F-1/A: ZenaTech Files for Nasdaq Direct Listing, Discloses Financials and Corporate Governance Details

ZenaTech, an enterprise software and drone technology company, files an amendment to its registration statement for a direct listing on the Nasdaq Capital Market, detailing its business, financials, risk factors, and corporate governance.

Summary

• ZenaTech, an enterprise software technology company specializing in cloud-based applications and drone technology, has filed an amendment to its registration statement for a direct listing on the Nasdaq Capital Market.
• The company operates through several subsidiaries, including PacePlus, SystemView, ZigVoice, WorkAware, TillerStack, and PsPortals, offering software solutions across various industries.
• ZenaTech is expanding into the drone business with its ZenaDrone 1000, showcasing it at trade shows and military conferences.
• The company has approximately 115 paying corporate clients for its software products and has signed five pilot program agreements for its drone technology.
• ZenaTech's revenue for the nine months ended September 30, 2023, was $1,126,577, with a net loss of $517,071.
• The company's total assets as of September 30, 2023, were $15,927,248, and total liabilities were $8,882,526.
• ZenaTech is considered an emerging growth company and a foreign private issuer, which allows it to comply with certain reduced reporting requirements.
• The company is also a controlled company under Nasdaq rules, as Dr. Shaun Passley controls more than 50% of the voting stock.
• ZenaTech faces various risks related to its common shares, listing, and business operations, including market volatility, competition, and regulatory risks.
• The company has entered into several agreements with Epazz, Inc., which are material to its business, including a management services agreement and technology licensing agreements.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While it highlights the company's expansion into the drone market and its diversified portfolio, it also acknowledges the net loss, reliance on related-party transactions, and various risks associated with its business operations.

Positives

• ZenaTech is expanding into the high-growth drone technology market.
• The company has a diversified portfolio of software solutions across multiple industries.
• ZenaTech has secured contracts with the US Air Force and US Naval Research, demonstrating the potential of its drone technology.
• The company has a management services agreement with Epazz to support the development of its products.

Negatives

• ZenaTech reported a net loss of $517,071 for the nine months ended September 30, 2023.
• The company is heavily reliant on agreements with Epazz, Inc., which is controlled by the same CEO.
• ZenaTech faces various risks related to its common shares, listing, and business operations, including market volatility, competition, and regulatory risks.
• The company has a limited operating history and may require additional capital to achieve its business objectives.

Risks

• The company's success is heavily dependent on the successful implementation of its business strategy.
• ZenaTech may not be able to manage its growth effectively, which may harm its profitability.
• The company's products will need market acceptance to be successful.
• Global financial developments may affect the development of the company's business.
• The company's business is subject to a variety of regulatory risks.
• There are risks of security weaknesses in the company's network core infrastructure software.
• The company's intellectual property rights may be infringed, or the company may infringe the intellectual property rights of others.
• If critical components or raw materials used to manufacture the company's drones become scarce or unavailable, then the company may incur delays in manufacturing and delivery of its drones, which could damage its business.
• The markets in which the company competes are characterized by rapid technological change, which requires the company to develop new products and product enhancements, and could render the company's existing products obsolete.
• If the company releases defective products or services, its operating results could suffer.
• The company expects to incur substantial research and development costs and devote significant resources to identifying and commercializing new products and services, which could significantly reduce its profitability and may never result in revenue to the company.
• The company's products and services are complex and could have unknown defects or errors, which may give rise to claims against the company, diminish its brand or divert its resources from other purposes.
• Investing in emerging markets generally involves risks.
• We may have operations in countries known to experience high levels of corruption and any violation of anti-corruption laws could subject us to penalties and other adverse consequences.
• Local legal and regulatory systems in which we operate are not equally robust.
• The company may operate in jurisdictions with historically high rates of inflation.
• Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
• The company does not currently carry directors and officers insurance.
• The company's insurance coverage may not sufficiently cover claims against the company.
• The company faces risks associated with potential acquisitions.
• We operate in competitive industries.
• Trends, risks and uncertainties make it difficult to predict all risks that might affect our business.
• The company's business is dependent on its relationship with Epazz Inc. and may become dependent on a variety of third-party relationships going forward.
• We are dependent on key personnel.
• The company may be subject to growth-related risks including pressure on its internal systems and controls.
• The company is subject to a variety of operational risks.
• There is risk of litigation.
• The company's business could be adversely affected if its consumer protection and data privacy practices are not seen as adequate or there are breaches of its security measures or unintended disclosures of its consumer data.
• There is no public market for our securities.
• Costs of Maintaining a Public Listing.
• Price Volatility of Publicly Traded Securities.
• We are responsible for establishing and maintaining adequate internal control over financial reporting.
• We do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud.
• Failure to adhere to our financial reporting obligations and other public company requirements could adversely impact the market price of our Common Shares.
• Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our reported financial results or financial condition.
• Our management team has limited experience managing a public company.
• Our directors and officers may have conflicts of interest.
• It may be difficult for investors to enforce within Canada any judgments obtained against the Company in the United States and to effect service of process against certain of the Companys directors and officers who are not resident in the United States.
• The company operates in multiple countries and is therefore subject to currency risk.
• The company has not paid any dividends to date.

