UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
FOR
THE THREE MONTH PERIOD ENDED:
For the transition period from ______________ to ______________
Commission
File Number:
(Exact name of Registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number)
Securities registered under Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| Warrants, each exercisable for one share of Common Stock | CUENW | The Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s
classes of common equity, as of the latest practicable date: As of August 15, 2022, the issuer had
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CUENTAS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF june 30, 2022
TABLE OF CONTENTS
i
CUENTAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands except share and per share data)
| June 30, 2022 | December 31, 2021 | |||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts Receivables, net | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and Equipment, net | ||||||||
| Investment in unconsolidated Entities | ||||||||
| Intangible assets | ||||||||
| Total assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Trade payable | ||||||||
| Other accounts liabilities | ||||||||
| Deferred revenue | ||||||||
| Notes and Loan payable | ||||||||
| Stock based liabilities | ||||||||
| Total current liabilities | ||||||||
| Other long-term loans | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock, authorized | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
1
CUENTAS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(U.S. dollars in thousands except share and per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUE | ||||||||||||||||
| COST OF REVENUE | ||||||||||||||||
| GROSS PROFIT (LOSS) | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Amortization of Intangible assets | ||||||||||||||||
| Selling, General and Administrative | ||||||||||||||||
| TOTAL OPERATING EXPENSES | ||||||||||||||||
| OPERATING LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER EXPENSES | ||||||||||||||||
| Other Income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain from Change in fair value of stock-based liabilities | ||||||||||||||||
| TOTAL OTHER EXPENSES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS BEFORE EQUITY LOSSES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Equity losses in non-consolidated entity | ( | ) | ( | ) | ||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
2
CUENTAS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(U.S. dollars in thousands, except share and per share data)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of December 31, 2021 | ( | ) | ||||||||||||||||||
| Shares issued for services and for employees | ||||||||||||||||||||
| Net income for the period ending June 30, 2022 | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of April 1, 2022 | ( | ) | ||||||||||||||||||
| Shares issued for services and for employees | ||||||||||||||||||||
| Net income for the period ending June 30, 2022 | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
3
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of December 31, 2020 | ( | ) | ||||||||||||||||||
| Issuance of Shares of Common Stock, net of issuance expenses ** | ||||||||||||||||||||
| Issuance of Warrants | ||||||||||||||||||||
| Shares issued for services and for employees | ||||||||||||||||||||
| Shares issued due to exercise of Warrants, net of issuance expenses *** | ||||||||||||||||||||
| Shares issued due to conversion of Convertible Note | ||||||||||||||||||||
| Return of Commitment Shares | ( | ) | ||||||||||||||||||
| Roundup Differences due to Reverse Split | ||||||||||||||||||||
| Net income for the period ending June 30, 2021 | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| * | Less than $1. | |
| ** | Issuance expenses totaled to $1,386 | |
| *** | Issuance expenses totaled to $103 |
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of April 1, 2021 | ( | ) | ||||||||||||||||||
| Shares issued due to exercise of Warrants, net of issuance expenses ** | ||||||||||||||||||||
| Issuance of warrants | ||||||||||||||||||||
| Shares issued for services and for employees | ||||||||||||||||||||
| Shares issued due to conversion of Convertible Note | ||||||||||||||||||||
| Net income for the period ending June 30, 2021 | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| * | |
| ** |
The accompanying notes are an integral part of these consolidated financial statements
4
CUENTAS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) before non-controlling interest | ( | ) | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Stock based compensation and shares issued for services | ||||||||
| Equity losses in non-consolidated entity | ||||||||
| Loss on fair value of marketable securities | ( | ) | ||||||
| Interest on loans | ||||||||
| Gain from change in on fair value of stock-based liabilities | ( | ) | ( | ) | ||||
| Depreciation and amortization expense | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other receivables | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Other Accounts payable | ( | ) | ( | ) | ||||
| Related parties, net | ||||||||
| Deferred revenue | ( | ) | ||||||
| Net Cash Used by Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of Intangible Asset | ( | ) | ||||||
| Investment in non-consolidated entity in non-consolidated entity | ( | ) | ||||||
| Purchase of equipment | ( | ) | ||||||
| Net Cash used for Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Related party, net | ( | ) | ||||||
| Proceeds from issuance of common stock due to exercise of warrants | ||||||||
| Repayment of loans | ( | ) | ||||||
| Proceeds from issuance of common stock, net of issuance expense | ||||||||
| Proceeds from issuance of warrants | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net Increase (decrease) in Cash | ( | ) | ||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | ||||||||
| Supplemental disclosure of non-cash financing activities | ||||||||
| Common stock issued for conversion of convertible note principal | ||||||||
| Investment in non-consolidated entity in non-consolidated entity against accounts receivables | ||||||||
| Issuance fee with connection to issuance of common stock due to exercise of warrants | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Cuentas, Inc. (the “Company”) together with its subsidiaries, is focused on financial technology (“FINTECH”) services, delivering mobile financial services, prepaid debit and digital content services to unbanked, underbanked and underserved communities. The Company derives its revenue from GPR “Debit” Card fees and the sales of prepaid products and services including third party digital content, gift cards, remittances, mobile phone topups and other digital services. Additionally, The Company has an agreement with Interactive Communications International, Inc. (“InComm”) a leading processor of general purpose reloadable (“GPR”) debit cards, to market and distribute a line of GPR cards targeted towards the Latin American market.
The
Company was incorporated under the laws of the State of Florida on September 21, 2005 to act as a holding company for its subsidiaries.
Its subsidiary is Meimoun and Mammon, LLC (
On May 27, 2022, the Company entered into a Membership Interest Purchase
Agreement (the “MIPA”) with SDI Black 011, LLC (“SDI Black”), the holders of all the membership interests of SDI
Black and Cuentas SDI, LLC, a Florida limited liability (“Cuentas SDI”), for the acquisition of
COVID-19
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, as well as our business and operations. COVID- 19 effectively reduced the Company’s capability to acquire accounts holders as a significant portion of our target demographic lost their ability to earn wages and subsequently could not load funds to the Company’s product. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our business and results of operations may be materially adversely affected
GOING CONCERN
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As of June 30, 2022, the Company had approximately $
6
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements presented herein have not been audited by an independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the for six-months ended June 30, 2022. However, these results are not necessarily indicative of results for any other interim period or for the year ending December 31, 2022. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, and expenses. Actual amounts could differ from these estimates.
Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on April 1, 2022 (the “Annual Report”). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Principles of Consolidation
The consolidated financial statements are prepared in accordance with US GAAP. The consolidated financial statements of the Company include the Company and its wholly owned and majority-owned subsidiaries. All inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.
7
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
Deferred Revenue
Deferred revenue is comprised mainly of unearned revenue related to prepayments from retail consumers for telecommunications minutes. The following table represents the changes in deferred revenue for the three months ended June 30, 2022:
| Deferred Revenue | ||||
| Balance at December 31, 2021 | $ | |||
| Change in deferred revenue | ( | ) | ||
| Balance at June 30, 2022 | $ | |||
Revenue
allocated to remaining performance obligations represent contracted revenue that has not yet been recognized (“contracted not recognized”).
Contracted not recognized revenue was $
Derivative and Fair Value of Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
8
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
| Balance as of June 30, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Stock based liabilities | ||||||||||||||||
| Total liabilities | ||||||||||||||||
| Balance as of December 31, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Stock based liabilities | ||||||||||||||||
| Total liabilities | ||||||||||||||||
Recently Issued Accounting Standards
New pronouncements issued but not effective as of June 30, 2022 are not expected to have a material impact on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
NOTE 3 – STOCK OPTIONS
The following table summarizes all stock option activity for the six months ended June 30, 2022:
| Shares | Weighted- Average Exercise Price Per Share | |||||||
| Outstanding, December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Forfeited | ||||||||
| Outstanding, June 30, 2022 | $ | |||||||
9
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
The following table discloses information regarding outstanding and exercisable options at June 30, 2022:
| Outstanding | Exercisable | |||||||||||||||||||||
| Exercise Prices | Number of Option Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | Number of Option Shares | Weighted Average Exercise Price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | |||||||||||||||||||||
On May 17, 2022, the Company issued
| Common stock price | ||||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % |
On February1, 2022, the Company issued
| Common stock price | ||||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % |
The following table discloses information regarding outstanding and exercisable options at December 31, 2021:
| Outstanding | Exercisable | |||||||||||||||||||||
| Exercise Prices | Number of Option Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Life (Years) |
Number of Option Shares |
Weighted Average Exercise Price |
|||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | |||||||||||||||||||||
10
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 5 – RELATED PARTY TRANSACTIONS
Related party balances at June 30, 2022 and December 31, 2021 consisted of the following:
Related party payables
| June 30, 2022 | December 31, 2020 | |||||||
| (dollars in thousands) | ||||||||
| (a) Due to Cima Telecom Inc. | $ | |||||||
| Total Due to related parties | $ | $ | ||||||
| (a) | Composed
of annual fees in the amount of $ |
Related party transactions
| 6 months ends at June 30, 2022 | 6 months ends at June 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Carol Pepper (b) | ||||||||
| Cima Telecom Inc. (a) | $ | |||||||
| $ | $ | |||||||
| (a) | Composed of periodic fees in the amount of $ |
| (b) | Composed of consulting fee for the first half of 2022 in additional to the directorship fees. |
| 3 months ends at June 30, 2022 | 3 months ends at June 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Carol Pepper (b) | ||||||||
| Cima Telecom Inc. (a) | $ | |||||||
| $ | $ | |||||||
| (a) | Composed of periodic fees in the amount of $ |
| (b) | Composed of consulting fee for the second quarter of 2022 in additional to the directorship fees. |
11
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 6 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On December 20, 2017,
On October 23, 2018, the Company was served by
Telco Cuba Inc. for an amount in excess of $
On May 1, 2019,
On May 25, 2022, the Company
received a notice of default from CIMA Telecom, Inc. (“CIMA”) related to that certain Platform Exclusive License Agreement,
maintenance, and related agreements by and among Cuentas, CIMA, Knetik, Inc., and Auris, LLC. The notice provides that Cuentas has failed
to pay $
On April 1, 2021 the Company executed a lease
for office space effective April 1, 2021. The lease requires monthly rental payments of $
12
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 7 – SEGMENTS OF OPERATIONS
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable operating segments. The Company manages its business primarily on a product basis. The accounting policies of the various segments are the same as those described in Note 2, “Summary of Significant Accounting Policies.” The Company evaluates the performance of its reportable operating segments based on net sales and gross profit.
