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Form 6-K Siyata Mobile Inc. For: May 17

May 17, 2022 6:12 AM EDT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

 

For the month of: May 2022

 

Commission file number: 001-39557

 

SIYATA MOBILE INC.

(Translation of registrant’s name into English)

 

2200 - 885 West Georgia Street

Vancouver, BC V6C 3E8

514-500-1181

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒            Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulations S-T Rule 101(b)(1):_____

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulations S-T Rule 101(b)(7):_____

 

 

 

 

 

 

On May 16, 2022, Siyata Mobile Inc., a British Columbia (Canada) company the (“Company”), issued a press release announcing its First Quarter 2022 Financial Results.

 

The Company’s press release is filed as Exhibit 99.3 to this Report and is incorporated herein by reference.

 

Attached hereto and incorporated herein is the Registrant’s Financial Results for the Three Months Ended March 31, 2022 and March 31, 2021.

  

Exhibit No.   Description
99.1   Siyata Mobile Group, Inc. Financial Results for the Three Months Ended March 31, 2022 and 2021
99.2   Management’s Discussion and Analysis for the Three Months Ended March 31, 2022
99.3  

Press Release dated May 16, 2022

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  SIYATA MOBILE INC.
  (Registrant)
     
  By: /s/ Marc Seelenfreund
  Name:  Marc Seelenfreund
  Title: Chief Executive Officer

 

Date: May 17, 2022

 

 

2

 

Exhibit 99.1

 

SIYATA MOBILE INC.

 

Consolidated Unaudited Interim Financial Statements

(Expressed in US Dollars)

 

As at March 31, 2022 and December 31, 2021

and for the three months’ ended March 31, 2022 and 2021

 

 

 

  

Siyata Mobile Inc.

(the “Company” or “Siyata”)

 

CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

NOTICE OF NO AUDITOR REVIEW OF INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

The Management of the Company is responsible for the preparation of the accompanying unaudited consolidated interim financial statements. The unaudited consolidated interim financial statements have been prepared using accounting policies in compliance with International Financial Reporting Standards (“IFRS”) for the preparation of consolidated interim financial statements and are in accordance with International Accounting Standards (“IAS”) 34 – Interim Financial Reporting.

 

The Company’s auditor has not performed a review of these consolidated interim financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor.

 

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Siyata Mobile Inc.

Consolidated Unaudited Interim Statements of Financial Position

(Expressed in US dollars)

  

   March 31, 2022   December 31, 2021 
ASSETS        
Current        
Cash  $9,221,049   $1,619,742 
Trade and Other Receivables (Note 5)   1,558,088    1,544,427 
Prepaid expenses   885,832    154,266 
Inventory (Note 6)   3,393,716    2,397,471 
Advance to suppliers   1,060,673    470,167 
    16,119,358    6,186,073 
Long term receivable (Note 10)   168,167    168,167 
Right of Use Assets (Note 7)   981,698    1,077,845 
Equipment   256,978    267,967 
Intangible assets (Note 8)   5,065,214    4,350,537 
Total assets  $22,591,415   $12,050,589 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current          
Bank Loan (Note 10)  $-   $27,159 
Accounts payable and accrued liabilities   1,809,625    2,646,321 
Lease Obligations (Note 13)   341,000    232,969 
Convertible debenture (Note 12)   2,023,751    1,421,911 
Warrant liability (Note 13)   886,779    2,176,686 
Future Purchase Consideration (Note 4,15)   -    350,000 
    5,061,155    6,855,046 
Lease Obligation (Note 11)   591,669    787,513 
Convertible debenture (Note 12)   -    1,921,382 
    591,669    2,708,895 
Total Liabilities   5,652,824    9,563,941 
Shareholders’ equity          
Share capital (Note 16)   66,880,862    54,655,244 
Reserves (Note 16)   17,484,904    10,389,555 
Accumulated other comprehensive loss   (14,272)   (38,739)
Deficit   (67,412,903)   (62,519,412)
    16,938,591    2,486,648 
Total liabilities and shareholders’ equity  $22,591,415   $12,050,589 

 

Nature of operations and going concern (Note 1)

Subsequent Events (Note 27)

 

Approved on May 16, 2022 on behalf of the Board:  

 

“Michael Kron”   “Marc Seelenfreund”  
Michael Kron – Director   Marc Seelenfreund - Director  

 

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

 

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Siyata Mobile Inc.

Consolidated Unaudited Interim Statements of Loss and Comprehensive Loss

(Expressed in US dollars)

For the three months’ ended March 31, 2022 and 2021

 

 

   3 months ended March 31 
   2022   2021 
         
Revenue (Note 25)  $832,974   $4,031,975 
Cost of Sales (Note 17)   (577,923)   (2,291,884)
Gross profit   255,051    1,740,091 
           
EXPENSES          
Amortization and Depreciation (Note 8)   124,505    321,017 
Development expenses (Note 8)   123,316    - 
Selling and marketing (Note 18)   1,045,051    972,959 
General and administrative (Note 19)   1,659,079    1,058,478 
Inventory impairment (Note 6)   64,336    - 
Bad Debts (recovered) (Note 5)   (7,358)   - 
Share-based payments (Note 16)   812,735    592,792 
Total Operating Expenses   3,821,664    2,945,246 
           
Net operating loss   (3,566,613)   (1,205,155)
           
OTHER EXPENSES          
Finance expense (note 20)   26,987    390,861 
Foreign exchange   (90,659)   440,321 
Change in fair value of convertible debenture (Note 12)   2,680,457    - 
Change in fair value of warrant liability (note 13)   (1,289,907)   - 
Transaction costs (Note 21)   -    79,069 
Total other expenses   1,326,878    910,251 
Net loss for the period  $(4,893,491)  $(2,115,406)
           
Other comprehensive income (loss)          
Translation Adjustment   (24,467)   67,415 
Comprehensive loss for the period  $(4,917,958)  $(2,047,991)
           
Weighted Average Shares   12,976,363    4,726,991 
           
Basic and diluted loss per share   (0.38)   (0.45)

 

The accompanying notes are an integral part of these consolidated unaudited interim financial statements

 

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Siyata Mobile Inc.

Consolidated Unaudited Interim Statement of Changes in Shareholders’ Equity

(Expressed in US dollars)

For the three months’ ended March 31, 2022 and 2021

 

   Number of
Common
Shares
   Share Capital Amount   Reserves  

Accumulated
other
comprehensive

Income (loss)

   Deficit   Total
Shareholders’
Equity
 
Balance, December 31, 2020   4,663,331   $50,088,369   $9,984,531   $100,025   $(38,893,870)  $21,279,055 
Issuance of shares to be issued   40,000    560,000    (560,000)             - 
Shares issued on acquisition of ClearRF   23,949    194,985                   194,985 
Shares issued on warrant exercises   88,911    721,958    (112,917)             609,041 
Share based payments   -         592,792              592,792 
Translation adjustment   -              (67,415)        (67,415)
Loss for the year   -                   (2,115,406)   (2,115,406)
Balance, March 31, 2021   4,816,191   $51,565,312   $9,904,406   $32,610   $(41,009,276)  $20,493,052 
                               
Balance, December 31, 2021   5,276,695   $54,655,244   $10,389,555   $(38,739)  $(62,519,412)  $2,486,648 
                             - 
Shares issued on acquisition of ClearRF   138,958    190,095                   190,095 
Share issuance on capital raise   7,215,652    11,092,708    9,227,524              20,320,232 
Share issuance costs on capital raise        (1,117,912)   (898,983)             (2,016,895)
Pre-funded warrants exercised   1,480,000    2,060,727    (2,045,927)             14,800 
Share based payments             812,735              812,735 
Translation adjustment                  24,467         24,467 
Loss for the period                       (4,893,491)   (4,893,491)
Balance, March 31, 2022   14,111,305   $66,880,862   $17,484,904   $(14,272)  $(67,412,903)  $16,938,591 

 

The accompanying notes are an integral part of these consolidated unaudited interim financial statements

 

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Siyata Mobile Inc.

Consolidated Unaudited Interim Statements of Cash Flows

(Expressed in US dollars)

For the three months’ ended March 31, 2022 and 2021

 

   31-Mar-22   31-Mar-21 
Operating activities:        
Net loss for the period  $(4,893,491)  $(2,115,406)
Items not affecting cash:          
Amortization and depreciation   124,505    321,017 
Bad debt expense   (7,358)   - 
Inventory impairments   64,336    - 
Fair value changes on derivatives   1,390,550    - 
Interest expense, net of repayments   (4,651)   260,521 
Interest income   -    516 
Share-based payments   812,735    592,792 
           
Net change in non-cash working capital items:          
Trade and other receivables   (6,303)   (1,205,038)
Prepaids   (731,566)   (107,540)
Inventory   (1,060,581)   (1,331,153)
Advances to suppliers   (590,506)   (190,683)
Accounts payable and accrued liabilities   (836,696)   (977,180)
Net cash used in operating activities   (5,739,026)   (4,752,154)
Investing activities:          
Intangible additions   (739,579)   (1,113,383)
Equipment additions   -    (35,688)
Acquistion of ClearRF   (155,014)   (122,014)
Net cash used in investing activities   (894,593)   (1,271,085)
Financing activities:          
Lease payments   (78,731)   (35,746)
Bank loan   (27,159)   (64,848)
Repayment of long-term debt   -    (14,286)
Convertible debt issued, net of repayments   (4,000,000)   (1,177,786)
Shares issued for cash, net of share issue costs   18,303,337    609,041 
  Exercise of pre-funded warrants   14,800    - 
Net cash from financing activities   14,212,247    (683,625)
Effect of foreign exchange on cash   22,679    (25,885)
Change in cash for the period   7,601,307    (6,732,749)
Cash and restricted cash, beginning of the period   1,619,742    16,464,266 
Cash and restricted cash, end of the period  $9,221,049   $9,731,517 

 

The accompanying notes are an integral part of these consolidated audited interim financial statements.

 

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Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

1.NATURE OF OPERATIONS AND GOING CONCERN

 

Siyata Mobile Inc. (“Siyata” or the “Company”) was incorporated under the Business Corporations Act, British Columbia on October 15, 1986. The Company’s shares are listed on NASDAQ under the symbol SYTA and warrants issued on September 29, 2020, are traded under the symbol SYTAW. The Company’s principal activity is the sale of vehicle-mounted, cellular-based communications platforms over advanced 4G mobile networks and cellular booster systems. The registered and records office is located at 2200 - 885 West Georgia Street, Vancouver, BC V6C 3E8.

 

These consolidated unaudited interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than a process of forced liquidation. These consolidated unaudited interim financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Company incurred a net loss of $4,893,491 during the three months ended March 31, 2022 (March 31, 2021- net loss of $2,115,406), and, as of that date, the Company’s total deficit was $ $67,412,903. The Company’s continuation as a going concern is dependent upon the success of the Company’s sale of inventory, the existing cash flows, and the ability of the Company to obtain additional debt or equity financing, all of which are uncertain. The Company faces risks related to (COVID-19) which could significantly disrupt research and development, operations, sales, and financial results. Our products are commonly used in industries that have been subject to disruption due to global lockdowns, and therefore demand and credit quality of our customers has been negatively impacted. It is not possible to predict the ultimate impact or duration of COVID-19 on our business.

 

These material uncertainties raise substantial doubt on the Company’s ability to continue as a going concern.

 

2.BASIS OF PREPARATION

 

Statement of compliance

 

These consolidated unaudited interim financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

 

Change of functional currency

 

Effective October 1, 2020, management determined that the Company’s functional currency changed from Canadian dollars to United States dollars (“USD”). The change in the functional currency has been accounted for on a prospective basis and is primarily based on the fact that the Company’s securities are listed on the Nasdaq exchange and as a result the future financing of the Company and cash flows of the entities will be in USD.

 

In accordance with Company’s existing policy, the Company did not reassess the classification of financial instruments as liabilities or equity as a result of the change in functional currency. As a result, warrants remain classified as equity and are not revalued at fair value. For the same reason, the change in functional currency did not give rise to an embedded derivative related to the Company’s previously outstanding convertible debt with a conversion price denominated in Canadian dollars.

 

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Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

  

2.BASIS OF PREPARATION (cont’d)

 

Change of presentation currency

 

As a result of the USD financing and the majority of cash flows denominated in US dollars, the Company changed its presentation currency from Canadian dollars to “USD” effective October 1, 2020. The change in the financial statement presentation currency is an accounting policy change and has been accounted for retrospectively. The balance sheets for each period presented have been translated from the related subsidiary’s functional currency to the new “USD” presentation currency at the rate of exchange prevailing at the respective balance sheet date except for equity items, which have been translated at accumulated historical rates from the related subsidiary’s date of incorporation. The statements of loss and comprehensive loss were translated at the average exchange rates for the reporting period, or at the exchange rate prevailing at the date of transactions. Exchange differences arising in 2018 on translation from the related subsidiary’s functional currency to the “USD” presentation currency have been recognized in other comprehensive income and accumulated as a separate component of equity.

 

With the retrospective application of the change in presentation currency from the Canadian dollar to the US dollar, the Accumulated Other Comprehensive Income (“AOCI”) related to the translation of “USD” functional currency subsidiaries was eliminated except for the wholly-owned subsidiary, Signifi Mobile Inc. whose functional currency is in Canadian dollars. However, with the retrospective application of the change in presentation currency to the “USD”, the Company’s corporate office, which had a Canadian dollar functional currency, resulted in an AOCI balance. The AOCI balance generated by the Canadian dollar entities has been adjusted since it now reflects the translation into the new “USD” presentation currency.

 

Basis of consolidation and presentation

 

These consolidated unaudited interim financial statements of the Company have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit and loss, which are stated at their fair value. In addition, the consolidated financial statements have been prepared using the accrual basis of accounting, except for the statement of cash flows.

 

These consolidated unaudited interim financial statements incorporate the financial statements of the Company and its wholly controlled subsidiaries. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. These consolidated unaudited interim financial statements include the accounts of the Company and its direct wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

 

The consolidated unaudited interim financial statements include the accounts of the Company and its wholly-owned subsidiaries:

 

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

 

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Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

2.BASIS OF PREPARATION (cont’d)

 

Foreign currency translation

 

Items included in the financial statements of each entity in the Company are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”) and has been determined for each entity within the Company. The functional currency of Siyata Mobile Inc. is the USD which is also the functional currency of all its subsidiaries except Signifi Mobile Inc. whose functional currency is Canadian dollars. The functional currency determinations were conducted through an analysis of the consideration factors identified in International Accounting Standards (“IAS”) 21, The Effects of Changes in Foreign Exchange Rates.

 

Assets and liabilities of entities with a functional currency other than the USD are translated into USD at period-end exchange rates. Income and expenses, and cash flows are translated into USD using the average exchange rate.

 

Transactions in currencies other than the entity’s functional currency are translated at the exchange rates in effect on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange in effect as at the statement of financial position date. Non-monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates prevailing at the time of the acquisition of the assets or assumption of the liabilities. Foreign currency differences arising on translation are recognized in the statement of loss and comprehensive loss.

 

Use of estimates and judgements

 

The preparation of the consolidated unaudited interim financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

i)Critical accounting estimates

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are, but not limited to the following:

 

Income taxes - Tax provisions are based on enacted or substantively enacted laws. Changes in those laws could affect amounts recognized in profit or loss both in the period of change, which would include any impact on cumulative provisions, and future periods. Deferred tax assets, if any, are recognized to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets are likely to reverse.

 

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Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

2.BASIS OF PREPARATION (cont’d)

 

Use of estimates and judgements (cont’d)

 

  Fair value measurements - Certain of the Company’s (financial) assets and liabilities are measured at fair value. In estimating fair value, the Company uses market-observable data to the extent it is available. In certain cases where Level 1 inputs are not available the Company will engage third-party qualified valuators to perform the valuation. Information about the valuation techniques and inputs used in determining the fair value of financial instruments is in Note 12(d).

 

Fair value of stock options and warrants - Determining the fair value of warrants and stock options requires judgments related to the choice of a pricing model, the estimation of stock price volatility, the expected forfeiture rate and the expected term of the underlying instruments. Any changes in the estimates or inputs utilized to determine fair value could have a significant impact on the Company’s future operating results or on other components of shareholders’ equity.

 

Capitalization of development costs and their amortization rate – Development costs are capitalized in accordance with the accounting policy. To determine the amounts earmarked for capitalization, management estimates the cash flows which are expected to be derived from the asset for which the development is carried out and the expected benefit period.

 

Inventory - Inventory is valued at the lower of cost and net realizable value. Cost of inventory includes cost of purchase (purchase price, import duties, transport, handling, and other costs directly attributable to the acquisition of inventories), cost of conversion, and other costs incurred in bringing the inventories to their present location and condition. Net realizable value for inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Provisions are made in profit or loss of the current period on any difference between book value and net realizable value.

 

Estimated product returns - Revenue from product sales are recognized net of estimated sales discounts, credits, returns, rebates and allowances. The return allowance is determined based on an analysis of the historical rate of returns, industry return data, and current market conditions, which is applied directly against sales.

 

Impairment of non-financial assets - The Company assesses impairment at each reporting date by evaluating conditions specific to the Company that may lead to asset impairment. The recoverable amount of an asset or a cash-generating unit (“CGU”) is determined using the greater of fair value less costs to sell and value in use which requires the use of various judgments, estimates, and assumptions. The Company identifies CGUs as identifiable groups of assets that are largely independent of the cash inflows from other assets or groups of assets. Value in use calculations require estimations of discount rates and future cash flows derived from revenue growth, gross margin and operating costs. Fair value less costs to sell calculations require the Company to estimate fair value of an asset or a CGU using market values of similar assets as well as estimations of the related costs to sell.

 

Useful life of intangible assets – The Company estimates the useful life used to amortize intangible assets which relate to the expected future performance of the assets acquired based on management’s estimate of the sales forecast.

 

Collectability of trade receivables – In order for management to determine expected credit losses in accordance with IFRS 9, we are required to make estimates based on historical information related to collections, in addition to taking the current condition of our customers’ credit quality into account.

 

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Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

2.BASIS OF PREPARATION (cont’d)

 

Use of estimates and judgements (cont’d)

 

ii)Critical accounting judgments

 

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are, but are not limited to, the following:

 

Deferred income taxes – judgments are made by management to determine the likelihood of whether deferred income tax assets at the end of the reporting period will be realized from future taxable earnings. To the extent that assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as the amounts recognized in profit or loss in the period in which the change occurs.

 

Functional currency - The functional currency for the Company and each of its subsidiaries is the currency of the primary economic environment in which the respective entity operates. The Company has determined the functional currency of each entity to be the USD as of October 1, 2020, except for Signifi Mobile Inc. whose functional currency is Canadian dollars. The Company reconsiders the functional currency of its subsidiaries if there is a change in events and/or conditions that determine the primary economic environment.

 

Going concern – As disclosed in Note 1 to the consolidated financial statements.

 

3.SIGNIFICANT ACCOUNTING POLICIES

 

(a)Impairment of long lived assets

 

The carrying amounts of the Company’s non-financial assets, other than deferred tax assets if any, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

 

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit” or “CGU”). The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

 

If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

 

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss.

 

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization if no impairment loss had been recognized. A reversal of an impairment loss is recognized immediately in profit or loss.

 

11

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

3.SIGNIFICANT ACCOUNTING POLICIES (cont’d)

 

(b)Intangible assets

 

i)Research and development

 

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss when incurred.

 

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and Siyata has the intention and sufficient resources to complete development and to use or sell the asset. The expenditure capitalized in respect of development activities includes the cost of materials, direct labor and overhead costs that are directly attributable to preparing the asset for its intended use, and capitalized borrowing costs. Other development expenditure is recognized in profit or loss as incurred.

 

In subsequent periods, capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses.

 

ii)Subsequent expenditure

 

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

 

iii)Amortization

 

Amortization is a systematic allocation of the amortizable amount of an intangible asset over its useful life. The amortizable amount is the cost of the asset less its estimated residual value.

 

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of the intangible assets from the date they are available for use. See Note 10 for amortization rates and methods applied to each class of intangible assets. An annual review of the useful life of intangible assets is made by management and any changes in useful life are reflected prospectively.

 

Internally generated intangible assets are not systematically amortized as long as they are not available for use (i.e. they have not completed certifications and/or are in working condition for their intended use). Accordingly, these intangible assets, such as development costs, are tested for impairment at least once a year, until such date as they are available for use.

