Cuentas Inc 10-Q for FY2022 Q3
Cuentas Inc. (CUEN)
About this 10-Q
Cuentas Inc filed this 10-Q on November 14, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.14M
- up 948.6% from $109K a year earlier
- Net loss
- $2.28M
- compared with a net loss of $2.41M a year earlier
- Diluted EPS
- -$0.14
- compared with -$0.16 a year earlier
UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
FOR THE THREE MONTH PERIOD ENDED:
For the transition period from ______________ to ______________
Commission File Number:
(Exact name of Registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number)
Securities registered under Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| Warrants, each exercisable for one share of Common Stock | CUENW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each
of the issuer’s classes of common equity, as of the latest practicable date: As of November 14 2022, the issuer had
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CUENTAS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF september 30, 2022
TABLE OF CONTENTS
i
CUENTAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands except share and per share data)
| September 30, 2022 | December 31, 2021 | |||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts Receivables, net | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and Equipment, net | ||||||||
| Investment in unconsolidated Entities | ||||||||
| Intangible assets | ||||||||
| Total assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Trade payable | ||||||||
| Other accounts liabilities | ||||||||
| Deferred revenue | ||||||||
| Notes and Loan payable | ||||||||
| Stock based liabilities | ||||||||
| Total current liabilities | ||||||||
| Other long-term loans | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock, authorized | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
1
CUENTAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited)
(U.S. dollars in thousands except share and per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUE | ||||||||||||||||
| COST OF REVENUE | ||||||||||||||||
| GROSS PROFIT (LOSS) | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Amortization of Intangible assets | ||||||||||||||||
| Selling, General and Administrative | ||||||||||||||||
| TOTAL OPERATING EXPENSES | ||||||||||||||||
| OPERATING LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSES) | ||||||||||||||||
| Other Income (expenses) | - | ( | ) | ( | ) | |||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain from Change in fair value of stock-based liabilities | ||||||||||||||||
| TOTAL OTHER EXPENSES | ( | ) | ( | ) | ||||||||||||
| NET LOSS BEFORE EQUITY LOSSES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Equity losses in non-consolidated entity | ( | ) | ( | ) | ||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
2
CUENTAS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(U.S. dollars in thousands, except share and per share data)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of January 1, 2022 | ( | ) | ||||||||||||||||||
| Issuance of Shares of Common Stock, net of issuance expenses ** | ||||||||||||||||||||
| Shares issued for services and for employees | - | - | ||||||||||||||||||
| Net income | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| * | Less than $1. |
| ** | Issuance expenses totaled to $312 |
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of July 1, 2022 | ( | ) | ||||||||||||||||||
| Issuance of Shares of Common Stock, net of issuance expenses ** | ||||||||||||||||||||
| Shares issued for services and for employees | ||||||||||||||||||||
| Net income | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| * | Less than $1. |
| ** | Issuance expenses totaled to $312 |
3
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of January 1, 2021 | ( | ) | ||||||||||||||||||
| Issuance of Shares of Common Stock, net of issuance expenses ** | ||||||||||||||||||||
| Issuance of Warrants | ||||||||||||||||||||
| Shares issued for services and for employees | ||||||||||||||||||||
| Shares issued due to exercise of Warrants, net of issuance expenses *** | ||||||||||||||||||||
| Shares issued due to conversion of Convertible Note | ||||||||||||||||||||
| Return of Commitment Shares | ( | ) | - | - | - | |||||||||||||||
| Roundup Differences due to Reverse Split | - | - | - | |||||||||||||||||
| Net income | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| * | Less than $1. |
| ** | Issuance expenses totaled to $1,386 |
| *** | Issuance expenses totaled to $499 |
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of July 1, 2021 | ( | ) | ||||||||||||||||||
| Shares issued for services and for employees | - | |||||||||||||||||||
| Shares issued due to exercise of Warrants, net of issuance expenses ** | ||||||||||||||||||||
| Shares issued due to conversion of Convertible Note | - | - | - | |||||||||||||||||
| Net income | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| * |
| ** |
The accompanying notes are an integral part of these consolidated financial statements
4
CUENTAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in thousands)
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss before non-controlling interest | ( | ) | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Stock based compensation and shares issued for services | ||||||||
| Equity losses in non-consolidated entity | ||||||||
| Loss on fair value of marketable securities | ||||||||
| Interest on loans | ||||||||
| Gain from change in on fair value of stock-based liabilities | ( | ) | ( | ) | ||||
| Depreciation and amortization expense | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Other receivables | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Other Accounts payable | ( | ) | ( | ) | ||||
| Related parties, net | ||||||||
| Deferred revenue | ( | ) | ||||||
| Net Cash Used by Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of Intangible Asset | ( | ) | ||||||
| Investment in non-consolidated entity in non-consolidated entity | ( | ) | ||||||
| Purchase of equipment | ( | ) | ||||||
| Net Cash used for Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Related party, net | ( | ) | ||||||
| Proceeds from issuance of common stock due to exercise of warrants | ||||||||
| Repayment of loans | ( | ) | ||||||
| Proceeds from issuance of common stock, net of issuance expense | ||||||||
| Proceeds from issuance of warrants | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net Increase (decrease) in Cash | ( | ) | ||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | ||||||||
| Supplemental disclosure of non-cash financing activities | ||||||||
| Common stock issued for conversion of convertible note principal | ||||||||
| Investment in non-consolidated entity in non-consolidated entity against accounts receivables | ||||||||
| Issuance fee with connection to issuance of common stock due to exercise of warrants | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Cuentas, Inc. (the “Company”) together
with its subsidiaries, is focused on financial technology (“FINTECH”) services, delivering mobile financial services, prepaid
debit and digital content services to unbanked, underbanked and underserved communities. The Company derives its revenue from GPR “Debit”
Card fees and the sales of prepaid products and services including third party digital content, gift cards, remittances, mobile phone
topups and other digital services. Additionally, The Company has an agreement with Interactive Communications International, Inc. (“InComm”)
a leading processor of general purpose reloadable (“GPR”) debit cards, to market and distribute a line of prepaid digital content and gift cards targeted
towards the Latin American market. Cuentas is able to purchase InComm's prepaid digital content and gift cards at a discount and resell these same
products in real time through its mobile app and through the Cuentas SDI network of over
The Company was incorporated under the laws of the
State of Florida on September 21, 2005 to act as a holding company for its subsidiaries. Its subsidiary is Meimoun and Mammon, LLC (
On May 27, 2022, the Company entered into a Membership
Interest Purchase Agreement (the “MIPA”) with SDI Black 011, LLC (“SDI Black”), the holders of all the membership
interests of SDI Black and Cuentas SDI, LLC, a Florida limited liability (“Cuentas SDI”), for the acquisition of
On August 22, 2022, the Company entered into a Software Licensing and transaction sharing Agreement with The OLB Group, Inc. (“OLB), a Delaware corporation whereas OLB, through its wholly-owned subsidiaries will establish a merchant services relationship whereby the parties will seek to sell or rent OLB’s point-of-sale (POS) devices to merchants in the network established by Cuentas SDI, LLC for the merchants in the SDI network and the Company will use reasonable best efforts to interconnect its reload agreement with the OLB POS platform for use in qualified merchant locations. The Company will market the OLB-branded products under the processing platform as a Cuentas white label application for payment processing and debit cards. OLB will develop for Cuentas’ Mobile App and associated products, an Application Programming Interface (API), databases and servers at no cost to the Company to allow for the registration, approval and onboarding of consumers onto the Cuentas GPR/Mobile App/Mobile Wallet platform with complete functions as currently available through the Cuentas App and associated products and services. OLB agreed to provide OLB’s Services for Cuentas’ benefit in exchange for revenue sharing and OLB will utilize its developers to enhance the Cuentas GPR-Mobile-App. Before the relaunch of the Cuentas GPR-Mobile-App, the OLB developers in consultation with Cuentas shall as necessary test the functionality, reliability and process of the Cuentas GPR-Mobile-App in a controlled testing environment. Upon approval by the Company of the results of the controlled testing environment to move the Cuentas GPR-Mobile-App into production, the OLB developers, in consultation with the Company, shall perform periodic test of the Cuentas GPR-Mobile-App to ensure continued functionality, reliability and process of the Cuentas GPR-Mobile-App and to remove and repair any bugs or malfunctions in the Cuentas GPR-Mobile-App as soon as practicable. All net revenue generated by OLB from the following: (i) net revenues from the sale or rental of OLB POS devices to Cuentas SDI Merchants, (ii) all other net revenues generated by OLB arising from or related to the OLB POS devices elected to be utilized by the Cuentas SDI Merchants, (iii) all net revenues generated by OLB from the Cuentas White Label Products/Services, and (iv) to the extent that the Reload Provider agrees to provide its reload capability through the OLB POS devices, the net revenues generated by OLB from the reloads shall be split between OLB and Cuentas. All net revenue generated by Cuentas from the following: (i) net revenues from each reload purchased though the OLB POS device through a Cuentas SDI Merchant, (ii) all retail digital products as set forth on Schedule A sold through a OLB POS device through a Cuentas SDI Merchant or the Cuentas White Label Products/Services, (iii) mobile top-ups net revenues sold through a OLB POS device through a Cuentas SDI Merchant: all net revenues to be split between OLB and Cuentas. Net revenue will be shared between the Parties and profits will be calculated and settled on a 30 net 30 basis (after each 30-day period closes, the Parties have 30 days to calculate and settle net revenue). On August 22, 2022, the Company entered into an Independent Sales Organization Processing Agreement with eVance, Inc., a wholly owned subsidiary of The OLB Group, Inc., whereby eVance is in the business of providing credit and debit card processing services to merchants. The Company desires to solicit and refer merchants to eVance for those Services under the terms of this Agreement. eVance will provide Merchants with access to Third-Party Authorization Networks, Settlement and other services to authorize, capture and transmit data relating to transactions on major credit and debit card networks.