Revenue by product for the six months ended June 30, 2022, and the six months ended June 30, 2021 are as follows:
| June 30, 2022 | June 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| General Purpose Reloadable Cards | ||||||||
| Total revenue | $ | $ | ||||||
Gross profit (loss) by product for the six months ended June 30, 2022, and the six months ended June 30, 2021 are as follows:
| June 30, 2022 | June 3031, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| General Purpose Reloadable Cards | ( | ) | ( | ) | ||||
| Total revenue | $ | $ | ||||||
Revenue by product for the three months ended June 30, 2022, and the three months ended June 30, 2021 are as follows:
| June 30, 2022 | June 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| General Purpose Reloadable Cards | ||||||||
| Total revenue | $ | $ | ||||||
Gross profit (loss) by product for the three months ended June 30, 2022, and the three months ended June 30, 2021 are as follows:
| June 30, 2022 | June 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| General Purpose Reloadable Cards | ( | ) | ||||||
| Total revenue | $ | $ | ||||||
Long lived assets by product for June 30, 2022 and December 31, 2021 are as follows:
| June 30, 2022 | December 31, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| General Purpose Reloadable Cards | ||||||||
| Total revenue | $ | $ | ||||||
13
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 8 – SUBSEQUENT EVENTS
On August 2, 2022, the Company and CIMA, along with two of CIMA’s wholly-owned subsidiaries, Knetik, Inc. (“Knetik”) and Auris, LLC, (“Auris” ) executed a Settlement Agreement and General Release (“Settlement Agreement”) which resolves the issues related to the July 8, 2022 notice of default from CIMA Telecom, Inc. (“CIMA”) related to that certain Platform Exclusive License Agreement, maintenance, and related agreements (collectively, the “License Agreement”) by and among Cuentas, CIMA, Knetik, Inc., and Auris, LLC.
The Parties executed Mutual General Releases and the settlement terms are as follows:
In exchange for the consideration
provided in the Settlement Agreement, (1) Cuentas paid CIMA $
On August 4, 2022,
Pursuant to an engagement agreement, H.C. Wainwright
& Co., LLC was engaged by the Company to act as its placement agent for the Private Placement. The Company agreed to pay the Placement
Agent a cash fee equal to
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021. Some of the information contained in this discussion and analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including statements regarding expectations, beliefs, intentions or strategies for the future. When used in this report, the terms “anticipate,” “believe,” “estimate,” “expect,” “can,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and words or phrases of similar import, as they relate to our company or our management, are intended to identify forward-looking statements. We intend that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance, and we undertake no obligation to update or revise, nor do we have a policy of updating or revising, any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as may be required under applicable law. Forward-looking statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements as a result of several factors including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and in this Quarterly Report on Form 10-Q for the quarter ended June, 2022.
The Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company’s other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company’s fluctuations in sales and operating results; (b) regulatory, competitive and contractual risks; (c) development risks; (d) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (e) pending litigation.
Overview and Outlook
OVERVIEW AND OUTLOOK
The Company was incorporated in September 2005 to act as a holding company for its subsidiaries in the technology, telecom and banking industries.
The Company invests in financial technology and engages in use of certain licensed technology to provide innovative telecommunications, mobility, and remittance solutions to unserved, unbanked, and emerging markets. The Company uses proprietary technology and certain licensed technology to provide innovative telecommunications and telecommunications mobility and remittance solutions in emerging markets. The Company also offers wholesale telecommunications minutes and prepaid telecommunications minutes to consumers through its Tel3 division.
The Company’s subsidiary, Meimoun and Mammon, LLC (100% owned) (“M&M”), through. Tel3, a business segment of Meimoun and Mammon, LLC provides prepaid calling cards to consumers directly.
The Company also owns 50% of CUENTASMAX LLC which installs WiFi6 shared network (“WSN”) systems in locations in the New York metropolitan tristate area using access points and small cells to provide users with access to the WSN.
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On May 27, 2022, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with SDI Black 011, LLC (“SDI Black”), the holders of all the membership interests of SDI Black and Cuentas SDI, LLC, a Florida limited liability (“Cuentas SDI”), for the acquisition of 19.99% of the membership interests of Cuentas SDI in exchange for $750,000. The Company also has the right to close on the potential acquisition of the remaining 80.01% of the membership interests of Cuentas SDI within 60 days (with a potential 30 day extension, the “Potential Acquisition Period”) in exchange for a purchase price of an additional $2.459,000. SDI Black previously transferred all of its assets including the platform, portals, domain names, and related software necessary to conduct its business to Cuentas SDI. The MIPA further provides that during the Potential Acquisition Period, the Company will invoice and Cuentas SDI will pay invoices on a seven-net-ten day basis and during this same period, Cuentas SDI will allow the Company to realize 40% of the Cuentas SDI gross revenues and reflect 40% of the gross revenues on its books and records.The MIPA contains a number of representations and warranties by each of the parties thereto which we believe are customary for transactions similar to the transactions contemplated by the MIPA. The 60-days option to acquire the remaining 80.01% of the membership interests of Cuentas SDI expired on July 27, 2022.
OUTLOOK
Business Environment
We are a technology payment platform company that enables digital and mobile payments on behalf of under-bank and unbanked individuals. We believe in providing simple, affordable, secure and reliable financial services and digital payments to help our customers to achieve their financial goals. We strive to increase our relevance for consumers, and family to access and move their money anywhere in the world, anytime, on any platform and through any device (e.g., mobile, tablets, personal computers or wearables). We provide safer and simpler ways for businesses of all sizes to accept payments from merchant websites, mobile devices and applications, and at offline retail locations through a wide range of payment solutions. We also facilitate person to person payments through Cuentas GPR Card.
We operate globally and in a rapidly evolving regulatory environment characterized by a heightened regulatory focus on all aspects of the payments industry. That focus continues to become even more heightened as regulators on a global basis focus on such important issues as countering terrorist financing, anti-money laundering, privacy and consumer protection. Some of the laws and regulations to which we are subject were enacted recently and the laws and regulations applicable to us, including those enacted prior to the advent of digital and mobile payments, are continuing to evolve through legislative and regulatory action and judicial interpretation. Non-compliance with laws and regulations, increased penalties and enforcement actions related to non-compliance, changes in laws and regulations or their interpretation, and the enactment of new laws and regulations applicable to us could have a material adverse impact on our business, results of operations and financial condition. Therefore, we monitor these areas closely to ensure compliant solutions for our customers who depend on us.
Industry Trends
Our industry is dynamic and highly competitive, with frequent changes in both technologies and business models. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. At Cuentas, we push the boundaries of what is possible through a broad range of research and development activities that seek to anticipate the changing demands of customers, industry trends and competitive forces.
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RESULTS OF OPERATIONS
Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021
Revenue
The Company generates revenues through the sale and distribution of prepaid telecom minutes, digital products and other related telecom services. The Company also generated sales from its Fintech products and services commencing in the third quarter of 2020. Revenues during the six months ended June 30, 2022 totaled $1,064,000 compared to $380,000 for the six months ended June 30, 2021. The increase in the sales of General-Purpose Reloadable Cards is mainly due to online marketing campaigns and other marketing initiatives.
Revenue by product for the six months ended June 30, 2022, and the six months ended June 30, 2022 are as follows:
| June 30, 2022 | June 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | 318 | $ | 353 | ||||
| General Purpose Reloadable Cards | 746 | 27 | ||||||
| Total revenue | $ | 1,064 | $ | 380 | ||||
Costs of Revenue and Gross profit
Cost of revenues during the six months ended June 30, 2022 totaled $869,000 compared to $380,000 for the six months ended June 30, 2022.
Cost of revenue consists of the purchase of wholesale minutes for resale, related telecom platform costs and purchase of digital products in the amount of $118,001 during the six months ended June 30, 2022 and $270,000 during the six months ended June 30, 2021.
Cost of revenue also consists of costs related to the sale of the Company’s GPR Card in the amount of $751,000 during the six months ended June 30, 2022 and $115,000 during the six months ended June 30, 2021.
Gross profit (loss) by product lines for six months ended June 30, 2022, and 2021 are as follows:
| June 30, 2022 | June 3031, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | 200 | $ | 149 | ||||
| General Purpose Reloadable Cards | (11 | ) | (39 | ) | ||||
| Total revenue | $ | 189 | $ | 110 | ||||
The gross loss stemmed from the lower margins of since most of the sales derived from the sale of digital products with minimal gross margins in both periods.
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Operating Expenses
Operating expenses consist of selling, general and administrative Expenses and amortization of Intangible assets as discussed below and totaled $6,938,000 during the six months ended June 30, 2022, compared to $3,716,000 during the six months ended June 30, 2021 representing a net increase of $3,222,000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses totaled $6,033,000 during the six months ended June 30, 2022 compared to $2,811,000 during the six months ended June 30, 2022, representing a net increase of 3,222,000. Included in in the Selling, general and administrative expenses, Stock-based compensation amounted to $1,094,000 and shares issued for services expenses amounted to $110,000 during the six months ended June 30, 2022 compared to $286,000 during the six months ended June 30, 2021. This increase was mainly due to issuance of 1,550,000 stock options to directors and officers of the Company in the 2021 and 400,000 stock options to officer and directors of the Company in the 2022. Such options can be exercised until 2032. The increase in the other operating expenses is mainly due to an increase in the agreed maintenance and support services in accordance with the software maintenance agreement with CIMA in the amount of $100,000 to $700,000 during the six months ended June 30, 2022 due to the settlement agreement with CIMA, increase in the agreed payments in accordance with the processing service agreement with Incomm in the amount of $115,000 to $375,000 during the six months ended June 30, 2022, increase in our compensation and director fees in the approximate amount of $471,000 to $1,064,000 and increase of approximately of $944,000 in our selling and marketing expenses during the six months ended June 30, 2022.
Amortization of Intangible assets
Amortization of Intangible assets totaled $905,000 during the six months ended June 30, 2022 and 2021. The amortization expense mainly stems from the one-time licensing fee in the amount of $9,000,000 that was paid in shares to Cima, on December 31, 2019. The acquired intangible assets that consisted of a perpetual software license had an estimated fair value of $9,000,000. The Company amortizes the intangible assets on a straight-line basis over their expected useful life of 60 months which is approximately $453,000 per quarter.
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Other Income
The Company recognized other expense of $34,000 during the six months ended June 30, 2022 compared to other expense of $70,000 during the six months ended June 30, 2021.
Net Income (Loss)
We incurred a net loss of $6,810,000 for the six months ended June 30, as compared to a net loss of 3,676,000 for the six months ended June 30, 2022 due to the increase in selling and general administrative expenses as described above.
Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021
Revenue
The Company generates revenues through the sale and distribution of prepaid telecom minutes, digital products and other related telecom services. The Company also generated sales from its Fintech products and services commencing in the third quarter of 2020. Revenues during the three months ended June 30, 2022 totaled $,000 compared to $155,000 for the three months ended June 30, 2021. The increase in the sales of General Purpose Reloadable Cards is mainly due to online marketing campaigns and other marketing initiatives.
Revenue by product for the three months ended June 30, 2022, and the three months ended June 30, 2021 are as follows:
| June 30, 2022 | June 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | 143 | $ | 147 | ||||
| General Purpose Reloadable Cards | 527 | 8 | ||||||
| Total revenue | $ | 670 | $ | 155 | ||||
Costs of Revenue and Gross profit
Cost of revenues during the three months ended June 30, 2022 totaled $615,000 compared to $32,000 for the three months ended June 30, 2021.
Cost of revenue consists of the purchase of wholesale minutes for resale, related telecom platform costs and purchase of digital products in the amount of $62,000 during the three months ended June 30, 2022 and $64,000 during the three months ended June 30, 2021.
Cost of revenue also consists of costs related to the sale of the Company’s GPR Card in the amount of $553,000 during the three months ended June 30, 2022 and $57,000 during the three months ended June 30, 2021.
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Gross profit (loss) by product lines for three months ended June 30, 2022 and 2021 are as follows:
| June 30, 2022 | June 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | 81 | $ | 83 | ||||
| General Purpose Reloadable Cards | (26 | ) | 49 | |||||
| Total revenue | $ | 55 | $ | 132 | ||||
The gross loss stemmed from the lower margins of since most of the sales derived from the sale of digital products with minimal gross margins in both periods.
Operating Expenses
Operating expenses consist of selling, general and administrative Expenses and amortization of Intangible assets as discussed below and totaled $3,196,000 during the three months ended June 30 2022, compared to $2,126,000 during the three months ended June 30, 2021 representing a net increase of $1,070,000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses totaled $2,744,000 during the three months ended June 30, 2022 compared to $1,673,000 during the three months ended June 30, 2021, representing a net increase of $1,071,000. Included in in the Selling, general and administrative expenses, Stock-based compensation and shares issued for services expenses amounted to $659,000 during the three months ended June 30, 2022 and $32,000 during the three months ended June 30, 2021. This increase was mainly due to issuance of 1,550,000 stock options to directors and officers of the Company in the 2021 and 400,000 stock options to officer and directors of the Company in the 2022. Such options can be exercised until, 2032.
The increase in the other operating expenses is mainly due to an increase in the agreed maintenance and support services in accordance with the software maintenance agreement with CIMA in the amount of $50,000 to $175,000 during the three months ended June 30, 2022, increase in the agreed payments in accordance with the processing service agreement with Incomm in the amount of $105,000 to $225,000 during the three months ended June 30, 2022, and decrease in our compensation and director fees in the approximate amount of $84,000 to $506,000 during the three months ended June 30, 2021 and increase of approximately of $29,000 in our selling and marketing expenses during the three months ended June 30, 2022.
Amortization of Intangible assets
Amortization of Intangible assets totaled $453,000 during the three months ended June 30, 2022 and 2021. The amortization expense mainly stems from the one-time licensing fee in the amount of $9,000,000 that was paid in shares to Cima, on December 31, 2019. The acquired intangible assets that consisted of a perpetual software license had an estimated fair value of $9,000,000. The Company amortizes the intangible assets on a straight-line basis over their expected useful life of 60 months which is approximately $453,000 per quarter.
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Other Income
The Company recognized other expense of $33,000 during the three months ended June 30, 2022 compared to other expense of $7,000 during the three months ended June 30, 2021.
Net Income (Loss)
We incurred a net loss of $3,186,000 for the three-month period ended June 30, 2022, as compared to a net loss of 2,001,000 for the three-month period ended June 30, 2021due to the increase in selling and general administrative expenses as described above.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
As of June 30, 2022, the Company had total current assets of $2,026,000, including $1,798,000 of cash, accounts receivables of $129,000, and other current assets of $99,000 and total current liabilities of 3,537,000 creating a working capital deficit of $1,511,000.
As of December 31, 2021, the Company had total current assets of $6,780,000, including $6,607,000 of cash, accounts receivables of $11,000, and other current assets of $162,000 and total current liabilities of $2,719,000 creating a working capital of $4,061,000.
The decrease in our working capital deficit was mainly attributable to the decrease in our Cash and Cash equivalents in the amount of $4,809,000 due to our losses.
To date, we have principally financed our operations through the sale of our Common Stock. Nevertheless, management anticipates that our current cash and cash equivalents position and generating revenue from the sales of our General-Purpose Reloadable Cards will provide us limited financial resources for the near future to continue implementing our business strategy of further developing our General Purpose Reloadable Card, enhance our digital products offering and increase our sales and marketing. Therefore. Management plans to secure additional financing sources, including but not limited to the sale of our Common Stock in future financings. This is expected to be used to further support our operations as described above and to complete the acquisition of the SDI’s assets, including the Black011.com domain and its network of approximately 31,600 bodegas. There can be no assurance, however, that the company will be successful in raising additional capital or that the company will have net income from operations to fund the business plan of the company for the near future or long term.
As of June 30, 2022, the Company had approximately $1,798 thousand in cash and cash equivalents, approximately $1,511 in negative working capital and an accumulated deficit of approximately $45,029 thousand . These conditions raise substantial doubt about the Company’s ability to continue as a going concern. On August 4, 2022, the Company, sold an aggregate of 1,655,000 shares of the Company’s common stock, $0.001 par value, pre-funded warrants to purchase up to 2,569,044 shares of Common and warrants to purchase up to 4,224,044 shares of Common Stock in consideration of $3.0 million. The net proceeds to the Company, after deducting placement agent fees and other offering expenses, are approximately $2.7 million. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. Management anticipates their business will require substantial additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity and capital markets as the Company will need to finance future activities.
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Cash Flows – Operating Activities
The Company’s operating activities for the six months ended June 30, 2022, resulted in net cash used of $4,145,000. Net cash used in operating activities consisted of a net loss of $6,786,000, partially offset by non-cash expenses consisting of share-based compensation of $1,196,000 and amortization of intangible assets of $905,000. Changes in operating assets and liabilities generated cash of $510,000, resulting mainly from an increase in accounts payables of $1,093,000 which was mitigated in an increase of in accounts receivables of $351,000.
The Company’s operating activities for the six months ended June 30, 2021, resulted in net cash used of $4,776,000. Net cash used in operating activities consisted of a net loss of $3,676,000, partially mainly offset by non-cash expenses consisting of share-based compensation of $286,000 and amortization of intangible assets of $905,000. Changes in operating assets and liabilities utilized cash of $2,328,000, resulting mainly from an increase in accounts receivable of $13,000, decrease in accrued expenses and other current liabilities of $1,084,000, and a decrease in accounts payables of $964,000.
Cash Flows – Investing Activities
The Company’s investment activities for the six months ended June 30, resulted in net cash used of $664,000 and net cash used of $47,000 for the same period in 2021. The increase was mainly due to the investment in Cuentas SDI LLC.
Cash Flows – Financing Activities
The Company had no financing activities for the six months ended June 30, 2022. The Company’s financing activities for the six months ended June 30, 2021, resulted in net cash received of $10,840,000, consisting of $10,614,000 received from the sale of our common stock and $1,307,000 from the issuance of shares due to exercise of warrants, partially offset by repayments of loans of $605,000 and repayments of $355,000 of loans from a related party.
Inflation and Seasonality
In management’s opinion, our results of operations have not been materially affected by inflation or seasonality, and management does not expect that inflation risk or seasonality would cause material impact on our operations in the future.
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Off-Balance Sheet Arrangements
As of June 30, 2022, we had no off-balance sheet arrangements of any nature.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. Note 3 to our consolidated audited financial statements filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, describes the significant accounting policies and methods used in the preparation of our financial statements.
Recently Issued Accounting Standards
New pronouncements issued but not effective as of June 30, 2022, are not expected to have a material impact on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, and as discussed in greater detail below, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, disclosure controls and procedures are not effective:
| ● | to give reasonable assurance that the information required to be disclosed in reports that are file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and |
| ● | to ensure that information required to be disclosed in the reports that are file or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our CEO and our Treasurer, to allow timely decisions regarding required disclosure. |
Changes in Internal Control over Financial Reporting
Our management, with the participation of our CEO and CFO, performed an evaluation to determine whether any change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the three-month period ended June 30, 2022. Based on that evaluation, our CEO and our CFO concluded that no change occurred in the Company’s internal control over financial reporting during the three-month period ended June 30, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On December 20, 2017, a complaint was filed by J. P. Carey Enterprises, Inc. (“JP Carey”) alleging a claim for $473,000 related to Franjose Yglesias-Bertheau, a former Vice President of PLKD. Even though the Company made the agreed payment of $10,000 on January 2, 2017, and issued 6,001 shares of Common Stock as conversion of the $70,000 note as agreed in its settlement agreement, JP Carey alleges damages that the Company claims are without merit because JP Carey received full compensation as agreed. The Company is in the process of defending itself against these claims. The Company has not accrued losses related to this claim due to the early stages of litigation. On January 29, 2019, the Company was served with another complaint by JP Carey claiming similar issues as to the previous complaint, with the new claimed damages totaling $1,108,037.85. JP Carey and the Company filed motions for a summary judgment. On October 1, 2020, the Superior Court of Fulton County, State of Georgia granted the Company’s motion for summary judgment and denied JP Carey’s motion for summary judgment. On October 30, 2020, JP Carey filed a notice of appeal to the trial court’s October 1 and 7, 2020 orders granting summary judgment in favor of the Company. The briefing in the appeal was completed during the first quarter of 2021. Oral argument held on April 13, 2021 but no decision has been rendered yet. On November 16, 2020, the Company filed a motion seeking payment from JP Carey of $140,970.82 in attorney fees and costs accrued as of November 13, 2020. JP Carey’s responded brief was filed on or about December 21, 2020 and thereafter the Company filed its reply. JP Carey’s petition to the Georgia Supreme Court for a writ of certiorari remains pending and is fully briefed as of January 14, 2022. On May 5, 2022 the Georgia Supreme Court denied JP Carey’s petition. On or about July 20, 2022 the parties settled the Company’s claim regarding attorney fees and costs for the amount of $40,000.
