Filed Pursuant to Rule 424(b)(4)
Registration No. 333-281218
![](https://www.sec.gov/Archives/edgar/data/1649009/000121390024069106/image_001.jpg)
Maximum of 80,000
Common Shares and/or
2,272,940 Pre-Funded Warrants to Purchase 2,272,940
Common Shares
We are offering on a best-efforts basis up to
80,000 common shares, no par value per share (each a “Common Share” and together, the “Common Shares”), of Siyata
Mobile Inc., at a public offering price of $1.70 per Common Share.
We are also offering to certain purchasers whose
purchase of Common Shares in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties,
beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding Common Shares immediately following
the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, 2,272,940 pre-funded warrants, or the
pre-funded warrants, in lieu of Common Shares that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99%
(or, at the election of the purchaser, 9.99%) of our outstanding Common Shares. The purchase price of each pre-funded warrant is $1.69
(which is equal to the public offering price per Common Share to be sold in this offering minus $0.01,
the exercise price per Common Share of each pre-funded warrant). The pre-funded warrants are immediately exercisable (subject to the beneficial
ownership cap) and may be exercised at any time until all of the pre-funded warrants are exercised in full. For each pre-funded warrant
we sell (without regard to any limitation on exercise set forth therein), the number of Common Shares we are offering will be decreased
on a one-for-one basis. See “Description of Securities” for more information.
We are also registering the Common Shares issuable
from time to time upon the exercise of the pre-funded warrants offered hereby. We refer to the Common Shares and pre-funded warrants,
collectively, as the Securities.
Our Common Shares are listed on the Nasdaq under
the symbol “SYTA.” On August 13, 2024, the last reported sale price of our Common Shares on Nasdaq was $2.83 per Common Share.
In addition to our Common Shares, we also have our warrants that were issued in connection with our initial public offering (“Prior
Warrants”) and are listed on the Nasdaq Capital Market under the symbol “SYTAW”. There is no established trading market
for the pre-funded warrants, and we do not expect an active trading market to develop. We do not intend to list the pre-funded warrants
on any securities exchange or other trading market. Without an active trading market, the liquidity of the pre-funded warrants will be
limited.
The Common Shares and the pre-funded warrants
offered hereby will be offered at a fixed price and will be issued in a single closing. We expect to close the offering on August 15,
2024. We will deliver all Securities to be issued in connection with this offering via delivery versus payment/receipt versus payment
upon receipt of investor funds received by us. Accordingly, neither we nor the Spartan Capital Securities, LLC (“Spartan”
or the “Placement Agent”) have made any arrangements to place investor funds in an escrow account or trust account since the
Placement Agent will not receive investor funds in connection with the sale of the Securities offered hereunder.
We have engaged the Placement Agent as our exclusive
placement agent. We have agreed to pay the placement agent the placement agent fees set forth in the table below. See “Plan of
Distribution” for more information.
Investing in our Securities involves a high degree
of risk. See the “Risk Factors” section beginning on page 23 of this
prospectus.
We are both an “emerging growth company”
and a “foreign private issuer” as defined under the federal securities laws and as such, may elect to comply with reduced
public company reporting requirements. Please read “Prospectus Summary - Implications of Our Being an Emerging Growth Company”
and “Prospectus Summary - Foreign Private Issuer Status” beginning on page 13
and 13 of this prospectus for more information.
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.
| |
Per Common Share | | |
Per Pre-Funded Warrant | | |
Total | |
Public offering price | |
$ | 1.70 | | |
| 1.69 | | |
$ | 3,977,268.60 | |
Placement agent fees(1) | |
$ | 0.034 | | |
| 0.0338 | | |
$ | 79,545.37 | |
Proceeds, before expenses, to us(2) | |
$ | 1.666 | | |
| 1.6562 | | |
$ | 3,897,723.03 | |
(1) |
See “Plan of Distribution” for a complete description of the compensation arrangements for the Placement Agent. |
(2) |
We estimate the total expenses of this offering, excluding the Placement Agent fees and expenses, will be approximately $326,941. |
We expect to deliver the Common Shares against
payment on or about August 15, 2024.
Sole Placement Agent
Spartan Capital Securities, LLC
The date of this prospectus is August 13, 2024
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
We incorporate by reference important
information into this prospectus. You may obtain the information incorporated by reference without charge by following the instructions
under “Where You Can Find More Information.” You should carefully read this prospectus as well as additional information
described under “Documents Incorporated by Reference,” before deciding to invest in our Securities.
Neither we nor the Placement Agent has authorized
anyone to provide you with information that is different from that contained in, or incorporated by reference into, this prospectus or
in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide
no assurance as to the reliability of, any other information that others may give you. We are offering to sell our Securities and seeking
offers to buy our Securities only in jurisdictions where offers and sales are permitted. The information contained in this prospectus
is accurate only as of its date, regardless of the time of delivery of this prospectus or any sale of our Securities. Our business, financial
condition, results of operations and prospects may have changed since that date.
For investors outside the United States: Neither
we nor the Placement Agent has done anything that would permit this offering, or possession or distribution of this prospectus, in any
jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into
possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our Securities and
the distribution of this prospectus outside of the United States. See the section of this prospectus entitled “Plan of Distribution”
for additional information on these restrictions.
Unless otherwise indicated, information in this prospectus
concerning economic conditions, our industries and our markets is based on a variety of sources, including information from third-party
industry analysts and publications and our own estimates and research. This information involves a number of assumptions, estimates and
limitations. The industry publications, surveys and forecasts and other public information generally indicate or suggest that their information
has been obtained from sources believed to be reliable. None of the third-party industry publications used in this prospectus were prepared
on our behalf nor have we taken any steps to independently verify such information. The industries in which we operate are subject to
a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” in this
prospectus. These and other factors could cause results to differ materially from those expressed in these publications.
On September 24, 2020, we effected a reverse share
split of our issued and outstanding Common Shares on the basis of one (1) Common Share for one hundred and forty-five (145) Common Shares,
or the Reverse Split. Unless otherwise indicated, the share and per share information in this Annual Report, reflects the Reverse Split.
(“2020 Reverse Split”). On August 9, 2023, we effected a reverse share split of our issued and outstanding Common Shares on
the basis of one (1) Common Share for one hundred (100) Common Shares, or the Reverse Split. Unless otherwise indicated, the share and
per share information in this Annual Report, reflects the Reverse Split. (“August 2023 Reverse-Split”). On December 4, 2023,
we effected a reverse share split of our issued and outstanding Common Shares on the basis of one (1) Common Share for seven (7) Common
Shares, or the Reverse Split. Unless otherwise indicated, the share and per share information in this Annual Report, reflects the Reverse
Split (“December 2023 Reverse Split”).
On August 2, 2024, we effected a reverse share split
of our issued and outstanding Common Shares on the basis of one (1) Common Share for eighteen (18) Common Shares, or the Reverse Split.
Unless otherwise indicated, the share and per share information in this Annual Report, reflects the Reverse Split (“August 2024
Reverse Split”). Unless indicated or the context otherwise requires, all per share amounts and numbers of Common Shares in this
prospectus supplement have been retrospectively adjusted for these reverse share splits.
References to “U.S. dollars” and “US$”
are to currency of the United States of America, references to “CAD$” are to the currency of Canada, also known as the Canadian
dollar and references to “NIS” are to the New Israeli Shekel, the currency of Israel. All financial information presented
in this Annual Report is in U.S. dollars unless otherwise expressly stated.
We own or have rights to various trademarks, service
marks and trade names that we use in connection with the operation of our businesses. Solely for convenience, the trademarks, service
marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but the omission of such references
is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right
of the applicable owner of these trademarks, service marks and trade names.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere
in or incorporated by reference into this prospectus. This summary does not contain all of the information that you should consider before
deciding to invest in our Securities. You should carefully read this entire prospectus and the documents and reports incorporated by reference
into this prospectus before making an investment decision, including the information presented under the headings “Risk Factors” and
“Cautionary Statement Regarding Forward-Looking Statements” in this prospectus and the historical financial statements
and the notes thereto incorporated by reference into this prospectus. You should pay special attention to the information contained under
the caption titled “Risk Factors” in this prospectus, in our most recent Annual Report on Form 20-F, in any subsequent Current
Reports on Form 6-K and in our other reports filed from time to time with the Securities and Exchange Commission, or the SEC, which are
incorporated by reference into this prospectus, before deciding to buy our Securities.
Unless otherwise indicated,
all share amounts and per share amounts in this prospectus have been presented on a retroactive basis to reflect a reverse share split
of our outstanding Common Shares at a ratio of 1 for 100, which was implemented on August 9, 2023, a reverse share split of our outstanding
Common Shares at a ratio of 1 for 7, which was implemented on December 4, 2023, and a reverse share split of our outstanding Common Shares
at a ratio of 1 for 18, which was implemented on August 2, 2024.
Our Company
Overview
Siyata Mobile Inc. is a B2B global developer and vendor
of next-generation Push-To-Talk over Cellular handsets and accessories. Its portfolio of rugged PTT handsets and accessories enables first
responders and enterprise workers to instantly communicate over a nationwide cellular network of choice, to increase situational awareness
and save lives. Police, fire, and ambulance organizations as well as schools, utilities, security companies, hospitals, waste management
companies, resorts and many other organizations use Siyata PTT handsets and accessories today.
In support of our Push-to-Talk handsets and accessories,
Siyata also offers enterprise-grade In-Vehicle solutions and Cellular Booster systems enabling our customers to communicate effectively
when they are in their vehicles, and even in areas where the cellular signal is weak.
Siyata sells its portfolio through leading U.S. cellular
carriers, and through international cellular carriers and distributors in Canada, Europe, Australia and the Middle East.
Products
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 and waste management, amusement parks, and mobile workers in multiple industries.
In 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 handset that Siyata announced in North America in the fourth quarter of 2021, and is now shipping in North
America, Europe, Middle East and Australia. The wireless carriers who have certified and are selling SD7 Handset include AT&T, FirstNet,
Verizon, T-Mobile, USCellular, Bell Mobility, Telstra, and KPN. The SD7 Rugged PTT Handset is targeting first responders and enterprise
customers who have previously used traditional legacy two-way Land Mobile Radios (“LMR”) but who would prefer a solution that
provides wide-area coverage like a cellular device, and also one that provides the same core functionality of Push-to-Talk that they used
with their previous older technology.
![](https://www.sec.gov/Archives/edgar/data/1649009/000121390024069106/image_002.jpg)
SD7+ Handset
Siyata has also announced
the SD7+ with Body Camera, which is similar to the SD7 Handset, but it incorporates body camera functionality. The SD7+ can replace both
an LMR two-way radio and a dedicated body camera device for police, security, or any customer who requires PTT and body camera functionality.
The SD7+ is expected to begin shipping in the coming months.
![](https://www.sec.gov/Archives/edgar/data/1649009/000121390024069106/image_003.jpg)
Siyata also offers purpose
built in-vehicle communication devices. In 2022, Siyata launched the VK7, a first-of-its-kind, patent-pending vehicle kit with an integrated
10-watt speaker, a simple slide-in connection sleeve for the SD7 Handset, and an external antenna connection for connecting an 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 Handset, while connecting directly into the vehicle’s power and can also
connect to our cellular amplifier for better cellular connectivity. The pending patent for the VK7 Vehicle Kit provides temperature control
by heating the VK7 in cold environments, and cooling the VK7 in hot environments. The VK7 can also be equipped with an external remote
speaker microphone (“RSM”) to ensure compliance with hands-free communication legislation.
![](https://www.sec.gov/Archives/edgar/data/1649009/000121390024069106/image_004.jpg)
VK7 Vehicle Kit
Prior to the third quarter of 2023, we launched commercially
a new In-Vehicle solution called Siyata Real Time View, which is a mobile DVR (Digital Video Recording) solution for monitoring
first responder vehicles. As the name suggests, video streaming from forward-facing, rear-facing, side-facing, and in-cab cameras are
all possible with Siyata Real Team View. We announced our first sale in June 2023 and in the third quarter of 2023 we began installing
the solution into ambulances and first responder vehicles of a large first responder organization. This solution has proven to be a key
tool for this organization to monitor its fleet of vehicles.
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 (“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, while the PoC market is growing at 13.6% CAGR to a projected
$7 Billion by the year 2027.
![](https://www.sec.gov/Archives/edgar/data/1649009/000121390024069106/image_005.jpg)
UV350 In-Vehicle Device
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, Middle East and other international markets.
Cellular boosters are also offered by Siyata with
approximately 30 million of these devices sold globally every year. Siyata manufactures and 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 scripts; 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 rugged handsets and in-vehicle devices as these sales can
be bundled through the Company’s existing sales channels.
![](https://www.sec.gov/Archives/edgar/data/1649009/000121390024069106/image_006.jpg) |
![](https://www.sec.gov/Archives/edgar/data/1649009/000121390024069106/image_007.jpg) |
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Uniden U70P In-Building Booster |
Uniden UM50 In-Vehicle Booster |
Uniden UM2M In-Vehicle Booster |
We offer a full line of cellular boosters, to boost
cellular reception, under the brand name Uniden®. We have entered into a partnership whereby Uniden America Corporation,
the North American subsidiary of Japan-based Uniden Corporation, has granted the exclusive license to us to market cellular signal boosters
under the Uniden® brand name within the U.S. and Canada, on a rolling three year contract term, with the current extension
expiring December 31, 2031 unless sooner terminated pursuant to the terms of this Agreement. As a world-wide leader in wireless communications,
Uniden America Corporation manufactures and markets wireless consumer electronic products. Based in Fort Worth, Texas, Uniden sells its
products through dealers and distributors throughout North, Central and South America. Uniden Cellular booster kits solve issues of poor
reception, dropped calls, lost data and transmission quality issues that users routinely experience on every cellular network. These easy-to-install
cellular booster kits are designed for homes, cabins, offices, and buildings to improve the cellular signal reception indoors, allowing
people to use their cellular phones indoors where they previously could not do so. We also offer models designed for vehicles, both wired
and wireless boosters, to improve the cellular reception inside a vehicle that is driving in a weak cellular signal area. Uniden cellular
signal boosters offer kits designed to offer cellphone coverage for difference distances, including kits for a small area of 1 or 2 rooms,
and more expansive solutions that will cover over 100,000 sq. ft. Our cellular signal boosters are carrier agnostic to ensure the best
signal integrity, supporting 2G, 3G, 4G and soon 5G (in development) technologies on all carriers operating in North America.
Customers and Channels
In 2022, Siyata secured North American wireless carrier
approvals of the SD7 Handset for use on their networks from AT&T, FirstNet, Verizon, and Bell Mobility. During 2023, Siyata added
T-Mobile and USCellular to its list of North American wireless carriers who approved SD7 for use on their networks. Internationally, Telstra
from Australia and KPN from the Netherlands also approved SD7 for use on their network during 2023. These wireless carriers also sell
the innovative VK7 Vehicle Kit that works with the SD7 Handset. These are major milestones for the Company following Siyata’s years
of experience perfecting in-vehicle cellular based technology, vehicle installations, software integration with various Push-to-Talk (“PTT”)
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.
Our rugged handsets are targeted to approximately
47 million enterprise task and public sector workers across North America including construction, transport& logistics, manufacturing,
energy & utility, public safety and federal government. 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. These Tier 1 cellular
carriers have a keen interest in selling the VK7 Vehicle Kit with the SD7 Handset and the UV350 In-Vehicle Device as they allow for new
SIM card activations and increased ARPU from existing customers with corporate and first responder fleets while targeting new customers
with a unique, dedicated PTT solution.
Our Pricing
Siyata sells its products to wireless carriers and
distributors who then resell the products to their customers. For wireless carriers, they are free to price the Siyata device how they
choose. In most cases for significant sales opportunities the carriers are willing to subsidize the cost of the device, or bundle the
device price with the SIM card and PTT service in order to secure the new activations with the associated monthly Average Revenue Per
User, or ARPU.
Even our unsubsidized full Manufacturers Suggested
Retail Prices (MSRP’s) are competitive compared to other LMR hardware solutions, but when our device price is subsidized or bundled,
the capital and operational expense benefits to customers compared to other solutions are even greater.
Competition
Rugged Handsets Category
Our direct competitors include Sonim Technologies,
Kyocera, and one ruggedized model from Samsung. These competitors also target sales of Push-to-Talk over Cellular (PoC) solutions through
wireless carriers in North America and internationally. None of these competitors offer a unique solution like our SD7 Handset which focuses
on a simple upgrade from two-way radios, nor do they offer an equivalent to our VK7 Vehicle Kit. These direct competitors focus on more
expensive ruggedized Smartphones.
Indirectly, we compete with low-cost Push-to-Talk
over Cellular devices designed and developed by various Chinese companies including Telo, Inrico, and others. These products are not approved
for sale by North America wireless carriers due to lower overall device specifications which do not meet requirements of North American
wireless carriers. These devices are mostly sold in international markets to highly price sensitive customers.
Indirectly, we also compete with traditional two-way
LMR radios, also known as “portables” that are carried or worn on a belt and used for PTT communications. These are sold by
a small number of large LMR vendors who sell directly to large first responder organizations and to large enterprise customers. They also
sell through dealers and distributors to small and medium-sized commercial customers. These products are generally not sold through wireless
carriers in North America or internationally. The government and enterprise customers that they target are now often considering the alternative
of Push-to-Talk over Cellular since customers do not need to purchase repeaters and towers nor any government licensing for the frequencies
that they use. Also, Push-to-Talk over Cellular provides much wider-area coverage, and these PoC solutions tend to be less expensive than
traditional LMR radios both to purchase the PoC hardware such as the Siyata SD7 Handset, as well as to subscribe to monthly PoC service
from a wireless carrier.
In-Vehicle Category
None of our competitors offer a vehicle kit like the
Siyata VK7 Vehicle Kit which transforms the SD7 Handset into a robust In-Vehicle solution with loud audio, and simple PTT communication
while in their vehicle. Also, we do not believe that we have any direct competitors within the in-vehicle market category in North America
that provide a dedicated cellular based device for commercial and first responder vehicles, and we believe that no other company offers
an In-Vehicle IoT device that is approved for sale in North America by wireless carriers.
We have several indirect competitors. Firstly, customers
could choose a handheld phone along with a professionally installed third party car kit. There are car kit providers who attempt to make
their car kits compatible with popular handheld phone models. By comparison, our In-Vehicle solutions offer enhanced audio quality, safety,
and reception. Our In-Vehicle solutions are always active and can be used in temperature extremes. Furthermore, our In-Vehicle solutions
are a complete solution from one supplier, as opposed to buying separately from two different companies and assembling a phone and a car
kit that offers no proven compatibility.
Our second group of indirect competitors are rugged
tablets that can be placed in a mount. Our In-Vehicle solutions offer better audio quality, better safety, better cellular reception,
which are always on and ready to be used. Also, compared to a tablet, the UV350 can also make cellular calls including emergency 911 calls
whereas the tablet cannot as it is a data only device.
Our third group of indirect competitors are In-Vehicle
Two-way LMR Radios also knows as “mobiles”. Not only can the UV350 make phone calls which the LMR radio cannot, but our In-Vehicle
solutions offer much better coverage due to using the cellular network as opposed to a limited two-way radio network. And the UV350 can
support downloadable Android apps and can serve as a modem for IoT devices and as a Wi-Fi hotspot for further connectivity options and
more.
Our fourth group of indirect competition is a leading
global LMR vendor who offers an In-Vehicle device which is a Push to Talk over Cellular device, compatible only with its own OEM’s
PTT application, and as it is not a smartphone based device so it does not offer any downloadable apps (fleet management, GPS tracking,
live video feed, etc.) nor the ability to make a phone call over the wireless network. This LMR vendor sells the In-Vehicle device directly
to customers and through its dealer channel, but not through wireless carriers.
Cellular Boosters Category
Within the Cellular Booster category, we have several
direct competitors, including Wilson Electronics, LLC, Nextivity Inc., and SureCall Company.
Intellectual Property
We own two patents that we acquired from ClearRF,
as discussed below, and we have entered into several licensing agreements for the use of a trademark and certain patents.
Uniden America Corporation
In December 2012, Signifi Mobile, the Company’s
wholly-owned subsidiary entered into a license agreement with Uniden America Corporation, as amended (the “Uniden Agreement”).
The Uniden Agreement provides for the Company to use the trademark “Uniden®”, along with associated designs
and trade dress to distribute, market and sell its In-Vehicle device, cellular signal booster and accessories during its term in North
America. The agreement includes renewal options up to December 31, 2031 and is subject to certain minimum royalties.
Wilson Electronics LLC
Effective January 1, 2018, Signifi Mobile Inc., the
Company’s wholly-owned subsidiary, entered into an agreement with Wilson Electronics, LLC to permit the Company to utilize several
of Wilson Electronics’ patents related to cellphone boosters (the “Wilson Agreement”). The Wilson Agreement grants the
Company an indefinite right to utilize its cellphone booster-related patents in exchange for paying Wilson Electronics, LLC a royalty
fee for boosters sold by the Company. The Wilson Agreement remains in force until the Wilson patents on the Booster products expire.
Via Licensing Corporation
Effective June 8, 2018, the Company entered into two
separate licensing agreements with Via Licensing Corporation to utilize worldwide patents related to the coding and decoding of “android”
software as well as access and download within the “LTE/ 4G” network. This patent is for an initial period of 5 years and
can be extended for a further 5-year term. The Company has the right at any time during the term on any extension hereof, to terminate
these agreements upon providing 60 days advanced notice of termination. The quarterly royalty fees are based solely on product sales and
is a percentage formula based upon the number of units sold, the country manufactured and the country location of the end customer. There
are no minimum royalty fees payable according to the agreement.
eWave Mobile Ltd.
Effective October 1, 2017, we entered into an Asset
Purchase Agreement with eWave Mobile Ltd., or eWave, for the purchase of certain distribution rights and contracts in connection with
the right to sell and distribute in Israel certain cellular devices for the push to talk market, or the eWave Supplies, in exchange for
$700,000 in cash and issued shares of common stock of the Company equal to $700,000. Additionally, we shall pay eWave 50% of up to $1,500,000
in net profit that we earn from sales related to the eWave Suppliers, and 25% thereafter of the net profit exceeding $1,500,000.
Clear RF, LLC
On March 31, 2021, the Company’s indirectly
and wholly-owned subsidiary ClearRF Nevada Inc. acquired all of the issued and outstanding interests of Clear RF, LLC, or ClearRF, a Washington
State limited liability company, for a total purchase price of US$700,000 in a combination of cash and Common Shares. ClearRF produces
M2M (machine-to-machine) cellular amplifiers for commercial and industrial M2M applications and offers patented direct connect cellular
amplifiers and patented auto gain & oscillation control designed for M2M and “internet-of-things.” Or IoT, applications.
Two patents (described below) held by ClearRF were subsequently transferred and assigned to ClearRF Nevada following the closing of this
acquisition.
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i. |
RF Passive Bypass technology enables tethered devices to communicate through the amplifier network, even if the amplifier loses power, or when the signal is not required, a key differentiator amongst competitors, in particular for mission-critical applications and first responder vehicles that require constant clear cellular coverage and connectivity. |
|
ii. |
Auto Gain & Oscillation Control detects the level of incoming signal strength and self-adjusts output power to ensure maximum signal strength. This feature is vital for telematics (mobile) M2M applications because the amplifier will be in constant motion and will require periodic self-adjustment based on changing incoming signal environment. |
Seasonality
We do not experience any effects of seasonality it
our business. Our products are designed to function at full capacity under all weather conditions and therefore, we do not experience
any shifts in our sales patterns.
Recent Developments
Recent Offerings.
On January 29, 2024, the Company entered into a securities
purchase agreement (the “January Purchase Agreement”) with an institutional investor (“Investor”), pursuant to
which the Company issued to the Investor an unsecured promissory note in the principal amount of $230,750 (the “Note”), with
a stated maturity date of November 15, 2024. The gross proceeds to the Company from the exercise totaled approximately $195,000, prior
to deducting Investor’s legal and diligence expenses and agent fees/expenses. The Note’s interest and outstanding principal
shall be paid in ten payments, each in the amount of $25,844.00 (a total payback to Investor of $258,440.00). The first payment was due
February 15, 2024, with nine subsequent payments due each month thereafter. In the event the Company fails to pay any amount when due
under the Note, the interest rate will increase to 22%. Upon the occurrence and during the continuation of any event of default under
the Note (“Event of Default”), the Note will become immediately due and payable and the Company is required to pay to the
Investor an amount equal to 150% times the sum of (a) the then outstanding principal amount of the Note, plus (b) any accrued and unpaid
interest on the unpaid principal amount of this Note, plus (c) default interest, if any, plus (d) any other amounts owed to the Investor
pursuant to the Note. Following any Event of Default, the Investor may convert any amount due under the Note into shares of the Company’s
common shares (the “Conversion Shares”) at a conversion price equal to 75% multiplied by the lowest trading price for the
Company’s common shares during the ten trading days prior to the conversion date (representing a discount rate of 25% to market);
provided, however, that Investor may not convert any portion of the Note that would cause it, together with its affiliates, to beneficially
own in excess of 4.99% of the Company’s common shares. The conversion price and number of shares of the Company’s common shares
issuable upon conversion of the Note (if at all) will be subject to adjustment from time to time in the event of any combinations, recapitalization,
reclassifications, or similar event.
On April 9, 2024, the Company entered into a Securities
Purchase Agreement (the “April Purchase Agreement”) with an institutional investor (the “Purchaser”), pursuant
to which the Company sold, in a private placement, (i) 290 shares of the Company’s Class C Preferred Shares (the “Class C
Preferred Shares”), stated value $1,000 per share (the “Stated Value”), at a price of $1,000 per share, convertible
into shares (the “Conversion Shares”) of the Company’s common shares, no par value per share and (ii) a warrant (the
“Warrant”) to purchase up to 6,556 shares of common shares. As additional consideration for entering into the April Purchase
Agreement, the Company issued to the Purchaser an additional 1,556 shares of common shares to be delivered to the Purchaser at the closing
(the “Commitment Shares,” together with the Class C Preferred Shares and the Warrant, the “Securities”). The offering
resulted in gross proceeds to the company of $250,000. The Warrant is immediately exercisable subject to certain beneficial ownership
limitations, has an exercise price of $57.24 per share, and will expire on the fifth anniversary of its issue date.
Each share of Class C Preferred Share shall be convertible,
at any time and from time to time, at the option of the holder, into that number of shares of Common Share, subject to certain beneficial
ownership limitations, determined by dividing the Stated Value of such share of Class C Preferred Share by the Conversion Price. The “Conversion
Price” for the Class C Preferred Shares shall be the lower of (i) $57.24, or (ii) 85% of the lesser of (a) the average of the closing
price for the Common Share during the ten (10) trading day period immediately prior to the closing of the April Purchase Agreement, and
(b) the average closing price for the Common Share on the ten (10) trading days immediately prior to the conversion price, subject to
adjustment as provided in the Notice Of Second Alteration Of Articles of the Company (the “Notice of Alteration”). Following
the occurrence of a Triggering Event (as defined in the Notice of Alteration), the conversion price shall be the lowest of (i) Eighteen
Dollars ($18.00), (ii) the then applicable conversion price; or (iii) twenty-five percent (25%) of the lowest traded price for the Common
Shares during the fifteen (15) Trading Days preceding the relevant conversion.
On April 17, 2024, the Company entered into a Securities
Purchase Agreement (the “Second April Purchase Agreement”) with another institutional investor (the “Purchaser”),
pursuant to which the Company sold, in a private placement 290 shares of the Company’s Class C Preferred Shares, stated value $1,000
per share (the “Stated Value”), at a price of $1,000 per share, convertible into shares (the “Conversion Shares”)
of the Company’s common shares, no par value per share. As additional consideration for entering into the Second April Purchase
Agreement, the Company issued to the Purchaser an additional 1,556 shares of common shares to be delivered to the Purchaser at the closing.
The offering resulted in gross proceeds to the company of $250,000. The terms of the Class C Preferred Shares is similar to the earlier
April Purchase Agreement. The Purchaser redeemed for cash 97 Class C Preferred Shares of the Company, in furtherance to the completion
of the below detailed May 2024 Offering.
