We will not receive any proceeds from the sale
of any common shares by the Selling Shareholders. Moreover, we will not receive any proceeds received from the exercise of any New Warrants
or Lind Waiver Warrants when they are exercised in a cashless manner. We will pay certain expenses associated with the registration of
the securities covered by this prospectus, as described in the section entitled “Plan of Distribution.”
Our common shares are listed on the Nasdaq Capital
Market (“Nasdaq”) under the symbol “SYTA.” The closing price of one common share on the Nasdaq on March 29, 2023
was $0.201.
PROSPECTUS
SUMMARY
This
summary description about us and our business highlights selected information contained elsewhere in this prospectus. This summary does
not contain all of the information you should consider before deciding to invest in our securities. The following summary is qualified
in its entirety by, and should be read in conjunction with, the more detailed information and financial statements included elsewhere
in this prospectus. You should also carefully consider the matters discussed in the section in this prospectus entitled “Risk
Factors.”
Corporate
Overview
Siyata
Mobile Inc. is a leading global developer of innovative cellular-based communications solutions over advanced mobile networks under the
Uniden® Cellular and Siyata brands to global first responders and enterprise customers. Siyata’s three complementary
product categories include rugged handheld mobile devices and in-vehicle communications solutions designed for first responders, military,
enterprise customers, commercial fleet vehicles and industrial workers, and cellular amplifiers to boost the cellular signal inside homes,
buildings and vehicles.
The
Company develops, markets and sells a portfolio of rugged handheld Push-to-Talk over Cellular (“PoC”) smartphone devices.
These rugged business-to-business (“B2B”) environments are focused on enterprise customers, first responders, construction
workers, security guards, government agencies, utilities, transportation, waste management, amusement parks and mobile workers in multiple
industries.
Prior to 2021, Siyata sold rugged handsets, such
as the Uniden UR5 and Uniden UR7 only in international markets. In the second quarter of 2022, Siyata unveiled its next generation rugged
device, the SD7. The SD7 is Siyata’s first mission critical push-to-talk device (“MCPTT”) and is also the first rugged
communications solution Siyata launched in North America and is expected to launch in Europe in 2023. Subsequent to the end of the third
quarter of 2022, Siyata announced the SD7+, a single platform solution that integrates PoC and bodycam functionality.
Our
second product category is purpose built in-vehicle communication devices. In the fourth quarter of 2021, Siyata launched the VK7, a
first-of-its-kind, patent-pending car kit with an integrated 10-watt speaker, a simple slide-in connection sleeve for the SD7, and an
external antenna connection for connecting to a windshield or roof mount antenna to allow for an in-vehicle experience for the user that
is similar to that from a traditional land mobile radio (“LMR”) device. The VK7 has been uniquely designed to be used with
the SD7, while connecting directly into the vehicle’s power and can also connect to a Uniden cellular amplifier for better cellular
connectivity. The VK7 can also be equipped with an external remote speaker microphone to ensure compliance with hands-free communication
legislation.
The
Uniden® UV350 4G/LTE, is a purpose built-in vehicle communication device designed specifically for professional vehicles such as
trucks, vans, buses, emergency service vehicles and other enterprise vehicles. This platform is designed to facilitate replacement of
the current in-vehicle, multi-device status-quo with a single device that incorporates voice, PoC, data, fleet management solutions and
other Android based professional applications. The UV350 also supports Band 14 for the First Responder Network Authority, or FirstNet®,
compatibility which is the U.S. First Responders 4G/LTE network with PoC capabilities that aims to replace aging LMR systems currently
in use.
The aforementioned portfolio of solutions offers
the benefits of PoC without any of the difficulties managing the current generation of rugged smart/feature phones and is ideally suited
as a perfect upgrade from LMR used for generations. LMR has a significant number of limitations, including network incompatibility, limited
coverage areas, and restricted functionality that leave a huge need for a unified network and platform. Siyata’s innovative PoC
product lines are helping to service the generational shift from LMR to PoC. According to VDC Research, the LMR market is growing at a
5.9% compound annual growth rate (“CAGR”), while the PoC market is growing at a 13.6% CAGR and annual PoC shipments are expected
to grow to 2.7 million in 2023.
Cellular
boosters are our third product category with approximately 30 million of these devices sold globally every year. Siyata sells Uniden®
cellular boosters and accessories for enterprise, first responder and consumer customers with a focus on the North America markets. Cellular
communication provides a robust, secure environment not just for remote workers, in-home and in-vehicles; but also for restaurant patrons
who wish to download menus; for patients at pharmacies who need to verify identity and download prescriptions; for remote workers who
require strong clear cellular signals; and for first responders where connectivity literally means the difference between life and death
- just to name a few examples. The vehicle vertical in this portfolio complements Siyata’s in-vehicle and rugged handheld smartphones
as these sales can be bundled through the Company’s existing sales channels.
AT&T,
our largest channel partner, represented 28.1% of our revenues in 2022. AT&T did not enter into a master services agreement with
us, but rather, enters into standard purchase order forms on a per order basis. We do not obligate AT&T to fulfill any required minimum
purchase orders. Our typical purchase order contracts with AT&T involve standard warranties and indemnification, insurance requirement
and delivery terms.
With
an estimated 17 million commercial vehicles as well as 3.5 million first responder vehicles, we view the U.S. market as our largest opportunity
with, according to the U.S. Department of Transportation, an estimated total addressable market of over $17 billion. The Tier 1 cellular
carriers that we work with have expressed interest in marketing and selling the UV350 as it would allow for new SIM card activations
in commercial vehicles and increased average revenue per user from existing customers with corporate and first responder fleets while
targeting new customers with a unique, dedicated, multi-purpose in-vehicle smartphone.
Competitive
Strengths
We
believe that the following competitive strengths contribute to our success and differentiate us from our competitors:
| ● | Our
innovative technology solutions and integration approach with minimal known competition. |
| ● | Our
reputation and recognition achieved from our previous success in this space. |
| ● | Our
experienced management team. |
| ● | Our
relationships and device approvals with leading North American wireless networks. |
Growth
Strategies
We
intend to further grow our business by pursuing the following strategies:
| ● | Ramp
up sales with our North American and global cellular carrier partners. |
| ● | Entering
new customer bases and markets. |
| ● | Implementing
effective resources management to improve operational efficiency and boost core competency. |
| ● | Designing
new products and improving our existing products for our current and future customer base. |
Our
Challenges
We
face challenges, risks and uncertainties in realizing our business objectives and executing our strategies, including those relating
to our ability to:
| ● | Grow
our market share in the United States which is a large-scale market for us. |
| ● | Navigate
in the fast-changing regulatory environment. |
| ● | Maintain
and improve our relationship with leading cellular carriers and business partners. |
| ● | Recruit
and retain qualified personnel. |
| ● | Manage
our growth effectively and efficiently. |
| ● | Enhance
our product lines in a cost-effective manner. |
Our
Products
The
Company develops, markets, and sells a portfolio of rugged handheld Push-to-Talk over Cellular smartphone devices. These rugged business-to-business
handsets are focused on enterprise customers, first responders, construction workers, security guards, government agencies, utilities,
transportation and waste management, amusement parks, and mobile workers in multiple industries.
In
the second quarter of 2022, Siyata unveiled its next generation rugged device, the SD7. The SD7 is Siyata’s first mission critical
push-to-talk device and is also the first rugged handset that Siyata launched in North America and is expected to launch in Europe in
2023.
Our
second product category are purpose built in-vehicle communication devices. In the fourth quarter of 2021, Siyata launched the VK7, a
first-of-its-kind, patent-pending car kit with an integrated 10-watt speaker, a simple slide-in connection sleeve for the SD7, and an
external antenna input for connecting to a windshield or roof mount antenna that provides an in-vehicle experience for the user that
is similar to that from a traditional land mobile radio device. The VK7 has been uniquely designed to be used with the SD7, while connecting
directly into the vehicle’s power and can also connect to a Uniden® cellular amplifier for better cellular connectivity.
The VK7 can also be equipped with an external remote speaker microphone to ensure compliance with hands-free communication legislation.
The
Uniden® UV350 4G/LTE is a purpose built in-vehicle communication device designed specifically for professional vehicles
such as trucks, vans, buses, emergency service vehicles and other enterprise vehicles. This platform is designed to facilitate the replacement
of the current in-vehicle, multi-device set up with a single device that incorporates voice, PoC, data, fleet management solutions and
other Android® based professional applications. The UV350 also supports Band 14 for the First Responder Network Authority,
or FirstNet®, compatibility which is the U.S. First Responders’ 4G/LTE network with PoC capabilities that aims
to replace aging LMR systems currently in use.
The aforementioned portfolio of solutions offers
the benefits of PoC without any of the difficulties managing the current generation of rugged smart/feature phones and is ideally suited
as a perfect upgrade from Land Mobile Radios. Used for generations, LMR has a significant number of limitations, including network incompatibility,
limited coverage areas, and restricted functionality that leave a huge need for a unified network and platform. Siyata’s innovative
PoC product lines are helping to service the generational shift from LMR to PoC. While LMR licensing activity is near historical lows,
the PoC is growing at a rapid pace. According to Allied Market Research, the PoC market is expected to grow at an estimated 9.4% compound
annual growth rate to approximately $6.96 billion by 2027.
Approximately
30 million cellular boosters are sold globally every year. Siyata sells Uniden® cellular boosters and accessories for
enterprise, first responder and consumer customers with a focus on the North American markets. Cellular communication provides a robust,
secure environment not just for remote workers, in-home and in-vehicles, but also for restaurant patrons who wish to download menus;
for patients at pharmacies who need to verify identity and download prescriptions; for remote workers who require strong, clear cellular
signals; and for first responders where connectivity literally means the difference between life and death. The vehicle vertical in this
portfolio complements Siyata’s in-vehicle and rugged handheld smartphones as these sales can be bundled through the Company’s
existing sales channels.
Our
Customers and Channels
Qualifications
with North American voice and data carriers began with Bell Mobility in late in the fourth quarter of 2018; at AT&T as well as at
its first responder cellular network FirstNet®, in late in the second quarter of 2019; with Rogers Wireless and Verizon
Wireless in the fourth quarter of 2019; and internationally with Telstra in the fourth quarter of 2021. These are major milestones for
the Company following Siyata’s seven years of experience innovating in-vehicle cellular based technology, vehicle installations,
software integration with various Push-to-Talk solutions and intensive carrier certifications.
Siyata’s
customer base includes cellular network operators and their dealers, as well as commercial vehicle technology distributors for fleets
of all sizes in the U.S., Canada, Europe, Australia, the Middle East and other international markets.
The
North American Tier 1 cellular carriers that Siyata is working with have large scale distribution and sales channels. With an estimated
25 million commercial vehicles including 7.0 million first responder vehicles, the Company sees the North American market as
its largest opportunity with a total addressable market over $19 billion. We believe that these Tier 1 cellular carriers have a
keen interest in launching the UV350 as it allows for new SIM card activations in commercial vehicles and increased average revenue per
unit from existing customers with corporate and first responder fleets while targeting new customers with a unique, dedicated, multi-purpose
in-vehicle Internet of Things (“IoT”) smartphone.
In
addition, our rugged handsets will ultimately be targeted to approximately 47 million enterprise task and public sector workers across
North America including construction, transport and logistics, manufacturing, energy and utility, public safety and the federal government.
Recent
Developments
Effects
of the Covid-19 Pandemic. In 2020, the global outbreak of the COVID-19 virus spread to every country and to
every state in the United States. The World Health Organization designated COVID-19 as a pandemic, and numerous countries, including
the United States, declared national emergencies with respect to COVID-19. While vaccines have been approved and have been deployed
in the United States, Canada and Israel, the global impact of the outbreak continues to adversely affect many industries, and different
geographies continue to reflect the effects of public health restrictions in various ways. The timing and likelihood of achieving widespread
global vaccination remains uncertain, and these vaccines may be less effective against new variants, potentially leading to various health
restrictions such as isolation, limiting large congregations of people and even lock-downs that may continue to keep the global economy
from recovering to pre-pandemic levels for a prolonged period of time.
The
economic recovery in the United States and Canada following the initial impact of COVID-19 is underway but it has been gradual,
uneven and characterized by meaningful dispersion across sectors and regions with uncertainty regarding its ultimate length and trajectory.
Further, although many jurisdictions had relaxed or lifted restrictions in an effort to generate more economic activity, the risk of
continued COVID-19 outbreaks remains, and certain jurisdictions have re-imposed restrictions in an effort to mitigate risks to public
health, especially as more infectious variants of the virus emerge. Increasing infection rates and hospitalizations in certain geographies
and a potential resulting market downturn have resulted in the COVID-19 pandemic continuing to impact our business and our results of
operations, financial condition and cash flow.
We
have experienced an increase of sales of our cellular boosters as more people are working remotely as a result of the COVID-19 pandemic
but our overall sales during the pandemic have remained similar to its sales in 2020 during this time period with a shift towards increased
sales in North America in the first responder market. It is not possible for us to predict the duration or magnitude of the adverse results
of the outbreak and its effects on our business or ability to raise funds. We plan to address any ongoing concerns from the pandemic
by continuing to increase our sales in North America. In addition, our cellular distribution business should remain strong during this
time since more individuals will continue to work from home. In addition, we believe that our cellular booster business will remain strong
as more individuals continue to work from home, requiring improved cellular reception.
Russia-Ukraine
Conflict. U.S. and global markets are experiencing volatility and disruption following the escalation
of geopolitical tensions and Russia’s launch of a full-scale military invasion of Ukraine in February 2022. Although the length
and impact of the ongoing military conflict is highly unpredictable, the war in Ukraine has led to market disruptions, including significant
volatility in commodity prices, credit, and capital markets. Additionally, Russia’s prior annexation of Crimea, the full scale
military invasion in Ukraine and the recent illegal annexation of two separatist republics in the Donetsk and Luhansk regions of Ukraine
have led to sanctions and other penalties being levied by the United States, the European Union, and other countries against Russia,
Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic,
including the agreement by the U.S. and the EU to remove certain Russian financial institutions from the Society for Worldwide Interbank
Financial Telecommunication (SWIFT) payment system. Additional potential sanctions and penalties have also been proposed and/or threatened.
Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability
and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional equity or debt funding. Any
of the abovementioned factors could affect our business, prospects, financial condition, and operating results.
The
short- and long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time. The imposition of sanctions
and Russia’s withholding of its oil and gas as an economic weapon may have an adverse effect on the economic markets generally
and could impact our business, financial condition, and results of operations. The war has created disruptions in the supply chain for
certain of our products which, to date, has not had a substantive impact on our operations. None of our critical raw materials are sourced
from, and none of our finished products are manufactured in, the sanctioned regions. We have no operations or other projects in that
region.
Investment
by Lind Partners. On October 27, 2021, we entered into a securities purchase agreement relating to the
purchase and sale of a senior secured convertible note (the “Lind Partners Note”) for gross proceeds of $6,000,000 (the “Purchase
Agreement”) with Lind Global Partners II, LP, an investment fund managed by The Lind Partners, a New York based institutional
fund manager. Proceeds were used to repay and terminate existing convertible notes, as well as to pay certain fees and costs associated
with the transaction. The Purchase Agreement provides for, among other things, the issuance of both 2,142,857 warrants at a $4.00 per
share exercise price (with the exercise price adjustable based on certain events such as capital raises and options issued) and a USD$7,200,000
note with a 24-month maturity, 0% annual interest rate, and a fixed conversion price of $10.00 per share (“Conversion Price”)
of our common shares. We are required to make principal payments in 18 equal monthly installments commencing 180 days after funding (“Repayment”).
At our discretion, the Repayments can be made in: (i) cash; (ii) common shares (after common shares are registered) (the “Repayment
Shares”); or a combination of both. Repayment Shares will be priced at 90% of the average of the five lowest daily volume weighted
average prices (“VWAPs”) during the 20 trading days before the issuance of the common shares (the “Repayment Price”).