 

(c)Business Combinations

 

Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values at the date of acquisition, of assets transferred, liabilities incurred or assumed, and equity instruments issued by the Company. The acquiree’s identifiable assets and liabilities assumed are recognized at their fair value at the acquisition date. The excess of the consideration over the fair value of the net identifiable assets and liabilities acquired is recorded as goodwill. Any gain on a bargain purchase is recorded in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. Any goodwill that arises is tested annually for impairment.

 

12

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

3.SIGNIFICANT ACCOUNTING POLICIES (cont’d)

 

(d)Goodwill

 

Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognized at the date of acquisition. Goodwill is initially recognized as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not subject to amortization but is tested for impairment annually.

 

(e)Inventory

 

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in first-out (FIFO) principle, and includes expenditure incurred in acquiring the inventories and the costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completing and selling expenses.

 

(f)Revenues

 

Revenue from the sale of goods, in the ordinary course of business, is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. When the credit period is short and constitutes the accepted credit in the industry, the future consideration is not discounted.

 

Revenue is recognized when persuasive evidence exists (usually in the form of an executed sales agreement), that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

 

Transfers of risks and rewards vary depending on the individual terms of the contract of sale. For sales on products in Israel, transfer usually occurs when the product is received at the customer’s warehouse, but for some international shipments transfer occurs upon loading the goods onto the relevant carrier.

 

(g)Financial Instruments

 

Financial assets

 

On initial recognition, financial assets are recognized at fair value and are subsequently classified and measured at: (i) amortized cost; (ii) fair value through other comprehensive income (“FVOCI”); or (iii) fair value through profit or loss (“FVTPL”). The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured at fair value net of transaction costs that are directly attributable to its acquisition except for financial assets at FVTPL where transaction costs are expensed. All financial assets not classified and measured at amortized cost or FVOCI are measured at FVTPL. On initial recognition of an equity instrument that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive.

 

The classification determines the method by which the financial assets are carried on the balance sheet subsequent to inception and how changes in value are recorded. The Company has classified its cash, restricted cash, loan to director and trade, and other receivables at amortized cost.

 

Changes to financial assets measured at fair value are recognized in profit and loss as they arise (“FVPL”).

 

Changes in financial assets recorded at amortized cost are recognized in profit and loss when the asset is derecognized or reclassified.

 

13

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

3.SIGNIFICANT ACCOUNTING POLICIES (cont’d)

 

(g)Financial Instruments (cont’d)

 

Impairment

 

An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period.

 

In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

 

Financial liabilities

 

All financial liabilities (including liabilities designated at FVTPL) are recognized initially on the date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

 

The subsequent measurement of financial liabilities is determined based on their classification as follows:

 

(i) FVTPL – Derivative financial instruments entered into by the Company are classified as FVTPL.

 

(ii) Amortized cost – All other financial liabilities are classified as amortized cost using the effective interest method.

 

The Company has classified its bank loan, accounts payable and accrued liabilities, and long-term debt as other financial liabilities and carried on the balance sheet at amortized cost. Future purchase consideration, convertible promissory note, and warrant liability are all classified as FVTPL.

 

(h)Loss per share

 

The Company presents basic and diluted loss per share data for its common shares. Basic loss per share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period, adjusted for own shares held. Diluted loss per share is calculated by dividing the loss by the weighted average number of common shares outstanding assuming that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period. In the Company’s case, diluted loss per share is the same as basic loss per share, as the effect of outstanding share options and warrants on loss per share would be anti-dilutive. The weighted average number of shares is retroactively changed to reflect the 1-to-145 reverse stock split that occurred on September 25, 2020.

 

14

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

3.SIGNIFICANT ACCOUNTING POLICIES (cont’d)

 

(i)Share-based payments

 

The stock option plan allows Company employees and consultants to acquire shares of the Company. The fair value of options granted is recognized as a share-based payment expense with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. Consideration paid on the exercise of stock options is credited to share capital and the fair value of the option is reclassified from share-based payment reserve to share capital.

 

In situations where equity instruments are issued to non-employees and some or all of the services received by the entity as consideration cannot be specifically identified, they are all measured at the fair value of the share-based payment, otherwise, share-based payments are measured at the fair value of the services received.

 

The fair value is measured at the grant date at each tranche is recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option-pricing model taking into account the terms and conditions upon which the options were granted. At each reporting date, the amount recognized as an expense is adjusted to reflect the number of stock options that are expected to vest.

 

(j)Provisions

 

Provisions are recognized when the Company has a present obligation (legal or constructive), as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where the effect is material, the provision is discounted to net present value using an appropriate current market-based pre-tax discount rate and the unwinding of the discount is included in profit or loss as interest expense from discounting obligations.

 

(k)Income taxes

 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable operations, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

 

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized for unused tax losses, tax credits, and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

 

15

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

3.SIGNIFICANT ACCOUNTING POLICIES (cont’d)

 

(l)Leases

 

The Company accounts for lease contracts in accordance with IFRS 16, Leases. At the inception of a contract, the Company assesses whether a contract is, or contains a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight- line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease tern. In addition, the right-of-use assets are adjusted for impairment losses, if any. The estimated useful lives and recoverable amounts of right-of-use assets are determined on the same basis as those of property and equipment.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases and leases for which the underlying asset is of low value. The Company recognizes the lease payments associated with these leases as an expense: on a straight-line basis over the lease term. During the years ended December 31, 2021 and 2020, the Company did not recognize any lease payments as expenses for short-term leases and leases for which the underlying assets are of low value.

 

(m)Equipment

 

Property, plant and equipment that qualifies for recognition as an asset shall be measured at its cost. The depreciable amount of an asset is determined after deducting its residual value. Depreciation of property, plant, and equipment is based on the straight-line method over the useful life of the asset. The depreciation charge for each period shall be recognized in profit or loss.

 

(n)New accounting pronouncements

 

There are no upcoming account pronouncements expected to have a material impact on the Company’s consolidated unaudited interim financial statements.

 

16

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

4.ACQUISITION OF CLEAR RF LLC

 

On March 31, 2021, the Company acquired all of the issued and outstanding units of Clear RF LLC (“ClearRF”). In consideration, the Company paid cash of $155,015 and issued 23,949 common shares at a value of $194,985.

 

As a further consideration, the Company made the additional following payments:

 

a)On March 31, 2022, pay $155,015 in cash (or less, subject to certain income minimums);
   
b)On March 31, 2022, issue common shares of the Company valued at $190,095, and

.

No further incentives were earned by the vendors other than the amounts outlined in 4(a) and (b) above.

 

This transaction qualifies as a business combination and was accounted for using the acquisition method of accounting. To account for the transaction, the Company has determined the fair value of the assets and liabilities of ClearRF at the date of the acquisition and a purchase price allocation. These fair value assessments require management to make significant estimates and assumptions as well as apply judgment in selecting the appropriate valuation techniques.

 

The acquisition of ClearRF is consistent with the Company’s corporate growth strategy to continue to acquire innovative patented products in the cellular booster market. The Company plans to leverage ClearRF’s machine-to-machine booster technology in order to build relationships and facilitate sales of the cellular booster suite of products.

 

The aggregate amount of the total acquisition consideration is $700,000, comprised as follows:

 

Consideration  Note   Fair Value 
Cash      $155,015 
Fair value of 23,949 shares at $8.14 per share  (i)    194,985 
Future purchase consideration  (ii)    350,000 
Total Consideration      $700,000 

 

(i)The fair value of the shares issued was determined by multiplying the number shares issued by the share price of the Company on March 31, 2021.

 

(ii)Future consideration represents the expected future payments of cash and common shares. Since the balance of the shares and the cash is due within one year, the Company did not discount the future purchase consideration for the time value of money.

 

The purchase price was allocated as follows:

 

Purchase price allocation  Fair Value 
     
Purchase price  $700,000 
      
Less: Net assets acquired     
   Net identifiable tangible assets   127,106 
   Net identifiable intangible assets   522,637 
    649,743 
Goodwill  $50,257 

 

17

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

4.ACQUISITION OF CLEAR RF LLC (cont’d)

 

The net identifiable intangible asset consists of two patents acquired on the acquisition that is valued at $122,717 plus supplier relationship valued at $399,920. These intangibles assets are recorded at cost and are amortized on a straight-line basis over its estimated useful life of four years with no residual value. The Company incurred costs related to the acquisition totaling $79,069 to complete the acquisition which was recorded in the statement of loss and comprehensive loss.

 

On December 31, 2021, the Company had an independent impairment in value report prepared for the intangibles and goodwill. Management, based on this report, impaired the full amount of the supplier relationship of $399,920 because of a worldwide component and supply chain shortfall. Management also impaired the full value of the goodwill in the amount of $50,257.

 

5.TRADE AND OTHER RECEIVABLES

 

   31-Mar-22   31-Dec-21 
Trade receivables  $1,785,445   $1,791,046 
Allowance for doubtful accounts   (1,095,655)   (1,090,066)
Taxes receivable   868,298    843,447 
Total  $1,558,088   $1,544,427 

  

Provisions on Trade Receivables

In accordance with policy to use the expected credit loss model, we utilize the expedited method where trade receivables are provided for based on their aging, as well as providing for specified balances deemed non-collectible. As at March 31, 2022, we concluded that a bad debt provision of $1,095,655 (December 31, 2021-$1,090,066) was to be recognized.

 

Factoring Arrangements and Liens

Siyata Mobile Israel (“SMI”) has a factoring agreement on its trade receivables, whereby invoices are fully assigned to a funding entity in return for 80%-85% of the total sale to be paid to SMI by the funding entity in advance. The remaining 15-20% is paid to SMI when the funding entity receives payment from the customer.

 

SMI incurs a financing charge of 3.1% on advances received and is subject to certain covenants.

 

The 80-85% received upfront remains a liability from SMI to the funding entity until final settlement, however, all such balances are fully insured in case of non-payment. As SMI has both the legally enforceable right and the intention to settle the receivable and liability on a net basis in accordance with IAS 32, Financial Instruments, trade receivables are presented net of the liability for amounts advanced. As at March 31, 2022, the total amount expended by the funding entity was NIL (December 31, 2021 - $27,000).

 

Siyata Mobile Inc. has provided the North American receivables as collateral for the outstanding convertible debenture as outlined Note 12(d). The carrying amount of the North American trade and other receivables on March 31, 2022 is $459,872 (December 31, 2021-$569,068).

 

18

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

6.INVENTORY

 

   31-Mar-22   31-Dec-21 
Finished products   7,010,939    6,031,753 
Impairment of finished products   (3,884,290)   (3,819,955)
Accessories and spare parts   1,106,760    1,025,366 
Impairment of accessories and spare parts   (839,693)   (839,693)
Total  $3,393,716   $2,397,471 

 

Refer to Note 17 for total inventories expensed as cost of sales during the three months ended March 31, 2022 and 2021.

 

Provision on inventory

Management is presently reviewing the inventory for impairment on a quarterly basis. As at March 31, 2022, it was determined that $4,723,983 (December 31, 2021- $4,659,648) of the inventory was impaired due to slow movement. The accessories and spare parts related to these products amounted to $839,693 (December 31, 2021 - $839,693), which was also impaired.

 

Liens

Siyata Mobile Inc. has provided the North American inventory as collateral for the outstanding convertible debenture as outlined in Note 12(d). The carrying amount of the North American inventory is $1,966,713 (December 31, 2021-$1,355,482).

 

7.RIGHT OF USE ASSETS

 

   March 31 22   Dec 31 21 
Opening Balance  $1,077,845   $377,035 
Addition in the year   -    910,055 
Translation adjustment   (14,579)   (4,328)
Amortization in the year   (81,568)   (204,917)
Closing Balance  $981,698   $1,077,845 
           
Allocation of Right of Use Assets          
Office lease  $935,488   $1,004,750 
Car leases   46,210    73,095 
Total Right of Use Assets  $981,698   $1,077,845 

 

19

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

8.INTANGIBLE ASSETS

 

   Development Costs   Uniden License   E-Wave License   Clear RF Patent + Supplier relationship   Total 
                     
Cost:                    
Balance at December 31, 2020   10,540,477    116,543    1,319,184    -    11,976,204 
Additions   2,769,679    -    -    522,637    3,292,316 
Foreign Exchange  $5,370    183    2,073         7,626 
Balance at December 31, 2021   13,315,526    116,726    1,321,257    522,637    15,276,146 
Additions   739,579    -    -    -    739,579 
Foreign Exchange   -    -    -    -    0 
Balance at March 31, 2022   14,055,105    116,726    1,321,257    522,637    16,015,725 
                          
Accumulated Amortization:                         
Balance at December 31, 2020   4,283,382    97,460    1,046,244    -    5,427,086 
Additions   469,789    19,418    278,567    29,189    796,963 
Impairment   4,339,366    -    -    399,920    4,739,286 
Foreign Exchange   (34,020)   (152)   (3,554)   -    (37,726)
Balance at December 31, 2021   9,058,517    116,726    1,321,257    429,109    10,925,609 
Additions   -    -    -    25,000    25,000 
Foreign Exchange   -    -    -    (98)   (98)
Balance at March 31, 2022   9,058,517    116,726    1,321,257    454,011    10,950,511 
                          
Net Book Value:                         
                          
Balance at December 31, 2021  $4,257,009   $0   $0   $93,528   $4,350,537 
                          
Balance at March 31, 2022  $4,996,588   $0   $0   $68,626   $5,065,214 

 

20

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

8.INTANGIBLE ASSETS (cont’d)

 

Development Costs  

 

Development costs are internally generated and are capitalized in accordance with the IAS 38, Intangible Assets. On an annual basis, the Company assesses capitalized development costs for indicators of impairment or when facts or circumstances suggest the carrying amount may exceed its recoverable amount.  

 

The Company engaged a third-party evaluator to determine the recoverable amount of the intangible assets at December 31, 2021. Based on the results of their analysis using the Value In Use (“VIU”) model using a discounted value of 14.2% in 2021, management determined that the recoverable amount was not equal to, or in excess of the carrying amount for a total impairment at December 31, 2021 of $4,739,286 as follows: rugged device impairment of $4,339,366 and $399,920 impairment to a supplier relationship.  

 

During the three months’ ended March 31, 2022 the Company incurred $123,316 (March 31, 2020-NIL) in product development costs which did not satisfy the criteria for capitalization and were recorded in profit and loss.  

 

Uniden License During 2016, the Company acquired a license agreement from Uniden America Corporation (“Uniden”). The agreement provides for the Company to use the trademark “Uniden”, along with associated designs and trade dress to distribute, market and sell its cellular signal booster and accessories during its term.  The agreement has been renewed up to December 31, 2022 and is subject to certain minimum royalties.  The license agreement is amortized on a straight-line basis over its five-year term and is fully amortized on December 31, 2021.

 

E-Wave License

 

On October 1, 2017, the Company acquired a license from E-Wave Mobile Ltd. (the “E-Wave License”). The license agreement is recorded at cost and is amortized on a straight-line basis over its estimated useful life of a four-year term and is fully amortized on December 31, 2021.

 

21

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

9.GOODWILL

 

The Company had recorded goodwill balances of $852,037 (December 31, 2020-$801,780), consisting of goodwill on the acquisition of the wholly-owned subsidiary, Signifi Mobile Inc. in the amount of $801,780 plus the newly acquired goodwill in 2021 from the acquisition of Clear RF in the amount of $50,257 (“CGU”). The Company assesses whether there are, events, changes in circumstances, and/or changes in key assumptions on which management has based its determination of the CGU, that would, more likely than not, reduce the fair value of the CGU to below its carrying value and therefore, require goodwill to be tested for impairment at the end of each reporting period.

 

As of December 31, 2021, the Company performed its annual impairment test on the goodwill using the Fair value less cost of disposal method. Due to a history of losses in this CGU in the preceding few years and without documentation of back-orders or basis to project profitable operations in the near term, management determined that the recoverable amount was less than the carrying value on December 31, 2021 and impaired the full amount of the Goodwill in the amount of $852,037.

 

10.BANK LOAN

 

Siyata Mobile Israel (“SMI”) has a factoring agreement on its trade receivables, whereby invoices are fully assigned to a funding entity in return for 80%-85% of the total sale to be paid to SMI by the funding entity in advance. The remaining 15-20% is paid to SMI when the funding entity receives payment from the customers. As at March 31, 2022, the total amount borrowed by the Company extended by this funding entity and included in the bank loan was NIL (December 31, 2021, -$27,000).

 

22

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

11.LEASE OBLIGATIONS

 

   Mar 31 22   Dec 31 21 
Opening Balance  $1,020,482   $341,592 
Additions in the year   -    833,766 
Interest expense   (4,651)   21,279 
Translation adjustment   (4,431)   6,527 
Lease payments   (78,731)   (182,682)
    932,669    1,020,482 
Due within one year   (341,000)   (232,969)
Balance-end of period  $591,669   $787,513 

 

Future Minimum Lease Payments    

 

   Mar 31 22   Dec 31 21 
year 1   341,000    232,969 
year 2   341,000    255,000 
year 3   125,335    270,000 
year 4   125,334    262,513 
Tota lease obligations  $932,669   $1,020,482 

 

The Company has a long term restricted term deposit of $168,167 held by the Company’s bank to guarantee a portion of the office lease located in Israel.

 

23

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

12.CONVERTIBLE DEBENTURES

 

   Dec 23/21   June 23/21   Nov 2/23     
   $CAD7.866MM   $CAD1.58MM   $6.0MM USD   Total 
Balance December 31, 2020   5,014,852    1,145,917    -    6,160,769 
                     
Interest and accretion expense   1,893,494    -    -    1,893,494 
Interest paid or accrued   (746,145)   -    -    (746,145)
Issuance of the $6MM debenture   -    -    4,395,881    4,395,881 
Repayment of 10% convertible debenture   -    (1,145,917)   -    (1,145,917)
Repayment of the 12% debenture   (6,162,201)   -    -    (6,162,201)
Unamortized fair value difference-opening   -    -    (1,341,948)   (1,341,948)
Amortization of fair value difference   -    -    111,830    111,830 
Change in fair value of debenture   -    -    177,530    177,530 
                     
Balance Dec 31, 2021   -    -    3,343,293    3,343,293 
                     
Partial repayment of $6MM convertible debenture   -    -    (4,000,000)   (4,000,000)
Unamortized day one fair value difference   -    -    757,951    757,951 
Change in fair value of debenture   -    -    1,922,507    1,922,507 
Balance March 31, 2022   -    -    2,023,751    2,023,751 
                     
Current portion of debenture             2,023,751    2,023,751 
Long term portion of debenture             -    - 

 

24

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

12.CONVERTIBLE DEBENTURES (cont’d)

 

(a) On December 23, 2019, the Company issued 7,866,000 unsecured 12% convertible debentures at a price of $0.77 per unit ($1.00 CAD), convertible into 0.0153 common shares of the Company at $65.25 CAD (the “Conversion Price”) per common share. The discounted liability for this convertible debenture at December 23, 2019, is $4,049,349. The amount allocated to contributed surplus was $445,053 and the balance of $1,547,500 was the transaction costs incurred.

 

Each of this Convertible Debenture unit bears an interest rate of 12% per annum from the date of issue, payable in cash quarterly in arrears. Any unpaid interest payments will accrue and be added to the principal amount of the Convertible Debenture. From January 1, 2021, until December 23, 2021, the Company paid $746,145 (2020-$715,763) in interest related to these 12% convertible debentures, included within finance expense in profit and loss.

 

On June 24, 2020, $57,692 ($75,000 CAD) the face value of the 12% convertible debentures was converted into common shares of the Company. The discounted value of this debenture at the date of conversion was $40,980 ($54,975 CAD). This gain on conversion of $16,712 was recorded as a finance income in 2020.

 

The 12% Convertible Debentures matured and was fully paid on December 23, 2021 (the “Maturity Date”) in the amount of $6,162,201.

 

(b) On June 23, 2020, the Company entered into a non-brokered private placement financing agreement with Accel Telecom Inc. Accel Telecom subscribed for 1,330 senior unsecured 10% convertible debentures maturing one year from the issue date at an issue price of $745 (CDN$1,000) per 10% Convertible Debenture for aggregate gross proceeds of $991,427 ($1,330,000 CAD). Each Convertible Debenture can be convertible, at the option of the holder, into 23 common shares in the capital of the Company at a price of $34.11 (CDN$43.50) per Common Share and are redeemable at 101% of the face value at any time after the closing date. On the closing date, Accel will also receive 0.0069 non-transferrable common share purchase warrant for each $0.784 (CDN$1.00) principal amount of the Convertible Debentures purchased. Each warrant entitles the holder to acquire one common share at an exercise price of $34.11 (CDN$43.50) per warrant share for a period of twelve (12) months after the date of issue.