On May 7, 2024, we announced that we had entered into
a Securities Purchase Agreement with certain investors named therein, pursuant to which we agreed to issue and sell, in a registered direct
offering (the “May 2024 Offering”) 3,889 of our Common Shares, at a purchase price of $23.40 per Common Share, along with
167,051 pre-funded warrants (“Pre-Funded Warrants”) to purchase Common Shares, at a purchase price of $23.22 per Pre-Funded
Warrant, exercisable at an exercise price of $0.18 per share. The Purchase Agreement contained customary representations and warranties
and agreements of the Company and the purchasers and customary indemnification rights and obligations of the parties. The closing of the
May 2024 Offering occurred on May 10, 2024. The May 2024 Offering resulted in gross proceeds to us of approx. $3.9 million before deducting
the fees payable to Spartan Capital Securities, LLC, as sole placement agent for the May 2024 Offering, and certain related May 2024 Offering
expenses. The Common Shares and the Pre-Funded Warrants were offered pursuant to our effective registration statement on Form F-1 (File
No. 333-278697), which was filed with the SEC on April 15, 2024 and was declared effective on May 7, 2024.
On June 5, 2024, the Company entered into a Securities
Purchase Agreement (the “June Purchase Agreement”) with an institutional investor, pursuant to which the Company sold, in
the private placement, (i) 118 shares of the Company’s Class C Preferred Shares, stated value $1,000 per share, at a price of $1,000
per share, convertible into shares of the Company’s common shares, no par value per share (“Class C Preferred Shares”),
(ii) a warrant to purchase up to 18,667 shares of common shares (“June Warrant”), and (iii) an amended and restated warrant
to purchase up to 18,667 shares of common shares of the Company, replacing in their entirety the prior issued Warrant(s) from the April
Purchase Agreement (“June A&R Warrant”, and together with “June Warrant 1”, hereinafter referred to as the
“Warrants”). As additional consideration for entering into the June Purchase Agreement, the Company issued to the institutional
investor an additional 8,444 shares of common shares to be delivered to the institutional investor at the closing (the “Commitment
Shares,” and together with the Class C Preferred Shares and the Warrants, the “Securities”). The offering resulted in
gross proceeds to the company of $105,000. The Warrants are immediately exercisable subject to certain beneficial ownership limitations,
have an exercise price of $57.24 per share, and will expire on the fifth anniversary of their respective issue date(s).
Additionally, on June 5, 2024, the Company entered
into a Securities Purchase Agreement (the “Second June Purchase Agreement”) with another institutional investor, pursuant
to which the Company sold, in the private placement 256 shares of the Company’s Class C Preferred Shares, stated value $1,000 per
share, at a price of $1,000 per share, convertible into shares of the Company’s common shares, no par value per share. As additional
consideration for entering into the Second June Purchase Agreement, the Company issued to the investor an additional 1,556 shares of common
shares to be delivered to the investor at the closing. The offering resulted in gross proceeds to the company of $220,000.
On June 27, 2024, we announced that we had entered
into a Securities Purchase Agreement with certain investors named therein, pursuant to which we agreed to issue and sell, in a registered
direct offering (the “June 2024 Offering”) 24,111 of our Common Shares, at a purchase price of $10.44 per Common Share, along
with 560,261 pre-funded warrants (“Pre-Funded Warrants”) to purchase Common Shares, at a purchase price of $10.26 per Pre-Funded
Warrant, exercisable at an exercise price of $0.18 per share. The Purchase Agreement contained customary representations and warranties
and agreements of the Company and the purchasers and customary indemnification rights and obligations of the parties. The closing of the
June 2024 Offering occurred on June 28, 2024. The June 2024 Offering resulted in gross proceeds to us of approx. $5.9 million before deducting
the fees payable to Dominari Securities LLC, as sole placement agent for the June 2024 Offering, and certain related June 2024 Offering
expenses. The Common Shares and the Pre-Funded Warrants were offered pursuant to our effective registration statement on Form F-1 (File
No. 333-280002), which was filed with the SEC on June 6, 2024 and was declared effective on June 26, 2024.
On July 18, 2024, the Company entered into an Exchange
Agreement with an institutional investor, pursuant to which the Company exchanged 37,333 share purchase warrants with an exercise price
of $57.24 and received 293 Class “C” preferred shares of the Company, which have a stated value $1,000 per share (the “Stated
Value”), at a price of $1,000 per share, convertible into shares (the “Conversion Shares”) of the Company’s common
shares, no par value per share.
Completed Investment in Canadian Towers &
Fiber Optics Inc.
We entered into a Subscription Agreement to acquire
a minority investment in Canadian Towers & Fiber Optics Inc. (“Canadian Towers”), a developer of fiber optic systems for
the telecommunications sector, for the total amount of $1,000,000 payable in cash on June 28, 2024. Canadian Towers is a company based
in Canada that develops, constructs and owns wireless towers in Mexico, owning the largest 5G dark fiber optic network in Central Mexico.
We believe that our strategic investment in Canadian Tower will allow us to penetrate the Latin American cellular market to distribute
our PTT products.
Creation of New Class of Preferred Share.
Concurrently with the April 9, 2024 offering, on the same date, the Company filed the Notice of Alteration with the State of British Columbia
designating 290 shares out of the authorized but unissued shares of its preferred shares as Class C Preferred Shares with a stated value
of $1,000 per share. The summary of the principal terms of the Class C Preferred Shares is detailed in the ‘Description of Securities’,
on page 75.
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, 2023, 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.
Reverse Share Split.
On August 9, 2023, we effected a 1-for-100 reverse share split of our authorized Common Share, including our issued and outstanding Common
Shares, with no change to the par value of our Common Share The reverse split resulted in certain adjustments being made to the existing
terms of the Prior Warrants. Unless otherwise indicated, all other share and per share data in this prospectus have been adjusted on a
retroactive basis, where applicable, to reflect the reverse share split as if it had occurred at the beginning of the earliest period
presented. On August 24, 2023, we announced that it had received formal notice from Nasdaq stating that we had regained compliance with
the minimum bid price requirement in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Stock Market.
Additionally, on December
4, 2023, we effected a 1-for-7 reverse share split of our authorized Common Share, including our issued and outstanding Common Shares,
with no change to the par value of our Common Share
Additionally, on August 2,
2024, we effected a 1-for-18 reverse share split of our authorized Common Share, including our issued and outstanding Common Shares, with
no change to the par value of our Common Share The reverse split resulted in certain adjustments being made to the existing terms of the
Prior Warrants.
Unless otherwise indicated,
all other share and per share data in this prospectus have been adjusted on a retroactive basis, where applicable, to reflect the reverse
share split as if it had occurred at the beginning of the earliest period presented.
IR Agency LLC Consulting Agreement:
We entered into a consulting agreement (the “IR Agency Consulting Agreement”) with IR Agency, LLC (“IR Agency”),
a provider of investor relations-related services on May 10, 2024. Pursuant to the IR Agency Consulting Agreement, we have engaged IR
Agency, on a non-exclusive basis, to prepare marketing materials and leverage digital newsletters to build a digital community of potential
investors for us.
As consideration for its performance under the IR
Agency Consulting Agreement, we paid IR Agency a fee of $1,750,000 in cash. IR Agency is not a registered broker-dealer or investment
advisor and will not engage in any activities on behalf of us that would require it to be registered as a broker-dealer or investment
advisor.
The IR Agency Consulting Agreement will have a term
of six (6) months and may be terminated by written notice, with or without cause, by us at any time.
During the term of the IR Agency Consulting Agreement,
IR Agency acknowledges that in order to prepare appropriate advertising in a timely manner it may be made aware of price sensitive or
confidential information that has not been publicly disclosed yet. IR Agency confirms that it is fully aware of its obligations in relation
to such information and will ensure that the confidentiality of such information is maintained at all times and that it, and its employees
and contractors, are all fully aware of and comply with, all appropriate securities laws and regulations in relation to insider trading
and related matters.
The IR Agency Consulting Agreement is governed by
the laws of the State of New Jersey, and came into effect on May 10, 2024.
Addendum to IR Agency LLC Consulting Agreement:
In addition to the prior scope of the IR Agency Consulting Agreement, the Company also entered into an Addendum to the IR Agency Consulting
Agreement, with IR Agency, for which it paid IR Agency an additional fee of $2,000,000 in cash on June 28, 2024.
Second Addendum to IR Agency LLC Consulting
Agreement: In addition to the prior scope of the IR Agency Consulting Agreement and the Addendum thereto, the Company now additionally
intends to enter into a Second Addendum to the IR Agency Consulting Agreement with IR Agency, for which it will pay IR Agency an additional
fee of $1,500,000 in cash (which is subject to our completion of the current transaction, and will be paid from the proceeds of the current
offering).
War in Israel. On October 7, 2023, Hamas
militants and members of other terrorist organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a
series of terror attacks on civilian and military targets. The intensity and duration of Israel’s current war against Hamas is difficult
to predict, and as are such war’s economic implications on the Company’s business and operations. To the extent that any of
these negative developments do occur, they may have an adverse effect on our business, our results of operations and our ability to raise
additional funds, if deemed necessary by our management and board of directors.
We are currently assessing the potential impact the
Company is likely to undergo due to the current conflict, and are reviewing the situation (as it is developing) on an active basis.
Changes in Board Composition
On May 15, 2024, Mr. Peter Goldstein, a member of
the board of directors (the “Board”) of the Company resigned from his position as the Chairman and Director of the Company.
The Board further appointed Mr. Gary Herman, a current director of the Company, as Chairman of the Board of the Company, effective immediately.
Subject to the current offering, the Company will
additionally be replacing Mr. Stephen Ospalak, with Mr. Campbell Becher.
Recent Marketing Milestones.
On January 22, 2024, the Company announced that CTS
Mobility, LTD, a recognized leader in the mobile communications space, is now a distributor of its mission-critical PoC (MCPTT) SD7 solution
and its broad range of accessories.
On January 29, 2024, the Company announced that that
it was providing its SD7 handsets for use at the 2024 Special Olympics. The Company partnered with ESChat, a provider of broadband Push-to-Talk
(PTT) services, to provide secure PTT communications for event personnel and volunteers.
On February 6, 2024, the Company announced that it
has expanded its alliance with Hyperion Partners (“Hyperion”), an industry-leading mobility primary agent and T-Mobile business
partner, to include distribution of the Company’s mission critical PoC (MCPTT) SD7 handsets and accessories.
On February 22, 2024, the Company announced that it
has received a purchase order for 1,000 units of its UV350 all-in-one in vehicle fleet communication devices from an international EMS
provider.
On March 11, 2024, the Company announced that the
Company hosted an exhibitor’s booth at the International Wireless Communications Expo (“IWCE”) 2024 in partnership with
Verizon. Siyata showcased its SD7 Mission Critical PTT Handset, its VK7 Vehicle Kit, and its accessories.
On March 21, 2024, the Company announced that it was
expanding global distribution of its Rugged PTT Handsets, and In-Vehicle Devices including its Real Time View products through a distribution
agreement with a leading mobility, transportation, logistics, energy and services group based in the Middle East.
On April 4, 2024, the Company announced that it has
expanded its distribution in a partnership with 3AM Innovations, Inc. (“3AM Innovations”), a provider of incident command
software for the public safety sector. 3AM Innovations is integrating its FLORIAN incident command software app with Company’s SD7
handset to enable incident commanders to effectively locate each firefighter at the scene of a fire enhancing safety and safeguarding
lives.
On May 9, 2024, the Company announced that it attended
and exhibited at Critical Communications World 2024 (“CCW”) between May 14-16 at the Dubai World Trade Centre in the city
of Dubai, in the United Arab Emirates.
On May 13, 2024, the Company announced that its SD7
Handset has been added to the ‘Free Feature Phone for Life’ promotion from FirstNet®, Built with AT&T.
On May 14, 2024, the Company announced that it has
received new orders for its SD7 handsets and related accessories valued at over $2.2 million in the aggregate.
On May 22, 2024, the Company announced the expansion
of its relationship with luxury resort property, Baha Mar Resorts located in Nassau, Bahamas. Baha Mar is now using hundreds of SD7 handsets
and accessories to extend usage of the devices across the property from valet services to the beach and numerous departments in between.
On May 28, 2024, the Company announced that it has
received an order from the City of Lancaster Public Utilities Department for its SD7 Push-to-Talk (PTT) handsets, VK7 Vehicle Kits and
related accessories. The department provides utilities for the residents of Lancaster, Ohio.
On May 28, 2024, the Company announced that it has
been awarded a new patent by the United States Patent and Trademark Office ("USPTO") for its VK7 Vehicle Kit. Patent number
US 11,949,442 B2 titled Mobile Conversion Apparatus For Docking Cellular Data Devices.
On June 5, 2024, the Company announced that it has
entered into a partnership with JD Telecom, a premier telecom solutions provider of commercial-grade vehicle solutions and a strategic
distribution partner for T-Mobile, to expand the distribution of its SD7 handsets, VK7 Vehicle Kits and related components.
On July 10, 2024, the Company announced that it has
appointed Bob Escalle as its Vice President of Public Safety.
On July 10, 2024, the Company announced that the Zello
push-to-talk (PTT) application is now available on Siyata’s SD7 push-to-talk handset.
On July 15, 2024, the Company announced that Bensalem
Township School District, a suburban school district located in Bucks County, Pennsylvania, has ordered its SD7 Push-to-Talk (PTT) handsets,
VK7 Vehicle Kits and related accessories.
On July 18, 2024, the Company announced that it has
added TJ Kennedy to its Advisory Board. Mr. Kennedy previously held the role of President of the First Responder Network Authority (FirstNet),
which oversees the nationwide public safety broadband network in the United States.
On July 22, 2024, the Company announced that it received
a $1.2 million order from an existing customer, a leading international EMS service provider, for additional units of the Company's PoC
rugged handsets, Real Time View and related accessories.
On July 25, 2024, the Company announced that it received
an order for its SD7 Push-to-Talk (PTT) Handsets and VK7 Vehicle Kits from the City of Hawaiian Gardens, California.
On July 26, 2024, the Company announced the launch
of the Siyata SD7, a purpose-built, mission-critical push-to-talk device designed to help revolutionize communication for first responders
and enterprise clients across the United States.
On July 30, 2024, the Company announced that it will
attend APCO 2024, APCO International's Annual Conference & Expo, August 4-7 at the Orange County Convention Center in Orlando, Florida.
Legal Proceedings
From time to time, we may become involved in litigation
relating to claims arising from the ordinary course of business. Other than as set forth below, there are currently no claims or actions
pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition
or cash flows.
On June 11, 2024, we received a demand letter from
a law firm representing a financial advisory firm seeking to collect $457,477 relating to an unpaid invoice for financial services allegedly
rendered by such firm. We are currently evaluating the claim with counsel. We intend to defend ourselves and cannot estimate our chance
of loss at this time.
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 U.S. federal securities laws. 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:
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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;” |
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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;” |
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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; |
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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); |
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are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and chief executive officer pay ratio disclosure; |
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are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards; and |
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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:
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we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company; |
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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; |
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we are not required to provide the same level of disclosure on certain issues, such as executive compensation; |
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we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; |
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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 |
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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. |
Risk Factors Summary
An investment in our securities involves a high degree
of risk. You should carefully consider the risks summarized below. These risks are discussed more fully in the “Risk Factors”
section immediately following this Prospectus Summary. These risks include, but are not limited to, the following:
Risks Related to Our Financial Condition and Capital
Requirements
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We have a history of operating losses and we may never achieve or maintain profitability. |
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Our consolidated audited financial statements for the fiscal year ended December 31, 2023 includes a “going concern” explanatory paragraph 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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In 2023, 2022 and 2021 our independent registered public accountants identified material weaknesses in our internal controls over financial reporting which have been partially remediated. 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. |
Risks Related to Our Business and Industry
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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If we are unable to sell our solutions into new markets, our revenues may not grow. |
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If we are unable to attract, integrate and retain additional qualified personnel, including top technical talent, our business could be adversely impacted. |
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A security
breach or other significant disruption of our information technology (“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. |
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We experience lengthy sales
cycles for our products and the delay of an expected large order could result in a significant unexpected revenue shortfall. |
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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. |
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Our financial condition
and results of operations as well as those of potential customers could be adversely affected by the Middle East War, which has caused
a material adverse effect on the level of economic activity around the world, including in the markets we serve. |
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We rely on industry data
and projections which may prove to be inaccurate. |
Risks Related to our Reliance on Third Parties
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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. |
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Our dependence on third-party
suppliers for key components of our products could delay shipment of our products and reduce our sales. |
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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. |
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The application development
ecosystem supporting our devices and related accessories is new and evolving. |
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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. |
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Our products are subject
to risks associated with sourcing and manufacturing. |
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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. |
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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. |
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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. |
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Natural or man-made disasters
and other similar events may significantly disrupt our business, and negatively impact our operating results and financial condition. |
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We are exposed to risks
associated with strategic acquisitions and investments. |
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We could be adversely impacted
by changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting
matters. |
Risks Related to Government Regulation
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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. |
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We are subject to a wide
range of product regulatory and safety, consumer, worker safety and environmental laws and regulations. |
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Changes in laws and regulations
concerning the use of telecommunication bandwidth could increase our costs and adversely impact our business. |
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We are subject to a wide
range of privacy and data security laws, regulations and other legal obligations. |
Risks Related to Our Intellectual Property
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Our use of open-source
software could subject us to possible litigation or otherwise impair the development of our products. |
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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. |
Risks Related to our Locations in Israel and
Canada and Our International Operations
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We also conduct our operations
in Israel. Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s
war against them, may affect our operations. |
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It may be difficult to
enforce a U.S. judgment against us, our officers and directors named herein 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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Operating outside of the
United States presents specific risks to our business, and we have substantial operations outside of the United States. |
Risks Related to This Offering and Ownership
of Our Securities
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This is a reasonable best
efforts offering, in which no minimum number or dollar amount of securities is required to be sold, and we may not raise the amount
of capital we believe is required for our business plans. |
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We are selling a substantial
number of our Common Shares to in this offering, which is expected to cause substantial dilution and could cause the price of our
Common Shares to decline. |
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Outstanding warrants and
future sales of our Securities may further dilute the Common Shares and adversely impact the price of our Common Shares. |
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There is no public market
for the pre-funded warrants being offered in this offering. |
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Holders of our pre-funded
warrants will have no rights as holders of Common Shares until such warrants are exercised. |
|
● |
Since we do not expect
to pay any cash dividends for the foreseeable future, investors may be forced to sell their stock in order to obtain a return on
their investment. |
|
● |
The trading price of our
Common Shares has been and is likely to continue to be highly volatile and could be subject to wide fluctuations in response to various
factors, some of which are beyond our control. |
|
● |
If we are not able to comply
with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our Common Shares. |
|
● |
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. |
|
● |
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. |
|
● |
We are governed by the
corporate laws of British Columbia, Canada which in some cases have a different effect on shareholders than the corporate laws of
the United States. |
|
● |
U.S. holders of the Company’s
shares may suffer adverse tax consequences if we are characterized as a passive foreign investment company. |
|
● |
If we fail to file our
financial disclosures with the securities regulators in British Columbia on time, we could be subject to such regulator issuing a
cease trade order that would affect the trading of our Common Shares in Canada, but not on the Nasdaq Capital Market. |
Risks Related to This Offering and Ownership
of Our Common Shares
|
● |
We are an “emerging
growth company,” and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable
to emerging growth companies could make our Common Shares less attractive to investors. |
|
● |
We incur significant increased
costs as a result of operating as a public company in the United States, and our management is required to devote substantial time
to new compliance initiatives. |
|
● |
If we fail to maintain
proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired. |
Corporate Information
We are organized as a corporation under the laws
of British Columbia, Canada, and maintain our registered and records office at 7404 King George Blvd., Suite 200, King’s Cross,
Surrey, British Columbia V3W 1N6, Canada. The principal place of business is located at 1751 Richardson Suite 2207, Montreal, Quebec
Canada H3K-1G6. Our telephone number is (514) 500-1181 and our website is located on the internet at https://www.siyatamobile.com. The
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:
![](https://www.sec.gov/Archives/edgar/data/1649009/000121390024069106/image_009.jpg)
The
Offering
Securities being offered: |
|
80,000 of Common Shares, on a best-efforts basis
at a public offering price of $1.70 per Common Share.
We are also offering 2,272,940 pre-funded warrants
to purchase Common Shares to those purchasers whose purchase of Common Shares in this offering would otherwise result in the purchaser,
together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of each purchaser,
9.99%) of our outstanding Common Shares immediately following the consummation of this offering, the opportunity to purchase, if any such
purchaser so chooses, pre-funded warrants, or the pre-funded warrants, in lieu of Common Shares that would otherwise result in such purchaser’s
beneficial ownership exceeding 4.99% (or, at the election of each purchaser, 9.99%) of our outstanding Common Shares. The purchase price
of each pre-funded warrant is $1.69 (which is equal to the public offering price per Common Share to be sold in this offering minus $0.01,
the exercise price per Common Share of each pre-funded warrant). The pre-funded warrants are immediately exercisable (subject to the beneficial
ownership cap) and may be exercised at any time until all of the pre-funded warrants are exercised in full. We are also registering the
Common Shares issuable from time to time upon the exercise of the pre-funded warrants offered hereby. See “Description of Securities”
for more information. |
|
|
|
Best efforts offering: |
|
We have agreed to offer and sell the Securities offered hereby directly to the purchasers. We have retained Spartan Capital Securities, LLC to act as our exclusive placement agent to use its reasonable best efforts to solicit offers to purchase the Securities offered by this prospectus. The Placement Agent is not required to buy or sell any specific number or dollar amount of the Securities offered hereby. See “Plan of Distribution” section beginning on page 95 for more information. |
|
|
|
Assumed Public Offering Price: |
|
$1.70 per Common Share, and $1.69 per pre-funded warrant. |
|
|
|
Common Shares outstanding immediately prior to this offering: |
|
802,450 Common Shares. |
|
|
|
Common Shares to be outstanding after this offering:(1) |
|
882,450 Common Shares. |
Use of proceeds: |
|
Assuming no exercise of the pre-funded warrants
in connection with this offering, we estimate the net proceeds of the offering will be approximately $3,570,782 after deducting
the placement agent fees and estimated offering expenses payable by us.
We currently intend to use the net proceeds from
this offering for general corporate purposes, which could include future acquisitions, investments in other companies, capital expenditures
and working capital, payments towards the services of a third-party marketing agency, and other additional services as is detailed further
in “Use of Proceeds” on page 58. |
Dividend
policy: |
|
We have never
declared or paid any dividends on our Common Shares. We do not anticipate paying any dividends in the foreseeable future. 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. |
Risk factors: |
|
Investing in
our Securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You
should carefully consider the information set forth in the “Risk Factors” section beginning on page 23. |
|
|
|
Lock-Up: |
|
We have agreed to a 40
days lock-up after the closing, and have agreed subject to prior written consent of the Placement Agent, not to offer, issue, sell,
contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our Common Shares or other securities
convertible into or exercisable or exchangeable for our Common Shares, or announce an intention to issue, any additional debt, common
shares or any securities convertible into or exchangeable for shares of the Company (except in connection with exchange, transfer,
conversion or exercise rights of existing outstanding securities or existing commitments to issue securities. |
|
|
|
Trading market and symbol: |
|
Our Common Shares and Prior
Warrants are listed on the Nasdaq Capital Market under the symbols “SYTA” and “SYTAW,” respectively. The
Common Shares offered hereby will trade on the Nasdaq Capital Market under the symbol “SYTA.” We do not intend to apply
for listing of the pre-funded warrants on any securities exchange or recognized trading system. |
|
|
|
Transfer agent: |
|
The transfer agent and
registrar for our Common Shares is Computershare Inc. |
(1) |
The number of Common Shares outstanding immediately following this offering is based on 802,409 Common Shares outstanding as of August 13, 2024 and excludes: |
|
● |
118 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 $32,130 per share; |
|
● |
243 Common Shares issuable upon the exercise of restricted share units outstanding under the 2016 Stock Option Plan, as amended, with a weighted-average exercise price of $NIL per share; |
|
● |
1,597 Common Shares issuable upon the exercise of outstanding warrants with a weighted average exercise price of $31,483 per share; |
|
|
|
|
● |
1,026 Common Shares issuable upon the exercise of outstanding investment banker’s warrants with a weighted average exercise price of $4,486 per share; |
|
● |
Common Shares issuable upon the conversion of the 290 Class C Preferred Shares, issued pursuant to the Second April Purchase Agreement, as described in “Summary – Recent Developments” less 97 preferred shares that were redeemed on May 16, 2024; |
|
● |
Common Shares issuable upon the conversion of the 290 Class C Preferred Shares, issued pursuant to the April Purchase Agreement, as described in “Summary – Recent Developments”; |
|
|
|
|
● |
Common Shares issuable upon the conversion of the 118 Class C Preferred Shares, issued pursuant to the June Purchase Agreement, as described in “Summary – Recent Developments”; |
|
● |
Common Shares issuable upon the conversion of the 256 Class C Preferred Shares, issued pursuant to the Second June Purchase Agreement, as described in “Summary – Recent Developments”; less 150 preferred shares that were redeemed on July 10, 2024; |
|
● |
Common Shares issuable upon the conversion of the 293 Class C Preferred Shares, issued pursuant to the July 18, 2024 Exchange Agreement, as described in “Summary – Recent Developments”; and |
|
● |
2,272,940 Common Shares issuable upon the exercise
of the pre-funded warrants issued in this offering. |
Summary
Consolidated Financial Information
The following tables summarize certain financial
data regarding our business and should be read in conjunction with our financial statements and related notes incorporated by reference
into this prospectus.
Our summary consolidated financial data as of
December 31, 2023 and 2022 and for the years then ended are derived from our audited consolidated financial statements incorporated by
reference into this prospectus. We derived our summary consolidated financial data as of March 31, 2024 and for the three months ended
March 31, 2023 and 2023 from our unaudited condensed consolidated interim financial statements incorporated by reference into this prospectus.
