World Health Energy Holdings, Inc 10-K for FY2021
World Health Energy Holdings, Inc. (WHEN)
About this 10-K
World Health Energy Holdings, Inc filed this 10-K on April 14, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $140.18K
- up 42.8% from $98.16K a year earlier
- Net loss
- $4.6M
- compared with a net loss of $872.79K a year earlier
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
MARK ONE:
For
the Fiscal Year ended
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) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered under Section 12 (b) of the Exchange Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
| N/A | N/A | N/A |
Securities registered under Section 12 (g) of the Exchange Act: Common Stock, par value $0.0007
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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 and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 and post such files). Yes ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
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 ☐
As
of April 10, 2022,
shares of the registrant’s common stock, par value $0.00001
per share, were outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant as of the last business
day of the registrant’s most recently completed second fiscal quarter (June 30, 2021) was approximately $
2021 ANNUA L REPORT (SEC FORM 10-K)
INDEX
Securities
and Exchange Commission
Item Number and Description
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CAUTIONARY NOTE REGARING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements regarding our business, financial condition, results of operations and prospects. The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results and the effects of the COVID-19 pandemic or any similar pandemic.
We caution that these factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
The following discussion should be read in conjunction with our unaudited financial statements and the related notes that appear elsewhere in this Annual Report on Form 10-K as well as our other SEC filings.
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PART I
Item 1. BUSINESS
Business Overview
World Health Energy Holdings, Inc. (“we” “us” “our” the “Company” or “WHEN”) WHEN is a diversified energy, health, and cybersecurity technology company. On April 27, 2020, WHEN completed a reverse triangular merger pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) among the Company, R2GA, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Sub”), UCG, Inc., a Florida corporation (“Seller”), SG 77 Inc., a Delaware corporation and wholly-owned subsidiary of Seller (“SG”), and RNA Ltd., an Israeli company and a wholly owned subsidiary of SG (“RNA”). Under the terms of the Merger Agreement, R2GA merged with and into SG, with SG remaining as the surviving corporation and a wholly-owned subsidiary of the Company (the “Merger”). The Merger became effective as of April 29, 2020. Each of Gaya Rozensweig and George Baumeohl, directors of the Company, are also the sole shareholders and directors of UCG.
RNA is primarily a research and development company that has been performing software design services in the field of cybersecurity. SG is primarily engaged in the marketing and distribution of cybersecurity related products. In anticipation of the transaction contemplated under the Merger Agreement, SG was formed and all of the cybersecurity rights and interests held by UCG, including the share ownership of RNA, were assigned to SG.
Following the closing, each of SG 77 and RNA became wholly-owned subsidiaries of the Company.
Recent Developments
On March 22, 2022 the Company, CrossMobile Sp zoo, a company formed under the laws of Poland (“CrossMobile”) and the shareholders of CrossMobile (of which our CEO, Giora Rosenzweig, holds 40.67% and George Baumeohl, a director, holds 6.67%, of the issued preferred share capital of CrossMobile), entered into an Investment Agreement (the “Agreement”) pursuant to which the Company is to purchase 26% of the outstanding common share capital of CrossMobile on a fully diluted basis, in consideration of the issuance by the Company to CrossMobile of 10,000,000,000 restricted shares of Company common stock (the “Initial Investment”). The acquisition is subject to the registration with the Polish Companies Registrar of the shares issuable to the Company in respect of the Initial Investment, as required under local law. Upon the registration of the Company shareholdings in CrossMobnile, the closing of the Initial Investment will be deemed to have occurred and the 10,000,000,000 Company shares of common stock will be issued to CrossMobile. In addition, for 18 months following the date of the Agreement, the Company has the option to purchase additional shares of CrossMobile, such that following such additional purchase, the Company shall hold approximately 51% of CrossMobile’s outstanding share capital on a fully diluted basis. In the event the Company shall choose to exercise the option, the Company shall issue such number of restricted shares of common stock of the Company calculated based on pre-money valuation of CrossMobile as determined by an independent appraiser agreed between the Company and CrossMobile
We believe that the acquisition of CrossMobile provides an opportunity in our evolution and provides us with a strong foothold in the European market. CrossMobile is part of a limited group of licensed operators in the EU. CrossMobile is planning to roll-out a comprehensive suite of value-added services for B2B and B2C customers in the telecom industry.
With our involvement in CrossMobile, we expect to provide advanced cybersecurity solutions and other next-generation value-added services to CrossMobile’s future product offerings as well the access to the EU market for our CyberSecurity products.
CyberSecurity Business
Through SG and RNA, we are primarily engaged in data security and analytics and provides intelligent security software and services to enterprises and individuals worldwide The Company leverages artificial intelligence (“AI”) and machine learning to deliver innovative solutions in the areas of cybersecurity, safety focusing on the areas of endpoint security, endpoint management and encryption.
As the digital transformation of enterprises continues to advance, workforces are becoming more dispersed and mobile, and data and applications are increasingly migrating to the cloud. As part of this trend, the number of connected endpoints is growing rapidly, as is their complexity and the volume of data that they process and store. These endpoints, which include smartphones, laptops, desktops, servers, vehicles, industrial equipment and other connected devices in the Internet of Things (“IoT”), are increasingly a target for cyber adversaries. The COVID-19 pandemic has accelerated the decentralization of the workplace prompting many enterprises to shift to substantially remote and mobile work models. At the same time, the threat environ\ment has become increasingly hostile as the number of adversaries grows and the scale and sophistication of their attacks, increasingly focused on the endpoint, continue to develop.
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The landscape of increasing vulnerability has created opportunities for secure communications platforms, endpoint cybersecurity and management solutions, analytic tools and related services that help enterprises and individuals to secure their connected endpoints.
Our software specializes in data protection, threat detection and response. Our Product offerings enable enterprises to protect data stored on premises and in the cloud, confidential data belonging to customers, financial records, strategic and product plans and other intellectual property and, on a parental or guardian level, to monitor minor children’s cyber activities.
Our product offering, built on proprietary technology, helps enterprises protect data against cyberattacks from both internal and external threats. Our products enable enterprises to analyze data, account activity and user behavior to detect attacks and prevents or limits unauthorized use of sensitive information and prevents potential cyberattacks and limits others by automatically locking down data, allowing access to those who need it. Our products efficiently sustain a secure state with automation and address additional important use cases including data protection, data governance, compliance, data privacy, classification and threat detection and response.
Strategy
We believe that the technology underlying our product offering is our primary competitive advantage. The strength of our solution is driven by several proprietary technologies and methodologies that we have developed, coupled with how we have combined them into our highly versatile platform. These advantages enable our end users to
| ● | Prevent trade secret and data leakage | |
| ● | Protect against hackers | |
| ● | Minimize loss of productivity | |
| ● | Detect embezzlements and thefts | |
| ● | Defend employees from harassments | |
| ● | Prevent talent and client poaching | |
| ● | Avoid human errors | |
| ● | Develop a new level of decision-making ability based on accurate and real-time data. | |
| ● | Assist parents and legal guardians in monitoring their minor children’s’ cyber online activities. |
The Company’s go-to-market strategy focuses principally on generating revenue from software, services and licensing. The Company intends to drive revenue growth and to achieve margins that are consistent with those of other enterprise software companies.
We intend to sell substantially all of our products and services to distributors and resellers, which will sell to end-user customers, which we refer to in this report as our customers.
We believe that the COVID-19 pandemic, which continues to impact all of society has increased our long-term opportunity to help our customers protect their data and detect threats. Companies around the world now have employees working remotely from potentially vulnerable home networks, accessing critical on-premises data storages and infrastructure through VPNs and sharing information in cloud data stores. We believe this trend is likely to continue in the long-term and that we are striving to capitalize on the opportunity ahead.
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The implementation of our strategies is subject to our raising significant cash resources to, of which no assurance can be provided that we will be successful in raising the needed capital on commercially reasonable terms. As of the date of this report, we have no commitments for any capital raise.
Product Offerings
Our Product offerings are comprised of two segments, one targeting for commercial enterprises (B2B) and one for the individual users (B2C).
B2B Offerings—The B2B Cybersecurity system software development and implementation program focused on innovative solutions for the constantly evolving cyber challenges of businesses, non-governmental organizations (NGO’s) and governmental entities.
We recently launched OTOGRAPH, our comprehensive cybersecurity and information security system, to enable business enterprises to monitor, analyze and prevent suspicious or harmful behavior on corporate networks and connected devices. The OTOGRAPH is designed to analyze and prevent internal or external abuse or abnormal activity on enterprise devices, such as PCs, mobile phones, servers or any other OS-based IOT device.
The rapid transition to open and cloud-based remote workforce has exposed businesses and organizations across the world to higher risks of cyber-attacks and information security breaches. To enable businesses to better protect their data and workflow, we developed a Business Behavioral Analysis (BBA) system that enables business leaders to track all activity from any given location on a one-stop dashboard. Developed over the past two years, OTOGRAPH provides aggregated data and a wide variety of real-time analytics such as real time monitoring of online behavior, applications and system behavior, data breaches, internal and external connections analytics, productivity analysis and psycholinguistic analysis. Corporations and organizations can then use the dashboard to detect suspicious human or device activities that put their company at risk.
OTOGRAPH was developed based on a state of the art intelligence technology combined with AI technology that processes and analyzes massive amounts of behavioral and communication data and enables organizations to make real time accurate preventive assessments and decisions to protect company assets and ensure operational efficiency. OTOGRAPH deploys a unique Business Behavioral Analysis (BBA) machine learning software. Behavioral digital data is extracted from all endpoint devices that are connected to the company’s network infrastructure – whether physically, wirelessly or remotely. The data is processed and analyzed to learn and to reveal the unique digital behavioral pattern of the organization as a whole and of every endpoint or individual.
OTOGRAPH then sets baselines of normal patterns for each, and constantly searches for anomalies – deviations from those expected patterns. The anomalies are detected automatically and instantly, categorized by their type and generate push alerts which are sent to the business leader’s dashboard and enabling him to respond to the threat.
OTOGRAPH is continuously learning and calibrating the normal patterns and their thresholds to minimize the number of false alarms and constantly adapt to the changing needs of organizations in real time.
B2C Cybersecurity —The B2C Cybersecurity division targets families concerned with external cyber threats and exposures in addition to monitoring a child’s behavioral patterns that may alert parents to potential tragedies caused by cyber bullying, pedophiles, other predators, and depression.
SG’s Parental System offers a comprehensive solution which is designed to enable parents wishing to observe their children’s online and offline behavior to learn if they are accessing inappropriate websites and content and/or to protect them from a range of threats including cyberbullying, pedophiles and other predators and identity theft.
The Parental System line is positioned as the “ultimate parental cyber solution”. This system incorporates a range of features enabling parents to view and manage their children’s phones. The key elements of our proprietary solutions include the following: analysis of all incoming and outgoing written data; analysis of all incoming and outgoing audio communication; real time location tracking; environmental surroundings analysis; and cyber activity analysis.
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The Parental System has similar features to those of the B2B yet tailored to fit the needs of parents and guardians to protect their children. Such variations focus on online behavioral patterns whether vocally, via SMS or social media platforms. If there is a change in behavior patterns, the product is designed to immediately send the parent or adult guardian an alert. For example, one of the identifiable indicators before suicide is social withdrawal, something which today appears as a significant decrease in text message exchanges. The system categorizes this decrease as a red flag. Moreover, there are certain words and phrases which increase in use prior to suicide which the system will detect these it will put them in the red flag category.
While analyzing voice calls based on; tone of speech, lengths of the conversation and the frequency of calls, Parental System Analytics is capable of identifying changes in behavioral patterns and flagging these changes. For example, studies showed that with deteriorating mental health, the frequency of calls decreases and the sentences along with the length of the conversations get shorter. Any such discrepancy in behavior patterns will send a real time alert to the parent or legal guardian, potentially avoiding a tragedy.
Sales and Marketing
We license the vast majority of our products and services thru a global network of resellers and distributors that we refer to as our channel partners. In addition, we maintain a highly trained professional sales force that is responsible for overall market development, including the management of the relationships with our channel partners and supporting channel partners in winning customers through product demonstrations and risk assessments. Our channel partners identify potential sales targets, maintain relationships with customers and introduce new products to existing customers. Sales to our channel partners are generally subject to our standard, non-exclusive channel partner agreement.
Research and Development
Our research and development efforts are focused primarily on improving and enhancing our existing products, as well as developing new products, features and functionality. Use of our products has expanded from data governance into areas such as data security, privacy, accessibility and retention, and we anticipate that customers and innovation will drive functionality into additional areas. We regularly release new versions of our products which incorporate new features and enhancements to existing ones. We conduct substantially all of our research and development activities in Israel, and we believe this provides us with access to world-class engineering talent. In addition, we continue to seek opportunities to extend our technological capabilities and grow our business from strategic technological tuck-in acquisitions.
Our research and development expense was $489,210 and $497,121 in 2020 and 2021, respectively.
Intellectual Property
We attempt to protect our technology and the related intellectual property under trade secret laws, confidentiality procedures and contractual provisions. No single intellectual property right is solely responsible for protecting our products. The nature and extent of legal protection of our intellectual property rights depends on, among other things, its type and the jurisdiction in which it arises. We currently have no issued patents.