 

On January 6, 2021, the Company redeemed in full this senior unsecured 10% convertible debenture for an amount of $964,601.

 

(c) On June 28, 2020, one of the 10.5% convertible debenture holders, see 10 (a), elected to participate on the exact same terms and conditions in the 10% convertible debenture described in 11 (c) for their $186,359 ($250,000 CAD) face value that would otherwise have matured on June 28, 2020.

 

On January 6, 2021, the Company redeemed in full this senior unsecured 10% convertible debenture for an amount of $181,316.

 

25

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

12.CONVERTIBLE DEBENTURES (cont’d)

 

(d) On November 3, 2021, the Company issued a US$7,200,000 million convertible promissory note (the “Promissory Note”) and 2,142,857 warrants for gross proceeds of US$6,000,000.

 

The warrants allow for the purchase of 2,142,857 common shares of the Company at an exercise price of US4.00 per common share. The warrants expire 5 years from the issue date of the promissory note. Under the terms of the warrants, the exercise price of the warrant will be adjusted if the Company closes an offering where the common shares of the Company are offered at a price less than the exercise price, resulting in a revision of the exercise price equal to the common share offering. Because the exercise price of the warrants will vary if the Company issues common shares at a price lower than the exercise price of the warrants, the warrants are classified as liabilities.

 

The promissory note matures on November 2, 2023 (the “Maturity Date”). The promissory note will be repaid commencing May 2022 in monthly instalments of US$400,000. At the Company’s option, the repayments will be made in cash or common shares of the Company, or a combination of both. If paid by the issuance of common shares, the repayment is paid at a redemption price equal to the greater of 90% of the average five lowest daily volume-weighted average prices during the twenty trading days prior to the issuance of the common shares or US$2.00 (the “Redemption Price”).

 

All or a portion of the US$7,200,000 is convertible into common shares of the Company at a conversion price of US$10.00 per common share (the “Conversion Price”), at the option of the holder, at any time subsequent to six months from the date of issuance to the maturity date of November 2, 2023. Under the terms of the promissory note, the conversion price of the promissory note will be adjusted if the Company closes an offering where the common shares of the Company are offered at a price less than the exercise price, resulting in a revision of the conversion price equal to the common share offering.

 

At any time during the promissory note outstanding, the Company can provide the holder of the promissory note written notice of its intention to repay the amount owing. If the notice is provided within the first 6 months post issuance, the Company is required to repay an amount equal to US$7,000,000. Subsequent to this time period, the amount outstanding must be converted in full. If the Company provides notice of prepayment, the holder has the option to convert up to 25% of the principal amount at the lesser of the Redemption Price and the Conversion Price, as defined above.

 

Furthermore, if at any time prior to November 2, 2023, the Company proposes to offer or sell new securities, the Company shall first offer the holder the opportunity to purchase ten percent of the new securities.

 

Finally, should the Company subsequently issue equity interests of the Company for aggregate proceeds to the Company of greater than US$10 million, excluding offering costs or other expenses, unless otherwise waived in writing by and at the discretion of the holder, the Company will direct twenty percent of such proceeds from such issuance to repay the promissory note.

 

The Company has elected to measure the promissory note (hybrid contract) at fair value through profit or loss (“FVTPL”) on initial recognition and, as such, the embedded conversion feature is not separated.

 

The Company paid legal fees and expenses of $1,145,538 related to the issuance of the promissory note and warrants which have been included in finance expense on the consolidated statement of operations for the year ending December 31, 2021.

 

26

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

12.CONVERTIBLE DEBENTURES (cont’d)

 

Note (12d) (Cont’d)

 

On initial recognition, the fair value of the convertible promissory note was $4,395,881, and the warrants issued in conjunction with the instrument (see below) were valued at $2,946,066. The fair value of the components exceeded the transaction price of $6,000,000 and the resulting difference has been deferred and will be recognized in the consolidated statement of operations over the term of the instrument on a straight-line basis, in the change in fair value of the convertible promissory note.

 

The unamortized fair value difference at March 31, 2022, and related activity during the period is as follows:

 

Balance, beginning of period  $1,230,118 
Recognized in profit or loss   (757,951)
Balance, end of period  $472,167 

 

The balance of the promissory notes is as follows:

 

   Promissory
Note
 
Balance, beginning of period  $4,573,412 
Repayment   (4,000,000)
Change in fair value   1,922,506 
Unamortized day one fair value difference   (472,167)
Balance, March 31, 2022  $2,023,751 
      
Current portion of the promissory note  $2,203,751 

 

As at March 31, 2022 the total principal amount outstanding on the convertible promissory note is $3,2000,000 payable in consecutive monthly instalments of $400,000 beginning on May 3, 2022, payable in cash or shares at the discretion of the Company.

 

Fair value calculation

 

The Company estimated the fair value of the promissory note using a binomial lattice model with the following assumptions: risk-free rate of 0.47% -1.18%; share price of $3.93; expected dividend yield of 0%; and expected volatility of 46%. Based on these estimates, the promissory note had a fair value of $4,395,881 upon issuance.

 

On March 31, 2022, the fair value of the promissory note was estimated at $2,203,751 (Dec 31, 2021-$4,573,411) using a binomial lattice model with the following assumptions: risk-free rate of 2.01% (Dec 31, 2021-0.67%); share price of $1.25 (Dec 31, 2021- $3.70), expected dividend yield of 0%, and expected volatility of 76% (Dec 31, 2021-45%).

 

There was no change in the fair value due to changes in own credit risk during the period.

 

27

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

12.CONVERTIBLE DEBENTURES (cont’d)

 

Note (12d) (Cont’d)

 

The Company completed a secondary offering of its common shares at a price of $2.30 per common share on January 11, 2022. In accordance with the terms of the agreement, as the common shares of the secondary prices were offered at a price less than the stated Conversion Price (US$10.00 per common share) of the promissory note and the Exercise Price of the warrants (US$4.00 per common share), both the Conversion Price and the Exercise Price were revised to US$2.30 per common share. In addition, as the total gross proceeds of the secondary offering were in excess of $10,000,000, excluding offering costs or other expenses, the Company was required to direct 20% of the gross proceeds to the Lender. A total of US$4,000,000 was repaid to the Lender on January 13, 2022.

 

13.WARRANT LIABILITY

 

The warrants allow for the purchase of 2,142,857 common shares of the Company at an exercise price of US4.00 per common share. The warrants expire 5 years from the issue date of the promissory note. Under the terms of the warrants, the exercise price of the warrant will be adjusted if the Company closes an offering where the common shares of the Company are offered at a price less than the exercise price, resulting in a revision of the exercise price equal to the common share offering. Because the exercise price of the warrants will vary if the Company issues common shares at a price lower than the exercise price of the warrants, the warrants are classified as liabilities. (see 12(d) for the change in exercise price as of January 13, 2022, to $2.30 per share).

 

On December 7, 2021, the holder exercised 250,000 warrants to acquire 250,000 common shares of the Company at an exercise price of $4.00 per common share. As a result of the exercise of the warrants, the Company received gross proceeds of $1,000,000 and the proportionate fair value of $385,190 of the underlying warrants on the date of exercise was transferred to share capital.

 

At March 31, 2022, 1,892,857 warrants were outstanding at an exercise price of $2.30 (December 31, 2021-$4.00 see 12(d)

 

The balance of the warrant liability is as follows:

 

   Warrant
liability
 
Balance, December 31, 2021  $2,176,686 
Change in fair value   (1,289,907)
Balance, March 31, 2021  $886,779 

 

The fair value of the warrants as at the issuance date was $2,946,066 and was determined using the Black-Scholes Option Pricing Model with the following assumptions: share price: $3.93; exercise price: $4.00; expected volatility: 39%; dividend yield: 0%, risk-free rate: 0.47%.

 

During the year ended December 31, 2021, the holder exercised 250,000 warrants to acquire 250,000 common shares of the Company at an exercise price of $4.00 per common share. As a result of the exercise of the warrants, the Company received gross proceeds of $1,000,000 and the proportionate fair value of $385,190 of the underlying warrants on the date of the exercise was transferred to share capital. The fair value of the warrants at the exercise date was determined using the Black-Scholes Option Pricing Model with the following assumptions: share price: $4.60; exercise price $4.00; expected volatility: 30%; dividend yield: 0%; risk-free rate: 1.24%.

 

As at March 31, 2022, the fair value of the remaining 1,892,857 warrants were determined to be $886,779 (December 31, 2021-$2,176,686) as calculated using the Black-Scholes Option Pricing Model with the following assumptions: share price $1.25 (Dec 31, 2021-$3.70); exercise price: $2.30 (Dec 31, 2021-$4.00); expected volatility: 63% (Dec 31, 2021-37%); dividend yield: 0%; risk-free rate 2.01% (Dec 31, 2021-0.67%).

 

28

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

14.LONG TERM DEBT

 

On June 28, 2018, Signifi borrowed $192,886 USD from the Business Development Bank of Canada (“BDC”) for a term of four years, payable in monthly instalments of principal and interest. This loan bears interest at the bank’s base rate + 3.2%. The loan was repaid in full in September 2021 including all capital and interest. The loan was secured by the assets of Signifi and a guarantee by the Company and its Canadian subsidiaries. All security liens were removed prior to December 31, 2021.

 

15.FUTURE PURCHASE CONSIDERATION

 

   Mar 31,
2022
  

Dec 31,

2021

 
Balance, beginning of the period  $350,000   $- 
ClearRF future purchase consideration   (350,000)   350,000 
Balance, end of the period   NIL   $350,000 
           
Classification:          
Short-term (payable within one year)   -   $350,000 
Long-term   -    - 

 

The future purchase consideration arose on the acquisition of ClearRF as outlined in Note 4.

 

On March 31, 2022, the Company paid $155,015 in cash and issued common shares of the Company valued at $190,095 to extinguish this future purchase consideration.

 

At each reporting period, management updates estimate with respect to the probability of payment form and recognize changes in the estimated value of future purchase consideration in profit or loss.

 

29

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

16.SHARE CAPITAL

 

(a)Authorized Unlimited number of common shares without par value
    Unlimited number of preferred shares without par value

 

As at March 31, 2022, the Company had 14,111,305 common shares issued and outstanding (Dec 31, 2021-5,296,695.

 

Subsequent to March 31, 2022, the Company issued:

 

155,000 shares to suppliers as part of their agreed compensation; and
   
417,537 shares as payment for the first principal repayment of $400,000 on the convertible promissory note.

 

On September 24, 2020, the Company consolidated (each a “Share”) its common shares on the basis of 145 pre-consolidation Shares for one(1) post-consolidation share. Share amounts have been retrospectively restated to reflect the post-consolidation number of shares.

 

(b)Common share transactions

 

Transactions for the three months’ ended March 31, 2022 are as follows:

 

(i) On January 11, 2022, the Company completed an underwritten public offering in the United States, raising a total of $20,013,043 in gross proceeds. The Company allocated the gross proceeds and direct costs between the units, pre-funded units and option warrants using the relative fair value of the components.

 

The underwritten public offering resulted in the sale to the public of 7,215,652 Units at $2.30 per Unit, with each Unit being comprised of one common share and one warrant (the “Unit Warrants”) exercisable at $2.30 per share. The Unit warrants are exercisable immediately and have a term of 5 years. Gross proceeds of $10,370,5020 were allocated to the common shares, and $4,731,934 to the unit warrants.

 

In addition, the Company issued 1,480,000 pre-funded units (“Pre-Funded Units”) at $2.29 per Pre-Funded Unit. Each Pre-Funded Unit is comprised of a one-pre-funded warrant (a “Pre-Funded Warrant”) to purchase one common share, and one warrant to purchase one common share. The Pre-Funded Warrant allows the holder to acquire one common share of the Company at an exercise price of $0.01 per common share, and a warrant to purchase a common share at an exercise price of $2.30 per share. The warrants are exercisable immediately and have a term of 5 years. Each Pre-Funded Warrant is exercisable immediately and is exercisable until all Pre-Funded Warrants are exercised. Proceeds of $2,127,090 were allocated to the pre-funded warrants, and $919,446 to the warrants.

 

The Company concurrently sold an additional 1,304,347 warrants to purchase 1,304,347 common shares exercisable at $2.30 per share (the “Option Warrants”) pursuant to an over-allotment option exercised by the underwriter. The exercise price of the warrants issued in connection with the exercise of the over-allotment option was $0.0097 per warrant. Each Option Warrant is exercisable immediately and has a term of five years from the issue date. Proceeds of $1,864,071 were allocated to the option warrants.

 

The fair value of the common shares and pre-funded units was determined by reference to the market price on the day of the offering, which was $1.73 per share. The Unit warrants, warrants, and Option Warrants were valued using the Black-Scholes model using the following assumptions: initial stock price $1.73, strike rate $2.30, dividend yield 0%, term 5 years, volatility 60.0% and risk free rate 0.50%.

 

The Company also issued warrants to the placement agents to purchase 434,783 common shares at an exercise price of $2.53 per share (the “Placement Agent Warrants”), which are exercisable 180 days from January 11, 2022, with a term of five years. The fair value of the Placement Agent Warrants was determined to be $307,189 using the Black-Scholes model with the following assumptions: initial stock price $1.73, strike rate $2.53, dividend yield 0%, term 5 years, volatility 60.0% and risk free rate 0.50%.

 

30

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

16.SHARE CAPITAL (cont’d)

 

(b)Common share transactions (cont’d)

Transactions for the three months’ ended March 31, 2022 (cont’d)

 

In aggregate, the Company issued 7,215,652 common shares, 1,480,000 Pre-Funded Warrants, 9,999,999 Unit Warrants, and 434,783 Placement Agent Warrants.

 

The direct costs related to the issuance of the common shares and warrants issued in the January 2022 underwritten public offering were $2,016,895, including the value of the Placement Agent Warrants. During the period, 1,480,000 Pre-Funded Warrants were exercised for gross proceeds of $14,800, converting into 1,480,000 common shares that were fully issued.

 

(ii) On March 31, 2022, as part of the ClearRF acquisition (Note 4 and 15), the Company issued 138,958 shares to the vendor.

 

Transactions for the year ended December 31, 2021 are as follows:

 

(i) During the month of February 2021, the Company received multiple tradeable warrant exercises for total proceeds of $609,041 on the redemption of a total of 88,911 tradeable warrants at an exercise price of $6.85 for each common share.

 

(ii) The company issued in February 2021, the 40,000 shares to be issued for services rendered at a value of $560,000.

 

(iii) As discussed in Note 4 -Acquisition of Clear Rf, the Company issued 23,949 common shares to the vendors of ClearRF equal to $194,985.

 

(iv) On July 21, 2021, the Company issued 5,000 common shares as part of the contractual obligations owed to one of its suppliers. This transaction was recorded to share capital in the amount of $36,050 (based on the market value on the date of issuance of $7.21 per share).

 

(v) On October 28, 2021, received gross cash of $1,027,500 from the exercise of 150,000 warrants at $6.85, and on October 29, 2021, received gross cash of $380,202 from the exercise of 55,504 warrants at $6.85.

 

(vi) On December 7, 2021, 250,000 warrants issued, as part of the $7.2MM convertible debentures, were exercised at $4.00 per share for gross proceeds of $1,000,000.

 

31

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

16.SHARE CAPITAL (cont’d)

 

(C)Stock options

 

The Company has a shareholder-approved “rolling” stock option plan (the “Plan”) in compliance with Nasdaq policies. Under the Plan the maximum number of shares reserved for issuance may not exceed 15% of the total number of issued and outstanding common shares at the time of granting. The exercise price of each stock option shall not be less than the market price of the Company’s stock at the date of grant, less a discount of up to 25%. Options can have a maximum term of ten years and typically terminate 90 days following the termination of the optionee’s employment or engagement, except in the case of retirement or death. Vesting of options is at the discretion of the Board of Directors at the time the options are granted.

 

A summary of the Company’s stock option activity is as follows:

 

   Number of
Stock
Options
   Weighted
Average
Exercise Price
 
Outstanding options, December 31, 2020   328,068   $13.99 
Granted   100,500    11.50 
Expired/Cancelled   (14,000)   16.38 
Outstanding options, December 31, 2021   414,568   $13.88 
Granted   

2,270,000

    1.03 
Expired/Cancelled   

(27,104

)   13.45 
Outstanding options, March 31, 2022   

2,657,464

   $2.89 

 

As at March 31, 2022 stock options (including restricted share units) outstanding are as follows:

 

Grant Date  Number of
options
outstanding
   Number of
options
exercisable
   Weighted
Average
Exercise
Price
   Expiry date  Remaining
contractual
life (years)
 
4-Apr-17   6,897    6,897    63.00   4-Apr-22   0.02 
24-Jul-17   7,929    7,929    79.00   24-Jul-22   0.32 
24-Dec-18   12,896    12,896    57.00   24-Dec-23   1.73 
15-Jan-19   828    828    57.00   15-Jan-24   1.79 
21-Mar-19   12,345    12,345    63.00   21-Mar-24   1.98 
1-Jan-20   2,069    2,069    57.00   1-Jan-24   1.75 
15-Nov-20   95,000    83,125    6.00   15-Nov-30   8.63 
15-Nov-20   161,500    141,313    6.00   15-Nov-25   3.63 
2-Jan-21   57,000    42,750    11.50   2-Jan-26   3.76 
2-Jan-21   5,000    3,750    11.50   2-Jan-31   7.76 
18-Jan-21   14,500    10,875    11.50   18-Jan-26   3.8 
18-Jan-21   1,500    1,500    11.50   31-Aug-22   0.58 
18-Jan-21   10,000    10,000    11.50   29-Oct-22   0.42 
1-Jan-22   20,000    5,000    4.00   29-Oct-26   4.58 
9-Mar-22   2,250,000    600,000    1.03   N/A   N/A 
 Total   2,657,464    941,277   $2.89       0.70 

 

32

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

16.SHARE CAPITAL (cont’d)

 

(c)Stock options (cont’d)

 

Transactions subsequent to March 31, 2022 are as follows:

 

On April 13, 2022, the Company granted 825,000 RSU’s to executives, employees and consultants at a price of $1.10 per share. Of these RSU’s granted, 240,000 vested immediately and the remaining 585,000 RSU’s vest quarterly with the first vesting of 48,750 taking place on the date of the grant and 11 equal quarterly vesting of 48,750 RSU’s per quarter thereafter.

 

On April 13, 2022, the Company granted 795,000 stock options to executives and employees at an exercise price of $1,10 per share. These options vest quarterly over three years period with the first vesting taking place at the date of the grant.

 

Transactions for the three months’ ended March 31, 2022 are as follows

 

On January 1, 2022, the Company granted 20,000 stock options at $4.00 per share that vest in 8 equal quarterly periods with the first vesting occurring on the grant date.

 

On March 9, 2022, the company granted a total of 2,250,000 restricted share units to executives with an exercise price of $1.03 per share of which 600,000 vested on the date of the grant and the remaining 1,650,000 vest on a quarterly basis over 11 periods.

 

On April 13, 2022, subsequent to the quarter end, the Company granted 795,000 stock options and 825,000 restricted share units at $1.10 per shares to executives, consultants and employees of the Company. These options and RSU’s vest on a quarterly basis over 12 periods with the first vesting occurring on the date of the grant.

 

Transactions for the year ended December 31, 2021 are as follows:

 

During the year ended December 31, 2021 the Company recorded share-based payments expense of $1,338,931 in relation to options vesting.

 

On January 2, 2021, the Company issued 62,000 stock options to various employees at an exercise price of $11.50 of which 57,000 expire on January 2, 2026 and 5,000 expires on January 2, 2031.

 

On January 18, 2021, the Company issued 38,500 stock options to various employees and consultants at an exercise price of $11.50 expiring on January 2, 2026.

 

On August 31, 2021, one of the employees was no longer with the Company. The employee had initially received 4,000 out of the 38,500 stock options issued on January 18, 2021. As a result of this employee’s departure, 2,500 of their unvested stock options were cancelled and the remaining 1,500 options expire one year from departure, August 31, 2022.

 

On October 29, 2021, one of the directors was no longer with the Company. The employee had initially received 20,000 out of the 38,500 stock options issued on January 18, 2021. As a result of this director’s departure, 10,000 of their unvested stock options were cancelled and the remaining 10,000 options expire one year from departure, October 29, 2022.

 

In December 2021, 1,500 stock options expired at an average of $57.00 per share.