All financial statements included in this prospectus
are prepared and presented in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”). The summary financial information is only a summary and should be read in conjunction
with our historical financial statements and related notes. Our financial statements fully represent our financial condition and operations;
however, they are not indicative of our future performance.
| |
Three Months Ended | | |
Three Months Ended | | |
Year Ended | | |
Year Ended | |
| |
March 31, 2024 | | |
March 31, 2023 | | |
December 31, 2023 | | |
December 31, 2022 | |
| |
(Unaudited) | | |
(Unaudited) | | |
| | |
| |
| |
| | |
| | |
| | |
| |
Revenue | |
$ | 2,357,879 | | |
$ | 1,807,637 | | |
$ | 8,233,301 | | |
$ | 7,545,488 | |
Cost of sales | |
| (1,404,462 | ) | |
| (1,306,120 | ) | |
| (5,575,372 | ) | |
| (5,092,011 | ) |
Gross profit | |
| 863,417 | | |
| 496,517 | | |
| 2,657,929 | | |
| 1,389,899 | |
| |
| | | |
| | | |
| | | |
| | |
EXPENSES | |
| | | |
| | | |
| | | |
| | |
Amortization and depreciation | |
| 404,658 | | |
| 401,640 | | |
| 1,754,955 | | |
| 1,142,165 | |
Development expenses | |
| 35,000 | | |
| 53,985 | | |
| 578,356 | | |
| 339,828 | |
Selling and marketing | |
| 1,298,018 | | |
| 1,003,365 | | |
| 4,784,994 | | |
| 4,723,309 | |
General and administrative | |
| 1,038,552 | | |
| 1,392,430 | | |
| 6,080,414 | | |
| 7,435,016 | |
Inventory impairment | |
| | | |
| | | |
| | | |
| | |
Loss (income) from water damage | |
| | | |
| | | |
| (834,713 | ) | |
| 544,967 | |
Bad debts | |
| 18,858 | | |
| | | |
| 47,526 | | |
| 86,103 | |
Share-based payments | |
| 117,124 | | |
| 310,828 | | |
| 930,564 | | |
| 2,888,704 | |
Total operating expenses | |
| (2,912,210 | ) | |
| (3,162,348 | ) | |
| (13,180,248 | ) | |
| (17,973,297 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net operating loss | |
| (2,048,793 | ) | |
| (2,665,731 | ) | |
| (10,522,319 | ) | |
| (16,583,398 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER EXPENSES | |
| | | |
| | | |
| | | |
| | |
Finance expense | |
| 779,756 | | |
| 34,098 | | |
| 841,815 | | |
| 181,413 | |
Foreign exchange loss (gain) | |
| (8,945 | ) | |
| 163 | | |
| (49,298 | ) | |
| 586,794 | |
Change in fair value of convertible promissory note | |
| | | |
| | | |
| | | |
| 4,794,710 | |
Change in fair value of warrant liability | |
| (22.584 | ) | |
| (2,178,007 | ) | |
| 1,517,389 | | |
| (8,245,662 | ) |
Transaction costs | |
| | | |
| | | |
| 99,529 | | |
| 1,398,598 | |
Total other expenses | |
| (748,227 | ) | |
| (2,212,268 | ) | |
| (2,409,475 | ) | |
| 1,284,147 | |
Net loss for the year | |
| (2,797,020 | ) | |
| (4,877,999 | ) | |
| (12,931,794 | ) | |
| (15,299,251 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive income | |
| | | |
| | | |
| | | |
| | |
Translation adjustment | |
| | | |
| | | |
| | | |
| 137,609 | |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive loss for the year | |
$ | (2,797,020 | ) | |
$ | (4,877,999 | ) | |
$ | (12,931,794 | ) | |
$ | (15,161,642 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares | |
| 570,462 | | |
| 84,432 | | |
| 228,578 | | |
| 29,964 | |
Basic and diluted loss per share | |
$ | (4.90 | ) | |
$ | (57.77 | ) | |
$ | (56.57 | ) | |
$ | (506.00 | ) |
| |
As of | | |
As of | | |
As of | |
Balance Sheet Data | |
31-March-2024 | | |
31-Dec-23 | | |
31-Dec-22 | |
| |
(unaudited) | | |
| | |
| |
Cash and cash equivalents | |
$ | 585,559 | | |
$ | 898,771 | | |
$ | 1,913,742 | |
Total current assets | |
| 5,714,162 | | |
| 6,702,447 | | |
| 7,910,276 | |
Total assets | |
| 14,308,055 | | |
| 15,512,405 | | |
| 16,142,531 | |
Total current liabilities | |
| 6,940,050 | | |
| 5,419,426 | | |
| 6,266,842 | |
Total liabilities | |
| 7,280,611 | | |
| 5,5805,065 | | |
| 6,902,059 | |
Total shareholders’ equity | |
| 7,027,444 | | |
| 9,707,340 | | |
| 9,240,472 | |
Total liabilities and shareholders’ equity | |
| 14,308,055 | | |
| 15,512,405 | | |
| 16,142,531 | |
RISK FACTORS
An investment in our securities involves a
high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this
prospectus, before purchasing our securities. We have listed below (not necessarily in order of importance or probability of occurrence)
what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable.
Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a
partial or complete loss of your investment. Some statements in this prospectus, including statements in the following risk factors,
constitute forward-looking statements. Please refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
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, 2023, and March 31, 2024, we had an accumulated deficit of $90,750,457,
and $93,547,477. 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, 2023, concurs with management 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, 2023, concurring with management 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 2023, 2022 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, 2023, 2022 and 2021, 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.
In 2023, our independent
registered public accountants identified the following material weaknesses in our internal control over financial reporting. The first
material weakness related to our revenue recognition practices where we do not sufficiently determine for specific transactions the correct
timing in which the revenue should be recorded after title transfer terms were met. The second material weakness related to insufficient
documentation of inventory controls relating to our inventory balances, transfer between sites and off-site inventory tracking is limited.
The third material weakness related to internal control weaknesses in the capitalization and coordination of development costs to prevent
excess payments and erroneously recorded invoices.
For the material weaknesses
identified in our 2023 audit, we have taken steps to remediate these material weaknesses, and to further strengthen our accounting staff
and internal controls, as detailed below:
|
● |
With respect to the revenue
recognition weakness, management has implemented a process that will scrutinize the delivery date for each sale that occurs to ensure
that the revenue recognition for each period is calculated properly. This will ensure proper matching of revenues in the period
incurred. |
|
● |
With respect to the inventory
transfers, management has implemented manual processes as a back up to ensure all inventory transfers are recorded properly so that
the inventory valuation is correct. |
With respect to the
research and development process, our research and development team will be required to approve all invoices from the research and development
subcontractor and ensure they fall within the budget and to ensure that new contracts and agreements are made to extend and expand the
previous contract once total payments reached the sum in the agreement to ensure the amounts capitalized are not in excess of the original
budget with its discounted cash flows. Once the research and development team has approved the invoice based on the above criteria, the
Company’s Chief Executive Officer will review the documentation and, once approved, will forward the documentation to the Company’s
Chief Financial Officer in Canada for wire initiation.
In 2022, our independent
registered public accountants identified the following material weaknesses in our internal control over financial reporting. The first
material weakness related to our revenue recognition practices where we do not sufficiently review (i) product returns in relation to
product sales and (ii) for title transfer terms to determine when revenue should be recorded. The second material weakness related to
insufficient documentation of inventory controls relating to our inventory balances, advances to suppliers, and off-site inventory tracking
is limited. The third material weakness related to internal control weaknesses in the capitalization and coordination of development
costs to prevent excess payments and erroneously recorded invoices.
For the material weaknesses
identified in our 2022 audit, we have taken steps to remediate these material weaknesses, and to further strengthen our accounting staff
and internal controls, as detailed below:
|
● |
With respect to the revenue
recognition practices, management will consistently apply of IFRS15 with respect to the five criterion for revenue recognition, In
addition, management will institute peer review of North American sales by the Israeli subsidiary’s chief financial officer
and peer review by Company’s Chief Financial Officer of Israeli sales recognition policy on a quarterly basis and engage in
dialogue on new customers to ensure the revenue recognition policy and the customer contracts are consistently applied. |
|
● |
With respect to the inventory
control weaknesses, management will institute the following remediation procedures: |
|
● |
Monthly comparison of inventory
first and last cost in USD$ between periods to note any changes and to investigate the reason for these discrepancies to provide
a more accurate quantum of write downs and consistent costing. |
|
● |
The implementation of an
IT system to track the inventory movements in North America; |
|
● |
Monthly comparison of inventory
units between periods to note any changes and to investigate the reason for any inconsistencies. |
|
● |
Obtain confirmation of
goods in transit with external vendors and consignment customers on a more timely basis. |
|
● |
With respect to the development
cost weaknesses, the research and development team will be required to approve all invoices from the R&D sub-contractor and ensure
they fall within the budget to ensure the amounts capitalized are not in excess of the original budget with its discounted cash flows.
Once the R&D team has approved the invoice based on the above criteria, the Company’s Chief Executive Officer will review
the documentation and once approved, will forward said documentation to the Company’s Chief Financial Officer in Canada for
wire initiation. |
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 (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. |
To date, we have only partially remediated the
material weaknesses identified in 2022 and 2021 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.
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 60%, 50%,
and 65% of our revenues for the years ended December 31, 2023 and 2022, and for the three months ended March 31, 2024, 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:
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AT&T, in the United
States; |
|
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FirstNet, in the United
States; |
|
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Verizon, in the United
States; |
|
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T-Mobile, in the United
States; |
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Bell Mobility, in Canada; |
|
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a leading global land mobile
radio, or 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.
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 LMR 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, Motorola,
and Tait International Limited. Within the Cellular Booster category, we have several direct competitors, including Wilson Electronics,
LLC, or Wilson Electronics, 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.
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 bring to injury in our reputation and 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:
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accelerate the adoption
of our solutions by new end customers; |
|
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expand into new vertical
markets; |
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develop and deliver new
products and services; |
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increase awareness of the
benefits that our solutions offer; and |
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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.
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:
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evolving industry standards; |
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frequent new product and
service introductions; |
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increasing demand for customized
product and software solutions; |
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rapid competitive developments; |
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changing customer demands;
and |
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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.
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.
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 limited history
and experience in contracting with third party manufacturers in Asia for the high-volume commercial production of our devices. Because
of this limited production history, 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. Moreover, we face manufacturing capacity constraints that present further
risks to our business. If overall demand of 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.
Our financial condition and results of
operations as well as those of potential customers could be adversely affected by the Middle East War, which may cause a material adverse
effect on the level of economic activity around the world, including in the markets we serve.
In October 2023, war broke out in the Middle
East between Israel and Hamas and possibly with other regional powers. As a result of this war, various nations, including the United
States, have been monitoring the situation closely. While we currently have customers, assets, liabilities, employees and suppliers in
the region we have not experienced any supply disruptions directly related to this war. As this war continues or possibly escalates,
this may lead to further disruption, instability and volatility in global markets and industries that could negatively impact our customers,
operations and our supply chain. The impact of the conflict and related sanctions on the world economy are subject to rapid change and
are difficult to predict. The war could create 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 Middle East region. We have no operations or other projects in that region.
We are monitoring any broader economic impact
from the Middle East war, including heightened risk of cyberattacks, property damage, employee inaccessibility to the workplace, increased
prices of fuel and other commodities, and potential impacts to our partners’ supply chains. Our financial condition, results of
operations, and cash flows may be materially adversely affected, but the specific impact on our financial condition, results of operations,
and cash flows is currently difficult to determine.
Our financial condition and results of
operations as well as those of potential customers could be adversely affected by the Russian invasion of Ukraine, which has caused a
material adverse effect on the level of economic activity around the world, including in the markets we serve.
In February 2022, the Russian Federation
invaded Ukraine. As a result of the invasion, various nations, including the United States, have instituted economic sanctions against
the Russian Federation and Belarus and certain of their citizens. While we currently have no customers or suppliers located in Belarus,
the Russian Federation or Ukraine, nor have we experienced any supply disruptions directly related to the Russian invasion of Ukraine
as we do not knowingly source any materials originating from Belarus, the Russian Federation or Ukraine, as the war in Ukraine continues
or possibly escalates, this may lead to further disruption, instability and volatility in global markets and industries that could negatively
impact our customers, operations and our supply chain. The impact of the conflict and related sanctions on the world economy are subject
to rapid change and are difficult to predict. 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.
We are monitoring any broader economic impact
from Russia’s invasion of Ukraine and the ongoing war between the two nations, including heightened risk of cyberattacks, increased
prices of fuel and other commodities, and potential impacts to our partners’ supply chains. Our financial condition, results of
operations, and cash flows may be materially adversely affected, but the specific impact on our financial condition, results of operations,
and cash flows is currently difficult to determine.
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.
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 years ended December 31, 2023 and
2022, and for the three-months ended March 31, 2024, we derived 52%, 49%, and 70% of our revenue, respectively, 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.
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, or
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, 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 became 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 partner and customer and consumer demand for our products and result in lower revenue and net income both in the short
and long term.
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, 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 and/or wholesale partners, 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:
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increased shipping costs; |
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the imposition of additional import or trade restrictions; |
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legal or economic restrictions on overseas suppliers’ ability to produce and deliver products; |
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increased custom duties and tariffs; |
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unforeseen delays in customs clearance of goods; |
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more restrictive quotas; |
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loss of a most favored nation trading status; |
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currency exchange rates; |
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port of entry issues; and |
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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 novel Coronavirus (Covid-19) 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.
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, changes in policies with respect to “sanctuary cities”
may result in a reduction in federal funds available to our current or potential end customers. Additionally, 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, inflation, changes in general
interest rates, decisions of central banks, 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.
Acquisitions and other
strategic decisions involve numerous risks, including:
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problems integrating and divesting the operations, technologies, personnel, services or products over geographically disparate locations; |
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unanticipated costs, taxes, litigation and other contingent liabilities; |
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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; |
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adverse impacts on existing business relationships with suppliers and customers; |
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cannibalization of revenues as customers may seek multi-product discounts; |
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risks associated with entering into markets in which we have no, or limited, prior experience; |
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incurrence of significant restructuring charges if acquired products or technologies are unsuccessful; |
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significant diversion of management’s attention from our core business and diversion of key employees’ time and resources; |
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licensing, indemnity or other conflicts between existing businesses and acquired businesses; |
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inability to retain key customers, distributors, suppliers, vendors and other business relations of the acquired business; and |
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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. Further, the terms of our indebtedness
constrain our ability to make and finance additional acquisitions or divestitures.
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, impact existing debt agreements and result in adverse changes to our financial statements.
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
recent 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, we manufacture our
mobile phones at our 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 (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 U.S. 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 US 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.
In 2022, five nations
had levied retaliatory tariffs up to 70 percent on approximately $73.2 billion of U.S. exports. These tariffs do not include retaliation
by Canada and Mexico; following the reversal of U.S. steel and aluminum tariffs, both Canada and Mexico withdrew their retaliatory tariffs
of 7 percent to 25 percent on approximately $20 billion of U.S. exports. These tariffs also no longer include retaliation by the EU,
as it cancelled its retaliatory tariffs in exchange for the United States replacing the aluminum and steel tariffs with a TRQ for EU
imports.
The invasion of Ukraine
by Russia has resulted increased sanctions on trade with Russia which could reverberate to other countries, other economies and other
markets. On February 24, 2023, the United States, in coordination with allies and G7 partners, announced a new set of sanctions, export
controls and tariffs targeting key, revenue-generating sectors of the Russian economy and restricting trade with over 200 persons, including
both Russian and third-country actors across Europe, Asia and the Middle East. These new measures, taken by the U.S. Department of the
Treasury’s Office of Foreign Assets Control, or OFAC, US Department of Commerce’s Bureau of Industry and Security, or BIS,
Office of the US Trade Representative, or USTR and U.S. Department of State, mark the one-year anniversary of Russia’s war against
Ukraine. These measures include the following:
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OFAC: (i) announced a new determination targeting the metals and mining sector of the Russian Federation economy under Executive Order 14024; (ii) added 83 entities and 22 individuals to the Specially Designated Nationals and Blocked Persons List, including over 30 third-country individuals and entities, resulting in the freezing of their assets within U.S. jurisdiction and prohibitions on transactions by U,S, persons or within the U.S. that involve such persons and their 50 percent or more owned entities; and (iii) made additions and revisions to several existing general licenses. |
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BIS: (i) announced four new rules targeting Russia’s defense-industrial base and military and third countries supporting Russia; (ii) expanded export controls under the Export Administration Regulations, including licensing requirements on several commercial and industrial items; and (iii) added 86 entities to the Entity List determined to have engaged in sanctions evasion and backfill activities in support of Russia’s defense-industrial sector, prohibiting the targeted companies from purchasing items, such as semiconductors, whether made in the US or with certain US technology or software abroad. |
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USTR announced additional tariff increases, primarily targeting metals, minerals and chemical products. |
These sanctions, export controls and tariffs are
part of the U.S.’s ongoing to impose economic costs on Russia in response to its actions in Ukraine.
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, 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 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. 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 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 manufactures 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 whistleblower 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.
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 manufacture and/or 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 manufacture and 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, manufacture, 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, or FTC, and various state, local and foreign agencies.
We may collect personally identifiable information, or 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.
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, or 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.
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 are often 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 had been approached by Wilson Electronics about potential infringement of several of their patents involving
cellphone boosters. As a result, the Company entered into a product technology licensing agreement with Wilson Electronics that resolved
their claim whereby Wilson is entitled to a 4.5% licensing fee on the revenues earned by the Company for every booster product sold Many
of these assertions are brought by non-practicing entities whose principal business model is to secure patent licensing revenues from
product manufacturing 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.
Risks Relating to our Locations in Israel
and Canada and our International Operations
We also conduct
our operations in Israel. Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip
and Israel’s war against them, may affect our operations.
Since 2015, we operate
a cellular technology company in Israel and a number of our officers, directors and employees are residents of Israel, and because of
this our business and operations are directly affected by economic, political, geopolitical and military conditions in Israel.
Since the establishment
of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and terrorist
organizations active in the region. These conflicts have involved missile strikes, hostile infiltrations and terrorism against civilian
targets in various parts of Israel, which have negatively affected business conditions in Israel.
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. In October 7, 2023, Hamas terrorists infiltrated
Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched
extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other
areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign
against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Moreover, the clash between
Israel and Hezbollah in Lebanon, may escalate in the future into a grater regional conflict.
Any hostilities involving
Israel, or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our
operations and results of operations and could make it more difficult for us to raise capital. Parties and our employees/contractors with
whom we may do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make
alternative arrangements when necessary. The conflict situation in Israel could cause situations where our operational/functional or auditing
bodies could not be able to function adequately, thus possibly leading to temporary suspensions or even cancellations of our product deliveries,
our work-flow clearance or other certifications.
The conflict situation
in Israel could cause disruptions in our supply chain and international trade, including the import of inputs and the export of our products,
The conflict situation in Israel could also 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.
There have been travel
advisories imposed as related to travel to Israel, and restriction on travel, or delays and disruptions as related to imports and exports
may be imposed in the future. Additionally, members of our management and employees are located and reside in Israel. Shelter-in-place
and work-from-home measures, government-imposed restrictions on movement and travel and other precautions taken to address the ongoing
conflict may temporarily disrupt our management and employees’ ability to effectively perform their daily tasks.
The Israel Defense Force
(the “IDF”), the national military of Israel, is a conscripted military service, subject to certain exceptions. Several of
our employees are or now may be subject to military service in the IDF and have been and may be called to serve. It is possible that there
will be further military reserve duty call-ups in the future, which may affect our business due to a shortage of skilled labor and loss
of institutional knowledge, and necessary mitigation measures we may take to respond to a decrease in labor availability, such as overtime
and third-party outsourcing, for example, which may have unintended negative effects and adversely impact our results of operations, liquidity
or cash flows.
It is currently not possible
to predict the duration or severity of the ongoing conflict or its effects on our business, operations and financial conditions. The ongoing
conflict is rapidly evolving and developing, and could disrupt our business and operations, interrupt our sources and availability of
supply and hamper our ability to raise additional funds or sell our securities, among others.
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, 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.
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 this 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. our 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.”
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 and the auditors 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 or such auditors 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:
(i) 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 (ii) 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.
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:
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effectively managing and overseeing operations that are distant and remote from corporate headquarters may be difficult and may impose increased operating costs; |
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fluctuating foreign currency rates could restrict sales, increase costs of purchasing, and impact collection of receivables outside of the United States; |
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volatility in foreign credit markets may affect the financial well-being of our customers and suppliers; |
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violations of anti-corruption laws, including the Foreign Corrupt Practices Act and the U.K. Bribery Act could result in large fines and penalties; |
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violations of privacy and data security laws could result in large fines and penalties; and |
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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:
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foreign governments may impose burdensome tariffs, quotas, taxes, trade barriers, or capital flow restrictions; |
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restrictions on the export or import of technology may reduce or eliminate the ability to sell in or purchase from certain markets; |
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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; |
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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; |
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staffing may be difficult along with higher turnover at international operations; |
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a government-controlled exchange rate and limitations on the convertibility of currencies, including the Chinese yuan; |
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transportation delays and customs related delays that may affect production and distribution of our products; and |
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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.
Risks Related to This Offering and Ownership of Our Securities
This is a reasonable best efforts offering,
in which no minimum number or dollar amount of Securities is required to be sold, and we may not raise the amount of capital we believe
is required for our business plans.
The Placement Agent has agreed to use its reasonable
best efforts to solicit offers to purchase the Securities in this offering. The Placement Agent has no obligation to buy any of the Securities
from us or to arrange for the purchase or sale of any specific number or dollar amount of the Securities. There is no required minimum
number of Securities that must be sold as a condition to completion of this offering, and there can be no assurance that the offering
contemplated hereby will ultimately be consummated. Even if we sell Securities offered hereby, because there is no minimum offering amount
required as a condition to the closing of this offering, the actual offering amount is not presently determinable and may be substantially
less than the maximum amount set forth on the cover page. We may sell fewer than all of the Securities offered hereby, which may significantly
reduce the amount of proceeds received by us. Thus, we may not raise the amount of capital we believe is required for our operations in
the short-term and may need to raise additional funds, which may not be available or available on terms acceptable to us.
Assuming that we are able to sell the maximum
number of Securities in this offering, we expect that the consummation of this offering could cause the price of our Common Shares to
decline.
In this offering, are
offering 80,000 shares of our Common Shares and 2,272,940 pre-funded warrants at an offering price per Common Share of $1.70 (with pre-funded
warrants at a price of $1.69). Immediately following the completion of the offering, based on the number of shares outstanding as of August
13, 2024, we will have 882,450 Common Shares outstanding. We cannot predict the effect, if any, that market sales of those shares or the
availability of those Common Shares for sale will have on the market price of our Common Shares. Any decline in the price of our Common
Shares will also have a negative effect on the price in the market of our Prior Warrants.
The Common Shares offered in the offering and
the Common Shares issuable upon the exercise of the pre-funded warrants offered in this offering may be resold in the public market immediately
without restriction, unless purchased by our “affiliates” as that term is defined in Rule 144 under the Securities Act, which
may be resold only if registered under the Securities Act or in accordance with the requirements of Rule 144 or another applicable exemption
from the registration requirements of the Securities Act.
Rule 144 sales in the future may have a
depressive effect on our share price.
All of the outstanding common shares held by the
present officers, directors, and affiliate shareholders are “restricted securities” within the meaning of Rule 144 under the
Securities Act of 1933, as amended, or the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act
and as required under applicable state securities laws. Rule 144 provides in essence that a person who is an affiliate or officer or director
who has held restricted securities for six months may, under certain conditions, sell every three months, in brokerage transactions, a
number of shares that does not exceed the greater of 1.0% of a company’s outstanding common shares. There is no limitation on the
amount of restricted securities that may be sold by a non-affiliate after the owner has held the restricted securities for a period of
six months if our company is a current reporting company under the Exchange Act. A sale under Rule 144 or under any other exemption from
the Securities Act, if available, or pursuant to subsequent registration of common shares of present shareholders, may have a depressive
effect upon the price of the common shares in any market that may develop.
Outstanding warrants and future sales of
our Securities may further dilute the Common Shares and adversely impact the price of our Common Shares.
As of August 13, 2024, we had 802,450 Common Shares
issued and outstanding. As of August 13, 2024, we have outstanding unexercised warrants to purchase 1,597 Common Shares as of August 13,
2024 that expire between September 25, 2025 until infinity (as 557 warrants have no expiry date). If the holder 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.
Common Shares representing a substantial
percentage of our outstanding shares may be sold in this offering, which could cause the price of our Common Shares to decline.
We are selling 80,000 Common Shares, or approximately
9.97% of our outstanding Common Shares, prior to this offering, as of August 13, 2024. We are also selling pre-funded warrants to purchase
an additional 2,279,940 Common Shares, which may/may not be exercised in the future (immediately or otherwise). This sale and any future
sales of a substantial number of Common Shares in the public market, or the perception that such sales or exercises may occur, could materially
adversely affect the price of our Common Shares. We cannot predict the effect, if any, that market sales of those Common Shares or the
availability of those Common Shares for sale will have on the market price of our Common Shares.
You may experience future dilution as a
result of future equity offerings.
In order to raise additional capital, we may in
the future offer additional Common Shares or other securities convertible into or exchangeable for our Common Shares that could result
in further dilution to the investor purchasing our Common Shares in this offering or result in downward pressure on the price of our Common
Shares. We may sell our Common Shares or other securities in any other offering at prices that are higher or lower than the prices paid
by the investor in this offering, and the investor purchasing shares or other securities in the future could have rights superior to existing
shareholders. Moreover, to the extent that we issue options or warrants to purchase, or securities convertible into or exchangeable for,
our Common Shares in the future and those options, warrants or other securities are exercised, converted or exchanged, stockholders may
experience further dilution.
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.
There is no public market for the pre-funded
warrants being offered in this offering.
There is no established public trading market
for the pre-funded warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to
apply to list the pre-funded warrants on any securities exchange or nationally recognized trading system. Without an active market, the
liquidity of the pre-funded warrants will be limited.
Holders of our pre-funded warrants will
have no rights as holders of Common Shares until such warrants are exercised.
Until you acquire Common Shares upon exercise
of your pre-funded warrants, you will have no rights with respect to Common Shares issuable upon exercise of your pre-funded warrants.
Upon exercise of your pre-funded warrants, you will be entitled to exercise the rights of a holder of Common Shares only as to matters
for which the record date occurs after the exercise date.
The pre-funded warrants are speculative
in nature.
The pre-funded warrants offered hereby do not confer any rights of
ownership of our Common Shares 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. Specifically, commencing on the date of issuance, holders of the pre-funded warrants
may acquire Common Shares issuable upon exercise of such warrants at an exercise price of $0.01 per Common Share. Moreover, following
this offering, the market value of the pre-funded warrants is uncertain, and there can be no assurance that the market value of the pre-funded
warrants will equal or exceed their public offering price.
Since we do not expect to pay any cash dividends
for the foreseeable future, investors 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.
The trading price of our Common Shares has
been and is likely to continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of
which are beyond our control.
Our
share price is highly volatile. During the period from January 1, 2024 to August 13, 2024, the closing price of our Common Shares ranged
from a high of $87.30 per share to a low of $2.83 per share. The stock market in general has experienced extreme volatility that has
often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell
your Common Shares at or above the public offering price and you may lose some or all of your investment.
Our management will have broad discretion
over the use of the proceeds we receive from the sale our Securities pursuant to this prospectus and might not apply the proceeds in ways
that increase the value of your investment.
Our management will have broad discretion to use
the net proceeds from the offering, and you will be relying on the judgment of our management regarding the application of these proceeds.
Except as described in any prospectus supplement or in any related free writing prospectus that we may authorize to be provided to you,
the net proceeds received by us from our sale of the Securities described in this prospectus will be added to our general funds and will
be used as described under “Use of Proceeds” herein. Our management might not apply the net proceeds from offerings
of our Securities in ways that increase the value of your investment and might not be able to yield a significant return, if any, on any
investment of such net proceeds. You may not have the opportunity to influence our decisions on how to use such proceeds.
If we are not able to comply with the applicable
continued listing requirements or standards of Nasdaq, Nasdaq could delist our Common Shares and Prior Warrants.
In order to maintain the listing of our Common
Shares and Prior Warrants on the Nasdaq Capital Market, we must satisfy minimum financial and other continued listing requirements and
standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity,
minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able to comply with such
applicable listing standards.
In addition, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iii),
if the Company’s Common Shares trade below $0.10 per share for 10 consecutive trading days, the Company could be subject to a Nasdaq
delisting notification which could result in the delisting of the Company’s Common Shares from the Nasdaq Capital Market immediately
unless appealed or unless the Nasdaq provides a compliance period in which to cure such bid price deficiency.
If the Common Shares are not listed on Nasdaq
at any time after this offering, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities; |
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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; |
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a limited amount of news and analyst coverage for our Company; and |
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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,
or 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 Securities and Exchange Commission (“SEC”
or the “Commission”) 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.
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.
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.
Based on shares outstanding as of August 13, 2024,
our executive officers and directors, together with entities affiliated with such individuals, along with our largest shareholder, will
beneficially own approximately 0.003% of our Common Shares based on 802,450 Common Shares issued and outstanding on such date.
We may issue additional debt and equity
securities, which are senior to our Common Shares as to distributions and in liquidation, which could materially adversely affect the
market price of our Common Shares.
In the future, we may attempt to increase our
capital resources by entering into additional debt or debt-like financing that is secured by all or up to all of our assets, or issuing
debt or equity securities, which could include issuances of commercial paper, medium-term notes, senior notes, subordinated notes or shares.
In the event of our liquidation, our lenders and holders of our debt securities would receive a distribution of our available assets before
distributions to our shareholders.
Any additional preferred securities, if issued
by our company, may have a preference with respect to distributions and upon liquidation, which could further limit our ability to make
distributions to our common shareholders. Because our decision to incur debt and issue securities in our future offerings will depend
on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings
and debt financing.
Further, market conditions could require us to
accept less favorable terms for the issuance of our securities in the future. Thus, you will bear the risk of our future offerings reducing
the value of your common shares and diluting your interest in us. In addition, we can change our leverage strategy from time to time without
approval of holders of our common shares, which could materially adversely affect the market share price of our common shares.
We are governed by the corporate laws of
British Columbia, Canada which in some cases have a different effect on shareholders than the corporate laws of the United States.
