UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
(Commission File Number)
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(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class |
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N/A |
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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, a 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 | ||
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| 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
As of September 20, 2023, there were
Metro One Telecommunications Inc.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Index to Unaudited Condensed Consolidated Financial Statements
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Unaudited Condensed Consolidated Balance Sheets at June 30, 2023 and December 31, 2022 | F-1 | ||
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F-3 | |||
F-4 | |||
F-5 |
3 |
Metro One Telecommunications, Inc.
Condensed Consolidated Balance Sheets
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| June 30, 2023 |
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| December 31, 2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable |
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Prepaid expenses |
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Royalty receivable |
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Other current assets |
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Total current assets |
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Property and equipment. net |
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Intangible assets, net |
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Operating lease right-of-use assets |
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Other assets |
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Total assets |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable and accrued liabilities |
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Debt, current portion |
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Current portion of operating lease liabilities |
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Total current liabilities |
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Debt |
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Other liability |
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Operating lease liabilities |
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Total liabilities |
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Stockholders’ equity |
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Common stock, $0.0001 par value; |
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Additional paid in capital |
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Accumulated deficit |
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Other comprehensive income (loss) |
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Stockholders’ equity |
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Total Liabilities and Stockholders’ Equity |
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| $ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-1 |
| Table of Contents |
Metro One Telecommunications, Inc.
Condensed Consolidated Statements of Operations
and Other Comprehensive Income
(Unaudited)
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| Three months ended June 30, |
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| Six months ended June 30, |
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Revenues |
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Operating expenses |
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Cost of revenue |
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Research and Development |
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General and administrative |
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Management Fees |
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Sales and Marketing |
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Total operating expenses |
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Operating (loss) |
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Other income (expense) |
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Finance Costs |
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Income tax refund |
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Total other income (expense) |
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Net Loss |
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Basic and diluted net loss per common share |
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Weighted average shares – basic and diluted |
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Other Comprehensive Loss |
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Net Loss |
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Foreign currency translation adjustment |
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| $ | ( | ) |
| $ | ( | ) |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
| Table of Contents |
Metro One Telecommunications, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
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| Common Stock |
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| Additional Paid-in |
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| Accumulated Other Comprehensive |
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| Total Stockholders’ Equity |
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| Shares |
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| Amount |
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Balance at December 31, 2022 |
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Reg A |
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Stock based compensation |
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Foreign currency translation adjustment |
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Net loss |
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Balance at March 31, 2023 |
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Stock based compensation |
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Foreign currency translation adjustment |
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Net loss |
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Balance at June 30, 2023 |
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| Common Stock |
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| Accumulated Other Comprehensive |
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Balance at December 31, 2021 |
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Stock warrants granted as financing costs |
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Stock based compensation |
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Capitalized stock-based compensation |
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Foreign currency translation adjustment |
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Net loss |
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Balance at March 31, 2022 |
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Stock warrants granted as financing costs |
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Stock based compensation |
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Capitalized stock-based compensation |
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Foreign currency translation adjustment |
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Net loss |
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Balance at June 30, 2022 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
| Table of Contents |
Metro One Telecommunications, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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| For Six Months Ended June 30, |
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Cash flows used in operating activities: |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Non-cash operating lease expense |
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Warrants issued as financing costs |
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Stock based compensation |
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Changes in certain assets and liabilities: |
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Accounts receivable |
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Prepaid costs and other assets |
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Accounts payable and other liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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Additions to intangible assets |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Proceeds from private placement |
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Proceeds from short term debt |
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Net cash provided by financing activities |
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Net decrease in cash and cash equivalents |
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Foreign Exchange Gain (loss) |
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Cash and cash equivalents, end of period |
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Supplemental disclosure of cash flow information: |
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Cash received for income taxes, net |
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Cash paid for interest |
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Non-cash Investing and Financing Activities |
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Stock-based compensation issued for capitalized research and development costs |
| $ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 1 - NATURE OF OPERATIONS
The Company was incorporated in the State of Oregon on February 8, 1989, as Metro One Direct Information Services Inc. On December 12, 1995, we changed our name to Metro One Telecommunications, Inc.
During the quarter ended June 30, 2021, the Company announced that its newly-formed, wholly owned Israeli subsidiary, Stratford Ltd. (“Stratford”) had received notification of approval from the Lod District Court in Israel for its winning bid to acquire assets of Royal App Ltd. out of insolvency proceedings for approximately $
Royal App, Ltd., is the developer of Shelfy, a white label, headless mobile enterprise software platform that helps retailers and fast-moving consumer goods companies become growth companies. The Shelfy product incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as supermarket chains, food and other clients. Concurrent with the acquisition of the Shelfy software assets, management determined the technological feasibility of proposed enterprise software product modifications, including functions, features, and technical performance requirements to relaunch the software as a SaaS product offering, initially integrated on key reseller platforms, with the intent of repositioning the software with an entirely new and much larger market base. An easy to use, fully customizable mobile commerce app for download by consumers across all industry segments for a base monthly subscription fee, and readily available add on features for additional monthly fees based on individual consumer selections.
On February 9, 2022, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission (“SEC”) to offer up to 80,000,000 Units consisting of one share of common stock and a ¼ warrant at $0.12 per Unit, with the associated warrants having an exercise price of $0.15 per share for a period of one year. The Company received notice of effect from the SEC on December 1, 2022. Further the Company registered a total of 200,031,733 shares of common stock and 21,998,323 shares of common stock underlying warrant exercises for certain selling stockholders. Subsequent to December 31, 2022, the Company received its first subscription under the offering for $250,000.
During the year ended December 31, 2022, the Company’s subsidiary launched its upgraded SaaS Shelfy.io Mobile App Builder. The Shelfy mobile app, which launched on August 1, 2022, is open to all merchants on the Shopify marketplace and can be accessed at https://apps.shopify.com/shelfy. The Shelfy mobile app also launched on WooCommerce on September 1, 2022 and is available to all WooCommerce developers, online stores, brands, and retailers at https://he.wordpress.org/plugins/shelfy-mobile-commerce-platform/.
On June 26, 2023, the Company was advised by Stratford that 12 of its employees filed a motion with the District Court of Tel Aviv (the “Court”), case no. 59931-06-23 (the “Temporary Trustee Motion”), to commence insolvency proceedings against Stratford. The motion was filed as a result of unpaid salaries and social benefits to those employees outstanding as of April 30, 2023, in the approximate US Dollar amount of $254,725 (NIS 945,604), not including additional amounts owing for pension and an educational savings plan. The motion further indicated the salary and benefits payable at the date of the filing had increased to a total approximate amount of $323,250 (NIS 1.2 million). In addition, the employees filed an ex-parte motion to appoint a temporary trustee in order to prevent concealment of assets. In response to the Temporary Trustee Motion, the Court declined to make a ruling on the ex-parte motion and ordered Stratford to file its response with the Court no later than July 2, 2023. If no objection is filed by Stratford, a temporary trustee will be immediately appointed from a list of three nominees offered by the local Ministry of Justice. Stratford did not file an objection to the Temporary Trustee Motion and on July 20, 2023 a Trustee was appointed by the Court and all remaining employees of Stratford were effectively terminated, including the Company’s CFO Efrat Reinhardt, whose employment contract was originally entered into with Stratford directly with services to be provided to each of Stratford and the Company. On termination of the employees the Company declined to enter into a new contract with Ms. Reinhardt directly.
| F-5 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 1 - NATURE OF OPERATIONS (Continued)
Concurrent with the appointment of the Trustee on July 20, 2023 (the “Effective Date”), the Company ceased to have effective control over Stratford as a result of the expectation of imminent liquidation proceedings, and therefore on the Effective Date, the Company will deconsolidate its subsidiary, Stratford. The Company has provided proforma information with respect to the deconsolidation in Note 10, Subsequent Events.
On June 27, 2023, each of Mr. Jonah Meer and Mr. James A. Brodie resigned as directors of Stratford.