Further, the Lind Partners Note provides for a pricing floor of $2.00 per common share (the “Repayment Share Price Floor”)
such that Repayment Shares shall be priced at 90% of the average of the five lowest daily VWAPs during the 20 trading days before the
issuance of the common shares, subject to the Repayment Share Floor Price provided, however, that the Repayment Share Price Floor became
inapplicable after we obtained stockholder approval as required by the Nasdaq at our Annual General Meeting of shareholders. All of the
Lind warrants received as part of this financing that had not yet been exercised participated in the Warrant Exercise Agreement transaction
resulting in the issuance of 1,892,857 common shares.
As
of December 3, 2021, we incurred an event of default under the terms of the Lind Partners Note. Upon the occurrence and during the continuance
of an “Event of Default”, the holder may at any time at its option: (1) declare that Interest Upon Default Amount (15%) has
commenced and (2) exercise all other rights and remedies available to it under the transaction documents; provided, however, that upon
the occurrence of an Event of Default described above, the holder, in its sole and absolute discretion, may: (a) from time-to-time demand
that all or a portion of the outstanding principal amount be converted into common shares at the lower of (i) the then-current Conversion
Price and (ii) 80% of the average of the three lowest daily Volume Weighted Average Prices during the 20 Trading Days prior to the
delivery by the holder of the applicable notice of conversion or (b) exercise or otherwise enforce any one or more of the holder’s
rights, powers, privileges, remedies and interests under the Lind Partners Note, the transaction documents or applicable law. No course
of delay on the part of the holder shall operate as a waiver thereof or otherwise prejudice the rights of the holder. The event of default
was cured on December 7, 2021 when the Company’s market capitalization increased to an amount over $20,000,000.
If
the Company issues any Equity Interests, other than Exempted Securities (as defined), for aggregate proceeds to the Company of greater
than $10,000,000, excluding offering costs or other expenses, unless otherwise waived in writing by and at the discretion of Lind Partners,
the Company will direct 20% of such proceeds to reduce the principal balance of the Lind Note. If the Company issues any equity interests
issued, subject to certain exemptions, at an effective price per share that is less than the exercise price of the Lind Warrant then
in effect or without consideration, then the exercise price of the Lind Warrants shall be reduced to a price equal to the consideration
per share paid for such additional common shares. Based on this offering at $0.20 per share, the Lind Warrants were repriced to $0.20.
Prior to this offering, the exercise price of the Lind Warrants was $0.23 per share. If the Company issues any equity interests, subject
to certain exemptions, at an effective price per share that is less than the conversion price of the Lind Notes then in effect or without
consideration, then the conversion price of the Lind Notes shall be reduced to a price equal to the consideration per share paid for
such additional common shares. Due to the cashless exercise provision in the New Warrants, the exercise price of the Lind Warrants was
reduced to $0.00.
Another
Event of Default occurred on July 12, 2022 when the Company’s market capitalization fell below $20,000,000 for 10 consecutive days.
Upon the occurrence of an Event of Default as described above, the holder, in its sole and absolute discretion, may: (a) from time-to-time
demand that all or a portion of the outstanding principal amount be converted into common shares at the lower of: (i) the then-current
Conversion Price, and (ii) 80% of the average of the three lowest daily Volume Weighted Average Prices during the 20 Trading Days prior
to the delivery by the holder of the applicable notice of conversion, or (b) exercise or otherwise enforce any one or more of the holder’s
rights, powers, privileges, remedies and interests under the Lind Partners Note, the transaction documents or applicable law.
The
Lind Note was repaid in full on November 14, 2022. Of the total repayment of principal and interest, the Company paid Lind $8,137,702
in cash and issued Lind 13,112,255 common shares.
The
Securities Purchase Agreement pursuant to which Lind Partners acquired the Lind Notes prohibits the Company from entering into any Prohibited
Transactions without Lind Partner’s prior written consent, until thirty days after such time as the Lind Note has been repaid in
full and/or has been converted into common shares. That agreement also provides to Lind a 10 day right of first purchase if the Company
makes a public offer of its common shares. On October 9, 2022, Lind Partners entered into an agreement pursuant to which they waived
such provisions in consideration of participating in the Company’s offering that closed on October 12, 2022 and receiving without
payment therefor common share purchase warrants in the private placement to acquire up to 1,739,130 common shares at an exercise price
of $0.23 per common share (the “Lind Waiver Warrants”). Lind did not exercise any of said Lind Waiver Warrants and did not
participate in the Warrant Exercise Agreement.
Change
in Accountants. On May 24, 2022, we received a letter from Davidson & Company LLP (“Davidson”)
that stated that Davidson did not wish to be reappointed as the Company’s independent registered public accounting firm for the
fiscal year ending December 31, 2022. Davidson ceased to serve as the Company’s independent registered accounting firm as
of May 24, 2022. The Company requested that Davidson respond fully to the inquiries of Friedman, LLP, the Company’s successor independent
registered public accounting firm (see below), and Davidson agreed to cooperate with the Company and Friedman with respect to the transition.
During
the Company’s fiscal years ended December 31, 2021 and 2020 and the subsequent interim period through the filing of the Company’s
Report of Foreign Private Issuer on Form 6-K on May 31, 2022, there were no “disagreements” (as defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions to Item 304 of Regulation S-K) with Davidson on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction
of Davidson, would have caused Davidson to make reference to the subject matter of such disagreements in connection with its report.
Davidson’s
report on the consolidated financial statements for the Company’s fiscal years ended December 31, 2021 and 2020 did not contain
any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles,
except that Davidson’s report for the years ended December 31, 2021 and 2020 contained an explanatory paragraph indicating
that there was substantial doubt about the ability of the Company to continue as a going concern. In a separate correspondence, Davidson
identified five material weaknesses in our internal controls over financial reporting.
As
previously disclosed in Item 15(a) “Controls and Procedures” of the Company’s Annual Report on Form 20-F for the fiscal
year ended December 31, 2021, Davidson identified five material weaknesses that related to: (i) the insufficient review of
inventory balances for products that are slow-moving; (ii) the insufficient review of advances to suppliers on products that are no longer
selling; (iii) the insufficient controls surrounding off-site inventory tracking; (iv) the insufficient review whether product returns
relate to sales recorded in the fiscal year; and (v) the insufficient review of title transfer terms to determine the period in which
revenue should be recorded.
During
the Company’s fiscal years ended December 31, 2021 and 2020 and the subsequent interim period through May 31, 2022, there had been
no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K), except for certain material weaknesses in the
Company’s internal control over financial reporting.
On
May 24, 2022, management of the Company notified Friedman LLP (“Friedman”) that Friedman had been approved by the Company’s
audit committee (“Audit Committee”) of the board of directors and the board of directors as the Company’s independent
registered public accounting firm for the fiscal year ended December 31, 2022. Friedman LLP combined with Marcum LLP effective September 1,
2022 (“Marcum”). During the fiscal years ended December 31, 2021 and 2020 and the subsequent interim period through
May 31, 2022, the Company did not consult with Friedman or Marcum with respect to: (a) the application of accounting principles
to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the Company’s
financial statements, and no written report or oral advice was provided to the Company by Friedman or Marcum that was an important factor
considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue, or (b) any matter
that was subject to any disagreement, as defined in the United States Securities and Exchange Commission’s Regulation SK,
Item 304(a)(1)(iv) and the related instructions thereto, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of
Regulation S-K.
As of March 21, 2023, Marcum notified the Company that Marcum had resigned as the Company’s independent
certified public accounting firm effective as of March 21, 2023. Marcum’s resignation as the Company’s independent registered
public accounting firm was accepted by the Audit Committee of the Board of Directors of the Company as of March 21, 2023.
Marcum served as the Company’s independent
registered public accounting firm since May 24, 2022. Marcum did not audit the Company’s financial statements for any year and
did not perform a review of the Company’s interim financial statements for the nine months ended September 30, 2022 but did review
the Company’s interim financial statements for the six months ended June 30, 2022.
During the fiscal years ended December 31,
2022 and 2021 and the period from May 24, 2022 through March 21, 2023:
|
(i) |
there
were no disagreements between the Company and Marcum on any matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedures, which disagreements, if not resolved to Marcum’s satisfaction, would have caused Marcum to
make reference in connection with its opinion on the Company’s financial statements for the year ended December 31, 2022 to
the subject matter of the disagreement; and |
|
(ii) |
there
were no “reportable events,” as that term is described in Item 304(a)(1)(v) of Regulation S-K. |
Moreover, Marcum did not issue any report on the Company’s financial statements that contained an adverse
opinion or a disclaimer of opinion, or a qualified or modified opinion as to uncertainty, audit scope or accounting principle, or make
a determination whether the Company would continue as a going concern.
On March 21, 2023, the Company engaged Barzily & Co. (“Barzily”) as its new independent
registered public accountant for the fiscal year ending December 31, 2022. This decision was approved by the Audit Committee of the Board
in accordance with the authority of the Audit Committee as specified in its Charter. Barzily has applied to register with the Canadian
Public Accountability Board, which like the Public Company Accounting Oversight Board in the United States, oversees public accounting
firms that audit Canadian reporting issuers.
During the fiscal years ended December 31,
2022 and 2021 and through March 21, 2023, neither the Company nor anyone on its behalf consulted with Barzily regarding: (i) the application
of accounting principles to a specified transaction, completed or proposed, or the type of audit opinion that might be rendered on the
Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Barzily concluded
was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue;
or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related
instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K). The Company filed a Form 6-K with the SEC
announcing this change on March 27, 2023.
Recent Offerings. On October 10,
2022, we entered into a Securities Purchase Agreement with certain institutional investors named therein, pursuant to which we agreed
to issue and sell, in a registered direct offering: (i) 15,810,000 of the Company’s common shares at $0.23 per share, (ii) 1,590,000
pre-funded warrants, at $0.22 per share with an exercise price of $0.01 per share, (“Pre-Funded Warrants”) and, (iii) in
a private placement under Rule 506 of Regulation D, common share purchase warrants to acquire 17,400,000 common shares at purchase
price of $0.23 per common share. Each Purchase Warrant entitled the holder to purchase one common share for a period of five years from
the date of issuance (which was October 12, 2022) for an exercise price of $0.23 per share. The Securities Purchase Agreement contained
customary representations and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations
of the parties as well as our obligation to register the common shares underlying the Purchase Warrant by November 24, 2022. The Company
registered the 17,400,000 underlying common shares on a F-1 Registration Statement (SEC File No. 333-268536 on November 22, 2022, which
Registration Statement was declared effective by the SEC on December 15, 2022.
On
January 18, 2023, the Company entered into warrant exercise agreements with fourteen existing accredited investors to exercise certain
outstanding warrants to purchase up to an aggregate of 18,042,857 of the Company’s common shares. The gross proceeds to the Company
from the Exercise totaled approximately $3,608,571, prior to deducting warrant inducement agent fees and estimated offering expenses.
In consideration for the immediate exercise of the Existing Warrants for cash, the exercising holders received new unregistered warrants
to purchase up to an aggregate of 18,042,857 common shares (equal to 100% of the common shares issued in connection with the Exercise)
in a private placement pursuant to Section 4(a)(2) of the Securities Act. In connection with the Exercise, the Company also agreed to
reduce the exercise price of the Existing Warrants from $0.23 to $0.20 per share. The warrant exercise agreements and the New Warrants
each include a beneficial ownership limitation that prevents the warrant holder from owning more than 4.99% (which may be increased to
9.99% in accordance with the terms of the New Warrants) of the Company’s outstanding common shares at any time. The New Warrants
are exercisable immediately upon issuance at a cash exercise price of $0.20 per share and have a term of exercise equal to five years.
However, the holder of the New Warrant may also effect an “alternative cashless exercise” on or after the earlier of: (i)
one hundred and eighty (180) day anniversary of the initial exercise date (January 19, 2023) or (ii) the day after effectiveness of the
registration statement of which this prospectus is a part. In such event, the aggregate number of common shares issuable in such alternative
cashless exercise pursuant to any given Notice of Exercise electing to effect an alternative cashless exercise will equal the product
of (x) the aggregate number of common shares that would be issuable upon exercise of the New Warrant in accordance with the terms of
the New Warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 1.0, which would result in
an effective exercise price of $0.00 at such time. In connection with the Exercise, the Company reduced the exercise price of 2,989,130
of certain of its remaining unexercised common share purchase warrants from $0.23 per common share to an exercise price of $0.20 per
common share, which warrants may subsequently be repriced to $0.00 if the cashless exercise price of the New Warrants is triggered. However,
previously issued warrants: (i) for 1,805,585 common shares that currently trade on the Nasdaq Capital Market under the symbol “SYTAW”
that have an exercise price of $6.85 per share; (ii) for 1,294,500 common shares that were issued in a private transaction that have
an exercise price of $11.50 per share; and (iii) for 9,999,999 common shares that were issued in a private transaction that have an exercise
price of $2.30 per share are not required by their terms to be repriced.
Restatement
of Financial Statements. As part of the Company’s normal quarterly reporting process for the six months
ended June 30, 2022, management and the Audit Committee concluded that a material error was made related to the accounting for the
Warrants entered into on January 11, 2022 and therefore were misstated in the Company’s March 31, 2022 prior period financial
statements (“Prior Period Financial Statements”). There was no impact on any of the year end financial statements previously
filed.
On
August 15, 2022, management and the Audit Committee determined that the Company’s condensed consolidated unaudited interim
financial statements for the three month period ended March 31, 2022, filed with the SEC on Form 6-K on May 17, 2022 should
no longer be relied upon due to an error in the accounting treatment for the classification of the Company’s Warrants as equity
rather than as a derivative liability. In addition, investors were advised that they should no longer rely upon any communications relating
to these condensed consolidated unaudited interim financial statements.
The
Company determined that the Warrants should be accounted for as a derivative liability in accordance with International Accounting Standards
No. 32.6 and International Financial Reporting Standards (“IFRS”) No. 9 that deal with the measurement of financial assets
and financial liabilities. As a result of this change, the Warrants for 9,999,999 common shares have been classified as liabilities rather
than equity, the fair value of the Warrants decreased by $2.9 million, transaction costs increased by $0.96 million and the
fair value loss increased by $0.96 million for the three months ended March 31, 2022.
The
Company filed its restated condensed consolidated unaudited interim financial statements for the three month period ended March 31,
2022 as Exhibit 99.1 to its Form 6-K with the SEC on August 18, 2022 together with its restated Management’s Discussion
and Analysis of Results of Operations and Financial Condition for the three months ended March 31, 2022.
Going
Concern. Our auditor has included a “going concern” explanatory paragraph in its report on our
consolidated financial statements for the fiscal year ended December 31, 2021, expressing substantial doubt about our ability to
continue as an ongoing business for the next twelve months. Our consolidated financial statements do not include any adjustments
that may result from the outcome of this uncertainty. If we cannot secure the financing needed to continue as a viable business, our
shareholders may lose some or all of their investment in us.
Nasdaq
Delisting Letter. On September 1, 2022, we announced that the Company had received a notification
letter dated August 26, 2022 from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”),
notifying the Company that it is currently not in compliance with the minimum bid price requirement set forth under Nasdaq Listing
Rule 5550(a)(2) (the “Minimum Bid Price Rule”), resulting from the fact that the closing bid price of the
Company’s common shares was below $1.00 per share for a period of thirty consecutive business days.