On August 31, 2022 The Company entered into a one year Marketing Agreement with LSI Group, which is extendable to 3 years total with completion of certain milestones. LSI will market the US based Cuentas Prepaid Debit Card, Mobile App and Cuentas Mobile’s USA phone service in countries including El Salvador, Guatemala and Honduras with plans to expand to South America, starting with Colombia. As of Septemeber 30, 2022 the Company has not generated any revenue from this transaction.
6
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
COVID-19
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, as well as our business and operations. COVID- 19 effectively reduced the Company’s capability to acquire accounts holders as a significant portion of our target demographic lost their ability to earn wages and subsequently could not load funds to the Company’s product. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our business and results of operations may be materially adversely affected
GOING CONCERN
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As of September 30, 2022, the Company had approximately $
7
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Unaudited Interim Financial Statements
The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements presented herein have not been audited by an independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the for nine-months ended September 30, 2022. However, these results are not necessarily indicative of results for any other interim period or for the year ending December 31, 2022. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, and expenses. Actual amounts could differ from these estimates.
Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on April 1, 2022 (the “Annual Report”). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Principles of Consolidation
The consolidated financial statements are prepared in accordance with US GAAP. The consolidated financial statements of the Company include the Company and its wholly owned and majority-owned subsidiaries. All inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.
8
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
Deferred Revenue
Deferred revenue is comprised mainly of unearned revenue related to prepayments from retail consumers for telecommunications minutes. The following table represents the changes in deferred revenue for the nine months ended September 30, 2022:
| Deferred Revenue | ||||
| Balance at December 31, 2021 | $ | |||
| Change in deferred revenue | ( | ) | ||
| Balance at September 30, 2022 | $ | |||
Revenue allocated to remaining performance obligations
represent contracted revenue that has not yet been recognized (“contracted not recognized”). Contracted not recognized revenue
was $
Derivative and Fair Value of Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.
9
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.
Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:
| Balance as of September 30, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Stock based liabilities | ||||||||||||||||
| Total liabilities | ||||||||||||||||
| Balance as of December 31, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Stock based liabilities | ||||||||||||||||
| Total liabilities | ||||||||||||||||
Recently Issued Accounting Standards
New pronouncements issued but not effective as of September 30, 2022 are not expected to have a material impact on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
10
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 3 – STOCK OPTIONS
The following table summarizes all stock option activity for the nine months ended September 30, 2022:
| Shares | Weighted- Average Exercise Price Per Share | |||||||
| Outstanding, December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Outstanding, September 30, 2022 | $ | |||||||
The following table discloses information regarding outstanding and exercisable options at September 30, 2022:
| Outstanding | Exercisable | |||||||||||||||||||||
| Exercise Prices | Number of Option Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | Number of Option Shares | Weighted Average Exercise Price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | |||||||||||||||||||||
On August
19, 2022, the Board of Directors approved the immediate acceleration of the vesting of
On May 17, 2022, the Company issued
| Common stock price | ||||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % |
11
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
On February1, 2022, the Company issued
| Common stock price | ||||
| Dividend yield | % | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % |
The following table discloses information regarding outstanding and exercisable options at December 31, 2021:
| Outstanding | Exercisable | |||||||||||||||||||||
| Exercise Prices | Number of Option Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | Number of Option Shares | Weighted Average Exercise Price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | |||||||||||||||||||||
NOTE 5 – RELATED PARTY TRANSACTIONS
Related party balances as of September 30, 2022 and December 31, 2021 consisted of the following:
Related party payables
| September 30, 2022 | December 31, 2021 | |||||||
| (dollars in thousands) | ||||||||
| (a) Due to Cima Telecom Inc. | $ | | ||||||
| Total Due to related parties | $ | $ | ||||||
| (a) | Composed from annual fees in the amount for the maintenance and support services in accordance with the software maintenance agreement for the second calendar year from the Effective Date and other software development services. |
12
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
Related party transactions
| 9 months ends at September 30, 2022 | 9 months ends at September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Carol Pepper (b) | ||||||||
| Cima Telecom Inc. (a) | $ | |||||||
| $ | $ | |||||||
| (a) | Composed of periodic fees in the amount of $ |
| (b) | Composed of consulting fee for the first half of 2022 in additional to the directorship fees. |
| 3 months ends at September 30, 2022 | 3 months ends at September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Cima Telecom Inc. (a) | $ | |||||||
| $ | $ | |||||||
| (a) | Composed of fees in the amount of $ |
Employment Agreements
On
August 18, 2022, Jeffery D. Johnson signed a Separation of Employment Agreement between himself and the Company and resigned as the
chief executive officer of the Company effective immediately. On August 19, 2022, the Board of Directors approved the Separation and
General Release Agreement, approved the immediate acceleration of the vesting of
On September 30, 2022, Anthony H. Meadows resigned as chief operating officer of the “Company. The Company is negotiating a settlement agreement with Mr. Meadows and may enter into a consulting agreement with Mr. Meadows to complete certain projects that Mr. Meadows was working on prior to his resignation.
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CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 6 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On October 23, 2018, the Company was served by
Telco Cuba Inc. for an amount in excess of $
On May
On October 4, 2022, Crosshair Media Placement, LLC, a Kentucky based marketing company, filed and served a complaint on Cuentas for breach of contract alleging breach of contract damages of $629,807.74, which case remains pending in the United States District Court for the Western District of Kentucky, case no. 3:22-CV-512-CHB. Cuentas is vigorously defending itself against this complaint and on November 8, 2022, filed a Motion to Dismiss for Lack of Jurisdiction and a Motion to Change Venue.
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CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
On April 1, 2021 the Company executed a lease
for office space effective April 1, 2021. The lease requires monthly rental payments of $
15
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
NOTE 7 – SEGMENTS OF OPERATIONS
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable operating segments. The Company manages its business primarily on a product basis. The accounting policies of the various segments are the same as those described in Note 2, “Summary of Significant Accounting Policies.” The Company evaluates the performance of its reportable operating segments based on net sales and gross profit.
Revenue by product for the nine months ended September 30, 2022, and the nine months ended September 30, 2021 are as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| Digital products and General Purpose Reloadable Cards | ||||||||
| Total revenue | $ | $ | ||||||
Gross profit (loss) by product for the nine months ended September 30, 2022, and the nine months ended September 30, 2021 are as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| Digital products and General Purpose Reloadable Cards | ( | ) | ||||||
| Total gross profit | $ | $ | ||||||
Revenue by product for the three months ended September 30, 2022, and the three months ended September 30, 2021 are as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| Digital products and General Purpose Reloadable Cards | ||||||||
| Total revenue | $ | $ | ||||||
16
CUENTAS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in U.S. dollar thousands, except share and per share data)
Gross profit (loss) by product for the three months ended September 30, 2022, and the three months ended September 30, 2021 are as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| Digital products and General Purpose Reloadable Cards | ( | ) | ||||||
| Total gross profit | $ | $ | ||||||
Long lived assets by product for September 30, 2022 and December 31, 2021 are as follows:
| September 30, 2022 | December 31, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | $ | ||||||
| Digital products and General Purpose Reloadable Cards | ||||||||
| Total Long lived assets by product | $ | $ | ||||||
NOTE 8 – STOCKHOLDERS’ EQUITY
On August 4, 2022, the Company, entered into a Securities Purchase
Agreement with an institutional investor pursuant to which the Purchaser agreed to purchase, and the Company agreed to issue and sell
to the Purchaser in a private placement, an aggregate of
Pursuant to an engagement agreement, H.C. Wainwright
& Co., LLC was engaged by the Company to act as its placement agent for the Private Placement. The Company agreed to pay the Placement
Agent a cash fee equal to
NOTE 8 – SUBSEQUENT EVENT
On October 4, 2022, Crosshair Media Placement, LLC, a Kentucky based marketing company, filed and served a complaint on Cuentas for breach of contract alleging breach of contract damages of $629,807.74, which case remains pending in the United States District Court for the Western District of Kentucky, case no. 3:22-CV-512-CHB. Cuentas is vigorously defending itself against this complaint and on November 8, 2022, filed a Motion to Dismiss for Lack of Jurisdiction and a Motion to Change Venue.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021. Some of the information contained in this discussion and analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including statements regarding expectations, beliefs, intentions or strategies for the future. When used in this report, the terms “anticipate,” “believe,” “estimate,” “expect,” “can,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and words or phrases of similar import, as they relate to our company or our management, are intended to identify forward-looking statements. We intend that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance, and we undertake no obligation to update or revise, nor do we have a policy of updating or revising, any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as may be required under applicable law. Forward-looking statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements as a result of several factors including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.
The Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company’s other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company’s fluctuations in sales and operating results; (b) regulatory, competitive and contractual risks; (c) development risks; (d) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (e) pending litigation.
Overview and Outlook
OVERVIEW AND OUTLOOK
The Company was incorporated in September 2005 to act as a holding company for its subsidiaries in the technology, telecom and banking industries.
The Company invests in financial technology and engages in use of certain licensed technology to provide innovative telecommunications, mobility, and remittance solutions to unserved, unbanked, and emerging markets. The Company uses proprietary technology and certain licensed technology to provide innovative telecommunications and telecommunications mobility and remittance solutions in emerging markets. The Company also offers wholesale telecommunications minutes and prepaid telecommunications minutes to consumers through its Tel3 division.
The Company’s subsidiary, Meimoun and Mammon, LLC (100% owned) (“M&M”), through. Tel3, a business segment of Meimoun and Mammon, LLC provides prepaid calling cards to consumers directly.
The Company also owns 50% of CUENTASMAX LLC which installs WiFi6 shared network (“WSN”) systems in locations in the New York metropolitan tristate area using access points and small cells to provide users with access to the WSN. CUENTASMAX LLC generated a net loss of $20,000 during the third quarter of 2022 and approximately $77,000 since its inception.
Cuentas SDI, LLC (the “Cuentas-SDI”) was incorporated in the State of Florida on January 4, 2022 and was a wholly owned subsidiary of SDI Black 011, Inc. (“SDI Black”). Cuentas-SDI is engaged in the business of electronic distribution and sales of virtual products via its Black 011 portal located at Yonkers, NY. Its electronic products range from prepaid wireless SIM activation, International mobile recharge services and international long distance phone services. During 2020, Cuentas-SDI also started sales of general merchandise to its retail reseller customers. Cuentas-SDI owns the assets of Black Wireless MVNO, Black 011 Long distance platform and operations and the SDI Black distribution platform and network of over 31,000 bodegas and convenience stores.
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On May 27, 2022, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with SDI Black 011, LLC (“SDI Black”), the holders of all the membership interests of SDI Black and Cuentas SDI, LLC, a Florida limited liability (“Cuentas SDI”), for the acquisition of 19.99% of the membership interests of Cuentas SDI in exchange for $750,000. The Company also has the right to close on the potential acquisition of the remaining 80.01% of the membership interests of Cuentas SDI within 60 days (with a potential 30 day extension, the “Potential Acquisition Period”) in exchange for a purchase price of an additional $2,459,000. SDI Black previously transferred all of its assets including the platform, portals, domain names, and related software necessary to conduct its business to Cuentas SDI. The MIPA further provides that during the Potential Acquisition Period, the Company will invoice and Cuentas SDI will pay invoices on a seven-net-ten day basis and during this same period, Cuentas SDI will allow the Company to realize 40% of the Cuentas SDI gross revenues and reflect 40% of the gross revenues on its books and records.The MIPA contains a number of representations and warranties by each of the parties thereto which we believe are customary for transactions similar to the transactions contemplated by the MIPA. The 60-days option to acquire the remaining 80.01% of the membership interests of Cuentas SDI expired on July 27, 2022.
On August 22, 2022, the Company entered into a Software Licensing and transaction sharing Agreement with The OLB Group, Inc. (“OLB), a Delaware corporation whereas OLB, through its wholly-owned subsidiaries will establish a merchant services relationship whereby the parties will seek to sell or rent OLB’s point-of-sale (POS) devices to merchants in the network established by Cuentas SDI, LLC for the merchants in the SDI network and the Company will use reasonable best efforts to interconnect its reload agreement with the OLB POS platform for use in qualified merchant locations. The Company will market the OLB-branded products under the processing platform as a Cuentas white label application for payment processing and debit cards. OLB will develop for Cuentas’ Mobile App and associated products, an Application Programming Interface (API), databases and servers at no cost to the Company to allow for the registration, approval and onboarding of consumers onto the Cuentas GPR/Mobile App/Mobile Wallet platform with complete functions as currently available through the Cuentas App and associated products and services. OLB agreed to provide OLB’s Services for Cuentas’ benefit in exchange for revenue sharing and OLB will utilize its developers to enhance the Cuentas GPR-Mobile-App. Before the relaunch of the Cuentas GPR-Mobile-App, the OLB developers in consultation with Cuentas shall as necessary test the functionality, reliability and process of the Cuentas GPR-Mobile-App in a controlled testing environment. Upon approval by the Company of the results of the controlled testing environment to move the Cuentas GPR-Mobile-App into production, the OLB developers, in consultation with the Company, shall perform periodic test of the Cuentas GPR-Mobile-App to ensure continued functionality, reliability and process of the Cuentas GPR-Mobile-App and to remove and repair any bugs or malfunctions in the Cuentas GPR-Mobile-App as soon as practicable. All net revenue generated by OLB from the following: (i) net revenues from the sale or rental of OLB POS devices to Cuentas SDI Merchants, (ii) all other net revenues generated by OLB arising from or related to the OLB POS devices elected to be utilized by the Cuentas SDI Merchants, (iii) all net revenues generated by OLB from the Cuentas White Label Products/Services, and (iv) to the extent that the Reload Provider agrees to provide its reload capability through the OLB POS devices, the net revenues generated by OLB from the reloads shall be split between OLB and Cuentas. All net revenue generated by Cuentas from the following: (i) net revenues from each reload purchased though the OLB POS device through a Cuentas SDI Merchant, (ii) all retail digital products as set forth on Schedule A sold through a OLB POS device through a Cuentas SDI Merchant or the Cuentas White Label Products/Services, (iii) mobile top-ups net revenues sold through a OLB POS device through a Cuentas SDI Merchant: all net revenues to be split between OLB and Cuentas. Net revenue will be shared between the Parties and profits will be calculated and settled on a 30 net 30 basis (after each 30-day period closes, the Parties have 30 days to calculate and settle net revenue). On August 22, 2022, the Company entered into an Independent Sales Organization Processing Agreement with eVance, Inc., a wholly owned subsidiary of The OLB Group, Inc.,. whereby eVance is in the business of providing credit and debit card processing services to merchants. The Company desires to solicit and refer merchants to eVance for those Services under the terms of this Agreement. eVance will provide Merchants with access to Third-Party Authorization Networks, Settlement and other services to authorize, capture and transmit data relating to transactions on major credit and debit card networks. As of the date of this report, the Company has not generated any revenue from this transaction.
On August 31, 2022 the Company entered into a one year Marketing Agreement with LSI Group, which is extendable to 3 years total with completion of certain milestones. LSI will market the US based Cuentas Prepaid Debit Card, Mobile App and Cuentas Mobile’s USA phone service in countries including El Salvador, Guatemala and Honduras with plans to expand to South America, starting with Colombia, with the goal to sign 200,000 US-based Cuentas customers in 1 year for international cross-border remittances. As of the date of this report, the Company has not generated any revenue from this transaction.
19
OUTLOOK
Business Environment
We are a technology payment platform company that enables digital and mobile payments on behalf of under-bank and unbanked individuals. We believe in providing simple, affordable, secure and reliable financial services and digital payments to help our customers to achieve their financial goals. We strive to increase our relevance for consumers, and family to access and move their money anywhere in the world, anytime, on any platform and through any device (e.g., mobile, tablets, personal computers or wearables). We provide safer and simpler ways for businesses of all sizes to accept payments from merchant websites, mobile devices and applications, and at offline retail locations through a wide range of payment solutions. We also facilitate person to person payments through Cuentas GPR Card.
We operate globally and in a rapidly evolving regulatory environment characterized by a heightened regulatory focus on all aspects of the payments industry. That focus continues to become even more heightened as regulators on a global basis focus on such important issues as countering terrorist financing, anti-money laundering, privacy and consumer protection. Some of the laws and regulations to which we are subject were enacted recently and the laws and regulations applicable to us, including those enacted prior to the advent of digital and mobile payments, are continuing to evolve through legislative and regulatory action and judicial interpretation. Non-compliance with laws and regulations, increased penalties and enforcement actions related to non-compliance, changes in laws and regulations or their interpretation, and the enactment of new laws and regulations applicable to us could have a material adverse impact on our business, results of operations and financial condition. Therefore, we monitor these areas closely to ensure compliant solutions for our customers who depend on us.