The Company is currently in the process of reviewing several suitable acquisition targets with revenue generating operations with the intent to complete an acquisition in the fourth quarter of fiscal 2023. The Company has no agreements, commitments or understanding either in writing or verbally with respect thereto. There is no assurance that the Company will successfully identify a suitable acquisition target. Even if a suitable acquisition target is identified, there is no assurance that any definitive agreement will be agreed upon and entered into, or that any transaction will be consummated on the terms or timeframe currently contemplated, or at all.
The Company anticipates that it will conclude a reverse stock split of its issued and outstanding shares of common stock at a ratio of 1-for-75 (the “Reverse Split”) and anticipates that it will file a Certificate of Amendment to the Company’s Certificate of Incorporation in order to effect the Reverse Split prior to such Reverse Split. The Reverse Split is expected to become effective after the market closes on September 27, 2023, Eastern Time. Assuming the Reverse Split becomes effective after the market closes on September 27, 2023, beginning with the opening of trading on September 28, 2023, the Company’s common stock will continue to trade on the OTC under the symbol “WOWI,” but will trade on a split-adjusted basis. The Certificate of Amendment will also reduce the number of authorized shares of common stock under the Company’s Certificate of Incorporation from 600 million shares authorized to 35 million shares authorized (the “Share Reduction”).
The Company’s stockholders approved the reverse stock split and the Share Reduction on February 28, 2023. In connection with approving the reverse stock split, the Company’s stockholders granted authority to the Company’s Board of Directors (the “Board”) to determine, in its sole discretion, the exact ratio of the reverse stock split within the range of 1-for-25 to 1-for-100. The Board approved the reverse stock split on February 23, 2023, and the exact ratio of 1-for-75 on August 4, 2023. The Reverse Split has not been consummated.
If the Reverse Split is consummated, every 75 pre-split shares of common stock outstanding will automatically combine into one new share of common stock without any action on the part of the holders and with no change in the par value of $0.0001 per share. The Reverse Split will proportionately reduce the number of shares of common stock available for issuance under the Company’s stock incentive plan and proportionately reduce the number of shares of common stock issuable upon the exercise or conversion of stock options and warrants outstanding immediately prior to the effectiveness of the Reverse Split.
If consummated the Reverse Split will reduce
NOTE 2 – GOING CONCERN
The accompanying condensed, consolidated financial statements have been prepared assuming the continuation of the Company as a going concern. The Company has generated modest revenues to date from the operations of its wholly owned subsidiary. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s plans for the continuation of the Company as a going concern include financing the Company’s operations through issuance of its common stock, increasing its current revenue generating operations or expanding the Company’s business operations to acquire projects which generate additional revenue. If the Company is unable to complete its financing requirements or achieve net profits as projected, it will then modify its expenditures and plan of operations to coincide with the actual financing completed and actual operating revenues, if any. The Company is currently seeking further equity financing of up to $10 million US Dollars to meet ongoing capital requirements and has filed a registration statement on Form S-1 for this purpose on February 9, 2022. The registration statement went effective on December 1, 2022. Further the Company entered into certain 15 month Term Promissory Notes and raised a total of $
| F-6 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 2 – GOING CONCERN (Continued)
There are no assurances the Company will succeed in implementing its plans. If the Company is unable to obtain adequate capital, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.
COVID-19 Pandemic and other factors
While it appears the COVID-19 pandemic has subsided and the global economy is focused on recovery, the impact of COVID-19 could continue to have an impact on the Company going forward. COVID-19 caused significant disruptions to the global financial markets, which may continue to impact the Company’s ability to raise additional capital and to pursue certain acquisitions. Although the COVID-19 pandemic has driven an increase in mobile commerce penetration, it is uncertain whether or the extent to which this trend will continue after the impact of the COVID-19 pandemic subsides Additional factors which may impact the Company’s ongoing operations include inflation, the addition and retention of suitable employees as a result of the ongoing recovery from the COVID-19 pandemic, the recent war in the Ukraine, climate change and others. These events may have serious adverse impact on domestic and foreign economies which may impact the Company’s operations as a result of a variety of factors including the potential for reduced consumer spending. The Company is unable to predict the ongoing impact of these factors on the Company’s consolidated financial operations. There are no assurances that the Company will be able to meet its ongoing obligations or raise additional funds.
The preparation of financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of these financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES
Fiscal Year end
The Company has selected December 31 as its fiscal year end.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with GAAP, and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished in the consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the SEC’s rules and regulations. The results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s 2022 Form 10-K as filed with the SEC on April 18, 2023 and Form 10-K/A as filed on May 2, 2023.
| F-7 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)
Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its 100% controlled Israeli subsidiary, Stratford Ltd (“Stratford”) as of June 30, 2023 and 2022. All significant intercompany accounting transactions have been eliminated as a result of consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel.
Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s consolidated statements of cash flows. Transaction gains and losses are included in “General and Administrative” expenses on the Company’s consolidated statements of operations.
Translation of amounts from Israeli Shekel (ILS) into U.S. Dollar has been made at the following exchange rates for the six months ended June 30, 2023 and 2022
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||
Period-end ILS: U.S. dollar exchange rate |
| $ |
|
| $ |
| ||
Period average ILS: U.S. dollar exchange rate |
| $ |
|
| $ |
| ||
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) includes foreign currency translation adjustments related to the Company’s subsidiary in Israel and is excluded from the accompanying consolidated statements of operations.
| F-8 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment, including leasehold improvements, are recorded at cost net of accumulated depreciation. Maintenance and repairs are expensed as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:
Computer and telephone equipment |
|
Intangible Assets
The Company recognizes assets for customer relationships, developed technology, post-technological feasibility software development costs, patents and finite-lived trade names. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets, generally from
In the year ended December 31, 2021, the Company recorded assets acquired in the cumulative amount of approximately $
Software Research and Development Expenditures
Software development expenditures consist primarily of costs associated with the on-going modifications to certain software acquired from Royal App including employee compensation and certain stock-based compensation associated with certain employee contracts, as well as other expenses for research and development, personnel, supplies and development materials, costs for consultants and related contract research and facility costs. Expenditures relating to research and development incurred pre-technological feasibility are expensed as incurred. Post-technological feasibility expenditures are capitalized as incurred. In the period ended December 31, 2021, the company recorded assets acquired in the cumulative amount of approximately $3.4 million purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation, which we recorded as intangible assets. During the year ended December 31, 2021, we capitalized approximately $
During the year ended December 31, 2022, we capitalized an additional $
Impairment
We account for intangible assets using the accounting guidance in ASC 350. The Company tests for impairment annually, or more frequently if events or circumstances indicate the asset might be impaired, by comparing the fair value of the assets to their carrying amount. Alternatively, the Company’s management may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative assessment. The Company presently has one reporting unit; and all intangible assets are included in this single reporting unit, therefore, all of its intangible assets are associated with the entire company. As a result, the Company presently has the option to bypass the qualitative assessment and perform the quantitative assessment.
| F-9 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)
Impairment (Cont’d)
The Company reviews the valuation of long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment testing is performed at the asset group level. There was no impairment of assets at December 31, 2022 or 2021.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:
| ● | Level 1: Observable inputs such as quoted prices in active markets; |
| ● | Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
| ● | Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The Company’s financial instruments include cash, accounts payable, related party loans and short term promissory notes. The carrying amounts of cash and accounts payable approximate their fair value, due to the short-term nature of these items.
Revenue Recognition
The Company has adopted the requirement of Accounting Standards Update, or ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).
We derive our revenues primarily from subscription fees for access to our software offerings, collected monthly, as well as from limited sales of customized professional services. We recognize revenues when a contract exists between the Company and a customer and upon transfer of control of promised products or services to such customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenues are recognized net of allowances and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We determine revenue recognition through the following steps:
| F-10 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)
Revenue Recognition (Cont’d)
| ● | Identification of the contract, or contracts, with a customer; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenues when, or as, the Company satisfies a performance obligation. |
Subscription Revenues
Subscription revenues primarily consist of monthly fees for providing customers access to our software offerings including feature-based pricing models, where distinct packages are aligned to a specific type of customer persona based on its size, market segment and physical/online store presence. Each package is very different than the next with prices increasing as the functionality increases.