Pursuant
to Nasdaq Listing Rule 5810(c)(3)(A), the Company had a compliance period of 180 calendar days, or until February 22, 2023 (the “Compliance
Period”), to regain compliance with the Nasdaq’s Minimum Bid Price Rule. The Company did not regain compliance with the minimum
$1.00 bid price per share requirement during the first 180-calendar-day Compliance Period and submitted a written request to the Nasdaq
to afford it an additional 180-day compliance period to cure the deficiency. On February 23, 2023, the Company received written notification
from the Listing Qualifications Department of Nasdaq granting the Company’s request for a 180-day extension to regain compliance
with Nasdaq’s Minimum Bid Price Rule. The Company now has until August 21, 2023 to meet this requirement. If at any time prior
to August 21, 2023, the bid price of the Company’s common shares closes at $1.00 per share or more for a minimum of 10 consecutive
business days, the Company will regain compliance with the Minimum Bid Price Rule. If the Company does not regain compliance with the
Minimum Bid Price Rule during the additional 180-day extension, Nasdaq will provide written notification to the Company that its common
shares will be delisted. At that time, the Company may appeal the relevant delisting determination to a hearings panel pursuant to the
procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if the Company does appeal the
delisting determination by Nasdaq to the hearings panel, that such appeal would be successful. Nor is there any assurance that the Company
would obtain a further extension of time to meet this requirement. The Company intends to actively monitor the closing bid price of its
common shares and may, if appropriate, consider implementing available options to regain compliance with the Minimum Bid Price Rule.
Inventory
Damage. On December 30, 2022, the Company was notified that there had occurred a significant infiltration of water into its warehouse
premises located at 1751 Richardson, Suite 2207, Montreal, Quebec, Canada, due to a leaking water pipe in the floor above (which floor
was not leased by Siyata). Upon inspection of the premises, the Company believed that there could be substantial damage to its warehoused
inventory of communication devices and signal boosters, the dollar value of which was not then determinable. The Company is continuing
to assess the potential damages, which will require a special inspection to determine the condition of the merchandise. Management believes
that any damage is covered by its current property insurance policy and intends to file a claim with its commercial property insurer
whose policy covers the selling price of damaged inventory. Because the Company stores similar inventory in another location, it does
not believe that this event will result in any interruption of its sales activities, and thus future revenues should not be impacted
by the water damage to the subject inventory. Only new, non-damaged, quality products will be shipped to Siyata’s customers. From
a balance sheet and income statement perspective, any damaged inventory will be considered impaired and written off (expensed) on the
Company’s income statement as an impairment due to the water damage, and the inventory values will be reduced on the balance sheet
by the amount of the damages in the fourth quarter of 2022. Any insurance proceeds receivable will be recorded as income in the quarter
(likely in 2023) when it is at least virtually certain that the proceeds to be paid by the Company’s insurer have been agreed by
both parties. Under international accounting standards, insurance proceeds are accounted for as “reimbursements” and would
be recognized as a separate asset (with related income) when the recovery is virtually certain.
Marketing
Milestones. On October 6, 2021, Siyata Mobile completed a major milestone and entered into a working
partnership with a global leading U.S. distributor (“Leading U.S. Distributor”) for its recently launched SD7 mission-critical
push-to-talk ruggedized handheld device. The companies signed an addendum to their Master Service Agreement appointing the Leading U.S. Distributor
as a non-exclusive SD7 marketing and distribution partner. The Leading U.S. Distributor, who is the leading global land mobile radio
vendor, will be marketing the SD7 both in North America as well as in international markets, selling both directly and in partnership
with us.
On
May 3, 2022, we announced that our SD7 push to talk over cellular device was certified and approved for use on FirstNet®,
the first high-speed, nationwide wireless broadband network dedicated to public safety.
On
June 7, 2022, we announced that Verizon Communications Inc., the largest mobile cellular telephone operator in the U.S. by
total retail connections, will fully integrate our rugged SD7 device into their network.
And
on June 27, 2022, we announced that the SD7 rugged device first became commercially available on and will be sold through the FirstNet®
network and to AT&T Inc.’s enterprise channels.
On
July 13, 2022, Siyata announced Logic Wireless Europe Ltd. a leading distributor of business-critical communication solutions across
the United Kingdom, Australia, New Zealand and the Pacific Islands, will introduce the Siyata SD7 rugged PoC device integrated with ChatterPTT.
On
July 14, 2022, Siyata announced it is launching a new product, a Siyata High Power User Equipment antenna, in conjunction with Assured
Wireless Corporation.
On
July 18, 2022, Siyata announced an agreement with Spain’s Wireless Zeta Telecomunicaciones, S.L. (“Azetti”) to
offer the Company’s SD7 rugged mission-critical push-to-talk device through Azetti’s existing enterprise sales channels.
On
July 26, 2022, Siyata announced its SD7 rugged mission-critical push-to-talk device is now available for customers who need the
integrated industry-leading PTT solutions from TASSTA, a global MCPTT software provider and end-to-end solution for critical communications.
On
July 28, 2022, Siyata announced the Company’s SD7 rugged push-to-talk over cellular devices were used to provide critical
emergency communications services for the World Athletics Championships “Oregon22” summer games.
On
August 30, 2022, Siyata announced that it is in the process of ramping up sales of its next-generation MCPTT SD7 device, as well
as the VK7 and Rapid Kit companion devices to numerous customers across multiple verticals.
On
September 8, 2022, Siyata announced that its SD7 rugged mission-critical push-to-talk device is now integrated with CrisisGo Inc.’s
Panic App, giving teachers instant access to first responders with a single push of a button.
On
September 22, 2022, Siyata announced that it has received a purchase order from a federal government contractor who will provide
Uniden® cellular booster kits and accessories to the U.S. Navy.
On
October 26, 2022, Siyata announced that its SD7+ ruggedized handset would soon be powered with Visual Labs Inc.’s innovative
body camera software, eliminating the need for users to carry two separate devices (a communication device and a body camera), creating
an ideal upgrade solution from legacy land mobile radio technologies or proprietary stand-alone body cameras.
On
October 31, 2022, Siyata announced that it had hired telecom industry veteran Dan Leech to join the Company’s sales team.
On
November 16, 2022, Siyata announced that Bell Mobility Inc., a leading wireless operator in Canada with more than 10 million
subscribers and a division of Bell Canada, will launch Siyata’s rugged SD7 device onto their network in the fourth quarter 2022.
On
December 6, 2022, Siyata Mobile announced that it has added DCS 2 Way Radio Ltd. doing business as RadioTrader, the UK’s and Ireland’s
premier two-way radio supplier, to distribute the SD7 ruggedized, mission critical PoC device and VK7 vehicle kit accessary in the United
Kingdom and Ireland.
On
January 9, 2023, the Company announced that T-Mobile US, Inc. is expected to launch Siyata’s rugged SD7 device onto T-Mobile’s
United States IoT network in the first quarter 2023. On January 18, 2023, the Company announced that it has received follow-on orders
from an existing customer, a leading Saudi Arabian cellular carrier, for its Uniden® UV350, a 4G/LTE all-in-one in-vehicle communication
device.
On
January 23, 2023, the Company announced that it has received an order for its next-generation mission critical push-to-talk solution,
which includes its SD7 device and related accessories, from a multi-billion-dollar, integrated resort and residential property development
located in The Bahamas.
On February 21, 2023, the Company announced
that it had received an order for $750,000 for its next-generation MCPTT (mission critical push-to-talk) solution to equip an independent
emergency management service provider with the Company’s SD7 devices and related accessories.
On February 23, 2023, the Company announced
that it had received written notification from the Listing Qualifications Department of Nasdaq granting the Company’s request for
a 180-day extension to regain compliance with Nasdaq’s minimum bid price requirement. The Company now has until August 21, 2023
to meet that requirement. See above “-Nasdaq Delisting Letter” and “Risk Factors - We could lose our listing
on the Nasdaq Capital Market if the closing bid price of our common shares does not return to above $1.00 for ten consecutive days
during the 180 days ending Augusty 21, 2023. The loss of the Nasdaq listing would make our common shares significantly less liquid
and would affect their value.”
On February 27, 2023, the Company announced
the launch of the Siyata T600 Cellular Booster for T-Mobile 5G enterprise customers.
On March 6, 2023, the Company announed that
it had successfully donated and deployed its mission critical push-to-talk solution for security and volunteer personnel at the 2023
Special Olympics New York Winter Games in Syracuse, New York.
On March 13, 2023, the Company announced that
will host an exhibitor’s booth at the International Wireless Communications Expo 2023 showcasing its new SD7 Mission Critical Push-To-Talk
solution, the SD7+ MCPTT solution with built in Body Camera and accessories from March 27-30 in Booth 2125, North Hall, at the Las Vegas
Convention Center.
On March 20, 2023, the Company announced the
successful certification and approval of its mission-critical PoC SD7 solution by Telstra, Australia’s largest wireless carrier
who is anticipated to begin sales of the SD7 to its enterprise and government customers in the second quarter of 2023.
On March 27, 2023, the Company announced that
it is collaborating with CrisisGo, Inc. (“CrisisGo”), the provider of the CrisisGo Panic app, an incident management platform
for first responders, to introduce next generation, cellular-based paging services for use by emergency response personnel.
Implications
of Our Being an “Emerging Growth Company”
As
a company with less than $7.5 million in revenue during our last fiscal year, we qualify as an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An “emerging growth company”
may take advantage of reduced reporting requirements that are otherwise applicable to larger public companies. In particular, as an emerging
growth company, we:
| ● | may
present only two years of audited financial statements and only two years of related
Management’s Discussion and Analysis of Financial Condition and Results of Operations,
or “MD&A;” |
| ● | are
not required to provide a detailed narrative disclosure discussing our compensation principles,
objectives and elements and analyzing how those elements fit with our principles and objectives,
which is commonly referred to as “compensation discussion and analysis;” |
| ● | are
not required to obtain an attestation and report from our auditors on our management’s
assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley
Act of 2002; |
| ● | are
not required to obtain a non-binding advisory vote from our shareholders on executive compensation
or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on
frequency” and “say-on-golden-parachute” votes); |
| ● | are
exempt from certain executive compensation disclosure provisions requiring a pay-for-performance
graph and chief executive officer pay ratio disclosure; |
| ● | are
eligible to claim longer phase-in periods for the adoption of new or revised financial accounting
standards under §107 of the JOBS Act; and |
| ● | will
not be required to conduct an evaluation of our internal control over financial reporting. |
Foreign
Private Issuer Status
We
are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). As such, we are exempt from certain provisions applicable to United States domestic public companies.
For example:
| ● | we
are not required to provide as many Exchange Act reports, or as frequently, as a domestic
public company; |
| ● | for
interim reporting, we are permitted to comply solely with our home country requirements,
which are less rigorous than the rules that apply to domestic public companies; |
| ● | we
are not required to provide the same level of disclosure on certain issues, such as executive
compensation; |
| ● | we
are exempt from provisions of Regulation FD aimed at preventing issuers from making
selective disclosures of material information; |
| ● | we
are not required to comply with the sections of the Exchange Act regulating the solicitation
of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;
and |
| ● | we
are not required to comply with Section 16 of the Exchange Act requiring insiders
to file public reports of their share ownership and trading activities and establishing insider
liability for profits realized from any “short-swing” trading transaction. |
RISK
FACTORS
An
investment in our securities involves a high degree of risk. Before investing in our common shares, you should carefully consider the
risk factors set forth below. If any of such risks or uncertainties occur, our business, financial condition, and operating results could
be materially and adversely affected. Additional risks and uncertainties not currently known to us or that we currently deem immaterial
also may materially and adversely affect our business operations. As a result, the trading price of our common shares could decline and
you could lose all or a part of your investment.
Risks
Related to Our Financial Position and Capital Requirements
We
have a history of operating losses and we may never achieve or maintain profitability.
We
have a limited operating history and a history of losses from operations. As of December 31, 2021, we had an accumulated deficit
of $62,519,412. As of September 30, 2022, we had an accumulated deficit of $71,230,357. Our existing cash and cash equivalents will
be insufficient to fully fund our business plan. Our ability to achieve profitability will depend on whether we can obtain additional
capital when we need it, complete the development of our technology, obtain required regulatory approvals and continue to develop arrangements
with channel partners. There can be no assurance that we will ever achieve profitability.
Our
independent registered public accounting firm, in its report on our financial statements for the year ended December 31, 2021, concurs
with management’s representation that raises substantial doubt about our ability to continue as a going concern.
We
may require additional capital to fund our business and support our growth, and our inability to generate and obtain such capital on
acceptable terms, or at all, could harm our business, operating results, financial condition and prospects.
We
intend to continue to make substantial investments to fund our business and support our growth. In addition, we may require additional
funds to respond to business challenges, including the need to develop new features or enhance our solutions, improve our operating infrastructure
or acquire or develop complementary businesses and technologies. As a result, in addition to the revenues we generate from our business,
we may need to engage in additional equity or debt financings to provide the funds required for these and other business endeavors. If
we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant
dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common
shares. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities
and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business
opportunities, including potential acquisitions. We may not be able to obtain such additional financing on terms favorable to us, if
at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue
to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely
impacted. In addition, our inability to generate or obtain the financial resources needed may require us to delay, scale back, or eliminate
some or all of our operations, which may have a significant adverse impact on our business, operating results and financial condition.
Our
independent registered public accountants have noted that we may not survive as a going concern.
Our
independent registered public accountants have included a “going concern” explanatory paragraph in its report on our consolidated
financial statements for the fiscal year ended December 31, 2021, concurring with management’s representation of expressing
substantial doubt about our ability to continue as an ongoing business for the next twelve months. Our consolidated financial statements
do not include any adjustments that may result from the outcome of this uncertainty. If we cannot secure the financing needed to continue
as a viable business, our shareholders may lose some or all of their investment in us.
Our
independent registered public accountants have identified material weaknesses in our internal controls over financial reporting in both
2020 and 2021. If we are unable to remediate these material weaknesses, we may not be able to report our financial results accurately,
prevent fraud or file our periodic reports as a public company in a timely manner.
In
connection with the audit of our consolidated financial statements for the years ended December 31, 2021 and 2020, our independent
registered public accountants identified several material weaknesses in our internal control over financial reporting. A “material
weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on
a timely basis.
In
2021, our independent registered public accountants identified the following material weaknesses in our internal control over financial
reporting. The first material weakness related to the insufficient review of inventory balances for products which are slow-moving. The
second material weakness related to the insufficient review of advances to suppliers on products that are no longer selling. The third
material weakness relates to insufficient controls surrounding off-site inventory tracking. The fourth material weakness related to insufficient
review whether product returns relate to sales recorded in the fiscal year. The fifth material weakness relates to insufficient review
of title transfer terms to determine the period in which revenue should be recorded.
For
the material weaknesses identified in our 2021 audit, we have taken steps to remediate these material weaknesses, and to further strengthen
our accounting staff and internal controls, as detailed below:
| ● | On
a quarterly basis, the Company now reviews inventory on hand for slow moving merchandise
and reviews inventory on hand regularly. For the year ended 2021, it was determined that
$4,659,648 (2020 — $1,571,649) of the inventory was impaired due to slow
movement. The accessories and spare parts related to these products amounted to $839,693
in 2021 (2020 — $316,000), which was also impaired. |
| ● | The
Company now reviews quantities on hand before approving purchase orders. |
| ● | As
of April 1, 2022, the Company signed a lease for their own exclusive warehouse space
so that outside contract warehouses will not be required. |
| ● | The
Company now reviews product returns to compare and ensure that they occur in the same fiscal
year. |
| ● | The
Company’s controller scrutinizes all revenues earned in the period to ensure compliance
with IFRS15. |
| ● | The
Company’s controller and CFO in Canada coordinates full scheduling of the year end
process to ensure timely close off of accounting periods. |
In
2020, our independent registered public accountants identified the following material weaknesses in our internal control over financial
reporting. The first material weakness related to the lack of formal review of the customers return rights for products prior to revenue
recognition. The second material weakness related to the review of receivables for the purpose of recording expected credit losses. The
third material weakness related to the review of inventory and spare parts for obsolete or slow-moving products. The fourth material
weakness related to the lack of formal review regarding appropriateness of classification of share issuance costs versus transaction
expenses through profit and loss. The fifth material weakness related to the classification of amounts held in trust separate from cash
and equivalents. The final material weakness related to the need to set a formal policy to enter all post-closing adjustments within
a set time period after year end, before providing records to the auditors.