On October 23, 2018, the Company was served by Telco Cuba Inc. for an amount in excess of $15,000 but the total amount was not specified. The Company was served on December 7, 2018, with a complaint alleging damages including unspecified damages for product, advertising and other damages in addition to $50,000 paid to Defendants. The Company has hired an attorney and has taken steps to defend itself vigorously in this case. Depositions are in process of being scheduled. On or about April 27, 2022, the Company settled the Telco Cuba Inc. matter in consideration of a settlement amount of $32,000.
On May 1, 2019, the Company received a notice of demand for arbitration from Secure IP Telecom, Inc. (“Secure IP”), who allegedly had a Reciprocal Carrier Services Agreement (“RCS”) exclusively with Limecom and not with the Company. The arbitration demand originated from another demand for arbitration that Secure IP received from VoIP Capital International (“VoIP”) in March 2019, demanding $1,052,838.09 in damages allegedly caused by unpaid receivables that Limecom assigned to VoIP based on the RCS. On June 5, 2020, Secure IP filed a complaint against Limecom, Heritage Ventures Limited (“Heritage”), an unrelated third party and owner of Limecom, and the Company. The complaint primarily concerns alleged indebtedness owed Secure IP by Limecom. Secure IP also alleges that the Company received certain transfers of funds which it alleges may be an avoidable transfer under Florida Statute §725.105 up to $1,052,838.09. The Company is contemplating filing a motion to dismiss the complaint and disputes that it received the alleged $1,052,838.09 from Limecom. Moreover, to the extent the Company has exposure for any transfers from Limecom, both Limecom and Heritage have indemnified the Company for any such liability. The Company continues to vigorously defend its position to be removed as a named party in this action due to the fact that the Company rescinded the Limecom Acquisition on January 30, 2019. Cuentas has provided requested discovery and expects depositions to be scheduled shortly. As of June 30, 2022 the company accrued $300,000 due to this matter.
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On May 25, 2022, the Company received a notice of default from CIMA Telecom, Inc. (“CIMA”) related to that certain Platform Exclusive License Agreement, maintenance, and related agreements by and among Cuentas, CIMA, Knetik, Inc., and Auris, LLC. The notice provides that Cuentas has failed to pay $700,000 of maintenance and pass-through fees that CIMA alleges are owed under the License Agreement and also afforded Cuentas the required sixty-day period (through July 24, 2022) to cure the default as provided under the License Agreement. Cuentas disagrees with the amount owed under the License Agreement. On August 2, 2022, the Company and CIMA, along with two of CIMA’s wholly-owned subsidiaries, Knetik, Inc. (“Knetik”) and Auris, LLC, (“Auris” ) executed a Settlement Agreement and General Release (“Settlement Agreement”) which resolves the issues related to the July 8, 2022 notice of default from CIMA Telecom, Inc. (“CIMA”) related to that certain Platform Exclusive License Agreement, maintenance, and related agreements (collectively, the “License Agreement”) by and among Cuentas, CIMA, Knetik, Inc., and Auris, LLC. The Parties have signed Mutual General Releases and the settlement terms are as follows: In exchange for the consideration provided in the Settlement Agreement, (1) Cuentas paid CIMA $350,000.00 on August 2, 2022 and (2) on or before 5:00 p.m New York City time, on August 15, 2022, Cuentas will pay CIMA the balance of the Unpaid Fees ($420,239.78) by wire transfer (3) will have a period of 30 days from execution date, the exclusive right to facilitate a third party (including to current shareholders and directors of Cuentas) purchase (without markup or broker fee) of, all of the shares of Cuentas held by CIMA at the higher of: (i) the average per share trading price for the three day average before notice in writing is provided by Cuentas of the intent to purchase CIMA’s Cuentas shares, or (ii) the minimum price of $0.50 per share on or before 5:00 p.m. New York City time, on August 31, 2022 pursuant to a purchase agreement delivered by and acceptable to CIMA without any changes thereto (provided, that CIMA shall not be required to provide any representations or warranties other than fundamental warranties related to (a) organization and good standing, (b) power and authority to undertake the transaction and (c) ownership of such shares, and ordinary representations and warranties that the Cuentas shares are being transferred free and clear of any liens, claims, or encumbrances); and (iv) on or before 5:00 p.m. New York City time, on August 2, 2022, Cuentas shall, and shall cause (x) Dinar Zuz, LLC, (y) Michael De Prado and (z) Arik Maimon to provide signed waiver letters, expressly waiving any right of first refusal and co-sale rights granted in their favor under that certain letter agreement, dated December 31, 2019, by and among CIMA, Dinar Zuz, LLC, Michael Del Prado and Arik Maimon, and (y) CIMA agrees: (i) to restore immediately Cuentas’s access to the Platform upon receipt of the $350,000.00 payment ; (ii) to provide Cuentas with a limited license to utilize the Platform the terms of which are detailed specifically in Section 6 of the agreement, and to use reasonable efforts, subject to Cuentas’ compliance hereto, to provide Cuentas’ customer data to Cuentas through the end of the limited license term described below in Section 6 of the agreement; (iii) deliver to Cuentas the Source Code (as that term is defined in paragraph 1.18 of the License Agreement) relating to Out-Of-Scope Services, and as further detailed in Section 6 of the agreement; (iv) not enforce its rights under the Side Letter (as that term is defined in the paragraph 1.1 of the Purchase Agreement) through and including August 31, 2022, and (v) shall not transfer, sell, or encumber its Cuentas shares through and including August 31, 2022, except as permitted herein. Cuentas acknowledges and agrees that the amount of Unpaid Fees ($770,239.78) is valid and outstanding, and waives any right to dispute them. If Cuentas fails to comply with any term of this Settlement Agreement, in addition to the Stipulated Judgment described in Section 5 of the agreement, the limited license set forth in Section 6 and any of CIMA’s obligations under this Settlement Agreement shall become null and CIMA shall have the right to shut off Cuentas access to the Platform without notice. The Settlement Agreement also provides for mutual general releases by Cuentas for the benefit of CIMA and by CIMA for the benefit of Cuentas of all claims other than claims relating to a breach of the Settlement Agreement. The settlement agreement by its terms in effect terminates the obligations under the license agreement, dated December 31, 2019 by and between Cuentas and CIMA.
25
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On August 4, 2022, the Company, entered into a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Purchaser”) pursuant to which the Purchaser agreed to purchase, and the Company agreed to issue and sell to the Purchaser in a private placement, an aggregate of 1,655,000 shares of the Company’s common stock, $0.001 par value, pre-funded warrants to purchase up to 2,569,044 shares of Common and warrants to purchase up to 4,224,044 shares of Common Stock. The purchase price per Share and associated Common Stock Warrant was $0.71022 and the purchase price per Pre Funded Warrant and associated Common Stock Warrant was $0.71012. Each Common Stock Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $0.59 per share. Each Pre Funded Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $0.0001 per share. The Common Stock Warrants are exercisable for a period of five years and six months commencing on the issuance date and the Pre Funded Warrants are exercisable until exercised. The Warrants also contain customary beneficial ownership limitations that may be waived at the option of each holder upon 61 days’ notice to the Company. The Private Placement closed on August 8, 2022. The gross proceeds to the Company, before deducting placement agent fees and other offering expenses, are approximately $3.0 million. On August 4, 2022, in connection with the Private Placement, the Company entered into a registration rights with the Purchaser, pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) to register for resale the Shares and any shares of the Company’s common stock issuable upon exercise of the Warrants within 30 days of the signing of the Registration Rights Agreement, with such registration statement becoming effective within 60 days after the signing of the Registration Rights Agreement, subject to adjustment in the event of a review by the SEC. The Company is subject to customary penalties and liquidated damages in the event it does not meet certain filing requirements and deadlines set forth in the Registration Rights Agreement.
Pursuant to an engagement agreement, H.C. Wainwright & Co., LLC (the “Placement Agent’) was engaged by the Company to act as its placement agent for the Private Placement. The Company agreed to pay the Placement Agent a cash fee equal to 7.0% of the gross proceeds received by the Company in the Private Placement, in addition to the reimbursement of certain expenses. The Company also agreed to issue to the Placement Agent warrants to purchase up to 295,683 shares of Common Stock, exercisable for a period of five years and six months commencing on the issuance date, at an exercise price of $0.8878 per share. We issued such shares in reliance on the exemptions from registration pursuant to Section 4(a)(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR DEBT
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
On May 27, 2022, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with SDI Black 011, LLC (“SDI Black”), the holders of all the membership interests of SDI Black and Cuentas SDI, LLC, a Florida limited liability (“Cuentas SDI”), for the acquisition of 19.99% of the membership interests of Cuentas SDI in exchange for $750,000. The Company also has the right to close on the potential acquisition of the remaining 80.01% of the membership interests of Cuentas SDI within 60 days (with a potential 30 day extension, the “Potential Acquisition Period”) in exchange for a purchase price of an additional $2.459,000. SDI Black previously transferred all of its assets including the platform, portals, domain names, and related software necessary to conduct its business to Cuentas SDI. The MIPA further provides that during the Potential Acquisition Period, the Company will invoice and Cuentas SDI will pay invoices on a seven-net-ten day basis and during this same period, Cuentas SDI will allow the Company to realize 40% of the Cuentas SDI gross revenues and reflect 40% of the gross revenues on its books and records. The MIPA contains a number of representations and warranties by each of the parties thereto which we believe are customary for transactions similar to the transactions contemplated by the MIPA.