Monthly subscriptions to our software packages include routine customer support and unspecified software updates and upgrades released when and if available during the term. Revenues are generally recognized monthly over the contract term beginning on the date that our service is made available to the customer, which we believe best reflects the manner in which our customers utilize our subscription offerings. Customers pay monthly for the services in advance, and if payments are not collected, the access to the service terminates. Arrangements with customers do not provide the customer with the right to take possession of the software supporting application service at any time and, as a result, are accounted for as a service contract.
Customized Service Revenues
Customized service contract revenues primarily consist of fees for deployment, configuration, and optimization services, and potentially, training. The majority of our professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods. A portion of our customized service contracts may be billed on a time and materials basis and revenues are recognized over time as the services are performed.
Stock-Based Compensation
We account for stock options granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model.
Compensation expense is recognized on a graded-vesting method over the requisite service period. Forfeitures are accounted for as they occur.
For the three and six months ended June 30, 2023 and 2022, stock-based compensation and other equity instrument related expenses and expenditures recognized in the consolidated statements of operations is as follows:
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Capitalized as software research and development expenditure |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Research and development expense |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||
Cost of revenue |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Sales and marketing |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ||
General and administrative expenses |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||
Total stock-based compensation expense |
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| |||
| F-11 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)
Leases
The Company determines if a contractual arrangement represents or contains a lease at inception. Operating leases with lease terms greater than 12 months are included in Operating lease right-of-use assets and Operating lease liabilities in the Consolidated Balance Sheets.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The right-of-use assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease arrangements that include both lease and non-lease components. The Company accounts for non-lease components separately from the lease component.
Income Taxes
Income taxes are recognized in accordance with ASC 740, “Income Taxes”, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Basic and Diluted Net Income (Loss) Per Share
In accordance with ASC Topic 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.
Potential common stock consists of the incremental common stock issuable upon convertible notes, stock options and warrants and classes of shares with conversion features. The computation of basic loss per share for the six months ended June 30, 2023 and 2022 excludes potentially dilutive securities because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted losses per share. The Company had a total of
Recent Accounting Pronouncements
The Company has reviewed all recently issued accounting pronouncements. The pronouncements that have already been adopted, did not have a material effect on our financial condition, results of operations, cash flows or reporting thereof. Since the fiscal year end December 31, 2022, there have been no recent accounting pronouncements or changes in accounting pronouncements that have been issued but not yet adopted that are of significance, or potential significance, to the Company.
| F-12 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 4 – INTANGIBLE ASSETS
The following table provides additional information regarding the Company’s intangible assets:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Purchased assets – Royal App |
| $ |
|
| $ |
| ||
Capitalized patent application costs |
|
|
|
|
|
| ||
Capitalized software development expenditures |
|
|
|
|
|
| ||
Total intangible assets |
|
|
|
|
|
| ||
Less: accumulated amortization |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
During the quarter ended September 30, 2022 the Company completed the upgraded SaaS software application which has been launched commercially for download on each of Shopify and WooCommerce. The majority of the Company’s intangible assets relate to one asset group, our Shelfy.io Mobile App Builder SaaS software app and related trademarks and patents. Assets are amortized over a five-year straight-line basis from commercial launch.
Details of amortization of our intangible assets by group for the period August 1, 2022 (commercial launch) through June 30, 2023, are below:
August 1, 2022 |
|
|
| |
Shelfy.io Mobile app builder SaaS software app |
| $ |
| |
Less: accumulated amortization |
|
| ( | ) |
Balance, December 31, 2022 |
|
|
| |
Less: accumulated amortization |
|
| ( | ) |
Balance, June 30, 2023 |
| $ |
| |
|
|
|
|
|
August 1, 2022 |
|
|
|
|
Customer relationships |
| $ |
| |
Less: accumulated amortization |
|
| ( | ) |
Balance December 31, 2022 |
|
|
| |
Less: accumulated amortization |
|
| ( | ) |
Balance, June 30, 2023 |
| $ |
| |
As of June 30, 2023, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows:
Years Ended December 31, |
| Amortization Expense |
| |
2023 |
| $ |
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
Total |
| $ |
| |
Amortization for developed technology is recognized in general and administrative expense.
| F-13 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 5 – DEBT
The following table provides additional information regarding the debt:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Notes payable |
| $ |
|
| $ |
| ||
Bank loan payable |
|
|
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|
|
| ||
Advances, unsecured, 0% interest |
|
|
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|
|
| ||
|
| $ |
|
| $ |
| ||
Notes payable
During the three months ended March 31, 2022, the Company received a total of $
In June 2022 the Company accepted a further $
The Company issued a total of
In June 2022, the Company received an additional $
Between June and December 31, 2022, the Company received a further $
Concurrent with the issuance of the New Notes a total of
| F-14 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 5 – DEBT(Continued)
Bank loan payable
On March 15, 2023, Stratford Ltd. received a short-term (3 month) loan of approximately $
Advances
During the period ended June 30, 2023, the Company received funds from a minority shareholder in the amount of $
The following table provides additional information regarding the financing costs associated with the aforementioned notes and advances:
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Interest expense on Notes |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Warrants |
|
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| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The following table provides additional information regarding accrued interest payable with respect to the aforementioned notes and loan, included in accounts payable:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Interest payable under notes |
| $ |
|
| $ |
| ||
Commission payable to company controlled by related party |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
NOTE 6 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
The Company has authorized
There were no shares issued during the three months ended June 30, 2023.
During the three months ended March 31, 2023, the Company received proceeds of $
During the year ended December 31, 2022, the Company issued a total of
On June 30, 2023, and December 31, 2022, the Company had
| F-15 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 6 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)
Stock Purchase Warrants
During the year ended December 31, 2022, the Company issued a total of
Warrant transactions are summarized as follows:
|
| Number of Warrants |
|
| Weighted Average Exercise Price ($) |
| ||
Balance, December 31, 2021 |
|
|
|
|
|
| ||
Warrants issued |
|
|
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|
|
| ||
Warrants cancelled |
|
| ( | ) |
|
|
| |
Warrants expired |
|
| - |
|
|
|
| |
Balance, December 31, 2022 |
|
|
|
| $ |
| ||
Warrants issued |
|
|
|
|
|
| ||
Warrants cancelled |
|
| - |
|
|
| - |
|
Warrants expired |
|
| ( | ) |
|
|
| |
Balance, June 30, 2023 |
|
|
|
| $ |
| ||
The following warrants were outstanding as at June 30, 2023:
Number of Warrants |
|
| Exercise Price ($) |
|
| Expiry Date |
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| F-16 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 6 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)
Stock Options
The Company granted the following stock options under its 2021 Employee Stock Incentive Plan:
- | On October 1, 2021, |
|
|
- | On October 26, 2021,
|
- | On November 11, 2021, |
- | On June 13, 2022, |
|
|
- | On August 1, 2022, |
|
|
- | During the year ended December 31, 2022, a total of |
|
|
- | On January 6, 2023, |
|
|
- | On January 6, 2023, |
|
|
- | During the three months ended March 31, 2023, |
|
|
- | During the three months ended June 30, 2023, the Company granted |
| F-17 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 6 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)
Additional information with respect to the stock option activity is as follows:
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
Granted |
|
|
|
|
|
|
|
|
|
|
| - |
| |||
Exercised |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
| |
Cancelled |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| |
Forfeiture |
|
| ( | ) |
|
|
|
|
| - |
|
|
| - |
| |
Outstanding at June 30, 2023 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
|
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Options exercisable at June 30, 2023 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at December 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
Granted |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
| |
Exercised |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
| |
Cancelled |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
| |
Forfeiture |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
| |
Outstanding at June 30, 2022 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at June 30, 2022 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
The following table summarizes information about stock options outstanding and exercisable at June 30, 2023:
Range of Exercise Prices |
|
| Number of Shares Outstanding |
|
| Weighted Average Remaining in Contractual Life in Years |
|
| Outstanding Options Weighted Average Exercise Price |
|
| Number of Options Exercisable |
|
| Exercisable Options Weighted Average Exercise Price |
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
$ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
The following table summarizes information about stock options outstanding and exercisable at June 30, 2022:
Range of Exercise Prices |
|
| Number of Shares Outstanding |
|
| Weighted Average Remaining in Contractual Life in Years |
|
| Outstanding Options Weighted Average Exercise Price |
|
| Number of Options Exercisable |
|
| Exercisable Options Weighted Average Exercise Price |
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
| - |
|
| $ |
| |||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
| - |
|
| $ |
| |||||
| $ |
|
|
|
|
|
|
| $ |
|
|
| - |
|
| $ |
| ||||||
$ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
Unamortized compensation expense associated with unvested options is $
| F-18 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 7 – COMMITMENTS
Leases
In March 2022, we leased a car in Israel with a lease term of
We used a discount rate of
We determine if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.