For
the material weaknesses identified in our 2020 audit, we have taken steps to remediate these material weaknesses, and to further strengthen
our accounting staff and internal controls, as detailed below:
| ● | The
Company now requires a formal signed distribution agreement with major customers which define
the terms, including payment terms, return policy, repair policy and warranty policy. |
| ● | The
Company is reviewing the credit risk of each customer and a part of the sales function has
the formalized distribution agreements in place. |
| ● | On
a quarterly basis, management is reviewing inventory on hand for slow moving merchandise
and reviews inventory on hand regularly. |
| ● | The
Company has engaged outside consultants to review purchase price adjustment valuation, impairment
valuations and complex transactions to ensure compliance with IFRS standards. |
| ● | The
Company has improved its internal financial reporting communication process. The Company
has streamlined the communications between the Company’s Israel and Canadian-based
financial reporting groups. Furthermore, the Company’s Audit Committee adopted a policy
requiring the Company’s Canadian CFO to meet with the Company’s Israel-based
reporting group at least twice a year to ensure that the Israel reporting group’s policies
and procedures are consistent with those in Canada and that all the inventory is properly
tracked and procedures for intercompany transactions must follow our existing formal standard
procedures. |
| ● | The
Audit Committee will ensure that at the quarterly financial meetings, there will be an agenda
item to discuss policies and procedures in place in ensure internal control compliance with
respect to intercompany transactions and returns so that all documentation is clear, consistent
and that they are recorded in a timely manner and the pricing policy is consistent. |
To
date, we have only partially remediated the material weaknesses identified in 2021 and 2020 above. We cannot be certain that other material
weaknesses and control deficiencies will not be discovered in the future. If our efforts are not successful or other material weaknesses
or control deficiencies occur in the future, we may be unable to report our financial results accurately on a timely basis or help prevent
fraud, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting
and cause the market price of our common shares to decline.
We
began to take steps to remediate these material weaknesses and strengthen our internal control over financial reporting, including the
following:
| (i) | documenting
and formally assessing our accounting and financial reporting policies and procedures; and |
| (ii) | increasing
the use of third-party consultants in assessing significant accounting transactions and other
technical accounting and financial reporting issues, preparing accounting memoranda addressing
these issues and maintaining these memoranda in our corporate records. |
While
we believe that these efforts will improve our internal control over financial reporting, the implementation of these measures is ongoing
and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial
reporting cycles. We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to
maintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a
misstatement of our accounts or disclosures that would result in a material misstatement of our financial statements that would not be
prevented or detected on a timely basis.
Risks
Related to Our Business and Industry
We
rely on our channel partners to generate a substantial majority of our revenues. If these channel partners fail to perform or if we cannot
enter into agreements with channel partners on favorable terms, our operating results could be significantly harmed.
More
than 54% and 47% of our revenues for the year ended December 31, 2021 and for the nine months ended September 30, 2022,
respectively, were generated through sales by our channel partners, which are primarily wireless carriers who sell our devices through
their sales channels. To the extent our channel partners are unsuccessful in selling or do not promote our products, or we are unable
to obtain and retain a sufficient number of high-quality channel partners, our business and operating results could be significantly
harmed. Our channel partners are wireless carriers who have direct and indirect sales channels which we are leveraging to get to their
customers. Our wireless carrier channel partners currently include:
| ● | AT&T,
in the United States; |
| ● | FirstNet,
in the United States; |
| ● | Verizon,
in the United States; |
| ● | a
leading global LMR vendor and distributor in North America and international markets. |
While
these arrangements are typically long term, they generally do not contain any firm purchase volume commitments. As a result, our channel
partners are not contractually obligated to purchase from us any minimum number of products. We are generally required to satisfy any
and all purchase orders delivered to us within specified delivery windows, with limited exceptions (such as orders significantly in excess
of forecasts). If we are unable to efficiently manage our supply and satisfy purchase orders on a timely basis to our channel partners,
we may be in breach of our sales arrangements and lose potential sales. If a technical issue with any of our covered products exceeds
certain present failure thresholds for the relevant performance standard or standards, the channel partner typically has the right to
cease selling the product, cancel open purchase orders and levy certain monetary penalties. If our products suffer technical issues or
failures following sales to our channel partners, we may be subject to significant monetary penalties and our channel partners may cease
making purchase orders, which would significantly harm our business and results of operations. In addition, our channel partners retain
sole discretion in which of their stocked products to offer their customers. While we may offer limited customer incentives, we generally
have limited to no control over which products our channel partners decide to offer or promote, which directly impacts the number of
products that our partners will purchase from us.
In
addition, our channel partners may be unsuccessful in marketing, selling and supporting our solutions. They may also market, sell and
support solutions that are somewhat competitive with ours, and may devote more resources to the marketing, sales and support of such
products. They may have incentives to promote our competitors’ products in lieu of our products, particularly for our bigger competitors
with larger volumes of orders, more diverse product offerings and a longer relationship with our generally large-scale channel partners.
As a result, our channel partners may stop selling our products completely. While we employ a small direct sales force, our channel partners
have significantly larger sales teams who are not contractually obligated to promote any of our devices and often have multiple competing
devices in stock to offer their customers. In addition, downstream sales by our channel partners often succeed due to attractive device
prices and monthly rate plans, which we do not control. In certain cases, we may promote our own devices through customer incentives,
however, there can be no assurance that any such incentives would contribute to increased purchases of our products. Further, given the
impact of attractive pricing on ultimate sales, we generally must offer increased promotional funding or price reductions for our more
expensive products. This promotional funding or price reductions operate to reduce our margins and significantly impact our profitability.
New
sales channel partners may take several months or more to achieve significant sales. Our channel partner sales structure could subject
us to lawsuits, potential liability and reputational harm if, for example, any of our channel partners misrepresents the functionality
of our products or services to their customers, or violate laws or our corporate policies.
If
we fail to effectively manage our existing or future sales channel partners, our channel partners fail to promote our products effectively,
we are unable to meet our obligations under our sales arrangements or future agreements that we may enter into with wireless carrier
customers have terms that are more favorable to the customer, our business and results of operations would be harmed.
We
are materially dependent on the adoption of our solutions by both the industrial enterprise and public sector markets, and if end customers
in those markets do not purchase our solutions, our revenues will be adversely impacted, and we may not be able to expand into other
markets.
Our
revenues have been primarily in the industrial enterprise market, and we are materially dependent on the adoption of our solutions by
both the industrial enterprise and public sector markets. End customers in the public sector market may remain, for reasons outside our
control, tied to Land Mobile Radio solutions or other competitive alternatives to our devices. Sales of our products to these buyers
may also be delayed or limited by these competitive conditions. If our products are not widely accepted by buyers in those markets, we
may not be able to expand sales of our products into new markets, and our business, results of operations and financial condition may
be adversely impacted.
We
participate in a competitive industry, which may become more competitive. Competitors with greater resources and significant experience
in high-volume product manufacturing may be able to respond more quickly and cost-effectively than we can to new or emerging technologies
and changes in customer requirements.
We
face significant competition in developing and selling our solutions. Our primary competitors in the non-rugged mobile device market
include LG Corporation, Apple Inc. and Samsung Electronics Co. Ltd. Our primary competitors in the rugged mobile device market include
Sonim Technologies Inc., Bullitt Mobile Ltd., and Kyocera Corporation. We also face competition from large system integrators and manufacturers
of private and public wireless network equipment and devices. Competitors in this space include Harris Corporation, JVC KENWOOD Corporation,
a leading LMR vendor, or MSI, and Tait International Limited. Within the Cellular Booster category, we have several direct competitors,
including Wilson Electronics, LLC, Nextivity, Inc. and SureCall Company.
We
cannot assure you that we will be able to compete successfully against current or future competitors. Increased competition in mobile
computing platforms, data capture products, or related accessories and software developments may result in price reductions, lower gross
profit margins, and loss of market share, and could require increased spending on research and development, sales and marketing, and
customer support. Some competitors may make strategic acquisitions or establish cooperative relationships with suppliers or companies
that produce complementary products, which may create additional pressures on our competitive position in the marketplace.
Most
of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial,
technical, sales, marketing and other resources and experience than we do. In addition, because of the higher volume of components that
many of our competitors purchase from their suppliers, they are able to keep their supply costs relatively low and, as a result, may
be able to recognize higher margins on their product sales than we do. Many of our competitors may also have existing relationships with
the channel partners who we use to sell our products, or with our potential customers. This competition may result in reduced prices,
reduced margins and longer sales cycles for our products. Our competitors may also be able to more quickly and cost-effectively respond
to new or emerging technologies and changes in customer requirements. The combination of brand strength, extensive distribution channels
and financial resources of the larger vendors could cause us to lose market share and could reduce our margins on our products. If any
of our larger competitors were to commit greater technical, sales, marketing and other resources to our markets, our ability to compete
would be adversely impacted. If we are unable to successfully compete with our competitors, our sales would suffer and as a result our
financial condition will be adversely impacted.
Defects
in our products could reduce demand for our products and result in a loss of sales, delay in market acceptance and injury to our reputation,
which would adversely impact our business.
Complex
software, as well as multiple components, displays, plastics and assemblies used in our products may contain undetected defects that
are subsequently discovered at any point in the life of the product. Defects in our products may result in a loss of sales, product malfunction,
delay in market acceptance and potential injuries to our customers which can harm our reputation and result in increased warranty costs.
Additionally,
our software may contain undetected errors, defects or bugs. Although we have not suffered significant harm from any errors, defects
or bugs to date, we may discover significant errors, defects, or bugs in the future that we may not be able to correct or correct in
a timely manner. It is possible that errors, defects or bugs will be found in our existing or future software and/or hardware products
and related services with the potential for delays in, or loss of market acceptance of, our products and services, diversion of our resources,
injury to our reputation, increased service and warranty expenses, and payment of damages.
Further,
errors, defects or bugs in our solutions could be exploited by hackers or could otherwise result in an actual or perceived breach of
our information systems. Alleviating any of these problems could require significant expense and could cause interruptions, delays or
cessation of our product licensing, which would reduce demand for our products and result in a loss of sales, delay in market acceptance
and injure our reputation and could adversely impact our business, results of operations and financial condition.
If
our business does not grow as we expect, or if we fail to manage our growth effectively, our operating results and business would suffer.
Our
ability to successfully grow our business depends on a number of factors including our ability to:
| ● | accelerate
the adoption of our solutions by new end customers; |
| ● | expand
into new vertical markets; |
| ● | develop
and deliver new products and services; |
| ● | increase
awareness of the benefits that our solutions offer; and |
| ● | expand
our domestic and international footprint. |
As
usage of our solutions grows, we will need to continue to make investments to develop and implement new or updated solutions, software,
technologies, security features and cloud-based infrastructure operations. In addition, we will need to appropriately scale our internal
business systems and our services organization, including the suppliers of our products and customer support services, to serve our growing
customer base. Any failure of, or delay in, these efforts could impair the performance of our solutions and reduce customer satisfaction.
Further,
our growth could increase quickly and place a strain on our managerial, operational, financial and other resources, and our future operating
results depend to a large extent on our ability to successfully manage our anticipated expansion and growth. To manage our growth successfully,
we will need to continue to invest in sales and marketing, research and development, and general and administrative functions and other
areas. We are likely to recognize the costs associated with these investments earlier than receiving some of the anticipated benefits,
and the return on these investments may be lower, or may develop more slowly, than we expect, which could adversely impact our operating
results.
If
we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new solutions
or upgrades to our existing solutions, satisfy customer requirements, maintain the quality and security of our solutions or execute on
our business plan, any of which could harm our business, operating results and financial condition.
We
may not be able to continue to develop solutions to address user needs effectively in an industry characterized by ongoing change and
rapid technological advances.
To
be successful, we must adapt to rapidly changing technological and application needs by continually improving our products, as well as
introducing new products and services, to address user demands.
Our
industry is characterized by:
| ● | evolving
industry standards; |
| ● | frequent
new product and service introductions; |
| ● | increasing
demand for customized product and software solutions; |
| ● | rapid
competitive developments; |
| ● | changing
customer demands; and |
| ● | evolving
distribution channels. |
Future
success will depend on our ability to effectively and economically adapt in this evolving environment. We could incur substantial costs
if we must modify our business to adapt to these changes, and may even be unable to adapt to these changes.
The
markets for our devices and related accessories may not develop as quickly as we expect, or may not develop at all. Our dependence on
our cellular carrier channel partners and their success in promoting Push to Talk over Cellular to their client base is key for the success
of the business.
Our
future success is substantially dependent upon continued adoption of devices and related accessories in the industrial enterprise and
public sector markets, including the transition from LMR to Push to Talk over Cellular and LTE networks. These market developments and
transitions may take longer than we expect or may not occur at all, and may not be as widespread as we expect. If the market does not
develop as we expect, our business, operating results and financial condition would be significantly harmed.
Our
future success is dependent on our ability to create independent brand awareness for our company and products with end customers, and
our inability to achieve such brand awareness could limit our prospects.
We
depend on wireless carriers to promote and distribute our products. While we intend to ramp up direct marketing and end-customer brand
awareness initiatives in the future, our sales and marketing efforts have historically been predominantly focused on channel partners.
To increase end-customer brand awareness, we intend to develop sales tools for key verticals within our target markets, increase usage
of social media and expand product training efforts, among other things. As a result, we expect our sales and marketing expenses to increase
in the future, primarily from increased sales personnel expenses, which will require us to cost-efficiently ramp up our sales and marketing
capabilities and effectively target end customers. However, there can be no assurance that we will successfully increase our brand awareness
or do so in a cost-efficient manner while maintaining market share within our existing sales channels. Our failure to establish stand-alone
brand awareness with end customers of our products will leave us vulnerable to the marketing and selling success of others, including
our channel partners, and these developments could have an adverse impact on our prospects. If we are unable to significantly increase
the awareness of our brand and solutions with end customers in a cost-efficient manner, we will remain significantly dependent on our
channel partners for sales of our products, and our business, financial condition and results of operations could be adversely impacted.
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 a limited history and experience in contracting with third party manufacturers in Asia for high-volume commercial production of
our devices. Because of this limited experience, we face challenges in predicting our business and evaluating its prospects, which may
result in breakdowns of our ability to timely supply our devices to our customers. s. If overall demand for our devices increases in
the future, we will need to expand our third party manufacturing capacity in a cost-efficient manner. Failing to meet customer demand
due to our failure to successfully address these risks and challenges could adversely impact our reputation and future sales, which would
significantly harm our business, results of operations and financial condition.
We
face risks related to novel Coronavirus (COVID-19) which could significantly disrupt our research and development, operations, sales,
supply chain and financial results.
Our
business will be adversely impacted by the effects of the novel Coronavirus (COVID-19). In addition to global macroeconomic effects,
the novel Coronavirus (COVID-19) outbreak and any other related adverse public health developments will cause disruption to our operations,
research and development, and sales activities. Our third-party manufacturers, third-party distributors, and our customers have been
and will be disrupted by worker absenteeism, quarantines and restrictions on employees’ ability to work, office and factory closures,
disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions. Depending on
the magnitude of such effects on our activities or the operations of our third-party manufacturers and third-party distributors, the
supply of our products will be delayed, which could adversely affect our business, operations and customer relationships. In addition,
the Coronavirus (COVID-19) or other disease outbreak will in the short-run and may over the longer term adversely affect the economies
and financial markets of many countries, resulting in an economic downturn that will affect demand for our products and impact our operating
results. There can be no assurance that any decrease in sales resulting from the Coronavirus (COVID-19) will be offset by increased sales
in subsequent periods. Although the magnitude of the impact of the Coronavirus (COVID-19) outbreak on our business and operations remains
uncertain, the continued spread of the Coronavirus (COVID-19) or the occurrence of other epidemics and the imposition of related public
health measures and travel and business restrictions will adversely impact our business, financial condition, operating results and cash
flows. In addition, we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations,
or other movement and restrictions on the ability of our employees to perform their jobs that may impact our ability to develop and design
our products in a timely manner or meet required milestones or customer commitments.
