴⁾	Since the reverse stock split has not been approved by the Board of the Company, the exact amount of shares outstanding after the IPO is indeterminable. The IPO is projected to issue 1,666,667 common shares at an assumed price of US$6.00 per share (133,333,360 common shares before the Assumed Reverse Split).

Assumed initial public offering price per unit	$	USD 6.00
As adjusted net tangible book value per share as of September 1, 2020	$	CAD 2.04
Increase per share attributable to this offering	$	CAD 2.83
As adjusted net tangible book value per share after this offering	$	CAD 4.87
Dilution per share to new investors in this offering	$	CAD 3.11

	2019			2018			2017
Revenues	$	13,019,792		$	14,220,542		$	17,753,006
Comprehensive Loss for the year		(10,545,572	)		(10,658,899	)		(5,218,304	)
Net loss for the year		(10,160,351	)		(11,527,981	)		(5,058,495	)
Net loss per share
Basic ⁽¹⁾	$	(0.09	)	$	(0.12	)	$	(0.06	)
Diluted ⁽¹⁾	$	(0.09	)	$	(0.12	)	$	(0.06	)
Total Assets		21,010,797			17,784,342			21,877,613
Total non-current financial liabilities ⁽²⁾		7,258,370			4,564,831			4,639,682
Cash dividends declared in all classes of shares		-			-			-

Name of Subsidiary	Place of Incorporation	Ownership
Queensgate Resources Corp.	British Columbia, Canada		100	%
Queensgate Resources US Corp.	Nevada, USA		100	%
Siyata Mobile (Canada) Inc.	British Columbia, Canada		100	%
Siyata Mobile Israel Ltd.	Israel		100	%
Signifi Mobile Inc.	Quebec, Canada		100	%

As at January 1, 2019	Previously Reported under IAS 17		IFRS 16 Transition Adjustments		As report under IFRS 16
Right of use Assets	$	-	$	407,776	$	407,776
Lease Obligation	$	-	$	407,776	$	407,776

	December 31, 2019			December 31, 2018
Revenues	$	13,019,792		$	14,220,542

Comprehensive Loss for the year		(10,545,572	)		(10,658,899	)
Net loss for the year		(10,160,351	)		(11,527,981	)
Net loss per share
Basic⁽¹⁾	$	(0.09	)	$	(0.12	)
Diluted⁽¹⁾	$	(0.09	)	$	(0.12	)
Total Assets		21,010,797			17,784,342
Total non-current financial liabilities⁽²⁾		7,258,370			4,564,831
Cash dividends declared in all classes of shares		-			-

(in thousands)	December 31, 2019		December 31, 2018
Salaries and related expenses	$	2,063	$	1,519
Advertising and marketing		2,256		3,545
Travel and conferences		404		385
Total	$	4,723	$	5,449

	As of December 31, 2019			As of December 31, 2018
Net cash used in operating activities		(8,544,227	)		(2,996,235	)
Net cash used in investing activities		(3,020,880	)		(2,879,193	)
Net cash from financing activities		12,569,404			3,813,315

	December 31, 2019			December 31, 2018
Financing activities:
Proceeds of loans		3,778,634			250,000
Repayment of loans		(34,000	)		(20,000	)
Lease payments		(165,584	)		-
Private placement		3,000,000			2,080,710
Share issue costs		(243,379	)		(375,423	)
Bank loan		42,230			-
Exercise of stock options		-			410,000
Exercise of warrants		5,862,745			1,324,464
Exercise of agents’ options		328,758			143,564
Net cash from financing activities		12,569,404			3,813,315

	Level 1		Level 2		Level 3

December 31, 2018:
Future purchase consideration	$	430,000	$	-	$	-

December 31, 2019:
Future purchase consideration	$	-	$	-	$	-

(in CAD thousands)	USD			NIS			CAD			Total
Financial assets and financial liabilities:

Current assets
Cash		175			1,273			2,017			3,465
Trade and other receivables		1,019			889			36			1,944
Due from director		260			-			-			260
Current liabilities
Bank Loan		-			(42	)		-			(42	)
Accounts payable and accrued liabilities		(448	)		(1,393	)		(725	)		(2,566	)
Due to related party		-			(100	)					(100	)
Convertible debentures								(6,636	)		(6,636	)
Long term debt		-			-			(196	)		(196	)
Total		1,006			627			(5,504	)		(3,871	)

	Less than one year		1-3 years		3-5 years		Over 5 years		Total

Capital lease obligations		151,437		101,582		-		-		253,019
Long Term Debt		60,000		136,000		-		-		196,000
Debentures		1,455,000		7,866,000		-		-		9,321,000
Other Long term Liabilities		-		173,044		-		-		173,044
Commitments by date due		1,666,437		8,276,626		-		-		9,943,063

Name	Age	Position(s)
Marc Seelenfreund	50	Chief Executive Officer and Chairman of the Board of Directors
Gerald Bernstein	57	Chief Financial Officer
Glenn Kennedy	53	Vice President of Sales
Steven Ospalak	52	Director
Gidi Bracha	43	Vice President of Technology and Product Development
Michael Kron	57	Director
Richard Hoy	57	Director
Brian Budd	52	Director

	●	appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;

	●	reviewing with the independent auditors any audit problems or difficulties and management’s response;

	●	discussing the annual audited financial statements with management and the independent auditors;

	●	reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;

	●	reviewing and approving all proposed related party transactions;

	●	meeting separately and periodically with management and the independent auditors; and

	●	monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

	●	reviewing and approving the total compensation package for our most senior executive officers;

	●	approving and overseeing the total compensation package for our executives other than the most senior executive officers;

	●	reviewing and recommending to the board with respect to the compensation of our directors;

	●	reviewing periodically and approving any long-term incentive compensation or equity plans;

	●	selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and

	●	reviewing programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.

	●	identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy;

	●	reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us;

	●	identifying and recommending to our board the directors to serve as members of committees;

	●	advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; and

	●	monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

Name	Fees Earned or Paid in Cash		Option Awards⁽¹⁾			Total
Brian Budd	$	38,000	$			$	38,000
Stephen Ospalak		75,835				$	75,835
Michael Kron		72,225					72,225
Richard Hoy		7,000		69,665	⁽¹⁾		76,665

Name and Principal Position	Year	Salary (CDN$)		Bonus (CDN$)		Stock Awards (CDN$)		Option Awards (CDN$)(1)			Non-Equity Incentive Plan Compensation ($)		Non-Equity Incentive Plan Compensation ($)		Deferred Compensation Earnings ($)		Other ($)		Total ($)

Marc Seelenfreund	2019		400,629		150,420		0		0			0		0		0		0		551,049
CEO	2018		389,122		92,000		0		0			0		0		0		0		481,122
Gerald Bernstein	2019		144,768		65,000		0		0			0		0		0		0		209,768
CFO	2018		135,465		30,000		0		139,193	(2)		0		0		0		0		304,658
Glenn Kennedy	2019		174,000																	174,000
VP Sales	2018		174,000		0		0		0			0		0		0		0		174,000