We rely on our unpatented proprietary technology and trade secrets. We generally enter into confidentiality agreements with our employees, consultants, service providers, vendors and customers and generally limit internal and external access to, and distribution of, our proprietary information and proprietary technology through certain procedural safeguards. We also rely on invention assignment agreements with our employees, consultants and others, to assign to the Company all inventions developed by such individuals in the course of their engagement with the Company.
In addition to Company-owned intellectual property, we license software from third parties for integration into our solutions, including open source software and other software available on commercially reasonable terms. It may be necessary in the future to seek or renew licenses relating to various aspects of our products, processes and services. While we have generally been able to obtain such licenses on commercially reasonable terms in the past, we cannot provide assurance that such third parties will maintain such software or continue to make it available.
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Competition
Our main competition in the global parental control software market are McAfee LLC (US), Avanquest (France), Bitdefender (Romania), SaferKid (US), Symantec Corporation (US), Webroot Inc. (US), Content Watch Holdings, Inc. (US), Verizon Communications Inc. (US), Mobicip LLC (US), and Trend Micro Inc. (Japan). These are companies that may have been in the market longer than our company, and/or have a more recognizable name, but our proprietary algorithms are designed to trace behavioral pattern changes in the user as opposed to the machine, thus providing a better understanding of the user.
With regards to the B2B product and software available to protect businesses, we believe that our B2B solution is truly unique. Our main known competitor is Checkpoint Systems, yet, our cyber software provides unique protection by analyzing inner company behavioral patterns as well as external, thus aiding our clients to foresee security breaches whether from an internal or external threat.
Regulatory Environment
Foreign and domestic laws and regulations apply to many aspects of the Company’s business.
The Company collects and uses a wide variety of information for various purposes in its business, including to help ensure the integrity of its services and to provide features and functionality to customers. This aspect of the Company’s business is subject to a broad array of evolving privacy and data protection laws, including the European Union’s General Data Protection Regulation national and state laws within the United States, including the California Privacy Rights Act. These laws impose strict operational requirements and can provide for significant penalties for non-compliance. Elements of these evolving laws and regulations, as well as their interpretation and enforcement, remain unclear and the Company may be required to modify its practices to comply with them in the future.
Employees
As of April 10, 2022, we had eight (8) employees, of which six (5) are primarily engaged in research and development and three (3) in administrative positions.
Other Corporate Holdings
We currently also have the following subsidiaries.
FSC Solutions, Inc. On June 26, 2015, we entered into a Stock Purchase Agreement (the “Agreement”) with FSC and its shareholders which included Uri Tadelis, our former Chief Executive Officer and Director and our former Directors Chaim J. Lieberman and Gal Levy. The Agreement was effective as of July 1, 2015 which served as the closing date for the acquisition. Pursuant to the terms of the Agreement, we acquired all of the capital stock of FSC in exchange for the issuance of 70 billion shares of our unregistered common stock with the possibility of the issuance of an additional 130 Billion common shares upon FSC meeting certain milestones as outlined in the Agreement. Upon completion of the acquisition of FSC, we intended to employ FSC’s software and trading platform to enter the on-line trading industry. Subsequent to the completion of the acquisition, we determined that FSC did not have control over the trading platform and software we expected to acquire and operate. Please refer to Item 3 of this report.
World Health Energy, Inc. World Health Energy, Inc. owns an algae-tech business whose primary focus was the production of algae using their proprietary GB3000 growth system. The system quickly and efficiently grows algae for the production of biofuels and food protein. We also sought to produce and market high-quality, low-cost B100 biodiesel. Though, we believe that the Company has been successful in demonstrating the effectiveness of the GB3000 system on a small-scale the Company has not yet been able to raise the necessary capital to implement their technologies on a commercial scale.
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Available Information
The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov. The Company’s websites are located at http://www.worldhealthenergy.com/ and http://www.whengreenenergy.com/. Information contained on, or accessible through, these websites, or any website stated in this report, is not a part of, and is not incorporated by reference into, this report.
Item 1A. Risk Factors.
You should consider each of the following risk factors and any other information set forth in this Form. 10-K as the other Company’s reports filed with the SEC, including the Company’s consolidated financial statements and related notes, in evaluating the Company’s business and prospects. The risks and uncertainties described below are not the only ones that impact the Company’s operations and business. Additional risks and uncertainties not presently known to the Company, or that the Company currently considers immaterial, may also impair its business or operations. If any of the following risks actually occur, the Company’s business and financial condition, results or prospects could be harmed.
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Risks Relating to Our Business and Industry
We will need to raise significant capital in order to realize our business plan and the failure to obtain the needed funding could lead to our operational failure.
We will need to raise additional working capital in order to design and develop our second-generation online security and data protection technologies, expand our market strategy and potentially acquire complementary technologies. Without adequate funding, we also may not be able to accelerate the development and deployment of our products, respond to competitive pressures and develop new or enhanced products. At the present time, we have no commitments for any financing, and there can be no assurance that capital will be available to us on commercially acceptable terms or at all. We may have difficulty obtaining additional funds as and when needed, and we may have to accept terms that would adversely affect our stockholders. Any failure to achieve adequate funding will delay our development programs and product launches and could lead to abandonment of one or more of our development initiatives, as well as prevent us from responding to competitive pressures or take advantage of unanticipated acquisition opportunities.
Any additional equity financing may be dilutive to stockholders, and debt and certain types of equity financing, if available, may involve restrictive covenants or other provisions that would limit how we conduct our business or finance our operations.
Even if we raise funds to address our immediate working capital requirements, we also may be required to seek additional financing in the future to respond to increased expenses or shortfalls in anticipated revenues, accelerate product development and deployment, respond to competitive pressures, develop new or enhanced products, or take advantage of unanticipated acquisition opportunities.
These conditions raise substantial doubt as to our ability to continue as a going concern and may make it more difficult for us to raise additional capital when needed. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of reported assets or liabilities should we be unable to continue as a going concern.
Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in this prospectus. Our audited financial statements at December 31, 2021 and 2020 and for the years then ended were prepared assuming that we will continue as a going concern.
Primarily as a result of our losses and limited cash balances and cash flows, the report of our independent registered public accounting firm included elsewhere in this prospectus contains an explanatory paragraph on our financial statements stating that our ability to continue as a going concern is highly contingent on our ability to raise capital for ongoing research and development and clinical trials as we expect to continue to incur losses for the foreseeable future. Such an opinion could materially limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise. There is no assurance that sufficient financing will be available when needed to allow us to continue as a going concern. The perception that we may not be able to continue as a going concern may also make it more difficult to operate our business due to concerns about our ability to meet our contractual obligations. We cannot provide any assurance that we will be able to raise additional capital.
If we are unable to secure additional capital, we may be required to curtail our clinical and research and development initiatives and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in our clinical and regulatory efforts, which is critical to the realization of our business plan. The accompanying financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern. It is not possible for us to predict at this time the potential success of our business. The revenue and income potential of our proposed business and operations are currently unknown. If we cannot continue as a viable entity, you may lose some or all of your investment.
We have a history of losses and expect to incur losses and negative operating cash flows in the future.
We expect our operating losses to continue as we continue to expend resources to further develop and enhance our technology offering, to complete prototypes for proof-of-concept, obtain regulatory clearances or approvals as required, expand our business development activities and finance capabilities and conduct further research and development. We also expect to experience negative cash flow in the short-term until licensing revenues increase from our planned acquisitions.
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The nature of the technology platforms utilized by us are complex and highly integrated, and if we fail to successfully manage releases or integrate new updates, it could harm our revenues, operating income, and reputation.
The technology platforms developed by us accommodate integrated applications that include our own developed technology and third-party technology, thereby substantially increasing their functionality. By enabling such system interoperability, our communications platform both reduces implementation and ongoing costs, and improves overall management efficiencies.
Due to this complexity and the condensed development cycles under which we operate, we may experience errors in our software, corruption or loss of our data, or unexpected performance issues from time to time. For example, our solutions may face interoperability difficulties with software operating systems or programs being used by our customers, or new releases, upgrades, fixes or the integration of acquired technologies may have unanticipated consequences on the operation and performance of our other solutions. If we encounter integration challenges or discover errors in our solutions late in our development cycle, it may cause us to delay our launch dates. Any major integration or interoperability issues or launch delays could have a material adverse effect on our revenues, operating income and reputation.
Security breaches, cyberattacks or other cyber-risks of our IT and production systems could expose us to significant liability and cause our business and reputation to suffer and harm our competitive position.
Our corporate infrastructure stores and processes our sensitive, proprietary and other confidential information (including as related to financial, technology, employees, marketing, sales, etc.) which is used on a daily basis in our operations. In addition to that, our software involves transmission and processing of our customers’ confidential, proprietary and sensitive information. We have legal and contractual obligations to protect the confidentiality and appropriate use of customer data.
High-profile cyberattacks and security breaches have increased in recent years, with the potential for such acts heightened as a result of the number of employees working remotely due to COVID-19. Security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting IT products and enterprise infrastructure. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and often are not recognized until launched against a specific target, we may be unable to anticipate these techniques or to implement adequate preventative measures. As we continue to increase our client base and expand our brand, we may become more of a target for third parties seeking to compromise our security systems and we anticipate that hacking attempts and cyberattacks will increase in the future. We cannot give assurance that we will always be successful in preventing or repelling unauthorized access to our systems. We also may face delays in our ability to identify or otherwise respond to any cybersecurity incident or any other breach. Additionally, we use third-party service providers to provide some services to us that involve the storage or transmission of data, such as SaaS, cloud computing, and internet infrastructure and bandwidth, and they face various cybersecurity threats and also may suffer cybersecurity incidents or other security breaches. Despite our security measures, our IT and infrastructure may be vulnerable to attacks. Threats to IT security can take a variety of forms. Individual and groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states, continuously undertake attacks that pose threats to our customers and our IT. These actors may use a wide variety of methods, which may include developing and deploying malicious software or exploiting vulnerabilities in hardware, software, or other infrastructure in order to attack our products and services or gain access to our networks, using social engineering techniques to induce our employees, users, partners, or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our users’ or customers’ data, or acting in a coordinated manner to launch distributed denial of service or other coordinated attacks. Inadequate account security practices may also result in unauthorized access to confidential and/or sensitive data.
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Security risks, including, but not limited to, unauthorized use or disclosure of customer data, theft of proprietary information, theft of intellectual property, theft of internal employee’s PII/PHI information, theft of financial data and financial reports, loss or corruption of customer data and computer hacking attacks or other cyberattacks, could require us to expend significant capital and other resources to alleviate the problem and to improve technologies, may impair our ability to provide services to our customers and protect the privacy of their data, may result in product development delays, may compromise confidential or technical business information, may harm our competitive position, may result in theft or misuse of our intellectual property or other assets and could expose us to substantial litigation expenses and damages, indemnity and other contractual obligations, government fines and penalties, If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures and our products could be harmed, we could lose potential sales and existing customers, our ability to operate our business could be impaired, and we may incur significant liabilities, and we could suffer harm to our reputation and competitive position, and our operating results could be negatively impact our business.
The market opportunity for our products and services may not develop in the ways that we anticipate.
The demand for our products and services can change quickly and in ways that we may not anticipate because the market in which we operate is characterized by rapid, and sometimes disruptive, technological developments, evolving industry standards, frequent new product introductions and enhancements, changes in customer requirements and a limited ability to accurately forecast future customer orders. Our operating results may be adversely affected if the market opportunity for our products and services does not develop in the ways that we anticipate or if other technologies become more accepted or standard in our industry or disrupt our technology platforms.
If we are unable to maintain successful relationships with our channel partners, our business could be adversely affected.
We rely on channel partners, such as distribution partners and resellers, to sell licenses and support and maintenance agreements for our software and to perform some of our professional services. Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our channel partners.
Our agreements with our channel partners are generally non-exclusive, meaning our channel partners may offer customers the products of several different companies. If our channel partners do not effectively market and sell our software, choose to use greater efforts to market and sell their own products or those of others, or fail to meet the needs of our customers, including through the provision of professional services for our software, our ability to grow our business, sell our software and maintain our reputation may be adversely affected. Our contracts with our channel partners generally allow them to terminate their agreements for any reason upon 30 days’ notice. A termination of the agreement has no effect on orders already placed. The loss of a substantial number of our channel partners, our possible inability to replace them, or the failure to recruit additional channel partners could materially and adversely affect our results of operations. If we are unable to maintain our relationships with these channel partners, our business, results of operations, financial condition or cash flows could be adversely affected. Finally, even if we are successful, our relationships with channel partners may not result in greater customer usage of our products and professional services or increased revenue.
The online security and device management industry is highly competitive, and we have a number of competitors that are larger and have greater resources.
We operate in an intensely competitive market which experiences rapid technological developments, changes in customer requirements and changes in industry standards. These in addition to the frequent new product introductions and improvements offered by our competitors. Our competitive position could weaken, and we could experience a drop-in revenue in we are not able to anticipate or react to competitive challenges or if new or existing competitors gain market share in any of our markets. In order to successfully compete, we must maintain a successful research and development effort to develop new product and enhance our existing products. Should we not be successful in responding to our competitors or to changing technological and customer demands, the outcome could be a negative effect on our competitive position and our financial results.