Our
business has not experienced any material impact from supply chain disruptions brought about by the COVID-19 pandemic, however there
is no certainty that this will continue into the future. Management is carefully monitoring the situation and is working with its partners,
suppliers and manufacturers to ensure minimal impact on its business.
We
rely on industry data and projections which may prove to be inaccurate.
We
obtained statistical data, market data and other industry data and forecasts used in this prospectus from market research, publicly available
information and industry publications. These industry data, including the vehicle communications industry, include projections that are
based on a number of assumptions which have been derived from industry and government sources which we believe to be reasonable. The
vehicle communications industry may not grow at the rate projected by industry data, or at all. The failure of the industry to grow as
anticipated is likely to have a material adverse effect on our business and the market price of our common shares. In addition, the rapidly
changing nature of the vehicle communications industry subjects any projections or estimates relating to the growth prospects or future
condition of our industries to significant uncertainties. Furthermore, if any one or more of the assumptions underlying the industry
data turns out to be incorrect, actual results may, and are likely to, differ from the projections based on these assumptions. While
we believe that the statistical data, industry data and forecasts and market research are reliable, we have not independently verified
the data.
Risks
Related to our Reliance on Third Parties
As
we work with multiple vendors for our components, if we fail to adequately forecast demand for our inventory and supply needs, we could
incur additional costs or experience manufacturing delays, which could reduce our gross margin or cause us to delay or even lose sales.
Because
our production volumes are based on a forecast of channel partner demand rather than purchase commitments from our major customers, there
is a risk that our forecasts could be inaccurate and that we will be unable to sell our products at the volumes and prices we expect,
which may result in excess inventory. We provide, and will continue to provide, forecasts of our demand to our third-party suppliers
prior to the scheduled delivery of products to our channel partners. If we overestimate our requirements, our contract manufacturers
may have excess component inventory, which could increase our costs. If we underestimate our requirements, our contract manufacturers
may have inadequate component inventory, which could interrupt the manufacturing of our products and result in delays in shipments and
revenues or even lost sales, or could incur unplanned overtime costs to meet our requirements, resulting in significant cost increases.
For example, certain materials and components used to manufacture our products may reach end of life during any of our product’s
life cycles, following which suppliers no longer provide such expired materials and components. This would require us to either source
and qualify an alternative component, which could require a re-certification of the device by the wireless carriers and/or regulatory
agencies, or forecast product demand for a final purchase of such materials and components that may reach end of life to ensure that
we have sufficient product inventory through a product’s life cycle. If we overestimate forecasted demand, we would hold excess
end-of-life materials and components resulting in increased costs. If we underestimate forecasted demand, we could experience delays
in shipments and loss of revenues.
In
addition, if we underestimate our requirements and the applicable supplier becomes insolvent or is no longer able to timely supply our
needs in a cost-efficient manner or at all, we may be required to acquire components, which may need to be customized for our products,
from alternative suppliers, including at significantly higher costs. If we cannot source alternative suppliers and/or alternative components,
we may suffer delays in shipments or lost sales. Similarly, credit constraints at our suppliers could require us to accelerate payment
of our accounts payable, impacting our cash flow. Further, lead times for materials and components that we order vary significantly and
depend on factors such as the specific supplier, contract terms, customization needed for any particular component and demand for each
component at a given time. Any such failure to accurately forecast demand and manufacturing and supply requirements, and any need to
obtain alternative supply sources, could materially harm our business, results of operations and financial condition.
Our
dependence on third-party suppliers for key components of our products could delay shipment of our products and reduce our sales.
We
depend on certain suppliers for the delivery of components used in the assembly of our products. Our reliance on third-party suppliers
creates risks related to our potential inability to obtain an adequate supply of components and reduced control over pricing and timing
of delivery of components. In particular, we have little to no control over the prices at which our suppliers sell materials and components
to us. Certain supplies of our components are available only from a single source or limited sources and we may not be able to diversify
sources in a timely manner. We have experienced shortages in the past that have negatively impacted our results of operations and may
experience such shortages in the future.
We
also do not have long-term supply agreements with any of our suppliers. Our current contracts with certain suppliers may be cancelled
or not extended by such suppliers and, therefore, do not afford us with sufficient protection against a reduction or interruption in
supplies. Moreover, in the event any of these suppliers breach their contracts with us, our legal remedies associated with such a breach
may be insufficient to compensate us for any damages we may suffer.
Any
interruption of supply for any material components of our products, or inability to obtain required components from our third-party suppliers,
could significantly delay the production and shipment of our products and harm our revenues, profitability and financial condition.
Because
we rely on a small number of channel partners/customers for a large portion of our revenue, the loss of any of these customers would
have a material adverse effect on our operating results and cash flows.
For
our fiscal year ended December 31, 2021 and for the nine months ended September 30, 2022, we derived 46% and 47% respectively,
of our revenue from five customers/channel partners. Any termination of a business relationship with, or a significant sustained reduction
in business from, one or more of these channel partners/customers could have a material adverse effect on our operating results and cash
flows.
If
dedicated public safety LTE networks are not deployed at the rate we anticipate or at all, demand for our solutions may not grow as expected.
A
key part of our strategy is to further expand the use of our solutions over dedicated LTE networks in the public safety market. If the
deployment of dedicated LTE networks is delayed or such networks are not adopted at the rate we anticipate, demand for our solutions
may not develop as we anticipate, which would have a negative effect on our revenues.
The
application development ecosystem supporting our devices and related accessories is new and evolving.
The
application development ecosystem supporting our devices and related accessories is new and evolving. Specifically, the number of application
developers in the ecosystem supporting our devices and accessories is small. If the market or the application development ecosystem does
not develop, timely or at all, demand for our products may be limited, and our business and results of operations will be significantly
harmed.
Failure
of our suppliers, subcontractors, distributors, resellers, and representatives to use acceptable legal or ethical business practices,
or to fail for any other reason, could negatively impact our business.
We
do not control the labor and other business practices of our suppliers, subcontractors, distributors, resellers and third-party sales
representatives (“TPSRs”), and cannot provide assurance that they will operate in compliance with applicable rules, and regulations
regarding working conditions, employment practices, environmental compliance, anti-corruption, and trademark a copyright and patent licensing.
If one of our suppliers, subcontractors, distributors, resellers, or TPSRs violates labor or other laws or implements labor or other
business practices that are regarded as unethical or illegal, the shipment of finished products to us could be interrupted, orders could
be cancelled, relationships could be terminated, and our reputation could be damaged. If one of our suppliers or subcontractors fails
to procure the necessary license rights to trademarks, copyrights or patents, legal action could be taken against us that could impact
the saleability of our products and expose us to financial obligations to a third party. Any of these events could have a negative impact
on our sales and results of operations.
Moreover,
any failure of our suppliers, subcontractors, distributors, resellers and TPSRs, for any reason, including bankruptcy or other business
disruption, could disrupt our supply or distribution efforts and could have a negative impact on our sales and results of operations.
Our
products are subject to risks associated with sourcing and manufacturing.
We
do not own or operate any of the manufacturing facilities for our products and rely on a concentrated number of independent suppliers
to manufacture all of the products we sell. For our business to be successful, our suppliers must provide us with quality products in
substantial quantities, in compliance with regulatory requirements, at acceptable costs and on a timely basis. Our ability to obtain
a sufficient selection or volume of merchandise on a timely basis at competitive prices could suffer as a result of any deterioration
or change in our supplier relationships or events that adversely affect our suppliers.
There
can be no assurance we will be able to detect, prevent or fix all defects that may affect our products manufactured by our suppliers.
Failure to detect, prevent or fix defects, or the occurrence of real or perceived quality or safety problems or material defects in our
current and future products, could result in a variety of consequences, including a greater number of product returns than expected from
customers and our wholesale partners, litigation, product recalls and credit, warranty or other claims, among others, which could harm
our brand, results of operations and financial condition. Such problems could hurt our brand image, which is critical to maintaining
and expanding our business. Any negative publicity or lawsuits filed against us related to the perceived quality and safety of our products
could harm our brand and decrease demand for our products.
If
one or more of our significant suppliers were to sever their relationship with us or significantly alter the terms of our relationship,
including due to changes in applicable trade policies, we may not be able to obtain replacement products in a timely manner, which could
have a material adverse effect on our business, results of operations and financial condition.
In
addition, if any of our primary suppliers fail to make timely shipments, do not meet our quality standards or otherwise fail to deliver
us product in accordance with our plans, there could be a material adverse effect on our results of operations.
Our
contractors and suppliers buy raw materials and are subject to wage rates that are oftentimes regulated by the governments of the countries
in which our products are manufactured. The raw materials used to manufacture our products are subject to availability constraints and
price volatility. There could be a significant disruption in the supply of raw materials from current sources or, in the event of a disruption,
our suppliers might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price or at all.
Our business is dependent upon the ability of our unaffiliated suppliers to locate, train, employ and retain adequate personnel. Our
unaffiliated suppliers have experienced, and may continue to experience in the future, unexpected increases in work wages, whether government-mandated
or otherwise. Our suppliers may increase their pricing if their raw materials become more expensive. Our suppliers may pass the increase
in sourcing costs to us through price increases, thereby impacting our margins. Material changes in the pricing practices of our suppliers
could negatively impact our profitability.
In
addition, we cannot be certain that our unaffiliated suppliers will be able to fill our orders in a timely manner. If we experience significant
increases in demand, or reductions in the availability of materials, or need to replace an existing supplier, there can be no assurance
additional supplies of raw materials or additional manufacturing capacity will be available when required on terms acceptable to us,
or at all, or that any supplier would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are
able to expand existing or find new manufacturing or sources of materials, we may encounter delays in production and added costs as a
result of the time it takes to train suppliers in our methods, products, quality control standards and labor, health and safety standards.
Any delays, interruption or increased costs in labor or wages, or the supply of materials or manufacture of our products, could have
an adverse effect on our ability to meet wholesale customer and consumer demand for our products and result in lower revenue and net
income both in the short and long term.
Events
that adversely impact our suppliers could impair our ability to obtain adequate and timely supplies. Such events include, among others,
difficulties or problems associated with our suppliers’ business, the financial instability and labor problems of suppliers, merchandise
quality and safety issues, natural or man-made disasters, inclement weather conditions, war, acts of terrorism and other political instability,
economic conditions, pandemics, transportation delays and shipment issues. Our suppliers may be forced to reduce their production, shut
down their operations or file for bankruptcy. Our suppliers may consolidate, increasing their market power. The occurrence of one or
more of these events could impact our ability to get products to our customers, result in disruptions to our operations, increase our
costs and decrease our profitability.
Global
sourcing and foreign trade involve numerous factors and uncertainties beyond our control, including:
| ● | increased
shipping costs; |
| ● | the
imposition of additional import or trade restrictions; |
| ● | legal
or economic restrictions on overseas suppliers’ ability to produce and deliver products; |
| ● | increased
custom duties and tariffs; |
| ● | unforeseen
delays in customs clearance of goods; |
| ● | more
restrictive quotas; |
| ● | loss
of a most favored nation trading status; |
| ● | currency
exchange rates; |
| ● | port
of entry issues; and |
| ● | foreign
government regulations, political instability and economic uncertainties in the countries
from which we or our suppliers source our products. |
Our
sourcing operations may also be hurt by health concerns regarding the outbreak of viruses, widespread illness, infectious diseases, contagions
and the occurrence of unforeseen epidemics (including the outbreak of the Coronavirus and its potential impact on our financial results)
in countries in which our merchandise is produced. Moreover, negative press or reports about internationally manufactured products may
sway public opinion, and thus customer confidence, away from our products. Furthermore, changes in U.S. trade policies, including
new restrictions, tariffs or other changes could lead to additional costs, delays in shipments, embargos and other uncertainties that
could negatively impact our relationships with our international suppliers and materially adversely affect our business. These and other
issues affecting our international suppliers or internationally manufactured merchandise could have a material adverse effect on our
business, results of operations and financial condition.
In
addition, some of our suppliers may not have the capacity to supply us with sufficient merchandise to keep pace with our growth plans,
especially if we need significantly greater amounts of inventory. In such cases, our ability to pursue our growth strategy will depend
in part upon our ability to develop new supplier relationships.
The
nature of our business may result in undesirable press coverage or other negative publicity, which would adversely impact our brand identity,
future sales and results of operations.
Our
solutions are used to assist law enforcement and other public safety personnel in situations involving public safety. The incidents in
which our solutions are deployed may involve injury, loss of life and other negative outcomes, and such events are likely to receive
negative publicity. Such negative publicity could have an adverse impact on new sales or renewals or expansions of coverage areas by
existing customers, which would adversely impact our financial results and business.
Changes
in the availability of federal funding to support local public safety or other public sector efforts could impact our opportunities with
public sector end customers.
Many
of our public sector end customers rely to some extent on funds from the U.S. federal government in order to purchase and pay for
our solutions. Any reduction in federal funding for local public safety or other public sector efforts could result in our end customers
having less access to funds required to continue, renew, expand or pay for our solutions. For example, any future U.S. government
shutdowns, could result in delayed public safety spending or re-allocation of funding into other areas of public safety. If federal funding
is reduced or eliminated and our end customers cannot find alternative sources of funding to purchase our solutions, our business will
be harmed.
Economic
uncertainties or downturns, or political changes, could limit the availability of funds available to our customers and potential customers,
which could significantly adversely impact our business.
Current
or future economic uncertainties or downturns could adversely impact our business and operating results. Negative conditions in the general
economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial
and credit market fluctuations, political deadlock, natural catastrophes, warfare and terrorist attacks in North America, Europe, the
Asia Pacific region or elsewhere, could cause a decrease in funds available to our customers and potential customers and negatively affect
the growth rate of our business.
These
economic conditions may make it extremely difficult for our customers and us to forecast and plan future budgetary decisions or business
activities accurately, and they could cause our customers to re-evaluate their decisions to purchase our solutions, which could delay
and lengthen our sales cycles or result in cancellations of planned purchases. Furthermore, during challenging economic times or as a
result of political changes, our customers may tighten their budgets and face constraints in gaining timely access to sufficient funding
or other credit, which could result in an impairment of their ability to make timely payments to us. In turn, we may be required to increase
our allowance for doubtful accounts, which would adversely impact our financial results.
We
cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular
industry, or the impact of political changes. If the economic conditions of the general economy or industries in which we operate worsen
from present levels, or if recent political changes result in less funding being available to purchase our solutions, our business, operating
results and financial condition could be adversely impacted.
Natural
or man-made disasters and other similar events may significantly disrupt our business, and negatively impact our operating results and
financial condition.
Any
of our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, tornadoes, hurricanes,
wildfires, floods, nuclear disasters, acts of terrorism or other criminal activities, infectious disease outbreaks, and power outages,
which may render it difficult or impossible for us to operate our business for some period of time. Our facilities would likely be costly
to repair or replace, and any such efforts would likely require substantial time. Any disruptions in our operations could negatively
impact our business and operating results, and harm our reputation. In addition, we may not carry business insurance or may not carry
sufficient business insurance to compensate for losses that may occur. Any such losses or damages could have a significant adverse impact
on our business, operating results and financial condition. In addition, the facilities of significant vendors may be harmed or rendered
inoperable by such natural or man-made disasters, which may cause disruptions, difficulties or significant adverse impact on our business.