26
ITEM 6. EXHIBITS
| Exhibit No. | Description | Location | ||
| 4.1 | Form of Common Stock Warrant | Form 8-K filed at August 9, 2022 | ||
| 4.2 | Form of Pre Funded Warrant | Form 8-K filed at August 9, 2022 | ||
| 4.3 | Form of Placement Agent Warrant | Form 8-K filed at August 9, 2022 | ||
| 10.1 | Form of Securities Purchase Agreement dated August 4, 2022 between the Company and the Purchaser | Form 8-K filed at August 9, 2022 | ||
| 10. 2 | Form of Registration Rights Agreement dated August 4, 2022 between the Company and the Purchaser | Form 8-K filed at August 9, 2022 | ||
| 10.3 | Form of Engagement Agreement dated August 3, 2022 between the Company and the Placement Agent. | Form 8-K filed at August 9, 2022 | ||
| 10.1 | Settlement Agreement and General Release | Form 8-K filed at August 4, 2022 | ||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 101.INS | Inline XBRL Instance Document. | Filed herewith | ||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | Filed herewith | ||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | Filed herewith | ||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | Filed herewith | ||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | Filed herewith | ||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | Filed herewith | ||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | Filed herewith |
27
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Cuentas, Inc. | ||
| (Registrant) | ||
| Date: August 15, 2022 | By: | /s/ Jeffery D. Johnson |
| Chief Executive Officer | ||
| By: | /s/ Ran Daniel | |
| Chief Financial Officer | ||
28
Exhibit 31.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey D. Johnson, certify that:
1. I have reviewed this Form 10-Q of Cuentas Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 15, 2022 | |
| /s/ Jeffrey D. Johnson | |
| Jeffrey D. Johnson | |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Ran Daniel, certify that:
1. I have reviewed this Form 10-Q of Cuentas Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 15, 2022 | |
| /s/ Ran Daniel | |
|
Ran Daniel |
|
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Cuentas Inc. (the “Company”) for the three-months ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jeffrey D. Johnson, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: August 15, 2022 | ||
| By: | /s/ Jeffrey D. Johnson | |
| Jeffrey d. Johnson | ||
| Chief Executive Officer | ||
This certification accompanies each Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Cuentas Inc. (the “Company”) for the three-months ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),, Ran Daniel, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: August 15, 2022 | ||
| By: | /s/ Ran Daniel | |
| Ran Daniel | ||
| Chief Financial Officer | ||
This certification accompanies each Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, shares authorized | 360,000,000 | 360,000,000 |
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares issued | 15,065,690 | 14,965,690 |
| Common stock, shares outstanding | 15,065,690 | 14,965,690 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| REVENUE | $ 670 | $ 155 | $ 1,064 | $ 380 |
| COST OF REVENUE | 615 | 23 | 875 | 270 |
| GROSS PROFIT (LOSS) | 55 | 132 | 189 | 110 |
| OPERATING EXPENSES | ||||
| Amortization of Intangible assets | 452 | 453 | 905 | 905 |
| Selling, General and Administrative | 2,744 | 1,673 | 6,033 | 2,811 |
| TOTAL OPERATING EXPENSES | 3,196 | 2,126 | 6,938 | 3,716 |
| OPERATING LOSS | (3,141) | (1,994) | (6,749) | (3,606) |
| OTHER EXPENSES | ||||
| Other Income (loss) | (32) | (50) | (32) | 3 |
| Interest expense | (3) | (4) | (172) | |
| Gain from Change in fair value of stock-based liabilities | 1 | 43 | 1 | 99 |
| TOTAL OTHER EXPENSES | (34) | (7) | (35) | (70) |
| NET LOSS BEFORE EQUITY LOSSES | (3,175) | (2,001) | (6,784) | (3,676) |
| Equity losses in non-consolidated entity | (11) | (26) | ||
| NET LOSS | $ (3,186) | $ (2,001) | $ (6,810) | $ (3,676) |
| Net loss per basic and diluted share (in Dollars per share) | $ (0.21) | $ (0.15) | $ (0.45) | $ (0.29) |
| Weighted average number of basic and diluted common shares outstanding (in Shares) | 15,047,212 | 13,438,215 | 15,006,899 | 12,878,116 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| Net loss per basic and diluted share | $ (0.21) | $ (0.15) | $ (0.45) | $ (0.29) |
| Weighted average number of basic and diluted common shares outstanding | 15,047,212 | 13,438,215 | 15,006,899 | 12,878,116 |
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Cash Flows from Operating Activities: | ||
| Net income (loss) before non-controlling interest | $ (6,810) | $ (3,676) |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
| Stock based compensation and shares issued for services | 1,204 | 286 |
| Equity losses in non-consolidated entity | 26 | |
| Loss on fair value of marketable securities | (1) | |
| Interest on loans | 6 | 88 |
| Gain from change in on fair value of stock-based liabilities | (2) | (50) |
| Depreciation and amortization expense | 905 | 905 |
| Changes in Operating Assets and Liabilities: | ||
| Accounts receivable | (351) | (13) |
| Other receivables | 63 | (317) |
| Accounts payable | 1,109 | (964) |
| Other Accounts payable | (136) | (1,084) |
| Related parties, net | 44 | |
| Deferred revenue | (159) | 6 |
| Net Cash Used by Operating Activities | (4,145) | (4,776) |
| Cash Flows from Investing Activities: | ||
| Purchase of Intangible Asset | (47) | |
| Investment in non-consolidated entity in non-consolidated entity | (657) | |
| Purchase of equipment | (7) | |
| Net Cash used for Investing Activities | (664) | (47) |
| Cash Flows from Financing Activities: | ||
| Related party, net | (355) | |
| Proceeds from issuance of common stock due to exercise of warrants | 1,307 | |
| Repayment of loans | (730) | |
| Proceeds from issuance of common stock, net of issuance expense | 10,614 | |
| Proceeds from issuance of warrants | 4 | |
| Net Cash Provided by Financing Activities | 10,840 | |
| Net Increase (decrease) in Cash | (4,809) | 6,017 |
| Cash at Beginning of Period | 6,607 | 227 |
| Cash at End of Period | 1,798 | 6,244 |
| Supplemental disclosure of non-cash financing activities | ||
| Common stock issued for conversion of convertible note principal | 81 | |
| Investment in non-consolidated entity in non-consolidated entity against accounts receivables | 233 | |
| Issuance fee with connection to issuance of common stock due to exercise of warrants | $ 103 | |
Organization and Description of Business |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Disclosure of Organization and Description of Business [Abstract] | |
| ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Cuentas, Inc. (the “Company”) together with its subsidiaries, is focused on financial technology (“FINTECH”) services, delivering mobile financial services, prepaid debit and digital content services to unbanked, underbanked and underserved communities. The Company derives its revenue from GPR “Debit” Card fees and the sales of prepaid products and services including third party digital content, gift cards, remittances, mobile phone topups and other digital services. Additionally, The Company has an agreement with Interactive Communications International, Inc. (“InComm”) a leading processor of general purpose reloadable (“GPR”) debit cards, to market and distribute a line of GPR cards targeted towards the Latin American market.
The Company was incorporated under the laws of the State of Florida on September 21, 2005 to act as a holding company for its subsidiaries. Its subsidiary is Meimoun and Mammon, LLC (100% owned) (“M&M”),Tel3, a business segment of Meimoun and Mammon, LLC provides prepaid calling cards to consumers directly and operates in a complimentary space as Meimoun and Mammon, LLC. The Company also owns 50% of CUENTASMAX LLC which installs WiFi6 shared network (“WSN”) systems in locations in the New York metropolitan tristate area using access points and small cells to provide users with access to the WSN.
On May 27, 2022, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with SDI Black 011, LLC (“SDI Black”), the holders of all the membership interests of SDI Black and Cuentas SDI, LLC, a Florida limited liability (“Cuentas SDI”), for the acquisition of 19.99% of the membership interests of Cuentas SDI in exchange for $750,000. The Company also has the right to close on the potential acquisition of the remaining 80.01% of the membership interests of Cuentas SDI within 60 days (with a potential 30 day extension, the “Potential Acquisition Period”) in exchange for a purchase price of an additional $2,459,000. SDI Black previously transferred all of its assets including the platform, portals, domain names, and related software necessary to conduct its business to Cuentas SDI. The MIPA further provides that during the Potential Acquisition Period, the Company will invoice and Cuentas SDI will pay invoices on a seven-net-ten day basis and during this same period, Cuentas SDI will allow the Company to realize 40% of the Cuentas SDI gross revenues and reflect 40% of the gross revenues on its books and records.The MIPA contains a number of representations and warranties by each of the parties thereto which we believe are customary for transactions similar to the transactions contemplated by the MIPA. The 60 day option to acquire the remaining 80.01% of the membership interests of Cuentas SDI expired on July 27, 2022.
COVID-19
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, as well as our business and operations. COVID- 19 effectively reduced the Company’s capability to acquire accounts holders as a significant portion of our target demographic lost their ability to earn wages and subsequently could not load funds to the Company’s product. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our business and results of operations may be materially adversely affected
GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 2022, the Company had approximately $1,798 in cash and cash equivalents, approximately $1,511 in negative working capital and an accumulated deficit of approximately $45,029. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. Management anticipates their business will require substantial additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity and capital markets as the Company will need to finance future activities. These financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. |
Summary of Significant Accounting Policies and Basis of Presentation |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements presented herein have not been audited by an independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the for six-months ended June 30, 2022. However, these results are not necessarily indicative of results for any other interim period or for the year ending December 31, 2022. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, and expenses. Actual amounts could differ from these estimates.
Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on April 1, 2022 (the “Annual Report”). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Principles of Consolidation
The consolidated financial statements are prepared in accordance with US GAAP. The consolidated financial statements of the Company include the Company and its wholly owned and majority-owned subsidiaries. All inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.
Deferred Revenue
Deferred revenue is comprised mainly of unearned revenue related to prepayments from retail consumers for telecommunications minutes. The following table represents the changes in deferred revenue for the three months ended June 30, 2022:
Revenue allocated to remaining performance obligations represent contracted revenue that has not yet been recognized (“contracted not recognized”). Contracted not recognized revenue was $524 as of June 30, 2022, of which the Company expects to recognize 100% of the revenue over the next 12 months.