Industry Trends
Our industry is dynamic and highly competitive, with frequent changes in both technologies and business models. The Fintech industry has had to adapt to the COVID pandemic with resulting challenges due to changes in the labor market, supply chains, inflation, increasing interest rates and the stock market uncertainty. Each industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the industry and our business. At Cuentas, we push the boundaries of what is possible through a broad range of research and development activities that seek to anticipate the changing demands of customers, industry trends and competitive forces. Society has seen a major shift towards cashless transactions and acceptance of digital currency for normal day to day transactions and services. Cuentas is currently offering digital reloads for several mass transit agencies in the USA and expects to increase that segment significantly as people continue to return to normal work commutes. Discounted digital offerings are also expected to increase in popularity as the public leans towards digital, touchless transactions and Cuentas is strategically aligned and interconnected with one of the largest digital gift card providers in the USA. Sports arenas are once again full and Cuentas has aligned itself with MASL, a new indoor soccer league starting in November 2022, which we believe has tremendous potential as the upcoming World Cup competition will stimulate interest in professional soccer leagues.
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RESULTS OF OPERATIONS
Comparison of the nine months ended September 30, 2022 to the nine months ended September 30, 2021
Revenue
The Company generates revenues through the sale and distribution of prepaid telecom minutes, digital products and other related telecom services. The Company also generated sales from its Fintech products and services commencing in the third quarter of 2020. Revenues during the nine months ended September 30, 2022 totaled $ 2,207,000 compared to $489,000 for the nine months ended September 30, 2021. The increase in our sales of digital products and General-Purpose Reloadable Cards is mainly due to increase in the sales of our digital telecom products due to online and other marketing initiatives.
Revenue by product for the nine months ended September 30, 2022, and the nine months ended September 30, 2022 are as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | 484 | $ | 440 | ||||
| Digital products and General Purpose Reloadable Cards | 1,723 | 49 | ||||||
| Total revenue | $ | 2,207 | $ | 489 | ||||
Costs of Revenue and Gross profit
Cost of revenues during the nine months ended September 30, 2022 totaled $1,902,000 compared to $361,000 for the nine months ended September 30, 2021.
Cost of revenue consists of the purchase of wholesale minutes for resale, related telecom platform costs and purchase of digital products in the amount of $187,000 during the nine months ended September 30, 2022 and $257,000 during the nine months ended September 30, 2021.
Cost of revenue also consists of costs related to the sale of the Company’s Digital products and GPR Cards in the amount of $1,715,000 during the nine months ended September 30, 2022 and $104,000 during the nine months ended September 30, 2021.
Gross profit (loss) by product lines for nine months ended September 30, 2022, and 2021 are as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | 297 | $ | 183 | ||||
| Digital products and General Purpose Reloadable Cards | 8 | (55 | ) | |||||
| Total gross profit | $ | 305 | $ | 128 | ||||
Gross margin for the nine months ended September 30, 2022 was 14% consisting of 62% margin for the telecommunications and less than 1% margin for the digital product and general purpose reloadable cards. The gross loss for the sale of digital product and general-purpose reloadable cards in 2021stemmed from the lower margins of the digital products since the sales derived from the sale of digital products has minimal gross margins.
21
Operating Expenses
Operating expenses consist of selling, general and administrative Expenses and amortization of Intangible assets as discussed below and totaled $9,320,000 during the nine months ended September 30, 2022, compared to $6,144,000 during the nine months ended September 30, 2021 representing a net increase of $3,176,000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses totaled $7,962,000 during the nine months ended September 30, 2022 compared to $4,787,000 during the nine months ended September 30, 2021, representing a net increase of $3,175,000. Included in in the Selling, general and administrative expenses, Stock-based compensation amounted to $1,438,000 and shares issued for services expenses amounted to $110,000 during the nine months ended September 30, 2022 compared to $541,000 during the nine months ended September 30, 2021. This increase was mainly due to issuance of 1,550,000 stock options to directors and officers of the Company in the 2021 and 400,000 stock options to officer and directors of the Company in the 2022. Such options can be exercised until 2032. The increase in the other operating expenses is mainly due to an increase in the agreed maintenance and support services in accordance with the software maintenance agreement with CIMA and settlement agreement in the amount to $942,000 during the nine months ended September 30, 2022 due to the settlement agreement with CIMA, increase in the agreed payments in accordance with the processing service agreement with Incomm in the amount of $185,000 to $625,000 during the nine months ended September 30, 2022, increase in our compensation and director fees in the approximate amount of $270,000 to $1,334,000 and increase of approximately of $1,090,000 in our selling and marketing expenses during the nine months ended September 30, 2022.
Amortization of Intangible assets
Amortization of Intangible assets totaled $1,358,000 during the nine months ended September 30, 2022 and $1,357,000 during the nine months ended Septemeber 2021. The amortization expense mainly stems from the one-time licensing fee in the amount of $9,000,000 that was paid in shares to Cima, on December 31, 2019. The acquired intangible assets that consisted of a perpetual software license had an estimated fair value of $9,000,000. The Company amortizes the intangible assets on a straight-line basis over their expected useful life of 60 months which is approximately $453,000 per quarter.
22
Other Income (expenses)
The Company recognized other expense of $34,000during the nine months ended September 30, 2022 compared to other expense of $66,000 during the nine months ended September 30, 2021. The other expenses during the nine months ended September 30, 2022, included an expense of $32,000 for the settlement of the Telco – Cuba matter.
Net Income (Loss)
We incurred a net loss of $9,085,000 for the nine months ended September 30,2022 as compared to a net loss of 6,082,000 for the nine months ended September 30, 2021 due to the increase in selling and general administrative expenses as described above.
Comparison of the three months ended September 30, 2022 to the three months ended September 30, 2021
Revenue
The Company generates revenues through the sale and distribution of prepaid telecom minutes, digital products and other related telecom services. The Company also generated sales from its Fintech products and services commencing in the third quarter of 2020. Revenues during the three months ended September 30, 2022 totaled $1,143,000 compared to $109,000 for the three months ended September 30, 2021. The increase in our sales of digital products and General-Purpose Reloadable Cards is mainly due to increase in the sales of our digital telecom product due to online and other marketing initiatives.
Revenue by product for the three months ended September 30, 2022, and the three months ended September 30, 2021 are as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | 166 | $ | 87 | ||||
| Digital products and General Purpose Reloadable Cards | 977 | 22 | ||||||
| Total revenue | $ | 1,143 | $ | 109 | ||||
Costs of Revenue and Gross profit
Cost of revenues during the three months ended September 30, 2022 totaled $1,027,000 compared to $91,000 for the three months ended September 30, 2021.
Cost of revenue consists of the purchase of wholesale minutes for resale, related telecom platform costs and purchase of digital products in the amount of $ 69,000 during the three months ended September 30, 2022 and $53,000 during the three months ended September 30, 2021.
Cost of revenue also consists of costs related to the sale of the Company’s GPR Card in the amount of $958,000 during the three months ended September 30, 2022 and $38,000 during the three months ended September 30, 2021.
23
Gross profit (loss) by product lines for three months ended September 30, 2022 and 2021 are as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| (dollars in thousands) | ||||||||
| Telecommunications | $ | 97 | $ | 34 | ||||
| Digital products and General Purpose Reloadable Cards | 19 | (16 | ) | |||||
| Total revenue | $ | 116 | $ | 18 | ||||
Gross margin for the three months ended September 30, 2022, was 10% consisting of 58% margin for the telecommunications and 2% margin for the digital product and general-purpose reloadable cards. The gross loss for the sale of digital product and general-purpose reloadable cards in 2021stemmed from the lower margins of the digital products since the sales derived from the sale of digital products has minimal gross margins. The gross loss for the sale of digital product and general-purpose reloadable cards in 2021stemmed from the lower margins of the digital products since the sales derived from the sale of digital products has minimal gross margins.
Operating Expenses
Operating expenses consist of selling, general and administrative Expenses and amortization of Intangible assets as discussed below and totaled $2,382,000 during the three months ended September 30 2022, compared to $2,428,000 during the three months ended September 30, 2021 representing a net decrease of $46,000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses totaled $1,929,000 during the three months ended September 30, 2022 compared to $1,976,000 during the three months ended September 30, 2021, representing a net decrease of $47,000. Included in in the Selling, general and administrative expenses, Stock-based compensation and shares issued for services expenses amounted to $234,000 during the three months ended September 30, 2022 and $255,000 during the three months ended September 30, 2021. This was mainly due to issuance of 1,550,000 stock options to directors and officers of the Company in the 2021 and 400,000 stock options to officer and directors of the Company in the 2022. Such options can be exercised until, 2032.
The increase in the other operating expenses is mainly due to an increase in the agreed maintenance and support services in accordance with the software maintenance agreement with CIMA in the amount of $383,000 during the three months ended September 30, 2022 in accordance with the software maintenance agreement and the Settlement Agreement and General Release dated August 2, 2022, increase in the agreed payments in accordance with the processing service agreement with Incomm in the amount of $70,000 to $250,000 during the three months ended September 30, 2022, and decrease in our compensation and director fees in the approximate amount of $3,000 to $403,000 during the three months ended September 30, 2022 and increase of approximately of $147,000 in our selling and marketing expenses during the three months ended September 30, 2022.
