Related Party Transactions

12 Months Ended

Dec. 31, 2023

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 7 – RELATED PARTY TRANSACTIONS

Employment agreements

On August 26, 2021, the Company and Arik Maimon entered into a Founder/Executive Chairman Compensation Agreement. Additionally, on August 26, 2021, the Company and Michael De Prado entered into a Founder/Executive Vice-Chairman Compensation Agreement (the “Compensation Agreements”). The term of each of these Compensation Agreements became effective as of August 26, 2021 and replaced any prior arrangements or employment agreements between the Company and each of Mr. Maimon and Mr. De Prado. Under the terms of the Compensation Agreements, the Executives agreed to be employed by the Company for an initial continuous twelve-month term beginning on the effective date of August 26, 2021, and ending on August 25, 2022. The initial term would be automatically extended for additional one (1) year periods on the same terms and conditions as set out in the Compensation Agreements; however, the Compensation Agreements, respectively, will not renew automatically if either the Company or the respective Executive provide a written notice to the other of a decision not to renew, which notice must be given at least ninety (90) days prior to the end of the initial term or any subsequently renewed one (1) year term. Pursuant to the terms of his Compensation Agreement, Mr. Maimon will receive an annual base salary of two hundred ninety-five thousand dollars ($295) per year, and pursuant to the terms of his Compensation Agreement, Mr. De Prado will receive an annual base salary of two hundred seventy-five thousand dollars ($275) per year, and each will be eligible for an annual incentive payment of up to one hundred percent (100%) of their respective base salary, which annual incentive payment shall be based on the Company’s performance as compared to the goals established by the Company’s Board of Directors in consultation with each Executive, respectively. This annual incentive shall have a twelve (12) month performance period and will be based on a January 1 through December 31 calendar year, with the Executives’ entitlement to the annual incentive and the amount of such award, if any, remaining subject to the good faith discretion of the Board of Directors. Any such annual incentive shall be paid by the end of the second quarter following the calendar year to which each respective Executive’s performance relates. Pursuant to the terms of the Compensation Agreements, each of Mr. Maimon and Mr. De Prado has the option to have any such earned annual incentive be paid in fully vested shares of the Company’s Common Stock, but must elect such option by the end of the first quarter following the relevant performance calendar year period. In the event of a change in control of the Company, as defined under the terms of the Compensation Agreements, that takes place (i) during the term of the Compensation Agreement or (ii) prior to the date which is twenty-four (24) months from the effective date of the Compensation Agreements, if the Executive’s employment otherwise terminates prior to such date, each respective Executive shall be entitled to a bonus payment equal to two and one-half percent (2.5%) of the cash consideration received by the shareholders of the Company in the change in control transaction. On August 19, 2022, the Company’s Board of Directors approved a motion to appoint Arik Maimon as Interim CEO (in addition to his current position as Chairman of the Board) and Michael De Prado as Interim President (in addition to his current position as Vice Chairman of the Board). Both Arik Maimon and Michael De Prado agreed to assume these positions with no additional compensation.

On August 21, 2023, the Company entered into an employment agreement with Arik Maimon pursuant to which Mr. Maimon agreed to serve as Executive Chairman and Chief Executive Officer of the Company (the “Maimon Employment Agreement”).

The Maimon Employment Agreement is for a term of five years, subject to the early termination provisions of the Maimon Employment Agreement, commencing August 21, 2023 (the “Effective Date”) and replaces any prior arrangements or employment agreements between the Company and Mr. Maimon. The Maimon Employment Agreement is subject to early termination upon Mr. Maimon’s death, or by the Company for Cause, adjudicated incompetency or adjudicated bankruptcy, the date upon which the Company gives Mr. Maimon notice of termination on account of Disability, and by Mr. Maimon in the event of an Adverse Change in Executive’s Employment Circumstances.

Pursuant to the terms of the Maimon Employment Agreement, Mr. Maimon will receive an annual base salary of $295 per year, subject to increase by the Company’s Board of Directors upon the recommendation of the Compensation Committee of the Company’s Board of Directors.