We
are exposed to risks associated with strategic acquisitions and investments.
We
may consider strategic acquisitions of companies with complementary technologies or intellectual property in the future. Acquisitions
hold special challenges in terms of successful integration of technologies, products, services and employees. We may not realize the
anticipated benefits of these acquisitions or the benefits of any other acquisitions we have completed or may complete in the future,
and we may not be able to incorporate any acquired services, products or technologies with our existing operations, or integrate personnel
from the acquired businesses, in which case our business could be harmed.
Acquisitions
and other strategic decisions involve numerous risks, including:
| ● | problems
integrating and divesting the operations, technologies, personnel, services or products over
geographically disparate locations; |
| ● | unanticipated
costs, taxes, litigation and other contingent liabilities; |
| ● | continued
liability for discontinued businesses and pre-closing activities of divested businesses or
certain post-closing liabilities which we may agree to assume as part of the transaction
in which a particular business is divested; |
| ● | adverse
impacts on existing business relationships with suppliers and customers; |
| ● | cannibalization
of revenues as customers may seek multi-product discounts; |
| ● | risks
associated with entering into markets in which we have no, or limited, prior experience; |
| ● | incurrence
of significant restructuring charges if acquired products or technologies are unsuccessful; |
| ● | significant
diversion of management’s attention from our core business and diversion of key employees’
time and resources; |
| ● | licensing,
indemnity or other conflicts between existing businesses and acquired businesses; |
| ● | inability
to retain key customers, distributors, suppliers, vendors and other business relations of
the acquired business; and |
| ● | potential
loss of our key employees or the key employees of an acquired organization or as a result
of discontinued businesses. |
Financing
for future acquisitions may not be available on favorable terms, or at all. If we identify an appropriate acquisition candidate for any
of our businesses, we may not be able to negotiate the terms of the acquisition successfully, finance the acquisition or integrate the
acquired business, products, service offerings, technologies or employees into our existing business and operations. Future acquisitions
and divestitures may not be well-received by the investment community, which may cause the value of our stock to fall. We cannot ensure
that we will be able to identify or complete any acquisition, divestiture or discontinued business in the future.
If
we acquire businesses, new products, service offerings or technologies in the future, we may incur significant acquisition-related costs.
In addition, we may be required to amortize significant amounts of finite-lived intangible assets and we may record significant amounts
of goodwill or indefinite-lived intangible assets that would be subject to testing for impairment. We have in the past and may in the
future be required to write off all or part of the intangible assets or goodwill associated with these investments that could harm our
operating results. If we consummate one or more significant future acquisitions in which the consideration consists of stock or other
securities, our existing stockholders’ ownership could be significantly diluted. If we were to proceed with one or more significant
future acquisitions in which the consideration included cash, we could be required to use a substantial portion of our cash and investments.
Acquisitions could also cause operating margins to fall depending on the businesses acquired.
Our
strategic investments may involve joint development, joint marketing, or entry into new business ventures, or new technology licensing.
Any joint development efforts may not result in the successful introduction of any new products or services by us or a third party, and
any joint marketing efforts may not result in increased demand for our products or services. Further, any current or future strategic
acquisitions and investments by us may not allow us to enter and compete effectively in new markets or enhance our business in our existing
markets and we may have to impair the carrying amount of our investments.
We
could be adversely impacted by changes in accounting standards and subjective assumptions, estimates and judgments by management related
to complex accounting matters.
International
financial reporting standards and related accounting pronouncements, implementation guidelines, and interpretations with regard to a
wide range of matters that are relevant to our businesses, including, but not limited to, revenue recognition, asset impairment, inventories,
customer rebates and other customer consideration, tax matters, and litigation and other contingent liabilities are highly complex and
involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying
assumptions, estimates or judgments could significantly change our reported or expected financial performance or financial condition.
New accounting guidance may also require systems and other changes that could increase our operating costs and/or change our financial
statements. For example, implementing future accounting guidance related to revenue, accounting for leases and other areas could require
us to make significant changes to our accounting systems and result in adverse changes to our financial statements.
Risks
Related to Government Regulation
The
impact of potential changes in customs, tariffs, and trade policies in the United States and the potential corresponding actions
by other countries, including trade initiatives announced by the U.S. presidential administration against China, in which we do
business could adversely impact our financial performance.
The
U.S. government has made proposals that are intended to address trade imbalances, which include encouraging increased production
in the United States. These proposals could result in increased customs duties and tariffs, and the renegotiation of some U.S. trade
agreements. We import a significant percentage of our products into the United States, and an increase in customs duties and tariffs
with respect to these imports could negatively impact our financial performance. If such customs duties and tariffs are implemented,
it also may cause U.S. trading partners to take actions with respect to U.S. imports or U.S. investment activities in
their respective countries. Any potential changes in trade policies in the United States and the potential corresponding actions
by other countries in which we do business could adversely impact our financial performance. Given the level of uncertainty over which
provisions will be enacted, we cannot predict with certainty the impact of the proposals.
For
example, in 2018, the U.S. presidential administration and Chinese government imposed significant tariffs on exports between the
two countries. This evolving policy dispute between China and the United States is likely to have significant impact on the industries
in which we participate, directly and indirectly, and no assurance can be given that any individual customer or significant groups of
companies or a particular industry, will not be adversely impacted by any governmental actions taken by either China or the United States.
In addition, our mobile phones are manufactured at a third party contractor’s facility in Shenzhen, China, which could result in
significant additional costs to us when shipping our products to various customers in the United States. It is not possible to predict
with any certainty the outcome of the trade dispute between the United States and China, and prolonged or increased tariffs on imports
from China to the United States would adversely impact our business, results of operations and financial condition.
In
2020, a Phase One trade agreement was signed imposing specific targets for Chinese purchases of various exports from the United States.
These ambitious commitments specified numerical targets in U.S. goods and services exports to China for increases of $77 billion
in 2020 and $123 billion in 2021 from the 2017 baseline. The Phase One agreement also imposed numerous tariffs on a variety
of goods including but not limited to imports from China along with steel and aluminum imports from across the world, creating an upward
pressure on prices in the United States. These tariffs currently impact over $350 billion of imports and exports and increase
consumer costs by roughly $51 billion annually based on 2021 import levels. The uncertainty of the Phase One deal, unilaterally
imposed in 2020 and substantially still in effect today, lie in their conditions. For instance, Section 301 enables the president
to impose tariffs or quotas wherever the United States Trade Representative (the “USTR”) finds that other nations are
engaging in unfair trade practices and Section 232 allows the president to impose trade barriers if the Department of Commerce finds
that imports threaten U.S. national security. The Company will be unable to pre-empt decisions of this nature, and as such, the
risks and consequences which accompany them.
In
2021, the U.S. presidential administration signed Executive Order 14017 into order, assessing vulnerabilities in four priority product
areas: semiconductors, large capacity batteries, critical minerals and materials, and pharmaceuticals and active pharmaceutical ingredients.
Executive Order 14017 established an interagency Supply Chain Trade Task Force led by USTR. This task force was directed to identify
foreign trade practices that the U.S. deemed unfair or otherwise determined to cause erosion to U.S. critical supply chains.
The impact and decisions of this task force may cause consequential action from other trading partners, potentially impacting the Company’s
financial performance.
Later
in 2021 and into 2022, the US Administration replaced the Section 232 tariffs on steel and aluminum imports from the EU with a tariff
rate quota system (“TRQ”), replaced the Section 232 tariffs on steel imports from Japan with a TRQ (the Section 232
aluminum imports from Japan are still in effect) and, as of March 2022, replaced the Section 232 tariffs on steel and aluminum
imports from the UK with a TRQ. To date, the U.S. Administration has kept in place all of the Section 301 tariffs on Chinese imports,
which might influence importers to shift away from China and reorganize supply chains or otherwise cause decreased trade altogether — both
imports and exports — raising prices and reducing options for consumers and businesses in the U.S. While a number of
exclusions and extensions to these tariffs exist and evolve within the current administration, retaliatory actions by other nations remain
a possibility.
As
of May 2022, five nations have levied retaliatory tariffs up to 70 percent on approximately $73.2 billion of U.S. exports of
which China represented 25%. The Biden Administration has to-date retained the Section 301 tariffs on over $300 billion worth of imports
from China, which were initially imposed in four different tranches throughout 2018 by the Trump Administration. Based on 2021 data,
U.S. consumers paid $48 billion in Section 301 tariffs to import goods from China. According to a study by the American Action Forum,
more than half of the amount paid on these tariffs were for Census-defined industrial supplies and/or capital goods that U.S. firms use
as inputs in their production processes. Removing the tariffs would lower input costs for U.S. firms, allowing them to lower prices,
expand output, increase investment, and ultimately be more competitive in domestic and international markets.
We
are subject to anti-corruption, anti-bribery, anti-money laundering, economic sanctions, export control, and similar laws. Non-compliance
with such laws can subject us to criminal or civil liability and harm our business, revenues, financial condition and results of operations.
We
are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained
in 18 U.S.C. Section 201, the U.S. Travel Act, and other anti-bribery and anti-money laundering laws in the countries in which we
conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly
to generally prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly
or indirectly, improper payments or benefits to recipients in the public or private sector. As we increase our international presence,
we may engage with distributors and third-party intermediaries to market our solutions and to obtain necessary permits, licenses, and
other regulatory approvals in countries outside the United States and Canada. In addition, we or our third-party intermediaries may have
direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities in countries
outside the United States and Canada. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries,
our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize such activities.
The
United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. In
particular, the United States prohibits U.S. persons from engaging with individuals and entities identified as “Specially
Designated Nationals,” such as terrorists and narcotics traffickers. These prohibitions are administered by the U.S. Department
of the Treasury’s Office of Foreign Assets Control (“OFAC”). OFAC rules prohibit U.S. persons from engaging in,
or facilitating a foreign person’s engagement in, transactions with or relating to the prohibited individual, entity or country,
and require the blocking of assets in which the individual, entity or country has an interest. Blocked assets (e.g., property or bank
deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Other countries in which
we operate, including Canada and the United Kingdom, also maintain economic and financial sanctions regimes.
Some
of our solutions, including software updates and third-party accessories, may be subject to U.S. export control laws, including
the Export Administration Regulations; however, the vast majority of our products are non-U.S.-origin items, developed and manufactured
outside of the United States, and therefore not subject to these laws. For third-party accessories, we rely on manufacturers to
supply the appropriate export control classification numbers that determine our obligations under these laws.
We
cannot assure you that our employees and agents will not take actions in violation of our policies and applicable law, for which we may
be ultimately held responsible. As we increase our international presence, our risks under these laws, rules, and regulations may increase.
Further, any change in the applicability or enforcement of these laws, rules, and regulations could adversely impact our business operations
and financial results.
Detecting,
investigating and resolving actual or alleged violations can require a significant diversion of time, resources, and attention from senior
management. In addition, noncompliance with anti-corruption, anti-bribery, anti-money laundering, or economic sanctions laws, rules,
and regulations could subject us to whistle blower complaints, investigations, sanctions, settlements, prosecution, other enforcement
actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment
from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral
consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail
in any possible civil or criminal litigation, our business, revenues, financial condition, and results of operations would be significantly
harmed. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources
and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, financial
condition and results of operations.
We
are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations.
Our
operations and the products we sell are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental
laws and regulations. Compliance with such existing or future laws and regulations could subject us to future costs or liabilities, impact
our production capabilities, constrict our ability to sell, expand or acquire facilities, restrict what solutions we can offer and generally
impact our financial performance. Our products are designed for use in potentially explosive or hazardous environments. If our product
design fails for any reason in such environments, we may be subject to product liabilities and future costs. In addition, some of these
laws are environmental and relate to the use, disposal, remediation, emission and discharge of, and exposure to hazardous substances.
These laws often impose liability and can require parties to fund remedial studies or actions regardless of fault. Environmental laws
have tended to become more stringent over time and any new obligations under these laws could have a negative impact on our operations
or financial performance.
Laws
focused on the energy efficiency of electronic products and accessories, recycling of both electronic products and packaging, reducing
or eliminating certain hazardous substances in electronic products, and the transportation of batteries continue to expand significantly.
Laws pertaining to accessibility features of electronic products, standardization of connectors and power supplies, the transportation
of lithium-ion batteries, and other aspects are also proliferating. There are also demanding and rapidly changing laws around the globe
related to issues such as product safety, radio interference, radio frequency radiation exposure, medical related functionality, and
consumer and social mandates pertaining to use of wireless or electronic equipment. These laws, and changes to these laws, could have
a substantial impact on whether we can offer certain products, solutions, and services, and on what capabilities and characteristics
our products or services can or must include.
These
laws and regulations impact our products and could negatively impact our ability to sell products competitively. In addition, we anticipate
that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products,
increasing energy efficiency and providing additional accessibility.
Changes
in laws and regulations concerning the use of telecommunication bandwidth could increase our costs and adversely impact our business.
Our
business depends on our ability to sell devices that use telecommunication bandwidth allocated to licensed and unlicensed wireless services,
and that use of that bandwidth is subject to laws and regulations that are subject to change over time. Changes in the permitted uses
of telecommunication bandwidth, reallocation of such bandwidth to different uses, and new or increased regulation of the capabilities,
importation, and use of devices that depend on such bandwidth could increase our costs, require costly modifications to our products
before they are sold, or limit our ability to sell those products into our target markets. In addition, we are subject to regulatory
requirements for certification and testing of our products before they can be marketed or sold. Those requirements may be onerous and
expensive. Changes to those requirements could result in significant additional costs and could adversely impact our ability to bring
new products to market in a timely fashion.
We
are subject to a wide range of privacy and data security laws, regulations and other legal obligations.
Personal
privacy and information security are significant issues in the United States and the other jurisdictions in which we operate or
make our products and applications available. The legislative and regulatory framework for privacy and security issues worldwide is rapidly
evolving and is likely to remain uncertain for the foreseeable future. Our handling of data is subject to a variety of laws and regulations,
including regulation by various government agencies, including the U.S. Federal Trade Commission (“FTC”), and various
state, local and foreign agencies. We may collect personally identifiable information (“PII”) and other data from our customers.
We use this information to provide services to our customers and to support, expand and improve our business. We may also share customers’
PII with third parties as allowed by applicable law and agreements and authorized by the customer or as described in our privacy policy.
The
U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, transfer,
use and storage of PII. In the United States, the FTC and many state attorneys general are applying federal and state consumer
protection laws as imposing standards for the online collection, use and dissemination of data. Many foreign countries and governmental
bodies, including Canada, the European Union and other relevant jurisdictions, have laws and regulations concerning the collection and
use of PII obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more
restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage,
disclosure and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and,
in some jurisdictions, Internet Protocol, or IP, addresses. Within the European Union, legislators have adopted the General Data Protection
Regulation, or GDPR, effective May 2018 which may impose additional obligations and risk upon our business, and which may increase
substantially the penalties to which we could be subject in the event of any non-compliance. We may incur substantial expense in complying
with the obligations imposed by the governments of the foreign jurisdictions in which we do business or seek to do business and we may
be required to make significant changes in our business operations, all of which may adversely impact our revenues and our business overall.
Although
we are working to comply with those federal, state, and foreign laws and regulations, industry standards, contractual obligations and
other legal obligations that apply to us, those laws, regulations, standards and obligations are evolving and may be modified, interpreted
and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal
obligations, our practices or the features of our products or applications. At state level, lawmakers continue to pass new laws concerning
privacy and data security. Particularly notable in this regard is the California Consumer Privacy Act (“CCPA”), which became
effective on January 1, 2020. The CCPA will introduce significant new disclosure obligations and provide California consumers with
significant new privacy rights. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations,
industry standards, contractual obligations or other legal obligations, or any actual or suspected security incident, whether or not
resulting in unauthorized access to, or acquisition, release or transfer of PII or other data, may result in governmental enforcement
actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in
us, which could have an adverse impact on our reputation and business. Any inability to adequately address privacy and security concerns,
even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal
obligations could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely impact our business.