Amortization of Intangible assets
Amortization of Intangible assets totaled $453,000 during the three months ended September 30, 2022 and 2021. The amortization expense mainly stems from the one-time licensing fee in the amount of $9,000,000 that was paid in shares to Cima, on December 31, 2019. The acquired intangible assets that consisted of a perpetual software license had an estimated fair value of $9,000,000. The Company amortizes the intangible assets on a straight-line basis over their expected useful life of 60 months which is approximately $453,000 per quarter.
24
Other Income
The Company recognized other income of $1,000 during the three months ended September 30, 2022 compared to other expenses of $4,000 during the three months ended September 30, 2021.
Net Income (Loss)
We incurred a net loss of $2,275,000 for the three-month period ended September 30, 2022, as compared to a net loss of 2,406,000 for the three-month period ended September 30, 2021due to the increase in selling and general administrative expenses as described above.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
As of September 30, 2022, the Company had total current assets of $2,429,000, including $2,108,000 of cash, accounts receivables of $264,000, and other current assets of $ 57,000 and total current liabilities of $2,720,000 creating a working capital deficit of $291,000.
As of December 31, 2021, the Company had total current assets of $6,780,000, including $6,607,000 of cash, accounts receivables of $11,000, and other current assets of $162,000 and total current liabilities of $2,719,000 creating a working capital of $4,061,000.
The decrease in our working capital deficit was mainly attributable to the decrease in our Cash and Cash equivalents in the amount of $4,499,000 due to our losses.
To date, we have principally financed our operations through the sale of our Common Stock. Nevertheless, management anticipates that our current cash and cash equivalents position and generating revenue from the sales of our digital products and General-Purpose Reloadable Cards will provide us limited financial resources for the near future to continue implementing our business strategy of further developing our digital products and General Purpose Reloadable Card, enhance our digital products offering and increase our sales and marketing. Management has taken important steps to reduce the financial burn rate and has curtailed some ineffective marketing programs, concentrating on those programs that have been proven to produce good results. Reduction of some top-level personnel has brought savings to the company as current executives took over the vacant positions at no additional cost to the Company. Management plans to secure additional financing sources, including but not limited to the sale of our Common Stock in future financings. There can be no assurance, however, that the company will be successful in raising additional capital or that the company will have net income from operations to fund the business plan of the company for the near future or long term.
As of September 30, 2022, the Company had approximately $2,108 thousand in cash and cash equivalents, approximately $291 thousand in negative working capital and an accumulated deficit of approximately $47,304 thousand . These conditions raise substantial doubt about the Company’s ability to continue as a going concern. On August 4, 2022, the Company, sold an aggregate of 1,655,000 shares of the Company’s common stock, $0.001 par value, pre-funded warrants to purchase up to 2,569,044 shares of Common and warrants to purchase up to 4,224,044 shares of Common Stock in consideration of $3.0 million. The net proceeds to the Company, after deducting placement agent fees and other offering expenses, were approximately $2.7 million. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. Management anticipates their business will require substantial additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity and capital markets as the Company will need to finance future activities.
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Cash Flows – Operating Activities
The Company’s operating activities for the nine months ended September 30, 2022, resulted in net cash used of $6,523,000. Net cash used in operating activities consisted of a net loss of $9,085,000 partially offset by non-cash expenses consisting of share-based compensation of $1,548,000 and amortization of intangible assets of $1,358,000. Changes in operating assets and liabilities used cash of $387,000, resulting mainly from an increase in accounts payables of $406,000 which was mitigated in an increase of in accounts receivables of $486,000.
The Company’s operating activities for the nine months ended September 30, 2021, resulted in net cash used of $7,227,000. Net cash used in operating activities consisted of a net loss of $6,082,000, which were offset partially by non-cash expenses consisting of share-based compensation of $541,000 and amortization of intangible assets of $1,357,000. Changes in operating assets and liabilities utilized cash of $3,078,000, resulting mainly from an increase in accounts receivable of $12,000, decrease in accrued expenses and other current liabilities of $262,000, and a decrease in accounts payables of $1,567,000.
Cash Flows – Investing Activities
The Company’s investment activities for the nine months ended September 30, resulted in net cash used of $664,000 and net cash used of $47,000 for the same period in 2021. The increase was mainly due to the investment in Cuentas SDI LLC.
Cash Flows – Financing Activities
The Company’s financing activities for the nine months ended September 30, 2022, resulted in net cash in the amount of $2,688,000 from the sale of our common stock. . The Company’s financing activities for the nine months ended September 30, 2021, resulted in net cash received of $15,797,000, consisting of $10,614,000 received from the sale of our common stock and $6,264,000 from the issuance of shares due to exercise of warrants, partially offset by repayments of loans of $730,000 and repayments of $355,000 of loans from a related party.
Inflation and Seasonality
In management’s opinion, our results of operations have not been materially affected by inflation or seasonality, and management does not expect that inflation risk or seasonality would cause material impact on our operations in the future.
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Off-Balance Sheet Arrangements
As of September 30, 2022, we had no off-balance sheet arrangements of any nature.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. Note 3 to our consolidated audited financial statements filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, describes the significant accounting policies and methods used in the preparation of our financial statements.
Recently Issued Accounting Standards
New pronouncements issued but not effective as of September 30, 2022, are not expected to have a material impact on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, and as discussed in greater detail below, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, disclosure controls and procedures are not effective:
| ● | to give reasonable assurance that the information required to be disclosed in reports that are file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and |
| ● | to ensure that information required to be disclosed in the reports that are file or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our CEO and our Treasurer, to allow timely decisions regarding required disclosure. |
Changes in Internal Control over Financial Reporting
Our management, with the participation of our CEO and CFO, performed an evaluation to determine whether any change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the three-month period ended September 30, 2022. Based on that evaluation, our CEO and our CFO concluded that no change occurred in the Company’s internal control over financial reporting during the three-month period ended September 30, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On December 20, 2017, a complaint was filed by J. P. Carey Enterprises, Inc. (“JP Carey”) alleging a claim for $473,000 related to Franjose Yglesias-Bertheau, a former Vice President of PLKD. Even though the Company made the agreed payment of $10,000 on January 2, 2017, and issued 6,001 shares of Common Stock as conversion of the $70,000 note as agreed in its settlement agreement, JP Carey alleges damages that the Company claims are without merit because JP Carey received full compensation as agreed. The Company is in the process of defending itself against these claims. The Company has not accrued losses related to this claim due to the early stages of litigation. On January 29, 2019, the Company was served with another complaint by JP Carey claiming similar issues as to the previous complaint, with the new claimed damages totaling $1,108,037.85. JP Carey and the Company filed motions for a summary judgment. On October 1, 2020, the Superior Court of Fulton County, State of Georgia granted the Company’s motion for summary judgment and denied JP Carey’s motion for summary judgment. On October 30, 2020, JP Carey filed a notice of appeal to the trial court’s October 1 and 7, 2020 orders granting summary judgment in favor of the Company. The briefing in the appeal was completed during the first quarter of 2021. Oral argument held on April 13, 2021 but no decision has been rendered yet. On November 16, 2020, the Company filed a motion seeking payment from JP Carey of $140,970.82 in attorney fees and costs accrued as of November 13, 2020. JP Carey’s responded brief was filed on or about December 21, 2020 and thereafter the Company filed its reply. JP Carey’s petition to the Georgia Supreme Court for a writ of certiorari remains pending and is fully briefed as of January 14, 2022. On May 5, 2022 the Georgia Supreme Court denied JP Carey’s petition. On or about July 20, 2022 the parties settled the Company’s claim regarding attorney fees and costs for the amount of $40,000.
On October 23, 2018, the Company was served by Telco Cuba Inc. for an amount in excess of $15,000 but the total amount was not specified. The Company was served on December 7, 2018, with a complaint alleging damages including unspecified damages for product, advertising and other damages in addition to $50,000 paid to Defendants. The Company has hired an attorney and has taken steps to defend itself vigorously in this case. Depositions are in process of being scheduled. On or about April 27, 2022, the Company settled the Telco Cuba Inc. matter in consideration of a settlement amount of $32,000.
On May 1, 2019, the Company received a notice of demand for arbitration from Secure IP Telecom, Inc. (“Secure IP”), who allegedly had a Reciprocal Carrier Services Agreement (“RCS”) exclusively with Limecom and not with the Company. The arbitration demand originated from another demand for arbitration that Secure IP received from VoIP Capital International (“VoIP”) in March 2019, demanding $1,052,838.09 in damages allegedly caused by unpaid receivables that Limecom assigned to VoIP based on the RCS. On June 5, 2020, Secure IP filed a complaint against Limecom, Heritage Ventures Limited (“Heritage”), an unrelated third party and owner of Limecom, and the Company. The complaint primarily concerns alleged indebtedness owed Secure IP by Limecom. Secure IP also alleges that the Company received certain transfers of funds which it alleges may be an avoidable transfer under Florida Statute §725.105 up to $1,052,838.09. The Company is contemplating filing a motion to dismiss the complaint and disputes that it received the alleged $1,052,838.09 from Limecom. Moreover, to the extent the Company has exposure for any transfers from Limecom, both Limecom and Heritage have indemnified the Company for any such liability. The Company continues to vigorously defend its position to be removed as a named party in this action due to the fact that the Company rescinded the Limecom Acquisition on January 30, 2019. Cuentas has provided requested discovery and expects depositions to be scheduled shortly. As of September 30, 2022 the company accrued $300,000 due to this matter.