Mr. Maimon is eligible to receive a discretionary annual performance-based payment of up to 100% of his base salary, which performance-based payment shall be determined by the Compensation Committee of the Board of Directors based on the Company’s performance as compared to the goals established by the Compensation Committee and the Company’s management, including the Annual Budget (as defined in the Maimon Employment Agreement), in consultation with Mr. Maimon. At the discretion of the Compensation Committee, this review may be performed each fiscal quarter but not less than semi-annually, and the Performance-Based Bonus awarded, if any, may be paid accordingly. The Performance-Based Bonus shall be prorated for any partial fiscal year in which the Executive was employed by the Company. Executive shall not be entitled to receive any portion of the Annual Incentive Bonus for any year in which his employment is terminated for Cause. Pursuant to the terms of the Maimon Employment Agreement, The Bonus shall be prorated, based on each fiscal quarter of employment, for any partial fiscal year.

Notwithstanding the limitation on the payment in cash of the Performance-Based Bonus, the Compensation Committee based upon certain criteria specified in the Maimon Employment Agreement may at its discretion award Mr. Maimon stock or stock options as an additional Performance-Based Bonus in addition to the cash component but only an annual basis and only for fiscal years in which the Company’s financial results substantially exceed the Annual Budget. 

Mr. Maimon is also entitled to receive as compensation for past services and to ensure his future services to the Company, subject to shareholder approval, 131,866 shares of the Company’s common stock valued at $140, 50% of which shares are to be issued by the Company as soon as practicable after shareholder approval has been obtained, with the remaining 50% of the shares to be issued equally at the end of each of the three calendar years following the Effective Date. The Maimon Employment Agreement provides that if Mr. Maimon’s 10% fully diluted equity interest in the Company is reduced upon issuance by the Company of additional shares, options, or warrants of any kind or nature, the Company shall issue to Mr. Maimon additional shares in number sufficient to preserve and maintain his 10% fully diluted equity interest in the Company, with such shares to be issued under the same terms set forth above. As of December 31, 2023 Mr. Maimon was entitled to additional 148,259 shares of the Company’s common stock valued at $157, under the 10% equity interest preservation term provided in the Maimon Employment Agreement.

Mr. Maimon is also entitled to a monthly automobile allowance. Mr. Maimon is eligible to participate in such benefit plans as are, or from time-to-time may be, provided by the Company for its senior executive officers.

The Company will pay or reimburse Mr. Maimon for all reasonable business expenses incurred or paid by him in the performance of his duties and responsibilities for the Company, provided that any expense in excess of $10 must be preapproved by the Board and subject to any maximum limit and other restrictions on such expenses set by specified by the Company from time to time.

Mr. Maimon is subject to certain obligations and restrictive covenants, including, but not limited to: confidentiality, non-competition, non-solicitation, and ownership of works (e.g., inventions and discoveries created or developed during the course of Mr. Maimon’s employment are owned by the Company).

During the year ended December 31, 2023, the Company paid Mr. Maimon an annual performance bonus for the year 2022 of $100,000. As of the date of the approval of these financial statements, the Compensation Committee did not convene to approve bonuses for 2023, accordingly no bonuses were accrued or paid on behalf of 2023.

In addition, on August 21, 2023, the Company entered into an employment agreement with Michael De Prado pursuant to which Mr. De Prado agreed to serve as Executive Vice Chairman and President of the Company (the “De Prado Employment Agreement”). The De Prado Employment Agreement is for a term of five years, subject to the early termination provisions of the De Prado Employment Agreement, commencing August 21, 2023 (the “Effective Date”) and replaces any prior arrangements or employment agreements between the Company and Mr. De Prado.