Another challenge is the growing competition from network equipment and computer hardware manufacturers as well as large operating system providers. These firms continuously develop and incorporate into their products data protection and storage and server management software that competes at some levels with our product offerings. Our competitive position could be adversely affected to the extent that our customers perceive the functionality incorporated into these products as replacing the need for our products.
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Many of our competitors have deeper pockets, greater technical, sales, marketing, or other resources than we do and consequently may have the ability to influence customers to purchase their products instead of ours.
There is uncertainty as to market acceptance of our technology and services.
The demand for our products and services can change quickly and in ways that we may not anticipate because the market in which we operated is characterized by rapid, and sometimes disruptive, technological development.
We may not be able to complete or integrate successfully any potential future acquisitions, partnerships or joint ventures.
Acquisitions can involve a number of special risks and challenges, including but not limited to:
| ● | Complexity, time and costs associated with the integration of acquired business operations, workforce, products and technologies into our existing business, sales force, employee base, product lines, and technology. | |
| ● | Management distraction from our existing business and other business opportunities. | |
| ● | Employee termination could occur and thus inducing costs associated with the termination of those employees. | |
| ● | Assumption of debt or other liabilities of the acquired business, including litigation related to the acquired business. | |
| ● | Increased expenses and working capital requirements. | |
| ● | Dilution of existing stockholders’ shares. | |
| ● | Increased costs and efforts in connection with compliance with Section 404 of the Sarbanes-Oxley Act. |
Integrating an acquired business can be complex, time consuming, as well as an expensive process, which can impact the effectiveness of our internal control over financial reporting.
If such integration is unsuccessful, we may not realize the potential benefits of an acquisition or suffer from adverse effects that we currently cannot foresee.
Any of the foregoing, along with other factors, could harm our ability to achieve anticipated levels of profitability from such acquired businesses or to realize other anticipated benefits of such acquisitions. Due to the fact that acquiring high technology companies is inherently risky, there can be no assurance that future acquisitions will be successful and shall not adversely affect our business, financial condition or operating results.
If we cannot keep pace with rapid developments and changes in our industry and provide new services to our clients, the use of our services could decline, reducing our revenues.
Our future success depends on our ability to respond to the rapidly changing needs of our customers by developing product upgrades and introducing new products on a timely basis. Though we have and continue to incur, significant research and development expenses, the development and introduction of a new product involves significant resources and time commitment and is therefore subject to risks including:
| ● | Managing the length of the development cycle for new product enhancements, which could be longer than originally anticipated. | |
| ● | Adapting our products to the endlessly evolving industry standards and to our competitors’ technological developments. |
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| ● | Entering into new markets in which we have limited experience. | |
| ● | Incorporating acquired products and technologies. | |
| ● | Integrating our various security and storage technologies, management solutions, and support into unified enterprise security and storage solutions. | |
| ● | Developing or expanding efficient sales channels. |
In addition, if we cannot adapt our business models to keep pace with industry trends, our revenue could be negatively impacted.
If we are not successful in managing these risks and challenges, or if our new products, product upgrades, and services are not technologically competitive or do not achieve market acceptance, our business and operating results could be adversely affected.
Our cybersecurity system might be used for fraudulent, illegal or improper purposes, which could expose us to additional liability and harm our business.
Reputation in the cybersecurity field is an important corporate asset. An operating incident, significant cybersecurity disruption, or other adverse event may have a negative impact on our reputation. This, in turn, could make it more difficult for us to compete successfully for new opportunities, obtain necessary regulatory approvals, or could reduce consumer demand for our branded products.
Furthermore, such disruptions or fraudulent use could expose us to liabilities such as lawsuits and settlements. Such liabilities could be time consuming, costly and harmful to our business and funds.
We may be subject to the risks of doing business internationally.
We have significant operations outside of the U.S., including engineering, sales, customer support and production, these will be subject to risks in addition to those faced by our domestic operations such as:
| ● | Potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights that U.S. laws or may not be adequately enforced. | |
| ● | Governmental control and other foreign law requirements, including labor restrictions and related laws that can impact our business operations. | |
| ● | Restrictions on our ability to repatriate cash from our international subsidiaries or to exchange cash availability for use in the U.S. | |
| ● | Fluctuations in currency exchange rates and economic instability such as higher interest rates in the U.S. and inflation could reduce our customers’ ability to obtain financing for software products or could make our products more expensive or could increase our costs of doing business in certain countries. | |
| ● | Longer payment cycles due to sales in foreign countries. | |
| ● | Difficulties related to administering a stock plan in some foreign countries. | |
| ● | Delays and costs related to developing software and providing support in various languages. | |
| ● | Political unrest, war, or terrorism, particularly in areas in which we have facilities. |
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Costs of compliance with laws and regulations
We are subject to regulatory environment changes regarding privacy and data protection and could have a material impact on our results of operations.
The growth and expansion of the company into a variety of new fields may potentially involve new regulatory issues/requirements such as the EU General Data Protection Regulation (GDPR) or the New York Department of Financial Services (NYDFS) Cybersecurity Regulation. The potential cost of compliance with or imposed by new/existing regulations and policies that are applicable to us may affect the use of our products and services and could have a material adverse impact on our results of operations.
We may not be able to successfully protect the intellectual property we license and may be subject to infringement claims.
We rely on a combination of contractual rights, copyright, trademark and trade secret laws to establish and protect our proprietary technology. We customarily require our employees and independent contractors to execute confidentiality agreements or otherwise to agree to keep our proprietary information confidential when their relationship with us begins. Typically, our employment contracts also include clauses requiring our employees to assign to us all of the inventions and intellectual property rights they develop in the course of their employment and to agree not to disclose our confidential information. Nevertheless, others, including our competitors, may independently develop similar technology to that licensed by us, duplicate our services or design around our intellectual property. Further, contractual arrangements may not prevent unauthorized disclosure of our confidential information or ensure an adequate remedy in the event of any unauthorized disclosure of our confidential information. Because of the limited protection and enforcement of intellectual property rights in many foreign markets, our intellectual property rights may not be as protected as they may be in more developed markets such as the United States. We may have to litigate to enforce or determine the scope or enforceability of our intellectual property rights (including trade secrets and know-how), which could be expensive, could cause a diversion of resources and may not prove successful. The loss of intellectual property protection could harm our business and ability to compete and could result in costly redesign efforts, discontinuance of certain service offerings or other competitive harm. Additionally, we do not hold any patents for our business model or our business processes, and we do not currently intend to obtain any such patents in Mexico, the United States or elsewhere.
We may also be subject to costly litigation in the event our services or the technology that we license are claimed to infringe, misappropriate or otherwise violate any third party’s intellectual property or proprietary rights. Such claims could include patent infringement, copyright infringement, trademark infringement, trade secret misappropriation or breach of licenses. We may not be able to successfully defend against such claims, which may result in a limitation on our ability to use the intellectual property subject to these claims and also might require us to redesign affected services, enter into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our services. In such circumstances, if we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from another source, our revenue and earnings could be adversely impacted. Additionally, in recent years, non-practicing entities have been acquiring patents, making claims of patent infringement and attempting to extract settlements from companies in our industry. Even if we believe that such claims are without merit and successfully defend these claims, defending against such claims is time consuming and expensive and could result in the diversion of the time and attention of our management and employees.
If we don’t have sufficient resellers it is possible we won’t have sufficient funds for aggressive advertising campaigns thus resulting in deficits.
We sell our products to customers around the world through resellers. Sales through indirect channels involve a number of risks, including:
| ● | Our resellers are not subject to minimum sales requirements or to any obligations to market our products to their customers | |
| ● | Our reseller agreements are generally nonexclusive and may be terminated at any time without cause. | |
| ● | It is possible that our resellers distribute competing products and may, occasionally, place a greater emphasis on the sale of these products due to pricing, promotions, and other terms offered by such competitors. |
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We are subject to Currency exchange rate fluctuations
Our exposure to exchange risk mainly involves sales negotiated with customers in U.S. dollars net of expenses and possible investment or loan repayments in this currency. The change in foreign currencies compared to the Israeli Shekel may have an impact on the profit and loss statements for the Company.
Fluctuations in demand for our products and services are driven by many factors, and a decrease in demand for our products could adversely affect our financial result.
We are subject to fluctuations in demand for our products and services due to a variety of factors, including general economic conditions, competition, technological changes, changes in buying patterns, financial difficulties and or budget cuts of our actual and potential customers or resellers, awareness of security threats to IT systems, and other factors. Though such factors can at times increase our sales, yet such fluctuations could have a negative impact on our product sales. If for any reason the demand for our products declines, our revenues and gross margin could be adversely affected.
Our products are complex and operate in a wide variety of computer configurations, which could result in errors or product failures.
Due to the complexity of our product, there is a chance that our products contain undetected errors, failures, or bugs, especially when products are first introduced or when new versions are released. Our products are installed and used in large-scale computing environments, therefore are subject to different operating systems, system management software and network configurations, all of which may cause errors or a failure in our products. Furthermore, these may expose undetected errors, failures, or bugs in our products.
Errors, failures, or bugs in our products could result in negative reviews and publicity, causing damage to our brand name, product returns. These in turn could result in loss of market acceptance, loss of competitive position, or claims by customers. Finally, if an actual or perceived breach of information integrity or availability occurs in one of our customer’s systems, regardless of whether the breach is attributable to our products, the market perception of the effectiveness of our products could be harmed.
Solving any of these problems could require significant expenses and other resources and could cause interruptions, delays, or cessation of our product licensing, which could cause us to lose existing or potential customers and thus affect our operating results.
If we are unable to attract and retain qualified employees, lose key personnel, fail to integrate replacement personnel successfully, or fail to manage our employee base effectively, we may be unable to develop new and enhanced products and services, effectively manage or expand our business, or increase our revenues.
Our future success depends upon our ability to recruit and retain our key management, technical, sales, marketing, finance, and other critical personnel. Our officers and other key personnel are employees-at-will, and we cannot assure you that we will be able to retain them as the competition for workers with the specific skills that we require is significant. In order to attract and retain personnel in a competitive marketplace, we believe that we must provide a competitive compensation package, including cash and equity-based compensation. The unpredictability in our stock price may from time to time unfavorably affect our ability to recruit or retain employees. In addition, we may be unable to obtain required stockholder approvals of future increases in the number of shares available for issuance under our equity compensation plans, and accounting rules require us to treat the issuance of employee stock options and other forms of equity-based compensation as compensation expense. As a result, we may decide to issue fewer equity-based incentives and may be impaired in our efforts to attract and retain necessary personnel. If we are unable to hire and retain qualified employees, or conversely, if we fail to manage employee performance or reduce staffing levels when required by market conditions, our business and operating results could be adversely affected.
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Similarly to every work place, from time to time, key personnel in our company may leave, which may in turn have a negative impact and result in significant disruptions to our operations, including harming the timeliness product release, the successful implementation and completion of company initiatives, effectiveness of our disclosure controls and procedures and our internal control over financial reports, and the results of our operations. Furthermore, recruiting, training and successfully integrating replacement employees could be time consuming and may result in additional disruptions to our operations, which could in turn negatively impact future revenues.
Third parties claiming that we infringe their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products.
There is a possibility of future claims that we allegedly infringed the intellectual property rights of others, including claims regarding patents, copyrights, and trademarks. In addition, former employers of our former, current, or future employees may assert claims that such employees have improperly disclosed to us the confidential or proprietary information of these former employers. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations. If we do not successfully defend our company of such claims, we could be forced to stop selling, or redesign our products, pay monetary amounts as damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our customers. We cannot assure you that any royalty or licensing arrangements that we may seek in such circumstances will be available to us on commercially reasonable terms or at all.
We must comply with governmental regulations setting privacy standards.
Governmental regulations setting environmental standards influence the design, components or operation of our products. New regulations and changes to current regulations are always possible and, in some jurisdictions, regulations may be introduced with little or no time to bring related products into compliance with these regulations. Our failure to comply with these regulations may prevent us from selling our products in certain countries. In addition, these regulations may increase our cost of supplying the product by forcing us to redesign existing products or to use more expensive designs or components. This may induce unexpected costs or operational complexities to bring products into compliance. Such could have an adverse effect on our revenues, gross profit margins and results of operations and increase the volatility of our financial results.
Our business may be affected by the ongoing COVID-19 pandemic and may be significantly adversely affected as the pandemic continues or if other events out of our control disrupt our business or that of our third party collaborators.
While the extent of the impact of the COVID-19 pandemic on our business and financial results is uncertain, a continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition and operating results. If the COVID-19 pandemic continues, other aspects of our may be may be adversely affected, delayed or interrupted. We currently rely on third parties to run our business. If any such third party in our supply chain for materials is adversely impacted by effects from the COVID-19 pandemic, including staffing shortages, production slowdowns and disruptions in delivery systems, our supply chain may be disrupted and our costs could be increased.
Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay, or otherwise adversely impact our business. In addition, this could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations.