Right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. Certain lease agreements contain extension options; however, we have not included such options as part of right-of-use assets and lease liabilities because we originally did not expect to extend the leases. We measure and record a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. In cases where the discount rate implicit in the lease is not known, we measure the right-of-use assets and lease liabilities using a discount rate equal to our estimated incremental borrowing rate for loans with similar collateral and duration.
Operating lease expense is comprised of the following:
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Operating lease cost |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Maturities of lease liabilities are as follows:
|
| Operating Leases |
| |
2023 |
| $ |
| |
2024 |
|
|
| |
Total lease payments |
|
|
| |
Less imputed interest |
|
| ( | ) |
Total lease liabilities |
|
|
| |
Less current portion of lease liabilities |
|
|
| |
Long-term lease liabilities |
| $ |
| |
| F-19 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 8 – RELATED PARTY TRANSACTIONS
Key management compensation
Key management personnel are persons responsible for planning, directing, and controlling the activities of the entity, and include all directors and officers.
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Management fees |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
At June 30, 2023, accounts payable and accrued liabilities included $
Effective April 1, 2022, Ms. Bianca Meger, the Company’s CEO, transitioned to focus a larger portion of her efforts on the day-to-day operations of Metro One and as a result, resigned from her position as Co-CEO of Stratford Ltd. On July 19, 2022, the Company accepted the resignation of Ms. Bianca Meger as the Company’s Chief Executive Officer and Mr. Elchanan Maoz was appointed to serve as Interim Chief Executive Officer.
On March 22, 2023, Eyal Pinto, resigned from his position as Chief Financial Officer and Mr. James Brodie, Treasurer and Director, was appointed to serve as interim Chief Financial Officer.
On May 11, 2023, the Company’s subsidiary, Stratford, entered into an employment agreement with Efrat Reinhardt to serve as the Chief Financial Officer of both the Company and Stratford. Concurrently Mr. James Brodie resigned from his position as interim Chief Financial Officer. Pursuant to the Employment agreement Ms. Reinhardt will receive an annual base salary of 480,000 New Israeli Shekels (“NIS”), which as of the date of this filing equates to approximately US$
Transactions with the Company’s CEO and President, and Companies controlled by him
During the year ended December 31, 2022, companies controlled by our interim CEO provided loans in the amount of $
A company controlled by the Company’s CEO invoiced commission fees of $
On March 15, 2023, Stratford Ltd. received a short-term (3 month) loan of approximately $
During the six months ended June 30, 2023, the Company’s CEO, Elchanan Maoz and corporations controlled by him advanced approximately $
| F-20 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2023
NOTE 9 – OTHER EVENTS
On June 26, 2023, the Company was advised by Stratford that 12 of its employees filed a motion with the District Court of Tel Aviv (the “Court”), case no. 59931-06-23 (the “Temporary Trustee Motion”), to commence insolvency proceedings against Stratford (Refer to Notes 1 and 10).
On June 27, 2023, each of Mr. Jonah Meer and Mr. James A. Brodie resigned as directors of Stratford.
NOTE 10 – SUBSEQUENT EVENTS
Deconsolidation of Subsidiary Stratford Ltd.
Further to the Temporary Trustee Motion described above in Notes 1 and 9 to these financial statements, on July 20, 2023, a Trustee was appointed by the Court and all remaining employees of Stratford were effectively terminated. Concurrent with the appointment of the Trustee the Company ceased to have effective control over Stratford as a result of the expectation of imminent liquidation proceedings. The Company has provided proforma information with respect to the anticipated deconsolidation of Stratford and loss in investment in Stratford below:
|
| June 30, 2023 |
|
| De- recognized |
|
| Inter- company |
|
| Reclassify |
|
| Proforma June 30, 2023 |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ |
|
| $ | ( | ) |
| $ | - |
|
| $ |
|
| $ |
| |||
Accounts receivable |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Prepaid expenses |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Royalty receivable |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Other current assets |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Total current assets |
|
|
|
|
| ( | ) |
|
| - |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment. net |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Intangible assets, net |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Operating lease right-of-use assets |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Other assets |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Total assets |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ |
|
| $ | ( | ) |
| $ | - |
|
| $ | - |
|
| $ |
| ||
Bank overdraft |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Intercompany payable |
|
|
|
|
|
| ( | ) |
|
|
|
|
| - |
|
|
| - |
| |
Debt |
|
|
|
|
| ( | ) |
|
|
|
|
| - |
|
|
|
| |||
Operating lease liabilities |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Total current liabilities |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liability |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Total liabilities |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
| ||
Additional paid in capital |
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| - |
|
|
| ( | ) | |
Other comprehensive income |
|
|
|
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| ||
Stockholders’ equity |
|
|
|
|
|
|
|
| ( | ) |
|
| - |
|
|
| ( | ) | ||
Total Liabilities and Stockholders’ Equity |
| $ |
|
| $ | ( | ) |
|
|
|
| $ |
|
| $ |
| ||||
Appointment of Interim CFO
On July 31, 2023, Mr. James Brodie, the Company’s current Treasurer and a member of the Company’s Board, was appointed as interim Chief Financial Officer of the Company. It is anticipated that Mr. Brodie will serve as interim Chief Financial Officer until a permanent Chief Financial Officer is appointed. Mr. Brodie will continue to serve as Treasurer and as a member of the Company’s Board.
Debt retirement
On September 21, 2023, the Company retired a short-term loan initially obtained on March 15, 2023 of approximately $
Advances from related parties
Subsequent to June 30, 2023, the Company received $
The Company has evaluated events for the period from June 30, 2023, through the date of the issuance of these financial statements, September 22, 2023, and determined that there are no additional events requiring disclosure.
| F-21 |
| Table of Contents |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains predictions, estimates and other forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “intends,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on April 18, 2023 and our Form 10-K/A as filed on May 2, 2023, that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.
Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Report. You should read this Report with the understanding that our actual future results may be materially different from what we expect.
All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.
The management’s discussion and analysis of our financial condition and results of operations are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023, and the notes thereto appearing elsewhere in this Report and the Company’s audited financial statements for the fiscal year ended December 31, 2022 included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on April 18, 2023 and our Form 10-K/A as filed on May 2, 2023.
General Overview
Metro One Telecommunications, Inc. (together with its subsidiary “Metro One,” the “Company,” “we,” “our” or “us”) enables retailers to grow their business, using mobile commerce to better engage their customers, both in-store and online with no coding required.
We are focused on changing the way retailers integrate mobile commerce solutions within their business. Our multi-model, plug and play mobile commerce platform enables retailers to launch their own branded mobile application serving as an additional sales channel in a matter of a few hours with no coding required.