The De Prado Employment Agreement is subject to early termination upon Mr. De Prado’s death, or by the Company for Cause, Mr. De Prado’s adjudicated incompetency or adjudicated bankruptcy, the date upon which the Company gives Mr. De Prado notice of termination on account of Disability, and by Mr. De Prado in the event of an Adverse Change in Executive’s Employment Circumstances. Pursuant to the terms of the De Prado Employment Agreement, Mr. De Prado will receive an annual base salary of $285 per year, subject to increase by the Company’s by Board of Directors upon the recommendation of the Compensation Committee of the Company’s Board of Directors.

Mr. De Prado is eligible to receive a discretionary annual performance-based payment of up to 100% of his base salary, which performance-based payment shall be determined by the Compensation Committee of the Board of Directors based on the Company’s performance as compared to the goals established by the Compensation Committee and the Company’s management, including the Annual Budget (as defined in the De Prado Employment Agreement), in consultation with Mr. De Prado. At the discretion of the Compensation Committee, this review may be performed each fiscal quarter but not less than semi-annually, and the Performance-Based Bonus awarded, if any, may be paid accordingly. The Performance-Based Bonus shall be prorated for any partial fiscal year in which the Executive was employed by the Company. Executive shall not be entitled to receive any portion of the Annual Incentive Bonus for any year in which his employment is terminated for Cause. Pursuant to the terms of the De Prado Employment Agreement, The Bonus shall be prorated, based on each fiscal quarter of employment, for any partial fiscal year. Notwithstanding the limitation on the payment in cash of the Performance-Based Bonus, the Compensation Committee based upon certain criteria specified in the De Prado Employment Agreement may at its discretion award Mr. De Prado stock or stock options as an additional Performance-Based Bonus in addition to the cash component but only an annual basis and only for fiscal years in which the Company’s financial results substantially exceed the Annual Budget. 

Mr. De Prado is also entitled to receive as compensation for past services to and to ensure his future services to the Company, subject to shareholder approval, 117,214 shares of the Company’s common stock valued at $124 to increase his ownership interest in the Company to 7.0% calculated on a fully diluted basis, 50% of which shares are to be issued by the Company as soon as practicable after shareholder approval has been obtained, with the remaining 50% of the shares to be issued equally at the end of each of the three calendar years following the Effective Date. The De Prado Employment Agreement provides that if Mr. De Prado’s 7% fully diluted equity interest in the Company is reduced upon issuance by the Company of additional shares, options, or warrants of any kind or nature, the Company shall issue to Mr. De Prado additional shares in number sufficient to preserve and maintain his 7% fully diluted equity interest in the Company, with such shares to be issued under the same terms set forth above. As of December 31, 2023 Mr. De Prado was entitled to additional 109,312 shares of the Company’s common stock valued at $116, under the 7% equity interest preservation term provided in the De Prado Employment Agreement.

Mr. De Prado is entitled to a monthly automobile allowance of $2. Mr. De Prado is also eligible to participate in such benefit plans as are, or from time-to-time may be, provided by the Company for its senior executive officers.

The Company will pay or reimburse Mr. De Prado for all reasonable business expenses incurred or paid by him in the performance of his duties and responsibilities for the Company, provided that any expense in excess of $10 must be preapproved by the Board and subject to any maximum limit and other restrictions on such expenses set by specified by the Company from time to time.

Mr. De Prado is subject to certain obligations and restrictive covenants, including, but not limited to: confidentiality, non-competition, non-solicitation, and ownership of works (e.g., inventions and discoveries created or developed during the course of Mr. De Prado’s employment are owned by the Company).

During the year ended December 31, 2023, the Company paid Mr. De Prado an annual performance bonus for the year 2022 of $100,000. As of the date of the approval of these financial statements, the Compensation Committee did not convene to approve bonuses for 2023, accordingly no bonuses were accrued or paid on behalf of 2023.