The COVID-19 pandemic continues to evolve. The ultimate impact of the COVID-19 pandemic on our business operations is highly uncertain and subject to change and will depend on future developments, which cannot be accurately predicted, including the duration of the pandemic, additional or modified government actions, and the actions taken to contain COVID-19 or address its impact, among others. We do not yet know the full extent of potential delays or impacts on our business, our research programs or the global economy. We will continue to monitor the situation closely.
In addition, our business could be significantly adversely affected by other business disruptions to us or our third party collaborators that could seriously harm our potential future revenue and financial condition. Our operations, and those of our collaborators, contract manufacturing organizations (CMOs) and other contractors, consultants, and third parties could be subject to other global pandemics, earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
It may be difficult to enforce a U.S. judgment against us, our officers and directors and the foreign persons named in this registration statement in the United States or in foreign countries, or to assert U.S. securities laws claims in foreign countries or serve process on our officers and directors and these experts.
While we are incorporated in the State of Delaware, currently all of our directors and executive officers are not residents of the United States, and the foreign persons named in this Annual report on Form 10-K are located outside of the United States. The majority of our assets are located outside the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws against us or any of these persons in a U.S. or foreign court, or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to assert U.S. securities law claims in original actions instituted in foreign countries. Foreign courts may refuse to hear a claim based on a violation of U.S. securities laws on the grounds that foreign countries are not necessary the most appropriate forum in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that foreign law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by foreign countries law. There is little binding case law in foreign countries addressing the matters described above.
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We may be subject to numerous and varying privacy and security laws, and our failure to comply could result in penalties and reputational damage.
We are subject to laws and regulations covering data privacy and the protection of personal information, including health information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues which may affect our business. In the U.S., numerou s federal and state laws and regulations, including state security breach notification laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of personal information. Each of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues for us. If we fail to comply with applicable laws and regulations we could be subject to penalties or sanctions, including criminal penalties if we knowingly obtain or disclose individually identifiable health information from a covered entity in a manner that is not authorized or permitted by the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HIPAA.
Other countries have, or are developing, laws governing the collection, use and transmission of personal information as well. The EU and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. In the EU, for example, effective May 25, 2018, the GDPR replaced the prior EU Data Protection Directive (95/46) that governed the processing of personal data in the European Union. The GDPR imposes significant obligations on controllers and processors of personal data, including, as compared to the prior directive, higher standards for obtaining consent from individuals to process their personal data, more robust notification requirements to individuals about the processing of their personal data, a strengthened individual data rights regime, mandatory data breach notifications, limitations on the retention of personal data and increased requirements pertaining to health data, and strict rules and restrictions on the transfer of personal data outside of the EU, including to the U.S. The GDPR also imposes additional obligations on, and required contractual provisions to be included in, contracts between companies subject to the GDPR and their third-party processors that relate to the processing of personal data. The GDPR allows EU member states to make additional laws and regulations further limiting the processing of genetic, biometric or health data.
Any failure to comply with the requirements of GDPR and applicable national data protection laws of EU member states, could lead to regulatory enforcement actions and significant administrative and/or financial penalties against us (fines of up to Euro 20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher), and could adversely affect our business, financial condition, cash flows and results of operations.
Risks Related to Our Securities
There is not an active liquid trading market for the Company’s common stock.
The Company reports under the Exchange Act and its Common Stock is eligible for quotation on the OTC Markets. However, there is no regular active trading market in the Company’s Common Stock, and we cannot give an assurance that an active trading market will develop. If an active market for the Company’s Common Stock develops, there is a significant risk that the Company’s stock price may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control:
| ● | Variations in our quarterly operating results; | |
| ● | Announcements that our revenue or income are below analysts’ expectations; |
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| ● | General economic slowdowns; | |
| ● | Sales of large blocks of the Company’s common stock; and | |
| ● | Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments. |
Directors, executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our stockholders do not consider to be in their best interests.
As of the date of this current report on Form 10-K, our directors, executive officers, principal stockholders and affiliated entities beneficially own, in the aggregate, approximately 90% of our outstanding voting securities. Additionally, Ms. Gaya Rozensweig, one of our directors, holds Series A preferred Stock which allows her to vote with holders of the Common Stock on an as converted basis giving her effective control of any vote.
This concentration of ownership may have the effect of delaying or preventing a change in control of our company that may be favored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current market prices. This concentration of ownership and influence in management and board decision-making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of our company.
The market price of our common stock may be volatile and such volatility could cause you to lose some or all of your investment.
The market price of our common stock can fluctuate, and as a result you could lose the value of your investment. The market price of our common stock may be affected by a number of factors, including:
| ● | Announcements of quarterly operating results and revenue and earnings predictions we made and failed to meet or be consistent with such earlier projections or the expectations of our investors. | |
| ● | Rumors, announcements, or press articles regarding our competitors’ operations, management, organization, financial condition, or financial statements. | |
| ● | Changes in revenue and earnings estimates by us or our investors. | |
| ● | Announcements of planned acquisitions or dispositions by us or by our competitors. | |
| ● | Announcement of a new or planned product to be released either by us, our competitors or our customers. |
| ● | Acquiring or losing a significant customer. | |
| ● | Inquiries by the SEC, NASDAQ, law enforcement or other regulatory bodies. | |
| ● | Acts of terrorism, the threat of war, and other crises or emergency situations. | |
| ● | Economic slowdowns or the perception of an oncoming economic slowdown in any of the major markets in which we operate. |
Because we became public by means of a reverse acquisition, we may not be able to attract the attention of brokerage firms.
We may be subject to additional risks because we became public through a reverse acquisition. Securities analysts of brokerage firms may not provide coverage of our company since there is little incentive for brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct secondary offerings on our behalf in the future.
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Our Board of Directors may issue and fix the terms of shares of our Preferred Stock without stockholder approval, which could adversely affect the voting power of holders of our Common Stock or any change in control of our Company.
Our Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares of “blank check” preferred stock, with a $0.0007 par value per share (the “Preferred Stock”), with such designation rights and preferences as may be determined from time to time by the Board of Directors. Our Board of Directors is empowered, without shareholder approval, to issue shares of Preferred Stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our Common Stock. In the event of such issuances, the Preferred Stock could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our Company.
Our board of directors has significant control over us and we have yet to establish committees comprised of independent directors.
We only have two directors. Because of such limited number of directors, each of our board members has significant control over all corporate issues. Our directors were also the former owners of RNA.
We have not yet established board committees comprised of independent members. Our directors perform these functions, despite there not being independent directors. Thus, there is potential conflict in that our directors are also engaged in management and participated in decisions concerning management compensation and audit issues. While we intend to rectify this situation by expanding the board of directors and forming independent audit and compensation committees, there is no assurance that we will be able to do so.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.
We must maintain effective internal controls to provide reliable financial reports and to detect and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as would be possible with an effective control system in place. We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.
We have been assessing our internal controls to identify areas that need improvement. We are in the process of implementing changes to internal controls but have not yet completed implementing these changes. Failure to implement these changes to our internal controls or any others that it identifies as necessary to maintain an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our common stock.
We do not expect to pay dividends and investors should not buy our Common Stock expecting to receive dividends.
We do not anticipate that we will declare or pay any dividends in the foreseeable future. Consequently, you will only realize an economic gain on your investment in our Common Stock if the price appreciates. You should not purchase our Common Stock expecting to receive cash dividends. Since we do not pay dividends, and if we are not successful in establishing an orderly trading market for our shares, then you may not have any manner to liquidate or receive any payment on your investment. Therefore, failure to pay dividends may result in you not seeing any return on your investment even if our business operations are successful. In addition, because we do not pay dividends, we may have trouble raising additional funds which could affect our ability to expand our business operations.
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We are likely to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock.
We have financed our operations, and we expect to continue to finance our operations, acquisitions and develop strategic relationships, by issuing equity or convertible debt securities, which could significantly reduce the percentage ownership of our existing stockholders. Furthermore, any newly issued securities could have rights, preferences and privileges senior to those of our existing Common Stock. Moreover, any issuances of equity securities made by us may be at or below the prevailing market price of our Common Stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our Common Stock to decline.
We may also raise additional funds through the incurrence of debt, and the holders of any debt we may issue would have rights superior to your rights in the event we are not successful and are forced to seek the protection of the bankruptcy laws.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Since May 8, 2018, the Company’s executive offices were, and continue to be at 1825 NW Corporate Blvd., Suite 110, Boca Raton, FL 3343. The Company pays $99 per month to lease this office space.
Our subsidiary RNA Ltd. currently has a corporate office located in, Herzliya, Israel. The office comprises approximately 247 square meters. The lease term for this office is from December 2020 through December 2024 and our monthly renal payment is approximately $4,700.
We believe that our facilities are generally in good condition and suitable to carry on our business. We also believe that, if required, suitable alternative or additional space will be available to us on commercially reasonable terms.
Item 3. Legal Proceedings.
On October 27, 2020 WHEN filed suit in State Court, Palm Beach County, Florida, against FSC Solutions, Inc. (“FSC”), Eli Gal Levy (“EL”) and Padem Consultants Sprl (collectively, the “Defendants”). The suit relates to the Stock Purchase Agreement entered into by WHEN with FSC and its shareholders, which included EL, pursuant to which WHEN acquired all of the issued and outstanding stock of FSC in exchange for the issuance of 70 billion shares of WHEN unregistered common stock. FSC was the putative owner of a software and trading platform which WHEN intended to use to enter into the on-line trading business. Subsequent to the completion of the acquisition, we determined that FSC did not have control over the trading platform and software we expected to acquire and operate. The Suit sought declaratory judgment to unwind the FSC transaction and cancel the shares of WHEN common stock issued in the FSC transaction that are still outstanding.
A hearing was set for January 6, 2021 whereupon mediation was ordered. Mediation meetings were held but no resolution was reached. The Florida lawsuit is currently pending.
On or about, January 19, 2022, EL filed a lawsuit in the Delaware Court of Chancery seeking to remove the restrictive legend from all the shares of Common Stock held by EL (the “2022 Lawsuit”), which are approximately 23,000,000,000 shares. The Company retained the services of Delaware counsel and has moved to dismiss or stay the 2022 Lawsuit in favor of the previously filed Florida lawsuit, which involves the same parties and same issues. The Company’s motion is currently pending in the Delaware Court of Chancery.
From time to time we may become involved in various legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings or claims that we believe, either individually or in the aggregate, will have a material adverse effect on our business, financial condition, or results of operations.
Item 4. MINE SAFETY DISCLOSURES
Not applicable
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our Common Stock is quoted on the OTC Pink tier of the OTC Markets Group, Inc. under the symbol “WHEN” and has been quoted under such symbol since July 2016. Our Common Stock is traded sporadically and no established liquid trading market currently exists and there can be no assurance that a liquid market for our Common Stock will ever develop.
Market Information
As of April 10, 2022, there were 381 active holders of record of our common stock, and the last reported sale price of our common stock on the OTC Pink-tier of OTC Markets on April 10, 2022 was $0.0004.
Dividend Policy
To date, we have paid no dividends on our common stock and do not expect to pay cash dividends in the foreseeable future. We plan to retain all earnings to provide funds for the operations of our company. In the future, our Board of Directors will decide whether to declare and pay dividends based upon our earnings, financial condition, capital requirements, and other factors that our Board of Directors may consider relevant. We are not under any contractual restriction as to present or future ability to pay dividends.
Unregistered Sales of Equity Securities
(i) During 2021, the Company and certain investors entered into subscription agreements for a private placement of units of the Company securities (the 2021 Private Placements”) where each unit (a “Unit” and collectively the “Units”) is comprised of (i) one (1) share of the Company’s Common Stock and (ii) one common stock purchase warrant to purchase an additional share of the Company’s Common Stock through the second anniversary thereof at a per share exercise price of $0.0002. The price per unit is $0.0001. Subscription agreements for an aggregate of $900,000 provided that the investors are to remit the subscription proceeds at the time of investment and in three month intervals thereafter, in each case in amounts equal to 20%- 25% of their committed amounts. Through December 31, 2021, the Company received a total of $386,000 from these subscription proceeds and in consideration thereof issued 3,860,000,000 shares of Common Stock and warrants for an additional 3,860,000,000 shares of Common Stock.
(ii) Through September 2021, we issued to three service providers options under the 2021 Equity Incentive Plan to purchase in the aggregate 6,800,000,000 shares of our common stock at a per share purchase price of $0.0001.
(iii) In November 2021 we issued to the CEO of CrossMobile 1,500,000,000 shares of our common stock following the closing of the letter of intent between the Company and CrossMobile.
(iii) In December 2021 we issued to a consultant 5,700,000,000 shares of our common stock upon conversion of consulting fees due under the service agreement with such consultant.
(iv) In December 2021we issued to a consultant 150,000,000 shares under an investment relations services agreement then entered into. The shares were issued as partial payment under such agreement.
We relied upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”) by virtue of Section 4(a)(2) thereof and/or Regulation S promulgated by the SEC under the Act with respect to the issuance of such securities.