Derivative and Fair Value of Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
Recently Issued Accounting Standards
New pronouncements issued but not effective as of June 30, 2022 are not expected to have a material impact on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption. |
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Stock Options |
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| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCK OPTIONS | NOTE 3 – STOCK OPTIONS
The following table summarizes all stock option activity for the six months ended June 30, 2022:
The following table discloses information regarding outstanding and exercisable options at June 30, 2022:
On May 17, 2022, the Company issued 200,000 options to its two members of the board of the Directors of the Company. The options carry an exercise price of $2.80 per share. half of the options vested on May17, 2022 and the balance shall vest on the first anniversary of grant date, so long as they engaged by the Company on that date. The Options are exercisable until May 17, 2032. The Company has estimated the fair value of such options at a value of $134 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:
On February1, 2022, the Company issued 200,000 options to its Chief Operating Officer of the Company. The options carry an exercise price of $2.80 per share. Fifty Thousand (50,000) of the options vested on February1, 2022. The option shall vest on the first, second and third anniversary of grant date, so long as its Chief Operating Officer is employed by the Company on that date. The Options are exercisable until January 31, 2032. The Company has estimated the fair value of such options at a value of $213 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:
The following table discloses information regarding outstanding and exercisable options at December 31, 2021:
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Related Party Transactions |
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| RELATED PARTY TRANSACTIONS | NOTE 5 – RELATED PARTY TRANSACTIONS
Related party balances at June 30, 2022 and December 31, 2021 consisted of the following:
Related party payables
Related party transactions
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Commitments and Contingencies |
6 Months Ended |
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| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 6 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On December 20, 2017, a complaint was filed by J. P. Carey Enterprises, Inc. (“JP Carey”) alleging a claim for $473 related to Franjose Yglesias-Bertheau, a former Vice President of PLKD. Even though the Company made the agreed payment of $10on January 2, 2017 and issued 6,001 shares of Common Stock as conversion of the $70,000 note as agreed in its settlement agreement, JP Carey alleges damages that the Company claims are without merit because JP Carey received full compensation as agreed. The Company is in the process of defending itself against these claims. The Company has not accrued losses related to this claim due to the early stages of litigation. On January 29, 2019, the Company was served with another complaint by JP Carey claiming similar issues as to the previous complaint, with the new claimed damages totaling $1,108. JP Carey and the Company filed motions for a summary judgment. On June 23, 2020, the case was transferred to the Business Court at the request of the Superior Court Judge previously assigned to the case. Judge Ellerbe from the Business Court has been assigned as the new judge. On October 1, 2020, the court granted the Company’s motion for summary judgment and denied JP Carey’s motion for summary judgment. On October 30, 2020, JP Carey filed a notice of appeal to the trial court’s October 1 and 7, 2020 orders granting summary judgment in favor of the Company. The briefing in the appeal was completed during the first quarter of 2021. Oral argument held on April 13, 2021 but no decision has been rendered yet. On November 16, 2020, the Company filed a motion seeking payment from JP Carey of $141 in attorney fees and costs accrued as of November 13, 2020. JP Carey’s respondent brief was filed on or about December 21, 2020 and thereafter the Company filed its reply. JP Carey’s petition to the Georgia Supreme Court for a writ of certiorari remains pending and is fully briefed as of January 14, 2022. On May 5, 2022 the Georgia Supreme Court denied JP Carey’s petition. On or about July 20, 2022 the parties settled the Company’s claim regarding attorney fees and costs for the amount of $40.
On October 23, 2018, the Company was served by Telco Cuba Inc. for an amount in excess of $15 but the total amount was not specified. The Company was served on December 7, 2018, with a complaint alleging damages including unspecified damages for product, advertising and other damages in addition to $50 paid to the Defendants. The Company retained an attorney and has taken steps to defend itself vigorously in this case. Depositions are in process of being scheduled. On or about April 27, 2022, the Company settled the Telco Cuba Inc. matter in consideration of a settlement amount of $32,000.
On May 1, 2019, the Company received a notice of demand for arbitration from Secure IP Telecom, Inc. (“Secure IP), who allegedly had a Reciprocal Carrier Services Agreement (“RCS”) exclusively with Limecom and not with the Company. The arbitration demand originated from another demand for arbitration that Secure IP received from VoIP Capital International (“VoIP”) in March 2019, demanding $1,053 in damages allegedly caused by unpaid receivables that Limecom assigned to VoIP based on the RCS. On or about October 5, 2020, the trial court appointed a receiver over Limecom, Inc. (“Limecom”) in the matter of Spectrum Intelligence Communications Agency, LLC. v. Limecom, Inc., case no. 2018-027150-CA-01 pending in the 11th Circuit for Miami-Dade County, Florida. On June 5, 2020, Secure IP Telecom, Inc. (“Secure IP”) filed a complaint against Limecom, Heritage Ventures Limited (“Heritage”), an unrelated third party and owner of Limecom, and the Company, case no. 20-11972-CA-01. Secure IP alleges that the Company received certain transfers from Limecom during the period that the Company wholly owned Limecom that may be an avoidable under Florida Statute § 725.105. On July 13, 2021, the two cases were consolidated, and are now pending before the same trial court under the former case number. The Company has answered and denied any liability with respect to both complaints. To the extent the Company has exposure for any transfers from Limecom, Heritage has indemnified the Company for any such liability and the Company has a pending cross-claim against Heritage for purposes of enforcing the indemnification obligation. A review of the books and records of the Company reflect aggregate transfers from Limecom to the Company or its affiliates of less than $600,000. The Company’s books and records reflect that the Company fully reimbursed Limecom through direct payment of expenses of Limecom and through issuance of shares by the Company to employees or other vendors on behalf of Limecom for settlement and release of claims the employees or vendors may have asserted against Limecom. The books and records of the Company therefore do not reflect an identifiable avoidable transfer, but this analysis may change as the discovery process continues. At this time, based upon an analysis of the Company’s books and records, the loss contingency is not capable of reasonable estimation under the above circumstances, and the likelihood of an adverse judgment is not probable at this time. An adverse judgment in this matter is reasonably possible and based upon an analysis of litigation costs and likelihood of a settlement, the undersigned recommends a litigation reserve of $200 to $300 thousand. As of June 30, 2022 the company accrued $300 thousand due to this matter.
On May 25, 2022, the Company received a notice of default from CIMA Telecom, Inc. (“CIMA”) related to that certain Platform Exclusive License Agreement, maintenance, and related agreements by and among Cuentas, CIMA, Knetik, Inc., and Auris, LLC. The notice provides that Cuentas has failed to pay $700,000 of maintenance and pass-through fees that CIMA alleges are owed under the License Agreement and also afforded Cuentas the required sixty-day period (through July 24, 2022) to cure the default as provided under the License Agreement. Cuentas disagrees with the amount owed under the License Agreement. Please refer to Note 8,
On April 1, 2021 the Company executed a lease for office space effective April 1, 2021. The lease requires monthly rental payments of $7. |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENTS OF OPERATIONS | NOTE 7 – SEGMENTS OF OPERATIONS
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable operating segments. The Company manages its business primarily on a product basis. The accounting policies of the various segments are the same as those described in Note 2, “Summary of Significant Accounting Policies.” The Company evaluates the performance of its reportable operating segments based on net sales and gross profit.
Revenue by product for the six months ended June 30, 2022, and the six months ended June 30, 2021 are as follows:
Gross profit (loss) by product for the six months ended June 30, 2022, and the six months ended June 30, 2021 are as follows:
Revenue by product for the three months ended June 30, 2022, and the three months ended June 30, 2021 are as follows:
Gross profit (loss) by product for the three months ended June 30, 2022, and the three months ended June 30, 2021 are as follows:
Long lived assets by product for June 30, 2022 and December 31, 2021 are as follows:
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2022 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 8 – SUBSEQUENT EVENTS
On August 2, 2022, the Company and CIMA, along with two of CIMA’s wholly-owned subsidiaries, Knetik, Inc. (“Knetik”) and Auris, LLC, (“Auris” ) executed a Settlement Agreement and General Release (“Settlement Agreement”) which resolves the issues related to the July 8, 2022 notice of default from CIMA Telecom, Inc. (“CIMA”) related to that certain Platform Exclusive License Agreement, maintenance, and related agreements (collectively, the “License Agreement”) by and among Cuentas, CIMA, Knetik, Inc., and Auris, LLC.
The Parties executed Mutual General Releases and the settlement terms are as follows:
In exchange for the consideration provided in the Settlement Agreement, (1) Cuentas paid CIMA $350,000.00 on August 2, 2022 and (2) on or before 5:00 p.m New York City time, on August 15, 2022, Cuentas will pay CIMA the balance of the Unpaid Fees ($420,239.78) by wire transfer (3) Cuentas will a period of 30 days from execution date, the exclusive right to facilitate a third party (including to current shareholders and directors of Cuentas) purchase (without markup or broker fee) of, all of the shares of Cuentas held by CIMA at the higher of: (i) the average per share trading price for the three day average before notice in writing is provided by Cuentas of the intent to purchase CIMA’s Cuentas shares, or (ii) the minimum price of $0.50 per share on or before 5:00 p.m. New York City time, on August 31, 2022 pursuant to a purchase agreement delivered by and acceptable to CIMA without any changes thereto (provided, that CIMA shall not be required to provide any representations or warranties other than fundamental warranties related to (a) organization and good standing, (b) power and authority to undertake the transaction and (c) ownership of such shares, and ordinary representations and warranties that the Cuentas shares are being transferred free and clear of any liens, claims, or encumbrances); and (iv) on or before 5:00 p.m. New York City time, on August 2, 2022, Cuentas shall, and shall cause (x) Dinar Zuz, LLC, (y) Michael De Prado and (z) Arik Maimon to provide signed waiver letters, expressly waiving any right of first refusal and co-sale rights granted in their favor under that certain letter agreement, dated December 31, 2019, by and among CIMA, Dinar Zuz, LLC, Michael Del Prado and Arik Maimon, and (y) CIMA agrees: (i) to restore immediately Cuentas’s access to the Platform upon receipt of the $350,000.00 payment ; (ii) to provide Cuentas with a limited license to utilize the Platform the terms of which are detailed specifically in Section 6 of the agreement, and to use reasonable efforts, subject to Cuentas’ compliance hereto, to provide Cuentas’ customer data to Cuentas through the end of the limited license term described below in Section 6 of the agreement; (iii) deliver to Cuentas the Source Code (as that term is defined in paragraph 1.18 of the License Agreement) relating to Out-Of-Scope Services, and as further detailed in Section 6 of the agreement; (iv) not enforce its rights under the Side Letter (as that term is defined in the paragraph 1.1 of the Purchase Agreement) through and including August 31, 2022, and (v) shall not transfer, sell, or encumber its Cuentas shares through and including August 31, 2022, except as permitted herein. Cuentas acknowledges and agrees that the amount of Unpaid Fees ($770,239.78) is valid and outstanding, and waives any right to dispute them. If Cuentas fails to comply with any term of this Settlement Agreement, in addition to the Stipulated Judgment described in Section 5 of the agreement, the limited license set forth in Section 6 and any of CIMA’s obligations under this Settlement Agreement shall become null and CIMA shall have the right to shut off Cuentas access to the Platform without notice. The Settlement Agreement also provides for mutual general releases by Cuentas for the benefit of CIMA and by CIMA for the benefit of Cuentas of all claims other than claims relating to a breach of the Settlement Agreement. The settlement agreement by its terms in effect terminates the obligations under the license agreement, dated December 31, 2019 by and between Cuentas and CIMA.