CIMA License Agreement:

On December 31, 2019, the Company entered into a series of integrated transactions to license the Platforms from CIMA, through CIMA’s wholly owned subsidiaries Knetik, and Auris (the “Transaction Closing”) pursuant to that certain Platform License Agreement, dated December 31, 2019 by and among (i) the Company, (ii) CIMA, (iii) Knetik and (iv) Auris (the “License Agreement”) and the various other agreements listed below. Under the License Agreement Cima received a one-time licensing fee in the amount of $9,000. 

Pursuant to the License Agreement, the Company shall pay CIMA annual fees for the maintenance and support services in accordance with the following schedule: (i) for the first (1st) calendar year from the Effective Date, $300 were paid in 2020; (ii) for the second (2nd) calendar year from the Effective Date, $500 were paid in 2021; (iii) for the third (3rd) calendar year from the Effective Date, $700 to be paid during 2022; (iv) for the fourth (4th) calendar year from the Effective Date, $1,000 to be paid on December 31, 2022; (v) for the fifth (5th) calendar year from the Effective Date, $640 to be paid on December 31, 2022; and (vi) for each calendar year thereafter, $640 to be paid on the anniversary date. On August 2, 2022, the Company and CIMA, along with two of CIMA’s wholly-owned subsidiaries, Knetik and Auris executed a Settlement Agreement and General Release (“Settlement Agreement”) which provides the following: In exchange for the consideration provided in the Settlement Agreement, (1) the Company paid CIMA $350 on or about August 2, 2022 and (2) on or about August 15, 2022, Cuentas paid CIMA the balance of the unpaid Fees of $420 CIMA agreed: (i) to restore immediately Cuentas’s access to the Platform upon receipt of the $350 payment; (ii) to provide Cuentas with a limited license to utilize the Platform the terms of which are detailed specifically in the Settlement Agreement, and to use reasonable efforts, subject to Cuentas’ compliance hereto, to provide the Company’s customer data to the Company through the end of the limited license term; (iii) deliver to the Company the Source Code relating to Out-Of-Scope Services, and as further detailed in the settlement agreement; The Settlement Agreement also provides other terms and for mutual general releases by the Company for the benefit of CIMA and by CIMA for the benefit of the Company 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 the Company and CIMA. Per the settlement agreement, the ownership of the platforms will be maintained by the Company and Cima will not be obligated to provide services under the license agreement.

During the year ended December 31, 2023 the Company paid CIMA a total of $120.

A. Transactions with related parties

	Year ended December 31
	2023		2022
Sales:
Sales to SDI Cuentas LLC	$	73	$	2,052
Sales to Next Communications INC (a company controlled by Arik Maimon, Company's Chairman of the Board and CEO) (a)		2,181		-
Total sales to related parties	$	2,254	$	2,052
Consulting fees to Angelo De Prado (b)	$	-	$	6
Consulting fees to Sima Maimon Bakhar (c)		-		10
Doubtful accounts – Cuentas SDI LLC		-		157
Cima Telecom Inc. (d)		120		918
Total transactions with related parties	$	120	$	1,051

B. Due from related parties:

	As of December 31,
	2023		2022
Arik Maimon (Chairman of the Board and the CEO)	$	73	$	-
Michael De Prado (Vice Chairman of the Board and President)		99		-
Current assets - Related parties		172		-
Next Communications INC (a company controlled by Arik Maimon Company's Chairman of the Board and CEO)		1,300		-
SDI Cuentas LLC.		-		198
Current assets – Accounts receivables		1,300		198
Total Due from related parties	$	1,472	$	198

(a)	On June 26, 2009 the Company and Next Communications INC (“Next”) entered into Bilateral Wholesale Carrier Agreement according to which the Company and Next will provide and purchase from time to time telecommunications transport services from each other and to other carriers at price determined in the agreement and as may mutually change from time to time. The Agreement shall continue on a month-to-month basis unless either Party notifies the other in writing not less than 30 days prior of its intent to terminate this Agreement
(b)	Angelo De Prado is the son of Michael De Prado.
(c)	Sima Maimon Bakhar is the wife of Arik Maimon.
(d)	Composed of consulting fee in additional to the directorship fees.