 

33

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

16.SHARE CAPITAL (cont’d)

 

(c)Stock options (cont’d)

 

The following weighted-average assumptions have been used for the Black-Scholes valuation for the stock options granted:

 

   2022   2021 
Exercise price  $1.03 to $4.00   $11.50 
Risk-free interest rate   0.23%   0.23%
Expected life   5    5 
Annualized volatility   85%   85%
Dividend rate   0.00%   0.00%

 

(d)Agents’ options:

 

Transactions for the three months’ ended March 31, 2022, are as follows:

 

The Company also issued warrants to the placement agents to purchase 434,783 common shares at an exercise price of $2.53 per share (the “Placement Agent Warrants”), which are exercisable 180 days from January 11, 2022, with a term of five years. The fair value of the Placement Agent Warrants was determined to be $307,189 using the Black-Scholes model with the following assumptions: initial stock price $1.73, strike rate $2.53, dividend yield 0%, term 5 years, volatility 60.0% and risk free rate 0.50%.

 

Transactions for the year ended December 31, 2021, are as follows:

 

In December 2021, 6,597 agent’s options expired at an average exercise price of $52.68.

 

A summary of the Company’s agents’ options activity is as follows

 

   Number of   Weighted average
exercise 
 
   options   price 
Outstanding agent options, December 31, 2020   452,523    8.02 
Expired   (6,597)   52.68 
Outstanding agent options, December 31, 2021   445,926   $7.51 
Granted   434,783    2.53 
Outstanding agent options, March 31, 2022   880,709   $5.05 

 

34

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

16.SHARE CAPITAL (cont’d)

 

(d)Agents’ options (cont’d)

 

On March 31, 2022 agents’ options outstanding are as follows:

 

Grant Date  Number of options outstanding   Number of options exercisable   Weighted Average Exercise Price   Expiry date  Remaining contractual life (years) 
28-Jul-20   1,702    1,702   $20.49   28-Jul-22   0.33 
29-Sep-20   113,500    113,500   $6.60   28-Sep-25   3.50 
29-Sep-20   266,000    266,000   $6.85   28-Sep-25   3.50 
31-Dec-20   64,724    64,724   $11.50   30-Jun-24   2.25 
11-Jan-22   434,783    0   $2.53   11-Jan-27   4.79 
Total   880,709    445,926   $5.05       4.04 

 

(e) Share purchase warrants

 

A summary of the Company’s share purchase warrant activity is as follows:

 

Transactions for the three months’ ended March 31, 2022 are as follows:

 

As more elaborated in Note 16(b)-Transactions for the three months’ ended March 31, 2022-, the Company issued on January 11, 2022, 8,695,652 share purchase warrants, exercisable immediately at a price of $2.30 and has a term of five years from the issue date. Proceeds of $5,778,360 were allocated to these warrants issued.

 

Company concurrently sold an additional 1,304,347 warrants to purchase 1,304,347 common shares exercisable at $2.30 per share (the “Option Warrants”) pursuant to an over-allotment option exercised by the underwriter. The exercise price of the warrants issued in connection with the exercise of the over-allotment option was $0.0097 per warrant. Each Option Warrant is exercisable immediately and has a term of five years from the issue date. Proceeds of $866,753 were allocated to the option warrants issued.

 

On January 11, 2022, the 1,892,857 share purchase warrants with an exercise price of $4.00 per share were re-priced to $2.30 consistent with the terms of the agreement and as outlined in Note 12(d) due to refinancing at $2.30 per unit.

 

Transactions for the year ended December 31, 2021 are as follows:

 

a.During the year, 68,647 share purchase warrants expired at an average price of $62.87.

 

b.In February 2021, 88,911 tradeable warrants were exercised at $6.85 for total proceeds of $609,040.

 

c.In October 2021, 205,504 tradeable warrants were exercised at $6.85 for total proceeds of $1,407,702.

 

d.On December 7, 2021, 250,000 warrants were exercised at $4.00 for total proceeds of $1,000,000 and the proportionate fair value of $385,190 of the underlying warrants on the date of the exercise was also transferred to share capital.

 

e.See Note 13 for warrants issued in the debenture financing. These warrants have met the criteria of a liability instrument on these financial statements.

 

35

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

16.SHARE CAPITAL (cont’d)

 

(e)Share purchase warrants (cont’d)

 

A summary of the Company’s share purchase warrant activity is as follows:

 

   Number of Warrants   Weighted average exercise price 
Outstanding, December 31, 2020   3,591,533   $10.55 
Granted   2,142,857    4.00 
Exercised   (544,415)   5.54 
Expired   (68,647)   62.87 
Outstanding, December 31, 2021   5,121,328   $7.64 
Granted   9,999,999    2.30 
Outstanding, March 31, 2022   15,121,327   $3.90 

 

At March 31, 2022, share purchase warrants outstanding and exercisable are as follows:

 

Grant Date  Number of Warrants outstanding and exercisable   Exercise Price   Expiry date
23-Dec-19   54,248    51.22   23-Dec-22
28-Jul-20   74,138    20.49   28-Jul-22
29-Sep-20   1,805,585    6.85   28-Sep-25
31-Dec-20   1,294,500    11.50   30-Jun-24
03-Nov-21   1,892,857    2.30   03-Nov-26
11-Jan-22   9,999,999    2.30   11-Jan-27
Total   15,121,327   $3.90    

 

36

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

17.COST OF SALES

 

(in thousands)  31-Mar-22   31-Mar-21 
Inventory expensed  $359   $2,117 
Royalties   54    150 
Other expenses   165    323 
Total  $578   $2,292 

 

18.SELLING AND MARKETING EXPENSES

 

(in thousands)  31-Mar-22   31-Mar-21 
Salaries and related expenses  $618   $725 
Advertising and marketing   398    246 
Travel and conferences   29    2 
Total  $1,045   $973 

 

19.GENERAL AND ADMINISTRATIVE EXPENSES

 

(in thousands)  31-Mar-22   31-Mar-21 
Salaries and related expenses  $125   $93 
Professional services   377    172 
Consulting and director fees   419    287 
Management fees   -    0 
Travel   36    26 
Office and general   442    330 
Regulatory and filing fees   21    24 
Shareholder relations   239    126 
Total  $1,659   $1,058 

 

37

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

20.FINANCE EXPENSES

 

   31-Mar-22   31-Mar-21 
Interest paid and acretive interest on debentures  $-   $443,996 
Interest expense on long term debt   -    2,375 
Interest on bank loans   7,220    15,251 
Other interest and bank charges   24,418    5,399 
Loss (gain)  on redemption of debentures   -    18,292 
Interest earned on director’s loan   -    (6,000)
Interest expense on lease obligations   (4,651)   1,000 
Other interest income   -    (89,452)
Total  $26,987   $390,861 

 

21.TRANSACTION COSTS

 

Transaction costs incurred in the first three months of 2022 were $NIL (March 31, 2021-$79,069 for the legal and due diligence costs for the acquisition of ClearRF, as more fully described in Note 4.)

 

22.CAPITAL MANAGEMENT

 

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.

 

The Company defines capital as consisting of shareholder’s equity. The Company’s objectives when managing capital are to support the creation of shareholder value, as well as to ensure that the Company is able to meet its financial obligations as they become due.

 

The Company manages its capital structure to maximize its financial flexibility making adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative measures to monitor its capital but rather relies on the expertise of the Company’s management to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

 

As at March 31, 2022, the Company is subject to externally imposed capital requirements arising from the repayment of monthly principal payments on the convertible promissory note outstanding, as described in Note 12. The Company is also subject to a debt covenant in relation to the factoring agreement described in Note 5.

 

38

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

23.FINANCIAL INSTRUMENTS

 

Fair Value.

 

The convertible promissory note is estimated at fair value using a binomial lattice model using the following inputs: stock price (Level 1 input); risk-free rates (Level 1 input); credit spread (Level 3 input); volatility (Level 3 input).

 

Sensitivity Analysis:

 

Type   Valuation Technique   Key Inputs   Inter-relationship between significant inputs and fair value measurement
Convertible Promissory Note   The fair value of the convertible promissory note has been calculated using a binomial lattice methodology  

Key observable inputs 

● Share price (March 31, 2022: US $1.25)

● Risk-free interest rate (March 31, 2022: 2.01%)

● Dividend yield (March 31, 2022: 0%)

 

Key unobservable inputs 

Instrument specific spread (March 31, 2022: 45%)

Credit spread (March 31, 2021: 8.87%)

 

The estimated fair value would increase (decrease) if:

 

● The share price was higher (lower)

The risk-free interest rate was higher (lower)

The dividend yield was lower (higher)

The instrument specific spread was lower (higher)

The credit spread was lower (higher)

 

The fair values of the Company’s cash, trade and other receivables, accounts payable and accrued liabilities and long term-debt, approximate carrying value, which is the amount recorded on the consolidated unaudited interim statement of financial position.

 

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company places its cash with institutions of high creditworthiness. Management has assessed there to be a low level of credit risk associated with its cash balances.

 

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. Approximately 23% of the Company’s revenue for the three months ended March 31, 2022 (2021 -36%) is attributable to sales transactions with a single customer.

 

39

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

23.FINANCIAL INSTRUMENTS (cont’d)

 

Credit risk (cont’d)

 

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, which represents the maximum open amount without requiring approval from the Risk Management Committee; these limits are reviewed quarterly. Certain key customers were offered extended payment terms on their purchases due to slow down from Covid-19 and budget approvals for government tenders. As s result, the Company had customers with overdue receivables on their books which resulted in the Company taking a bad debt provision on these overdue receivables which amounted to $1,095,655 on March 31, 2022, (March 31, 2021-$1,530,667).

 

More than 18% of the Company’s customers have been active with the Company for over four years, and the impairment of $1,095,655 (March 31, 2021-$1,530,667) in impairment loss has been recognized against these customers. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer, geographic location, industry, aging profile, maturity, and the existence of previous financial difficulties. Trade and other receivables relate mainly to the Company’s wholesale customers. Customers that are graded as “high risk” are placed on a restricted customer list and monitored by the Company.

 

The carrying amount of financial assets represents the maximum credit exposure, notwithstanding the carrying amount of security or any other credit enhancements.

 

The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was as follows:

 

(in thousands)  March 31,
2022
   December 31,
2021
 
EMEA  $1,060   $879 
Australia   39    119 
North America   459    546 
Total  $1,558   $1,544 

 

Liquidity risk

 

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

 

The Company examines current forecasts of its liquidity requirements so as to make certain that there is sufficient cash for its operating needs, and it is careful at all times to have enough unused credit facilities so that the Company does not exceed its credit limits and is in compliance with its financial covenants (if any). These forecasts take into consideration matters such as the Company’s plan to use debt for financing its activity, compliance with required financial covenants, compliance with certain liquidity ratios, and compliance with external requirements such as laws or regulation.

 

40

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

23.FINANCIAL INSTRUMENTS (cont’d)

 

Liquidity risk (cont’d)

 

The Company uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimizing its cash return on investments. Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 90 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

 

The Company has a factoring agreement with external funding (Note 5).

 

With the exception of employee benefits, the Company’s accounts payable and accrued liabilities have contractual terms of 90 days. The employment benefits included in accrued liabilities have variable maturities within the coming year.

 

Market risk

 

a) Currency Risk

 

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The functional currency of the Company is the USD as of October 1, 2020 as discussed in Note 2. As at March 31, 2022, the Company’s exposure to foreign currency risk with respect to financial instruments is as follows:

 

(in USD thousands)  USD   NIS   CAD   Total 
Financial assets and financial liabilities:                
Current assets                
Cash   8,994    44    183    9,221 
Trade and other receivables   166    1,046    346    1,558 
Advances to supplier   1,061    -    -    1,061 
Long term receivable   -    168    -    168 
Current liabilities                    
Accounts payable and accrued liabilities   (219)   (760)   (831)   (1,810)
Convertible debentures   (2,024)   -    -    (2,024)
Warrant liability   (887)   -    -    (887)
Total  $7,091    498    (302)   7,287 
                     
10% fluctuation in exchange rate   709    50    (30)   729 

 

41

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

23.FINANCIAL INSTRUMENTS (cont’d)

 

b)Interest Rate Risk

 

Interest rate risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in interest rates. The Company’s sensitivity to interest rates is inherently involved n the fair value of both the convertible promissory note and the warranty liability which are revalued based on changes parameters which include the prevailing interest rate.

 

c)Price Risk

 

The Company is exposed to price risk with respect to equity prices. Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. The Company closely monitors individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company.

 

24.RELATED PARTY TRANSACTIONS

 

Key Personnel Compensation

 

Key management personnel includes those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of executive and non-executive members of the Company’s Board of Directors and corporate officers. The remuneration of directors and key management personnel for the three months ended March 31, 2022 and 2021 are as follows:

 

  

2022

  

2021

 
         
Payments to key management personnel:        
Salaries, consulting and directors’ fees  $491,889   $287,427 
Share-based payments   767,436    425,416 
Total  $1,259,325   $712,843 

 

Salaries, consulting and directors’ fees shown above are classified within profit and loss as shown below:

 

      (in thousands) 
Type of Service  Nature of Relationship  2022   2021 
Selling and marketing expenses  VP Technology/VP Sales International   84    40 
General and administrative expense  Companies controlled by the CEO, CFO and Directors   408    247 

 

Loan to Director

 

On April 1, 2019 the Company loaned to a director and its Chief Executive Officer, $200,000 USD. This loan was for a term of 5 years with interest charged at rate of 7% per annum payable quarterly. As of January 1, 2020, the interest rate on the loan was increased to 12% per annum. There were no capital repayment requirements until the end of the term when a balloon payment of the principal balance was required. The director repaid the loan in full on May 23, 2021.

 

42

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

25.SEGMENTED INFORMATION

 

The Company is domiciled in Canada and it operates and produces its income primarily in Israel, Europe and North America. The Company operates as a single segment being the sale of cellular-based communications products.

 

The Company’s entity-wide disclosures include disaggregated information about product sales and geographical areas.

 

Geographical area information is shown below: 

 

External Revenues (in thousands)  31-Mar-22   31-Mar-21 
EMEA  $326   $1,941 
USA   245    1,741 
Canada   249    350 
Australia and New Zealand   13    - 
Total  $833   $4,032 

 

Non-current asset geographic area information is shown below:

 

Non-current assets in thousands $  31-Mar-22   31-Dec-21 
Long term receivable total  $168   $168 
Canada   -    - 
EMEA   168    168 
           
Right of use assets total  $982   $1,078 
Canada   176    188 
EMEA   806    890 
           
Equipment total  $257   $268 
Canada   34    34 
EMEA   223    234 
           
Intangibles-total  $5,065   $4,351 
Canada   69    94 
EMEA   4,996    4,257 
           

 

43

 

 

Siyata Mobile Inc.

Notes to the Consolidated Unaudited Interim Financial Statements

(Expressed in US dollars)

As at March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021

 

25.SEGMENTED INFORMATION (cont’d)

 

Product information is shown below:

 

Revenues by product (in thousands)  31-Mar-22   31-Mar-21 
Cellular boosters and related accessories   463    1,992 
Rugged devices and related accessories   370    2,040 
Total revenues  $833   $4,032 

 

26.SUPPLEMENTAL INFORMATION WITH RESPECT TO CASH FLOWS

 

During the three months ended March 31, 2022, the Company paid $2,569 (March 31, 2021 - $462,622) in interest and $Nil in income taxes for the three months ended March 31, 2022, ($Nil- three months ended March 31, 2021).

 

27. SUBSEQUENT EVENTS

 

(a)On April 13, 2022, the company granted 795,000 stock options and 825,000 restricted share units to executives, consultants, and employees, exercisable at $1.10 per share. These options vest quarterly over a three-year period with the first vesting occurring on the date of issuance.

 

(b)The Company issued 52,500 agents’ options at $2.30 per option that expire 5 years from the issue date.

 

(c)The Company issued 155,000 common shares to consultants as part of their compensation for services rendered.

 

(d)The Company issued 417,537 common shares with a value of $400,000 as payment of the monthly principal as required contractually per the promissory note.

 

 

 44

 

 

 

Exhibit 99.2

 

 

 

 

 

 

 

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

 

FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

 

AS AT MAY 16, 2022

 

 

 

 

 

 

 

 

 

 

 

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

MAY 16, 2022

 

Management’s Responsibility for Financial Reporting

 

The following Management Discussion and Analysis (“MD&A”) reports on the operating results, financial condition, and business risks of Siyata Mobile Inc. (formerly Teslin River Resources Corp.) (“Siyata” or the “Company”, “we” or “us”) and is designed to help the reader understand the results of operations and financial condition of the Company for the three months ended March 31, 2022. This MD&A should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2021, and 2020 and the notes thereto (collectively the “Financial Statements”) which were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”). Other information contained in these documents has also been prepared by management and is consistent with the data contained in the Financial Statements. All dollar amounts referred to in this MD&A are expressed in US dollars except where indicated otherwise.

 

The Company’s certifying officers, based on their knowledge, having exercised reasonable diligence, are also responsible to ensure that these filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading considering the circumstances under which it was made, with respect to the period covered by these filings. These Financial Statements together with the other financial information included in these filings fairly present, in all material respects. the financial condition, results of operations, and cash flows of the Company, as of the date of and for the years presented in this filing. The Board of Directors approves the Financial Statements and MD&A and ensures that management has discharged its financial responsibilities. The Board’s review is accomplished principally through the Audit Committee, which meets periodically to review all financial reports, prior to filing.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

 

This MD&A includes “forward-looking statements”, within the meaning of applicable securities legislation, which are based on the opinions and estimates of management and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “budget”, “plan”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar words suggesting future outcomes or statements regarding an outlook. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These forward-looking statements include but are not limited to statements concerning:

 

1

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION (CONT’D…)

 

The Company’s strategies and objectives

 

The Company’s other financial operating objectives

 

The availability of qualified employees for business operations

 

General business and economic conditions

 

The Company’s ability to meet its financial obligations as they become due

 

The positive cash flows and financial viability of its operations and new business opportunities

 

The Company’s ability to manage growth with respect to its operations and new business opportunities

 

The Company’s tax position, anticipated tax refunds and the tax rates applicable to the Company

 

Readers are cautioned that the preceding list of risks, uncertainties, assumptions and other factors are not exhaustive. Events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. The forward-looking statements contained in this document are made as of the date of this MD&A.

 

CORPORATE Overview

 

Siyata Mobile Inc. is a leading global developer of innovative cellular-based communications solutions over advanced 4G/LTE mobile networks under the Uniden® Cellular and Siyata brands to global first responders and enterprise customers. Siyata’s three complementary product categories include in-vehicle communications solutions and rugged handheld mobile devices for first responders, enterprise customers, commercial fleet vehicles and industrial workers, and cellular amplifiers to boost the cellular signal inside homes, buildings and vehicles.

 

On September 25, 2020 the Company listed on the NASDAQ CAPITAL MARKETS (“NASDAQ”) under the symbol SYTA for its common shares, and the Company’s warrants issued on September 29, 2020 at $6.85 USD are traded under the symbol SYTAW, and expire in 5 years from the date of issue.

 

The registered and records office is located at 2200 - 885 West Georgia Street, Vancouver, BC V6C 3E8.

 

2

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

CORPORATE Overview (CONT’D…)

 

Products

 

The Company develops, manufactures, markets, and sells a portfolio of rugged handheld Push to Talk smartphone devices. These rugged B2B environments are focused on enterprise customers, first responders, construction workers, security guards, government agencies and mobile workers in multiple industries.

 

In Q3 2021, Siyata unveiled its next generation rugged device, the SD7. The SD7 is Siyata’s first mission critical push-to-talk device (MCPTT) and is also the first rugged handset that Siyata launched in North America, in the fourth quarter of 2021, and is expected to launch this device in Europe in 2022. With this device, Siyata expects to increase its MCPTT market share in the first responder market and the utilities, transportation, and waste management markets.

 

In Q4 2021, Siyata launched its VK7 (Vehicle Kit 7), a new and unique vehicle kit accessory that provides an in-vehicle solution designed specifically for use with the Company’s SD7 device. Using the SD7, first responders (police, fire, ambulance) – which number over two million in the U.S. alone, as well as secondary support personnel – can quickly connect and coordinate on unified public cellular networks in North America and other international markets.

 

The SD7 offers the benefits of Push-To-Talk over Cellular without any of the difficulties managing the current generation of rugged smart/feature phones and is ideally suited as a perfect upgrade from Land Mobile Radios (LMR). Used for generations, LMR has a significant number of limitations, including network incompatibility, limited coverage areas, and restricted functionality that leave a huge need for a unified network and platform. Siyata’s innovative product line, including the SD7, is helping to service the generational shift from LMR to PoC. According to VDC Research, the LMR market is growing at 5.9% compound annual growth rate, while the PoC market is growing at 13.6% CAGR and annual PoC shipments are expected to grow 40% from 1.9 million in 2018 to 2.7 million in 2023.