Our operating subsidiary, Stratford, Ltd, operates the Shelfy.io Mobile App Builder (“Shelfy.io” or “Shelfy”) which merges the functionality of mobile technology, artificial intelligence (“AI”), and machine learning enabling retailers to quickly and easily bring their online business to significantly:
| · | Increase customer retention; |
| · | Increase Revenues |
| · | Increase average basket size; |
| · | Increase upsell and cross-sell; and |
| · | Increase customers lifetime value (“CLV”). |
| 4 |
| Table of Contents |
During the year ended December 31, 2022 we completed the transformation of our acquired suite of software products to fully modular software as a service (“SaaS”) based platform. This will enable us to scale the company significantly, onboarding multiple retailers simultaneously without any additional integration costs.
Shelfy provides a mobile commerce platform that enables retailers to build their own branded mobile application in a matter of hours with intuitive drag and drop tools with no coding required. Adding mobile as an additional sales channel enables retailers to grow its customer loyalty and its revenues.
| · | Mobile Commerce Merchant Platform: Enabling small and medium-sized business (“SMB”) retailers and enterprises to launch a fully branded and functional mobile app with unique and patented features. Great for retailers with at least 200+ return customers. Our patented UX/UI features are available on both IOS and Android and include unique features such as voice search, shoppable videos, and barkers for upselling. |
|
|
|
| · | Mobile Commerce Enterprise Platform: Enabling enterprise retailers who own and operates both brick and mortar store as well as e-commerce platforms to better engage with their customer both online and in-store via the customer’s mobile application. |
|
|
|
| · | Instore Engagement Suite: Providing a purely customer-centric approach to shopping. Once completed, we expect that our Scan, Pay & Go will reduce customer’s shopping time by approximately 40%. Imagine no more waiting in lengthy lines, no more time and effort spent on packing, unpacking and packing again, and for retailers, an effective way to reduce cost on hardware acquisition and maintenance. Additional in-store features will include in-store navigation, in-store personalized shopping experience, and in-store customer loyalty program activation. During this phase, we might consider merging with or into, or acquiring, small startups with unique technological features enriching our suite of products without having to develop from scratch. |
A modular stack of technology also enables us to target retailers who has an existing mobile commerce solution as they can merely plug into one our specific features enriching their offering, mobile commerce suite, where the retailer can and as their business needs develop.
Our recently launched mobile commerce apps represent over 14 months of post feasibility development including reprogramming and industry required modifications to transform our suite of Shelfy enterprise commerce software applications from IOS and Android to flutter applications, among other modifications for initial integration with WooCommerce and Shopify reseller platforms. We believe that the re-developed Shelfy software suite, now a single format mobile commerce offering available to all industry users, and fully customizable by the user, will generate increasing revenues period over period through recurring monthly subscriptions.
Historically, the Company was not generating revenue from its operations. Upon acquisition of the Shelfy intellectual property in 2021, we acquired two legacy customer accounts, using the existing Shelfy enterprise commerce software, one of which customer contracts terminated prior to close of fiscal 2022. As of December 31, 2022 the Company had one remaining client for its legacy enterprise software and during the most recent six months ended June 30, 2023 we have been engaging with industry partners to market and sell our mobile commerce app. To date we have only onboarded seven new customers for our redeveloped “one-stop-shop” mobile commerce application. We expect our operational expenses to continue to exceed incoming revenues until such time as our recently launched mobile software suite obtains sufficient customer subscriptions to meet our ongoing expenses. We expect we will be required to support the sale of our downloadable mobile commerce app with substantial marketing expenditures when funds become available. We plan to continue to onboard new customers on a monthly basis through 2023 as we focus on marketing our current software offering. While we continue to develop and expand our primary business operations during 2023, our revenues are not expected to be sufficient to meet our ongoing expenses.
| 5 |
| Table of Contents |
Recent Developments
The Company has recently entered into licensing and marketing agreements with Cardcom Ltd. and Direct Accounting Management Ltd (“Invoice4U”) based in Israel whereby Stratford has granted licenses for third parties to market and sell Shelfy to their clients consisting of thousands of customers. Under the terms of the agreements our industry partners will manage the marketing and sales activity with their customers in exchange for a commission from the total receipts that Stratford receives from such sales.
On June 26, 2023, the Company was advised by Stratford that 12 of its employees filed a motion with the District Court of Tel Aviv (the “Court”), case no. 59931-06-23 (the “Temporary Trustee Motion”), to commence insolvency proceedings against Stratford. Stratford did not file an objection to the Temporary Trustee Motion and on July 20, 2023 a Trustee was appointed by the Court and all remaining employees of Stratford were effectively terminated.
Concurrent with the appointment of the Trustee on July 20, 2023 (the “Effective Date”), the Company ceased to have effective control over Stratford as a result of the expectation of imminent liquidation proceedings, and therefore on the Effective Date, the Company will deconsolidate its subsidiary, Stratford. The Company has provided proforma information with respect to the deconsolidation as a part of the notes to the financial statements included herein.
On June 27, 2023, each of Mr. Jonah Meer and Mr. James A. Brodie resigned as directors of Stratford.
The Company is currently in the process of reviewing several suitable acquisition targets with revenue generating operations with the intent to complete an acquisition in the fourth quarter of fiscal 2023. The Company has no agreements, commitments or understanding either in writing or verbally with respect thereto. There is no assurance that the Company will successfully identify a suitable acquisition target. Even if a suitable acquisition target is identified, there is no assurance that any definitive agreement will be agreed upon and entered into, or that any transaction will be consummated on the terms or timeframe currently contemplated, or at all.
The Company anticipates that it will conclude a reverse stock split of its issued and outstanding shares of common stock at a ratio of 1-for-75 (the “Reverse Split”) and anticipates that it will file a Certificate of Amendment to the Company’s Certificate of Incorporation in order to effect the Reverse Split prior to such Reverse Split. The Reverse Split is expected to become effective after the market closes on September 27, 2023 Eastern Time. Assuming the Reverse Split becomes effective after the market closes on September 27, 2023, beginning with the opening of trading on September 28, 2023, the Company’s common stock will continue to trade on the OTC under the symbol “WOWI,” but will trade on a split-adjusted basis. The Certificate of Amendment will also reduce the number of authorized shares of common stock under the Company’s Certificate of Incorporation from 600 million shares authorized to 35 million shares authorized (the “Share Reduction”).
| 6 |
| Table of Contents |
Results of Operations
Three months ended June 30, 2023, compared to the three months ended June 30, 2022
Revenue
We have generated $16,865 in revenue during the three months ended June 30, 2023 compared to $18,937 during the three months ended June 30, 2022. The slight reduction in revenue during the three months ended June 30, 2023 is predominantly related to certain service fees charged in the three months ended June 30, 2022 which did not reoccur in the current quarter ended June 30, 2023.
Cost of Revenue
Cost of revenue in the current three months ended June 30, 2023 of $435 (2022 - $0) primarily consists of software hosting costs related to our recently launched SaaS mobile commerce software.
Operating Expenses
For the three months ended June 30, 2023 and 2022 we had the following operating expenses:
|
| Three months ended June 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Operating expenses |
|
|
|
|
|
| ||
Cost of revenue |
| $ | 435 |
|
| $ | - |
|
Research and development expenses |
|
| 173,717 |
|
|
| - |
|
General and administrative |
|
| 371,939 |
|
|
| 398,375 |
|
Management Fees |
|
| 80,728 |
|
|
| 120,578 |
|
Sales and Marketing |
|
| 45,186 |
|
|
| 20,365 |
|
Total operating expenses |
| $ | 672,005 |
|
| $ | 539,318 |
|
Total operating expenses for the three months ended June 30, 2023 were $672,005 compared to total operating expenses of $539,318 for the three months ended June 30, 2022. The increase in operating expenses during the three months ended June 30, 2023 is predominantly the result of an increase of $173,717 in research and development expenses predominantly related to our SaaS software with an estimated useful life of 5 years, which was launched commercially in August 2022, with $0 recorded in the comparative three months ended June 30, 2022, prior to commercial launch. Prior to commercial launch of the SaaS mobile software offerings applicable research and development expenditures were capitalized. The Company expended $45,186 in the current three months ended June 30, 2023 as compared to $20,365 in the three months ended June 30, 2022 on sales and marketing costs as we moved to increase exposure for our software suite. We expended $80,728 and $120,578 on management fees, respectively in the three months ended June 30, 2023 and 2022, as we reduced the size of our management team to allocate more resources to sales and marketing efforts. General and administrative costs were $371,939 and $398,385, respectively.