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On May 25, 2022, the Company received a notice of default from CIMA Telecom, Inc. (“CIMA”) related to that certain Platform Exclusive License Agreement, maintenance, and related agreements by and among Cuentas, CIMA, Knetik, Inc., and Auris, LLC. The notice provides that Cuentas has failed to pay $700,000 of maintenance and pass-through fees that CIMA alleges are owed under the License Agreement and also afforded Cuentas the required sixty-day period (through July 24, 2022) to cure the default as provided under the License Agreement. On August 2, 2022, the Company and CIMA, along with two of CIMA’s wholly-owned subsidiaries, Knetik, Inc. (“Knetik”) and Auris, LLC, (“Auris” ) executed a Settlement Agreement and General Release (“Settlement Agreement”) which resolves the issues related to the July 8, 2022 notice of default from CIMA Telecom, Inc. (“CIMA”) related to that certain Platform Exclusive License Agreement, maintenance, and related agreements (collectively, the “License Agreement”) by and among Cuentas, CIMA, Knetik, Inc., and Auris, LLC. The Parties have signed Mutual General Releases and the settlement terms are as follows: In exchange for the consideration provided in the Settlement Agreement, (1) Cuentas paid CIMA $350,000.00 on August 2, 2022 and (2) on or about August 15, 2022, Cuentas paid CIMA the balance of the Unpaid Fees ($420,239.78) by wire transfer (3) the Company will had a period of 30 days from execution date, the exclusive right to facilitate a third party (including to current shareholders and directors of Cuentas) purchase (without markup or broker fee) of, all of the shares of Cuentas held by CIMA at the higher of: (i) the average per share trading price for the three day average before notice in writing is provided by Cuentas of the intent to purchase CIMA’s Cuentas shares, or (ii) the minimum price of $0.50 per share on or before 5:00 p.m. New York City time, on August 31, 2022 pursuant to a purchase agreement delivered by and acceptable to CIMA without any changes thereto (provided, that CIMA shall not be required to provide any representations or warranties other than fundamental warranties related to (a) organization and good standing, (b) power and authority to undertake the transaction and (c) ownership of such shares, and ordinary representations and warranties that the Cuentas shares are being transferred free and clear of any liens, claims, or encumbrances); and (iv) on or before 5:00 p.m. New York City time, on August 2, 2022, Cuentas shall, and shall cause (x) Dinar Zuz, LLC, (y) Michael De Prado and (z) Arik Maimon to provide signed waiver letters, expressly waiving any right of first refusal and co-sale rights granted in their favor under that certain letter agreement, dated December 31, 2019, by and among CIMA, Dinar Zuz, LLC, Michael Del Prado and Arik Maimon, and (y) CIMA agrees: (i) to restore immediately Cuentas’s access to the Platform upon receipt of the $350,000.00 payment ; (ii) to provide Cuentas with a limited license to utilize the Platform the terms of which are detailed specifically in Section 6 of the agreement, and to use reasonable efforts, subject to Cuentas’ compliance hereto, to provide Cuentas’ customer data to Cuentas through the end of the limited license term described below in Section 6 of the agreement; (iii) deliver to Cuentas the Source Code (as that term is defined in paragraph 1.18 of the License Agreement) relating to Out-Of-Scope Services, and as further detailed in Section 6 of the agreement; (iv) not enforce its rights under the Side Letter (as that term is defined in the paragraph 1.1 of the Purchase Agreement) through and including August 31, 2022, and (v) shall not transfer, sell, or encumber its Cuentas shares through and including August 31, 2022, except as permitted herein. Cuentas acknowledges and agrees that the amount of Unpaid Fees ($770,239.78) is valid and outstanding, and waives any right to dispute them. If Cuentas fails to comply with any term of this Settlement Agreement, in addition to the Stipulated Judgment described in Section 5 of the agreement, the limited license set forth in Section 6 and any of CIMA’s obligations under this Settlement Agreement shall become null and CIMA shall have the right to shut off Cuentas access to the Platform without notice. The Settlement Agreement also provides for mutual general releases by Cuentas for the benefit of CIMA and by CIMA for the benefit of Cuentas of all claims other than claims relating to a breach of the Settlement Agreement. The settlement agreement by its terms in effect terminates the obligations under the license agreement, dated December 31, 2019 by and between Cuentas and CIMA. The Company did not exercise its exclusive right to facilitate a third party purchase of, all of the shares of Cuentas held by CIMA.
On October 4, 2022, Crosshair Media Placement, LLC, a Kentucky based marketing company, filed and served a complaint on Cuentas for breach of contract alleging breach of contract damages of $629,807.74, which case remains pending in the United States District Court for the Western District of Kentucky, case no. 3:22-CV-512-CHB. Cuentas is vigorously defending itself against this complaint and on November 8, 2022, filed a Motion to Dismiss for Lack of Jurisdiction and a Motion to Change Venue.
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ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On August 4, 2022, the Company, entered into a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Purchaser”) pursuant to which the Purchaser agreed to purchase, and the Company agreed to issue and sell to the Purchaser in a private placement, an aggregate of 1,655,000 shares of the Company’s common stock, $0.001 par value, pre-funded warrants to purchase up to 2,569,044 shares of Common and warrants to purchase up to 4,224,044 shares of Common Stock. The purchase price per Share and associated Common Stock Warrant was $0.71022 and the purchase price per Pre Funded Warrant and associated Common Stock Warrant was $0.71012. Each Common Stock Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $0.59 per share. Each Pre Funded Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $0.0001 per share. The Common Stock Warrants are exercisable for a period of five years and six months commencing on the issuance date and the Pre Funded Warrants are exercisable until exercised. The Warrants also contain customary beneficial ownership limitations that may be waived at the option of each holder upon 61 days’ notice to the Company. The Private Placement closed on August 8, 2022. The gross proceeds to the Company, before deducting placement agent fees and other offering expenses, are approximately $3.0 million. On August 4, 2022, in connection with the Private Placement, the Company entered into a registration rights with the Purchaser, pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) to register for resale the Shares and any shares of the Company’s common stock issuable upon exercise of the Warrants within 30 days of the signing of the Registration Rights Agreement, with such registration statement becoming effective within 60 days after the signing of the Registration Rights Agreement, subject to adjustment in the event of a review by the SEC. The Company is subject to customary penalties and liquidated damages in the event it does not meet certain filing requirements and deadlines set forth in the Registration Rights Agreement.
Pursuant to an engagement agreement, H.C. Wainwright & Co., LLC (the “Placement Agent’) was engaged by the Company to act as its placement agent for the Private Placement. The Company agreed to pay the Placement Agent a cash fee equal to 7.0% of the gross proceeds received by the Company in the Private Placement, in addition to the reimbursement of certain expenses. The Company also agreed to issue to the Placement Agent warrants to purchase up to 295,683 shares of Common Stock, exercisable for a period of five years and six months commencing on the issuance date, at an exercise price of $0.8878 per share. We issued such shares in reliance on the exemptions from registration pursuant to Section 4(a)(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR DEBT
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
Employment Agreements
On August 18, 2022, Jeffery D. Johnson signed a Separation of Employment Agreement between himself and the Company and resigned as the chief executive officer of the Company effective immediately. On August 19, 2022, the Board of Directors approved the Separation and General Release Agreement, approved the immediate acceleration of the vesting of 160,000 options previously issued under the Stock Option Plan that will be exercisable for a period of three years after the resignation and noted that the separation was cordial and positive. Mr. Johnson received a onetime Separation Payment of $100,000 and the Company will pay all costs for COBRA (health insurance) benefits through the end of calendar year 2022.
On September 30, 2022, Anthony H. Meadows resigned as chief operating officer of the “Company. The Company is negotiating a settlement agreement with Mr. Meadows and may enter into a consulting agreement with Mr. Meadows to complete certain projects that Mr. Meadows was working on prior to his resignation.