 

[source: VDC Research; American Security Council Foundation; Statistics Canada; Bureau of Transportation Statistics; Industry Research]

 

Our second product category is the Uniden® UV350 4G/LTE, 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, Push-to-Talk over Cellular (“PoC”), data, fleet management solutions and other Android based professional applications. The UV350 also supports Band 14 for the First Responder Network Authority, or the FirstNet Authority, compatibility which is the U.S. First Responders 4G/LTE network with push-to-talk-over-cellular (PoC) capabilities that aims to replace aging two-way radio systems currently in use.

 

3

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

CORPORATE Overview (CONT’d…)

 

Cellular boosters are our third product category with approximately 30 million of these devices sold globally every year. Siyata manufactures and sells Uniden®cellular boosters and accessories for enterprise, first responder and consumer customers with a focus on the North America markets. Cellular communication provides a robust, secure environment not just for remote workers, in-home and in-vehicles; but also for restaurant patrons who wish to download menus; for patients at pharmacies who need to verify identity and download scripts; for remote workers who require strong clear cellular signals; and for first responders where connectivity literally means the difference between life and death - just to name a few examples. The vehicle vertical in this portfolio complements Siyata’s in-vehicle and rugged handheld smartphones as these sales can be bundled through the Company’s existing sales channels.

 

Customers and Channels

 

Siyata launched its 4G/LTE UV350 commercial vehicle smartphone device at Bell Mobility in late Q4 2018, at AT&T as well as at its first responder cellular network First Responder Network Authority (FirstNet) in late Q2 2019, with Rogers Wireless and Verizon Wireless in Q4 2019, and Telstra in Q4 2021. These are major milestones for the Company following Siyata’s seven years of experience perfecting in-vehicle cellular based technology, vehicle installations, software integration with various Push-to-Talk (PTT) solutions and intensive carrier certifications.

 

Siyata’s customer base includes cellular network operators and their dealers, as well as commercial vehicle technology distributors for fleets of all sizes in the U.S., Canada, Europe, Australia, the Middle East and other international markets.

 

The North American Tier 1 cellular carriers that Siyata is working with have large scale distribution and sales channels. With an estimated 25 million commercial vehicles including 7.0 million first responder vehicles. The Company sees the North American market as its largest opportunity with a total addressable market over $19 billion. These Tier 1 cellular carriers have a keen interest in launching the UV350 as it allows for new SIM card activations in commercial vehicles and increased ARPU from existing customers with corporate and first responder fleets while targeting new customers with a unique, dedicated, multi-purpose in-vehicle 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 & logistics, manufacturing, energy & utility, public safety and federal government.

 

4

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

SIGNIFICANT HIGHLIGHTS

 

The following highlights and developments for the year ended December 31, 2021, and to the date of this MD&A:

 

On January 11, 2022, Siyata announced the closing of its previously announced underwritten public offering of 8,695,652 common shares (or pre-funded warrants to purchase common shares in lieu thereof) and accompanying warrants to purchase up to 8,695,652 common shares. Each common share (or pre-funded warrant in lieu thereof) was sold together with one common warrant at a combined effective offering price of $2.30 USD. The common warrants were immediately exercisable at a price of $2.30 USD per common share and will expire five years from the date of issuance. The common shares (or pre-funded warrants in lieu thereof) and the accompanying common warrants were only able to be purchased together in the offering but were issued separately and were immediately separable upon issuance.

 

On January 18, 2022, Siyata announced it entered into a new distribution agreement with U.S.-based TESSCO Technologies Incorporated, a leading value-added distributor of wireless communications products for network infrastructure, site support, and fixed and mobile broadband networks.

 

On February 2, 2022, Siyata announced that Goosetown Communications, a division of Goosetown Enterprises, Inc., will introduce the Siyata SD7 device with its Push-to-Talk over Cellular (PoC) service TeamConnect®.

 

On February 7, 2022, Siyata received a $750,000 in purchase orders from an emergency medical service provider and an international defense contractor both located in the European, Middle Eastern and African (EMEA) region with its handheld rugged Push-to-Talk (PTT) devices.

 

On May 3, 2022, Siyata announced that its SD7 ruggedized device is now certified and approved for use on FirstNet®. The SD7 is now FirstNet Ready®, which means first responders can use it to tap into specialized capabilities designed to meet their needs on FirstNet®.

 

OUTLOOK

 

Siyata has laid the foundation for greater distribution with expanded partnerships, key new sale hires, and expanded product offerings into North America. The pandemic caused by COVID-19 slowed the company’s growth plans for 2021, however business has resumed in all three product categories. Management is hopeful that this momentum will continue as it leverages its key sales channels, and with its expanded and refreshed product offerings.

 

Uniden® UV350 | Many large-scale programs were delayed due to the pandemic, therefore creating pent-up demand for this disruptive solution. Active engagements including many customer trials have resumed in 2022 which should translate into robust growth in this product line.

 

Rugged Handsets | Siyata’s rugged handsets are targeted to the approximately 47 million enterprise task and public sector workers across North America including construction, transport & logistics, manufacturing, energy & utility, public safety, and federal government. To date, Siyata has sold its rugged handsets only in international markets. Siyata expanded its footprint in this product category with the marketing campaign of the SD7 device, in Q4 2021 in North America and is expected to launch its marketing campaign for this device in Europe in 2022. The SD7 is a next-generation device and Siyata’s first mission-critical push-to-talk (MCPTT) handset.

 

Cellular Boosters | The pandemic has helped fuel strong demand for Siyata’s boosters in 2020 and 2021. We believe this momentum will resume in 2022 with multiple programs with existing customers, numerous trials with new customers and expanding opportunities in new verticals.

 

5

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

SUMMARY OF QUARTERLY RESULTS

 

The following unaudited table sets out selected financial information for the Company on a consolidated basis for the last eight most recently completed quarters.

 

   Quarter Ended 
  

Mar 31,

2022

  

Dec 31,

2021

  

Sep 30,

2021

  

Jun 30,

2021

  

Mar 31,

2021

  

Dec 31,

2020

  

Sep 30,

2020

  

Jun 30,

2020

 
Income/(loss)  $(4,893,491)  $(4,979,661)  $(5,667,937)  $(10,862,538)  $(2,115,406)  $(9,911,960)  $(1,881,981)  $(627,004)
Comprehensive income/(loss) for the period  $(4,917,958)  $(4,833,795)  $(5,677,274)  $(10,927,718)  $(2,047,991)  $(9,247,116)  $(1,870,348)  $(1,016,568)
Loss per share  $(0.38)  $(0.99)  $(1.18)  $(2.26)  $(0.45)  $(3.08)  $(1.92)  $(0.73)

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

The following is an analysis of the Company’s operating results for the three months ended March 31, 2022 and includes a comparison against the three months ended March 31, 2021.

 

Operations:

 

Revenues for the three months ended March 31, 2022, were $832,974 compared to $4,031,975 for the three months ended March 31, 2021. This negative variance of $3,199,001 (-79.0%) is due mainly to the transition from the legacy product sales cycle to the new product line, where production has been ramped up for the SD7 rugged hand set which has only been approved for FirstNet® after the end of the quarter. As well, in the prior-year period, the Company had a large one-time booster sale to a specific customer for $1.5MM which did not recur in 2022.

 

Gross Profit for the three months ended March 31, 2022, was $255,051 (30.8% of sales) compared to $1,740,091 (43.2% of sales) in the same period in 2021, a negative variance in gross margin dollars of $1,485,040. This decrease in margin relates both to the sale of rugged and in-vehicle cellular devices at lower margins compared to the sale of industrial boosters in the USA marketplace at slightly higher margins and due to the prior-year period, one-time booster sale of $1.5MM in Q1 2021 at higher margins.

 

Amortization and depreciation costs for the three-month period ended March 31, 2022, and 2021 were $124,505 and $321,01, respectively, a positive variance of $196,512. This positive variance is due to the intangible impairments in 2021 that have reduced the intangible asset cost base eligible for amortization. As well there are two new devices that are the majority of the intangible assets that are either under development and/or only recently are available in the marketplace, and therefore no amortization was taken on these products in the period.

 

Development expenses for the three months ended March 31, 2022, and 2021 were $123,316 and $NIL, respectively. This negative variance is due to both the development costs incurred on the company’s rugged device development program that did not meet the criteria for capitalization.

 

6

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2022 (CONT’D…)

 

Selling and marketing costs for the three months ended March 31, 2022, and 2021, were $1,045,051 and $972,959, respectively. This negative variance of $72,092 is due mainly to the increase in marketing costs related to the launching of our new suite of rugged devices in the amount of $152,059, the increase in travel costs of $27,345 offset by the decrease in our U.S. sales team headcount of $107,312.

 

General and administrative costs for the three months ended March 31, 2022, and 2021 were $1,659,079 and $1,058,478, respectively. This negative variance of $600,601 relates mainly to the increase in insurance of $111,955, increase in professional fees of $205,615 related to the non capitalized accounting, and legal costs associated with the capital raise in January 2022, and the audit fees and related consultants for the annual PCAOB audit, increase in consulting and director’s fees of $131,972, additional investor relations costs of $113,554 in 2022 due to engaging US investor relation firms, the increase of $10,280 in travel costs and the increase in general and administrative salaries by $31,066 offset by the decrease of $3,841 in regulatory and filing fees.

 

Inventory Impairment costs for the three months ended March 31, 2022, and 2021 of $64,336 versus $NIL in 2021, relates to a provision for slow-moving merchandise.

 

Bad debts recovery for the three months ended March 31, 2022, and 2021 of $7,358 and $NIL respectively, relate to the receipt of payment for previously provisioned receivables.

 

Share-based compensation costs for the three months ended March 31, 2022, and 2021 were $812,735 and $592,792 respectively, a negative variance of $219,343. The increase in share-based compensation relates to the valuation of stock options vested during the period due to the granting in March 2022 of 2,250,000 restricted share units of which 600,00 vested in Q1 2022.

 

Finance expenses for the three months ended March 31, 2022, and 2021 was $26,987 and $390,861 respectively, a positive variance of $363,874. This variance is due to all interest-bearing convertible debentures being extinguished in the previous year. The outstanding convertible debenture is a financial derivative and therefore is revalued every period end for a change in fair value that has no direct impact on the finance expenses.

 

Foreign exchange loss (income) for the three months ended March 31, 2022, and 2021 was income of ($90,659) versus an expense of $440,321, a positive variance of $530,980. This variance resulted from foreign currency fluctuations in the period.

 

Transaction costs for the three months ended March 31, 2022, and 2021, of $Nil and $79,069 respectively. In Q1 2021, transaction costs for the Clear RF acquisition were $79,069 and were not capitalized since the acquisition was treated as a business combination using the acquisition method of accounting. The costs included are legal fees, due diligence fees, and other professional fees.

 

7

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2022 (CONT’D…)

 

Change in fair value of the convertible promissory note for the three months ended March 31, 2022, and 2021, in the amount of $2,680,457, and $Nil respectively relates to the change in fair value of the promissory note resulting from both the fair value change as the liability is closer to maturity, the reduction in the principal balance the payment of $4.0MM, and due to the change in the conversion exercise price from $10.00 to $2.30 as required to equate to the price of a unit for the January 2022 capital raise.

 

Change in fair value of the warrant liability for the three months ended March 31, 2022, and 2021 is a gain of $1,289,907 and $Nil respectively. This gain relates to the change in fair value of the 1,892,857 warrants outstanding from the Lind Partners financing which is a financial derivative liability for financial statement purposes. The change in fair value is recorded as profit or loss in the period. This period gain in fair value, relates both to the change in fair value as this liability is closer to its expiry date of November 3, 2026 and due to the change in the warrant exercise price from $4.00 to $2.30 as required to equate to the price of a warrant for the January 2022 capital raise.

 

Net loss for the period

 

The Company experienced a net loss for the three months ended March 31, 2022, of ($4,893,491) as compared to a net loss of ($2,115,406) in the same period in the prior year, a negative variance of ($2,778,085.) This negative variance was due mainly to, a decrease in gross profit of $1,485,040, a change in fair value of derivatives of $1,390,950, an increase in general and administrative expenses of $600,601, an increase in share-based payments of $219,943, an increase in development expenses of $123,316, an increase in selling and marketing expenses of $72,092, inventory impairment of $64,336 and offset by a decrease in foreign exchange expense of $530,980, a decrease in finance expenses of $363,874, a decrease in amortization of $196,512, a decrease in transactions costs of $79,069, and a decrease in bad debts of $7,358.

 

Loss and comprehensive loss for the period

 

As a result of the activities discussed above, the Company experienced a comprehensive loss for the three months ended March 31, 2022, of ($4,917,958) as compared to a comprehensive loss of ($2,047,991) for the same period in the prior year, representing a negative variance of $2,869,967.

 

Adjusted EBITDA

 

For the three months ended March 31, 2022, the adjusted EBITDA is negative ($2,629,373) versus negative ($291,346) in the same period in the prior year, a negative variance of $2,338,027. Adjusted EBITDA is defined as the net operating loss excluding depreciation and amortization, and share-based compensation expense.

 

8

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Risks and Uncertainties

 

Summary of Risk Factors

 

Risks Related to Our Financial Condition and Capital Requirements

 

We have a history of operating losses and we may never achieve or maintain profitability;

 

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.

 

In 2021, our independent registered public accountants identified five material weaknesses in our internal controls over financial reporting. 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 2020, our independent registered public accountants identified six material weaknesses in our internal controls over financial reporting, which have only been partially remediated.

 

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.

 

  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.

 

  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.

 

  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.

 

9

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

  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 independent registered public accountants have identified two material weaknesses in our internal controls over financial reporting. If we are unable to remediate these material weaknesses, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner.

 

Risks Related to Government Regulation

 

  We are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations.

 

  Changes in laws and regulations concerning the use of telecommunication bandwidth could increase our costs and adversely impact our business.

 

Risks Related to Our Intellectual Property

 

  If we are unable to successfully protect our intellectual property, our competitive position may be harmed.

 

  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.

 

  Our use of open-source software could subject us to possible litigation or otherwise impair the development of our products.

 

Risks Related to our Locations in Israel and Canada and Our International Operations

 

  Conditions in Israel could materially and adversely affect our business.
     
 

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.

 

Risks Related to Ownership of Our Securities

 

  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. In addition, such funding may dilute our existing shareholders.

 

10

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

  Because we are a foreign private issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer.

 

  Our executive officers and directors, and their affiliated entities, along with our two other largest stockholders, own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

 

 

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

 

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 March 31, 2022, we had an accumulated deficit of $67,412,903. 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 financial statements for both March 31, 2022 and for the year ended December 31, 2021, states that their may be 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.

 

11

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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 that are slow-moving. The second material weakness related to the insufficient review of advances to suppliers on products that are no longer selling, the third material weakness relates to insufficient controls surrounding off-site inventory tracking. The fourth material weakness related to insufficient review whether product returns relate to sales recorded in the fiscal year. The fifth material weakness relates to insufficient review of title transfer terms to determine the period in which revenue should be recorded.

 

For the material weaknesses identified in our 2021 audit, we have taken steps to remediate these material weaknesses, and to further strengthen our accounting staff and internal controls, as detailed below:

 

On a quarterly basis, the Company now reviews inventory on hand for slow moving merchandise and reviews inventory on hand regularly. For the year ended 2021, it was determined that $4,659,648 (2020- $1,571,649) of the inventory was impaired due to slow movement. The accessories and spare parts related to these products amounted to $839,693 (2020 - $316,000), which was also impaired.

 

The Company now reviews quantities on hand before approving purchase orders.

 

As of April 1, 2022, the Company signed a lease for their own exclusive warehouse space so that outside contract warehouses will not be required.

 

The Company now reviews product returns to compare and ensure that they occur in the same fiscal year.

 

The Company’s controller scrutinizes all revenues earned in the period to ensure compliance with IFRS-15.

 

The Company’s controller and CFO in Canada coordinate full scheduling of the year-end process to ensure timely close of the accounting periods.

 

12

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

In 2020, our independent registered public accountants identified the following material weaknesses in our internal control over financial reporting. The first material weakness is related to the lack of formal review of the customers’ return rights for products prior to revenue recognition. The second material weakness is related to the review of receivables for the purpose of recording expected credit losses. The third material weakness is related to the review of inventory and spare parts for obsolete or slow-moving products. The fourth material weakness is related to the lack of formal review regarding the appropriateness of classification of share issuance costs versus transaction expenses through profit and loss. The fifth material weakness is related to the classification of amounts held in trust separate from cash and equivalents. The final material weakness is 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. We believe that these measures should ensure that for the 2022 fiscal year, our financial controls will be remediated.

 

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.

 

13

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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 37% of our revenues for the three months ended, 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.

 

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.

 

14

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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 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 competitors with larger volumes of orders, more diverse product offerings and a longer relationship with our 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, or LMR, solutions or other competitive alternatives to our phones. 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.

 

15

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

We participate in a competitive industry, which may become more competitive. Competitors with greater resources and significant experience in high-volume product manufacturing may be able to respond more quickly and cost-effectively than we can to new or emerging technologies and changes in customer requirements.

 

We face significant competition in developing and selling our solutions. Our primary competitors in the non-rugged mobile device market include LG Corporation, Apple Inc. and Samsung Electronics Co. Ltd. Our primary competitors in the rugged mobile device market include Sonim Technologies Inc., Bullitt Mobile Ltd., and Kyocera Corporation. We also face competition from large system integrators and manufacturers of private and public wireless network equipment and devices. Competitors in this space include Harris Corporation, JVC KENWOOD Corporation, Motorola Solutions, Inc., or MSI, and Tait International Limited. Within the Cellular Booster category, we have several direct competitors, including Wilson Electronics, LLC, or Wilson Electronics, Nextivity, Inc. and SureCall Company.

 

We cannot assure you that we will be able to compete successfully against current or future competitors. Increased competition in mobile computing platforms, data capture products, or related accessories and software developments may result in price reductions, lower gross profit margins, and loss of market share, and could require increased spending on research and development, sales and marketing, and customer support. Some competitors may make strategic acquisitions or establish cooperative relationships with suppliers or companies that produce complementary products, which may create additional pressures on our competitive position in the marketplace.

 

Most of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources and experience than we do. In addition, because of the higher volume of components that many of our competitors purchase from their suppliers, they are able to keep their supply costs relatively low and, as a result, may be able to recognize higher margins on their product sales than we do. Many of our competitors may also have existing relationships with the channel partners who we use to sell our products, or with our potential customers. This competition may result in reduced prices, reduced margins and longer sales cycles for our products. Our competitors may also be able to more quickly and cost-effectively respond to new or emerging technologies and changes in customer requirements. The combination of brand strength, extensive distribution channels and financial resources of the larger vendors could cause us to lose market share and could reduce our margins on our products. If any of our larger competitors were to commit greater technical, sales, marketing and other resources to our markets, our ability to compete would be adversely impacted. If we are unable to successfully compete with our competitors, our sales would suffer and as a result our financial condition will be adversely impacted.

 

16

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Defects in our products could reduce demand for our products and result in a loss of sales, delay in market acceptance and injury to our reputation, which would adversely impact our business.

 

Complex software, as well as multiple components, displays, plastics and assemblies used in our products may contain undetected defects that are subsequently discovered at any point in the life of the product. Defects in our products may result in a loss of sales, product malfunction, delay in market acceptance and potential injuries to our customers which can bring to injury in our reputation and increased warranty costs.

 

Additionally, our software may contain undetected errors, defects or bugs. Although we have not suffered significant harm from any errors, defects or bugs to date, we may discover significant errors, defects, or bugs in the future that we may not be able to correct or correct in a timely manner. It is possible that errors, defects or bugs will be found in our existing or future software and/or hardware products and related services with the potential for delays in, or loss of market acceptance of, our products and services, diversion of our resources, injury to our reputation, increased service and warranty expenses, and payment of damages.

 

Further, errors, defects or bugs in our solutions could be exploited by hackers or could otherwise result in an actual or perceived breach of our information systems. Alleviating any of these problems could require significant expense and could cause interruptions, delays or cessation of our product licensing, which would reduce demand for our products and result in a loss of sales, delay in market acceptance and injure our reputation and could adversely impact our business, results of operations and financial condition.

 

If our business does not grow as we expect, or if we fail to manage our growth effectively, our operating results and business would suffer.