On August 4, 2022, the Company, entered into a Securities Purchase Agreement with an institutional investor pursuant to which the Purchaser agreed to purchase, and the Company agreed to issue and sell to the Purchaser in a private placement, an aggregate of 1,655,000 shares of the Company’s common stock, $0.001 par value, pre-funded warrants to purchase up to 2,569,044 shares of Common and warrants to purchase up to 4,224,044 shares of Common Stock. The purchase price per Share and associated Common Stock Warrant was $0.71022 and the purchase price per Pre Funded Warrant and associated Common Stock Warrant was $0.71012. Each Common Stock Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $0.59 per share. Each Pre Funded Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $0.0001 per share. The Common Stock Warrants are exercisable for a period of five years and six months commencing on the issuance date and the Pre Funded Warrants are exercisable until exercised. The Warrants also contain customary beneficial ownership limitations that may be waived at the option of each holder upon 61 days’ notice to the Company. The Private Placement closed on August 8, 2022. The gross proceeds to the Company, before deducting placement agent fees and other offering expenses, are approximately $3.0 million. On August 4, 2022, in connection with the Private Placement, the Company entered into a registration rights with the Purchaser, pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) to register for resale the Shares and any shares of the Company’s common stock issuable upon exercise of the Warrants within 30 days of the signing of the Registration Rights Agreement, with such registration statement becoming effective within 60 days after the signing of the Registration Rights Agreement, subject to adjustment in the event of a review by the SEC. The Company is subject to customary penalties and liquidated damages in the event it does not meet certain filing requirements and deadlines set forth in the Registration Rights Agreement.
Pursuant to an engagement agreement, H.C. Wainwright & Co., LLC was engaged by the Company to act as its placement agent for the Private Placement. The Company agreed to pay the Placement Agent a cash fee equal to 7.0% of the gross proceeds received by the Company in the Private Placement, in addition to the reimbursement of certain expenses. The Company also agreed to issue to the Placement Agent warrants to purchase up to 295,683 shares of Common Stock, exercisable for a period of five years and six months commencing on the issuance date, at an exercise price of $0.8878 per share. We issued such shares in reliance on the exemptions from registration pursuant to Section 4(a)(2) of the Securities Act. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unaudited Interim Financial Statements | Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements presented herein have not been audited by an independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the for six-months ended June 30, 2022. However, these results are not necessarily indicative of results for any other interim period or for the year ending December 31, 2022. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, and expenses. Actual amounts could differ from these estimates.
Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on April 1, 2022 (the “Annual Report”). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
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| Principles of Consolidation | Principles of Consolidation
The consolidated financial statements are prepared in accordance with US GAAP. The consolidated financial statements of the Company include the Company and its wholly owned and majority-owned subsidiaries. All inter-company balances and transactions have been eliminated.
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| Use of Estimates | Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.
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| Deferred Revenue | Deferred Revenue
Deferred revenue is comprised mainly of unearned revenue related to prepayments from retail consumers for telecommunications minutes. The following table represents the changes in deferred revenue for the three months ended June 30, 2022:
Revenue allocated to remaining performance obligations represent contracted revenue that has not yet been recognized (“contracted not recognized”). Contracted not recognized revenue was $524 as of June 30, 2022, of which the Company expects to recognize 100% of the revenue over the next 12 months.
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| Derivative and Fair Value of Financial Instruments | Derivative and Fair Value of Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
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| Recently Issued Accounting Standards | Recently Issued Accounting Standards
New pronouncements issued but not effective as of June 30, 2022 are not expected to have a material impact on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption. |
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Summary of Significant Accounting Policies and Basis of Presentation (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of deferred revenue |
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| Schedule of financial assets and liabilities are measured at fair value on a recurring basis |
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Stock Options (Tables) |
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| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of stock option activity |
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| Schedule of information regarding outstanding and exercisable options |
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| Schedule of estimated the fair value |
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Related Party Transactions (Tables) |
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of related party payables |
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| Schedule of related party transactions |
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| Schedule of directorship fees |
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Segments of Operations (Tables) |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of reportable operating segments |
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Organization and Description of Business (Details) - USD ($) |
1 Months Ended | 6 Months Ended | |
|---|---|---|---|
May 27, 2022 |
Sep. 21, 2005 |
Jun. 30, 2022 |
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| Organization and Description of Business (Details) [Line Items] | |||
| Ownership percentage in subsidiaries | 80.01% | 100.00% | |
| Offering cost (in Dollars) | $ 2,459,000 | ||
| Gross revenues percentage | 40.00% | ||
| Acquire interests percentage | 80.01% | ||
| Cash and cash equivalents (in Dollars) | $ 1,798 | ||
| Working capital (in Dollars) | 1,511 | ||
| Accumulated deficit (in Dollars) | $ 45,029 | ||
| CUENTASMAX LLC [Member] | |||
| Organization and Description of Business (Details) [Line Items] | |||
| Ownership percentage | 50.00% | ||
| Cuentas SDI [Member] | |||
| Organization and Description of Business (Details) [Line Items] | |||
| Ownership percentage in subsidiaries | 19.99% | ||
| Offering cost (in Dollars) | $ 750,000 | ||
| Gross revenues percentage | 40.00% |
Summary of Significant Accounting Policies and Basis of Presentation (Details) $ in Thousands |
6 Months Ended |
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Jun. 30, 2022
USD ($)
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| Accounting Policies [Abstract] | |
| Revenue recognized | $ 524 |
| Revenue percentage | 100.00% |
Summary of Significant Accounting Policies and Basis of Presentation (Details) - Schedule of deferred revenue $ in Thousands |
6 Months Ended |
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Jun. 30, 2022
USD ($)
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| Schedule of deferred revenue [Abstract] | |
| Balance beginning | $ 683 |
| Change in deferred revenue | (159) |
| Balance ending | $ 524 |
Summary of Significant Accounting Policies and Basis of Presentation (Details) - Schedule of financial assets and liabilities are measured at fair value on a recurring basis - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Liabilities: | ||
| Total liabilities | $ 1 | $ 3 |
| Stock Based Liabilities [Member] | ||
| Liabilities: | ||
| Total liabilities | 1 | 3 |
| Level 1 [Member] | ||
| Liabilities: | ||
| Total liabilities | 1 | 3 |
| Level 1 [Member] | Stock Based Liabilities [Member] | ||
| Liabilities: | ||
| Total liabilities | 1 | 3 |
| Level 2 [Member] | ||
| Liabilities: | ||
| Total liabilities | ||
| Level 2 [Member] | Stock Based Liabilities [Member] | ||
| Liabilities: | ||
| Total liabilities | ||
| Level 3 [Member] | ||
| Liabilities: | ||
| Total liabilities | ||
| Level 3 [Member] | Stock Based Liabilities [Member] | ||
| Liabilities: | ||
| Total liabilities |
Stock Options (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | |
|---|---|---|
Feb. 01, 2022 |
May 17, 2022 |
|
| Stock Options (Details) [Line Items] | ||
| Fair value options (in Dollars) | $ 134 | |
| Options vested | 50,000 | |
| Estimated fair value (in Dollars) | $ 213 | |
| Board of directors [Member] | ||
| Stock Options (Details) [Line Items] | ||
| Shares issued | 200,000 | |
| Exercise price (in Dollars per share) | $ 2.8 | |
| Chief Operating Officer [Member] | ||
| Stock Options (Details) [Line Items] | ||
| Shares issued | 200,000 | |
| Exercise price (in Dollars per share) | $ 2.8 |
Stock Options (Details) - Schedule of stock option activity |
6 Months Ended |
|---|---|
|
Jun. 30, 2022
$ / shares
shares
| |
| Schedule of stock option activity [Abstract] | |
| Shares, Outstanding beginning | shares | 1,585,200 |
| Weighted- Average Exercise Price Per Share, Outstanding beginning | $ / shares | $ 3.69 |
| Shares, Granted | shares | 400,000 |
| Weighted- Average Exercise Price Per Share, Granted | $ / shares | $ 2.8 |
| Shares, Forfeited | shares | |
| Weighted- Average Exercise Price Per Share, Forfeited | $ / shares | |
| Shares, Outstanding ending | shares | 1,985,200 |
| Weighted- Average Exercise Price Per Share, Outstanding ending | $ / shares | $ 3.51 |
Stock Options (Details) - Schedule of information regarding outstanding and exercisable options - Stock Option [Member] - $ / shares |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
| Stock Options (Details) - Schedule of information regarding outstanding and exercisable options [Line Items] | ||
| Outstanding, Number of Option Shares (in Shares) | 1,985,200 | 1,585,200 |
| Outstanding, Weighted Average Exercise Price | $ 3.69 | $ 3.69 |
| Outstanding, Weighted Average Remaining Life (Years) | 9 years 1 month 2 days | 9 years 1 month 17 days |
| Exercisable, Number of Option Shares (in Shares) | 935,200 | 920,200 |
| Exercisable, Weighted Average Exercise Price | $ 4.01 | $ 4.24 |
| 14.35 [Member] | ||
| Stock Options (Details) - Schedule of information regarding outstanding and exercisable options [Line Items] | ||
| Exercise Prices | $ 14.35 | $ 14.35 |
| Outstanding, Number of Option Shares (in Shares) | 79,200 | 79,200 |
| Outstanding, Weighted Average Exercise Price | $ 14.35 | $ 14.35 |
| Outstanding, Weighted Average Remaining Life (Years) | 8 months 26 days | 1 year 2 months 26 days |
| Exercisable, Number of Option Shares (in Shares) | 79,200 | 79,200 |
| Exercisable, Weighted Average Exercise Price | $ 14.35 | $ 14.35 |
| 7.50 [Member] | ||
| Stock Options (Details) - Schedule of information regarding outstanding and exercisable options [Line Items] | ||
| Exercise Prices | $ 7.5 | $ 7.5 |
| Outstanding, Number of Option Shares (in Shares) | 36,000 | 36,000 |
| Outstanding, Weighted Average Exercise Price | $ 7.5 | $ 7.5 |
| Outstanding, Weighted Average Remaining Life (Years) | 1 year 2 months 15 days | 1 year 8 months 15 days |
