Financial Condition and Compliance - As of December 31, 2022, the company had an accumulated deficit of $77,818,663, indicating a history of operating losses and uncertainty about achieving profitability [28]. - The independent registered public accountants expressed substantial doubt about the company's ability to continue as a going concern for the next twelve months [29]. - The company is currently under a cease trading order with the British Columbia Securities Commission due to late filing of financial statements [31]. - The company has until August 21, 2023, to regain compliance with Nasdaq's minimum bid price requirement of $1.00 per share [31]. - The company did not regain compliance with Nasdaq's minimum bid price requirement by February 22, 2023, and requested an additional 180-day compliance period [169]. - If the company does not regain compliance by August 21, 2023, Nasdaq may delist its Common Shares, which would result in trading over-the-counter and increased risks for investors [170]. - The company has taken steps to remediate identified material weaknesses but cannot guarantee that further weaknesses will not be discovered in the future [187]. - The company is subject to Nasdaq Listing Rules and must maintain compliance to avoid potential delisting, having regained compliance after a notice in May 2021 [184]. Internal Controls and Operational Risks - In 2022, three material weaknesses in internal controls over financial reporting were identified, including issues with revenue recognition practices and inventory controls [34][35]. - The company has identified material weaknesses in internal controls and is taking steps to remediate these issues, including peer reviews and improved inventory tracking [37]. - The company incurred significant increased costs due to operating as a public company in the U.S., impacting net income and potentially leading to cost reductions in other areas [182]. - The company may face challenges in attracting and retaining qualified board members due to increased compliance costs and regulatory requirements [183]. Revenue Generation and Market Dependence - The company relies heavily on channel partners for revenue generation, and any failure in these partnerships could significantly harm operating results [18]. - In 2022, more than 49% of the company's revenues were generated through sales by channel partners, primarily wireless carriers [41]. - The company relies on a small number of channel partners/customers for a significant portion of its revenue, deriving 49% and 46% from five customers/channel partners in fiscal years 2022 and 2021, respectively [87]. - The company is materially dependent on the adoption of its solutions by both industrial enterprise and public sector markets, which significantly impacts revenue [50]. Supply Chain and Manufacturing Risks - The company faces risks related to reliance on third-party suppliers, which could delay product shipments and reduce sales [23]. - The company has a limited history of contracting with third-party manufacturers in Asia, which may lead to manufacturing capacity constraints [20]. - The company does not have long-term supply agreements with suppliers, which increases the risk of supply interruptions and potential revenue loss [85]. - Any interruption in the supply of key components could significantly delay production and shipment, adversely affecting revenues and profitability [86]. - The company faces risks related to sourcing and manufacturing, relying on independent suppliers for all products, which could impact quality and timely delivery [92]. Economic and Political Risks - Economic uncertainties, including the impact of the Russian invasion of Ukraine, could adversely affect the company's financial condition and results of operations [20]. - The Russian invasion of Ukraine has created economic uncertainty that could adversely affect the company's financial condition and operations [78]. - The U.S. government has proposed changes to trade policies that could increase customs duties and tariffs, negatively impacting financial performance due to significant imports [114]. - The invasion of Ukraine by Russia has led to increased sanctions affecting trade, with new measures targeting key sectors of the Russian economy [120]. - Political and military conditions in Israel may directly affect the company's operations, as many officers and directors are residents of Israel [143]. Strategic Growth and Development - The company may require additional capital to fund its business and support growth, with potential dilution of existing shareholders if new equity is issued [30]. - The company is investing in research and development to ensure that capitalized amounts do not exceed original budgets [37]. - The company faces increasing demand for customized products and software solutions in a rapidly evolving market [65]. - Future success depends on establishing independent brand awareness with end customers, with anticipated increases in sales and marketing expenses [66]. - The company may consider strategic acquisitions in the future, which involve risks related to integration and realization of anticipated benefits [108]. Regulatory and Compliance Challenges - Compliance with a wide range of product regulatory and safety laws could lead to increased costs and liabilities, affecting financial performance [128]. - The company is subject to evolving privacy and data security laws, which could impact operations and handling of personally identifiable information [132]. - The company faces risks related to government regulation, including potential changes in tariffs and trade policies that could adversely affect financial performance [115]. - The California Consumer Privacy Act (CCPA), effective January 1, 2020, introduces significant new disclosure obligations and privacy rights for California consumers, potentially affecting the company's operations [134]. Financial Instruments and Shareholder Information - The company has 44,868,560 Common Shares issued and outstanding as of December 31, 2022, with an additional 17,015,084 Common Shares underlying outstanding warrants registered for resale as of May 14, 2023 [165]. - Executive officers, directors, and affiliated entities own approximately 13.0% of the Common Shares based on 80,028,404 shares outstanding as of May 15, 2023 [176]. - The company completed a private placement on January 2, 2021, raising aggregate gross proceeds of $12,945,000 USD by issuing 129,450 units at $100 per unit [192]. - The company closed an underwritten public offering on January 11, 2022, resulting in gross proceeds of approximately $20,000,000 and net proceeds of $18,358,028 [203]. - The company entered into warrant exercise agreements with fourteen accredited investors to exercise existing warrants for a total of 18,042,857 Common Shares [210].
SIYATA MOBL.EQ.WARRT(SYTAW) - 2023 Q2 - Quarterly Report