 

Our ability to successfully grow our business depends on a number of factors including our ability to:

 

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.

 

17

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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.

 

18

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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 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 are 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.

 

19

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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.

 

20

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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.

 

21

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

We have a limited history of high-volume commercial production of our devices, and we may face manufacturing capacity constraints.

 

We have limited history and experience in high-volume commercial production of our devices. Because of this limited production history, we face challenges in predicting our business and evaluating its prospects, which may result in breakdowns of our ability to timely supply our devices to our customers. Moreover, we face manufacturing capacity constraints that present further risks to our business. If overall demand of our devices increases in the future, we will need to expand our 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.

 

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 will 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.

 

22

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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, we derived 59% 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.

 

23

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

The application development ecosystem supporting our devices and related accessories is new and evolving.

 

The application development ecosystem supporting our devices and related accessories is new and evolving. Specifically, the number of application developers in the ecosystem supporting our devices and accessories is small. If the market or the application development ecosystem does not develop, timely or at all, demand for our products may be limited, and our business and results of operations will be significantly harmed.

 

Failure of our suppliers, subcontractors, distributors, resellers, and representatives to use acceptable legal or ethical business practices, or to fail for any other reason, could negatively impact our business.

 

We do not control the labor and other business practices of our suppliers, subcontractors, distributors, resellers and third-party sales representatives, or TPSRs, and cannot provide assurance that they will operate in compliance with applicable rules, and regulations regarding working conditions, employment practices, environmental compliance, anti-corruption, and trademark a copyright and patent licensing. If one of our suppliers, subcontractors, distributors, resellers, or TPSRs violates labor or other laws or implements labor or other business practices that are regarded as unethical, the shipment of finished products to us could be interrupted, orders could be cancelled, relationships could be terminated, and our reputation could be damaged. If one of our suppliers or subcontractors fails to procure the necessary license rights to trademarks, copyrights or patents, legal action could be taken against us that could impact the saleability of our products and expose us to financial obligations to a third party. Any of these events could have a negative impact on our sales and results of operations.

 

Moreover, any failure of our suppliers, subcontractors, distributors, resellers and TPSRs, for any reason, including bankruptcy or other business disruption, could disrupt our supply or distribution efforts and could have a negative impact on our sales and results of operations.

 

Our products are subject to risks associated with sourcing and manufacturing.

 

We do not own or operate any of the manufacturing facilities for our products and rely on a concentrated number of independent suppliers to manufacture all of the products we sell. For our business to be successful, our suppliers must provide us with quality products in substantial quantities, in compliance with regulatory requirements, at acceptable costs and on a timely basis. Our ability to obtain a sufficient selection or volume of merchandise on a timely basis at competitive prices could suffer as a result of any deterioration or change in our supplier relationships or events that adversely affect our suppliers.

 

There can be no assurance we will be able to detect, prevent or fix all defects that may affect our products manufactured by our suppliers. Failure to detect, prevent or fix defects, or the occurrence of real or perceived quality or safety problems or material defects in our current and future products, could result in a variety of consequences, including a greater number of product returns than expected from customers and our wholesale partners, litigation, product recalls and credit, warranty or other claims, among others, which could harm our brand, results of operations and financial condition. Such problems could hurt our brand image, which is critical to maintaining and expanding our business. Any negative publicity or lawsuits filed against us related to the perceived quality and safety of our products could harm our brand and decrease demand for our products.

 

24

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

If one or more of our significant suppliers were to sever their relationship with us or significantly alter the terms of our relationship, including due to changes in applicable trade policies, we may not be able to obtain replacement products in a timely manner, which could have a material adverse effect on our business, results of operations and financial condition.

 

In addition, if any of our primary suppliers fail to make timely shipments, do not meet our quality standards or otherwise fail to deliver us product in accordance with our plans, there could be a material adverse effect on our results of operations.

 

Our contractors and suppliers buy raw materials and are subject to wage rates that are oftentimes regulated by the governments of the countries in which our products are manufactured. The raw materials used to manufacture our products are subject to availability constraints and price volatility. There could be a significant disruption in the supply of raw materials from current sources or, in the event of a disruption, our suppliers might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price or at all. Our business is dependent upon the ability of our unaffiliated suppliers to locate, train, employ and retain adequate personnel. Our unaffiliated suppliers have experienced, and may continue to experience in the future, unexpected increases in work wages, whether government-mandated or otherwise. Our suppliers may increase their pricing if their raw materials became more expensive. Our suppliers may pass the increase in sourcing costs to us through price increases, thereby impacting our margins. Material changes in the pricing practices of our suppliers could negatively impact our profitability.

 

In addition, we cannot be certain that our unaffiliated suppliers will be able to fill our orders in a timely manner. If we experience significant increases in demand, or reductions in the availability of materials, or need to replace an existing supplier, there can be no assurance additional supplies of raw materials or additional manufacturing capacity will be available when required on terms acceptable to us, or at all, or that any supplier would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new manufacturing or sources of materials, we may encounter delays in production and added costs as a result of the time it takes to train suppliers in our methods, products, quality control standards and labor, health and safety standards. Any delays, interruption or increased costs in labor or wages, or the supply of materials or manufacture of our products, could have an adverse effect on our ability to meet wholesale partner and customer and consumer demand for our products and result in lower revenue and net income both in the short and long term.

 

Events that adversely impact our suppliers could impair our ability to obtain adequate and timely supplies. Such events include, among others, difficulties or problems associated with our suppliers’ business, the financial instability and labor problems of suppliers, merchandise quality and safety issues, natural or man-made disasters, inclement weather conditions, war, acts of terrorism and other political instability, economic conditions, transportation delays and shipment issues. Our suppliers may be forced to reduce their production, shut down their operations or file for bankruptcy. Our suppliers may consolidate, increasing their market power. The occurrence of one or more of these events could impact our ability to get products to our customers and/or wholesale partners, result in disruptions to our operations, increase our costs and decrease our profitability.

 

25

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control, including:

 

increased shipping costs;

 

the imposition of additional import or trade restrictions;

 

legal or economic restrictions on overseas suppliers’ ability to produce and deliver products;

 

increased custom duties and tariffs;

 

unforeseen delays in customs clearance of goods;

 

more restrictive quotas;

 

loss of a most favored nation trading status;

 

currency exchange rates;

 

transportation delays;

 

port of entry issues; and

 

foreign government regulations, political instability and economic uncertainties in the countries from which we or our suppliers source our products.

 

 Our sourcing operations may also be hurt by health concerns regarding the outbreak of viruses, widespread illness, infectious diseases, contagions and the occurrence of unforeseen epidemics (including the outbreak of the coronavirus and its potential impact on our financial results) in countries in which our merchandise is produced. Moreover, negative press or reports about internationally manufactured products may sway public opinion, and thus customer confidence, away from our products. Furthermore, changes in U.S. trade policies, including new restrictions, tariffs or other changes could lead to additional costs, delays in shipments, embargos and other uncertainties that could negatively impact our relationships with our international suppliers and materially adversely affect our business. These and other issues affecting our international suppliers or internationally manufactured merchandise could have a material adverse effect on our business, results of operations and financial condition.

 

In addition, some of our suppliers may not have the capacity to supply us with sufficient merchandise to keep pace with our growth plans, especially if we need significantly greater amounts of inventory. In such cases, our ability to pursue our growth strategy will depend in part upon our ability to develop new supplier relationships.

 

26

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

The nature of our business may result in undesirable press coverage or other negative publicity, which would adversely impact our brand identity, future sales and results of operations.

 

Our solutions are used to assist law enforcement and other public safety personnel in situations involving public safety. The incidents in which our solutions are deployed may involve injury, loss of life and other negative outcomes, and such events are likely to receive negative publicity. Such negative publicity could have an adverse impact on new sales or renewals or expansions of coverage areas by existing customers, which would adversely impact our financial results and business.

 

Changes in the availability of federal funding to support local public safety or other public sector efforts could impact our opportunities with public sector end customers.

 

Many of our public sector end customers rely to some extent on funds from the U.S. federal government in order to purchase and pay for our solutions. Any reduction in federal funding for local public safety or other public sector efforts could result in our end customers having less access to funds required to continue, renew, expand or pay for our solutions. For example, changes in policies with respect to “sanctuary cities” may result in a reduction in federal funds available to our current or potential end customers. Additionally, the recent U.S. government partial shutdown, and 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.

 

27

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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;

 

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SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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. Further, the terms of our indebtedness constrain our ability to make and finance additional acquisitions or divestitures.

 

If we acquire businesses, new products, service offerings or technologies in the future, we may incur significant acquisition-related costs. In addition, we may be required to amortize significant amounts of finite-lived intangible assets and we may record significant amounts of goodwill or indefinite-lived intangible assets that would be subject to testing for impairment. We have in the past and may in the future be required to write off all or part of the intangible assets or goodwill associated with these investments that could harm our operating results. If we consummate one or more significant future acquisitions in which the consideration consists of stock or other securities, our existing stockholders’ ownership could be significantly diluted. If we were to proceed with one or more significant future acquisitions in which the consideration included cash, we could be required to use a substantial portion of our cash and investments. Acquisitions could also cause operating margins to fall depending on the businesses acquired.

 

Our strategic investments may involve joint development, joint marketing, or entry into new business ventures, or new technology licensing. Any joint development efforts may not result in the successful introduction of any new products or services by us or a third party, and any joint marketing efforts may not result in increased demand for our products or services. Further, any current or future strategic acquisitions and investments by us may not allow us to enter and compete effectively in new markets or enhance our business in our existing markets and we may have to impair the carrying amount of our investments.

 

29

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

We could be adversely impacted by changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters.

 

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our businesses, including, but not limited to, revenue recognition, asset impairment, inventories, customer rebates and other customer consideration, tax matters, and litigation and other contingent liabilities are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change our reported or expected financial performance or financial condition. New accounting guidance may also require systems and other changes that could increase our operating costs and/or change our financial statements. For example, implementing future accounting guidance related to revenue, accounting for leases and other areas could require us to make significant changes to our accounting systems, impact existing debt agreements and result in adverse changes to our financial statements.

 

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 Novel 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 Novel Coronavirus (COVID-19) will be offset by increased sales in subsequent periods. Although the magnitude of the impact of the Novel Coronavirus (COVID-19) outbreak on our business and operations remains uncertain, the continued spread of the Novel 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 been 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.

 

30

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Risks Related to Government Regulation

 

The impact of potential changes in customs, tariffs, and trade policies in the United States and the potential corresponding actions by other countries, including recent trade initiatives announced by the U.S. presidential administration against China, in which we do business could adversely impact our financial performance.

 

The U.S. government has made proposals that are intended to address trade imbalances, which include encouraging increased production in the United States. These proposals could result in increased customs duties and tariffs, and the renegotiation of some U.S. trade agreements. We import a significant percentage of our products into the United States, and an increase in customs duties and tariffs with respect to these imports could negatively impact our financial performance. If such customs duties and tariffs are implemented, it also may cause U.S. trading partners to take actions with respect to U.S. imports or U.S. investment activities in their respective countries. Any potential changes in trade policies in the United States and the potential corresponding actions by other countries in which we do business could adversely impact our financial performance. Given the level of uncertainty over which provisions will be enacted, we cannot predict with certainty the impact of the proposals.

 

For example, in 2018, the U.S. presidential administration and Chinese government imposed significant tariffs on exports between the two countries. This evolving policy dispute between China and the United States is likely to have significant impact on the industries in which we participate, directly and indirectly, and no assurance can be given that any individual customer or significant groups of companies or a particular industry, will not be adversely impacted by any governmental actions taken by either China or the United States. In addition, we manufacture our mobile phones at our facility in Shenzhen, China, which could result in significant additional costs to us when shipping our products to various customers in the United States. It is not possible to predict with any certainty the outcome of the trade dispute between the United States and China, and prolonged or increased tariffs on imports from China to the United States would adversely impact our business, results of operations and financial condition.

 

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. § 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 addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize such activities.

 

31

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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, or 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 manufactures to supply the appropriate export control classification numbers that determine our obligations under these laws.

 

We cannot assure you that our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. As we increase our international presence, our risks under these laws, rules, and regulations may increase. Further, any change in the applicability or enforcement of these laws, rules, and regulations could adversely impact our business operations and financial results.

 

Detecting, investigating and resolving actual or alleged violations can require a significant diversion of time, resources, and attention from senior management. In addition, noncompliance with anti-corruption, anti-bribery, anti-money laundering, or economic sanctions laws, rules, and regulations could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, revenues, financial condition, and results of operations would be significantly harmed. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, financial condition and results of operations.

 

32

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

We are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations.

 

Our operations and the products we manufacture and/or sell are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations. Compliance with such existing or future laws and regulations could subject us to future costs or liabilities, impact our production capabilities, constrict our ability to sell, expand or acquire facilities, restrict what solutions we can offer and generally impact our financial performance. Our products are designed for use in potentially explosive or hazardous environments. If our product design fails for any reason in such environments, we may be subject to product liabilities and future costs. In addition, some of these laws are environmental and relate to the use, disposal, remediation, emission and discharge of, and exposure to hazardous substances. These laws often impose liability and can require parties to fund remedial studies or actions regardless of fault. Environmental laws have tended to become more stringent over time and any new obligations under these laws could have a negative impact on our operations or financial performance.

 

Laws focused on the energy efficiency of electronic products and accessories, recycling of both electronic products and packaging, reducing or eliminating certain hazardous substances in electronic products, and the transportation of batteries continue to expand significantly. Laws pertaining to accessibility features of electronic products, standardization of connectors and power supplies, the transportation of lithium-ion batteries, and other aspects are also proliferating. There are also demanding and rapidly changing laws around the globe related to issues such as product safety, radio interference, radio frequency radiation exposure, medical related functionality, and consumer and social mandates pertaining to use of wireless or electronic equipment. These laws, and changes to these laws, could have a substantial impact on whether we can offer certain products, solutions, and services, and on what capabilities and characteristics our products or services can or must include.

 

These laws and regulations impact our products and could negatively impact our ability to manufacture and sell products competitively. In addition, we anticipate that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products, increasing energy efficiency and providing additional accessibility.

 

Changes in laws and regulations concerning the use of telecommunication bandwidth could increase our costs and adversely impact our business.

 

Our business depends on our ability to sell devices that use telecommunication bandwidth allocated to licensed and unlicensed wireless services, and that use of that bandwidth is subject to laws and regulations that are subject to change over time. Changes in the permitted uses of telecommunication bandwidth, reallocation of such bandwidth to different uses, and new or increased regulation of the capabilities, manufacture, importation, and use of devices that depend on such bandwidth could increase our costs, require costly modifications to our products before they are sold, or limit our ability to sell those products into our target markets. In addition, we are subject to regulatory requirements for certification and testing of our products before they can be marketed or sold. Those requirements may be onerous and expensive. Changes to those requirements could result in significant additional costs and could adversely impact our ability to bring new products to market in a timely fashion.

 

33

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

We are subject to a wide range of privacy and data security laws, regulations and other legal obligations.

 

Personal privacy and information security are significant issues in the United States and the other jurisdictions in which we operate or make our products and applications available. The legislative and regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, including the U.S. Federal Trade Commission, or FTC, and various state, local and foreign agencies. We may collect personally identifiable information, or PII, and other data from our customers. We use this information to provide services to our customers and to support, expand and improve our business. We may also share customers’ PII with third parties as allowed by applicable law and agreements and authorized by the customer or as described in our privacy policy.

 

The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, transfer, use and storage of PII. In the United States, the FTC and many state attorneys general are applying federal and state consumer protection laws as imposing standards for the online collection, use and dissemination of data. Many foreign countries and governmental bodies, including Canada, the European Union and other relevant jurisdictions, have laws and regulations concerning the collection and use of PII obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, Internet Protocol, or IP, addresses. Within the European Union, legislators have adopted the General Data Protection Regulation, or GDPR, effective May 2018 which may impose additional obligations and risk upon our business, and which may increase substantially the penalties to which we could be subject in the event of any non-compliance. We may incur substantial expense in complying with the obligations imposed by the governments of the foreign jurisdictions in which we do business or seek to do business and we may be required to make significant changes in our business operations, all of which may adversely impact our revenues and our business overall.

 

Although we are working to comply with those federal, state, and foreign laws and regulations, industry standards, contractual obligations and other legal obligations that apply to us, those laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations, our practices or the features of our products or applications. At state level, lawmakers continue to pass new laws concerning privacy and data security. Particularly notable in this regard is the California Consumer Privacy Act, or CCPA, which became effective on January 1, 2020. The CCPA will introduce significant new disclosure obligations and provide California consumers with significant new privacy rights. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspected security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of PII or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse impact on our reputation and business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely impact our business.

 

34

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

We also expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. New laws, amendments to or re-interpretations of existing laws and regulations, industry standards, contractual obligations and other obligations may require us to incur additional costs and restrict our business operations. Such laws and regulations may require companies to implement privacy and security policies, permit users to access, correct and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals’ consent to use PII for certain purposes. In addition, a foreign government could require that any PII collected in a country not be disseminated outside of that country, and we are not currently equipped to comply with such a requirement.

 

Risks Related to Our Intellectual Property

 

If we are unable to successfully protect our intellectual property, our competitive position may be harmed.

 

Our ability to compete is heavily affected by our ability to protect our intellectual property. We rely on a combination of patent licenses, confidentiality procedures and contractual provisions to protect our proprietary rights. We also enter, and plan to continue to enter, into confidentiality, invention assignment or license agreements with our employees, consultants and other parties with whom we contract, and control access to and distribution of our software, documentation and other proprietary information. The steps we take to protect our intellectual property may be inadequate, and it is possible that some or all of our confidentiality agreements will not be honored, and certain contractual provisions may not be enforceable. Existing trade secret, trademark and copyright laws offer only limited protection. Unauthorized parties may attempt to copy aspects of our products or obtain and use information which we regard as proprietary. Policing unauthorized use of our products is difficult, time consuming and costly, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. We cannot assure you that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology, the effect of either of which would harm our competitive position in the market. Furthermore, disputes can arise with our strategic partners, customers or others concerning the ownership of intellectual property.

 

Others may claim that we infringe on their intellectual property rights, which may result in costly and time-consuming litigation and could delay or otherwise impair the development and commercialization of our products.

 

In recent years, there has been a significant increase in litigation in the United States involving patents and other intellectual property rights, and because our products are comprised of complex technology, we are often involved in or impacted by assertions, including both requests to take licenses and litigation, regarding infringement of patent and other intellectual property rights of third parties. Third parties have asserted, and in the future may assert, intellectual property infringement claims against us and against our channel partners, end customers and suppliers. For example, we 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 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.

 

35

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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.

 

36

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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, 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. 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, could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countries in the region, including Syria, which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflict in Syria has escalated and chemical weapons have been used in the region. Foreign actors have intervened and may continue to intervene in Syria. This instability and any intervention may lead to deterioration of the political and economic relationships that exist between the State of Israel and some of these countries and may lead to additional conflicts in the region. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Iran also has a strong influence among extremist groups in the region, including Hamas in Gaza, Hezbollah in Lebanon and various rebel militia groups in Syria. These situations have escalated at various points in recent years and may escalate in the future to more violent events, which may affect Israel and us. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary, in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

 

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.

 

In addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial condition and results of operations.

 

37

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

It may be difficult to enforce a U.S. judgment against us, our officers and directors named in this annual report on form 20-Fin Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors.

 

Not all of our directors or officers are residents of the United States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Additionally, Israeli courts might not enforce judgments obtained in the United States against us or our non-U.S. our directors and executive officers, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.

 

Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought. For more information, see “Enforceability of Civil Liabilities.”

 

Because we are a corporation incorporated in British Columbia and some of our directors and officers are resident in Canada, it may be difficult for investors in the United States to enforce civil liabilities against us based solely upon the federal securities laws of the United States. Similarly, it may be difficult for Canadian investors to enforce civil liabilities against our directors and officers residing outside of Canada.

 

We are a corporation incorporated under the laws of British Columbia with our principal place of business in Montreal, Canada. Some of our directors and officers and the auditors or other experts named herein are residents of Canada and all or a substantial portion of our assets and those of such persons are located outside the United States. Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon us or our directors or officers or such auditors who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States predicated upon civil liabilities under the Securities Act. Investors should not assume that Canadian courts: (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.

 

38

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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 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 to 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 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.

 

39

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

The impact of potential changes in customs, tariffs, and trade policies in the United States and the potential corresponding actions by other countries, including recent trade initiatives announced by the U.S. presidential administration against China, in which we do business could adversely impact our financial performance.