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Securities Authorized for Issuance under Equity Compensation Plans
The following table provides certain aggregate information with respect to the Company’s shares of common stock that as of December 31, 2021 were issuable under its 2021 Equity Incentive Plan in effect as of December 31, 2021.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | Weighted-average exercise price of outstanding options, warrants and rights (2) | Number of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in first column) (3) | |||||||||
| Equity compensation plans approved by security holders | 6,800,000,000 | $ | 0.0001 | 43,200,000,000 | ||||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||
| Total | 6,800,000,000 | $ | 0.0001 | 43,200,000,000 | ||||||||
| (1) | Represents shares of common stock issuable under our 2021 Equity Incentive Plan upon exercise of outstanding options to purchase 6,800,000,000 shares of common stock. |
| (2) | The weighted average remaining term for the expiration of remaining stock options is three years. |
| (3) | Represents shares of common stock available for future issuance under equity compensation plans. “Equity Compensation Plan” under Item 11 hereof contains a description of the material features of the 2021 Equity Incentive Plan. |
Issuer Purchases of Equity Securities
None
Our transfer agent is Continental Stock Transfer & Trust Company, with an address at 17 Battery Place, New York, NY 10004.Their telephone number is (212) 509-4000.
Dividend Policy
We have never paid a cash dividend on our Common Stock. We currently intend to retain all earning, if any, to finance the growth and development of our business. We do not anticipate paying any. Cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
None.
Item 6 -RESERVED
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Results of Operations
Summary of Results of Operations
| Year ended | ||||||||
| December 31 | ||||||||
| 2021 | 2020 | |||||||
| Revenues | $ | 140,177 | $ | 98,159 | ||||
| Operating Expenses | ||||||||
| Research and development expenses | (497,121 | ) | (489,210 | ) | ||||
| General and administrative expenses | (682,859 | ) | (523,663 | ) | ||||
| Share base compensation expenses | (3,485,830 | ) | - | |||||
| Operating loss | (4,525,633 | ) | (914,714 | ) | ||||
| Financing income (expenses), net | (71,180 | ) | 41,921 | |||||
| Net loss | (4,596,813 | ) | (872,793 | ) | ||||
Revenues
Revenues for the years ended December 31, 2020 and 2021 were $98,159 and 140,177, respectively.
Research and Development Expenses. Research and development expenses consist of salaries and related expenses, consulting fees, service providers’ costs and overhead expenses. Research and development expenses increased from $489,210 for the year ended December 31, 2020 to $497,121 in 2021. The increase resulted primarily from increased in salaries and related expenses and other development costs associated with our development activities, partially offset by decrease in consulting and professional fees.
General and Administrative Expenses. General and administrative expenses consist primarily of salaries and related expenses and other non-personnel related expenses such as legal expenses. General and administrative expenses increased from $523,663 for the year ended December 31, 2020 to $682,859 in 2021. The increase primarily attributed to the increase in professional services and other non-personnel related expenses, partially offset by decrease in salaries and related expenses.
Financing Expenses, Net. Financing expenses, net increased from financing income of $41,921of financing for the year ended December 31, 2020 to financing expenses, net of $71,180 for the year ended December 31, 2021. The increase is mainly a result of currency exchange differences between the Dollar and the New Israeli Shekel.
Net Loss. Net loss for the year ended December 31, 2021 was $4,596,813 and is primarily attributable to increase in share based compensation expenses to our employees and services providers.
Financial Condition, Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. At December 31, 2021 and 2020, we had current assets of $1,312,175 and $407,213 , respectively, and total assets of $1,588,375 and $458,150 respectively. The increase in total assets is mainly due to the increase in prepaid expenses resulted from issuance of Company’s shares to service providers and as part of our CrossMobile transaction as detailed above as well as increase in rights of use asset arising from operating lease . We had current liabilities of $764,203 as compared to $523,158 as of December 31, 2021 and 2020, respectively and total liabilities of $3,107,629 as compared to $2,440,712 as of December 31, 2021 and 2020 , respectively. The increase is mainly attributed to the increase in the balance of employees and related institutions, accrued expenses and increase in loans received from a related party as well as increase in right of use liability arising from operating lease.
At December 31, 2021, we had a cash balance of $46,022 compared to the cash balance of $359,949 as of December 31, 2020. We have no cash equivalents.
At December 31, 2021, we had a working capital of $547,972 as compared with a working capital deficiency of $115,945 at December 31, 2020.
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We need to raise additional operating capital in order to realize our business plan, including the expansion into the MVNO business. Management believes that funds on hand, as well as the subscription proceeds that we are to receive through our fiscal year 2022 on a periodic basis under the committed subscription agreements with certain of our investors, will enable us to fund our operations and capital expenditure requirements through March 2023. Our requirements for additional capital during this period will depend on many factors.
We may seek to raise any necessary additional capital through a combination of private or public equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights, future revenue streams, or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through private or public equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. We have a stockholders’ deficit of $1,519,254 and a working capital of $547,972 at December 31, 2021 as well as negative operating cash flows. These conditions raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Critical Accounting Policies
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheets and consolidated statements of operations. Actual results may differ significantly from those estimates. The most significant estimates and assumptions used in the financial statements relate to going concern and stock based compensation assumptions.
Off-Balance Sheet Arrangements We have not entered into any off-balance sheet arrangements during 2021 and do not anticipate entering into any off-balance sheet arrangements during the next 12 months.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The Company’s consolidated financial statements, together with the report of the independent registered public accounting firm thereon and the notes thereto, are presented beginning at page F-1. The Company’s consolidated balance sheet as of December 31, 2021 and December 31, 2020, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the year then ended have been audited by Halperin Ilanit CPA, which is an independent registered public accounting firm, engaged by the Company since May 8, 2020. These financial statements have been prepared in accordance with accounting principles generally accepted in the United State of America and pursuant to Regulations S-K as promulgated by the Securities and Exchange Commission and are included herein pursuant to Part II, Item 8 of this Form 10-K. The financial statements have been prepared assuming the Company will continue as a going concern.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
On May 7, 2020 (the “Notification Date”) Daszkal Bolton LLP (“Daszkal”) have notified the board of directors that they have decided not to stand for re-appointment as independent registered public accounting firm for World Health Energy Holdings, Inc. (the “Company”). On May 7, 2020, the Company engaged Halperin Ilanit, CPA, Financial Consulting & Management (“Halperin”) as its new independent registered public accounting firm. The change of the Company’s independent registered public accounting firm from Daszkal to Halperin was approved unanimously by the Company’s board of directors.
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The reports of Daszkal on the Company’s financial statements for the two most recent fiscal years did not contain an adverse or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles, other than an explanatory paragraph relating to the Company’s ability to continue as a going concern.
During the two most recent fiscal years and through the Notification Date, there were (i) no disagreements between the Company and Daszkal on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement, if not resolved to the satisfaction of Daszkal, would have caused Daszkal to make reference thereto in their reports on the consolidated financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
During the Company’s two most recent fiscal years and in the subsequent interim period through the Notification Date, the Company has not consulted with Halperin regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company by Halperin that was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue; or (ii) any matter that was the subject of either a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. Management of the Company, with the participation of the Interim Chief Executive Officer and Directors, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934) pursuant to Rule 13a-15 under the Exchange Act. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported on a timely basis and that such information is communicated to management, including the Interim Chief Executive Officer and the Company’s Board of Directors, to allow timely decisions regarding required disclosure. Based upon that evaluation, the Interim Chief Executive Officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2020 for the reasons discussed below.
Management’s Report on Internal Control over Financial Reporting. Management is responsible for the preparation of our financial statements and related information. Management uses its best judgment to ensure that the financial statements present fairly, in material respects, our financial position and results of operations in conformity with generally accepted accounting principles. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. It should be noted that the Company’s management, including the Interim Chief Executive Officer does not expect that the Company’s internal controls will necessarily prevent all errors or fraud. A control system, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance that the objectives of the control system are met, Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting.
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We conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and subsequent guidance prepared by the Commission specifically for smaller public companies. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2021 for the reasons discussed below:
| 1. | Due to the size of our Company and available resources, there are limited personnel to assist with the accounting and financial reporting function, which results in a lack of segregation of duties. | |
| 2. | We do not have a full time Chief Financial Officer that can oversee day to day operations and the financial reporting function. | |
| 3. | We do not have an independent audit committee that can provide management oversight. |
We expect to be materially dependent upon third parties to provide us with accounting consulting services and legal services related to the preparation and filing of reports with the Commission for the foreseeable future. We believe this will be sufficient to remediate the material weaknesses related to our accounting and SEC disclosures discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result in errors in our financial statements which could lead to a restatement of those financial statements.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. The Company’s internal controls over financial reporting was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules if the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
On March 22, 2022 the Company, CrossMobile S p zoo, a company formed under the laws of Poland (“CrossMobile”) and the shareholders of CrossMobile (of which Mr. Giora Rosenzweig, our CEO, holds 40.67% and Mr. George Baumeohl, onle of our directors, holds 6.67%, of the issued preferred share capital of CrossMobile), entered into an Investment Agreement (the “Agreement”) pursuant to which the Company is to purchase 26% of the outstanding common share capital of CrossMobile on a fully diluted basis, in consideration of the issuance by the Company to CrossMobile of 10,000,000,000 restricted shares of Company common stock (the “Initial Investment”). The acquisition is subject to the registration with the Polish Companies Registrar of the shares issuable to the Company in respect of the Initial Investment, as required under local law. Upon the registration of the Company shareholdings in CrossMobnile, the closing of the Initial Investment will be deemed to have occurred and the 10,000,000,000 Company shares of common stock will be issued to CrossMobile.
CrossMobile is a licensed mobile virtual network operator (“MVNO”) in Poland, providing the necessary licenses and key infrastructure to service an estimated population of 540 million in the EU. With its involvement in CrossMobile, the Company expects to provide advanced cybersecurity solutions and other next-generation value-added services to CrossMobile’s future product offerings
In addition, for 18 months following the date of the Agreement, the Company has the option to purchase additional shares of CrossMobile, such that following such additional purchase, the Company shall hold approximately 51% of CrossMobile’s outstanding share capital on a fully diluted basis. In the event the Company shall choose to exercise the option, the Company shall issue such number of restricted shares of common stock of the Company calculated based on pre-money valuation of CrossMobile as determined by an independent appraiser agreed between the Company and CrossMobile.
Under the Agreement, upon the closing of the Initial Investment, Giora Rosenzweig, is to be appointed to the CrossMobile board of directors. The Agreement provides that either party may terminate the Agreement and the transactions is the Initial Investment has not closed by September 30, 2022.
The preferred share capital provides certain privileges, including the right to participate in CrossMobile shareholder meetings at a rate of two votes for each preferred share and preference as to distribution of dividends at a rate equal to twice the dividends distributed to the holders of the common shares in CrossMobile.
Mr. Tromer, the CEO of CrossMobile, was appointed to the Company’s advisory board in February 2022. In connection with his service on the advisory board, he was awarded options under the Company’s 2021 Equity Incentive Plan to purchase 6 billion shares of the Company’s common stock, at a per share exercise price of $0.0001 per share, which the exercise price for all grants to date to member of the Company’s advisory board. Mr. Tromer’s options vest as follows: 25% (i.e., 1,500,000,000) option shares vest on the first anniversary of the appointment to the advisory board and the balance in increments of 400,000,000 shares on each subsequent three (3) month anniversary. In addition, in November 2021 the Company issued to Mr. Tromer an additional 1,500,000,00 shares of common stock in consideration of his efforts in the execution of the letter of intent between the Company and CrossMobile in respect of the above referenced transaction.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable
PART III
Item 10. Directors, Executive Officers, and Corporate Governance.
Set forth below are the names, ages, position with the Company and business experiences of the executive officers and directors of the Company.
| Name | Age | Position(s) with Company | ||
| Giora Rozensweig | 49 | Interim Chief Executive Officer | ||
| Maj (Ret) Danny Yatom | 77 | President | ||
| Gaya Rozensweig | 41 | Director | ||
| George Baumoehl | 56 | Director |
Our directors are appointed for one-year terms to hold office until the next annual general meeting of the holders of our Common Stock or until removed from office in accordance with our by-laws. Our officers are appointed by our board of directors and hold office until removed by our board of directors.
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Giora Rozensweig. Mr. Rozensweig, age 49, holds degrees in software development, application DBA and IT, which he received from Kedem College in 1994. Mr. Rozensweig has twenty years of experience in the industry and has worked with the Israeli Government, Hewlett Packard, IBM, and Checkpoint. He is also the co-founder of RNA Technology Ltd. where he has served as Chief Executive Officer since 2015. Previously Mr. Rozensweig served as Chief Executive Officer of Tomagi, Ltd. from 2008 until 2015.