We are governed by the Business Corporations
Act (British Columbia) (the “Business Corporations Act”) and other relevant laws, which may affect the rights of shareholders
differently than those of a company governed by the laws of a U.S. jurisdiction, and may, together with our charter documents, have the
effect of delaying, deferring or discouraging another party from acquiring control of our company by means of a tender offer, a proxy
contest or otherwise, or may affect the price an acquiring party would be willing to offer in such an instance. The material differences
between the Business Corporations Act and Delaware General Corporation Law (the “DGCL”) that may have the greatest such effect
include, but are not limited to, the following: (i) for certain corporate transactions (such as mergers and amalgamations or amendments
to our articles) the Business Corporations Act generally requires the voting threshold to be a special resolution approved by 662∕3%
of shareholders, or as set out in the articles, as applicable, whereas DGCL generally only requires a majority vote; and (ii) under the
Business Corporations Act a holder of 5% or more of our common shares can requisition a special meeting of shareholders, whereas such
right does not exist under the DGCL. We cannot predict whether investors will find our company and our common shares less attractive because
we are governed by foreign laws.
U.S. holders of the Company’s shares
may suffer adverse tax consequences if we are characterized as a passive foreign investment company.
The rules governing “passive foreign investment
companies” (“PFICs”) can have adverse effects on U.S. Holders (as defined below in “Material U.S. Federal Income
Tax Considerations”) for U.S. federal income tax purposes. Generally, if, for any taxable year, at least 75% of our gross income
is passive income, or at least 50% of the value of our assets (generally, using a quarterly average) is attributable to assets that produce
passive income or are held for the production of passive income (including cash), we would be characterized as a PFIC for U.S. federal
income tax purposes. The determination of whether we are a PFIC, which must be made annually after the close of each taxable year, depends
on the particular facts and circumstances and may also be affected by the application of the PFIC rules, which are subject to differing
interpretations. Our status as a PFIC will depend on the composition of our income and the composition and value of our assets (including
goodwill and other intangible assets), which will be affected by how, and how quickly, we spend any cash that is raised in this offering
or in any other subsequent financing transaction.
If we are a PFIC, a U.S. Holder would be subject
to adverse U.S. federal income tax consequences, such as ineligibility for certain preferred tax rates on capital gains or on actual
or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal
income tax laws and regulations. A U.S. Holder may in certain circumstances mitigate adverse tax consequences of the PFIC rules by filing
an election to treat the PFIC as a qualified electing fund, or QEF, or, if shares of the PFIC are “marketable stock,” which
such term includes the Common Shares, for purposes of the PFIC rules, by making a mark-to-market election with respect to the shares
of the PFIC. U.S. Holders should be aware that, for each tax year, if any, that we are a PFIC, we can provide no assurances that we will
satisfy the record keeping requirements of a PFIC, or that we will make available to U.S. Holders the information such U.S. Holders require
to make a QEF election with respect to us, and as a result, a QEF election may not be available to U.S. Holders. For more information,
see the discussion below under “Material U.S. Federal Income Tax Considerations — Passive Foreign Investment
Company Considerations.” You should consult your own tax advisors regarding the potential consequences to you if we were or were
to become a PFIC, including the availability, and advisability, of, and procedure for making, QEF elections and mark-to-market elections.
General Risk Factors
The unfavorable outcome of any future litigation,
arbitration or administrative action could have a significant adverse impact on our financial condition or results of operations.
From time to time, we are a party to litigation,
arbitration, or administrative actions. Our financial results and reputation could be negatively impacted by unfavorable outcomes to
any future litigation or administrative actions, including those related to the Foreign Corrupt Practices Act, the U.K. Bribery Act,
or other anti-corruption laws. There can be no assurances as to the favorable outcome of any litigation or administrative proceedings.
In addition, it can be very costly to defend litigation or administrative proceedings and these costs could negatively impact our financial
results.
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 unfavorable 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.
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 Securities
Exchange Act of 1934, as amended, or 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 Capital Market. 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 are an “emerging growth company,”
and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth
companies could make our common shares less attractive to investors.
We are an “emerging growth company,”
as defined in the federal securities laws. For as long as we continue to be an “emerging growth company,” we may choose to
take advantage of exemptions from various reporting requirements applicable to other public companies that are not “emerging growth
companies,” including, but not limited to, not being required to have our independent registered public accounting firm audit our
internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We can remain an “emerging
growth company” for up to five fiscal years from the completion of our initial public offering in September 2020, although, if
we have more than US$1.235 billion in annual revenue, if the market value of our common shares held by non-affiliates exceeds US$700
million as of June 30 of any year, or we issue more than US$1.0 billion of non-convertible debt over a three-year period before the end
of that five-year period, we would cease to be an “emerging growth company” as of the following December 31. Investors could
find our common shares less attractive if we choose to rely on these exemptions. If some investors find our common shares less attractive
as a result of any choices to reduce future disclosure, there may be a less active trading market for our common shares and our share
price may be more volatile. We have elected not to take advantage of the extended transition period allowed for emerging growth companies
for complying with new or revised accounting guidance as allowed by Section 7(a)(2)(B) of the Securities Act.
We incur significant increased costs as
a result of operating as a public company in the United States, and our management is 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 that we did not incur previously. 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, quarterly 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, or 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 their initial 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.
We expect the rules and regulations applicable
to public companies to substantially increase our legal and financial compliance costs and to 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.
Although as a Foreign Private Issuer we
are exempt from certain corporate governance standards applicable to US issuers, if we cannot satisfy, or continue to satisfy, the initial
listing requirements and other rules of the Nasdaq Capital Market, our securities may not be listed or may be delisted, which could negatively
impact the price of our securities and your ability to sell them.
In order to maintain our listing on the Nasdaq
Capital Market, we will be required to comply with certain rules of the Nasdaq Capital Market, including those regarding minimum shareholders’
equity, minimum share price, minimum market value of publicly held shares, and various additional requirements. Even if we initially
meet the listing requirements and other applicable rules of the Nasdaq Capital Market, we may not be able to continue to satisfy these
requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities
could be subject to delisting. In that regard, on May 18, 2021, we received a notice from Nasdaq indicating that, as a result of not
having timely filed our Annual Report on Form 20-F for the fiscal year ended December 31, 2020, we were not in compliance with Nasdaq
Listing Rule 5250(c)(1), which requires timely filing of all required periodic financial reports with the Securities and Exchange Commission.
Nasdaq required that we submit a plan no later than July 16, 2021 to regain compliance and we have in fact regained compliance with Nasdaq’s
listing requirements since then.
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 Securities Exchange Act of 1934, as amended, 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 International Financial Reporting Standards.
In connection with the audit of our consolidated
financial statements for the years ended December 31, 2023, 2022 and 2021, our independent registered public accountants identified 3,
4 and 5 material weaknesses, respectively, in our internal control over financial reporting.
We have taken steps to remediate these material
weaknesses, and to further strengthen our accounting staff and internal controls, as described above. These measures have only partially
remediated the material weaknesses identified in 2023 and 2022 as discussed above. We cannot be certain that other material weaknesses
and control deficiencies will not be discovered 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 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, cause the market price of our Common Shares to decline, and we could be subject to sanctions
or investigations by Nasdaq, the Securities and Exchange Commission, 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.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus and the information incorporated
by reference in this prospectus contain forward-looking statements that are based on our management’s beliefs and assumptions and
on information currently available to us. The words “believe,” “may,” “will,” “estimate,”
“continue,” “anticipate,” “intend,” “expect,” “could,” “would,”
“project,” “plan,” “potentially,” “likely,” and similar expressions and variations thereof
are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Those statements
appear in this prospectus and the documents incorporated herein by reference, particularly in the sections titled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and include statements
regarding the intent, belief or current expectations of our management that are subject to known and unknown risks, uncertainties and
assumptions. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various
factors.
Forward-looking statements include, but are not
limited to, statements about:
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the size and growth potential
of the markets for our products, and our ability to serve those markets; |
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the rate and degree of
market acceptance of our products; |
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our ability to expand our
sales organization to address effectively existing and new markets that we intend to target; |
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impact from future regulatory,
judicial, and legislative changes or developments in the U.S. and foreign countries; |
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our ability to compete
effectively in a competitive industry; |
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our ability to obtain funding
for our operations and effectively utilize the capital raised therefrom; |
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our ability to attract
collaborators and strategic partnerships; |
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our ability to meet the
continued listing requirements and standards of the Nasdaq Capital Market, or Nasdaq; |
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our ability to meet our
financial operating objectives; |
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the availability of, and
our ability to attract, qualified employees for our business operations; |
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general business and economic
conditions; |
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our ability to meet our
financial obligations as they become due; |
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positive cash flows and
financial viability of our operations and any new business opportunities; |
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our ability to secure intellectual
property rights over our proprietary products or enter into license agreements to secure the legal use of certain patents and intellectual
property; |
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our ability to be successful
in new markets; |
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our ability to avoid infringement
of intellectual property rights; |
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security, political and
economic instability in the Middle East that could harm our business, including due to the current war between Israel and Hamas;
and |
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the effects of the global
COVID-19 pandemic and the war in Ukraine. |
Because forward-looking statements are inherently
subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely upon forward-looking statements
as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur
and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law,
including the securities laws of the United States and the rules and regulations of the SEC, we do not plan to publicly update or revise
any forward-looking statements contained herein after we distribute this prospectus, whether as a result of any new information, future
events or otherwise.
In addition, statements that “we believe”
and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available
to us as of the date of this prospectus, and although we believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry
into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned
not to unduly rely upon these statements.
USE OF PROCEEDS
Assuming no exercise of the pre-funded warrants
in connection with this offering, we estimate the net proceeds of the offering will be approximately 3,570,782 after deducting the placement
agent fees and estimated offering expenses payable by us.
Out of the total proceeds of this offering, we
intend to use the proceeds of this offering for:
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$2,070,782 for general corporate purposes, which could include future acquisitions, investments in other companies, capital expenditures and working capital; and |
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$1,500,000 for payments to IR Agency, a third-party marketing agency, for services related to marketing and advertising, which will become effective as of the closing date of this offering; and |
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pending these uses, we may invest the net proceeds in short-and intermediate-term interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States government. |
The expected use of net proceeds from this offering
represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business
conditions evolve and change. As a result, our management will retain broad discretion over the allocation of the net proceeds from this
offering. See “Risk Factors—Risks Related to this Offering and the Ownership of Our Common Shares— Our management
will have broad discretion over the use of the proceeds we receive from the sale our Securities pursuant to this prospectus and might
not apply the proceeds in ways that increase the value of your investment.”
CAPITALIZATION
The following table sets forth our capitalization
as of March 31, 2024:
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on a pro forma basis to
reflect the following: (i) the issuance by the Company of 1,500 Common Shares pursuant to exercise of 1,500 pre-funded warrants at
an exercise price of $1.26 per warrant for total proceeds of $1,890, (ii) the issuance of 1,556 Common Shares in addition to now
amended and restated 18,667 warrants exercisable at $57.24 per share, 290 Class C Preferred Shares pursuant to the April Purchase
Agreement, (iii) the issuance of 1,556 Common Shares, 290 Class C Preferred Shares pursuant to the Second April Purchase Agreement,
net of a redemption of 97 preferred shares on May 16, 2024, (iv) the issuance of 8,444 Common Shares, in addition to 18,667 warrants
exercisable at $57.24 per share, and 118 Class C Preferred Shares pursuant to the June Purchase Agreement, (v) the issuance of 1,556
Common Shares, along with 256 Class C Preferred Shares issued pursuant to the Second June Purchase Agreement, net of a redemption
of 150 preferred shares on July 8, 2024; (vi) the issuance and sale of 3,889 Common Shares at a price of $23.40 per share plus
the issuance of 167,051 prefunded warrants purchased at $23.22 per prefunded warrant with an exercise price of $0.18 for gross proceeds
of $3,969,929 in a public offering that closed on May 10, 2024; (vii) the exercise of the 167,051 prefunded warrants at $0.18 per
prefunded warrant inro 167,051 common shares of the Company for gross proceeds of $30,069.22; (viii) the issuance and sale of 24,111
Common Shares at a price of $10.44 per share plus the issuance of 560,261 prefunded warrants purchased at $10.26 per prefunded warrant
with an exercise price of $0.18 for gross proceeds of $5,999,999 in a public offering that closed on June 28, 2024; (ix) the exercise
of the 560,261 prefunded warrants at $0.18 per prefunded warrant inro 560,261 common shares of the Company for gross proceeds of
$100,847.00; |
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on a pro-forma as adjusted basis to give further effect to the issuance and sale by us in this offering of 80,000 Common Shares and 2,272,940 pre-funded warrants offered by us in this prospectus (assuming no exercise of the pre-funded warrants being offered by us in this prospectus) at the public offering price of $1.70 per Common Share and $1.69 per pre-funded warrant, after deducting the Placement Agent fees and other estimated offering expenses payable by us, and after giving effect to the use of proceeds described herein. |
The Pro-forma as adjusted information below is
illustrative only. You should read this table together with our financial statements and the related notes incorporated by reference
into this prospectus.
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Actual as of March 31, 2024 | | |
Pro Forma | | |
Pro Forma as Adjusted | |
Cash and cash equivalents | |
$ | 585,559 | | |
$ | 10,295,252 | | |
$ | 13,866,035 | |
Bank Loan | |
| 476,777 | | |
| 476,777 | | |
| 476,777 | |
Sale of future receipts | |
| 2,182,918 | | |
| 2,182,918 | | |
| 2,182,918 | |
Warrant and preferred share Liability | |
$ | 133,849 | | |
$ | 1,246,089 | | |
$ | 5,223,358 | |
Lease Obligations (short and long term) | |
$ | 568,942 | | |
$ | 568,942 | | |
$ | 568,942 | |
Total liabilities not included in capitalization | |
$ | 7,280,611 | | |
$ | 8,392,851 | | |
$ | 12,370,120 | |
Total Outstanding Long-Term Debt | |
$ | - | | |
$ | - | | |
$ | - | |
Stockholders’ Equity | |
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Common shares, no par value: unlimited shares authorized; 31,692 shares actual; 802,450 shares pro forma; 882,450 pro-forma as adjusted | |
$ | 85,714,727 | | |
$ | 98,149,461 | | |
$ | 98,149,461 | |
Preferred shares no par value: unlimited shares authorized; Nil shares actual, 1,000 shares pro-forma, 1,000 shares pr-forma as adjusted | |
| - | | |
| - | | |
| - | |
Reserves | |
$ | 14,761,324 | | |
$ | 14,761,324 | | |
$ | 14,761,324 | |
Accumulated Other Comprehensive Income (loss) | |
$ | 98,870 | | |
$ | 98,870 | | |
$ | 98,870 | |
Shareholders’ Deficit | |
$ | (93,547,477 | ) | |
$ | (97,749,877 | ) | |
$ | (98,156,363 | ) |
Total Shareholders’ Equity | |
$ | 7,027,444 | | |
$ | 15,259,779 | | |
$ | 14,853,293 | |
Total Capitalization | |
$ | 7,027,444 | | |
$ | 15,259,779 | | |
$ | 14,853,293 | |
(1) |
The number of Common Shares outstanding immediately following this offering is based on 802,450 Common Shares outstanding as of August 13, 2024 and excludes: |
|
● |
118 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 $32,130 per share; |
|
● |
243 Common Shares issuable
upon the exercise of restricted share units outstanding under the 2016 Stock Option Plan, as amended, with a weighted-average exercise
price of $NIL per share; |
|
● |
1,597 Common Shares issuable
upon the exercise of outstanding warrants with a weighted average exercise price of $31,483 per share; |
|
|
|
|
● |
1,026 Common Shares issuable
upon the exercise of outstanding investment banker’s warrants with a weighted average exercise price of $4,486.22 per share; |
|
● |
Common Shares issuable upon the conversion of the 290 Class C Preferred Shares, issued pursuant to the Second April Purchase Agreement, as described in “Summary – Recent Developments” less 97 preferred shares that were redeemed on May 16, 2024; |
|
|
|
|
● |
Common Shares issuable upon the conversion of the 118 Class C Preferred Shares, issued pursuant to the June Purchase Agreement, as described in “Summary – Recent Developments”; |
|
|
|
|
● |
Common Shares issuable upon the conversion of the 256 Class C Preferred Shares, issued pursuant to the Second June Purchase Agreement, as described in “Summary – Recent Developments” less 150 preferred shares that were redeemed on July 10, 2024; |
|
|
|
|
● |
Common Shares issuable upon the conversion of 297 Class “C” preferred shares issued pursuant to an Exchange Agreement on July 18, 2024 that exchanged 37,333 share purchase warrants for 256 Class C Preferred Shares, as described in “Summary – Recent Developments”; and |
|
● |
2,272,940 Common Shares issuable upon the exercise of the pre-funded warrants issued in this offering. |
DILUTION
If you invest in our Common Shares in this offering,
your interest will be diluted to the extent of the difference between the public offering price per share of the Common Share and the
pro-forma as adjusted net tangible book value per share of a Common Share immediately after this offering.
Our historical net tangible book value as of
March 31, 2024 was negative $704,208 or negative $22.22 per Common Share. Our historical net tangible book value is the amount of our
total tangible assets (Total assets less Intangible Assets and Goodwill) less our liabilities. Historical net tangible book value per
Common Share is our historical net tangible book value divided by the number of outstanding Common Shares as of March 31, 2024.
The pro forma net tangible book value of our
Common Shares as of March 31, 2024 was $7,528,127, or $9.38 per Common Share. Pro forma net tangible book value per Common Share represents
our total tangible assets less our total liabilities, divided by the number of outstanding Common Shares, after giving effect to the
pro forma adjustments referenced under “Capitalization.”
After giving effect to the sale of 80,000 Common
Shares that we are offering at an offering price of $1.70 per Common Share (assuming the sale of the maximum offering amount and that
2,272,940 pre-funded warrants are sold in this offering at $1.69), after deducting underwriting discounts and commissions and estimated
offering expenses payable by us, our net tangible book value on a pro forma as adjusted basis as of March 31, 2024 would have been $8.07
per Common Share. This amount represents an immediate decrease in net tangible book value of $1.31 per Common Share to our existing shareholders
and an immediate increase of $6.38 per Common Share to new investors purchasing Common Shares in this offering. We determine dilution
by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor
paid for a Common Share.
The following table illustrates this dilution:
Public offering price per Common Share | |
$ | 1.70 | |
Pro-forma net tangible book value per Common Share as of March 31, 2024 (1) | |
$ | 9.38 | |
Increase per share attributable to this offering(2) | |
$ | 7.68 | |
Pro-Forma as adjusted net tangible book value per Common Share after this offering(2) | |
$ | 8.07 | |
Increase per share to new investors in this offering(3) | |
$ | 6.37 | |
(1) |
Pro-form as adjusted
net tangible book value is calculated from the following items on the March 31, 2024 (unaudited) financial statements: |
Pro-forma Shareholders’ Equity | |
$ | 15,259,779 | |
Less: Intangible Assets | |
$ | (7,731,652 | ) |
Pro-forma net tangible book value at March 31, 2024 | |
$ | 7,528,127 | |
Pro-forma net tangible book value per Common Share at March 31, 2024 | |
$ | 9.38 | |
Pro-forma as adjusted net tangible book value at March 31, 2024 | |
$ | 8.07 | |
Number of Common Shares outstanding at March 31, 2024 | |
| 31,692 | |
Total pro-forma Common Shares outstanding at March 31, 2024 | |
| 802,450 | |
Total pro-forma as adjusted Common Shares at March 31, 2024 | |
| 882,450 | |
Pro-forma as adjusted net tangible book value per Common Share at March 31, 2024 | |
$ | 8.07 | |
(2) |
Increase per share attributable
to this offering at March 31, 2024 is as follows |
Number of Common Shares to be issued in the offering | |
| 80,000 | |
Total pro-forma Common Shares outstanding at March 31, 2024 | |
| 802,450 | |
Total pro-forma as adjusted Common Shares outstanding at March 31, 2024 | |
| 882,450 | |
Pro-forma net tangible book value per Common Share at March 31, 2024 | |
$ | 9.38 | |
Pro-forma as adjusted net tangible book value per Common Share March 31, 2024 per (1) above | |
$ | 8.07 | |
Decrease per Common Share attributable to this offering | |
$ | 1.31 | |
(3) |
Dilution per share to new investors |
Offering Price per Common Share | |
$ | 1.70 | |
Pro-forma as adjusted net tangible book value per Common Share at March 31, 2024 | |
$ | 8.07 | |
Increase per Common Share to new investors in this offering | |
$ | 6.37 | |
The foregoing discussion and table do not take
into account further dilution to new investors that could occur upon the exercise of all currently outstanding warrants having a per
share exercise or conversion price less than the per Common Share offering price to the public in this offering.
The foregoing discussion and table excludes the
following:
|
● |
118 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 $32,130 per share; |
|
● |
243 Common Shares issuable
upon the exercise of restricted share units outstanding under the 2016 Stock Option Plan, as amended, with a weighted-average exercise
price of $NIL per share; |
|
● |
1,597 Common Shares issuable
upon the exercise of outstanding warrants with a weighted average exercise price of $31,482,69 per share; |
|
|
|
|
● |
1,026 Common Shares issuable
upon the exercise of outstanding investment banker’s warrants with a weighted average exercise price of $4,486.22 per share; |
|
● |
Common Shares issuable
upon the conversion of the 290 Class C Preferred Shares, issued pursuant to the Second April Purchase Agreement, as described in
“Summary – Recent Developments” less 97 preferred shares that were redeemed on May 16, 2024; |
|
● |
Common Shares issuable
upon the conversion of the 290 Class C Preferred Shares, issued pursuant to the April Purchase Agreement, as described in “Summary
– Recent Developments”; |
|
|
|
|
● |
Common Shares issuable upon the conversion
of the 118 Class C Preferred Shares, issued pursuant to the June Purchase Agreement, as described in “Summary – Recent
Developments”; and
|
|
● |
Common Shares issuable
upon the conversion of the 256 Class C Preferred Shares, issued pursuant to the Second June Purchase Agreement, as described in “Summary
– Recent Developments” less 150 preferred shares that were redeemed on July 10, 2024; |
| ● | Common
Shares issuable upon the conversion of 297 Class “C” preferred shares issued
pursuant to an Exchange Agreement on July 18, 2024 that exchanged 37,333 share purchase warrants
for 256 Class C Preferred Shares, as described in “Summary – Recent Developments”
|
MANAGEMENT
Directors and Executive Officers
Set forth below is information concerning our directors, executive
officers, and other key employees.
Name |
|
Age |
|
Position(s) |
Marc Seelenfreund |
|
55 |
|
Director; Chief Executive Officer |
Gerald Bernstein |
|
61 |
|
Chief Financial Officer |
Glenn Kennedy |
|
58 |
|
Vice President of Sales |
Gidi Bracha |
|
49 |
|
Vice President of Technology and Product Development |
Gary Herman |
|
60 |
|
Director and Chairman of the Board of Directors |
Steven Ospalak |
|
57 |
|
Director |
Lourdes Felix |
|
56 |
|
Director |
Campbell Becher |
|
54 |
|
Director (Nominee) |
Marc Seelenfreund
Marc Seelenfreund is the Founder and CEO of Siyata
Mobile Inc. since July 2015, when the reverse takeover of Teslin Resources created Siyata Mobile Inc. Marc Seelenfreund has over 20 years’
experience in the telecom and cellular arena as founder of a leading telecom distribution company representing multiple global telecom
vendors. From August 2004 to July 2015, he was the CEO of Accel Telecom Inc. a key importer and integrator of advanced telecom equipment
into the Israeli telecom market. Accel Telecom Inc’s products and services included importing and distribution of mobile devices,
including smartphones and feature phones, integration of cloud software, and distribution and integration of networking equipment including
routers and mobile broadband solutions. Marc Seelenfreund received a law degree from Bar Ilan University and is the Chairman of Ono Academic
College.
Gerald Bernstein
Gerald Bernstein has been CFO of the Company
since July 2016. Mr. Bernstein was previously the VP Finance from July 2015 until June 2016 of Pazazz Printing Inc. a printing and fulfillment
service to ensure a seamless flow throughout projects including printing, graphic design, direct marketing, fulfillment and logistics.
Previously, Mr. Bernstein served as the VP Finance from July 2013 until February 2015 of Amcor Holdings Inc., an international real estate
development and management company. From September 2003 until July 2015, Mr. Bernstein was a self-employed certified public accountant
consultant, working on various mandates in mortgage financing, tax planning, turnaround, process re-engineering and private equity due
diligence. Mr. Bernstein holds a Bachelor of Commerce Degree and a Graduate Diploma in Public Accountancy from McGill University. Mr.
Bernstein has been a member of the Canadian Institute of Chartered Professional Accountants since 1987.
Glenn Kennedy
Glenn Kennedy has over 25 years of sales experience
in the telecommunications industry where he has managed sales nationally for Motorola Canada, HTC Communications Canada and Sonim Technologies;
Glenn Kennedy is the VP Sales of Siyata Mobile Inc. since January 2017 including product certification, sales training and education
to the marketplace. Previously Mr. Kennedy severed as the Director of Carrier Sales for Sonim Technologies working exclusively on the
Rogers Wireless account from October 2015 until December 2016. Mr. Kennedy was the National Account Manager for HTC Communications Canada,
working exclusively on the Bell Mobility account from August 2011 until August 2015. From April 2003 until May 2011, Mr. Kennedy was
the National Account Manager for Motorola Mobility, working specifically on the Telus account. Mr. Kennedy has earned a Bachelor of Arts
with Honors in Business Administration from the Richard Ivey School of Business at the University of Western Ontario.
Gidi Bracha
Gidi Bracha served as a VP of Technology since
2011 and has spearheaded the development of Siyata’s various cellular products. Mr. Bracha has over 15 years of technological experience
in the telecommunications industry. Mr. Bracha has served in various key positions at Cellcom, Israel’s leading cellular provider,
including Head of Car Mobility Products and as a Director of Type Approvals. Mr. Bracha has served as an engineer in the Anti-Aircraft
division of the air force in the IDF. Mr. Bracha holds a bachelor’s degree in Engineering and Business Management from the University
of Derby.
Gary Herman
Mr. Herman has been
a member of the Board since August 10, 2023, and became Chairman of the Board effective May 15, 2024. Mr. Herman is a seasoned investor
with many years of investment and advisory experience. Since 2005, Mr. Herman has managed Strategic Turnaround Equity Partners, LP (Cayman)
and its affiliates. From January 2011 to August 2013, he was a managing member of Abacoa Capital Management, LLC, which managed, Abacoa
Capital Master Fund, Ltd. focused on a Global-Macro investment strategy. From 2005 to 2020, Mr. Herman was affiliated with Arcadia Securities
LLC, a FINRA-registered broker-dealer. From 1997 to 2002, he was an investment banker with Burnham Securities, Inc. From 1993 to 1997,
he was a managing partner of Kingshill Group, Inc., a merchant banking and financial firm with offices in New York and Tokyo. Mr. Herman
has a B.S. from the University at Albany with a major in Political Science and minors in Business and Music. Mr. Herman has many years
of experience serving on the boards of private and public companies. He presently sits on the board of SusGlobal Energy Corp. (OTC: SNRG)
as well as the Board and Audit Chairperson of: XS Financial Inc. (CSE: XS).
Stephen Ospalak
Stephen Ospalak combines over twenty-one years
of experience in the communications industry. Mr. Ospalak has been the director of the Company since July 27, 2015. Mr. Ospalak has been
a Managing Director of Breen Management Group, Inc. (BMG) since January 2009. Previously, Mr. Ospalak was the Vice President of Products
and Service Marketing at TELUS Communications Inc. from September 1999 until November 2008. Mr. Ospalak received a Bachelor of Science
from the University of Toronto and an Honors Bachelor of Commerce from the University of Windsor.
Lourdes Felix
Lourdes Felix is a corporate finance executive
offering over fifteen years of combined experience in public accounting and in the private sector in building, leading, and advising
corporations through complex restructurings. Ms. Felix has been instrumental in assisting in capital procurement and implementing an
audit committee. She is thoroughly experienced in guiding troubled companies to greater efficiency and profitability. Ms. Felix has acquired
expertise in securities laws and knowledge of SOX requirements. She has worked with private and public SEC reporting companies. Ms. Felix
was previously the controller for a mid-size public accounting firm for over seven years and was responsible for the operations and financial
management of regional offices. Her experience includes a wide variety of industries including advertising, marketing, non-profit organizations,
medical practices, mortgage banking, manufacturing and SEC reporting companies. She has assisted companies with documented contributions
leading to improved financial performance, heightened productivity, and enhanced internal controls. Ms. Felix has been a Director of
BioCorRx Inc. since March 7, 2013. Ms. Felix was appointed Chief Executive Officer of BioCorRx on November 9, 2020 and became Chief Financial
Officer of BioCorRx on October 1, 2012. Ms. Felix was President of BioCorRx from February 26, 2020 until she resigned upon her appointment
as CEO on November 9, 2020. Ms. Felix is very active in the Hispanic community and speaks fluent Spanish. Ms. Felix holds a Bachelor
of Science degree in Business Management and Accounting from University of Phoenix.