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ITEM 6. EXHIBITS
| Exhibit No. | Description | Location | ||
| 10.1 | Separation Agreement, dated as of August 18, 2022, by and between Cuentas, Inc. and Jeffery D. Johnson | Form 8-K filed at August 24, 2022 | ||
| 10. 2 | SOFTWARE LICENSING AND TRANSACTION SHARING AGREEMENT -REDACTED | Form 8-K filed at August 26, 2022 | ||
| 10.3 | INDEPENDENT SALES ORGANIZATION PROCESSING AGREEMENT - REDACTED | Form 8-K filed at August 26, 2022 | ||
| 10.4 | Marketing Agreement | filed herewith | ||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 101.INS | Inline XBRL Instance Document. | Filed herewith | ||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | Filed herewith | ||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | Filed herewith | ||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | Filed herewith | ||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | Filed herewith | ||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | Filed herewith | ||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | Filed herewith |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Cuentas, Inc. | ||
| (Registrant) | ||
| Date: November 14, 2022 | By: | /s/ Shalom Arik Maimon |
| Interim Chief Executive Officer | ||
| By: | /s/ Ran Daniel | |
| Chief Financial Officer | ||
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Exhibit 10.4
Marketing Agreement
This Marketing Agreement (this “Agreement”), dated as of August 31, 2022 (the “Effective Date”), is by and between Cuentas, Inc. (“Cuentas”), a Florida corporation with offices located at 235 Lincoln Road, Suite 210, Miami Beach, Florida 33139 and LSI Group S.A., a Guatemalan corporation with offices located at 16 Calle 31-90 zona 7 Villa Linda 2, Guatemala, Guatemala, 01007 (“LSI Group”, and together Cuentas, the “Parties,” or as to each a “Party”).
WHEREAS, Cuentas is engaged in the business of registration, approval and onboarding of consumers onto the Cuentas GPR/Mobile App/Mobile Wallet platform (the “Cuentas GPR Card and Mobile App”);
and
WHEREAS, LSI Group is engaged in the business of providing customers (“LSI Group Customers”) with fund remittances services from the United States to Colombia, El Salvador, Honduras and Guatemala; and
WHEREAS, the LSI Group agrees to offer the Cuentas GPR Card and Mobile App to LSI Group Customers and to encourage them to register, activate and maintain the Cuentas GPR Card and Mobile App active.
NOW, therefore, in consideration of the foregoing, the mutual covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Definitions.
Capitalized terms have the meaning set forth in this Section 1.
“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person.
“Control” (and with correlative meanings, the terms “Controlled by” and “under common Control with”) means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of another Person, whether through the ownership of voting securities, by contract, or otherwise.
“Intellectual Property” means all (a) patents, patent disclosures, and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, together with all of the goodwill associated therewith, (c) copyrights, copyrightable works and works of authorship (whether copyrightable or not), including computer programs, data collections, and databases, (d) trade secrets, know-how, and other confidential or proprietary information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all applications for, and renewals or extensions of, such rights.
2. LSI Group Promotion Of Cuentas GPR Cards; Referrals; compensation.
2.1 LSI Group agrees to offer the Cuentas GPR Card and Mobile App to LSI Group Customers and to encourage them to register, activate and maintain the Cuentas GPR Card and Mobile App active.
2.2 During the one year term of this Agreement, LSI Group marketing efforts shall result in: (a) 200,000 LSI Group Customers successfully registering with a special promo code, activating and maintaining the Cuentas GPR Card and Mobile App (the “LSI Group Referrals”). To qualify as a LSI Group Referral, the referred LSI Group Customer must have a $50 deposit or cash load to the Cuentas GPR Card and Mobile App within reasonable time after registration, onboarding to the Cuentas platform and/or receipt of the Cuentas card.
2.3 LSI Group will have up to 6 months to reach the goal of 100,000 LSI Group Referrals to be the exclusive referral provider of Cuentas for Honduras, Colombia, El Salvador and Guatemala. Once LSI Group reaches or surpasses the 100,000 LSI Group Referrals within 6 months, LSI Group’s exclusive will be extended for another 6 months. LSI Group will work for a total of 12 months to reach the total minimum goal of 200,000 LSI Group referrals to be the exclusive referral provider to Cuentas for remittances to the countries of Honduras, Colombia, El Salvador and Guatemala. LSI Group will continue to be the exclusive referral provider of Cuentas for Honduras, Colombia, El Salvador and Guatemala for the next 2 years, assuming they reach 400,000 LSI Group Referrals after 2 years and 600,000 after 3 years. The exclusive status will terminate after 3 years, subject to renegotiation. If the conversion rate of LSI Group’s campaign is less than 10%, the parties may redesign the campaign.
2.4 LSI Group will receive thirty percent (30%) of the net revenue earned by Cuentas from the LSI Group Referrals and Cuentas shall retain the remaining seventy percent (70%) net revenue, (CUENTAS = 70%, LSI Group = 30%).
2.5 The Parties shall consult with each other on at least a monthly basis to review the results of the preceding month to determine the number of LSI Group Referrals and the net revenue due to LSI Group from Cuentas and discuss other opportunities or marketing strategies to improve the results.
3. Confidentiality.
3.1 From time to time during the Term of this Agreement, either Party (as the “Disclosing Party”) may disclose or make available to the other Party (as the “Receiving Party”) information about its business affairs, Intellectual Property, products/services/products and services, third-party confidential information and other sensitive or proprietary information, whether orally or in written, electronic or other form or media, and whether or not marked, designated or otherwise identified as “confidential” (collectively, “Confidential Information”).
3.2 Confidential Information shall not include information that at the time of disclosure: (i) is or becomes generally available to and known by the public other than as a result of, directly or indirectly, any breach of this Section 3 by the Receiving Party or any of its Affiliates, employees, officers, directors, partners, shareholders, agents, attorneys, third-party advisors, successors, and permitted assigns (collectively “Representatives”); (ii) is or becomes available to the Receiving Party on a non-confidential basis from a third-party source, provided that such third party is not and was not prohibited from disclosing such Confidential Information; (iii) was known by or in the possession of the Receiving Party or its Representatives before being disclosed by or on behalf of the Disclosing Party; or (iv) was or is independently developed by the Receiving Party without reference to or use, in whole or in part, of any of the Disclosing Party’s Confidential Information.
3.3 The Receiving Party shall: (A) protect and safeguard the confidentiality of the Disclosing Party’s Confidential Information with at least the same degree of care as the Receiving Party would protect its own Confidential Information, but in no event with less than a commercially reasonable degree of care; (B) not use the Disclosing Party’s Confidential Information, or permit it to be accessed or used, for any purpose other than to exercise its rights or perform its obligations under this Agreement; and (C) not disclose any such Confidential Information to any Person or entity, except to the Receiving Party’s Representatives who need to know the Confidential Information to assist the Receiving Party, or act on its behalf, to exercise its rights or perform its obligations under the Agreement.
3.4 The Receiving Party shall be responsible for any breach of this Section 3 caused by any of its Representatives. On the expiration or termination of the Agreement, the Receiving Party shall promptly return, and shall require its Representatives to return to the Disclosing Party all copies, whether in written, electronic or other form or media, of the Disclosing Party’s Confidential Information. In addition to all other remedies available at law, the Disclosing Party may seek equitable relief (including injunctive relief) against the Receiving Party and its Representatives to prevent the breach or threatened breach of this Section 3 and to secure its enforcement.
4. Public Announcements.
Neither Party nor any of its Affiliates or Representatives shall (orally or in writing) publicly disclose, issue any press release, or make any other public statement, or otherwise communicate with the media, concerning the existence of this Agreement or the subject matter hereof, without the prior written approval of the other Party, which shall not be unreasonably withheld, conditioned or delayed, except if and to the extent that such Party based on the reasonable advice of counsel is required to make any public disclosure or filing (“Required Disclosure”) regarding the subject matter of this Agreement (i) by applicable Law, (ii) pursuant to any rules or regulations of any securities exchange of which the securities of such Party or any of its Affiliates are listed or traded or (iii) in connection with enforcing its rights under this Agreement. In each case pursuant to clauses (i) or (ii) of this Section 4, the Party making any Required Disclosure shall consult with the other Party regarding the substance of the Required Disclosure and provide the other Party no less than three business days to review and comment on the content of the Required Disclosure prior to its publication or filing. Without limitation of the foregoing, the Parties shall issue a joint press release in the form acceptable to the Parties. Each Party shall be liable for any failure of its Affiliates or Representatives to comply with the restrictions set forth in this Section 4.
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5. Indemnification.
5.1 Subject to the terms and conditions set forth in Sections 5.2, each Party (as “Indemnifying Party”) shall indemnify and hold harmless, and defend the other Party (collectively, “Indemnified Party”) against any and all losses, damages, liabilities, deficiencies, claims, actions, judgments, settlements, interest, awards, penalties, fines, costs, or expenses of whatever kind, including reasonable attorneys’ fees, that are incurred by Indemnified Party in a final judgment (collectively, “Losses”), arising out of any third-party claim alleging:
(a) any grossly negligent or more culpable act or omission of Indemnifying Party including any reckless or willful misconduct in connection with the performance of its obligations under this Agreement; or
(b) any failure by Indemnifying Party to materially comply with any applicable federal, state, or local laws, regulations, or codes in the performance of its obligations under this Agreement.