Maj. Gen. (Ret.) Yatom, age 77 has over 40 years of experience in top intelligence and security leadership roles, including as the Director of Mossad, the national intelligence and special operations agency of Israel and one of the world’s leading intelligence secret and operations agencies. From 1999 to 2001, he served as Chief of Staff for Security and Policy to Prime Minister Ehud Barak. He also served in various positions in the Israeli security forces and government, including head of the Israeli Defense Forces’ Planning Directorate, commander of the Central Command, and military secretary to defense ministers Moshe Arens and Yitzhak Rabin and prime ministers Yitzhak Rabin and Shimon Peres. He holds Bachelor of Science degree in Physics, Mathematics and Computer Science from the Hebrew University in Jerusalem and Master of Arts degree in the Middle Eastern studies from Tel Aviv University
Gaya Rozensweig. Mrs. Rozensweig, age 40, holds a Degree in Business Management & Information Systems, which she received from the College of Management, Jerusalem in 2003. Mrs. Rozensweig is a co-founder of RNA Technology Ltd. and has headed the sales and marketing of a startup with a 27-person team that worked with government offices, banks, insurance companies. Mrs. Rozensweig has served as Chief Financial Officer of RNA Technology, Ltd. since 2015. Previously she served as Chief Financial Officer at Tomagi Ltd. from 2008 until 2015.
George Baumoehl. Mr. Baumoehl, age 56, George holds a MSc. Degree in Architecture and Construction Economics from University College London which he received in 1993. Mr. Baumoehl has a background in a real estate investment and development and brings a professional outside look into our Company. He has been the Chief Executive Officer of Spectrum Real Estate Management GmbH & Co. KG since 2006.
Giora Rozensweig is the spouse of Gaya Rozensweig. Other than the foregoing, there is no family relationship between the Interim Chief Executive Officer, the directors and any director or executive officer of the Company or any person nominated or chosen to become a director or executive officer of the Company.
Involvement in Certain Legal Proceedings
None of our directors, executive officers, significant employees or control persons has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.
Corporate Governance
Our board of directors has not established any committees, including an audit committee, a compensation committee or a nominating committee, or any committee performing a similar function. The functions of those committees are being undertaken by our board. Because we do not have any independent directors, our board believes that the establishment of committees of our board would not provide any benefits to our Company and could be considered more form than substance.
We do not have a policy regarding the consideration of any director candidates that may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our officers and directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our officers and directors have not considered or adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our board of directors.
Given our relative size and lack of directors’ and officers’ insurance coverage, we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all current members of our board will participate in the consideration of director nominees.
As with most small, early stage companies until such time as we further develop our business, achieve a stronger revenue base and have sufficient working capital to purchase directors’ and officers’ insurance, we do not have any immediate prospects to attract independent directors. When we are able to expand our board to include one or more independent directors, we intend to establish an audit committee of our board of directors. It is our intention that one or more of these independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements that a majority of our board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our board of directors include “independent” directors, nor are we required to establish or maintain an audit committee or other committee of our board.
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Code of Ethics
We adopted a Code of Ethics and Business Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We undertake to provide to any person without charge, upon request, a copy of our Code of Ethics and Business Conduct.
Role of Board in Risk Oversight Process
Management is responsible for the day-to-day management of risk and for identifying our risk exposures and communicating such exposures to our board. Our board is responsible for designing, implementing and overseeing our risk management processes. The board does not have a standing risk management committee, but administers this function directly through the board as a whole. The entire board considers strategic risks and opportunities and receives reports from its officers regarding risk oversight in their areas of responsibility as necessary. We believe our board’s leadership structure facilitates the division of risk management oversight responsibilities and enhances the board’s efficiency in fulfilling its oversight function with respect to different areas of our business risks and our risk mitigation practices.
Director Compensation
Historically, our non-employee directors have not received compensation for their service outside the compensation set forth in the Summary Compensation Table below, but we may compensate our directors for their service in the future. We reimburse our non-employee directors for reasonable travel expenses incurred in attending board and committee meetings. We also intend to allow our non-employee directors to participate in any equity compensation plans that we adopt in the future.
Conflicts of Interest
None of our officers will devote more than a portion of his or her time to our affairs. There will be occasions when the time requirements of our business conflict with the demands of the officers other business and investment activities. Such conflicts may require that we attempt to employ additional personnel. There is no assurance that the services of such persons will be available or that they can be obtained upon terms favorable to us.
Our officers, directors and principal shareholders may actively negotiate for the purchase of a portion of their common stock as a condition to, or in connection with, a proposed merger or acquisition transaction, if any. In the event that such a transaction occurs, it is anticipated that a substantial premium may be paid by the purchaser in conjunction with any sale of shares by our officers, directors and principal shareholders made as a condition to, or in connection with, a proposed merger or acquisition transaction. The fact that a substantial premium may be paid to members of our management to acquire their shares creates a conflict of interest for them and may compromise their state law fiduciary duties to our other shareholders. In making any such sale, members of Company management may consider their own personal pecuniary benefit rather than the best interests of the Company and the Company’s other shareholders, and the other shareholders are not expected to be afforded the opportunity to approve or consent to any particular buy-out transaction involving shares held by members of Company management.
It is not currently anticipated that any salary, consulting fee, or finder’s fee shall be paid to any of our directors or executive officers, or to any other affiliate of us except as described under Executive Compensation below. Although management has no current plans to cause us to do so, it is possible that we may enter into an agreement with an acquisition candidate requiring the sale of all or a portion of the Common Stock held by our current stockholders to the acquisition candidate or principals thereof, or to other individuals or business entities, or requiring some other form of payment to our current stockholders, or requiring the future employment of specified officers and payment of salaries to them. It is more likely than not that any sale of securities by our current stockholders to an acquisition candidate would be at a price substantially higher than that originally paid by such stockholders. Any payment to current stockholders in the context of an acquisition involving us would be determined entirely by the largely unforeseeable terms of a future agreement with an unidentified business entity.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, and to the best of our knowledge, all executive officers, directors and persons holding greater than 10% of our issued and outstanding stock have not filed the required reports in a timely manner during the fiscal year ended December 31, 2021.
Item 11. Executive Compensation.
The following table sets forth certain compensation information for: (i) our principal executive officer or other individual serving in a similar capacity during our fiscal year ended December 31, 2021, (ii) our two most highly compensated executive officers other than our principal executive officers who were serving as executive officers at December 31, 2021 whose compensation exceed $100,000 and (iii) up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, 2021. Compensation information is shown for the fiscal years ended December 31, 2021 and 2020:
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards (1) | Non-Equity Incentive Plan Compensation | Non-Qualified Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||||||||
| Giora Rozensweig | 2021 | 139,086 | - | - | - | - | - | - | 139,086 | |||||||||||||||||||||||||||
| 2020 | 93,255 | - | - | - | - | - | - | 93,255 | ||||||||||||||||||||||||||||
| Gaya Rozensweig | 2021 | 83,025 | - | - | - | - | - | - | 83,025 | |||||||||||||||||||||||||||
| 2020 | 74,524 | - | - | - | - | - | - | 74,524 | ||||||||||||||||||||||||||||
| Danny Yatom | 2021 | - | - | - | 1,838,930 | 2 | - | - | - | 1,838,930 | ||||||||||||||||||||||||||
| 2020 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
1. In accordance with SEC rules, the amounts in this column reflect the fair value on the grant date of the option awards granted to the named executive, calculated in accordance with ASC Topic 718. Stock options were valued using the Black-Scholes model. The grant-date fair value does not necessarily reflect the value of shares which may be received in the future with respect to these awards. The grant-date fair value of the stock options in this column is a non-cash expense for us that reflects the fair value of the stock options on the grant date and therefore does not affect our cash balance. The fair value of the stock options will likely vary from the actual value the holder receives because the actual value depends on the number of options exercised and the market price of our Common Stock on the date of exercise. For a discussion of the assumptions made in the valuation of the stock options, see Note 9 to the financial reports attached to this Annual Report.
2. Represents compensation expense recorded by the Company in respect of the options for 6,000,000,000 shares granted in June 2021.
Employment Agreements with Executive Officers
On October 21, 2020, RNA Ltd., the Company’s subsidiary, and Giora Rozensweig, the Company’s interim Chief Executive Officer, entered into an employment agreement providing for the employment (the “Giora Employment Agreement”) of Mr. Giora Rozensweig as RNA’s Chief Executive Officer, with retroactive application to July 1, 2020. Under the Giora Employment Agreement, Mr. Rozensweig is paid an annual gross salary of the current New Israeli Shekel equivalent of $133,500, payable monthly. Under the Giora Rozensweig Employment Agreement he also receives the following: (i) Manager’s Insurance under Israeli law for the benefit of Mr. Rosenzweig pursuant to which RNA contributes amounts equal to (a) 8-1/3 percent (and Mr. Rosenzweig contributes an additional 5%) of each monthly salary payment, and (b) 6.5% of Mr. Rosenzweig’s salary (with Mr. Rosenzweig contributing an additional 6%) to a pension fund, a form of deferred compensation program established under Israeli law. The Giora Employment Agreement also contains certain provisions for termination by RNA, which may result in a severance payment equal to twenty four months of base salary then in effect.
| 30 |
1On October 21, 2020, RNA Ltd., the Company’s subsidiary, and Gaya Rozensweig entered into an employment agreement providing for the employment (the “Gaya Employment Agreement”) of Ms. Gaya Rozensweig as RNA’s controller, with retroactive application to July 1, 2020. Under the Gaya Employment Agreement, Ms. Rozensweig is paid an annual gross salary of the current New Israeli Shekel equivalent of $93,500, payable monthly. Under the Rosenzweig Employment Agreement, she also receives the following: (i) Manager’s Insurance under Israeli law for the benefit of Ms. Rosenzweig pursuant to which RNA contributes amounts equal to (a) 8-1/3 percent (and Ms. Rosenzweig contributes an additional 5%) of each monthly salary payment, and (b) 6.5% of Ms. Rosenzweig’s salary (with Ms. Rosenzweig contributing an additional 6%) to a pension fund, a form of deferred compensation program established under Israeli law. The Gaya Employment Agreement also contains certain provisions for termination by RNA, which may result in a severance payment equal to twenty four months of base salary then in effect.
Termination of Employment and Change of Control Arrangement
Under each of the Giora Employment Agreement and the Gaya Employment Agreement, in the event that the Company terminates the agreement for reasons other than casue, then the employee is entited to two years of salary payments.
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2021
The following table sets forth information concerning equity awards held by each of our Named Executive Officers as of December 31, 2021.
| Name | Number of Securities Underlying Options (#) Exercisable | Number of Securities Underlying Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Securities Underlying RSUs (#) Unvested | |||||||||||||
| Danny Yatom | - | 6,000,000,000 | $ | 0.0001 | 6/26/31 | -- | ||||||||||||
There were no outstanding equity awards at December 31, 2021 to our named executive officers.
Compensation of Directors
We have no standard arrangements for compensating our board of directors for their attendance at meetings of the Board of Directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information concerning the number of shares of our common and preferred stock owned beneficially as of April 10, 2022 by: (i) our directors and executive officer; and (ii) each person or group of persons known by us to beneficially own more than 5% of our outstanding shares of common stock. Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares they own.
Under securities laws, a person is considered to be the beneficial owner of securities owned by him (or certain persons whose ownership is attributed to him) or securities that can be acquired by him within 60 days, including upon the exercise of options, warrants or convertible securities. The Company determines a beneficial owner’s percentage ownership by assuming that options, warrants and convertible securities that are held by the beneficial owner, but not those held by any other person, and which are exercisable within 60 days, have been exercised or converted.
The Company believes that all persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as being owned by them. Unless otherwise indicated, the addr ess of each beneficial owner in the table set forth below is care of World Health Energy Holdings, Inc. at 1825 NW Corporate Blvd. Suite 110, Boca Raton, FL 3343.
| Name of Beneficial Owner | COMMON STOCK | % of class (Common Stock) (1) | SERIES A PREFERRED STOCK (4) | % of class (Series A Preferred) | ||||||||||||||||||||
| Officers and Directors | ||||||||||||||||||||||||
| Giora Rozensweig, Interim Chief Executive Officer | — | (2) | — | — | — | — | — | |||||||||||||||||
| Gaya Rozensweig, Director | 27,383,333,333 | (3) | 5.61 | % | 2,500,000 | 50 | % | — | — | |||||||||||||||
| George Baumeohl. Director | 17,683,333,334 | (3) | 3.62 | % | 2,500,000 | 50 | % | — | — | |||||||||||||||
| 5% or More Shareholders | ||||||||||||||||||||||||
| UCG, Inc. (3) | 387,000,000,000 | 79.22 | % | |||||||||||||||||||||
| Total Held by Officers and Directors of Each Class | 45,066,666,666 | 88.45 | % | 5,000,000 | 100 | % | — | — | ||||||||||||||||
| 1. | Based on 489,839,407,996 shares of Common Stock outstanding as of April 10, 2022. |
| 31 |
| 2. | Gaya Rozensweig is the spouse of Giora Rozensweig. While the shares of Common Stock are held as of record by Gaya Rozensweig, both persons may be deemed to control the voting and disposition of these shares. | |
| 3. | The sole shareholders and directors of UCG, Inc. are Gaya Rozensweig and George Baumeohl and, as such, they may be deemed to beneficially own these shares. The address of UCG Inc. is 1825 NW Corporate Blvd. Suite 110, Boca Raton, Florida 33431. | |
| 4. | The Series A Preferred Stock were issued in August 2019 to each of Gaya Rozensweig and George Baumeohl. The Series A Preferred Stock is authorized to vote with the Common Stock in all stockholder meetings that the Common Stock may vote and each share has voting power equal to 10,000 votes per share. |
Item 13. Certain Relationships and Related Transactions and Director Independence.