Campbell Becher
Campbell
Becher is the Chief Executive Officer of IberAmerican Lithium, and has held that position since September 2023. Mr. Becher has also been
president or Orchid Capital Partners Corp. since 2014, and has over 20 years of experience in investment banking, including the founding
of Byron Capital Markets, an investment bank focused on the electric metals sector. Mr. Becher served as Byron’s CEO from 2008
to 2014 and led its sponsorship of the Electric Metals Conference for several years as well as sponsoring the Industrial Minerals World
Lithium Conference. Mr. Becher currently serves as a board member at Royal Helium Ltd. and Strategic Minerals Europe Corp. and previously
served as a Managing Director at Haywood Securities Inc. Mr. Becher attended both Lakehead University and Brock University studying
Business Administration.
Appointment
of Mr. Becher on the Board of the Company is contingent upon the successful closing of the current offering, at which time, Mr. Becher
will be appointed as the Director on the Board. Mr. Becher will
successfully replace Mr. Ospalak on all the Committees of the Board.
Board Diversity Matrix
Board
Diversity (As of August 13, 2024) |
Country
of Principal Executive Offices: |
Canada |
Foreign
Private Issuer: |
Yes |
Disclosure
Prohibited Under Home Country Law: |
No |
Total
Number of Directors: |
4 |
|
Female |
Male |
Non-Binary |
Did
Not
Disclose
Gender |
Part
I: Gender Identity |
|
Directors |
1 |
3 |
|
|
Part
II: Demographic Background |
|
Underrepresented
Individual in Home Country Jurisdiction |
1 |
3 |
|
|
LGBTQ+ |
|
|
|
4 |
Did
Not Disclose Demographic Background |
1 |
3 |
|
|
Family Relationships
None of our directors or executive officers has a family relationship.
Involvement in Certain Legal Proceedings
To the best of our knowledge, except as described
below, none of our directors or executive officers has, during the past ten years:
|
● |
been convicted in a criminal
proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
|
● |
had any bankruptcy petition
filed by or against the business or property of the person, or of any partnership, corporation or business association of which he
was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
|
● |
been subject to any order,
judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state
authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business,
securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons
engaged in any such activity; |
|
● |
been found by a court of
competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
|
● |
been the subject of, or
a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended
or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any
federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance
companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty
or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire
fraud or fraud in connection with any business entity; or |
|
● |
been the subject of, or
a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined
in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity
Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or persons associated with a member. |
Corporate Governance
Board of Directors Structure
Our board of directors currently consists of
five directors of which three of our directors have been determined to be “independent” within the meaning of Section 5605(a)(2)
of the NASDAQ Listing Rules and meet the criteria for independence set forth in Rule 10A-3 of the Securities Exchange Act of 1934, as
amended. Our articles provide that, so long as we are a public company, the board of directors must be composed of the greater of three
members and the number set by ordinary resolution of our shareholders, which was set at five members. Our directors serve until a successor
has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office
until the next following annual meeting of shareholders at which time such director is eligible for re-election.
Terms of Directors and Executive Officers
Each of our directors holds office until a successor
has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office
until the next following annual meeting of shareholders at which time such director is eligible for re-election. All of our executive
officers are appointed by and serve at the discretion of our board of directors.
Qualification
There is currently no shareholding qualification
for directors, although a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution.
Insider Participation Concerning Executive
Compensation
No executive officer of the Company is involved
in determinations regarding executive officer compensation.
Committees of the Board of Directors
We have established three committees under the
board of directors: an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which
acts pursuant to a charter governing the authority and responsibility of each committee. We have determined that Stephen Ospalak, Gary
Herman and Lourdes Felix will satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and
Rule 10A-3 under the Exchange Act. Each committee’s members and functions are described below.
Audit Committee. Our audit committee
consists of Gary Herman, Stephen Ospalak, and Lourdes Felix. Lourdes Felix is the chairperson of our audit committee. Our board also
has determined that Gary Herman qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial
sophistication within the meaning of the Nasdaq Listing Rules. The audit committee oversees our accounting and financial reporting processes
and the audits of the financial statements of our company. The audit committee is responsible for, among other things:
|
● |
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. |
Compensation Committee. We follow
home country rules with respect to the composition and responsibilities of our compensation committee. Our compensation committee consists
of Lourdes Felix, Stephen Ospalak and Gary Herman. Steve Ospalak is the chairperson of our compensation committee. The compensation committee
assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors
and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated.
The compensation committee is responsible for, among other things:
|
● |
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. |
Nominating and Corporate Governance Committee.
We follow home country rules with respect to the composition and responsibilities of our nominating and corporate governance committee.
Our nominating and corporate governance committee consists of Stephen Ospalak, Gary Herman, and Lourdes Felix. Gary Herman is the chairperson
of our nominating and corporate governance committee. The nominating and corporate governance committee assists the board of directors
in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating
and corporate governance committee are responsible for, among other things:
|
● |
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. |
Code of Business Conduct and Ethics
Our board of directors has adopted a “Code
of Ethical Conduct”. See Item 16B. The Siyata Code of Ethical Conduct establishes standards of desired behaviors that apply to
directors, senior management, all employees and contract workers, including the responsibility to be truthful, respect others, comply
with laws, regulations and our policies, and engage in sales practices that are fair and not misleading.
The board annually reviews the Code of Ethical
Conduct and closely collaborates with management to set the tone from above and promote a strong governance culture that influences Siyata
at every level and across our business. Our Code of Ethical Conduct sets out fundamental principles that guide the board in its deliberations.
It creates a frame of reference for properly addressing sensitive and complex issues, requiring directors, senior management, and all
employees and contract workers to report misconduct. Siyata encourages an open and transparent environment where team members can speak
up and raise concerns without any form of retaliation.
EXECUTIVE COMPENSATION
Summary Compensation Table - Years Ended December 31, 2023 and
2022
The following table sets forth information concerning
all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during
the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.
Name and Principal Position | |
Year | |
Salary | | |
Bonus | | |
Option Award (1) | | |
Total | |
Gerald Bernstein | |
2023 | |
$ | 211,592 | | |
$ | - | | |
$ | 97,698 | | |
$ | 309,290 | |
| |
2022 | |
$ | 253,038 | | |
$ | 50,000 | | |
$ | 212,836 | | |
$ | 515,893 | |
Marc Seelenfreund (2) | |
2023 | |
$ | 350,345 | | |
$ | 120,000 | | |
$ | 510,426 | | |
$ | 980,771 | |
| |
2022 | |
$ | 329,904 | | |
$ | 100,000 | | |
$ | 1,229,033 | | |
$ | 1,658,937 | |
Gidi Bracha | |
2023 | |
$ | 220,671 | | |
$ | | | |
$ | 75,431 | | |
$ | 296,102 | |
| |
2022 | |
$ | 218,500 | | |
$ | 20,800 | | |
$ | 156,203 | | |
$ | 395,505 | |
Glenn Kennedy | |
2023 | |
$ | 147,080 | | |
$ | | | |
$ | 29,959 | | |
$ | 177,039 | |
| |
2022 | |
$ | 133,712 | | |
$ | 8,895 | | |
$ | 38,636 | | |
$ | 181,343 | |
Total | |
2023 | |
$ | 929,688 | | |
$ | 120,000 | | |
$ | 713,514 | | |
$ | 1,763,202 | |
| |
2022 | |
| 935,154 | | |
$ | 179,695 | | |
$ | 1,636,730 | | |
$ | 2,771,579 | |
(1) |
Represents the aggregate
grant date fair value computed in accordance with IFRS 2 Share-based payments. The price for each amount is based on the closing
price of the trading price of our shares on the NASDAQ on the date of grant. |
|
|
(2) |
Includes 143 restricted
share units that vest over three years that were issued on March 9, 2022. |
Employment Agreements
Marc Seelenfreund, Chief Executive Officer
Effective July 1, 2018, the Company entered into
a consulting agreement with BSD Ltd. and Marc Seelenfreund, or the Seelenfreund Consulting Agreement, pursuant to which Marc Seelenfreund,
as Chief Executive Officer, will be paid an initial base salary approximately $300,000. The Seelenfreund Consulting Agreement also contains
change of control provisions such that if the Seelenfreund Consulting Agreement is terminated by us without good cause or Marc Seelenfreund
is constructively dismissed within six months of a change of control, Marc Seelenfreund will receive a lump-sum payment equal to 36 months’
worth of salary in addition to the continuing payment of a quarterly bonus equal to 5% of the Company’s EBITDA for three years
following the termination or constructive dismissal, as applicable. In the event of a hostile change of control, Marc Seelenfreund will
be entitled to elect to terminate the Seelenfreund Consulting Agreement and will thereafter be entitled to receive a lump-sum payment
equal to 36 months’ worth of salary in addition to the continuing payment of a quarterly bonus equal to 5% of the Company’s
EBITDA for three years following the election. In July 2019, the Seelenfreund Consulting Agreement was assigned to BASAD Partners Ltd.
Effective November 1, 2020, the Company entered
into a consulting agreement with Mr. Seelenfreund, or the Seelenfreund Director Service Agreement, pursuant to which Mr. Seelenfreund,
as a member of the Board of Directors, will be paid an initial base salary of approximately $40,000 and granted 8 Common Share options
that vest quarterly over a two year period. The Seelenfreund Director Service Agreement also contains change of control provisions such
that if there is a change of control, Mr. Seelenfreund’s stock option vesting will be accelerated.
Effective March 9, 2022, granted 143 RSU’s
to Marc Seelenfreund that vest quarterly over three years with the first vesting as at the date of the grant.
Effective November 1,
2022, Siyata amended the consulting agreement with Marc Seelenfreund pursuant to which Marc Seelenfreund, as an officer of the Company
will be paid an annual fee of $360,000. The term of the amended agreement is effective November 1, 2022 and expires on January 1,
2025. The consulting agreement has been re-assigned to BSD Capital Partners Ltd.
Gerald Bernstein, Chief Financial Officer
Effective July 1, 2018, we entered into an amended
and restated employment agreement with Gerald Bernstein, or the Bernstein Employment Agreement, pursuant to which Gerald Bernstein, as
CFO, will be paid an initial base salary of $102,790 ($140,000 CAD) per year. The Bernstein Employment Agreement also contains change
of control provisions such that if the Bernstein Employment Agreement is terminated without good cause by us or Gerald Bernstein is constructively
dismissed within six months of a change of control, Gerald Bernstein will receive a lump-sum payment equal to two years’ worth
of salary.
Effective November 1, 2020, we entered into an
amended and restated employment agreement with Mr. Bernstein, or the Bernstein Employment Agreement, pursuant to which Mr. Bernstein,
as Chief Financial Officer, will be paid an initial base salary of $225,000 per year on a three- year term. The Bernstein Employment
Agreement also contains change of control provisions such that if the Bernstein Employment Agreement is terminated without good cause
by us or Mr. Bernstein is constructively dismissed within six months of a change of control, Mr. Bernstein will receive a lump-sum payment
equal to two years’ worth of salary. Effective November 1, 2020, Siyata entered into a two year employment with Gerald Bernstein,
pursuant to which Gerald will continue to be the Chief Financial Officer and will be paid an annual base salary of $CAD300,000. Additionally,
Gerald Bernstein was granted 2 stock options, to vest over 24 month period in 8 equal tranches beginning on the date of the grant, at
$75,600 per share with an expiry date of 5 years from the date of granting.
Effective April 13, 2022, Gerald was granted
24 RSU’s that vest quarterly over three years with the first vesting as at the date of the grant. Gerald’s contract is automatically
renewed on the same terms and conditions.
Glenn Kennedy, Vice President of Sales (North
America)
Effective November 26, 2018, we entered into
a consulting agreement with Glenn Kennedy, or the Kennedy Consulting Agreement, pursuant to which Glenn Kennedy, as Vice President of
Sales, North America, will be paid an annual fee of CAD$150,000. According to the terms of the Kennedy Consulting Agreement, Mr. Kennedy
received commission of 1.5% on all North American sales of our products exceeding CAD$5,000,000 but less than CAD$18,500,00, and commission
of 0.75% on sales exceeding CAD$18,500,000. Effective January 1, 2021, the Kennedy Consulting Agreement was amended to update the commission
rates to be paid to Mr. Kennedy in connection with the sales of our products. Pursuant to the amendment, Mr. Kennedy will receive commission
of 1.5% of the gross sales of the UV350 and CP250 devices in Canada, in international markets other than the U.S. and Israel, and to
MSI, other than in Israel. Mr. Kennedy will also receive commission of 1.5% of the gross sales of boosters to Canadian carriers, International
Carriers and Motorola worldwide, and 0.25% of gross sales of boosters, UV350 and CP250 devices to U.S. carriers. The Kennedy Consulting
Agreement can be terminated without good cause by either us or Mr. Kennedy upon 90 days’ notice.
Effective January 1, 2021, we entered into an
addendum # 1 to the consulting agreement of Glenn Kennedy dated November 18, 2018, whereby the agreement is renewed for a further term
of two years commencing on January 1, 2021 and expiring on December 31, 2022. The base fee will remain at $150,000 CAD per annum. The
commission will be all of (i) 1.5% of gross sales of the UV350 and the CP250 in any of Canada, international markets, outside of the
USA and Israel, and to Motorola worldwide (other than Motorola Israel). (ii) 1.5% of the gross sales of Boosters sold to Canadian Carriers,
International carriers and Motorola worldwide, (iii) 0.25% of gross sales of boosters to the US carrier and UV350 and CP250 devices to
U.S. carriers.
Effective April 13, 2022, Glenn Kennedy was granted
7 stock options with a $13,860 exercise price that vest quarterly over three years with the first vesting as at the date of the grant.
Effective July 12, 2022, 2022, Glenn Kennedy
was granted 7 stock options with a $13,860 exercise price that vest quarterly over three years with the first vesting as at the date
of the grant.
Effective January 1, 2023, we entered into an
addendum # 2 to the consulting agreement of Glenn Kennedy dated November 18, 2018, whereby the agreement is renewed for a further term
of three years commencing on January 1, 2023 and expiring on December 31, 2025. The base fee will remain at $165,000 CAD per annum. The
commission will be all of (i) 1.5% of gross sales of the UV350, CP250, SD7, SD7+, SD8 and VK7 Devices (in any of Canada, international
markets, outside of the USA and Israel, and to Motorola worldwide (other than Motorola Israel). (ii) 1.5% of the gross sales of Boosters
sold to Canadian Carriers, International carriers and Motorola worldwide, (iii) 0.25% of gross sales of boosters to the US carrier and
UV350, CP250, SD7, SD7+, SD8 and VK7 devices to U.S. carriers.
Gidi Bracha, Vice President of Technology
and Product Development
Effective January 1, 2020, we entered into a
consulting agreement with Gidi Bracha, or the Bracha Consulting Agreement, pursuant to which Gidi Bracha, as Vice President of Technology
and Product Development, will be paid an annual fee of $194,000. Additionally, Mr. Bracha will receive a car allowance of $20,000. The
Bracha Consulting Agreement can be terminated without good cause by either us or Mr. Bracha upon 90 days’ notice.
Effective July 12, 2022, Gidi Bracha was granted
12 stock options with a $13,860 exercise price that vest quarterly over three years with the first vesting as at the date of the grant.
Effective July 12, 2022, Gidi Bracha was granted
12 RSU’s that vest quarterly over three years with the first vesting as at the date of the grant.
Retirement Benefits
We have not maintained, and do not currently
maintain, a defined benefit pension plan, nonqualified deferred compensation plan or other retirement benefits.
Outstanding Equity Awards at Fiscal Year-End
2023 Outstanding Option Awards at Fiscal Year Ended December
31, 2023
Name | |
Number of securities underlying
unexercised options (#) | | |
Equity incentive plan
awards: Number of securities underlying unexercised unearned options (#) | | |
Option exercise price
$USD | | |
Option expiration
date | | |
Number of shares or units
of stock that have not vested (#) | | |
Market value of shares
of units of stock that have not vested ($) | | |
Equity
incentive plan awards: Number
of
unearned shares, units or other rights that have not vested
(#) | | |
Equity incentive plan
awards: Market or payout value of unearned shares, units or other rights that have
not vested ($) | |
Marc Seelenfreund | |
| 8 | | |
| 0 | | |
$ | 4,200.00 | | |
15-Nov-25 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 1 | | |
| 0 | | |
$ | 741,888 | | |
21-Mar-24 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 143 | | |
| 0 | | |
| N/A | | |
N/A | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 152 | | |
| 0 | | |
| | | |
| | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Gerald Bernstein | |
| 24 | | |
| 0 | | |
| N/A | | |
N/A | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 2 | | |
| 0 | | |
$ | 75,600 | | |
15-Nov-25 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 26 | | |
| 0 | | |
| | | |
| | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Glenn Kennedy | |
| 7 | | |
| 0 | | |
$ | 13,860 | | |
12-Jul-27 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 7 | | |
| 0 | | |
$ | 13,860 | | |
13-Apr-27 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 1 | | |
| 0 | | |
$ | 75,600 | | |
15-Nov-25 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 1 | | |
| 0 | | |
$ | 144,900 | | |
18-Jan-26 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 18 | | |
| 0 | | |
| | | |
| | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Stephen Ospalak | |
| | | |
| | | |
| | | |
| | |
| | | |
| | | |
| | | |
| | |
| |
| 2 | | |
| 0 | | |
$ | 75,600 | | |
15-Nov-25 | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 7 | | |
| 0 | | |
| N/A | | |
N/A | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 9 | | |
| 0 | | |
| | | |
| | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Gidi Bracha | |
| | | |
| | | |
| | | |
| | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 12 | | |
| 0 | | |
| N/A | | |
N/A | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 12 | | |
| 0 | | |
$ | 13,860 | | |
13-Apr-27 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 2 | | |
| 0 | | |
$ | 75,600 | | |
15-Nov-25 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 26 | | |
| 0 | | |
| | | |
| | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Lourdes Felix | |
| 2 | | |
| 0 | | |
$ | 50,400 | | |
15-Nov-25 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 7 | | |
| 0 | | |
| N/A | | |
N/A | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| 9 | | |
| 0 | | |
| | | |
| | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
* |
Resigned effective May
15, 2024. |
Non-Employee Director Compensation
The table below sets forth the compensation paid
to our non-employee directors during the fiscal year ended December 31, 2023.
Name | |
Salary | | |
Bonus | | |
Option Awards | | |
Total | |
Steve Ospalak | |
$ | 101,496 | | |
| | | |
$ | - | | |
$ | 101,496 | |
Gary Herman | |
| 41,250 | | |
| | | |
| - | | |
| 41,250 | |
Peter Goldstein* | |
| 97,008 | | |
| | | |
| - | | |
| 97,008 | |
Lourdes Felix | |
| 98,083 | | |
| | | |
| - | | |
| 98,083 | |
Total | |
$ | 337,837 | | |
| | | |
$ | - | | |
$ | 337,837 | |
* |
Resigned effective May
15, 2024. |
Stephen Ospalak, Director (Independent)
Effective November 1,
2020, Siyata entered into a two-year consulting agreement with Stephen Ospalak, or, the Ospalak Consulting Agreement, pursuant to which
Stephen Ospalak, as a member of the Board of Directors, will be paid an annual fee of $37,000. Additionally, Stephen Ospalak was granted
29 stock options, to vest over 24-month period in 8 equal tranches beginning on the date of the grant, at $4,200 per share with an expiry
date of 5 years from the date of granting.
Effective March 9, 2022,
Siyata amended the consulting agreement with Stephen Ospalak, or, the Amended Ospalak Consulting Agreement, pursuant to which Stephen
Ospalak, as a member of the Board of Directors, will be paid an annual fee of $97,000. Additionally, Stephen Ospalak was granted 7 restricted
stock units, RSU’s, to vest immediately. The term of the amended agreement is effective March 9, 2022 and expires on March
8, 2024.
Effective August 3,
2023 Steve Ospalak compensation was amended to $99,000 on an annual basis.
Lourdes Felix, Director (Independent)
Effective October 29,
2021, Siyata entered into a two-year consulting agreement with Lourdes Felix, pursuant to which Lourdes Felix, as a member of the Board
of Directors, will be paid an annual fee of $43,200. Additionally, Lourdes Felix was granted 29 stock options, to vest over a 24-month
period in eight equal tranches beginning on the date of the grant, at $50,400 exercise price, with an expiry date of 5 years from the
date of granting.
Effective August 3,
2023 Lourdes Felix compensation was amended to $99,000 on an annual basis.
Effective March 9, 2022,
Siyata amended the consulting agreement with Lourdes Felix, pursuant to which Lourdes Felix, as a member of the Board of Directors, will
be paid an annual fee of $98,000. Additionally, Lourdes Felix was granted 7 restricted stock units, RSU’s, to vest immediately. The
term of the amended agreement is effective March 9, 2022 and expires on March 8, 2024.
Gary Herman, Director (Independent)
Effective August 10,
2023, the Company entered into a consulting agreement with Gary Herman, pursuant to which as a member of the Board of Directors,
will be paid an annual fee of $99,000.
Effective May 15, 2024,
the Company appointed Mr. Herman as the Chairman of the Board, further to the resignation of Mr. Peter Goldstein from the Board and Company.
Equity Incentive Plan
On January 6, 2022, our board of directors approved
an amended and restated equity incentive plan (the “Plan”), which has replaced our previous stock option plan in its entirety.
The shareholders of the Company subsequently approved a further amended Plan on February 14, 2022. The Plan permits the Corporation to
issue stock options and restricted share units (“RSUs”) to eligible directors, officers, employees, and consultants of the
Company. The maximum number of Common shares issued under the Plan, together with any other securities-based compensation, may not exceed
15% of the number of the issued and outstanding Common shares on a fully diluted basis.
Stock options are exercisable for Common shares.
The exercise price of each stock option shall not be less than the market price of the Common shares at the date of grant. Options can
have a maximum term of ten years and typically terminate 30 days following the termination of the optionee’s employment or engagement,
except in the case of retirement or death. Vesting of options is at the discretion of our board of directors at the time the options
are granted.
RSUs are redeemable for Common shares, a cash
amount in lieu thereof, or a combination of Common shares and cash. RSUs typically terminate on the termination of the RSU holder’s
employment or engagement, except in the case of retirement or death. Vesting of options is at the discretion of the Corporation’s
board of directors at the time the options are granted. In the event of a change of control, RSUs will immediately vest and be settled
for Common shares, a cash amount in lieu thereof, or a combination of Common shares and cash.
As of August 13, 2024, the number of Common Shares
reserved for the exercise of awards granted under the Plan was 4,149. In addition, as of August 13, 2024, options to purchase 118 Common
Shares were issued and outstanding, out of which options to purchase 96 Common Shares were vested as of that date, with an average exercise
price of $32,130. Exercise prices in CAD$ are translated into U.S. dollars at the rate of CAD$1.35 = U.S. $1.00, based on the closing
rate of exchange between the CAD$ and the U.S. dollar as reported by Bank of Canada on March 29, 2024 addition, restricted share units
to purchase 243 Common Shares were issued and outstanding at August 13, 2024 out of which restricted share units to purchase 182 common
Shares were vested as of that date
Under the Plan, the maximum number of Common
Shares reserved for issuance may not exceed 15% of the total number of issued and outstanding Common Shares on a fully diluted basis
at the time of granting.
Our Plan was adopted by our board of directors
on January 6, 2022 and was approved by our shareholders at our annual general and special meeting on February 14, 2022.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Other than as disclosed below, and except for
the regular salary and bonus payments made to our directors and officers in the ordinary course of business as described in “Executive
Compensation,” there have been no transactions since January 1, 2021, or any currently proposed transaction or series of similar
transactions to which the Company was or is to be a party, in which the amount involved exceeds USD$120,000 and in which any current
or former director or officer of the Company, any 5% or greater shareholder of the Company or any member of the immediate family of any
such persons had or will have a direct or indirect material interest. We believe the terms obtained or consideration that we paid or
received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would
be paid or received, as applicable, in arm’s-length transactions.
Purchase of Units by Marc Seelenfreund
Marc Seelenfreund, the CEO and director of the
Company, purchased an aggregate of 138 common shares in a private placement in Canada that closed in August 2020 in for aggregate consideration
of CDN$36,000 in connection with the Company’s August 2020 financing.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information
with respect to the beneficial ownership of our Common Shares as of August 13, 2024 for (i) each of our named executive officers and directors;
(ii) all of our named executive officers and directors as a group; and (iii) each other shareholder known by us to be the beneficial owner
of more than 5% of our outstanding Common Shares, assuming that we sell the maximum number of Common Shares being offered.
Beneficial ownership is determined in accordance
with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group
of persons is deemed to have “beneficial ownership” of any shares that such person or any member of such group has the right
to acquire within sixty (60) days. For purposes of computing the percentage of outstanding shares of our Common Shares held by each person
or group of persons named above, any shares that such person or persons has the right to acquire within sixty (60) days of August 13,
2024 are deemed to be outstanding for such person, but not deemed to be outstanding for the purpose of computing the percentage ownership
of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership
by any person. The share ownership numbers after the offering for the beneficial owners indicated below exclude any potential purchases
that may be made by such persons in this offering.
Unless otherwise indicated, the address of each
beneficial owner listed in the table below is c/o Siyata Mobile Inc., 7404 King George Blvd., Suite 200, King’s Cross, Surrey,
British Columbia V3W 1N6, Canada, 514-500-1181.
| |
Common
Shares Beneficially Owned Prior to this Offering(1) | | |
Common Shares Beneficially
Owned After this Offering(2) | |
Name of Beneficial Owner | |
Shares | | |
% | | |
Shares | | |
% | |
Marc Seelenfreund, CEO and Director | |
| 152 | (3) | |
| * | % | |
| 152 | | |
| * | |
Gerald Bernstein, Chief Financial Officer | |
| 26 | (4) | |
| * | | |
| 26 | | |
| * | |
Glenn Kennedy, VP of Sales | |
| 18 | (5) | |
| ** | | |
| 18 | | |
| * | |
Gidi Bracha, VP of Technology and Product Development | |
| 26 | (6) | |
| | | |
| 26 | | |
| * | |
Stephen Ospalak | |
| 9 | (7) | |
| * | | |
| 9 | | |
| * | |
Gary Herman, Chairman of the Board and Director | |
| 0 | | |
| * | | |
| 0 | | |
| * | |
Lourdes Felix*** | |
| 9 | (8) | |
| * | | |
| 9 | | |
| * | |
All executive officers and directors (8 persons above) | |
| 240 | | |
| 0.003 | % | |
| 240 | | |
| 0.003 | % |
5% or Greater Shareholders: | |
| | | |
| | | |
| | | |
| | |
N/A | |
| | | |
| | | |
| | | |
| | |
** |
Peter Goldstein resigned
effective May 15, 2024. |
*** |
Lourdes Felix became a
Director effective October 29, 2021. |
(1) |
Based on 802,450 Common Shares issued and outstanding as of August 13, 2024. |
(2) |
Based on 882,450 Common Shares issued and outstanding after this offering assuming that we sell the maximum number of Common Shares being offered. |
(3) |
Represents 9 options convertible
to Common Shares and 143 Restricted shares units convertible to Common Shares and 2 Common Shares held by Mr. Seelenfreund. |
(4) |
Represents 3 options and
24 Restricted Share Units both convertible to Common Shares all held by Mr. Bernstein. |
(5) |
Represents 15 options convertible
to Common Shares held by Mr. Kennedy. |
(6) |
Represents 14 options and
12 Restricted Share Units both convertible to Common Shares held by Gidi Bracha. |
(7) |
Represents 2options and
7 Restricted Share Units both convertible to Common Shares held by Mr. Ospalak. |
(8) |
Represents 2 options
and 7 Restricted Share Units both convertible to Common Shares held by Ms. Felix. |
We do not currently have any arrangements which
if consummated may result in a change of control of our company.