5.2 Notwithstanding anything to the contrary in this Agreement, Indemnifying Party is not obligated to indemnify, hold harmless, or defend Indemnified Party against any claim (whether direct or indirect) to the extent such claim or corresponding Losses arise out of or result from, in whole or in part, Indemnified Party’s:
(a) Gross negligence or more culpable act or omission (including recklessness or willful misconduct); or
(b) failure to materially comply with any of its obligations set forth in this Agreement; or
(c) promotion or offering of the Cuentas GPR Card and Mobile App in in any manner not otherwise authorized under this Agreement.
6. Limitation of Liability.
6.1 No Consequential or Indirect Damages. EXCEPT AS OTHERWISE PROVIDED IN SECTIONS 3 AND 5, IN NO EVENT SHALL EITHER PARTY BE LIABLE UNDER THIS AGREEMENT TO THE OTHER PARTY OR ANY THIRD PARTY FOR CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR ENHANCED DAMAGES, LOST PROFITS OR REVENUES OR DIMINUTION IN VALUE, ARISING OUT OF, OR RELATING TO, AND/OR IN CONNECTION WITH ANY BREACH OF THIS AGREEMENT, REGARDLESS OF (A) WHETHER SUCH DAMAGES WERE FORESEEABLE, (B) WHETHER OR NOT IT WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND (C) THE LEGAL OR EQUITABLE THEORY (CONTRACT, TORT OR OTHERWISE) UPON WHICH THE CLAIM IS BASED.
6.2 Exceptions. THE LIMITATIONS AND EXCLUSIONS SET FORTH IN THIS SECTION SHALL NOT APPLY TO DAMAGES OR LIABILITIES ARISING FROM:
(a) THIRD-PARTY CLAIMS THAT ARE SUBJECT TO INDEMNIFICATION UNDER SECTION 5;
(b) THE GROSSLY NEGLIGENT ACTS OR OMISSIONS OR WILLFUL MISCONDUCT OF LSI GROUP IN PERFORMING ITS OBLIGATIONS UNDER THIS AGREEMENT; OR
(c) BREACH OF THE CONFIDENTIALITY OBLIGATIONS SET FORTH IN SECTION 3.
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7. Assignment and Delegation.
Neither Party shall assign any of its rights or delegate any of its obligations hereunder without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed.
8. No Solicitation.
8.1 During the Term of this Agreement and for a period of TWO YEARS thereafter, neither Party will directly or indirectly solicit or hire or engage as an independent contractor, any current or former employee of the other Party or any of its Affiliates (each, a “Covered Employee”).
8.2 The Parties acknowledge that the duration and scope of the restrictions contained in Section 8.1 are reasonable. Upon a determination that any term or provision of this Section 8 is invalid, illegal, or unenforceable, the court may modify this Section 8 to substitute the maximum duration or scope legally permissible under such circumstances to the greatest extent possible to effect the restrictions originally contemplated by the Parties hereto.
9. Relationship of the Parties.
9.1 Each Party is an independent contractor with regard to this Agreement. Nothing contained in this Agreement shall be construed as creating any agency, partnership, joint venture, or other form of joint enterprise, employment, or fiduciary relationship between the Parties. Neither Party, by virtue of this Agreement, will have any right, power, or authority to act or create an obligation, express or implied, on behalf of the other Party.
9.2 Any Persons employed or engaged by a Party in connection with the cross-marketing arrangement set forth herein shall be that Party’s employees or contractors. Each Party assumes responsibility for the actions of its employees and contractors under this Agreement and will be solely responsible for their supervision, daily direction, and control, wage rates, withholding income taxes, providing unemployment and disability benefits, and the manner and means through which the work under this Agreement will be accomplished.
10. Choice of Forum.
Each Party irrevocably and unconditionally agrees that it will not commence any action, litigation, or proceeding of any kind whatsoever against the other Party in any way arising from or relating to this Agreement, including all exhibits, schedules, attachments, and appendices attached to this Agreement and thereto, and all contemplated transactions, including contract, equity, tort, fraud, and statutory claims, in any forum other than US DISTRICT COURT or, if such court does not have subject matter jurisdiction, the courts of the State of Florida sitting in Miami-Dade County, and any appellate court thereof. Each Party irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and agrees to bring any such action, litigation, or proceeding only in said court. Each Party agrees that a final judgment in any such action, litigation, or proceeding is conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
11. Term, Termination, and Survival.
11.1 This Agreement shall commence as of the Effective Date and shall continue thereafter for a period of 12 months unless sooner terminated pursuant to Section 13.2 or Section 13.3 (“Term”). If LSI Group meets the goal of 200,000 successful LSI Group Referrals within the first 12 months, the agreement will be extended for an additional 3 years as an exclusive relationship for these 4 countries.
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11.2 Either Party may terminate this Agreement, effective upon written notice to the other Party (the “Defaulting Party”) if the Defaulting Party:
(a) Materially breaches this Agreement, and such breach is incapable of cure, or with respect to a material breach capable of cure, the Defaulting Party does not cure such breach within thirty (30) days after receipt of written notice of such breach.
(b) Becomes insolvent or admits its inability to pay its debts generally as they become due.
(c) Becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law.
(d) Is dissolved or liquidated or takes any corporate action for such purpose.
(e) Makes a general assignment for the benefit of creditors.
(f) Has a receiver, trustee, custodian, or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business.
11.3 The rights and obligations of the Parties set forth in this Sections 3, 4 and 5, and any right or obligation of the Parties in this Agreement which, by its nature, should survive termination or expiration of this Agreement, will survive any such termination or expiration of this Agreement.
11.4 Either Party, in its sole discretion, may terminate this Agreement at any time, without cause, by providing at least sixty days’ prior written notice to the other Party.
12. Severability.
If any term or provision of this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon a determination that any term or provision is invalid, illegal, or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement to effect the original intent of the parties as closely as possible in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
13. Waiver.
No waiver by either Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the Party so waiving. No waiver by either Party shall operate or be construed as a waiver in respect of any failure, breach, or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power, or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.
14. Entire Agreement.
This Agreement and any other documents incorporated herein by reference and all related Exhibits and Schedules, constitute the sole and entire agreement of the Parties with respect to the subject matter of this Agreement and therein and supersedes all prior and contemporaneous understandings, agreements, representations, and warranties, both written and oral, with respect to the subject matter. The Parties have not relied on any statement, representation, warranty, or agreement of the other Party or any other Person on such Party’s behalf, including any representations, warranties, or agreements arising from statute or otherwise in law, except for the representations, warranties, or agreements expressly contained in this Agreement.
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15. No Oral Amendments.
No amendment to this Agreement is effective unless it is in writing, identified as an amendment to this Agreement and signed by an authorized representative of each Party.
16. Notice.
Each Party shall deliver all notices, requests, consents, claims, demands, waivers, and other communications under this Agreement (each, a “Notice”) in writing and addressed to the other Party at the addresses set forth on the first page of this Agreement (or to such other address that the receiving Party may designate from time to time in accordance with this section). Each Party shall deliver all Notices by personal delivery, nationally recognized overnight courier (with all fees prepaid), facsimile [or email] (with confirmation of transmission), or certified or registered mail (in each case, return receipt requested, postage prepaid). Except as otherwise provided in this Agreement, a Notice is effective only (a) upon receipt by the receiving party and (b) if the party giving the Notice has complied with the requirements of this Section.
17. Choice of Law.
This Agreement and all related documents including all exhibits attached hereto, and all matters arising out of or relating to this Agreement, whether sounding in contract, tort, or statute are governed by, and construed in accordance with, the laws of the State of Florida without giving effect to the conflict of law provisions thereof to the extent such principles or rules would require or permit the application of the laws of any jurisdiction other than those of the State of Florida. The parties agree that the United Nations Convention on Contracts for the International Sale of Goods does not apply to this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date set forth above.
| CUENTAS, INC. | LSI GROUP S.A. | |||
| By | /s/ Shalom Arik Maimon | By | /s/ Ana Alicia Illescas Figueroa | |
| Name: | Shalom Arik Maimon | Name: | Ana Alicia Illescas Figueroa | |
| Title: | Interim CEO | Title: | CEO/Legal Representative | |
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Exhibit 31.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Shalom Arik Maimon , certify that:
1. I have reviewed this Form 10-Q of Cuentas Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 14, 2022 | |
| /s/ Shalom Arik Maimon | |
| Shalom Arik Maimon | |
| Interim Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Ran Daniel, certify that:
1. I have reviewed this Form 10-Q of Cuentas Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 14, 2022 | |
| /s/ Ran Daniel | |
| Ran Daniel | |
| Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Cuentas Inc. (the “Company”) for the three-months ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Shalom Arik Maimon, Interim Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: November 14, 2022 | ||
| By: | /s/ Shalom Arik Maimon | |
| Shalom Arik Maimon | ||
| Interim Chief Executive Officer | ||
This certification accompanies each Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Cuentas Inc. (the “Company”) for the three-months ended Septemeber 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Ran Daniel, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: November 14, 2022 | ||
| By: | /s/ Ran Daniel | |
| Ran Daniel | ||
| Chief Financial Officer | ||
This certification accompanies each Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by §906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.