Other Income (Expenses)
Other expenses for the three months ended June 30, 2023 and 2022 totaled $50,973 and $38,460, respectively consisting of finance costs including interest expense applicable to certain loans payable.
Net Loss
We had a net loss of $706,113 during the three months ended June 30, 2023, compared to a net loss of $558,841 during the three months ended June 30, 2022.
| 7 |
| Table of Contents |
Six months ended June 30, 2023, compared to the six months ended June 30, 2022
Revenue
We have generated $34,680 in revenue during the six months ended June 30, 2023 compared to $38,143 during the six months ended June 30, 2022. The slight reduction in revenue during the six months ended June 30, 2023 is predominantly related to certain service fees charged in the six months ended June 30, 2022 which did not reoccur in the current six month period ended June 30, 2023.
Cost of Revenue
Cost of revenue in the current three months ended June 30, 2023 of $21,895 (2022 - $0) primarily consists of salaries paid to employees, certain share-based compensation expenses and software hosting costs related to our recently launched SaaS mobile commerce software.
Operating Expenses
For the six months ended June 30, 2023 and 2022 we had the following operating expenses:
|
| Six months ended June 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Operating expenses |
|
|
|
|
|
| ||
Cost of revenue |
| $ | 21,895 |
|
| $ | - |
|
Research and development expenses |
|
| 529,604 |
|
|
| - |
|
General and administrative |
|
| 1,251,018 |
|
|
| 805,726 |
|
Management Fees |
|
| 181,696 |
|
|
| 256,548 |
|
Sales and Marketing |
|
| 107,864 |
|
|
| 101,795 |
|
Total operating expenses |
| $ | 2,092,077 |
|
| $ | 1,164,069 |
|
Total operating expenses for the six months ended June 30, 2023 were $2,092,077 compared to total operating expenses of $1,164,069 for the six months ended June 30, 2022. The increase in operating expenses during the six months ended June 30, 2023 is predominantly the result of an increase of $529,604 in research and development expenses predominantly related to our SaaS software with an estimated useful life of 5 years, which was launched commercially in August 2022, with $0 recorded in the comparative six months ended June 30, 2022, prior to commercial launch. Prior to commercial launch of the SaaS mobile software offerings applicable research and development expenditures were capitalized. The Company expended $107,864 in the current six months ended June 30, 2023 as compared to $101,795 in the six months ended June 30, 2022 on sales and marketing costs as we moved to increase exposure for our software suite. We expended $181,696 and $256,548 on management fees, respectively in the six months ended June 30, 2023 and 2022, as we reduced the size of our management team in the current six month period, to allocate more resources to sales and marketing efforts. General and administrative costs were $1,251,018 and $805,726, respectively, including amortization and depreciation costs of $580,833 in the current six month period with only $2,452 in the six months ended June 30, 2022 as we amortized our SaaS software over its useful life.
Other Income (Expenses)
Other expenses for the six months ended June 30, 2023 and 2022 totaled $100,188 and $181,291, respectively consisting of finance costs including interest expense applicable to certain loans payable. During the six months ended June 30, 2022 other expenses were offset by $114,861 as a result of an income tax refund with no comparable result in the six months ended June 30, 2023.
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Net Loss
We had a net loss of $2,157,585 during the six months ended June 30, 2023, compared to a net loss of $1,192,356 during the three months ended June 30, 2022.
Statement of Cash Flows
Six months ended June 30, 2023 and 2022
The following table summarizes our cash flows for the comparative three-month periods presented:
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||
Net cash used in operating activities |
| $ | (638,007 | ) |
| $ | (709,951 | ) |
Net cash used in investing activities |
| - |
|
|
| (864,709 | ) | |
Net cash provided by financing activities |
|
| 418,925 |
|
|
| 570,000 |
|
Foreign exchange gain (loss) |
|
| (8,286 | ) |
|
| 2,103 |
|
Decrease in cash |
|
| (231,763 | ) |
|
| (1,004,660 | ) |
Cash end of period |
| $ | 4,395 |
|
| $ | 126,268 |
|
Cash used in operating activities:
Net cash used in operating activities was $638,007 for the six months ended June 30, 2023 compared to net cash used in operating activities of $709,951 for the six months ended June 30, 2022. Net cash used in operating activities for the six months ended June 30, 2023 was primarily the result of the net loss of $2,157,585, offset by non-cash expenses including stock based compensation of $261,109, depreciation and amortization of $580,833 and non-cash lease expenses of $600, as well as changes to operating assets and liabilities, including a decrease to accounts receivable of $4,767, a decrease to prepaid expenses and other assets of $49,759, and an increase to accounts payable of $622,460. Net cash provided by operating activities for the six months ended June 30, 2022 was primarily the result of the net loss of $1,192,356, offset by non-cash financing fees of $165,602 as a result of the issuance of warrants in relation to certain loan agreements, stock based compensation of $388,954, depreciation and amortization of $2,452 and non-cash lease expenses of $652, and changes to operating assets and liabilities, including a decrease to accounts payable of $95,251, a decrease to accounts receivable of $939, and a decrease to prepaid costs and other assets of $19,057.
Cash used in investing activities:
The Company purchased assets for a cash value of $17,503 and capitalized certain intangible assets of $847,206 during the six months ended June 30, 2022, with no comparable results in the six months ended June 30, 2023. Cash used in investing activities in the six months ended June 30, 2023 was $0 as compared to $864,709 in the six months ended June 30, 2022.
Cash provided by financing activities:
Net cash provided by financing activities during the six months ended June 30, 2023 totaled $418,925 comprised of $250,000 in proceeds from a subscription under our offering on Form S-1, proceeds from a short term bank loan of $68,925 and an unsecured interest free advance of $100,000 from a minority shareholder. Net cash provided by financing activities in the six months ended June 30, 2022 includes $570,000 in proceeds from short term loans.
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Liquidity and Capital Resources
As of June 30, 2023, we had cash of $4,395. We are in the early stage of development having acquired certain intellectual property assets through a bankruptcy proceeding during fiscal year 2021 that the Company has only recently begun to operate during the third quarter of fiscal year 2022. We have experienced net losses to date and have generated modest revenue from operations during the year ended December 31, 2022 and six months to June 30, 2023, which raises substantial doubt about our ability to continue as a going concern. While we have raised additional proceeds totaling $418,925 during the current six months ended June 30, 2023, including $250,000 from investors in the form of subscriptions under our current offering at $0.12 per unit for a total of 2,083,333 shares of common stock and 520,822 common stock purchase warrants for exercise at $0.15 per share, and a further $68,925 (NIS 250,000) as a result of a short term loan from a local Israeli bank for operations of our subsidiary, Stratford Ltd., as well as $100,000 in advances from a minority shareholder, these funds are not sufficient to meet ongoing shortfalls in our operating expenses. Further, subsequent to June 30, 2023 certain employees have filed a motion with the District Court of Tel Aviv (the “Court”), case no. 59931-06-23 (the “Temporary Trustee Motion”), to commence insolvency proceedings against Stratford. We expect to deconsolidate the operations of our subsidiary in the third quarter of fiscal 2023 as we look to obtain the financing to acquire additional operations. There can be no assurance that financing, whether debt or equity, will be available to us in the amount required at any particular time or for any particular period or, if available, that it can be obtained on terms favorable to us. If additional funds are raised by the issuance of equity securities, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt instruments we may be subject to certain limitations in our operations, and issuance of such instruments may have rights senior to those of the then existing stockholders.
We continue exploring sources of additional capital. There can be no assurance the necessary financing will be available to meet our timeline. We currently believe that the Company’s cash requirement during the following twelve months may exceed $5,000,000. Without additional financing, we do not believe our resources will be sufficient to meet our operating and capital needs for fiscal year 2023 and beyond.