| Exercisable, Number of Option Shares (in Shares) | 36,000 | 36,000 |
| Exercisable, Weighted Average Exercise Price | $ 7.5 | $ 7.5 |
| 5.23 [Member] | ||
| Stock Options (Details) - Schedule of information regarding outstanding and exercisable options [Line Items] | ||
| Exercise Prices | $ 5.23 | $ 5.23 |
| Outstanding, Number of Option Shares (in Shares) | 20,000 | 20,000 |
| Outstanding, Weighted Average Exercise Price | $ 5.23 | $ 5.23 |
| Outstanding, Weighted Average Remaining Life (Years) | 1 year 8 months 26 days | 2 years 2 months 26 days |
| Exercisable, Number of Option Shares (in Shares) | 20,000 | 20,000 |
| Exercisable, Weighted Average Exercise Price | $ 5.23 | $ 5.23 |
| 2.80 [Member] | ||
| Stock Options (Details) - Schedule of information regarding outstanding and exercisable options [Line Items] | ||
| Exercise Prices | $ 2.8 | $ 2.8 |
| Outstanding, Number of Option Shares (in Shares) | 1,850,000 | 1,450,000 |
| Outstanding, Weighted Average Exercise Price | $ 2.8 | $ 2.8 |
| Outstanding, Weighted Average Remaining Life (Years) | 9 years 4 months 17 days | 9 years 10 months 2 days |
| Exercisable, Number of Option Shares (in Shares) | 800,000 | 785,000 |
| Exercisable, Weighted Average Exercise Price | $ 2.8 | $ 2.8 |
Stock Options (Details) - Schedule of estimated the fair value |
6 Months Ended |
|---|---|
|
Jun. 30, 2022
$ / shares
| |
| Board of Directors [Member] | |
| Stock Options (Details) - Schedule of estimated the fair value [Line Items] | |
| Common stock price (in Dollars per share) | $ 0.67 |
| Dividend yield | 0.00% |
| Risk-free interest rate | 2.98% |
| Expected term (years) | 10 years |
| Expected volatility | 480.00% |
| Chief Operating Officer [Member] | |
| Stock Options (Details) - Schedule of estimated the fair value [Line Items] | |
| Common stock price (in Dollars per share) | $ 1.07 |
| Dividend yield | 0.00% |
| Risk-free interest rate | 1.79% |
| Expected term (years) | 10 years |
| Expected volatility | 197.00% |
Related Party Transactions (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |
|---|---|---|---|---|---|
Mar. 31, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Related Party Transactions (Details) [Line Items] | |||||
| Annual fees amount | $ 700 | ||||
| Software development services | $ 12 | $ 16 | |||
| Consulting services | $ 30 | 30 | $ 121 | ||
| Director [Member] | |||||
| Related Party Transactions (Details) [Line Items] | |||||
| Annual fees amount | $ 525 | ||||
| Software development services | 34 | 125 | |||
| Software Maintenance Agreement [Member] | |||||
| Related Party Transactions (Details) [Line Items] | |||||
| Annual fees amount | $ 700 | ||||
| Software development services | $ 178 | $ 250 | |||
Related Party Transactions (Details) - Schedule of related party payables - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2020 |
||
|---|---|---|---|---|
| Related Party Transactions (Details) - Schedule of related party payables [Line Items] | ||||
| Total Due to related parties | $ 746 | $ 552 | ||
| Due to Cima Telecom Inc. [Member] | ||||
| Related Party Transactions (Details) - Schedule of related party payables [Line Items] | ||||
| Total Due to related parties | [1] | $ 746 | $ 552 | |
| ||||
Related Party Transactions (Details) - Schedule of related party transactions - USD ($) $ in Thousands |
Jun. 30, 2022 |
Jun. 30, 2021 |
||||
|---|---|---|---|---|---|---|
| Related Party Transaction [Line Items] | ||||||
| Total Related party transactions | $ 918 | $ 292 | ||||
| Carol Pepper [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Total Related party transactions | [1] | 40 | ||||
| Cima Telecom Inc. [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Total Related party transactions | [2] | $ 878 | $ 292 | |||
| ||||||
Related Party Transactions (Details) - Schedule of directorship fees - USD ($) $ in Thousands |
3 Months Ended | |||||
|---|---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|||||
| Related Party Transactions (Details) - Schedule of directorship fees [Line Items] | ||||||
| Total directorship fees | $ 599 | $ 246 | ||||
| Carol Pepper [Member] | ||||||
| Related Party Transactions (Details) - Schedule of directorship fees [Line Items] | ||||||
| Total directorship fees | [1] | 40 | ||||
| Cima Telecom Inc. [Member] | ||||||
| Related Party Transactions (Details) - Schedule of directorship fees [Line Items] | ||||||
| Total directorship fees | [2] | $ 559 | $ 246 | |||
| ||||||
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
1 Months Ended | 6 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 01, 2021 |
May 01, 2019 |
Dec. 07, 2018 |
Jul. 20, 2022 |
May 25, 2022 |
Apr. 27, 2022 |
Nov. 16, 2020 |
Jan. 29, 2019 |
Oct. 23, 2018 |
Dec. 20, 2017 |
Jun. 30, 2022 |
|
| Commitments and Contingencies (Details) [Line Items] | |||||||||||
| Legal settlement alleging claim, description | a complaint was filed by J. P. Carey Enterprises, Inc. (“JP Carey”) alleging a claim for $473 related to Franjose Yglesias-Bertheau, a former Vice President of PLKD. Even though the Company made the agreed payment of $10on January 2, 2017 and issued 6,001 shares of Common Stock as conversion of the $70,000 note as agreed in its settlement agreement, JP Carey alleges damages that the Company claims are without merit because JP Carey received full compensation as agreed. | ||||||||||
| New claimed damages total | $ 1,108 | ||||||||||
| Amount of fee and cost | $ 40 | ||||||||||
| Settlement amount | $ 32,000 | ||||||||||
| Commitments and contingencies, description | the Company received a notice of demand for arbitration from Secure IP Telecom, Inc. (“Secure IP), who allegedly had a Reciprocal Carrier Services Agreement (“RCS”) exclusively with Limecom and not with the Company. The arbitration demand originated from another demand for arbitration that Secure IP received from VoIP Capital International (“VoIP”) in March 2019, demanding $1,053 in damages allegedly caused by unpaid receivables that Limecom assigned to VoIP based on the RCS. On or about October 5, 2020, the trial court appointed a receiver over Limecom, Inc. (“Limecom”) in the matter of Spectrum Intelligence Communications Agency, LLC. v. Limecom, Inc., case no. 2018-027150-CA-01 pending in the 11th Circuit for Miami-Dade County, Florida. On June 5, 2020, Secure IP Telecom, Inc. (“Secure IP”) filed a complaint against Limecom, Heritage Ventures Limited (“Heritage”), an unrelated third party and owner of Limecom, and the Company, case no. 20-11972-CA-01. Secure IP alleges that the Company received certain transfers from Limecom during the period that the Company wholly owned Limecom that may be an avoidable under Florida Statute § 725.105. On July 13, 2021, the two cases were consolidated, and are now pending before the same trial court under the former case number. The Company has answered and denied any liability with respect to both complaints. To the extent the Company has exposure for any transfers from Limecom, Heritage has indemnified the Company for any such liability and the Company has a pending cross-claim against Heritage for purposes of enforcing the indemnification obligation. A review of the books and records of the Company reflect aggregate transfers from Limecom to the Company or its affiliates of less than $600,000. The Company’s books and records reflect that the Company fully reimbursed Limecom through direct payment of expenses of Limecom and through issuance of shares by the Company to employees or other vendors on behalf of Limecom for settlement and release of claims the employees or vendors may have asserted against Limecom. The books and records of the Company therefore do not reflect an identifiable avoidable transfer, but this analysis may change as the discovery process continues. At this time, based upon an analysis of the Company’s books and records, the loss contingency is not capable of reasonable estimation under the above circumstances, and the likelihood of an adverse judgment is not probable at this time. An adverse judgment in this matter is reasonably possible and based upon an analysis of litigation costs and likelihood of a settlement, the undersigned recommends a litigation reserve of $200 to $300 thousand. | ||||||||||
| Accrued amount | $ 300 | ||||||||||
| Rental payments | $ 7 | ||||||||||
| CIMA Alleges [Member] | |||||||||||
| Commitments and Contingencies (Details) [Line Items] | |||||||||||
| License agreement | $ 700,000 | ||||||||||
| JP Carey [Member] | |||||||||||
| Commitments and Contingencies (Details) [Line Items] | |||||||||||
| Payment from related party | $ 141 | ||||||||||
| Telco Cuba Inc. [Member] | |||||||||||
| Commitments and Contingencies (Details) [Line Items] | |||||||||||
| Service provider amount | $ 15 | ||||||||||
| Advertising and other damages | $ 50 | ||||||||||
Segments of Operations (Details) - Schedule of reportable operating segments - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
|
| Revenue [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenue | $ 670 | $ 155 | $ 1,064 | $ 380 | |
| Gross profit (loss) [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenue | 55 | 132 | 189 | 110 | |
| Long lived assets [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenue | 4,500 | $ 5,400 | |||
| Telecommunications [Member] | Revenue [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenue | 143 | 147 | 318 | 353 | |
| Telecommunications [Member] | Gross profit (loss) [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenue | 81 | 83 | 200 | 149 | |
| Telecommunications [Member] | Long lived assets [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenue | |||||
| General Purpose Reloadable Cards [Member] | Revenue [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenue | 527 | 8 | 746 | 27 | |
| General Purpose Reloadable Cards [Member] | Gross profit (loss) [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenue | (26) | $ 49 | $ (11) | $ (39) | |
| General Purpose Reloadable Cards [Member] | Long lived assets [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Revenue | $ 4,500 | $ 5,400 | |||
Subsequent Events (Details) - USD ($) |
1 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Aug. 15, 2022 |
Aug. 04, 2022 |
Aug. 31, 2022 |
Jun. 30, 2022 |
|
| Subsequent Events (Details) [Line Items] | ||||
| Gross proceed percentage | 7.00% | |||
| Purchase of shares (in Shares) | 295,683 | |||
| Exercise price (in Dollars per share) | $ 0.8878 | |||
| Subsequent Event [Member] | ||||
| Subsequent Events (Details) [Line Items] | ||||
| Cash paid | $ 350,000 | |||
| Unpaid fees | $ 420,239.78 | $ 770,239.78 | ||
| Minimum price per share (in Dollars per share) | $ 0.5 | |||
| Payment receipt | $ 350,000 | |||
| Subsequent events, description | the Company, entered into a Securities Purchase Agreement with an institutional investor pursuant to which the Purchaser agreed to purchase, and the Company agreed to issue and sell to the Purchaser in a private placement, an aggregate of 1,655,000 shares of the Company’s common stock, $0.001 par value, pre-funded warrants to purchase up to 2,569,044 shares of Common and warrants to purchase up to 4,224,044 shares of Common Stock. The purchase price per Share and associated Common Stock Warrant was $0.71022 and the purchase price per Pre Funded Warrant and associated Common Stock Warrant was $0.71012. Each Common Stock Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $0.59 per share. Each Pre Funded Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $0.0001 per share. The Common Stock Warrants are exercisable for a period of five years and six months commencing on the issuance date and the Pre Funded Warrants are exercisable until exercised. The Warrants also contain customary beneficial ownership limitations that may be waived at the option of each holder upon 61 days’ notice to the Company. The Private Placement closed on August 8, 2022. The gross proceeds to the Company, before deducting placement agent fees and other offering expenses, are approximately $3.0 million. |