We
also expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection
and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact
such future laws, regulations and standards may have on our business. New laws, amendments to or re-interpretations of existing laws
and regulations, industry standards, contractual obligations and other obligations may require us to incur additional costs and restrict
our business operations. Such laws and regulations may require companies to implement privacy and security policies, permit users to
access, correct and delete personal information stored or maintained by such companies, inform individuals of security breaches that
affect their personal information, and, in some cases, obtain individuals’ consent to use PII for certain purposes. In addition,
a foreign government could require that any PII collected in a country not be disseminated outside of that country, and we are not currently
equipped to comply with such a requirement.
Risks
Related to Our Intellectual Property
If
we are unable to successfully protect our intellectual property, our competitive position may be harmed.
Our
ability to compete is heavily affected by our ability to protect our intellectual property. We rely on a combination of patent licenses,
confidentiality procedures and contractual provisions to protect our proprietary rights. We also enter, and plan to continue to enter,
into confidentiality, invention assignment or license agreements with our employees, consultants and other parties with whom we contract,
and control access to and distribution of our software, documentation and other proprietary information. The steps we take to protect
our intellectual property may be inadequate, and it is possible that some or all of our confidentiality agreements will not be honored
and certain contractual provisions may not be enforceable. Existing trade secret, trademark and copyright laws offer only limited protection.
Unauthorized parties may attempt to copy aspects of our products or obtain and use information which we regard as proprietary. Policing
unauthorized use of our products is difficult, time consuming and costly, particularly in foreign countries where the laws may not protect
our proprietary rights as fully as in the United States. We cannot assure you that our means of protecting our proprietary rights
will be adequate or that our competitors will not independently develop similar technology, the effect of either of which would harm
our competitive position in the market. Furthermore, disputes can arise with our strategic partners, customers or others concerning the
ownership of intellectual property.
Others
may claim that we infringe on their intellectual property rights, which may result in costly and time-consuming litigation and could
delay or otherwise impair the development and commercialization of our products.
In recent years, there has been a significant
increase in litigation in the United States involving patents and other intellectual property rights, and because our products are
comprised of complex technology, we could, in the future, be involved in or impacted by assertions, including both requests to take licenses
and litigation, regarding infringement of patent and other intellectual property rights of third parties. Third parties have asserted,
and in the future may assert, intellectual property infringement claims against us and against our channel partners, end customers and
suppliers. For example, we have been approached by Wilson Electronics about potential infringement of several of their patents involving
cellphone boosters. Many of these assertions are brought by non-practicing entities whose principal business model is to secure patent
licensing revenues from product manufacturing or sales companies. Claims for alleged infringement and any resulting lawsuit, if successful,
could subject us to significant liability for damages and invalidation of our intellectual property rights. Defending any such claims,
with or without merit, including pursuant to indemnity obligations, could be time consuming, expensive, cause product shipment delays
or require us to enter into a royalty or licensing agreement, any of which could delay the development and commercialization of our products
or reduce our margins. If we are unable to obtain a required license, our ability to sell or use certain products may be impaired. In
addition, if we fail to obtain a license, or if the terms of the license are burdensome to us, our operations could be significantly harmed.
Our
use of open source software could subject us to possible litigation or otherwise impair the development of our products.
A
portion of our technologies incorporates open source software, including open source operating systems such as Android, and we expect
to continue to incorporate open source software into our platform in the future. Few of the licenses applicable to open source software
have been interpreted by courts, and their application to the open source software integrated into our proprietary technology platform
may be uncertain. If we fail to comply with these licenses, then pursuant to the terms of these licenses, we may be subject to certain
requirements, including requirements that we make available the source code for our software that incorporates the open source software.
We cannot assure you that we have not incorporated open source software in our software in a manner that is inconsistent with the terms
of the applicable licenses or our current policies and procedures. If an author or other third party that distributes such open source
software were to allege that we had not complied with the conditions of one or more of these licenses, we could incur significant legal
expenses defending against such allegations. Litigation could be costly for us to defend, have a negative effect on our operating results
and financial condition or require us to devote additional research and development resources to change our technology platform.
With
respect to open source operating systems, if third parties cease continued development of such operating systems or restrict our access
to such operating system, our business and financial results could be adversely impacted. We are dependent on third parties’ continued
development of operating systems, software application ecosystem infrastructures, and such third parties’ approval of our implementations
of their operating and system and associated applications. If such parties cease to continue development or support of such operating
systems or restrict our access to such operating systems, we would be required to change our strategy for our devices. As a result, our
financial results could be negatively impacted because a resulting shift away from the operating systems we currently use, and the associated
applications ecosystem could be costly and difficult.
Our
inability to obtain and maintain any third-party license required to develop new products and product enhancements could seriously harm
our business, financial condition and results of operations.
From
time to time, we are required to license technology from third parties to develop new products or product enhancements. Third-party licenses
may not be available to us on commercially reasonable terms, or at all. If we fail to renew any intellectual property license agreements
on commercially reasonable terms, or any such license agreements otherwise expire or terminate, we may not be able to use the patents
and technologies of these third parties in our products, which are critical to our success. We cannot assure you that we will be able
to effectively control the level of licensing and royalty fees paid to third parties, and significant increase in such fees could have
a significant and adverse impact on our future profitability. Seeking alternative patents and technologies may be difficult and time-consuming,
and we may not be successful in finding alternative technologies or incorporating them into our products. Our inability to obtain any
third-party license necessary to develop new products or product enhancements could require us to obtain substitute technology of lower
quality or performance standards, or at greater cost, which could seriously harm our business, financial condition and results of operations.
Risks relating to our locations in Israel and
Canada and our international operations
Conditions in Israel could materially and
adversely affect our business.
A number of our officers and directors are residents
of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business
and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and
its neighboring countries or territories, as well as terrorist acts committed within Israel by hostile elements. Any hostilities involving
Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and
results of operations. During the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite
militia group and political party. In December 2008 and January 2009 there was an escalation in violence among Israel, Hamas,
the Palestinian Authority and other groups, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted
in missiles being fired from the Gaza Strip into Southern Israel. During November 2012 and from July through August 2014, Israel
was engaged in an armed conflict with a militia group and political party who controls the Gaza Strip, which resulted in missiles being
fired from the Gaza Strip into Southern Israel, as well as at areas more centrally located near Tel Aviv and at areas surrounding Jerusalem.
These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees
and some of our consultants are located, and negatively affected business conditions in Israel. This pattern of activity erupts from
time to time with varying degrees of intensity and for varying periods of time and typically ends with a cease fire until hostilities
flare up again.
Since February 2011, Egypt has experienced
political turbulence and an increase in terrorist activity in the Sinai Peninsula. Such political turbulence and violence may damage
peaceful and diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political
turbulence has occurred in other countries in the region, including Syria, which shares a common border with Israel, and is affecting
the political stability of those countries. Since April 2011, internal conflict in Syria has escalated and chemical weapons have
been used in the region. Foreign actors have intervened and may continue to intervene in Syria. This instability and any intervention
may lead to deterioration of the political and economic relationships that exist between the State of Israel and some of these countries
and may lead to additional conflicts in the region. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons.
Iran also has a strong influence among extremist groups in the region, including Hamas in Gaza, Hezbollah in Lebanon and various rebel
militia groups in Syria. These situations have escalated at various points in recent years and may escalate in the future to more
violent events, which may affect Israel and us. Any armed conflicts, terrorist activities or political instability in the region could
adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital.
Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing
us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and
security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are
not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.
Further, in the past, the State of Israel and
Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with
Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the
expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely
impact our business.
Notwithstanding such boycotts, in August 2020,
an agreement for the normalization of relations between Israel and the United Arab Emirates (the “UAE”) was reached and in
September 2020 the Abraham Accords Peace Treaty was signed at the White House. The Accords officially established diplomatic relations
between Israel and the UAE. This was shortly followed by an agreement for the normalization of ties between Israel and the Kingdom of
Bahrain, which was signed in a Joint Communique between Israel and Bahrain in Manama, Bahrain in November 2020. In December 2020, Israel
and Morocco established full diplomatic relations. And in January 2021, Sudan acceded to the Abraham Accords during the visit of then-U.S.
Treasury Secretary Steven Mnuchin to Khartoum. These agreements have led to other trade and military alliances between Israel and neighboring
Arab countries.
In addition, many Israeli citizens are obligated
to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older,
for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to
active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists.
It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which
may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial
condition and results of operations.
It may be difficult to enforce a U.S. judgment
against us, our officers and directors named in our annual report on Form 20-F in Israel or the United States, or to assert
U.S. securities laws claims in Israel or serve process on our officers and directors.
Not all of our directors or officers are residents
of the United States and most of their and our assets are located outside the United States. Service of process upon us or
our non-U.S. resident directors and officers may be difficult to obtain within the United States. We have been informed by
our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted
in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse
to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel
may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine
that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable
U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed
by Israeli law. There is little binding case law in Israel addressing the matters described above. Additionally, Israeli courts might
not enforce judgments obtained in the United States against us or our non-U.S. directors and executive officers, which may make
it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.
Moreover, an Israeli court will not enforce a
non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject
to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained
by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between
the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time
the foreign action was brought. For more information, see “Enforceability of Civil Liabilities.”
Because we are a corporation incorporated
in British Columbia and some of our directors and officers are resident in Canada, it may be difficult for investors in the United States
to enforce civil liabilities against us based solely upon the federal securities laws of the United States. Similarly, it may be
difficult for Canadian investors to enforce civil liabilities against our directors and officers residing outside of Canada.
We are a corporation incorporated under the laws
of British Columbia with our principal place of business in Montreal, Canada. Some of our directors and officers or other experts named
herein are residents of Canada and all or a substantial portion of our assets and those of such persons are located outside the United States.
Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon us or our directors
or officers who are not residents of the United States, or to realize in the United States upon judgments of courts of the
United States predicated upon civil liabilities under the Securities Act. Investors should not assume that Canadian courts: (1) would
enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the
U.S. federal securities laws or the securities or blue-sky laws of any state within the United States or (2) would enforce, in original
actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue-sky
laws.
Similarly, some of our directors and officers
are residents of countries other than Canada and all or a substantial portion of the assets of such persons are located outside Canada.
As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these non-Canadian residents. In
addition, it may not be possible for Canadian investors to collect from these non-Canadian residents’ judgments obtained in courts
in Canada predicated on the civil liability provisions of securities legislation of certain of the provinces and territories of Canada.
It may also be difficult for Canadian investors to succeed in a lawsuit in the United States, based solely on violations of Canadian
securities laws.
We have operations in China, which exposes
us to risks inherent in doing business there.
We use multiple third-party suppliers and manufacturers
based primarily in China. With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase
in the future. Furthermore, pursuant to Chinese labor laws, employers in China are subject to various requirements when signing labor
contracts, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. Our
results of operations will be materially and adversely affected if the labor costs of our third-party suppliers and manufacturers increase
significantly. In addition, we and our manufacturers and suppliers may not be able to find a sufficient number of qualified workers due
to the intensely competitive and fluid market for skilled labor in China.
Operating in China exposes us to political, legal
and economic risks. In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable.
Our ability to utilize parties that operate in China may be adversely affected by changes in U.S. and Chinese laws and regulations
such as those related to, among other things, taxation, import and export tariffs, environmental regulations, land use rights, intellectual
property, currency controls, network security, employee benefits, hygiene supervision and other matters. In addition, we may not obtain
or retain the requisite legal permits to continue utilizing third-parties that operate in China, and costs or operational limitations
may be imposed in connection with obtaining and complying with such permits. In addition, Chinese trade regulations are in a state of
flux, and we may potentially become subject to other forms of taxation, tariffs and duties in China. Furthermore, the third parties we
rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result
in the illegal distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition
and results of operations could be materially and adversely affected.
In addition, in 2022, there have been outbreaks
of the Omicron variant of the COVID-19 in Hong Kong and other cities in Mainland China resulting in central and local government ordered
lock downs restricting employees from their offices and factories, travel restrictions, mandatory COVID-19 tests, quarantine requirements
and/or closure of office buildings and facilities. Although our operations have not been materially and negatively impacted by such outbreaks
in 2022, the government authorities may issue new orders of lock-downs, office closures, travel and transportation restrictions in China
due to the resurgence of the COVID-19 and outbreak of new variants, which could have material negative impact to our business and financial
conditions.
Operating outside of the United States
presents specific risks to our business, and we have substantial operations outside of the United States.
Most of our employee base and operations are
located outside the United States, primarily in Canada and Israel. Most of our software development, third-party contract manufacturing,
and product assembly operations are conducted outside the United States.
Risks associated with operations outside the
United States include:
| ● | effectively managing
and overseeing operations that are distant and remote from corporate headquarters may be
difficult and may impose increased operating costs; |
| ● | fluctuating foreign
currency rates could restrict sales, increase costs of purchasing, and impact collection
of receivables outside of the United States; |
| ● | volatility in
foreign credit markets may affect the financial well-being of our customers and suppliers; |
| ● | violations of
anti-corruption laws, including the Foreign Corrupt Practices Act and the U.K. Bribery
Act could result in large fines and penalties; |
| ● | violations of
privacy and data security laws could result in large fines and penalties; and |
| ● | tax disputes with
foreign taxing authorities, and any resultant taxation in foreign jurisdictions associated
with operations in such jurisdictions, including with respect to transfer pricing practices
associated with such operations. |
Foreign currency fluctuations may reduce
our competitiveness and sales in foreign markets.
The relative change in currency values creates
fluctuations in product pricing for international customers. These changes in foreign end-customer costs may result in lost orders and
reduce the competitiveness of our products in certain foreign markets. These changes may also negatively impact the financial condition
of some foreign customers and reduce or eliminate their future orders of our products. We also face adverse changes in, or uncertainty
of, local business laws or practices, including the following:
| ● | foreign governments
may impose burdensome tariffs, quotas, taxes, trade barriers, or capital flow restrictions; |
| ● | restrictions on
the export or import of technology may reduce or eliminate the ability to sell in or purchase
from certain markets; |
| ● | political and
economic instability, including deterioration of political relations between the United States
and other countries, may reduce demand for our solutions or put our non-U.S. assets
at risk; |
| ● | potentially limited
intellectual property protection in certain countries may limit recourse against infringing
on our solutions or cause us to refrain from selling in certain geographic territories; |
| ● | staffing may be
difficult along with higher turnover at international operations; |
| ● | a government-controlled
exchange rate and limitations on the convertibility of currencies, including the Chinese
yuan; |
| ● | transportation
delays and customs related delays that may affect production and distribution of our products;
and |
| ● | integration and
enforcement of laws vary significantly among jurisdictions and may change significantly over
time. |
Our failure to manage any of these risks successfully
could harm our international operations and adversely impact our business, operating results and financial condition.
Risks Related to Ownership of Our Securities
The New Warrants and the Lind Waiver Warrants
are speculative in nature.