 

The U.S. government has made proposals that are intended to address trade imbalances, which include encouraging increased production in the United States. These proposals could result in increased customs duties and tariffs, and the renegotiation of some U.S. trade agreements. We import a significant percentage of our products into the United States, and an increase in customs duties and tariffs with respect to these imports could negatively impact our financial performance. If such customs duties and tariffs are implemented, it also may cause U.S. trading partners to take actions with respect to U.S. imports or U.S. investment activities in their respective countries. Any potential changes in trade policies in the United States and the potential corresponding actions by other countries in which we do business could adversely impact our financial performance. Given the level of uncertainty over which provisions will be enacted, we cannot predict with certainty the impact of the proposals.

 

For example, in 2018, the U.S. presidential administration and Chinese government imposed significant tariffs on exports between the two countries. This evolving policy dispute between China and the United States is likely to have significant impact on the industries in which we participate, directly and indirectly, and no assurance can be given that any individual customer or significant groups of companies or a particular industry, will not be adversely impacted by any governmental actions taken by either China or the United States. In addition, we manufacture our mobile phones at our facility in Shenzhen, China, which could result in significant additional costs to us when shipping our products to various customers in the United States. It is not possible to predict with any certainty the outcome of the trade dispute between the United States and China, and prolonged or increased tariffs on imports from China to the United States would adversely impact our business, results of operations and financial condition.

 

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;

 

40

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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.

 

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.

 

41

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Risks Related to Ownership of Our Securities

 

We do not know whether an active, liquid, and the orderly trading market will develop for our Common Shares or what the market price of our Common Shares will be and as a result, it may be difficult for you to sell your Common Shares.

 

You may not be able to sell your shares quickly or at the market price if trading in our Common Shares is not active. The initial public offering price for our Common Shares will be determined through negotiations with the underwriters, and the negotiated price may not be indicative of the market price of the Common Shares after the offering. As a result of these and other factors, you may be unable to resell your Common Shares at or above the initial public offering price. Further, an inactive market may also impair our ability to raise capital by selling our Common Shares and may impair our ability to enter into strategic partnerships or acquire companies or products by using our Common Shares as consideration.

 

We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above the price at which you purchased our Common 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;

 

42

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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. 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.

 

Our executive officers and directors, and their affiliated entities, along with our two other largest stockholders, own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

 

Based on shares outstanding as of March 31, 2022, our executive officers and directors, together with entities affiliated with such individuals, along with our largest shareholder, will beneficially own approximately 8.4% 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.

 

General Risk Factors

 

The unfavorable outcome of any future litigation, arbitration or administrative action could have a significant adverse impact on our financial condition or results of operations.

 

From time to time, we are a party to litigation, arbitration, or administrative actions. Our financial results and reputation could be negatively impacted by unfavorable outcomes to any future litigation or administrative actions, including those related to the Foreign Corrupt Practices Act, the U.K. Bribery Act, or other anti-corruption laws. There can be no assurances as to the favorable outcome of any litigation or administrative proceedings. In addition, it can be very costly to defend litigation or administrative proceedings and these costs could negatively impact our financial results.

 

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

 

The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our securities would likely be negatively impacted. In the event, securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our securities could decrease, which might cause our stock price and trading volume to decline.

 

43

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

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 (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) 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 New York Stock Exchange. 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.

 

If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our Common Shares could decline.

 

We cannot predict whether future issuances of our Common Shares or the availability of shares for resale in the open market will decrease the market price per common share. We are not restricted from issuing additional Common Shares of, including any securities that are convertible into or exchangeable for, or that represent the right to receive Common Shares. Sales of a substantial number of our Common Shares in the public market or the perception that such sales might occur could materially adversely affect the market price of our Common Shares. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our shareholders bear the risk of any future stock issuances reducing the market price of our Common Shares and diluting their stock holdings in us.

 

We will 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 will incur significant legal, accounting and other expenses that we did not incur previously. We will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, which will require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and Nasdaq to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive-compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas. Recent legislation permits emerging growth companies to implement many of these requirements over a longer period and up to five years from the pricing of their initial public offering. We intend to take advantage of this new legislation, but cannot assure you that we will not be required to implement these requirements sooner than planned and thereby incur unexpected expenses. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

 

44

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. The increased costs will decrease our net income or increase our consolidated net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

 

Although as a Foreign Private Issuer we are exempt from certain corporate governance standards applicable to US issuers, if we cannot satisfy, or continue to satisfy, the initial listing requirements and other rules of the Nasdaq Capital Market, our securities may not be listed or may be delisted, which could negatively impact the price of our securities and your ability to sell them.

 

In order to maintain our listing on the Nasdaq Capital Market, we will be required to comply with certain rules of the Nasdaq Capital Market, including those regarding minimum shareholders’ equity, minimum share price, minimum market value of publicly held shares, and various additional requirements. Even if we initially meet the listing requirements and other applicable rules of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.

 

If the Nasdaq Capital Market does not list our securities, or subsequently delists our securities from trading, we could face significant consequences, including:

 

  a limited availability for market quotations for our securities;
     
  reduced liquidity with respect to our securities;
     
  a determination that our Common Share is a “penny stock,” which will require brokers trading in our Common Share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Common Share;
     
  limited amount of news and analyst coverage; and
     
  a decreased ability to issue additional securities or obtain additional financing in the future.

 

45

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

 

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with accounting principles generally accepted in the U.S.

 

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 Securities and Exchange Commission, or 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, 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.

 

46

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Liquidity AND capITal resouRces

 

The Company defines capital as consisting of shareholder’s equity (comprised of issued share capital, reserves, accumulated translation differences and deficit). The Company manages its capital structure to maximize its financial flexibility making adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative measures to monitor its capital, but rather relies on the expertise of the Company’s management to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. As at March 31, 2022, the Company is subject to externally imposed capital requirements arising from the monthly payments of principal on the convertible debenture. The Company is also subject to a debt covenant in relation to the factoring agreement described in Note 5.

 

Siyata Mobile Israel has a factoring facility with Israeli banks whereby the Bank advances funds to Siyata Mobile Israel and charges a fluctuating interest rate on the advanced funds until it is repaid by the borrowers’ customers. The Bank has a lien on these receivables. The factored receivables are all required to be insured in case of customer default with a financial institution.

 

The Company’s objective in managing liquidity risk is to maintain sufficient liquidity to meet operational and investing requirements at any point in time. The Company has historically financed its operations primarily through a combination of demand loans and the sale of share capital by way of private placements.

 

As at March 31, 2022 the Company had a cash balance $9,221,049 (Dec 31, 2021- $1,619,742). The Company has an accumulated deficit of $67,412,903 (Dec 31, 2020-$62,519,412) and working capital of $11,058,203- (December 31, 2021-negative $688,973).

 

Net cash flows related to operating activities used in the three-month period ended March 31, 2022, and March 31, 2021, were negative ($5,739,026) and negative ($4,752,154), respectively. The increase in cash used of $986,872 was primarily due to the increase in the net loss by $2,778,085 and increased by the following non-cash items, a decrease in amortization of $196,512, a decrease in bad debts of $7,358, decrease in accretive interest of $265,172, decrease in interest income of $516, offset by the following non-cash expenses, increase in inventory impairment of $64,336, increase of share-based payments of $219,943, the change in fair value of the derivatives in the period of $1,390,550 and as well as the increase in the non-cash working capital items by $585,942.

 

The non-cash working capital variances consisted of an increase in trade and other receivables of $1,198,735, an increase in accounts payable and accrued liabilities of $140,484, and an increase in inventory before impairment of $270,572, offset by a decrease in prepaid by $624,026 and a decrease in advances to suppliers of $399,823.

 

Net cash flows used in investing activities for the three months ended March 31, 2022, and March 31, 2021, were negative ($894,593) and negative ($1,271,085), respectively, with a positive variance of $376,492. This variance relates primarily to a decrease in additions to intangibles of $373,804, and a decrease in equipment by $35,668, offset by the acquisition of ClearRF of $33,000.

 

47

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Liquidity AND capITal resouRces (Cont’d…)

 

Net cash provided by financing activities in the three months ended March 31, 2022, and March 31, 202,1 was $14,212,247 and negative ($683,625), respectively. This positive variance of $14,895,872 is mainly due to the increase in shares issued for cash in the year, net of share issuance costs, of $17,694,296, a decrease in the bank loan for a positive variance of $37,689, the positive variance on the repayment of the long term debt of $14,286, the exercise of the pre-funded warrants for $14,800, offset by convertible debt net repayments increase by $2,822,214, and the net increase in payments on leases of $42,985.

 

The future success of the Company is dependent on the continued success of its vehicle-mounted communications products, its mobile rugged phones, and its booster products together with the ability to finance the necessary working capital, at agreeable terms, to support the growth of the business.

 

The Company’s consolidated unaudited interim audited financial statements have been prepared in accordance with IFRS under the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than a process of forced liquidation. The consolidated audited financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

 

SHARE CAPITAL

 

(a)Authorized Unlimited number of common shares without par value

Unlimited number of preferred shares without par value

 

As at March 31, 2022, the Company had 14,111,305 common shares issued and outstanding (Dec 31, 2021-5,296,695.

 

Subsequent to March 31, 2022, the Company issued:

 

155,000 shares to suppliers as part of their agreed compensation; and

 

417,537 shares as payment for the first principal repayment of $400,000 on the promissory note.

 

On September 24, 2020, the Company consolidated (each a “Share”) its common shares on the basis of 145 pre-consolidation Shares for one (1) post-consolidation share. Share amounts have been retrospectively restated to reflect the post-consolidation number of shares.

 

48

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

SHARE CAPITAL (Cont’d…)

 

(b)Common share transactions

 

Transactions for the three months ended March 31, 2022 are as follows:

 

(i) On January 11, 2022, the Company completed an underwritten public offering in the United States, raising a total of $20,013,043 in gross proceeds. The Company allocated the gross proceeds and direct costs between the units, pre-funded units and option warrants using the relative fair value of the components.

 

The underwritten public offering resulted in the sale to the public of 7,215,652 Units at $2.30 per Unit, with each Unit being comprised of one common share and one warrant (the “Unit Warrants”) exercisable at $2.30 per share. The Unit warrants are exercisable immediately and have a term of 5 years. Gross proceeds of $10,370,5020 were allocated to the common shares, and $4,731,934 to the unit warrants.

 

In addition, the Company issued 1,480,000 pre-funded units (“Pre-Funded Units”) at $2.29 per Pre-Funded Unit. Each Pre-Funded Unit is comprised of a one-pre-funded warrant (a “Pre-Funded Warrant”) to purchase one common share, and one warrant to purchase one common share. The Pre-Funded Warrant allows the holder to acquire one common share of the Company at an exercise price of $0.01 per common share, and a warrant to purchase a common share at an exercise price of $2.30 per share. The warrants are exercisable immediately and have a term of 5 years. Each Pre-Funded Warrant is exercisable immediately and is exercisable until all Pre-Funded Warrants are exercised. Proceeds of $2,127,090 were allocated to the pre-funded warrants, and $919,446 to the warrants.

 

The Company concurrently sold an additional 1,304,347 warrants to purchase 1,304,347 common shares exercisable at $2.30 per share (the “Option Warrants”) pursuant to an over-allotment option exercised by the underwriter. The exercise price of the warrants issued in connection with the exercise of the over-allotment option was $0.0097 per warrant. Each Option Warrant is exercisable immediately and has a term of five years from the issue date. Proceeds of $1,864,071 were allocated to the option warrants.

 

The fair value of the common shares and pre-funded units was determined by reference to the market price on the day of the offering, which was $1.73 per share. The Unit warrants, warrants, and Option Warrants were valued using the Black-Scholes model using the following assumptions: initial stock price $1.73, strike rate $2.30, dividend yield 0%, term 5 years, volatility 60.0% and risk free rate 0.50%.

 

49

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

SHARE CAPITAL (Cont’d…)

 

(b)Common share transactions (cont’d)

 

Transactions for the three months ended March 31, 2022 (cont’d)

 

The Company also issued warrants to the placement agents to purchase 434,783 common shares at an exercise price of $2.53 per share (the “Placement Agent Warrants”), which are exercisable 180 days from January 11, 2022, with a term of five years. The fair value of the Placement Agent Warrants was determined to be $307,189 using the Black-Scholes model with the following assumptions: initial stock price $1.73, strike rate $2.53, dividend yield 0%, term 5 years, volatility 60.0% and risk free rate 0.50%.

 

In aggregate, the Company issued 7,215,652 common shares, 1,480,000 Pre-Funded Warrants, 9,999,999 Unit Warrants, and 434,783 Placement Agent Warrants.

 

The direct costs related to the issuance of the common shares and warrants issued in the January 2022 underwritten public offering were $2,016,895, including the value of the Placement Agent Warrants. During the period, 1,480,000 Pre-Funded Warrants were exercised for gross proceeds of $14,800, converting into 1,480,000 common shares that were fully issued.

 

(ii) On March 31, 2022, as part of the ClearRF acquisition (Note 4 and 15), the Company issued 138,958 shares to the vendor.

 

(c)Stock Options:

 

The Company has a shareholder-approved “rolling” stock option plan (the “Plan”) in compliance with NASDAQ policies. Under the Plan the maximum number of shares reserved for issuance may not exceed 15% of the total number of issued and outstanding common shares on a fully diluted basis at the time of granting. The exercise price of each stock option shall not be less than the market price of the Company’s stock at the date of grant, less a discount of up to 25%. Options can have a maximum term of ten years and typically terminate 90 days following the termination of the optionees’ employment or engagement, except in the case of retirement or death. Vesting of options is at the discretion of the Board of Directors at the time the options are granted.

 

A summary of the Company’s stock option activity at March 31, 2022 is as follows:

 

  Number of    Weighted Average 
   Stock Options   Exercise Price 
Outstanding options, December 31, 2020   328,068   $13.99 
Granted   100,500    11.50 
Expired/Cancelled   (14,000)   16.38 
Outstanding options, December 31, 2021    414,568   $13.88 
Granted   2,270,000    1.03 
Expired/Cancelled   (27,104)   13.45 
Outstanding options, March 31, 2022    2,657,464   $2.89 

 

50

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Share Capital (cont’d…)

 

Stock options (cont’d)

 

Transactions from January 1, 2022 to the date of this MD&A are as follows:

 

On January 1, 2022, the Company granted 20,000 stock options at $4.00 per share that vest in 8 equal quarterly periods with the first vesting occurring on the grant date.

 

On March 9, 2022, the company granted a total of 2,250,000 restricted share units to executives with an exercise price of $1.03 per share of which 600,000 vested on the date of the grant and the remaining 1,650,000 vest on a quarterly basis over 11 periods.

 

On April 13, 2022, subsequent to the quarter end, the Company granted 795,000 stock options and 825,000 restricted share units at $1.10 per shares to executives, consultants and employees of the Company. These options and RSU’s vest on a quarterly basis over 12 periods with the first vesting occurring on the date of the grant.

 

Stock options outstanding at March 31, 2022 are as follows:

 

Grant Date  Number of
options outstanding
   Number of
options exercisable
   Weighted Average
Exercise Price
    Expiry date     Remaining contractual
life (years)
 
4-Apr-17   6,897    6,897    63.00    4-Apr-22     0.02 
24-Jul-17   7,929    7,929    79.00    24-Jul-22     0.32 
24-Dec-18   12,896    12,896    57.00    24-Dec-23     1.73 
15-Jan-19   828    828    57.00    15-Jan-24     1.79 
21-Mar-19   12,345    12,345    63.00    21-Mar-24     1.98 
1-Jan-20   2,069    2,069    57.00    1-Jan-24     1.75 
15-Nov-20   95,000    83,125    6.00    15-Nov-30     8.63 
15-Nov-20   161,500    141,313    6.00    15-Nov-25     3.63 
2-Jan-21   57,000    42,750    11.50    2-Jan-26     3.76 
2-Jan-21   5,000    3,750    11.50    2-Jan-31     7.76 
18-Jan-21   14,500    10,875    11.50    18-Jan-26     3.8 
18-Jan-21   1,500    1,500    11.50    31-Aug-22     0.58 
18-Jan-21   10,000    10,000    11.50    29-Oct-22     0.42 
1-Jan-22   20,000    5,000    4.00    29-Oct-26     4.58 
9-Mar-22   2,250,000    600,000    1.03    N/A     N/A 
Total   2,657,464    941,277   $2.89          0.70 

 

51

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Share Capital (cont’d…)

 

Stock options (cont’d)

 

Stock options outstanding as of the date of the MD&A are as follows:

 

Date Issued  Number of
options
outstanding
   Number of
options
exercisable
   Weighted Average Exercise Price   Expiry date    Remaining
contractual
life (years)
 
24-Jul-17   7,929    7,929    79.00   24-Jul-22    0.2 
24-Dec-18   12,896    12,896    57.00   24-Dec-23    1.61 
15-Jan-19   828    828    57.00   15-Jan-24    1.67 
21-Mar-19   12,345    12,345    63.00   21-Mar-24    1.86 
1-Jan-20   2,069    2,069    57.00   1-Jan-24    1.63 
15-Nov-20   95,000    83,125    6.00   15-Nov-30    8.5 
15-Nov-20   161,500    141,313    6.00   15-Nov-25    3.5 
2-Jan-21   57,000    42,750    11.50   2-Jan-26    3.64 
2-Jan-21   5,000    3,750    11.50   2-Jan-31    7.63 
18-Jan-21   14,500    10,875    11.50   18-Jan-26    3.68 
18-Jan-21   1,500    1,500    11.50   31-Aug-22    0.46 
18-Jan-21   10,000    10,000    11.50   29-Oct-22    0.3 
1-Jan-22   20,000    5,000    4.00   29-Oct-26    4.46 
9-Mar-22   2,250,000    600,000    1.03   N/A    N/A 
13-Apr-22   795,000    66,250    1.10   13-Apr-27    4.9 
13-Apr-22   825,000    288,750    1.10   N/A    N/A 
Total   4,270,567    1,289,380   $2.12        1.34 

 

(d)Agent’s options

 

A summary of the Company’s agents’ options activity for the three months ended March 31, 2022 are as follows:

 

   Number of
options
   Weighted average
exercise price
 
Outstanding agent options, December 31, 2020   452,523    8.02 
Expired   (6,597)   52.68 
Outstanding agent options, December 31, 2021   445,926   $7.51 
Granted   434,783    2.53 
Outstanding agent options, March 31, 2022   880,709   $5.05 

 

52

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Share Capital (cont’d…)

 

(d)Agents options (cont’d)

 

Transactions for the three months ended March 31, 2022, are as follows:

 

The Company also issued warrants to the placement agents to purchase 434,783 common shares at an exercise price of $2.53 per share (the “Placement Agent Warrants”), which are exercisable 180 days from January 11, 2022, with a term of five years. The fair value of the Placement Agent Warrants was determined to be $307,189 using the Black-Scholes model with the following assumptions: initial stock price $1.73, strike rate $2.53, dividend yield 0%, term 5 years, volatility 60.0% and risk free rate 0.50%.

 

At March 31, 2022, agents’ options outstanding are as follows:

 

Grant Date  Number of
options outstanding
   Number of
options exercisable
   Weighted Average
Exercise Price
    Expiry date    Remaining
contractual
life (years)
 
28-Jul-20   1,702     1,702   $20.49    28-Jul-22    0.33 
29-Sep-20   113,500     113,500   $6.60    28-Sep-25    3.50 
29-Sep-20   266,000     266,000   $6.85    28-Sep-25    3.50 
31-Dec-20   64,724     64,724   $11.50    30-Jun-24    2.25 
11-Jan-22   434,783     0   $2.53    11-Jan-27    4.79 
Total   880,709     445,926   $5.05         4.04 

 

As of the date of this MD&A, agents’ options outstanding are as follows:

 

Grant Date  Number of
options outstanding
   Number of
options exercisable
   Weighted Average
Exercise Price
    Expiry date    Remaining contractual
life (years)
 
28-Jul-20   1,702     1,702   $20.49    28-Jul-22    0.33 
29-Sep-20   113,500     113,500   $6.60    28-Sep-25    3.50 
29-Sep-20   266,000     266,000   $6.85    28-Sep-25    3.50 
31-Dec-20   64,724     64,724   $11.50    30-Jun-24    2.25 
11-Jan-22   434,783     0   $2.53    11-Jan-27    4.79 
1-Apr-22   52,500     0   $2.30    8-Mar-27    4.94 
Total   933,209     445,926    4.90         4.09 

 

On April 1, 2022, the Company issued 52,500 agent warrants at $2.30.