DESCRIPTION OF SECURITIES
General
The following description of our share capital
and provisions of our articles are summaries and do not purport to be complete. Reference is made to our 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”).
Securities Offered in this Offering
This is an offering of our Common Shares.
Our Common Shares are 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. Our Common Shares are issued in registered form and are issued when registered in our register of
members. 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 number
of Common Shares with no par value per share. Subject to the provisions of the Business Corporations Act and our articles regarding redemption
and purchase of the shares, the directors have general and unconditional authority to allot (with or without confirming rights of renunciation),
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. Such authority could be exercised by the directors to allot shares which carry rights and privileges that are preferential
to the rights attaching to Common Shares. No share may be issued at a discount except in accordance with the provisions of the Business
Corporations Act. 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.
On September 20, 2020, the Company consolidated
our issued and outstanding Common Shares on a 145-to-1 basis.
On August 9, 2023 the
Company consolidated our issued and outstanding Common Shares on a 100-to-1 basis.
On December 4, 2023
the Company consolidated our issued and outstanding Common Shares on a 100-to-1 basis.
On August 2, 2024 the
Company consolidated our issued and outstanding Common Shares on a 18-to-1 basis.
Except where otherwise
indicated, all share and per share data in this prospectus have been retroactively restated to reflect the Reverse Split.
Pre-Funded Warrants
The following summary of certain terms and provisions
of the Pre-Funded Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by the provisions
of, the Pre-Funded Warrant. Prospective investors should carefully review the terms and provisions of the form of Pre-Funded Warrant
for a complete description of the terms and conditions of the Pre-Funded Warrants.
Purchase. The term “pre-funded”
refers to the fact that the purchase price of our Common Shares in this offering includes almost the entire exercise price that will
be paid under the Pre-Funded Warrants, except for a nominal remaining exercise price of $0.01. The purpose of the Pre-Funded Warrants
is to enable investors that may have restrictions on their ability to beneficially own more than 4.99% (or, upon election of the holder,
9.99%) of our outstanding Common Shares following the consummation of this offering the opportunity to invest capital into the Company
without triggering their ownership restrictions, by receiving Pre-Funded Warrants in lieu of our Common Shares which would result in
such ownership of more than 4.99% (or 9.99%), and receive the ability to exercise their option to purchase the shares underlying the
Pre-Funded Warrants at such nominal price at a later date.
Duration. The Pre-Funded Warrants offered
hereby will entitle the holders thereof to purchase our Common Shares at a nominal exercise price of $0.01 per share, commencing immediately
on the date of issuance.
Exercise Limitation. A holder will not
have the right to exercise any portion of the Pre-Funded Warrant if the holder (together with its affiliates) would beneficially own
in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares of our Common Shares outstanding immediately after
giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrants. However,
any holder may increase or decrease such percentage, provided that any increase will not be effective until the 61st day after such election.
Exercise Price. The Pre-Funded Warrants
will have an exercise price of $0.01 per share. The exercise price is subject to appropriate adjustment in the event of certain stock
dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Shares and also
upon any distributions of assets, including cash, stock or other property to our stockholders. The pre-funded warrant holders must pay
the exercise price in cash upon exercise of the pre-funded warrants, unless such pre-funded warrant holders are utilizing the cashless
exercise provision of the pre-funded warrants.
As an alternative to payment in immediately available
funds, the holder may elect to exercise the pre-funded warrant through a cashless exercise, in which the holder would receive upon such
exercise the net number of Common Shares determined according to the formula set forth in the pre-funded warrant (in which case, the pre-funded
warrants may only be exercised via a “cashless” exercise provision).
Transferability. Subject to applicable
laws, the Pre-Funded Warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing. There is no established
trading market for the Pre-Funded Warrants and we do not expect a market to develop. In addition, we do not intend to apply for the listing
of the Pre-Funded Warrants on any national securities exchange or other trading market. Without an active trading market, the liquidity
of the Pre-Funded Warrants will be limited.
Fundamental Transactions. If a fundamental
transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that
we may exercise and will assume all of our obligations under the Pre-Funded Warrants with the same effect as if such successor entity
had been named in the Pre-Funded Warrant itself. If holders of our Common Shares are given a 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 consideration it receives upon
any exercise of the Pre-Funded Warrant following such fundamental transaction.
Rights as a Stockholder. Except as otherwise
provided in the Pre-Funded Warrants or by virtue of such holder’s ownership of our Common Shares, the holder of a Pre-Funded Warrants
does not have the rights or privileges of a holder of our Common Shares, including any voting rights, until the holder exercises the
Pre-Funded Warrant.
Prior Warrants
Overview. Our Prior Warrants were listed
on the Nasdaq Capital Market and currently trade under the symbols “SYTAW.” The Prior Warrants are not a part of this offering.
The following summary of certain terms and provisions
of the Prior Warrants is not complete and is subject to, and qualified in its entirety by, the provisions of the warrant agency agreement
between us and the Warrant Agent, and the form of Prior Warrant, both of which are filed as exhibits to the registration statement of
which this prospectus is a part. Prospective investors should carefully review the terms and provisions set forth in the warrant agency
agreement, including the annexes thereto, and form of Prior Warrant.
The Prior Warrants entitle the registered holder
to purchase Common Shares at a price equal to $86,310 per share, subject to adjustment as discussed below, immediately following the issuance
of such warrant and terminating at 5:00 p.m., New York City time, five years after the closing of the public offering in September, 2020.
The exercise price and number of Common Shares
issuable upon exercise of the Prior Warrants may be adjusted in certain circumstances, including in the event of a stock dividend or
recapitalization, reorganization, merger or consolidation. However, the Prior Warrants will not be adjusted for issuances of Common Shares
at prices below its exercise price.
Exercisability. The Prior Warrants are
exercisable at any time after their original issuance and at any time up to the date that is five years after their original issuance.
The Prior Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the
Warrant Agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied
by full payment of the exercise price, by certified or official bank check payable to us, for the number of Prior Warrants being exercised.
Under the terms of the Warrant Agreement, we must use our best efforts to maintain the effectiveness of the registration statement and
current prospectus relating to Common Shares issuable upon exercise of the Prior Warrants until the expiration of the warrants. If we
fail to maintain the effectiveness of the registration statement and current prospectus relating to the Common Shares issuable upon exercise
of the Prior Warrants, the holders of the Prior Warrants shall have the right to exercise the Prior Warrants solely via a cashless exercise
feature provided for in the Prior Warrants, until such time as there is an effective registration statement and current prospectus.
Exercise Limitation. A holder may not
exercise any portion of a Prior 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 warrant, except that upon prior notice from the holder to us, the holder may waive such limitation up
to a percentage not in excess of 9.99%.
Exercise Price. The exercise price per
whole Common Share purchasable upon exercise of the Prior Warrants is no less than 100% of public offering price of the units that were
previously offered by the Company. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and
distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Shares and also upon any distributions
of assets, including cash, stock or other property to our stockholders.
Fractional Shares. No fractional Common
Shares will be issued upon exercise of the Prior Warrants. As to any fraction of a share which the holder would otherwise be entitled
to purchase upon such exercise, the Company will round up or down, as applicable, to the nearest whole share.
Transferability. Subject to applicable
laws, the Prior Warrants may be offered for sale, sold, transferred or assigned without our consent.
Warrant Agent; Global Certificate. The
Prior Warrants were issued in registered form under a warrant agency agreement between the Warrant Agent and us. The Prior Warrants were
initially represented only by one or more global warrants deposited with the Warrant Agent, as custodian on behalf of The Depository
Trust Company (DTC) and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Fundamental Transactions. In the event
of a fundamental transaction, as described in the Prior Warrants and generally including any reorganization, recapitalization or reclassification
of our Common Shares, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation
or merger with or into another person, the acquisition of more than 50% of our outstanding Common Shares, or any person or group becoming
the beneficial owner of 50% of the voting power represented by our outstanding Common Shares, the holders of the Prior Warrants will
be entitled to receive the kind and amount of securities, cash or other property that the holders would have received had they exercised
the Prior Warrants immediately prior to such fundamental transaction.
Rights as a Stockholder. The Prior Warrant
holders do not have the rights or privileges of holders of Common Shares or any voting rights until they exercise their warrants and
receive Common Shares. After the issuance of Common Shares upon exercise of the Prior Warrants, each holder will be entitled to one vote
for each share held of record on all matters to be voted on by shareholders.
Governing Law. The Prior Warrants and
the warrant agency agreement are governed by New York law.
Other Securities
On September 29, 2020
the Company completed an initial public offering of 167 units (the “Units”) at $75,600 for gross proceeds of $12,600,000.
Each Unit consisting of one Common Share and one tradeable warrant to purchase one Common Share. Each warrant has an exercise price of
$86,310 per share, is exercisable immediately and will expire five (5) years from the date of issuance. The Common Shares and the warrants
comprising the Units are immediately separable upon issuance and will be issued separately in this offering. The Common Shares using
the residual value approach were valued at $59,598 per share and each warrant was valued at $16,002 per warrant. Share issuance costs
related to the initial public offering was $2,810,274 including 9 underwriter warrants exercisable at $83,160 per share, with a Black
Scholes Value of $315,796, and underwriter overallotment 21 tradeable warrants with an exercise price of $86,310 with a Black Scholes
Value of $335,160.
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 therefore Common Share purchase warrants in the private
placement to acquire up to 138 Common Shares at an exercise price of $2,898 per Common Share (the “Lind Waiver Warrants”).
Lind did not exercise any of the said Lind Waiver Warrants pursuant to the Warrant Exercise Agreement. The Common Shares underlying the
Lind Waiver Warrant have been registered on a registration statement of the Company on Form F-1, filed with the SEC on February 15, 2023,
amended by Amendment No.1 to the registration statement on Form F-1/A, as filed with the SEC on March 27, 2023, and declared effective
with the SEC on March 30, 2023.
On January 11, 2022,
the Company completed an underwritten public offering of 690 Common Shares (or pre-funded warrants to purchase Common Shares in lieu
thereof) and accompanying warrants to purchase up to 690 Common Shares. Each Common Share (or pre-funded warrant in lieu thereof) was
sold together with one common warrant at a combined effective offering price of $28,980. In addition, the Company issued 117 pre-funded
units (“2022 Pre-Funded Units”) at $28,854 per 2022 Pre-Funded Unit. Each 2022 Pre-Funded Unit is comprised of a one-pre-funded
warrant (a “2022 Pre-Funded Warrant”) to purchase one Common Share, and one warrant to purchase one Common Share. The 2022
Pre-Funded Warrant allows the holder to acquire one Common Share of the Company at an exercise price of $126.00 per Common Share, and
a warrant to purchase a Common Share at an exercise price of $28,980 per share. The Company also issued warrants to the placement agents
to purchase 35 Common Shares at an exercise price of $31,878 per share (the “Placement Agent Warrants”), which are exercisable
180 days from January 11, 2022, with a term of five years. The fair value of the Placement Agent Warrants was determined to be $307,189
using the Black-Scholes model with the following assumptions: initial stock price $21,798, strike rate $31,878, dividend yield 0%, term
5 years, volatility 60.0% and risk-free rate 0.50%.
On October 13, 2022,
the Company closed a $4.0 million underwritten registered direct offering. The Company previously entered into a securities purchase
agreement with certain institutional investors to purchase approximately 1,255 Common Shares and 126 pre-funded warrants. In a private
placement, which was consummated concurrently with the offering, the Company issued warrants to purchase up to an aggregate of 1,381
Common Shares. The warrants are immediately exercisable, expire 5 years from the date of issuance and have an exercise price of $2,898
per Common Share.
On January 19, 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 1,432 of the Company’s Common Shares. In consideration for the immediate exercise of the outstanding
warrants for cash, the Company agreed to reduce the exercise price from $2,898 to $2,520 per share and issue new unregistered warrants
to purchase up to an aggregate of 1,432 Common Shares with an exercise price of $2,520 per share. The gross proceeds to the Company from
the exercise totaled approximately $3,608,571, prior to deducting warrant inducement agent fees and offering expenses. The new warrants
are exercised immediately upon issuance at an exercise price of $2,520 per share and have a term of exercise equal to five years. In
connection with the exercise, the Company will be required pursuant to the terms of 237 of its remaining unexercised common share purchase
warrants, to reduce the exercise price of such warrants from $2,898 per Common Share to an exercise price of $2,520 per Common Share.
The Company has registered for resale 1,432 Common Shares underlying these warrants on a registration statement of the Company on Form
F-1, filed with the SEC on February 15, 2023, amended by Amendment No.1 to the registration statement on Form F-1/A, as filed with the
SEC on March 27, 2023, and declared effective with the SEC on March 30, 2023.
In April 2023, cashless
warrants were exercised in exchange for a total of 1,359 Common Shares issued by the Company. Since no cash was used for the exercise
of such warrants, the Company received no proceeds from such exercise.
On June 27, 2023, the
Company announced that it had entered into a Securities Purchase Agreement, dated as of June 26, 2023 with a certain institutional investor
(the “Purchaser”), pursuant to which the Company agreed to issue and sell to the Purchaser and to certain additional institutional
investors an aggregate of 3,968 of the Company’s Common Shares, at a purchase price of $567.00 per Common Share (the “June
2023 Offering”). The closing of the June 2023 Offering occurred on June 28, 2023. The June 2023 Offering resulted in gross proceeds
to the Company of $2,250,000 before deducting the fees payable to Maxim Group LLC, as sole placement agent for the June 2023 Offering,
and certain related June 2023 Offering expenses. The Common Shares were offered pursuant to a registration statement on Form F-1 (SEC
File No. 333-272512), filed with the SEC on June 8, 2023, as amended, which was declared effective on June 26, 2023.
On July 11, 2023, the
Company announced that it had entered into a Securities Purchase Agreement with certain institutional investors named therein (the “Purchasers”),
pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “July 2023 Offering”) 4,083
of the Company’s Common Shares, at a purchase price of $567.00 per Common Share. The Purchase Agreement contained customary representations
and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations of the parties.
The closing of the July 2023 Offering occurred on July 13, 2023. The July 2023 Offering resulted in gross proceeds to the Company of
$2,315,250 before deducting the fees payable to Maxim Group LLC, as sole placement agent for the Offering, and certain related July 2023
Offering expenses. The Common Shares were offered pursuant to a prospectus supplement, filed with the SEC on July 13, 2023, to the Company’s
effective shelf registration statement on Form F-3 (File No. 333-265998), which was filed with the SEC on July 1, 2022 and was declared
effective on July 18, 2022.
On August 18, 2023,
the Company filed a Notice of Alteration creating the Preferred Shares. The special rights and restrictions attached to the Class A Preferred
Shares and Class B Preferred Shares are the same and are described below:
|
● |
the holders of Preferred
Shares (the “Preferred Shareholders”) are entitled to vote on the basis of one vote per Preferred Share, voting together
as a single class with holders of Common Shares; |
|
● |
if the Board authorizes
any of the Preferred Shares to be issued as convertible, each convertible Preferred Share will be convertible into only one Common
Share; |
|
● |
the Preferred Shares shall,
as to the payment of dividends and return of capital in the event of liquidation, dissolution or winding up of the Company, rank
in priority to the Common Shares; and |
|
● |
the Preferred Shares may
be issued with certain preferences over the Common Shares with respect to dividends or the power to approve the declaration of a
dividend. |
As of the date hereof,
no Class A Preferred Shares and Class B Preferred Shares have been issued.
On January 29, 2024, the Company entered into
a securities purchase agreement with an institutional investor, pursuant to which the Company issued to the investor an unsecured promissory
note in the principal amount of $230,750 (the “Note”), with a stated maturity date of November 15, 2024. The gross proceeds
to the Company from the exercise totaled approximately $195,000, prior to deducting investor’s legal and diligence expenses and
agent fees/expenses.
On April 9, 2024, the Company entered into a securities purchase agreement
with an institutional investor (the “Purchaser”), pursuant to which the Company sold, in a private placement, (i) 290 shares
of the Company’s Class C Preferred Shares (the “Class C Preferred Shares”), stated value $1,000 per share (the “Stated
Value”), at a price of $1,000 per share, convertible into shares (the “Conversion Shares”) of the Company’s common
shares, no par value per share and (ii) a warrant (the “Warrant”) to purchase up to 6,556 shares of common shares. As additional
consideration for entering into the securities purchase agreement, the Company issued to the Purchaser an additional 1,556 shares of common
shares to be delivered to the Purchaser at the closing. The offering resulted in gross proceeds to the company of $250,000. The Warrant
is immediately exercisable subject to certain beneficial ownership limitations, has an exercise price of $57.24 per share, and will expire
on the fifth anniversary of its issue date.
On April 17, 2024, the Company entered into a
Securities Purchase Agreement (the “Second April Purchase Agreement”) with another institutional investor (the “Purchaser”),
pursuant to which the Company sold, in a private placement 290 shares of the Company’s Class C Preferred Shares, stated value $1,000
per share (the “Stated Value”), at a price of $1,000 per share, convertible into shares (the “Conversion Shares”)
of the Company’s common shares, no par value per share. As additional consideration for entering into the Second April Purchase
Agreement, the Company issued to the Purchaser an additional 1,556 shares of common shares to be delivered to the Purchaser at the closing.
The offering resulted in gross proceeds to the company of $250,000. The terms of the Class C Preferred Shares is similar to the earlier
April Purchase Agreement. The Purchaser redeemed for cash 97 Class C Preferred Shares of the Company, in furtherance to the completion
of the below detailed May 2024 Offering.
On May 7, 2024, the
Company completed an underwritten public offering of 170,940 Common Shares and/or pre-funded warrants to purchase Common Shares. Each
Common Share, or pre-funded warrant in lieu thereof, was sold at an effective offering price of $23.40 for Common Shares or $23.22 for
Pre-Funded Warrants, with an exercise price of $0.18 per share. The gross proceeds to the Company from the offering totaled approximately
$3.9 million, prior to deducting legal and diligence expenses and agent fees/expenses.
On June 5, 2024, the Company entered into a Securities Purchase Agreement
(the “June Purchase Agreement”) with an institutional investor, pursuant to which the Company sold, in the private placement,
(i) 118 shares of the Company’s Class C Preferred Shares, stated value $1,000 per share, at a price of $1,000 per share, convertible
into shares of the Company’s common shares, no par value per share (“Class C Preferred Shares”), (ii) a warrant to purchase
up to 18,667 shares of common shares (“June Warrant”), and (iii) an amended and restated warrant to purchase up to 18,667
shares of common shares of the Company, replacing in their entirety the prior issued Warrant(s) from the April Purchase Agreement (“June
A&R Warrant”, and together with “June Warrant 1”, hereinafter referred to as the “Warrants”). As additional
consideration for entering into the June Purchase Agreement, the Company issued to the institutional investor an additional 8,444 shares
of common shares to be delivered to the institutional investor at the closing (the “Commitment Shares,” and together with
the Class C Preferred Shares and the Warrants, the “Securities”). The offering resulted in gross proceeds to the company of
$105,000. The Warrants are immediately exercisable subject to certain beneficial ownership limitations, have an exercise price of $57.24
per share, and will expire on the fifth anniversary of their respective issue date(s).
Additionally, on June 5, 2024, the Company entered
into a Securities Purchase Agreement (the “Second June Purchase Agreement”) with another institutional investor, pursuant
to which the Company sold, in the private placement 256 shares of the Company’s Class C Preferred Shares, stated value $1,000 per
share, at a price of $1,000 per share, convertible into shares of the Company’s common shares, no par value per share. As additional
consideration for entering into the Second June Purchase Agreement, the Company issued to the investor an additional 1,556 common shares
of the Company to be delivered to the investor at the closing. The offering resulted in gross proceeds to the company of $220,000.
On June 28, 2024, the
Company completed an underwritten public offering of 584,372 Common Shares and/or pre-funded warrants to purchase Common Shares. Each
Common Share, or pre-funded warrant in lieu thereof, was sold at an effective offering price of $10.44 for Common Shares or $10.26 for
Pre-Funded Warrants, with an exercise price of $0.18 per share. The gross proceeds to the Company from the offering totaled approximately
$5.9 million, prior to deducting legal and diligence expenses and agent fees/expenses.
Class C Preferred Shares
On April 9, 2024, the Company filed the Notice
of Alteration with the State of British Columbia designating 1,000 shares out of the authorized but unissued shares of its preferred
shares as Class C Preferred Shares with a stated value of $1,000 per share. The following is a summary of the principal terms of the
Class C Preferred Shares as set forth in the Notice of Alteration. Capitalized terms not defined herein shall have the meaning assigned
to them in the Notice of Alteration.
Dividends. Pursuant to the Notice of Alteration,
the Class C Preferred Shares shall receive cumulative dividends of 0% per annum, payable quarterly. Further, each holder of Class C Preferred
Shares shall be entitled to receive, and the Company shall pay, dividends on shares of Class C Preferred Shares equal to (on an as-if-converted-to-Common-Stock
basis) and in the same form as dividends actually paid on shares of the Common Share when, as and if such dividends are paid on shares
of the Common Share.
So long as any Class C Preferred Shares shall
remain outstanding, neither the Company nor any of its subsidiaries shall redeem, purchase or otherwise acquire directly or indirectly
any Junior Securities or pari passu securities other than any Class C Preferred Shares purchased to the terms of the Notice of Alteration.
So long as any Class C Preferred Shares shall remain outstanding, neither the Company nor any of its subsidiaries shall directly or indirectly
pay or declare any dividend or make any distribution upon (subject to limited exceptions exceptions), nor shall any distribution be made
in respect of, any Junior Securities or pari passu securities as long as any dividends due on the Class C Preferred Shares remain unpaid,
nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities
or pari passu securities.
Voting Rights. The Class C Preferred Shares
will vote together with the Common Share on an as-converted basis subject to the Beneficial Ownership Limitation (as defined below).
However, as long as any shares of Class C Preferred Shares are outstanding, the Company shall not, without the affirmative vote of the
holders of a majority of the then outstanding shares of the Class C Preferred Shares directly and/or indirectly (a) alter or change adversely
the powers, preferences or rights given to the Class C Preferred Shares or alter or amend the Notice of Alteration, (b) authorize or
create any class of stock ranking as to redemption or distribution of assets upon a Liquidation (as defined below) senior to, or otherwise
pari passu with, the Class C Preferred Shares or, authorize or create any class of stock ranking as to dividends senior to, or otherwise
pari passu with, the Class C Preferred Shares, or (c) enter into any agreement with respect to any of the foregoing.
Liquidation. Upon any liquidation, dissolution
or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the holders of the Class C Preferred Shares
shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the Stated Value, plus
any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon under the Notice of Alteration,
for each share of Class C Preferred Shares before any distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders
shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such shares if all
amounts payable thereon were paid in full.
Conversion.
Each share of Class C Preferred Share shall be convertible, at any time and from time to time, at the option of the holder, into that
number of shares of Common Share, subject to certain beneficial ownership limitations, determined by dividing the Stated Value of such
share of Class C Preferred Share by the Conversion Price. The “Conversion Price” for the Class C Preferred Stock shall be
the lower of (i) $57.24, or (ii) 85% of the lesser of (a) the average of the closing price for the Common Share during the ten (10) trading
day period immediately prior to the closing of the Purchase Agreement, and (b) the average closing price for the Common Share on the
ten (10) trading days immediately prior to the conversion price, subject to adjustment as provided in the Notice Of Second Alteration
Of Articles of the Company (the “Notice of Alteration”). Following the occurrence of a Triggering Event (as defined in the
Notice of Alteration), the conversion price shall be the lowest of (i) One Dollar ($1.00), (ii) the then applicable conversion price;
or (iii) twenty-five percent (25%) of the lowest traded price for the Common Shares during the fifteen (15) Trading Days preceding the
relevant conversion.
Beneficial Ownership Limitation. The Company
shall not affect any conversion of the Class C Preferred Shares, and a holder shall not have the right to convert any portion of the
Class C Preferred Shares, to the extent that, after giving effect to the conversion, such holder would beneficially own in excess of
4.99% of the number of shares of the Common Share outstanding immediately after giving effect to the issuance of shares of Common Share
issuable upon conversion of Class C Preferred Shares held by the applicable holder (the “Beneficial Ownership Limitation”).
Most Favored Nation. Until the date when
no shares of Class C Preferred Shares are outstanding, upon any issuance by the Company of Class C Preferred Shares for cash consideration,
(a “Subsequent Financing”), the Holder may elect, in its sole discretion, to exchange (in lieu of conversion), if applicable,
all or some of the shares of Class C Preferred Shares then held for any securities or units issued in a Subsequent Financing on a $1.00
for $1.00 basis. If in such Subsequent Financing there are any contractual provisions or side letters that provide terms more favorable
to the investors than the terms provided for under the Notice of Alteration, then the Company shall specifically notify the holder of
the Class C Preferred Shares of such additional or more favorable terms and such terms, at holder’s option, shall become a part
of the transaction documents with the holder.
Redemption. The Company shall have the
right to redeem (a “Corporation Redemption”), all (or part) of the Class C Preferred Shares issued and outstanding at any
time after the Original Issue Date, at its discretion and upon three (3) trading days written notice to the holders, redeem all the Class
C Preferred Shares at the following premium: (i) within the first ninety (90) calendar days from issuance, at a price equal to 1.25,
multiplied by the sum of the Stated Value, all accrued but unpaid dividends and all other amounts due pursuant to the Notice of Alteration
for all Class C Preferred Shares; and (ii) after ninety (90) calendar days but within one hundred eighty (180) calendar days from issuance,
at a price equal to 1.35 multiplied by the sum of the Stated Value, all accrued but unpaid dividends and all other amounts due pursuant
to the Notice of Alteration for all Class C Preferred Shares.
Upon the occurrence of a Triggering Event and
following a five (5) trading day opportunity to cure following written notice, each holder shall have the right, exercisable at the sole
option of such holder, to require the Company to redeem all of the Class C Preferred Shares then held by such holder for a redemption
price, in cash, equal to the Triggering Redemption Amount, and increase the dividend rate on all of the outstanding Class C Preferred
Shares held by such holder to 18% per annum thereafter. The Triggering Redemption Amount, whether payable in cash or in shares, shall
be due and payable or issuable, as the case may be, within five (5) trading days of the date on which the notice for the payment therefor
is provided by a holder. If the Corporation fails to pay in full the Triggering Redemption Amount hereunder on the date such amount is
due (whether in cash or shares of Common Share), the Company will pay interest thereon at a rate equal to the lesser of 18% per annum
or the maximum rate permitted by applicable law, accruing and compounding daily from such date until the Triggering Redemption Amount,
plus all such interest thereon, is paid in full. The Triggering Redemption Amount means for each share of Class C Preferred Shares, the
sum of (x) 150% of the Stated Value, (y) all accrued but unpaid dividends thereon, and (z) all liquidated damages, Late Fees and other
costs, expenses or amounts due in respect of the Class C Preferred Shares including, but not limited to legal fees and expenses of legal
counsel to the holder in connection with, related to and/or arising out of a Triggering Event.
Trading Market. There is no established
trading market for any of the Class C Preferred Shares, and we do not expect a market to develop. We do not intend to apply for a listing
for any of the Class C Preferred Shares on any securities exchange or other nationally recognized trading system. Without an active trading
market, the liquidity of the Class C Preferred Shares will be limited.
Listing
Our Common Shares and Prior Warrants are listed
on the Nasdaq Capital Market under the symbol “SYTA” and “SYTAW,” respectively. The Common Shares offered hereby
will trade on the Nasdaq Capital Market under the symbol “SYTA.” The Class C Preferred Shares are not listed on any stock
exchange.
Transfer Agent
The transfer agent for the Common Shares is Computershare
Inc., 510 Burrard Street, 2nd Floor, Vancouver, British Columbia V6C 3B9, Canada.
Dividends
Subject to the provisions of the Business Corporations
Act and any rights attaching to any class or classes of shares under and in accordance with the articles:
|
a) |
the directors may declare
dividends or distributions out of our funds which are lawfully available for that purpose; and |
|
b) |
our shareholders may, by
ordinary resolution, declare dividends but no such dividend shall exceed the amount recommended by the directors. |
Unless provided by the rights attached to a share,
no dividend shall bear interest.