On December 31, 2020, the Company, UCG, RNA, Gaya Rozensweig, Giora Rozensweig and George Baumoehl entered into a Set-Off Agreement pursuant to which the parties set-off a debit balance of $250,609 owed by Gaya Rozensweig and Giora Rozensweig to RNA Ltd. against the credit balance of UCG, Inc.
On December 31, 2020, Giora Rozensweig and our subsidiary SG entered into an Irrevocable License and Royalty Agreement pursuant to which Mr. Rozensweig granted to the WHEN group an irrevocable worldwide license certain technologies and the related intelelctual rights. In consideration of such license, Mr. Rozensweig is entitled to 1.5% of annual gross revenues, payable on a quarterly basis. The payments are to be made at such time as the WHEN Group’s revenues exceed on an aggregate basis $120,000.
On March 22, 2022 the Company, CrossMobile S.P.Zooand the shareholders of CrossMobile (of which Mr. Giora Rosenzweig, holds 40.67% and Mr. George Baumeohl holds 6.67%, of the issued preferred share capital of CrossMobile), entered into an Investment Agreement (the “Agreement”) pursuant to which the Company is to purchase 26% of the outstanding common share capital of CrossMobile on a fully diluted basis, in consideration of the issuance by the Company to CrossMobile of 10,000,000,000 restricted shares of Company common stock (the “Initial Investment”). The acquisition is subject to the registration with the Polish Companies Registrar of the shares issuable to the Company in respect of the Initial Investment, as required under local law. Upon the registration of the Company shareholdings in CrossMobnile, the closing of the Initial Investment will be deemed to have occurred and the 10,000,000,000 Company shares of common stock will be issued to CrossMobile.
Item 14. Principal Accounting Fees and Services.
The following table shows the fees that were billed for the audit and other services.In May 2020 Halperin Ilanit CPA was appointed as the Company’s auditors. The amounts for the years ended December 31, 2021 and 2020 reflects amounts paid to Halperin Ilanit CPA.
| 2021 | 2020 | |||||||
| Audit Fees | $ | 27,500 | $ | 27,500 | ||||
| Audit-Related Fees | — | — | ||||||
| Tax Fees | — | — | ||||||
| All Other Fees | — | — | ||||||
| Total | $ | 27,500 | 27,500 | |||||
Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting.
| 32 |
Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees — This category consists of fees for other miscellaneous items.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
| (a) | 1. | Financial Statements |
| The financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to Financial Statements” on page F-3 and included on pages F-1 through F-24. | ||
| 2. | Financial Statement Schedules | |
| All schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein. | ||
| 3. | Exhibits |
The following exhibits are filed or “furnished” herewith:
ITEM 16. FORM 10-K SUMMARY
Not applicable.
| 33 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| WORLD HEALTH ENERGY HOLDINGS, INC. | ||
| (Registrant) | ||
| By: | /s/ Giora Rozensweig | |
| Giora Rozensweig | ||
| Interim Chief Executive Officer | ||
| Date: | April 14, 2022 | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||
| /s/ Gaya Rozensweig | Director | April 14, 2022 | ||
| Gaya Rozensweig | ||||
| /s/ George Baumoehl | Director | April 14, 2022 | ||
| George Baumoehl |
| 34 |
WORLD HEALTH ENERGY HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
WORLD HEALTH ENERGY HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
IN U.S. DOLLARS
TABLE OF CONTENTS
| F-2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
WORLD HEALTH ENERGY HOLDING, INC.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of World Health Energy Holding, Inc. (the “Company”) as of December 31, 2021 and 2020, the related statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the years in the period ended December 31, 2021 and 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the year in the period ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1D to the financial statements, the Company has not yet generated material revenues from its operations to fund its activities and is therefore dependent upon external sources for financing its operations. As of December 31, 2021, the Company has incurred accumulated deficit of $6,093 thousands and negative operating cash flows. These factor among others, as discussed in Note 1D to the financial statements raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1D to the financial statements. The financial statements do not include any adjustments that might result from the outcome of’ these uncertainties.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
Certified Public Accountants (Isr.)
PCAOB number 650100001
April 14, 2022
We have served as the Company’s auditor since 2020
| F-3 |
WORLD HEALTH ENERGY HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars except share and per share data)
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts receivable, net | ||||||||
| Prepaid share based payment to service providers | ||||||||
| Other current assets (Note 3) | ||||||||
| Total Current assets | ||||||||
| Right Of Use asset arising from operating lease (Note 6) | ||||||||
| Long term prepaid expenses | ||||||||
| Property and Equipment, Net (Note 4) | ||||||||
| Funds in respect of employee rights upon termination | ||||||||
| Total assets | ||||||||
| Liabilities and Shareholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | ||||||||
| Right Of Use liabilities arising from operating lease (Note 6) | ||||||||
| Other account liabilities (Note 5) | ||||||||
| Total current liabilities | ||||||||
| Liability for employee rights upon retirement | ||||||||
| Long term loan from parent company | ||||||||
| ||||||||
| Right Of Use liabilities arising from operating lease (Note 6) | ||||||||
| ||||||||
| Total liabilities | ||||||||
| Stockholders’ Deficit (Note 8) | ||||||||
| Preferred stock, par $, shares authorized, shares issued and outstanding as of December 31, 2021 and December 31, 2020. | ||||||||
| Series B Convertible Preferred stock, par $, shares authorized, and shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively. | ||||||||
| Preferred stock, value | ||||||||
| Common stock, par $, and shares authorized at December 31, 2021 and December 31, 2020, respectively. and shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively. | ||||||||
| Additional paid-in capital | ( | ) | ( | ) | ||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-4 |
WORLD HEALTH ENERGY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars except share and per share data)
| Year ended | ||||||||
| December 31 | ||||||||
| 2021 | 2020 | |||||||
| Revenues | ||||||||
| Research and development expenses (Note 10) | ( | ) | ( | ) | ||||
| General and administrative expenses (Note 11) | ( | ) | ( | ) | ||||
| Share base compensation expenses (Notes 8, 9) | ( | ) | ||||||
| Operating loss | ( | ) | ( | ) | ||||
| Financing income (expenses), net | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Loss per common stock (basic and diluted) | ( | ) | ( | ) | ||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-5 |
WORLD HEALTH ENERGY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(U.S. dollars, except share and per share data)
Preferred Stock, $0.0007, Par Value | Preferred Stock B, $0.0007, Par Value | Common Stock, $0.00001, Par Value | Additional | Foreign currency | Total Company’s | |||||||||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Number of Shares | Amount | paid-in capital | translation adjustments | Accumulated deficit | stockholder’s deficit | |||||||||||||||||||||||||||||||
BALANCE AT JANUARY 1, 2020 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2020: | ||||||||||||||||||||||||||||||||||||||||
| Effect of Reverse Capitalization (Note 1 B) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
CHANGES DURING THE YEAR ENDED DECEMBER 31, 2021: | ||||||||||||||||||||||||||||||||||||||||
| Issuance of shares (Note 8) | - | - | ||||||||||||||||||||||||||||||||||||||
| Issuance of shares in exchange for services (Note 8) | - | - | ||||||||||||||||||||||||||||||||||||||
| Share based compensation for services providers (Note 9) | - | - | - | |||||||||||||||||||||||||||||||||||||
| Conversion preferred stock to common stock (Note 8) | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of shares in respect of purchase of investee (Note 8) | - | - | ||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| F-6 |
WORLD HEALTH ENERGY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars except share and per share data)
| Year ended | ||||||||
| December 31 | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss for the period | ( | ) | ( | ) | ||||
| Adjustments required to reconcile net loss for the period to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Share based payment to a service providers (Note 9) | ||||||||
| Interest on lease liability | ||||||||
| Increase in liability for employee rights upon retirement | ||||||||
| Increase (decrease) in accounts receivable | ( | ) | ||||||
| Decrease (increase) in other current assets | ( | ) | ( | ) | ||||
| Increase (decrease) in accounts payable | ( | ) | ||||||
| Increase in other accounts liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Loans granted to related parties | ( | ) | ( | ) | ||||
| Increase in asset for employee rights upon retirement | ( | ) | ||||||
| Increase in other long term prepaid expenses | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payments of lease liability | ( | ) | ( | ) | ||||
| Proceeds from stock issued for cash | ||||||||
| Loan received from parent company | ||||||||
| Net cash provided by financing activities | ||||||||
| INCREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non cash transaction: | ||||||||
| Debt set off | ||||||||
| Initial recognition of operating lease right-of-use | ||||||||
| Prepaid expenses for service providers in Company’s shares | ||||||||
The accompanying notes are an integral part of the consolidated financial statement
| F-7 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
| A. | Operations |
World Health Energy Holdings, Inc., (the “Company” or “WHEN”), was formed on May 21, 1986, under the laws of the State of Delaware. The Company has invested in and abandoned a variety of software programs that it strove to commercialize.
UCG, INC. (the “UCG”) was incorporated on September 13, 2017, under the laws of the State of Florida. The Company wholly-owns the issued and outstanding shares of RNA Ltd. (Hereinafter: “RNA”).
RNA is primarily a research and development company that has been performing software design work for UCG in the field of cybersecurity under the terms of development agreement between UCG and RNA. UCG is primarily engaged in the marketing and distribution of cybersecurity related products.
In anticipation of the transaction contemplated under the Merger Agreement, SG 77 Inc. a Delaware Corporation and a wholly-owned subsidiary of UCG (“SG”), was incorporated on April 16, 2020 and all of the cybersecurity rights and interests held by UCG, including the share ownership of RNA, were assigned to SG.
On March 22, 2022 the Company, CrossMobile S.P.Zoo (“CrossMobile”) and the shareholders of CrossMobile (of which several are related parties in the Company), entered into an Investment Agreement (the “Agreement”) pursuant to which, the Company is to purchase of the outstanding common share capital of CrossMobile on a fully diluted basis, in consideration of the issuance by the Company to CrossMobile of restricted shares of Company common stock. In addition, for 18 months following the date of the Agreement, the Company has the option to purchase additional shares of CrossMobile, such that following such additional purchase, the Company shall hold approximately of CrossMobile’s outstanding share capital on a fully diluted basis. (see Note 15 for additional information).
| B. | Merger Transaction |
On April 27, 2020, the Company completed a reverse triangular merger pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) among WHEN, R2GA, Inc., a Delaware corporation and a wholly owned subsidiary of WHEN (“Sub”), UCG, SG, and RNA. Under the terms of the Merger Agreement, R2GA merged with SG, with SG remaining as the surviving corporation and a wholly-owned subsidiary of the WHEN (the “Merger”). The Merger was effective as of April 27, 2020 whereby SG became a direct and wholly owned subsidiary of WHEN and RNA indirect wholly owned subsidiary of WHEN. Each of Gaya Rozensweig and George Baumeohl, directors of WHEN, are also the sole shareholders and directors of WHEN.
As consideration for the Merger, WHEN issued to UCG Series B Convertible Preferred Stock, par value $ per share, of WHEN (the “Series B Preferred Shares”). Each share of the Series B Preferred Shares will automatically convert into shares of WHEN’s common stock, par value $ (the “Common Stock”), for an aggregate amount of shares of WHEN’s Common Stock, upon the filing with the Secretary of State of Delaware of an amendment to WHEN’s certificate of incorporation increasing the number of authorized shares of Common Stock that the Company is authorized to issue from time to time.
On October 7,2021, and following the Shareholders’ meeting approval, the Company increase its authorized shares to (from shares) and changed the par value of the common stock to $per share (from $) (see Note 8).
Following the effectiveness of the Amendment referred to above, on December 3, 2021, the Company issued shares of the Company’s common stock to UCG, Inc. upon the automatic conversion of all outstanding shares of the Company’s Series B Preferred Shares issued in April 2020 in connection with the acquisition of RNA, Ltd. From UCG, Inc.
The Company, collectively with SG, Sub and RNA are hereunder referred to as the “Group”.
| F-8 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – GENERAL (continue)
The transaction was accounted for as a reverse asset acquisition in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Under this method of accounting, SG was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Merger: (i) SG’s stockholders owned a substantial majority of the voting rights in the combined company, (ii) SG designated a majority of the members of the initial board of directors of the combined company, and (iii) SG’s senior management holds all key positions in the senior management of the combined company. As a result of the Recapitalization Transaction, the shareholders of SG received the largest ownership interest in the Company, and SG was determined to be the “accounting acquirer” in the Recapitalization Transaction.
As a result, the historical financial statements of the Company were replaced with the historical financial statements of SG. The number of shares prior to the reverse capitalization have been retroactively adjusted based on the equivalent number of shares received by the accounting acquirer in the Recapitalization Transaction.
| C. | Board and Shareholder Authority for Reverse Stock Split |
On
June 21, 2021,
| D. | Going concern uncertainty |
Since
inception, the Group has devoted substantially all its efforts to research and development. The Group is still in its development stage
and the extent of the Group’s future operating losses and the timing of becoming profitable, if ever, are uncertain. As of December
31, 2021, the Group had $
The Group will need to secure additional capital in the future in order to meet its anticipated liquidity needs primarily through the sale of additional Common Stock or other equity securities and/or debt financing. Funds from these sources may not be available to the Group on acceptable terms, if at all, and the Group cannot give assurance that it will be successful in securing such additional capital (see Note 8 in respect to subscription agreements signed during 2021).