The New Warrants and the Lind Waiver Warrants owned
by the Selling Shareholders do not confer any rights of common share ownership on their holders, such as voting rights or the right to
receive dividends, but rather merely represent the right to acquire common shares at a fixed price for a limited period of time. Specifically,
commencing on the date of issuance, holders of the New Warrants and the Lind Waiver Warrants may exercise their right to acquire the common
shares and pay an exercise price of $0.20 per share (unless the cashless exercise option is exercised, in; which case the exercise price
would be effectively $0), prior to five years from the date of issuance, after which date any unexercised warrants will expire and have
no further value. As of March 29, 2023, the closing price of one common share on the Nasdaq was $0.201, making the New Warrants and the
Lind Waiver Warrants “out-of-the-money” if exercised at $0.20 per common share (but not if they are cashless exercised at
an exercise price of $0.00 per share). As long as the New Warrants and the Lind Waiver Warrants remain out-of-the-money, it is unlikely
that a significant number of them will be exercised. We cannot assure you that the price of our common shares will ever exceed the $0.20
per share exercise price of the New Warrants and the Lind Waiver Warrants.
Holders of the New Warrants and the Lind
Waiver Warrants will have no rights as a common shareholder until they acquire our common shares.
Until holders of the New Warrants and the Lind
Waiver Warrants acquire common shares upon exercise of those warrants, the holders will have no rights with respect to the common shares
issuable upon exercise of those warrants. Upon exercise of those warrants, the holder will be entitled to exercise the rights of a common
shareholder as to the security exercised only as to matters for which the record date occurs after the exercise.
There is no public market for the New Warrants
and the Lind Waiver Warrants.
There is no established public trading market
for the New Warrants and the Lind Waiver Warrants and we do not expect a market to develop. In addition, we do not intend to apply to
list the New Warrants and the Lind Waiver Warrants on any national securities exchange or other nationally recognized trading system,
including The Nasdaq Capital Market. Without an active trading market, the liquidity of the New Warrants and the Lind Waiver Warrants
will be limited.
We expect that our stock price will fluctuate
significantly, and you may not be able to resell your shares at or above the price you paid for your shares.
The trading price of our common shares is likely
to be volatile and subject to wide price fluctuations in response to various factors, including:
| ● | market conditions
in the broader stock market in general, or in our industry in particular; |
| ● | actual or anticipated
fluctuations in our quarterly financial and operating results; |
| ● | introduction of
new products and services by us or our competitors; |
| ● | sales, or anticipated
sales, of large blocks of our stock; |
| ● | issuance of new
or changed securities analysts’ reports or recommendations; |
| ● | failure of industry
or securities analysts to maintain coverage of our Company, changes in financial estimates
by any industry or securities analysts that follow our Company, or our failure to meet such
estimates; |
| ● | additions or departures
of key personnel; |
| ● | regulatory or
political developments; |
| ● | changes in accounting
principles or methodologies; |
| ● | acquisitions by
us or by our competitors; |
| ● | litigation and
governmental investigations; and |
| ● | economic, political
and geopolitical conditions or events. |
These and other factors may cause the market
price and demand for our common shares to fluctuate substantially, which may limit or prevent investors from readily selling their common
shares and may otherwise negatively affect the liquidity of our common shares. If the market price of our common shares after this offering
does not exceed the price you paid, you may not realize any return on your investment in us and may lose some or all of your investment.
In addition, in the past, when the market price of a stock has been volatile, holders of that stock have often instituted securities
class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could
incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.
We could lose our listing on the Nasdaq
Capital Market if the closing bid price of our common shares does not return to above $1.00 for ten consecutive days during the
180 days ending August 21, 2023. The loss of the Nasdaq listing would make our common shares significantly less liquid and would
affect their value.
On September 1, 2022, we announced that
the Company had received a notification letter dated August 26, 2022 from the Listing Qualifications Department of The Nasdaq Stock
Market LLC, notifying the Company that it is currently not in compliance with the minimum bid price requirement set forth under Nasdaq
Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”), resulting from the fact that the closing bid price
of the Company’s common shares was below $1.00 per share for a period of thirty consecutive business days.
Pursuant to Nasdaq Listing Rule 5810(c)(3)(A),
the Company had a compliance period of 180 calendar days, or until February 22, 2023 (the “Compliance Period”), to regain
compliance with the Nasdaq’s Minimum Bid Price Rule. The Company did not regain compliance with the minimum $1.00 bid price per
share requirement during the first 180-calendar-day Compliance Period and submitted a written request to the Nasdaq to afford it an additional
180-day compliance period to cure the deficiency. On February 23, 2023, the Company received written notification from the Listing Qualifications
Department of Nasdaq granting the Company’s request for a 180-day extension to regain compliance with Nasdaq’s Minimum Bid
Price Rule. The Company now has until August 21, 2023 to meet this requirement. If at any time prior to August 21, 2023, the bid price
of the Company’s common shares closes at $1.00 per share or more for a minimum of 10 consecutive business days, the Company will
regain compliance with the Minimum Bid Price Rule. If the Company does not regain compliance with the Minimum Bid Price Rule during the
additional 180-day extension, Nasdaq will provide written notification to the Company that its common shares will be delisted. At that
time, the Company may appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable
Nasdaq Listing Rules. However, there can be no assurance that, if the Company does appeal the delisting determination by Nasdaq to the
hearings panel, that such appeal would be successful. Nor is there any assurance that the Company would obtain a further extension of
time to meet this requirement. The Company intends to actively monitor the closing bid price of its common shares and may, if appropriate,
consider implementing available options to regain compliance with the Minimum Bid Price Rule.
If the common shares are not listed on Nasdaq
at any time after this offering, we could face significant material adverse consequences, including:
| ● | a limited availability
of market quotations for our securities; |
| ● | a determination
that the common shares are a “penny stock” which will require brokers trading
in our shares to adhere to more stringent rules, possibly resulting in a reduced level of
trading activity in the secondary trading market for the common shares; |
| ● | a limited amount
of news and analyst coverage for our Company; and |
| ● | a decreased ability
to issue additional securities or obtain additional financing in the future. |
Upon delisting from the Nasdaq Capital Market,
our common shares would be traded over-the-counter inter-dealer quotation system, more commonly known as the OTC. OTC transactions
involve risks in addition to those associated with transactions in securities traded on the securities exchanges, such as the Nasdaq
Capital Market (“Exchange-listed Stocks”). Many OTC stocks trade less frequently and in smaller volumes than Exchange-listed
Stocks. Accordingly, our stock would be less liquid than it would be otherwise. Also, the values of OTC stocks are often more volatile
than Exchange-listed Stocks. Additionally, institutional investors are usually prohibited from investing in OTC stocks, and it might
be more challenging to raise capital when needed.
In addition, if our common shares are delisted,
your ability to transfer or sell your common shares may be limited and the value of those securities will be materially adversely affected.
If our common shares become subject to
the penny stock rules, it may be more difficult to sell our common shares.
The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of
less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated
quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by
the exchange or system). The OTC Bulletin Board does not meet such requirements and if the price of our common shares is less than $5.00
and our common shares are no longer listed on a national securities exchange such as Nasdaq, our stock may be deemed a penny stock. The
penny stock rules require a broker-dealer, at least two business days prior to a transaction in a penny stock not otherwise
exempt from those rules, to deliver to the customer a standardized risk disclosure document containing specified information and to obtain
from the customer a signed and dated acknowledgment of receipt of that document. In addition, the penny stock rules require that prior
to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive: (i) the purchaser’s written acknowledgment of
the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed
and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity
in the secondary market for our common shares, and therefore shareholders may have difficulty selling their shares.
We will require additional capital to fund
our business and support our growth, and our inability to generate and obtain such capital on acceptable terms, or at all, could harm
our business, operating results, financial condition and prospects.
We intend to continue to make substantial investments
to fund our business and support our growth. In addition, we may require additional funds to respond to business challenges, including
the need to develop new features or enhance our solutions, improve our operating infrastructure or acquire or develop complementary businesses
and technologies. As a result, in addition to the revenues we generate from our business, we may need to engage in additional equity
or debt financings to provide the funds required for these and other business endeavors. If we raise additional funds through future
issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities
we issue could have rights, preferences and privileges superior to those of holders of our common shares. Any debt financing that we
may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational
matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential
acquisitions. We may not be able to obtain such additional financing on terms favorable to us, if at all. If we are unable to obtain
adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth
and to respond to business challenges could be significantly impaired, and our business may be adversely impacted. In addition, our inability
to generate or obtain the financial resources needed may require us to delay, scale back, or eliminate some or all of our operations,
which may have a significant adverse impact on our business, operating results and financial condition.
If we fail to maintain proper and effective
internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
We are subject to the reporting requirements of
the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires, among other things,
that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with IFRS. We must perform system and process evaluation and testing of our internal controls
over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 20-F
filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. This will require that we incur substantial additional
professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts.
During the evaluation and testing process of
our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable
to assert that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses
or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control
over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If
we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting
firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose
investor confidence in the accuracy and completeness of our financial reports, the market price of our common shares could decline, and
we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities. Failure to remedy any material
weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public
companies, could also restrict our future access to the capital markets.
Because we are a foreign private issuer
and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than
you would have if we were a domestic issuer.
Nasdaq Listing Rules require listed companies
to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to,
and we may follow home country practice in lieu of the above requirements, or we may choose to comply with the above requirement within
one year of listing. The corporate governance practice in our home country does not require a majority of our board to consist of independent
directors. Thus, although a director must act in the best interests of the Company, it is possible that fewer board members will be exercising
independent judgment and the level of board oversight on the management of our company may decrease as a result. In addition, Nasdaq
Listing Rules also require foreign private issuers to have a compensation committee, a nominating/corporate governance committee composed
entirely of independent directors, and an audit committee with a minimum of three members. We, as a foreign private issuer, are not subject
to these requirements. Nasdaq Listing Rules may require shareholder approval for certain corporate matters, such as requiring that shareholders
be given the opportunity to vote on all equity compensation plans and material revisions to those plans, and certain common share issuances.
We intend to comply with the requirements of Nasdaq Listing Rules in determining whether shareholder approval is required on such matters
and to appoint a nominating and corporate governance committee. We may, however, consider following home country practice in lieu of
the requirements under Nasdaq Listing Rules with respect to certain corporate governance standards which may afford less protection to
investors.
We may lose our foreign private issuer
status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private
issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act.
In the future, we would lose our foreign private issuer status if (i) more than 50% of our outstanding voting securities are owned
by U.S. residents and (ii) a majority of our directors or executive officers are U.S. citizens or residents, or we fail
to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status,
we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more
detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal
proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and
recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain
corporate governance requirements under the listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private
issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.
We will continue to incur significant increased
costs as a result of operating as a public company in the United States, and our management will be required to devote substantial
time to new compliance initiatives.
As a public company in the United States,
we incur significant legal, accounting and other expenses. We are subject to the reporting requirements of the Securities Exchange Act of 1934,
as amended, which requires, among other things, that we file with the SEC annual and current reports with respect to our business and
financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and Nasdaq to implement provisions
of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of
effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), was enacted. There are significant corporate governance
and executive-compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in
these areas. Recent legislation permits emerging growth companies to implement many of these requirements over a longer period and up
to five years from the pricing of our public offering. We intend to take advantage of this new legislation, but cannot assure you
that we will not be required to implement these requirements sooner than planned and thereby incur unexpected expenses. Stockholder activism,
the current political environment and the current high level of government intervention and regulatory reform may lead to substantial
new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our
business in ways we cannot currently anticipate.
The rules and regulations applicable to public
companies substantially increase our legal and financial compliance costs and make some activities more time-consuming and costly. If
these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse
effect on our business, financial condition and results of operations. The increased costs will decrease our net income or increase our
consolidated net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services.
For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer
liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or
estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could
also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or
as executive officers.
Our executive officers and directors, and
their affiliated entities, along with our two other largest stockholders, own a significant percentage of our stock and will be able
to exert significant control over matters subject to stockholder approval
As of the date of this prospectus, our executive
officers and directors, together with entities affiliated with such individuals, along with our two other largest stockholders, beneficially
own approximately 31.6% of our common shares. Accordingly, these stockholders may, as a practical matter, continue to be able to control
the election of a majority of our directors and the determination of all corporate actions. This concentration of ownership could delay
or prevent a change in control of the Company.
The exercise of the outstanding warrants
may further dilute the common shares and adversely impact the price of our common shares.
As of March 30, 2023, we had 62,911,417 common shares issued and outstanding
and, if all of the warrants are exercised for the common shares to be sold by the Selling Shareholders are sold in this offering, we will
have an additional 19,781,987 common shares outstanding for a total of 83,943,404 common shares issued and outstanding. The Company has
other outstanding unexercised warrants and agents’ options to purchase 14,031,591 common shares as of March 30, 2023 that expire
between June 30, 2024 and March 8, 2027. If the holders of our free trading shares wanted to sell these shares, there might not be enough
purchasers to maintain the market price of our common shares on the date of such sales. Any such sales, or the fear of such sales, could
substantially decrease the market price of our common shares and the value of your investment. A decline in the price of shares of our
common shares might impede our ability to raise capital through the issuance of additional common shares or other equity securities.
The market for our common shares may not
provide investors with adequate liquidity.
Liquidity of the market for our common shares
depends on a number of factors, including our financial condition and operating results, the number of holders of our common shares,
the market for similar securities and the interest of securities dealers in making a market in the securities. We cannot predict the
extent to which investor interest in the Company will maintain a trading market in our common shares, or how liquid that market will
be. If an active market is not maintained, investors may have difficulty selling common shares that they hold.
Since we do not expect to pay any cash
dividends for the foreseeable future, investors in this offering may be forced to sell their stock in order to obtain a return on their
investment.
We do not anticipate declaring or paying in the
foreseeable future any cash dividends on our capital stock. Instead, we plan to retain any earnings to finance our operations and growth
plans discussed elsewhere or incorporated by reference in this prospectus. Accordingly, investors must rely on sales of their common
shares after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors
seeking cash dividends should not purchase our common shares.
If securities or industry analysts do not
publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our securities will depend
in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts
do not currently, and may never, publish research on our Company. If no securities or industry analysts commence coverage of our Company,
the trading price for our securities would likely be negatively impacted. In the event securities or industry analysts initiate coverage,
if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavourable research about our business,
our stock price may decline. If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly,
demand for our securities could decrease, which might cause our stock price and trading volume to decline.
A possible “short squeeze”
due to a sudden increase in demand of our common shares that largely exceeds supply may lead to price volatility in our common shares.
Investors may purchase our common shares to hedge
existing exposure in our common shares or to speculate on the price of our common shares. Speculation on the price of our common shares
may involve long and short exposures. To the extent aggregate short exposure exceeds the number of our common shares available for purchase
in the open market, investors with short exposure may have to pay a premium to repurchase our common shares for delivery to lenders of
our common shares. Those repurchases may in turn, dramatically increase the price of our common shares until investors with short exposure
are able to purchase additional common shares to cover their short position. This is often referred to as a “short squeeze.”
A short squeeze could lead to volatile price movements in our common shares that are not directly correlated to the performance or prospects
of our common shares and once investors purchase the common shares necessary to cover their short position the price of our common shares
may decline.
We have broad discretion in the use of
the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in
the application of the net proceeds from the cash exercise of the New Warrants, including for any of the purposes described in the section
entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the
net proceeds will be used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds
from the cash exercise of the New Warrants, their ultimate use may vary substantially from their currently intended use. Our management
might not apply our net proceeds in ways that ultimately increase the value of your investment. We currently intend to use the net proceeds
from the cash exercise of the New Warrants to expand marketing and brand enhancement related to our products, to fund our ongoing research
and development activities, for personnel development and training and for resource management software development. Our expected use
of net proceeds from the cash exercise of the New Warrants represents our current intentions based upon our present plans and business
condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be
received upon the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and
timing of our actual use of the net proceeds will vary depending on numerous factors, including the commercial success of our systems
and the costs of our research and development activities, as well as the amount of cash used in our operations. As a result, our management
will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application
of the net proceeds of this offering.
The failure by our management to apply these
funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade,
interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the
net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could
cause our stock price to decline.