Voting Rights
Subject to any rights or restrictions as to voting
attached to any shares, unless any share carries special voting rights, on a show of hands every shareholder who is present in person
and every person representing a shareholder by proxy shall have one vote per Common Shares. During a shareholder vote, every shareholder
who is present in person and every person representing a shareholder by proxy shall have one vote for each share of which he or the person
represented by proxy is the holder. In addition, all shareholders holding shares of a particular class are entitled to vote at a meeting
of the holders of that class of shares. Votes may be given either personally or by proxy.
Variation of Rights of Shares
Whenever our capital is divided into different
classes of shares, the rights attaching to any class of share (unless otherwise provided by the terms of issue of the shares of that
class) may be varied either with the consent in writing of the holders of not less than two-thirds of the issued shares of that class,
or with the sanction of a resolution passed by a majority of not less than two-thirds of the holders of shares of the class present in
person or by proxy at a separate general meeting of the holders of shares of that class.
Unless the terms on which a class of shares was
issued state otherwise, the rights conferred on the shareholder holding shares of any class shall not be deemed to be varied by the creation
or issue of further shares ranking pari passu with the existing shares of that class.
Alteration of Share Capital
Subject to the Business Corporations Act, the
Company may, by ordinary resolution:
|
1) |
create one or more classes
or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series
of shares; |
|
2) |
increase, reduce or eliminate
the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum
number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established; |
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3) |
or consolidate all or any
of its unissued, or fully paid issued, shares; |
|
4) |
if the Company is authorized
to issue shares of a class of shares with par value: |
|
a) |
decrease the par value
of those shares; or |
|
b) |
if none of that class of
shares are allotted or issued, increase the par value of those shares; |
|
5) |
change all or any of its
unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value
into shares with par value; |
|
6) |
alter the identifying name
of any of its shares; or |
|
7) |
otherwise alter its shares
or authorized share structure when required or permitted to do so by the Business Corporations Act. |
General Meetings
Under the Business Corporations Act, the Company
must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and
after that much hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual
reference date at such time and place as may be determined by the directors.
If all the shareholders who are entitled to vote
at an annual general meeting consent by a unanimous resolution to all of the business that is required to be transacted at that annual
general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders much,
in any unanimous resolution, select as the Company’s annual reference date, a date that would be appropriate for the holding of
the applicable annual general meeting.
The directors may also, whenever they think fit,
call a meeting of the shareholders.
A general meeting of the Company may be held
anywhere in North America, as determined by the directors.
The Company must send notice of the date, time
and location of any meeting of shareholders in the manner provided in the Business Corporations Act to each shareholder entitled to attend
the meeting and to each director of the Company if and for so long as the Company is a public company, twenty-one days, and otherwise
ten days.
The directors may set a date as the record date
for the purpose of determining shareholders entitled to, or the non-receipt of any notice by, any of the persons entitled to notice does
not invalidate any proceeding at that meeting. Any persons entitled to notice of a meeting of shareholders may, in writing or otherwise,
waive or reduce the period of notice of such meeting.
Accidental omission to send notice of any meeting
of shareholder to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceeding at that
meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive or reduce the period of notice
of such meeting.
If a meeting of shareholders is to consider special
business, as defined in the Company’s articles, the notice of meeting must:
|
1) |
state the general nature
of the special business; |
|
2) |
if the special business
includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document,
have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders: |
|
a) |
at the Company’s
record office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and |
|
b) |
during statutory business
hours on any one or more specified days before the day set for the holding of the meeting. |
A shareholder may participate in a meeting of
the shareholders in person or by telephone if all shareholders participate in the meeting, whether in person or by telephone or other
communications medium, are able to communicate with each other and if all shareholders who wish to participate in the meeting agree to
such participation.
The quorum for the transaction of business at
a meeting of shareholders is two persons, who are or representing by proxy, shareholders holding, in the aggregate, at least 33.33 percent
of the issued shares entitled to be voted at the meeting. On a show of hands, every person present who is a shareholder or proxy holder
entitled to vote on the matter has one vote.
Directors
Under the Business Corporations Act, as a publicly
traded company, the Company must have at least three directors, and as many directors as set by ordinary resolution. The shareholders
may elect or appoint the directors needed to fill any vacancies in the board of directors up to the number of opened vacancies. A director
is entitled to remuneration for acting as directors.
At every annual general meeting, the shareholder
entitled to vote must elect, or in a unanimous resolution, appoint, a board of directors consisting of the number of directors for the
time being.
The shareholding qualification for directors
may be fixed by our shareholders by ordinary resolution and unless and until so fixed no share qualification shall be required.
Each director holds office for the term, if any,
fixed by the terms of his appointment or until his earlier death, bankruptcy, insanity, resignation or removal. If no term is fixed on
the appointment of a director, the director serves indefinitely until his earlier death, bankruptcy, insanity, resignation or removal.
A director may be removed by ordinary resolution.
A director may at any time resign or retire from
office by giving us notice in writing. Unless the notice specifies a different date, the director shall be deemed to have resigned on
the date that the notice is delivered to us.
Subject to the provisions of the articles, the
office of a director may be terminated forthwith if:
|
a) |
he resigns his office by
notice to us; |
|
b) |
he only held office as
a director for a fixed term and such term expires; |
|
d) |
he is removed pursuant
to the articles of the Company. |
Each of the compensation committee and the nominating
and corporate governance committee shall consist of at least three directors and the majority of the committee members are independent
within the meaning of Section 5605(a)(2) of the NASDAQ Listing Rules. The audit committee consists of at least three directors, all of
whom are independent within the meaning of Section 5605(a)(2) of the NASDAQ Listing Rules and meet the criteria for independence set
forth in Rule 10A-3 or Rule 10C-1 of the Exchange Act.
Powers and Duties of Directors
Subject to the provisions of the Business Corporations
Act and our articles of association, our business shall be managed by the directors, who may exercise all our powers. No prior act of
the directors shall be invalidated by any subsequent alteration of our articles of association. To the extent allowed by the Business
Corporations Act, however, shareholders may by special resolution validate any prior or future act of the directors which would otherwise
be in breach of their duties.
The directors may delegate any of their powers
to any person to be the attorney of the Company.
The board of directors may establish any local
or divisional board of directors or agency and delegate to it its powers and authorities (with power to sub-delegate) for managing any
of our affairs.
The directors may from time to time and at any
time by power of attorney or in any other manner they determine appoint any person, either generally or in respect of any specific matter,
to be our agent with or without authority for that person to delegate all or any of that person’s powers.
The directors may from time to time and at any
time by power of attorney or in any other manner appoint any person, whether nominated directly or indirectly by the directors, to be
our attorney or our authorized signatory and for such period and subject to such conditions as they may think fit. The powers, authorities
and discretions, however, must not exceed those vested in, or exercisable, by the directors under the articles.
The board of directors may remove any person
so appointed and may revoke or vary the delegation.
A director may, as a director, vote (and be counted
in the quorum) in respect of any contract, transaction, arrangement or proposal in which he has an interest which is not a material interest.
However, a director who holds a disclosable interest in a contract or transaction win which the Company has entered or proposes to enter
is not entitled to vote on any directors’ resolutions to approve the contract or transaction, unless the directors have disclosable
interest in that contract or transaction, in which case any or all of those directors may vote on such resolution. Such director who
holds a disclosable interest that is present for a meeting of directors may be counted in the quorum at the meeting, whether or not the
director votes on any or all of the resolutions considered at the meeting.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
Subject to the limitations and qualifications
stated herein, the following discussion sets forth the material U.S. federal income tax considerations relating to the acquisition, ownership
and disposition by U.S. Holders (as defined below) of Common Shares and pre-funded warrants acquired pursuant to this offering. The discussion
is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed
regulations thereunder, published rulings and court decisions, all as currently in effect and all subject to change at any time, possibly
with retroactive effect. This summary applies only to U.S. Holders and does not address tax consequences to a non-U.S. Holder (as defined
below) investing in Common Shares.
This discussion of a U.S. Holder’s tax
consequences addresses only those persons that hold Common Shares as capital assets and does not address the tax consequences to any
special class of holders, including without limitation, holders (directly, indirectly or constructively) of 10% or more of the Company’s
equity (based on value or voting power), dealers in securities or currencies, banks, tax-exempt organizations, insurance companies, financial
institutions, broker-dealers, regulated investment companies, real estate investment trusts, traders in securities that elect the mark-to-market
method of accounting for their securities holdings, persons that hold Common Shares that are a hedge or that are hedged against currency
or interest rate risks or that are part of a straddle, conversion or “integrated” transaction, persons required to accelerate
the recognition of any item of gross income as a result of such income being recognized on an applicable financial statement, persons
subject to the “base erosion and anti-avoidance” tax, U.S. expatriates or former long-term residents of the United States,
partnerships or other pass-through entities for U.S. federal income tax purposes, U.S. Holders that acquire Common Shares in connection
with the exercise of employee stock options or otherwise as compensation for services and U.S. Holders whose functional currency for
U.S. federal income tax purposes is not the U.S. dollar. This discussion does not address the effect of alternative minimum taxes, U.S.
federal estate and gift tax, the 3.8% Medicare contribution tax on net investment income or any state, local or non-U.S. tax laws applicable
to a holder of Common Shares. This discussion does not take into account the individual facts and circumstances of any particular U.S.
Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including specific tax consequences to a U.S. Holder
under an applicable tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal
income tax advice with respect to any particular U.S. Holder. Each U.S. Holder should consult its own tax advisor regarding the U.S.
federal, U.S. state and local, U.S. federal estate and gift, alternative minimum, and non-U.S. tax consequences of the acquisition, ownership
and disposition of Common Shares.
This discussion also does not address the U.S.
federal income tax considerations applicable to U.S. Holders who are: (a) persons that have been, are, or will be a resident or deemed
to be a resident in Canada for purposes of the Income Tax Act (Canada); (b) persons that use or hold, will use or hold, or that are or
will be deemed to use or hold securities in connection with carrying on a business in Canada; (c) persons whose securities constitute
“taxable Canadian property” under the Income Tax Act (Canada); or (e) persons that have a permanent establishment in Canada
for the purposes of the Canada-U.S. Tax Convention.
For purposes of this discussion, a “U.S.
Holder” is a beneficial owner of Common Shares acquired pursuant to this offering that is for U.S. federal income tax purposes:
(a) an individual who is a citizen or resident of the United States; (b) a corporation (or other entity taxable as a corporation for
U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of
Columbia; (c) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (d) a trust (i) if
a court within the United States can exercise primary supervision over its administration, and one or more U.S. persons have the authority
to control all of the substantial decisions of that trust, or (ii) that has a valid election in effect under applicable Treasury regulations
to be treated as a U.S. person. The term “non-U.S. Holder” means any beneficial owner of Common Shares or pre-funded warrants
acquired pursuant to this offering that is not a U.S. Holder, a partnership (or an entity or arrangement that is treated as a partnership
or other pass-through entity for U.S. federal income tax purposes) or a person holding Common Shares through such an entity or arrangement.
If a partnership or an entity or arrangement
that is treated as a partnership for U.S. federal income tax purposes holds Common Shares or pre-funded warrants, the tax treatment of
a partner generally will depend upon the status of the partner and the activities of the partnership. Partners in partnerships that hold
Common Shares or pre-funded warrants should consult their own tax advisors. You are urged to consult your own independent tax advisor
regarding the specific U.S. federal, state, local and non-U.S. income and other tax considerations relating to the acquisition, ownership
and disposition of Common Shares.
Cash Dividends and Other Distributions
on the Common Shares
Subject to the rules described below under the
heading “Passive Foreign Investment Company Considerations,” any distributions (including constructive distributions) made
with respect to a Common Share, a U.S. Holder generally will be required to include the amount of such distribution in gross income (including
the amount of Canadian taxes withheld, if any) as dividend income to the extent of the Company’s current and accumulated earnings
and profits (computed using U.S. federal income tax principles). A dividend generally will be taxed to a U.S. Holder at ordinary income
tax rates if the Company is a PFIC for the tax year of such distribution or the preceding tax year. To the extent that a distribution
exceeds the Company’s current and accumulated “earnings and profits,” such distribution will be treated first as a
non-taxable return of capital to the extent of the holder’s adjusted tax basis in such Common Shares and, thereafter, as gain from
the sale or exchange of such Common Shares (see “Sale or Disposition” below). There can be no assurance that the Company
will maintain calculations of the Company’s earnings and profits in accordance with U.S. federal income tax accounting principles.
U.S. Holders should therefore assume that any distribution with respect to the Common Shares will constitute ordinary dividend income.
Dividends paid on such Common Shares generally will not be eligible for the dividends received deduction generally allowed to U.S. corporations.
Dividends paid to a non-corporate U.S. Holder
by a “qualified foreign corporation” may be subject to reduced rates of taxation if certain holding period and other requirements
are met. A qualified foreign corporation generally includes a foreign corporation (other than a foreign corporation that is a PFIC in
the taxable year in which the dividend is paid or the preceding taxable year) if (i) its securities are readily tradable on an established
securities market in the United States or (ii) it is eligible for benefits under a comprehensive U.S. income tax treaty that includes
an exchange of information program and which the U.S. Treasury Department has determined is satisfactory for these purposes. The Common
Shares are readily tradable on an established securities market in the United States, the Nasdaq. However, the Company may also be eligible
for the benefits of the Canada-U.S. Tax Convention. Accordingly, subject to the PFIC rules discussed below, the Company expects that
a non-corporate U.S. Holder should qualify for the reduced rate on dividends so long as the applicable holding period requirements are
met. U.S. Holders should consult their own tax advisors regarding the availability of the reduced tax rate on dividends in light of their
particular circumstances.
Non-corporate U.S. Holders will not be eligible
for reduced rates of taxation on any dividends received from us if the Company is a PFIC in the taxable year in which such dividends
are paid or in the preceding taxable year.
A U.S. Holder who pays (whether directly or through
withholding) Canadian taxes with respect to dividends paid on the Common Shares (or with respect to any constructive dividend on the
warrants) may be entitled to receive, at the election of such U.S. Holder, either a deduction or a foreign tax credit for such Canadian
taxes paid. Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate
share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income
bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income
and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” In addition,
this limitation is calculated separately with respect to specific categories of income. Dividends paid by us generally will constitute
“foreign source” income and generally will be categorized as “passive category income.” However, if 50% or more
of the Company’s equity (based on voting power or value) is treated as held by U.S. persons, the Company will be treated as a “United
States-owned foreign corporation,” in which case dividends may be treated for foreign tax credit limitation purposes as “foreign
source” income to the extent attributable to the Company’s non-U.S. source earnings and profits and as “U.S. source”
income to the extent attributable to the Company’s U.S. source earnings and profits. Because the foreign tax credit rules are complex,
each U.S. Holder should consult its own tax advisor regarding the foreign tax credit rules.
Sale or Disposition on the Common Shares
Subject to the PFIC rules discussed below, a
U.S. Holder generally will recognize gain or loss on the taxable sale or exchange of its Common Shares in an amount equal to the difference
between the U.S. dollar amount realized on such sale or exchange and the U.S. Holder’s adjusted tax basis in the Common Shares
sold or otherwise disposed.
Assuming the Company is not a PFIC and has not
been treated as a PFIC during your holding period for Common Shares, such gain or loss will be capital gain or loss and will be long-term
gain or loss if the Common Shares have been held for more than one year. Under current law, long-term capital gains of non-corporate
U.S. Holders generally are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Capital
gain or loss, if any, recognized by a U.S. Holder generally will be treated as U.S. source income or loss for U.S. foreign tax credit
purposes. Consequently, a U.S. Holder may not be able to use the foreign tax credit arising from any Canadian tax imposed on the disposition
of Common Shares unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived
from foreign sources. U.S. Holders are encouraged to consult their own tax advisors regarding the availability of the U.S. foreign tax
credit in their particular circumstances.
Dividends and Other Distributions on the Pre-Funded
Warrants.
The pre-funded warrants do not pay dividends
to the holders of the pre-funded warrants. However, in the event that the exercise price or conversion ratio of pre-funded warrants is
adjusted as a result of an action affecting the Common Shares, such as a stock dividend being paid on the Common Shares, a U.S. Holder
may be treated as receiving a distribution from us. Subject to the PFIC rules such deemed distributions may be treated as a dividend
and may be eligible for preferential tax rates, as described above under “Cash Dividends and Other Distributions on the Common
Shares”.
Sale and Exercise of the Pre-Funded Warrants
Sale of Pre-Funded Warrants
A U.S. Holder has a tax basis in its pre-funded
warrants equal to the amount paid for the pre-funded warrants. A U.S. Holder’s holding period in the pre-funded warrants begins
on the day that the U.S. Holder acquires the pre-funded warrants. Upon a sale of the pre-funded warrants, the U.S. Holder will have a
capital gain or loss equal to the difference between its tax basis in the pre-funded warrants and the amount realized on the sale. The
gain or loss will be long-term gain or loss if the U.S. Holder has held the pre-funded warrants for more than one year. If the Company
is a PFIC at the time of the sale, the PFIC rules may apply to a sale of the pre-funded warrants if, as discussed below, the pre-funded
warrants are treated as Common Shares.
Exercise of pre-funded warrants and sale of
Common Share
No gain or loss will be recognized upon the
exercise of a pre-funded warrant. The tax basis of the pre-funded warrant will carry over to Common Shares received upon exercise,
increased by the exercise price of $0.01 per share. Moreover, while the question is not entirely free from doubt, upon exercise the
holding period of a pre-funded warrant should carry over to the Common Shares received. While the Code provides that upon the
exercise of “rights to acquire …stock or securities” the holding period of the acquired stock begins on the date
of acquisition, pre-funded warrant should be treated as stock for this purpose, not as rights to acquire stock, because the U.S.
Holder has already fully paid for the Common Shares when he exercises the pre-funded warrants. Our position that upon exercise
pre-funded warrants should be treated like Common Shares is not binding on the IRS and the IRS may treat the pre-funded warrants as
warrants to acquire our Common Shares (we are not aware of any on-point authority on this issue).
Subject to the PFIC rules, upon a sale of the
Common Shares acquired through the exercise of the pre-funded warrants, the U.S. Holder will have a capital gain or loss equal to the
difference between its tax basis in the Common Shares (which includes its tax basis in the pre-funded warrants) and the amount realized
on the sale. The gain or loss will be long-term gain or loss if the U.S. Holder has held the Common Shares for more than one year (including,
we believe, the period of time during which the U.S. Holder held the pre-funded warrants).
Each holder should consult his, her or its
own tax advisor regarding the tax consequences of the acquisition and exercise of pre-funded warrants pursuant to this offering (including
potential alternative characterizations).
Passive Foreign Investment Company Considerations
Status as a PFIC
The rules governing PFICs can have adverse tax
effects on U.S. Holders. The Company generally will be classified as a PFIC for U.S. federal income tax purposes if, for any taxable
year, either: (1) 75% or more of its gross income consists of certain types of passive income, or (2) the average value (determined on
a quarterly basis), of its assets that produce, or are held for the production of, passive income is 50% or more of the value of all
of its assets.
For purposes of the PFIC provisions, “gross
income” generally means sales revenues less cost of goods sold, plus income from investments and from incidental or outside operations
or sources. Passive income generally includes dividends, interest, rents and royalties (other than certain rents and royalties derived
in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a non-U.S. corporation
owns at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as
owning its proportionate share of the assets of the other corporation and as directly receiving its proportionate share of the other
corporation’s income.
Additionally, if the Company is classified as
a PFIC in any taxable year with respect to which a U.S. Holder owns Common Shares, the Company generally will continue to be treated
as a PFIC with respect to such U.S. Holder in all succeeding taxable years, regardless of whether the Company continues to meet the tests
described above, unless the U.S. Holder makes the “deemed sale election” described below.
The Company does not believe that it is currently
a PFIC and does not anticipate becoming a PFIC in the foreseeable future. Notwithstanding the foregoing, the determination of whether
the Company is a PFIC is made annually and depends on the particular facts and circumstances (such as the valuation of its assets, including
goodwill and other intangible assets) and also may be affected by the application of the PFIC rules, which are subject to differing interpretations.
The Company’s status as PFIC depends upon the composition of its income and assets, which will be affected by how, and how quickly,
the Company spends any cash that is raised in any financing transaction, including this offering. In light of the foregoing, no assurance
can be provided that the Company is not currently a PFIC or that it will not become a PFIC in any future taxable year. Prospective investors
should consult their own tax advisors regarding the Company’s potential PFIC status.
U.S. Federal Income Tax Treatment of a
Shareholder of a PFIC
If the Company is classified as a PFIC for any
taxable year during which a U.S. Holder owns Common Shares, the U.S. Holder, absent certain elections (including the mark-to-market and
QEF elections described below), generally will be subject to adverse rules (regardless of whether the Company continues to be classified
as a PFIC) with respect to (i) any “excess distributions” (generally, any distributions received by the U.S. Holder on its
Common Shares in a taxable year that are greater than 125% of the average annual distributions received by the U.S. Holder in the three
preceding taxable years or, if shorter, the U.S. Holder’s holding period for the Common Shares) and (ii) any gain realized on the
sale or other disposition, including a pledge, of Common Shares.
Under these adverse rules (a) the excess distribution
or gain will be allocated ratably over the U.S. Holder’s holding period, (b) the amount allocated to the current taxable year and
any taxable year prior to the first taxable year in which the Company is classified as a PFIC will be taxed as ordinary income, (c) the
amount allocated to each other taxable year during the U.S. Holder’s holding period in which the Company was classified as a PFIC
(i) will be subject to tax at the highest rate of tax in effect for the applicable category of taxpayer for that year and (ii) will be
subject to an interest charge at a statutory rate with respect to the resulting tax attributable to each such other taxable year, and
(d) loss recognized on the disposition of the Common Shares will not be deductible.
If the Company is classified as a PFIC, a U.S.
Holder generally will be treated as owning a proportionate amount (by value) of stock or shares owned by the Company in any direct or
indirect subsidiaries that are also PFICs and will be subject to similar adverse rules with respect to any distributions the Company
receives from, and dispositions the Company makes of, the stock or shares of such subsidiaries. You are urged to consult your tax advisors
about the application of the PFIC rules to any of the Company’s subsidiaries.
If the Company is classified as a PFIC and then
cease to be so classified, a U.S. Holder may make an election (a “deemed sale election”) to be treated for U.S. federal income
tax purposes as having sold such U.S. Holder’s Common Shares on the last day the Company’s taxable year during which the
Company was a PFIC. A U.S. Holder that makes a deemed sale election with respect to its Common Shares would then cease to be treated
as owning stock in a PFIC by reason of ownership of the Common Shares. However, gain recognized as a result of making the deemed sale
election would be subject to the adverse rules described above and loss would not be recognized.
PFIC “Mark-to-Market” Election
In certain circumstances, a U.S. Holder can avoid
certain of the adverse rules described above by making a mark-to-market election with respect to its Common Shares, provided that such
shares are “marketable.” The Common Shares generally will be marketable if they are “regularly traded” on certain
U.S. stock exchanges or on a foreign stock exchange that meets certain conditions. For these purposes, the Common Shares will be considered
regularly traded during any calendar year during which they are traded, other than in de minimis quantities, on at least 15 days during
each calendar quarter. Any trades that have as their principal purpose meeting this requirement will be disregarded. The Common Shares
are listed on the Nasdaq, which is a qualified exchange for these purposes. Consequently, if the Common Shares remain listed on the Nasdaq
and are regularly traded, and you are a holder of Common Shares, it is expected the mark-to-market election would be available to you
if the Company is a PFIC. There can be no assurance that the shares will be “regularly traded” in subsequent calendar quarters.
You should consult your own tax advisor as to the whether a mark-to-market election is available or advisable with respect to the Common
Shares.
A U.S. Holder that makes a mark-to-market election
must include in gross income, as ordinary income, for each taxable year that the Company is a PFIC an amount equal to the excess, if any,
of the fair market value of the U.S. Holder’s Common Shares at the close of the taxable year over the U.S. Holder’s adjusted
tax basis in such Common Shares. An electing U.S. Holder may also claim an ordinary loss deduction for the excess, if any, of the U.S.
Holder’s adjusted tax basis in its Common Shares over the fair market value of such Common Shares at the close of the taxable year,
but this deduction is allowable only to the extent of any net mark-to-market gains previously included in income. A U.S. Holder that makes
a mark-to-market election generally will adjust such U.S. Holder’s tax basis in its Common Shares to reflect the amount included
in gross income or allowed as a deduction because of such mark-to-market election. Gains from an actual sale or other disposition of Common
Shares in a year in which the Company is a PFIC will be treated as ordinary income, and any losses incurred on a sale or other disposition
of such Common Shares will be treated as ordinary losses to the extent of any net mark-to-market gains previously included in income.
If the Company is classified as a PFIC for any
taxable year in which a U.S. Holder owns Common Shares but before a mark-to-market election is made, the adverse PFIC rules described
above will apply to any mark-to-market gain recognized in the year the election is made. Otherwise, a mark-to-market election will be
effective for the taxable year for which the election is made and all subsequent taxable years. The election cannot be revoked without
the consent of the IRS, unless the Common Shares cease to be marketable, in which case the election is automatically terminated.
A U.S. Holder makes a mark-to-market election
by attaching a completed IRS Form 8621 to a timely filed U.S. federal income tax return. Each U.S. Holder should consult its own tax advisor
regarding the availability of, and procedure for making, a mark-to-market election.
A mark-to-market election is not permitted for
the shares of any of the Company’s subsidiaries that are also classified as PFICs. Prospective investors should consult their own
tax advisors regarding the availability of, and the procedure for making, a mark-to-market election.
PFIC “QEF” Election
In some cases, a shareholder of a PFIC can avoid
the interest charge and the other adverse PFIC consequences described above by obtaining certain information from such PFIC and by making
a QEF election to be taxed currently on its share of the PFIC’s undistributed income. The Company does not, however, expect to provide
the information regarding its income that would be necessary in order for a U.S. Holder to make a QEF election with respect to Common
Shares if the Company is classified as a PFIC.
PFIC Information Reporting Requirements
If the Company is a PFIC in any year, a U.S. Holder
will be required to file an annual information return on IRS Form 8621 regarding distributions received on its Common Shares and any gain
realized on disposition of such Common Shares. In addition, if the Company is a PFIC, a U.S. Holder generally will be required to file
an annual information return with the IRS (also on IRS Form 8621, which PFIC shareholders are required to file with their U.S. federal
income tax or information return) relating to their ownership of Common Shares. This new filing requirement is in addition to the pre-existing
reporting requirements described above that apply to a U.S. Holder’s interest in a PFIC (which this requirement does not affect).
NO ASSURANCE CAN BE GIVEN THAT THE COMPANY IS
NOT CURRENTLY A PFIC OR THAT IT WILL NOT BECOME A PFIC IN THE FUTURE. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE OPERATION OF THE PFIC RULES AND RELATED REPORTING REQUIREMENTS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE ADVISABILITY
OF MAKING ANY ELECTION THAT MAY BE AVAILABLE.
Reporting Requirements and Backup Withholding
Under U.S. federal income tax law and applicable
Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement
in, a non-U.S. corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on U.S. Holders that hold
certain specified foreign financial assets in excess of certain threshold amounts. The definition of specified foreign financial assets
includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial
institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer
or counterparty other than a U.S. person, and any interest in a non-U.S. entity. U.S. Holders may be subject to these reporting requirements
unless such U.S. Holder’s Common Shares are held in an account at certain financial institutions. Penalties for failure to file
certain of these information returns are substantial.
Payments made within the United States or by a
U.S. payor or U.S. middleman of (a) distributions on the Common Shares, and (b) proceeds arising from the sale or other taxable disposition
of Common Shares generally may be subject to information reporting and backup withholding, currently at the rate of 24%, if a U.S. Holder
(a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an
incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report
items subject to backup withholding, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct
U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding. However,
certain exempt persons generally are excluded from these information reporting and backup withholding rules. Any amounts withheld under
the U.S. backup withholding rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any,
or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner. The information reporting and backup
withholding rules may apply even if, under the Canada-U.S. Tax Convention, payments may be exempt from the dividend withholding tax rules
or otherwise eligible for a reduced withholding rate. Each U.S. Holder should consult its own tax advisor regarding the information reporting
and backup withholding rules.