Going Concern
The accompanying condensed, consolidated financial statements have been prepared assuming the continuation of the Company as a going concern. The Company has generated modest revenues to date from the operations of its wholly owned subsidiary. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s plans for the continuation of the Company as a going concern include financing the Company’s operations through issuance of its common stock, increasing its current revenue generating operations or expanding the Company’s business operations to acquire projects which generate additional revenue. If the Company is unable to complete its financing requirements or achieve net profits as projected, it will then modify its expenditures and plan of operations to coincide with the actual financing completed and actual operating revenues, if any. The Company is currently seeking further equity financing of up to $10 million US Dollars to meet ongoing capital requirements and has filed a registration statement on Form S-1 for this purpose on February 9, 2022. The registration statement went effective on December 1, 2022. Further the Company entered into certain 15 months Term Promissory Notes and raised a total of $1,939,000 during the year ended December 31, 2022. During the three months ended March 31, 2023, the Company received its first subscription under its offering for $250,000 and obtained a short-term loan for operations of its subsidiary of ILS 250,000 (approximately US $69,000) from a local bank in Israel, such loan secured by a guarantee from our CEO. During the three months ended June 30, 2023 the Company received an additional $100,000 in unsecured, non-interest bearing advances from a third party.
There are no assurances the Company will succeed in implementing its plans. If the Company is unable to obtain adequate capital, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.
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COVID-19 Pandemic and other factors
While it appears the COVID-19 pandemic has subsided and the global economy is focused on recovery, the impact of COVID-19 could continue to have an impact on the Company going forward. COVID-19 caused significant disruptions to the global financial markets, which may continue to impact the Company’s ability to raise additional capital and to pursue certain acquisitions. Although the COVID-19 pandemic has driven an increase in mobile commerce penetration, it is uncertain whether or the extent to which this trend will continue after the impact of the COVID-19 pandemic subsides Additional factors which may impact the Company’s ongoing operations include inflation, the addition and retention of suitable employees as a result of the ongoing recovery from the COVID-19 pandemic, the recent war in the Ukraine, climate change and others. These events may have serious adverse impact on domestic and foreign economies which may impact the Company’s operations as a result of a variety of factors including the potential for reduced consumer spending. The Company is unable to predict the ongoing impact of these factors on the Company’s consolidated financial operations. There are no assurances that the Company will be able to meet its ongoing obligations or raise additional funds.
Off-Balance Sheet Arrangements
None.
Critical Accounting Estimates
We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements. Our significant accounting policies are described in Note 3 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Certain accounting policies involve significant judgments and assumptions by our management that can have a material impact on the carrying value of certain assets and liabilities. We consider such accounting policies to be our critical accounting policies. The judgments and assumptions used by our management in these critical accounting policies are based on historical experience and other factors that our management believes to be reasonable under the circumstances. Because of the nature of these judgments and assumptions, actual results could differ significantly from these judgments and estimates, which could have a material impact on the carrying values of our assets and liabilities and our results of operations. Our critical accounting policies are described below.
Revenue Recognition
The Company has adopted the requirement of Accounting Standards Update, or ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).
We derive our revenues primarily from subscription fees for access to our software offerings, collected monthly, as well as from limited sales of customized professional services. We recognize revenues when a contract exists between the Company and a customer and upon transfer of control of promised products or services to such customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenues are recognized net of allowances and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We determine revenue recognition through the following steps:
| · | Identification of the contract, or contracts, with a customer; |
| · | Identification of the performance obligations in the contract; |
| · | Determination of the transaction price; |
| · | Allocation of the transaction price to the performance obligations in the contract; and |
| · | Recognition of revenues when, or as, the Company satisfies a performance obligation |
Stock-Based Compensation
We account for stock options granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model.
Compensation expense is recognized on a graded-vesting method over the requisite service period. Forfeitures are accounted for as they occur.
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Intangible Assets
The Company recognizes assets for customer relationships, developed technology, post-technological feasibility software development costs, patents and finite-lived trade names. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets, generally from 3 to 8 years. Amortization for developed technology is recognized in cost of revenue. Amortization for customer relationships and trade names is recognized in sales and marketing expenses.
Software Research and Development Expenditures
Software development expenditures consist primarily of costs associated with the on-going modifications to certain software acquired from Royal App including employee compensation and certain stock-based compensation associated with certain employee contracts, as well as other expenses for research and development, personnel, supplies and development materials, costs for consultants and related contract research and facility costs. Expenditures relating to research and development incurred pre-technological feasibility are expensed as incurred. Post-technological feasibility expenditures are capitalized as incurred. Ongoing research and development expenses, post commercial release of our software suite, are expensed as incurred and included as a part of general and administrative expenses.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel.
Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s consolidated statements of cash flows. Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in “General and Administrative” expenses on the Company’s consolidated statements of operations.
Impairment
We account for indefinite-lived intangible assets using the accounting guidance in ASC 350-30-35. The Company tests for impairment annually, or more frequently if events or circumstances indicate the asset might be impaired, by comparing the fair value of the assets to their carrying amount. Alternatively, the Company’s management may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative assessment. The Company presently has one reporting unit; and all intangible assets are included in this single reporting unit, therefore, all of its intangible assets are associated with the entire company. As a result the Company presently has the option to bypass the qualitative assessment and perform the quantitative assessment.
The Company reviews the valuation of long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment testing is performed at the asset group level.
Recent Accounting Pronouncements
We have reviewed all recently issued accounting pronouncements. The pronouncements that we have already adopted, did not have a material effect on our financial condition, results of operations, cash flows or reporting thereof. Since the fiscal year end December 31, 2022, there have been no recent accounting pronouncements or changes in accounting pronouncements that have been issued but not yet adopted that are of significance, or potential significance, to us.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company and are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.
As of June 30, 2023, we carried out an evaluation, with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective, as of June 30, 2023.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness, as of June 30, 2023, of our internal control over financial reporting based on the framework in 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under this framework, our management concluded that our internal control over financial reporting was not effective as of June 30, 2023 due to material weaknesses in our internal control over financial reporting described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has concluded that material weaknesses existed as of June 30, 2023, as described below:
| · | Implementation of enhanced cost allocation processes with respect to costs of goods sold; |
| · | Implementation of enhanced cut off processes and procedures for our controlled subsidiary; |
| · | Continuing to enhance our impairment testing procedures with the assistance of our third-party experts. |
| · | Collection of information in order to be able to report on a timely basis. |
The material weaknesses did not result in any restatements of consolidated financial statements previously reported by us, there were no changes in previously released financial results and management concluded that the consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented, in conformity with accounting principles generally accepted in the United States.
Management has, and will continue to, allocate resources as available to its remediation plan, which include (i) the establishment of additional internal procedures with respect to the documentation of budget and forecasting process with respect to material assumptions or determinations, (ii) the implementation of additional processes to bolster accuracy of underlying assumptions and (iii) the implementation of more detailed month end and quarter close procedures for installation at our operating subsidiary location to enhance procedures currently in place. Management is committed to maintaining a strong internal control environment and allocating the necessary resources to remediate the identified material weaknesses.
Changes in Internal Control over Financial Reporting
There was no change in our system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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| Table of Contents |
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. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest, other than as set out below:
On June 26, 2023, the Company was advised by Stratford that 12 of its employees filed a motion with the District Court of Tel Aviv (the “Court”), case no. 59931-06-23 (the “Temporary Trustee Motion”), to commence insolvency proceedings against Stratford. The motion was filed as a result of unpaid salaries and social benefits to those employees outstanding as of April 30, 2023, in the approximate US Dollar amount of $254,725 (NIS 945,604), not including additional amounts owing for pension and an educational savings plan. The motion further indicated the salary and benefits payable at the date of the filing had increased to a total approximate amount of $323,250 (NIS 1.2 million). In addition, the employees filed an ex-parte motion to appoint a temporary trustee in order to prevent concealment of assets. In response to the Temporary Trustee Motion, the Court declined to make a ruling on the ex-parte motion and ordered Stratford to file its response with the Court no later than July 2, 2023. If no objection is filed by Stratford, a temporary trustee will be immediately appointed from a list of three nominees offered by the local Ministry of Justice. Stratford did not file an objection to the Temporary Trustee Motion and on July 20, 2023 a Trustee was appointed by the Court and all remaining employees of Stratford were effectively terminated.