 

53

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Share Capital (cont’d…)

 

(e)Share Purchase Warrants:

 

A summary of the Company’s warrant activity is as follows:

 

Transactions from January 1, 2021 until the date of the MD&A are as follows:

 

As more elaborated in Note 16(b) of the March 31, 2022 financial statements -Transactions for the three months ended March 31, 2022-, the Company issued on January 11, 2022, 8,695,652 share purchase warrants, exercisable immediately at a price of $2.30 and has a term of five years from the issue date. Proceeds of $5,778,360 were allocated to these warrants issued.

 

Company concurrently sold an additional 1,304,347 warrants to purchase 1,304,347 common shares exercisable at $2.30 per share (the “Option Warrants”) pursuant to an over-allotment option exercised by the underwriter. The exercise price of the warrants issued in connection with the exercise of the over-allotment option was $0.0097 per warrant. Each Option Warrant is exercisable immediately and has a term of five years from the issue date. Proceeds of $866,753 were allocated to the option warrants issued.

 

On January 11, 2022, the 1,892,857 share purchase warrants with an exercise price of $4.00 per share were re-priced to $2.30 consistent with the terms of the agreement and as outlined in Note 12(d) due to refinancing at $2.30 per unit.

 

Share purchase warrant activity was as follows:

 

   Number of
Warrants
   Weighted average
exercise price
 
Outstanding, December 31, 2020   3,591,533   $10.55 
Granted    2,142,857    4.00 
Exercised   (544,415)   5.54 
Expired   (68,647)   62.87 
Outstanding, December 31, 2021   5,121,328   $7.64 
Granted    9,999,999    2.30 
Outstanding, March 31, 2022   15,121,327   $3.90 

 

At March 31, 2022 and the date of this MD&A, share purchase warrants outstanding and exercisable are as follows:

 

Grant Date  Number of
Warrants outstanding
and exercisable
   Exercise Price   Expiry date  
23-Dec-19   54,248    51.22   23-Dec-22  
28-Jul-20   74,138    20.49   28-Jul-22  
29-Sep-20   1,805,585    6.85   28-Sep-25  
31-Dec-20   1,294,500    11.50   30-Jun-24  
3-Nov-21   1,892,857    2.30   3-Nov-26  
11-Jan-22   9,999,999    2.30   11-Jan-27  
Total   15,121,327   $3.90      

 

54

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

FINANCIAL INSTRUMENTS

 

Fair Value.

 

The convertible promissory note is estimated at fair value using a binomial lattice model using the following inputs: stock price (Level 1 input); risk-free rates (Level 1 input); credit spread (Level 3 input); volatility (Level 3 input).

 

Sensitivity Analysis:

 

  Type Valuation Technique Key Inputs Inter-relationship between significant inputs and fair value measurement
  Convertible Promissory Note The fair value of the convertible promissory note has been calculated using a binomial lattice methodology Key observable inputs The estimated fair value would increase (decrease) if:
  Share price (March 31, 2022: US $1.25) The share price was higher (lower)
  Risk-free interest rate (March 31, 2022: 2.01%) The risk-free interest rate was higher (lower)
  Dividend yield (March 31, 2022: 0%) The dividend yield was lower (higher)
  Key unobservable inputs The instrument specific spread was lower (higher)
      Instrument specific spread (March 31, 2022: 45%) The credit spread was lower (higher)
      Credit spread (March 31, 2021: 8.87%)    

 

The fair values of the Company’s cash, trade and other receivables, due from related party, and accounts payable and accrued liabilities approximate carrying value, which is the amount recorded on the consolidated statement of financial position.

 

55

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

FINANCIAL INSTRUMENTS (CONT’D)

 

The Company is exposed to varying degrees to a variety of financial instrument related risks:

 

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company places its cash with institutions of high credit worthiness. Management has assessed there to be a low level of credit risk associated with its cash balances.

 

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, which represents the maximum open amount without requiring approval from the Risk Management Committee; these limits are reviewed quarterly. Certain key customers were offered extended payment terms on their purchases due to slow down from Covid-19 and budget approvals for government tenders. As s result, the Company had customers with overdue receivables on their books which resulted in the Company taking a bad debt provision on these overdue receivables which amounted to $1,095,655 on March 31, 2022, (March 31, 2021-$1,530,667).

 

More than 18% of the Company’s customers have been active with the Company for over four years, and the impairment of $1,095,655 (2020-$1,530,667) in impairment loss has been recognized against these customers. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer, geographic location, industry, aging profile, maturity, and the existence of previous financial difficulties. Trade and other receivables relate mainly to the Company’s wholesale customers. Customers that are graded as “high risk” are placed on a restricted customer list and monitored by the Company.

 

The carrying amount of financial assets represents the maximum credit exposure, notwithstanding the carrying amount of security or any other credit enhancements.

 

The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was as follows:

 

(in thousands)  March 31,
2022
   December 31,
2021
 
EMEA  $1,060   $879 
Australia   39    119 
North America   459    546 
Total  $1,558   $1,544 

 

56

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

FINANCIAL INSTRUMENTS (CONT’D)

 

Liquidity risk

 

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

 

The Company examines current forecasts of its liquidity requirements so as to make certain that there is sufficient cash for its operating needs, and it is careful at all times to have enough unused credit facilities so that the Company does not exceed its credit limits and is in compliance with its financial covenants (if any). These forecasts take into consideration matters such as the Company’s plan to use debt for financing its activity, compliance with required financial covenants, compliance with certain liquidity ratios, and compliance with external requirements such as laws or regulation.

 

The Company uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimizing its cash return on investments. Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 90 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

 

The Company has a factoring agreement with external funding (Note 5) of the March 31, 2022 consolidated unaudited interim financial statements.

 

With the exception of employee benefits, the Company’s accounts payable and accrued liabilities have contractual terms of 90 days. The employment benefits included in accrued liabilities have variable maturities within the coming year.

 

57

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

FINANCIAL INSTRUMENTS (CONT’D)

 

Market risk

 

a)Currency Risk

 

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The functional currency of the Company is the USD as of October 1, 2020 as discussed in Note 2. As at March 31, 2022 the Company’s exposure to foreign currency risk with respect to financial instruments is as follows:

 

(in USD thousands)  USD   NIS   CAD   Total 
Financial assets and financial liabilities:
Current assets                    
Cash   8,994    44    183    9,221 
Trade and other receivables   166    1,046    346    1,558 
Advances to supplier   1,061    -    -    1,061 
Long term receivable   -    168    -    168 
                     
Current liabilities                    
Accounts payable and accrued liabilities   (219)   (760)   (831)   (1,810)
Convertible debentures   (2,024)   -    -    (2,024)
Warrant liability   (887)   -    -    (887)
Total  $7,091    498    (302)   7,287 
10% fluctuation in exchange rate   709    50    (30)   729 

 

b)Interest Rate Risk

 

Interest rate risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in interest rates. The Company’s sensitivity to interest rates is currently immaterial as the Company’s debt bears interest at fixed rates.

 

c)Price Risk

 

The Company is exposed to price risk with respect to equity prices. Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. The Company closely monitors individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company.

 

58

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

 

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates:

 

i)Critical accounting estimates

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are, but not limited to the following:

 

Income taxes - Tax provisions are based on enacted or substantively enacted laws. Changes in those laws could affect amounts recognized in profit or loss both in the period of change, which would include any impact on cumulative provisions, and future periods. Deferred tax assets, if any, are recognized to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets are likely to reverse.

 

Fair value of stock options and warrants - Determining the fair value of warrants and stock options requires judgments related to the choice of a pricing model, the estimation of stock price volatility, the expected forfeiture rate and the expected term of the underlying instruments. Any changes in the estimates or inputs utilized to determine fair value could have a significant impact on the Company’s future operating results or on other components of shareholders’ equity.

 

Capitalization of development costs and their amortization rate – Development costs are capitalized in accordance with the accounting policy. To determine the amounts earmarked for capitalization, management estimates the cash flows which are expected to be derived from the asset for which the development is carried out and the expected benefit period.

 

Inventory - Inventory is valued at the lower of cost and net realizable value. Cost of inventory includes cost of purchase (purchase price, import duties, transport, handling, and other costs directly attributable to the acquisition of inventories), cost of conversion, and other costs incurred in bringing the inventories to their present location and condition. Net realizable value for inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Provisions are made in profit or loss of the current period on any difference between book value and net realizable value.

 

59

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D…)

 

Estimated product returns - Revenue from product sales is recognized net of estimated sales discounts, credits, returns, rebates and allowances. The return allowance is determined

 

based on an analysis of the historical rate of returns, industry return data, and current market conditions, which is applied directly against sales.

 

Impairment of non-financial assets - The Company assesses impairment at each reporting date by evaluating conditions specific to the Company that may lead to asset impairment. The recoverable amount of an asset or a cash-generating unit (“CGU”) is determined using the greater of fair value less costs to sell and value in use which requires the use of various judgments, estimates, and assumptions.

 

Useful life of intangible assets – The Company estimates the useful life used to amortize intangible assets which relates to the expected future performance of the assets acquired based on management estimate of the sales forecast.

 

Future purchase consideration - In a business combination, the Company recognizes a contingent consideration at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value recognized either in profit or loss, or as a change to other comprehensive income (“OCI”).   If the contingent consideration is not within the scope of IAS 39, it is measured at fair value in accordance with the appropriate IFRS.   Contingent consideration that is classified as equity is not re-measured and subsequent settlement is accounted for within equity.

 

Contingent consideration from an asset acquisition is recognized when: the conditions associated with the contingency are met; the Company has a present legal or constructive obligation that can be estimated reliably; and it is probably that an outflow of economic benefits will be required to settle the obligation.

 

60

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D…)

 

ii)Critical accounting judgments

 

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are, but are not limited to, the following:

 

Deferred income taxes – judgments are made by management to determine the likelihood of whether deferred income tax assets at the end of the reporting period will be realized from future taxable earnings. To the extent that assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as the amounts recognized in profit or loss in the period in which the change occurs.

 

Functional currency - The functional currency for the Company and each of the Company’s subsidiaries is the currency of the primary economic environment in which the respective entity operates. The Company has determined the functional currency of each entity to be the Canadian dollar with the exception of Siyata Israel which has the functional currency of the US dollar. Such determination involves certain judgments to identify the primary economic environment. The Company reconsiders the functional currency of its subsidiaries if there is a change in events and/or conditions which determine the primary economic environment.

 

Going concern – As disclosed in Note 1 to the consolidated unaudited interim financial statements.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

None than specifically apply to the Company as evaluated by management.

 

61

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

Related Party transactionS

 

Key Personnel Compensation

 

Key management personnel includes those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of executive and non-executive members of the Company’s Board of Directors and corporate officers. The remuneration of directors and key management personnel for the years ended December 31, 2021, 2020 and 2019 are as follows:

 

   2022   2021 
Payments to key management personnel:          
Salaries, consulting and directors’ fees  $491,889   $287,427 
Share-based payments   767,436    425,416 
Total  $1,259,325   $712,843 

 

Salaries, consulting and directors’ fees shown above are classified within profit and loss as shown below:

 

      (in thousands) 
Type of Service  Nature of Relationship  2022   2021 
Selling and marketing expenses  VP Technology/VP Sales International   84    40 
General and administrative expense  Companies controlled by the CEO, CFO and Directors   408    247 

 

Loan to Director

 

On April 1, 2019 the Company loaned to a director and its chief Executive Officer, $200,000 USD. This loan was for a term of 5 years with interest charged at rate of 7% per annum payable quarterly. As of January 1, 2020, the interest rate on the loan was increased to 12% per annum. There were no capital repayment requirements until the end of the term when a balloon payment of the principal balance was required. The director repaid the loan in full on May 23, 2021.

 

62

SIYATA MOBILE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company currently has no off-balance sheet arrangements.

 

Additional Information

 

Additional information relating to the Company can be found on SEDAR at www.sedar.com.

 

63

Exhibit 99.3

 

____________________________________________________________________________

 

N E W S     R E L E A S E

 

____________________________________________________________________________

 

Siyata Mobile Announces First Quarter 2022 Financial Results

  

Q1 revenue negatively impacted due to transition from legacy product sales cycle to new product lines

 

Subsequent to quarter end, Siyata received a $2.2 million purchase order for a Tier 1 US wireless operator for SD7, VK7 and various accessories

 

Vancouver, BC – May 16, 2022 -- Siyata Mobile Inc. (Nasdaq: SYTA, SYTAW) (“Siyata” or the “Company”), a global vendor of Push-to-Talk over Cellular (PoC) devices and cellular signal booster systems, announced its financial results for the three months ended March 31, 2022. Subsequent to quarter end, the Company received a $2.2 million purchase order for a Tier 1 US wireless operator. All amounts are in US dollars unless otherwise indicated.

 

“We fortified the foundation for our North American launch of the SD7, our newest push-to-talk ruggedized device, and the accompanying vehicle kit accessory, the VK7, during the first quarter,” said Marc Seelenfreund, Founder and CEO of Siyata. “The recent approval onto a national broadband network for first responders and certification of the SD7, enabling first responders to tap into specialized capabilities designed to meet their needs, is a game changer that is expected to accelerate sales growth in the quarters ahead, as evidenced by the $2.2 million purchase order we recently received for a Tier 1 US wireless operator. We believe there is significant near and long-term growth potential for these product lines which have the potential to disrupt the $12.6 billion Land Mobile Radio (LMR) industry and replace traditional two-way radios with next-generation devices.”

 

First Quarter 2022 Financial Highlights:

 

Revenues for the three months ended March 31, 2022, were $832,974 compared to $4,031,975 for the three months ended March 31, 2021. This variance of $3,199,001 is mainly due to the transition from the legacy product sales cycle to the new product line, where production has been ramped up for the SD7 rugged handset.

 

Gross margin for the three months ended March 31, 2022 was $255,051 (30.6% of sales) compared to $1,740,091 43.2% of sales for the three months ended March 31, 2021, a variance in gross margin dollars of $1,485,040 primarily related to both to the sale of rugged and in-vehicle cellular devices at lower margins compared to the sale of industrial boosters in the US marketplace at slightly higher margins and due to the prior-year period, one-time booster sale in Q1 2021 at higher margins.

 

For the year three months ended March 31, 2022, adjusted EBITDA is negative ($2,629,373) versus negative ($291,346) in the prior year period, a variance of ($2,338,967). Adjusted EBITDA is defined as the net operating loss excluding depreciation and amortization and share-based compensation expense.

 

 

 

 

The Company experienced a net loss for the three months ended March 31, 2022 of ($4,893,491) as compared to a net loss of ($2,115,406) in the prior year period, a variance of ($2,778,085). This negative variance was due mainly to, a decrease in gross profit of $1,485,040 and a change in fair value of derivatives of $1,390,950.

 

As at March 31, 2022 the Company had a cash balance $9,221,049 (Dec 31, 2021- $1,619,742) and working capital of $11,058,203- (December 31, 2021-negative $688,973). Cash consumed in the quarter relates largely to cash consumed for operations, a $4.0 million repayment of a $7.2 million senior secured convertible promissory note, and the fees associated with a previously announced $20 million underwritten public offering. In addition, the Company’s preparation to launch its new products resulted in a sequential: $1.0 million increase in inventory, $0.6 million increase in advance to suppliers, and a $0.8 million reduction to accounts payable.

 

Outlook

 

Siyata is building on a strong foundation, expanding distribution partnerships, adding key new sales hires, and accelerating its North American rollout. The recently announced certification and approval of Siyata’s SD7 ruggedized device is a major milestone that furthers the Company’s goal of disrupting the $12.6 billion LMR industry. Subsequent to this carrier approval, the Company received a $2.2 million purchase order (PO) for a Tier 1 US wireless operator. The PO included SD7 devices and associated accessories as well as VK7 kits (Vehicle Kit 7), a first-of-its-kind, patent-pending car kit designed for optimal in-vehicle experience for the user that is similar to a traditional LMR mobile device.

 

Rugged Handsets | Siyata’s rugged handsets are targeted to the approximately 47 million enterprise task and public sector workers across North America including construction, transport & logistics, manufacturing, energy & utility, public safety, and federal government. Siyata’s Q4 2021 launch of the SD7 device in North America expanded the Company’s footprint in this product category. The Company is planning to launch the SD7 device in Europe in 2022.

 

Uniden® UV350 | Pent-up demand for this disruptive solution in the wake of pandemic-related delays has led to multiple active engagements with many customer trials resuming in 2022, which should translate into robust growth in this product line in the quarters ahead.

 

Cellular Boosters | The pandemic has helped fuel strong demand for Siyata’s boosters in 2020 and 2021. We believe this momentum will resume in 2022 with multiple programs with existing customers, numerous trials with new customers, and expanding opportunities in new verticals.

 

2

 

 

Selected Financial Information

Consolidated Statements of Loss and Comprehensive Loss

(Expressed in US dollars)

For the three months ended March 31, 2022 and 2021

 

   2022   2021 
         
Revenue (Note 25)   832,974    4,031,975 
Cost of Sales (Note 17)   (577,923)   (2,291,884)
Gross profit   255,051    1,740,091 
           
EXPENSES          
Amortization and Depreciation (Note 8)   124,505    321,017 
Development expenses (Note 8)   123,316    - 
Selling and marketing (Note 18)   1,045,051    972,959 
General and administrative (Note 19)   1,659,079    1,058,478 
Inventory impairment (Note 6)   64,336    - 
Bad Debts (recovered) (Note 5)   (7,358)   - 
Share-based payments (Note 16)   812,735    592,792 
Total Operating Expenses   3,821,664    2,945,246 
           
Net operating loss   (3,566,613)   (1,205,155)
           
OTHER EXPENSES          
Finance expense (note 20)   26,987    390,861 
Foreign exchange   (90,659)   440,321 
Change in fair value of convertible debenture (Note 12)   2,680,457    - 
Change in fair value of warrant liability (note 13)   (1,289,907)   - 
Transaction costs (Note 21)   -    79,069 
Total other expenses   1,326,878    910,251 
Net loss for the period   -4,893,491    -2,115,406 
           
Other comprehensive income (loss)          
Translation Adjustment   (24,467)   67,415 
Comprehensive loss for the period   -4,917,958    -2,047,991 
           
Weighted Average Shares   12,976,363    4,726,991 
           
Basic and diluted loss per share   (0.38)   (0.45)
           

 

The accompanying notes are an integral part of these consolidated unaudited interim financial statements

 

3

 

 

Reconciliation to Adjusted EBITDA

(Expressed in US dollars)

For the three months ended March 31, 2022 and 2021

 

   2022   2021 
Operating Loss   (3,566,613)   (1,205,155)
Depreciation and Amortization   124,505    321,017 
EBITDA   (3,442,108)   (884,138)
Share-based Compensation Expense   812,735    592,792 
Adjusted EBITDA   (2,629,373)   (291,346)

 

4

 

 

About Siyata Mobile

 

Siyata Mobile Inc. is a B2B global vendor of next generation Push-To-Talk over Cellular (PoC) devices and cellular booster systems. Its portfolio of in-vehicle and rugged smartphones enable first responders and enterprise workers to instantly communicate, over a nationwide cellular network of choice, to increase situational awareness and save lives.

 

Its portfolio of enterprise grade and consumer cellular booster systems enables first responders and enterprise workers to amplify cellular signal in remote areas, inside buildings where signals are weak and within vehicles for the maximum cellular signal strength possible.

 

Siyata’s common shares trade on the Nasdaq under the symbol “SYTA” and its warrants under “SYTAW”.

 

Visit siyatamobile.com and unidencellular.com to learn more.

 

Investor Relations (United States):

 

Dave Gentry, CEO

RedChip Companies

1-800 RED-CHIP (733-2447)

407-491-4499

[email protected]

 

Investor Relations (Canada):

 

Kin Communications

1-866-684-6730

[email protected]

 

Siyata Mobile Corporate:

 

Daniel Kim, VP of Corporate Development

Siyata Mobile Inc.

[email protected]

 

 

Forward Looking Statements

 

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws. Words such as “aims,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” and similar expressions or variations of such words are intended to identify forward-looking statements. Because such statements deal with future events and are based on Siyata’s current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of Siyata could differ materially from those described in or implied by the statements in this press release. The forward-looking statements contained or implied in this press release are subject to other risks and uncertainties, including those discussed under the heading “Risk Factors” in Siyata’s filings with the Securities and Exchange Commission (“SEC”), and in any subsequent filings with the SEC. Except as otherwise required by law, Siyata undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. References and links to websites have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.

 

-END-

 

5

 

 



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