THE ABOVE DISCUSSION DOES NOT COVER ALL TAX
MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR. YOU ARE STRONGLY URGED TO CONSULT YOUR OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES
TO YOU OF AN INVESTMENT IN THE COMMON SHARES.
CERTAIN CANADIAN FEDERAL INCOME TAX IMPLICATIONS
The following summary describes, as of the date
hereof, the principal Canadian federal income tax considerations under the Income Tax Act (Canada) (the “Tax Act”)
and the regulations thereunder (the “Regulations”) generally applicable to an investor who acquires Common Shares pursuant
to this offering. This summary applies only to an investor who is a beneficial owner of Common Shares and who, for the purposes of the
Tax Act, and at all relevant times: (i) deals at arm’s length with the Company, (ii) is not affiliated with the Company; and (iii)
acquires and holds the Common Shares as capital property (a “Holder”).
Common Shares will generally be considered to
be capital property to a Holder unless they are held in the course of carrying on a business of trading or dealing in securities or were
acquired in one or more transactions considered to be an adventure or concern in the nature of trade.
This summary is not applicable to a Holder: (i)
that is a “financial institution” for the purposes of the mark-to-market rules contained in the Tax Act, (ii) that is a “specified
financial institution” (as defined in the Tax Act); (iii) an interest in which is a “tax shelter investment” for purposes
of the Tax Act; (iv) that has made a functional currency reporting election under section 261 of the Tax Act to report its “Canadian
tax results” as defined in the Tax Act in a currency other than Canadian currency; (v) that has entered into, or will enter into,
a “derivative forward agreement” or “synthetic disposition arrangement” (each as defined in the Tax Act) with
respect to the Common Shares; or (vi) that receives dividends on Common Shares under or as part of a “dividend rental arrangement”
(as defined in the Tax Act). This summary does not address the deductibility of interest by a Holder who has borrowed money to acquire
the Common Shares. Such Holders should consult their own tax advisors.
Additional considerations, not discussed herein,
may apply to a Holder that is a corporation resident in Canada, and is or becomes (or does not deal at arm’s length for purposes
of the Tax Act with a corporation resident in Canada that is or becomes), as part of a transaction or event or series of transactions
or events that includes the acquisition of the Common Shares, controlled by a non-resident person or a group of non-resident persons that
do not deal with each other at arm’s length for purposes of the “foreign affiliate dumping” rules in section 212.3 of
the Tax Act. Such Holders should consult their own tax advisors.
This summary is based on the facts set out herein,
the provisions of the Tax Act and Regulations in force as of the date prior to the date hereof, counsel’s understanding of the current
administrative policies and assessing practices of the Canada Revenue Agency (“CRA”) published in writing by the CRA prior
to the date hereof. This summary takes into account all specific proposals to amend the Tax Act and the Regulations publicly announced
by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”) and assumes that
the Proposed Amendments will be enacted in the form proposed, although no assurance can be given that the Proposed Amendments will be
enacted in their current form or at all. This summary does not take into account or anticipate any changes in the law or in the administrative
practices or assessing policies of CRA, whether by legislative, governmental, administrative or judicial decision or action, nor does
it take into account or consider other federal or any provincial, territorial or foreign tax considerations, which may differ significantly
from the Canadian federal income tax considerations discussed in this summary.
This summary is not exhaustive of all possible
Canadian federal income tax considerations applicable to an investment in Common Shares. The following description of income tax matters
is of a general nature only and is not intended to be, nor should it be construed to be, legal or income tax advice to any particular
Holder. Holders are urged to consult their own tax advisors with respect to the tax consequences applicable to them based on their own
particular circumstances.
Taxation of Resident Holders
The following portion of this summary applies
to a Holder who, for the purposes of the Tax Act, is or is deemed to be resident in Canada at all relevant times (a “Resident Holder”).
A Resident Holder whose Common Shares might not otherwise qualify as capital property may be entitled to make an irrevocable election
permitted by subsection 39(4) of the Tax Act to deem the Common Shares, and every other “Canadian security” (as defined in
the Tax Act), held by such person, in the taxation year of the election and each subsequent taxation year to be capital property. Resident
Holders should consult their own tax advisors regarding this election.
Dividends
Dividends received or deemed to be received on
the Common Shares will be included in computing a Resident Holder’s income. In the case of an individual (other than certain trusts),
such dividends will be subject to the gross-up and dividend tax credit rules normally applicable in respect of “taxable dividends”
received from “taxable Canadian corporations” (as such terms are defined in the Tax Act). An enhanced gross-up and dividend
tax credit will be available to individuals in respect of “eligible dividends” designated by the Company to the Resident Holder
in accordance with the provisions of the Tax Act. There may be limitations on the ability of the Company to designate dividends as eligible
dividends.
Dividends received or deemed to be received on
the Common Shares by a Resident Holder that is a corporation will be included in computing its income for the taxation year in which such
dividends are received, but such dividends will generally be deductible in computing the corporation’s taxable income. In certain
circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received or deemed to be received by a Resident Holder that
is a corporation as proceeds of disposition or a capital gain. Resident Holders that are corporations should consult their own tax advisors
having regard to their own circumstances.
A Resident Holder that is a “private corporation”
as defined in the Tax Act or a “subject corporation” as defined in subsection 186(3) of the Tax Act may be liable under Part
IV of the Tax Act to pay a refundable tax on dividends received or deemed to be received on the Common Shares to the extent that such
dividends are deductible in computing the Resident Holder’s taxable income for the taxation year. Such Resident Holders should consult
their own tax advisors in this regard.
Disposition of Common Shares
A Resident Holder who disposes, or is deemed to
dispose, of a Common Share (other than on a disposition to the Company that is not a sale in the open market in the manner in which shares
would normally be purchased by any member of the public in an open market) generally will realize a capital gain (or capital loss) in
the taxation year of the disposition equal to the amount, if any, by which the proceeds of disposition, net of any reasonable costs of
disposition, are greater (or are less) than the adjusted cost base to the Resident Holder of such Common Share immediately before the
disposition or deemed disposition. The taxation of capital gains and capital losses is generally described below under the heading “Capital
Gains and Capital Losses”.
Capital Gains and Capital Losses
Generally, a Resident Holder is required to include
in computing income for a taxation year two- thirds of the amount of any capital gain (a “taxable capital gain”) realized
by the Resident Holder in such taxation year. Subject to and in accordance with the rules contained in the Tax Act, a Resident Holder
is required to deduct two thirds of the amount of any capital loss (an “allowable capital loss”) realized in a particular
taxation year against taxable capital gains realized by the Resident Holder in the year. Allowable capital losses in excess of taxable
capital gains realized in a taxation year may be carried back and deducted in any of the three preceding taxation years or carried forward
and deducted in any subsequent taxation year against net taxable capital gains realized in such years, to the extent and under the circumstances
described in the Tax Act.
The amount of any capital loss realized by a Resident
Holder that is a corporation on the disposition or deemed disposition of a Common Share may be reduced by the amount of any dividends
received or deemed to have been received by such Resident Holder on such shares, to the extent and under the circumstances described in
the Tax Act. Similar rules may apply where a Resident Holder that is a corporation is a member of a partnership or a beneficiary of a
trust that owns Common Shares, directly or indirectly, through a partnership or trust. Resident Holders to whom these rules may be relevant
should consult their own tax advisors.
Additional Refundable Tax
A Resident Holder that is throughout the relevant
taxation year a “Canadian-controlled private corporation” (as defined in the Tax Act) may be liable to pay an additional tax
(refundable in certain circumstances) on certain investment income, including any dividends or deemed dividends that are not deductible
in computing the Resident Holder’s taxable income and taxable capital gains. Proposed Amendments announced by the Minister of Finance
(Canada) on April 7, 2022 are intended to extend this additional tax and refund mechanism in respect of such investment income to “substantive
CCPCs” as defined in such Proposed Amendments and draft legislation implementing such Proposed Amendments that was released on August
9, 2022. Such Resident Holders should consult their own tax advisors.
Alternative Minimum Tax
Generally, a Resident Holder that is an individual
(other than certain trusts) that receives or is deemed to have received taxable dividends on the Common Shares or realizes a capital gain
on the disposition or deemed disposition of the Common Shares may be liable for alternative minimum tax under the Tax Act. Resident Holders
should consult their own tax advisors with respect to the application of alternative minimum tax.
Taxation of Non-Resident Holders
The following portion of this summary is generally
applicable to Holders who, for the purposes of the Tax Act and at all relevant times: (i) are not resident or deemed to be resident in
Canada, and (ii) do not use or hold Common Shares in the course of a business carried on or deemed to be carried on in Canada (“Non-Resident
Holders”). Special rules, which are not discussed in this summary, may apply to a Non-Resident Holder that is an insurer carrying
on business in Canada and elsewhere or that is an “authorized foreign bank” (as defined in the Tax Act). Such Non-Resident
Holders should consult their own tax advisors.
Dividends
Dividends paid or credited or deemed to be paid
or credited to a Non-Resident Holder on the Common Shares will generally be subject to Canadian withholding tax at the rate of 25% on
the gross amount of the dividend, unless such rate is reduced by the terms of an applicable income tax treaty or convention. Under the
Canada-United States Tax Convention (1980), as amended (the “Treaty”), the rate of withholding tax on dividends paid or credited
to a Non-Resident Holder who is resident in the U.S. for purposes of the Treaty, is the beneficial owner of the dividends, and is fully
entitled to benefits under the Treaty (a “Treaty Holder”) is generally reduced to 15% of the gross amount of the dividend.
The rate of withholding tax is further reduced to 5% if the beneficial owner of such dividend is a Treaty Holder that is a company that
owns, directly or indirectly, at least 10% of the voting stock of the Company. Non-Resident Holders should consult their own tax advisors
regarding the application of the Treaty or any other tax treaty.
Disposition of Common Shares
A Non-Resident Holder will not be subject to tax
under the Tax Act in respect of any capital gain realized on a disposition or deemed disposition of a Common Shares, nor will capital
losses arising therefrom be recognized under the Tax Act, unless the Common Shares constitute “taxable Canadian property”
(as defined in the Tax Act) of the Non-Resident Holder at the time of disposition and the Non-Resident Holder is not entitled to relief
under an applicable income tax treaty or convention between Canada and the country in which the Non-Resident Holder is resident.
Provided that the Common Shares are listed on
a “designated stock exchange” for the purposes of the Tax Act (which currently includes the Nasdaq), at the time of disposition,
the Common Shares generally will not constitute taxable Canadian property of a Non-Resident Holder at that time, unless at any time during
the 60 month period immediately preceding the disposition, (i) 25% or more of the issued shares of any class or series of the capital
stock of the Company were owned by, or belonged to, any combination of (a) the Non-Resident Holder, (b) persons with whom the Non-Resident
Holder did not deal at arm’s length (for purposes of the Tax Act), and (c) partnerships in which the Non-Resident Holder or a person
described in (b) holds a membership interest directly or indirectly through one or more partnerships, and (ii) at such time, more than
50% of the fair market value of such shares was derived, directly or indirectly, from any combination of real or immovable property situated
in Canada, “Canadian resource property” (as defined in the Tax Act), “timber resource property” (as defined in
the Tax Act), or options in respect of, interests in, or for civil law rights in such properties, whether or not such property exists.
Notwithstanding the foregoing, the Common Shares may also be deemed to be taxable Canadian property to a Non-Resident Holder for purposes
of the Tax Act in certain other circumstances. Non-Resident Holders should consult their own tax advisors as to whether their Common Shares
constitute “taxable Canadian property” in their own particular circumstances.
In the event that a Common Share constitutes taxable
Canadian property of a Non-Resident Holder and any capital gain that would be realized on the disposition thereof is not exempt from tax
under the Tax Act pursuant to an applicable income tax treaty or convention, the income tax consequences discussed above for Resident
Holders under “Taxation of Resident Holders – Disposition of Common Shares” and “Capital Gains and Capital Losses”
will generally apply to the Non-Resident Holder. Non-Resident Holders whose Common Shares are taxable Canadian property should consult
their own tax advisors.
THE FOREGOING SUMMARY IS NOT INTENDED TO CONSTITUTE
A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES THAT MAY BE RELEVANT TO PARTICULAR HOLDERS OF COMMON SHARES AND IS NOT TAX OR LEGAL ADVICE.
HOLDERS OF COMMON SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, HOLDING AND
DISPOSING OF THE COMMON SHARES.
PLAN OF DISTRIBUTION
Pursuant to a placement agency agreement, we have
engaged Spartan Capital Securities, LLC (the “Placement Agent”) to act as our exclusive placement agent to solicit offers
to purchase the Securities offered by this prospectus. The Placement Agent is not purchasing or selling any Securities, nor is it required
to arrange for the purchase and sale of any specific number or dollar amount of Securities, other than to use its “reasonable best
efforts” to arrange for the sale of the Securities by us. Therefore, we may not sell the entire amount of Securities being offered.
The placement agency agreement also provides that the Placement Agent’s obligations are subject to conditions contained in the placement
agency agreement. We will enter into a securities purchase agreement directly with the investors, at the investor’s option, who
purchase our Securities in this offering. Investors who do not enter into a securities purchase agreement shall rely solely on this prospectus
in connection with the purchase of our Securities in this offering. The Placement Agent may engage one or more subagents or selected dealers
in connection with this offering.
We are offering up to a maximum of 2,352,940 shares
of our Securities in this offering. There will be no minimum amount of proceeds as a condition to closing of this offering. The actual
amount of gross proceeds, if any, in this offering could vary substantially from the gross proceeds from the sale of the maximum amount
of Securities being offered in this prospectus.
In connection with this offering, the Placement Agent may distribute
prospectuses electronically.
Placement Agent, Commissions and Expenses
Upon the closing of this offering, we will pay
the Placement Agent a cash transaction fee equal to two percent (2.0%) of the aggregate gross cash proceeds to us from the sale of the
securities in the offering. We also agreed to pay the Placement Agent up to $150,000
for fees and expenses of legal counsel and other out-of-pocket expenses, roadshow expenses and cost of background checks, including if
applicable, the costs associated with the use of a third-party electronic road show service such as net roadshow. Additionally, we will
pay all closing costs, which shall also include the reimbursement of the out-of-pocket cost of the escrow agent or clearing agent, as
applicable, up to a maximum of $15,000.
The following table shows the public offering
price, Placement Agent fees and proceeds, before expenses, to us.
| |
Per Common Share | | |
Per Pre- Funded Warrant | | |
Total | |
Public offering price | |
$ | 1.70 | | |
| 1.69 | | |
| 3,977,268.60 | |
Placement Agent fee | |
$ | 0.034 | | |
| 0.0338 | | |
| 79,545.36 | |
Proceeds, before expenses, to us | |
$ | 1.666 | | |
| 1.6562 | | |
| 3,897,723.24 | |
|
(1) |
See “Plan of Distribution” for a complete description of the compensation arrangements for the Placement Agent. |
|
(2) |
We estimate the total expenses of this offering, excluding the Placement Agent fees and expenses, will be approximately $326,941. |
Indemnification
We have agreed to indemnify the Placement Agent
against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the Placement Agent may
be required to make for these liabilities.
Tail
Unless there is a termination for “cause”
which shall include the Placement Agent's material failure to provide the placement services contemplated in the written agreement, if
there is a closing of this offering, or if our agreement with the Placement Agent is terminated prior to closing of this offering, then
if within twelve (12) months following such time, the Company receives any financing from any public offering of equity, equity derivatives
or equity linked instruments to the extent such financing is provided by any of the investors contacted by the Placement Agent or introduced
to the Company by the Placement Agent during the term of the engagement agreement, then the Company will pay the Placement Agent upon
the closing of such financing a cash transaction fee equal to two percent (2.0%) of the aggregate gross proceeds of such financing.
Standstill and Lock-Up
The Company agrees that until the date which is
40 days after the closing, it will not, without the written consent of the Placement Agent, which consent will not be unreasonably withheld
or delayed, issue, or announce an intention to issue, any additional debt, common shares or any securities convertible into or exchangeable
for shares of the Company (except in connection with exchange, transfer, conversion or exercise rights of existing outstanding securities
or existing commitments to issue securities. The Company has also agreed that it will not sell, transfer or pledge, or otherwise dispose
of, any securities of the Company until the date, which is 40 days after the closing date, in each case without the prior written consent
of the Placement Agent, such consent not to be unreasonably withheld or delayed.
Regulation M
The Placement Agent may be deemed to be an underwriter
within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale
of the Securities sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities
Act. As an underwriter, the Placement Agent would be required to comply with the requirements of the Securities Act and the Exchange Act,
including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of
purchases and sales of our Securities by the placement agent acting as principal. Under these rules and regulations, the Placement Agent
(i) may not engage in any stabilization activity in connection with our Securities and (ii) may not bid for or purchase any of our Securities
or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed
its participation in the distribution.
Determination of Offering Price
The actual offering price of the Securities were
negotiated between us, the Placement Agent and the investors in the offering based on the trading of our Common Shares prior to the offering,
among other things. Other factors considered in determining the public offering price of the Securities we are offering, include our history
and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented,
an assessment of our management, the general conditions of the securities markets at the time of the offering and such other factors as
were deemed relevant.
Electronic Distribution
A prospectus in electronic format may be made
available on a website maintained by the Placement Agent. In connection with the offering, the Placement Agent or selected dealers may
distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe® PDF
will be used in connection with this offering.
Other than the prospectus in electronic format,
the information on the Placement Agent’s website and any information contained in any other website maintained by the Placement
Agent is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or
endorsed by us or the Placement Agent in its capacity as placement agent and should not be relied upon by investors.
Certain Relationships
The Placement Agent and its affiliates have and
may in the future provide, from time to time, investment banking and financial advisory services to us in the ordinary course of business,
for which they may receive customary fees and commissions.
SELLING RESTRICTIONS
Other than in the United States of America,
no action has been taken by us or the Placement Agent that would permit a public offering of the Securities offered by this prospectus
in any jurisdiction where action for that purpose is required. The Securities offered by this prospectus may not be offered or sold, directly
or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such
Securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable
rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about
and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any Securities offered by this prospectus in any jurisdiction in which such an offer
or a solicitation is unlawful.
European Economic Area
In relation to each Member State of the European
Economic Area (each, a Member State), no Securities have been offered or will be offered pursuant to this offering to the public in that
Member State prior to the publication of a prospectus in relation to our Securities which has been approved by the competent authority
in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State,
all in accordance with the Prospectus Regulation, except that offers of shares may be made to the public in that Member State at any time
under the following exemptions under the Prospectus Regulation:
|
(a) |
to any legal entity which is a qualified investor as defined in the Prospectus Regulation; |
|
(b) |
by the placement agent to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior written consent of the representatives for any such offer; or |
|
(c) |
in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
provided that no such offer of our Securities
shall result in a requirement for us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation
or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
Each person in a Member State who initially acquires
any of our Securities or to whom any offer is made will be deemed to have represented, acknowledged, and agreed with us and the representatives
that it is a qualified investor within the meaning of the Prospectus Regulation.
In the case of any of our Securities are being
offered to a financial intermediary as that term is used in Article 5(1) of the Prospectus Regulation, each such financial intermediary
will be deemed to have represented, acknowledged and agreed that the Securities acquired by it in the offer have not been acquired on
a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances
which may give rise to an offer to the public other than their offer or resale in a Member State to qualified investors, in circumstances
in which the prior written consent of the representatives has been obtained to each such proposed offer or resale.
We, the placement agent, and their affiliates
will rely upon the truth and accuracy of the foregoing representations, acknowledgments, and agreements.
For the purposes of this provision, the expression
an “offer to the public” in relation to any of our Securities in any Member State means the communication in any form and
by any means of sufficient information on the terms of the offer and any of our Securities to be offered so as to enable an investor to
decide to purchase or subscribe for our Securities, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
United Kingdom
No shares have been offered or will be offered
pursuant to this offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares which
has been approved by the Financial Conduct Authority, except that the shares may be offered to the public in the United Kingdom at any
time:
|
(a) |
to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation; |
|
(b) |
to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or |
|
(c) |
in any other circumstances falling within Section 86 of the Financial Services and Markets Act 2000, or FSMA; |
provided that no such offer of the shares shall
require the us or any placement agent to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant
to Article 23 of the UK Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public”
in relation to the shares in the United Kingdom means the communication in any form and by any means of sufficient information on the
terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares and the
expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the
European Union (Withdrawal) Act 2018.
Canada
The Securities may be sold in Canada only to purchasers
purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus
Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument
31 103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Securities must be made
in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or
territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment
thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the
time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any
applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or
consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument
33 105 Underwriting Conflicts (NI 33 105), the placement agent are not required to comply with the disclosure requirements
of NI 33-105 regarding placement agent conflicts of interest in connection with this offering.
Israel
This document does not constitute a prospectus
under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel Securities Authority.
In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the shares is directed only
at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in
trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange,
placement agent, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals,”
each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case
purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in
the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are
aware of the meaning of same and agree to it.
Hong Kong
Our Securities may not be offered or sold in Hong
Kong by means of any document other than (1) in circumstances which do not constitute an offer to the public within the meaning of
the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (“Companies (Winding Up and
Miscellaneous Provisions) Ordinance”) or which do not constitute an invitation to the public within the meaning of the Securities
and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), or the Securities and Futures Ordinance, or (2) to “professional
investors” as defined in the Securities and Futures Ordinance and any rules made thereunder, or (3) in other circumstances
which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, and no advertisement, invitation or document relating to our Securities may be issued or may be in the possession of any person
for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to
be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with
respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors”
in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.
Singapore
This prospectus has not been registered as a prospectus
with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer
or sale, or invitation for subscription or purchase, of our Securities may not be circulated or distributed, nor may our Securities be
offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore
other than (1) to an institutional investor (as defined under Section 4A of the Securities and Futures Act, Chapter 289 of Singapore,
or the SFA) under Section 274 of the SFA, (2) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to
Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified
in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision
of the SFA, in each case subject to conditions set forth in the SFA.
Where our Securities are subscribed or purchased
under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A
of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals,
each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be
transferable for six months after that corporation has acquired our Securities under Section 275 of the SFA except: (1) to
an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where
such transfer arises from an offer in that corporation’s securities pursuant to Section 275(1A) of the SFA, (3) where
no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7)
of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures)
Regulations 2005 of Singapore, or Regulation 32.
Where our Securities are subscribed or purchased
under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in
Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the
beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for six months after that
trust has acquired our Securities under Section 275 of the SFA except: (1) to an institutional investor under Section 274
of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that
is made on terms that such rights or interest are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign
currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where
no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7)
of the SFA, or (6) as specified in Regulation 32.
Japan
The Securities have not been and will not be registered
under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The securities may not be offered
or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or
any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan
or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and
otherwise in compliance with any relevant laws and regulations of Japan.
Dubai International Financial Centre
This prospectus relates to an “Exempt Offer”
in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or the DFSA. This prospectus is intended for
distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on
by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA
has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus.
Our Securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers
of our Securities should conduct their own due diligence on such shares. If you do not understand the contents of this prospectus, you
should consult an authorized financial advisor.
Switzerland
Our Securities may not be publicly offered in
Switzerland and will not be listed on the SIX Swiss Exchange, or the SIX, or on any other stock exchange or regulated trading facility
in Switzerland. This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure
standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing
prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility
in Switzerland. Neither this document nor any other offering or marketing material relating to our Securities or this offering may be
publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or
marketing material relating to this offering, our company or our Securities have been or will be filed with or approved by any Swiss regulatory
authority. In particular, this document will not be filed with, and the offer of our Securities will not be supervised by, the Swiss Financial
Market Supervisory Authority and the offer of our Securities have not been and will not be authorized under the Swiss Federal Act on Collective
Investment Schemes, or the CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the
CISA does not extend to acquirers of our Securities.
Australia
No placement document, prospectus, product disclosure
statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, or ASIC, in relation
to this offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the
Corporations Act 2001, or the “Corporations Act”, and does not purport to include the information required for a prospectus,
product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of our Securities may only
be made to persons, or “Exempt Investors”, who are “sophisticated investors” (within the meaning of section 708(8)
of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise
pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer our Securities without
disclosure to investors under Chapter 6D of the Corporations Act.
Our Securities applied for by Exempt Investors
in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under this offering,
except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption
under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter
6D of the Corporations Act. Any person acquiring our Securities must observe such Australian on-sale restrictions.
This prospectus contains general information only
and does not take account of the investment objectives, financial situation, or particular needs of any particular person. It does not
contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether
the information in this prospectus is appropriate to their needs, objectives, and circumstances, and, if necessary, seek expert advice
on those matters.
We have not engaged counsel outside of the United
States to review any other country’s securities laws and therefore, notwithstanding the above, neither we nor the placement agent
can assure you that the summary of the laws above are accurate as of the date of this prospectus.
LEGAL MATTERS
Certain legal matters with respect to Canadian
law and with respect to the validity of the offered Common Shares under the law of British Columbia, Canada, will be passed upon for us
by our Canadian legal counsel CC Corporate Counsel Professional Corporation. Certain legal matters with respect to the validity of the
offered Pre-Funded Warrants under New York law and with respect to U.S. federal securities law will be passed upon for us by Sichenzia
Ross Ference Carmel LLP. Lucosky Brookman LLP is acting as counsel to the Placement Agent.
EXPERTS
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, 2023 have been audited
by Barzily and Co., CPA’s, 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.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising
under the Securities Act, may be permitted to our directors, officers or persons controlling us, we have been advised that it is the SEC’s
opinion that such indemnification is against public policy as expressed in such act and is, therefore, unenforceable.
EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses,
other than underwriting discounts and commissions, payable by us in connection with the sale of the securities being registered. All amounts,
other than the SEC registration fee and FINRA filing fee, are estimates. We will pay all these expenses.
| |
Amount | |
SEC registration fee | |
$ | 1,476.00 | |
FINRA filing fee | |
$ | 2,000.00 | |
Accounting fees and expenses | |
$ | 13,500.00 | |
Legal fees and expenses | |
$ | 298,000.00 | |
Transfer agent fees and expenses | |
$ | 3,500.00 | |
Printing and related fees and expenses | |
$ | 8,000.00 | |
Miscellaneous fees and expenses | |
$ | 465.00 | |
Total | |
$ | 326,941.00 | |
ENFORCEMENT 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
which 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 and Co., our legal counsel in Israel 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.
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.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference
much of the information that we file with the SEC, which means that we can disclose important information to you by referring you to those
publicly available documents. The information that we incorporate by reference in this prospectus is considered to be part of this prospectus.
Because we are incorporating by reference future filings with the SEC, this prospectus is continually updated, and those future filings
may modify or supersede some of the information included or incorporated by reference in this prospectus. This means that you must look
at all of the SEC filings that we incorporate by reference to determine if any of the statements in this prospectus or in any document
previously incorporated by reference have been modified or superseded. This prospectus incorporates by reference the documents listed
below and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 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, 2023, filed with the SEC on April 8, 2024 (hereinafter referred to as the
“Form 20-F”); and |
| ● |
our Report of Foreign
Private Issuer on Form 6-K furnished to the SEC on
January 16, 2024; January
22, 2024; January 29,
2024; February 1, 2024; February
6, 2024; February 13,
2024; February 15,
2024; February 22, 2024; February
23, 2024; March 11,
2024; March 22, 2024; April
4, 2024; April 5, 2024; April
5, 2024; April 8, 2024; April
15, 2024; May 9, 2024; May
10, 2024; May 13, 2024; May
14, 2024; May 16, 2024; May
22, 2024; May 23, 2024; May
28, 2024; May 30,
2024; June 5, 2024; July
2, 2024; July 10, 2024; July
10, 2024; July 15, 2024; July
18, 2024; July 23,
2024; July 25, 2024; July
26, 2024; July 30,
2024; August 12, 2024; and August 13, 2024
|
|
● |
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, 7404 King George Blvd., Suite 200, King’s Cross, Surrey, British Columbia
V3W 1N6, Canada; 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.
Maximum of 80,000 Common Shares
and/or
2,272,940 Pre-Funded Warrants to Purchase 2,272,940
Common Shares
![](https://www.sec.gov/Archives/edgar/data/1649009/000121390024069106/image_001.jpg)
PROSPECTUS
Sole Placement Agent
Spartan Capital Securities, LLC
August 13, 2024
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