Future Outlook

The company plans to expand its business into Unmanned Vehicle Systems (drones) and expects its drone business to increasingly generate income over the next five years.

Industry Context

The document indicates that ZenaTech operates in the competitive enterprise software and drone technology industries, requiring continuous innovation and adaptation to changing technologies.

Comparison to Industry Standards

• The document mentions competitors in the medical records software industry, including AdvanceMD, DrChrono EHR, NextGen, and Kareo.
• Competitors in the safety, compliance, and field management software industry include Alcumus, gocanvas, EHSInsight, SimPRO, and ServiceTitan.
• Drone industry competitors include DJI, Draganfly, and Drone Delivery Canada.
• The ZenaDrone 1000 is described as being five times larger than many commercial drones, suggesting a focus on larger-scale applications.
• The ZenaDrone 1000 has a longer flight time than many commercial drones and can self-charge on charging pads, indicating a focus on extended operational capabilities.

Corporate Governance

Legal Proceedings

• The Company filed a complaint against NOW Corporation in the State of Nevada for breach of the convertible note, among other things, to which NOW countersued for breach of contract, among other things.
• Vendors of WorkAware Corporation are suing the Company for $200,000, claiming the Company did not report all revenues and are suing the Company for $200,000. The Company plans to vigorously defend against the claim, including stating that the vendors should have proceeded by way of binding arbitration. The Company has also countersued the vendors for $600,000 in damages for misrepresenting the capabilities of certain software acquired.

Related Party Transactions

• The company has entered into a management services agreement with Epazz, Inc., pursuant to which Epazz provides the company with a variety of services, including with respect to intellectual property relied on by the company and personnel to develop products.
• Shaun Passley is the founder and a director and officer of the company and the sole director and office and 95% shareholder of Epazz.
• The company has entered into a number of agreements with Epazz that are material to the business of the company.

Stakeholder Impact

• Shareholders: The direct listing on Nasdaq could provide increased liquidity and visibility for the company's shares.
• Employees: The company's growth and expansion into the drone market could create new job opportunities.
• Customers: The company's continued development of innovative software and drone technology could provide enhanced solutions for their business needs.
• Suppliers: The company's drone manufacturing operations could create new opportunities for suppliers of components and materials.
• Creditors: The company's ability to generate revenue and manage its debt obligations will impact its creditworthiness.

Next Steps

• The company expects its common stock to begin trading on or about March 31, 2024, subject to Nasdaq approval.
• ZenaTech plans to develop markets for its drones in the United States, Canada, Germany, and Dubai.
• The company plans to pursue business enterprises in a variety of sectors, from agriculture to infrastructure to mining.

Key Dates

Keywords

ZenaTech, direct listing, Nasdaq, software, drone technology, financial results, corporate governance, risk factors, Epazz, subsidiaries