Concurrent with the appointment of the Trustee on July 20, 2023 (the “Effective Date”), the Company ceased to have effective control over Stratford as a result of the expectation of imminent liquidation proceedings, and therefore on the Effective Date, the Company will deconsolidate its subsidiary, Stratford. The Company has provided proforma information with respect to the deconsolidation in Note 10, Subsequent Events.
ITEM 1A. RISK FACTORS
Please refer to the disclosure contained in “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC on April 18, 2023, as amended May 2, 2023. The risks described in the 2022 Annual Report on Form 10-K are not the only risks that the Company faces. Additional risks and uncertainties not currently known to the Company, or that the Company currently deems to be immaterial, also may have a material adverse impact on the Company’s business, financial condition, or results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of equity securities during the period covered by this Report that were not registered under the Securities Act and/or were not previously reported in a Current Report on Form 8-K filed by the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
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| Table of Contents |
ITEM 5. OTHER INFORMATION
On June 27, 2023, each of Mr. Jonah Meer and Mr. James A. Brodie resigned as directors of Stratford.
Concurrent with the appointment of a Trustee by the Court in relation to insolvency proceedings against Stratford, all remaining employees of Stratford were effectively terminated on July 20, 2023, including the Company’s CFO Efrat Reinhardt, whose employment contract was originally entered into with Stratford directly with services to be provided to each of Stratford and the Company. On termination of the employees the Company declined to enter into a new contract with Ms. Reinhardt directly. On July 31, 2023, Mr. James Brodie, the Company’s current Treasurer and a member of the Company’s Board, was appointed as interim Chief Financial Officer of the Company. It is anticipated that Mr. Brodie will serve as interim Chief Financial Officer until a permanent Chief Financial Officer is appointed. Mr. Brodie will continue to serve as Treasurer and as a member of the Company’s Board.
Mr. Brodie, age 69, has served as a member of the Company’s Board since November 2018 and as Treasurer of the Company since January 2019. Mr. Brodie is a successful businessman who has added significant value in many business sectors including healthcare both products and services, wine importation and distribution, air ambulance services, inflight entertainment and strategic consulting. He has formed and led teams that have successfully started and grown small businesses and as a result has extensive M&A experience. Currently, Mr. Brodie serves as a strategic advisor to Citadel America Asset Group based in New York, New York. The group purchases and restores B grade apartment complexes across the southern tier of the United States. The group has about 1,500 units and is actively seeking additional properties. The group has about $150 million under management. Mr. Brodie is also a partner in the development of a family business, J Wilder Importers, that designs and imports bespoke shoes, premium leather belts and hand loomed textiles. Products are sourced from Spain, Argentina, Morocco, Tunisia, Greece, Turkey, India and Australia. Other leadership experience includes being the founding partner of a New York Stock Exchange brokerage firm, a board member of the Pink Sheets, and a managing director of Tocqueville Asset Management. He also served as a managing director in the turnaround of a family office and trading firm that made markets in over 400 stocks. Mr. Brodie served as an advisor to the largest operating charity on Long Island, New York where he worked to grow or merge their foundation with smaller charitable foundations. Finally, Mr. Brodie was the president of Temple Gwathmey Steeplechase Foundation, a national organization dedicated to the history and promotion of the safety of the equine sport of steeplechasing in the United States.
Mr. Brodie has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K, and there are no family relationships between Mr. Brodie and any of the Company’s other executive officers or directors. There are no other arrangements or understandings between Mr. Brodie and any other persons pursuant to which Mr. Brodie was appointed as interim Chief Financial Officer.
The Company anticipates that it will conclude a reverse stock split of its issued and outstanding shares of common stock at a ratio of 1-for-75 (the “Reverse Split”) and anticipates that it will file a Certificate of Amendment to the Company’s Certificate of Incorporation in order to effect the Reverse Split prior to such Reverse Split. The Reverse Split is expected to become effective after the market closes on September 27, 2023 Eastern Time. Assuming the Reverse Split becomes effective after the market closes on September 27, 2023, beginning with the opening of trading on September 28, 2023, the Company’s common stock will continue to trade on the OTC under the symbol “WOWI,” but will trade on a split-adjusted basis. The Certificate of Amendment will also reduce the number of authorized shares of common stock under the Company’s Certificate of Incorporation from 600 million shares authorized to 35 million shares authorized (the “Share Reduction”).
The Company’s stockholders approved the reverse stock split and the Share Reduction on February 28, 2023. In connection with approving the reverse stock split, the Company’s stockholders granted authority to the Company’s Board of Directors (the “Board”) to determine, in its sole discretion, the exact ratio of the reverse stock split within the range of 1-for-25 to 1-for-100. The Board approved the reverse stock split on February 23, 2023, and the exact ratio of 1-for-75 on August 4, 2023. The Reverse Split has not been consummated.
If the Reverse Split is consummated, every 75 pre-split shares of common stock outstanding will automatically combine into one new share of common stock without any action on the part of the holders and with no change in the par value of $0.0001 per share. The Reverse Split will proportionately reduce the number of shares of common stock available for issuance under the Company’s stock incentive plan and proportionately reduce the number of shares of common stock issuable upon the exercise or conversion of stock options and warrants outstanding immediately prior to the effectiveness of the Reverse Split.
If consummated, the Reverse Split will reduce the number of shares of the Company’s issued and outstanding common stock from approximately 273.7 million pre-Reverse Split shares to approximately 3.6 million post-Reverse Split shares. No fractional shares will be issued as a result of the Reverse Split. Fractional shares that would have resulted from the Reverse Split will be rounded up to the next whole number. In addition, stockholders who would own less than 100 shares as a result of the Reverse Split will have their total ownership amount rounded up to exactly 100 shares.
On September 21, 2023 the Company retired a short-term loan initially obtained on March 15, 2023 of approximately $69,425 (NIS250,000) from Bank Hapoalim in Israel for ongoing operations of subsidiary Stratford, Ltd. The loan was secured by a personal guarantee from Elchanan Maoz, our Interim CEO and President, and was retired with proceeds obtained in an unsecured advance from a company controlled by Mr. Maoz.
Subsequent to June 30, 2023, the Company received $116,106 in unsecured, non-interest-bearing advances from a company controlled by our CEO, Elchanan Maoz, for ongoing operational overhead. From these proceeds Mr. Moaz was repaid approximately $28,000 in out-of-pocket expenses.
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ITEM 6. EXHIBITS
Exhibit Number |
| Exhibit |
| ||
| ||
| ||
| ||
| ||
| ||
101 |
| The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Other Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity (Deficit), (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. |
101.INS* |
| INLINE XBRL INSTANCE DOCUMENT (THE INSTANCE DOCUMENT DOES NOT APPEAR IN THE INTERACTIVE DATA FILE BECAUSE ITS XBRL TAGS ARE EMBEDDED WITHIN THE INLINE XBRL DOCUMENT) |
101.SCH* |
| INLINE XBRL TAXONOMY EXTENSION SCHEMA |
101.CAL* |
| INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE |
101.DEF* |
| INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE |
101.LAB* |
| INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE |
101.PRE* |
| INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
104* |
| COVER PAGE INTERACTIVE DATA FILE (FORMATTED AS INLINE XBRL AND CONTAINED IN EXHIBIT 101) |
*Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| METRO ONE TELECOMMUNICATIONS, INC. |
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Date: September 22, 2023 | By: | /s/ Elchanan (Nani) Maoz |
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| Elchanan Nani Maoz |
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| Chief Executive Officer (Principal Executive Officer) |
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Date: September 22, 2023 | By: | /s/ James Brodie |
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| James Brodie |
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| Principal Financial and Accounting Officer |
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| 17 |