These conditions raise substantial doubt about the Company’s ability to continue to operate as a “going concern.” The Company’s ability to continue operating as a going concern is dependent on several factors, among them is the ability to raise sufficient additional funding.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| F-9 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – GENERAL (continue)
| E. | The COVID-19 pandemic continues to create business and economic uncertainty and volatility in the global markets. Many countries around the world are experiencing further outbreaks of the pandemic, following which governments are once again imposing various restrictions. At the same time, there is a recovery trend in the volume of economic activity around the world that leads on one hand, to significant demand for certain products and services and on the other hand, disruptions to worldwide supply chain routes and some raw materials. The Group continues to take measures to ensure the health and safety of its employees, suppliers, other business partners and the communities in which it operates in order to ensure, among others, the operation level, the proper functioning of its facilities and to minimize the pandemic’s potential impact on its business. Manufacturing continues at the Group’s sites without interruptions. However, there is still a difficulty in assessing the future impacts of the pandemic on the Group’s operations, inter alia, in light of the uncertainty of its duration, the extent of its intensity and effects on global supply chains and global markets, and additional countermeasures that may be taken by governments and central banks. |
| F. | Risk factors |
The Group face a number of risks, including uncertainties regarding finalization of the development process, demand and market acceptance of the Group’s products, the effects of technological changes, competition and the development of products by competitors. Additionally, other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Group’s future results. In addition, the Group expects to continue incurring significant operating costs and losses in connection with the development of its products and increased marketing efforts. As mentioned above, the Group has not yet generated significant revenues from its operations to fund its activities, and therefore the continuance of its activities as a going concern depends on the receipt of additional funding from its current stockholders and investors or from third parties.
| F-10 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP).
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. As applicable to these financial statements, the most significant estimates and assumptions relate to the going concern assumptions, stock based compensation and estimations in respect of service period upon issuance of shares to services providers.
Functional Currency and Foreign Currency Translation and Transactions.
Effective January 1, 2020, the Company adopted the US dollar as its functional currency. Prior to January 1, 2020, the functional currency of the Company was the New Israeli Shekel (“NIS”). The change in functional currency of the Company is due to the increased exposure to the US dollar as a result of the currency in the primary economic environment in which the Israeli subsidiary operates is the USD.
Therefore, the currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is the US dollar.
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net loss for the year ended As of December 31, 2021 and 2020.
Cash and cash equivalents
Cash equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.
| F-11 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Property, plant and equipment, net
| 1. | Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. When an asset is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition is reflected in the Statements of Operations and Comprehensive Loss. |
| 2. | Rates of depreciation: |
SCHEDULE OF RATE OF DEPRECIATION
| % | ||||
| Computers and software | ||||
| Furniture and office equipment | ||||
Impairment of long-lived assets
The Group’s long-lived assets are reviewed for impairment in accordance with Accounting Standards Codification (“ASC”) Topic 360, “Property, Plant and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets.
ROU assets represent Company’s right to use an underlying asset for the lease term and lease liabilities represent Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, the Company generally uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Stock-based compensation
The Company measures and recognizes the compensation expense for all equity-based payments to employees based on their estimated fair values in accordance with ASC 718, “Compensation-Stock Compensation”. Share-based payments including grants of stock options are recognized in the statement of comprehensive loss as an operating expense based on the fair value of the award at the date of grant. The fair value of stock options granted is estimated using the Black-Scholes option-pricing model. The Company has expensed compensation costs, net of estimated forfeitures, applying the accelerated vesting method, over the requisite service period or over the implicit service period when a performance condition affects the vesting, and it is considered probable that the performance condition will be achieved.
Share-based payments awarded to consultants (non-employees) are accounted for in accordance with ASC Topic 505-50, “Equity-Based Payments to Non-Employees”.
| F-12 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Deferred income taxes
The Group accounts for income taxes in accordance with ASC Topic 740, “Income Taxes”. Accordingly, deferred income taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between the financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed using the enacted tax rates expected to be in effect when these differences reverse. Valuation allowances in respect of deferred tax assets are provided for, if necessary, to reduce deferred tax assets to amounts more likely than not to be realized.
The Group accounts for uncertain tax positions in accordance with ASC Topic 740-10, which prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements. According to ASC Topic 740-10, tax positions must meet a more-likely-than-not recognition threshold. The Company’s accounting policy is to classify interest and penalties relating to uncertain tax positions under income taxes, however the Company did not recognize such items in its fiscal 2021 and 2020 financial statements and did not recognize any liability with respect to an unrecognized tax position in its balance sheets.
Revenue recognition
Revenue is recognized only when all of the following conditions have been met: (i) there is persuasive evidence of an arrangement; (ii) delivery has occurred; (iii) the fee is fixed or determinable; and (iv) collectability of the fee is reasonably assured. The Company usually sells its software licenses as part of an overall solution offered to a customer that combines the sale of software licenses.
Research and development expenses
Research and development expenses are charged to operations as incurred.
Basic loss per ordinary share is computed by dividing the loss for the period applicable to ordinary shareholders, by the weighted average number of shares of common stock outstanding during the period. Securities that may participate in dividends with the shares of common stock (such as the convertible preferred) are considered in the computation of basic loss per share under the two-class method. However, in periods of net loss, only the convertible preferred shares are considered, since such shares have a contractual obligation to share in the losses of the Company.
In computing diluted loss per share, basic loss per share is adjusted to reflect the potential dilution that could occur upon the exercise of potential shares. Accordingly, in periods of net loss, no potential shares are considered.
Concentrations of credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents as well as certain other current assets that do not amount to a significant amount. Cash and cash equivalents, which are primarily held in Dollars and New Israeli Shekels, are deposited with major banks in Israel and United States. Management believes that such financial institutions are financially sound and, accordingly, minimal credit risk exists with respect to these financial instruments. The Company does not have any significant off-balance-sheet concentration of credit risk, such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
| F-13 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (cont.)
Contingencies
The Company records accruals for loss contingencies arising from claims, litigation and other sources when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Legal costs incurred in connection with loss contingencies are expensed as incurred.
Recent Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies certain aspects of the current guidance to improve consistent application among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022, though early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company is currently evaluating the effect the adoption of ASU 2019-12 will have on its consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of ASU 2020-06 will have on the Company’s consolidated financial statement presentation or disclosures.
Other new pronouncements issued but not effective as of December 31, 2021 are not expected to have a material impact on the Company’s consolidated financial statements.
NOTE 3 – OTHER CURRENT ASSTES
SCHEDULE OF OTHER CURRENT ASSETS
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Related Parties | ||||||||
| Government Institutions | ||||||||
| Other Receivable | ||||||||
| Other Current Assets | ||||||||
| F-14 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except share and per share data)
NOTE 4 – PROPERTY AND EQUIPMENT, NET
SCHEDULE OF PROPERTY AND EQUIPMENT, NET
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Computers | ||||||||
| Furniture and office equipment | ||||||||
| Property and equipment, gross | ||||||||
| Less - accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | ||||||||
In
the years ended December 31, 2021 and 2020, depreciation was US$
In the years
ended December 31, 2021 and 2020, the Company acquired fixed assets in the amounts of US$
NOTE 5 –OTHER ACCOUNTS LIABILITIES
SCHEDULE OF OTHER ACCOUNTS LIABILITIES
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Employees and related institutions | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Deferred revenues | ||||||||
| Related parties | ||||||||
| Other Accounts Liabilities | ||||||||
NOTE 6 – LEASES
In
December 16, 2020 the Company signed a lease agreement effective as from January 1, 2021, for office space in Herzliya, Israel for a
period of
| A. | The components of operating lease cost for the year ended December 31, 2021 and 2020 were as follows: |
SCHEDULE OF LEASE COST
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating lease costs | ||||||||
| Short-term lease cost | - | |||||||
| Total operating lease cost | ||||||||
| F-15 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except share and per share data)
NOTE 6 – LEASES (continue)
| B. | Supplemental cash flow information related to operating leases was as follows: |
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION TO OPERATING LEASES
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Cash flows from operating leases | ||||||||
| Right-of-use assets obtained in exchange for lease obligations (non-cash): | ||||||||
| Operating leases | ||||||||
| C. | Supplemental balance sheet information related to operating leases was as follows: |
SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION TO OPERATING LEASES
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating leases: | ||||||||
| Operating leases right-of-use asset | ||||||||
| Current operating lease liabilities | ||||||||
| Non-current operating lease liabilities | ||||||||
| Total operating lease liabilities | ||||||||
| Weighted average remaining lease term (years) | - | |||||||
| Weighted average discount rate | % | - | ||||||
| D. | Future minimum lease payments under non-cancellable leases as of December 31, 2021 were as follows: |
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
| 2021 | ||||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Total operating lease payments | ||||
| Less: imputed interest | ||||
| Present value of lease liabilities | ||||
| F-16 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except share and per share data)
NOTE 7 – COMMITMENTS AND CONTINGENCIES
On October 27, 2020 WHEN filed suit in State Court, Palm Beach County, Florida, against FSC Solutions, Inc. (“FSC”), Eli Gal Levy (“EL”) and Padem Consultants Sprl (collectively, the “Defendants”). The lawsuit relates to the Stock Purchase Agreement entered into by WHEN with FSC and its shareholders, which included EL, pursuant to which WHEN acquired all of the issued and outstanding stock of FSC in exchange for the issuance of billion shares of WHEN unregistered common stock. FSC was the putative owner of a software and trading platform which WHEN intended to use to enter into the on-line trading business. Subsequent to the completion of the acquisition, we determined that FSC did not have control over the trading platform and software we expected to acquire and operate. The Florida lawsuit seeks a declaratory judgment to unwind the FSC transaction and cancel the shares of WHEN common stock issued in the FSC transaction that are still outstanding.
A hearing was set for January 6, 2021 whereupon mediation was ordered. The Company and EL were in discussions to resolve this issue but no resolution was reached. The Florida lawsuit is currently pending.
On or about, January 19, 2022, EL filed a lawsuit in the Delaware Court of Chancery seeking to remove the restrictive legend from all the shares of Common Stock held by EL (the “2022 Lawsuit”), which are approximately 23,000,000,000 shares. The Company retained the services of Delaware counsel and has moved to dismiss or stay the 2022 Lawsuit in favor of the previously filed Florida lawsuit, which involves the same parties and same issues. The Company’s motion is currently pending in the Delaware Court of Chancery.
NOTE 8 – SHAREHOLDERS’ EQUITY
Description of the rights attached to the Shares in the Company:
Common stock:
On October 7, 2021, the Company filed an amendment (the “Amendment”) to its Certificate of Incorporation, as amended, to increase the Company’s authorized share capital and to change the par value of the Company’s Common Stock. The Amendment increased the Company’s authorized share capital to shares of common stock (from shares) and changed the par value of the common stock to $ per share (from $). The Amendment was effective retroactive to September 28, 2021.
As of December 31, 2021, there were shares of Common Stock issued and outstanding.
Each share of common stock entitles the holder to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the stockholders of the Company’s common stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of the directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of common stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.
| F-17 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except share and per share data)
NOTE 8 – SHAREHOLDERS’ EQUITY (continue)
SERIES A PREFERRED STOCK
The Company has authorized Series A Preferred Stock $ par value per share (the “Preferred Stock Series A”). As of December 31, 2021, and 2020, there are shares of Preferred Stock Series A outstanding.
The
Preferred Stock Series A have the right to vote with the Common Stock on all matters.
SERIES B PREFERRED STOCK
The Company has authorized Series B Convertible Preferred Stock $ par value per share (the “Preferred Stock Series B”). As of December 31, 2020, there are shares of Preferred Stock Series B outstanding.
The Preferred Stock Series B are held by UCG, the principal shareholders of the Company. The principal’s shareholders of UCG are George Baumoehl and Gaya Rozensweig, the directors of the Company.
The Preferred Stock Series B were issued to UCG as consideration for the Merger. Each share of the Series B Preferred Shares will convert into shares of WHEN’s common stock, par value $ (the “Common Stock”), for an aggregate amount of shares of WHEN’s Common Stock, upon the filing with the Secretary of State of Delaware of an amendment to WHEN’s certificate of incorporation increasing the number of authorized shares of Common Stock that the Company is authorized to issue from time to time.
TRANSACTIONS
Following the effectiveness of the Amendment referred to in above, On December 3, 2021, the Company issued shares of the Company’s common stock to UCG, Inc. upon the automatic conversion of all outstanding shares of the Company’s Series B Preferred Shares issued in April 2020 in connection with the acquisition of RNA, Ltd. From UCG, Inc.
On
August 31, 2021 the Company issued shares of common stock, par value $,
to its legal advisor in respect of consulting services related to assisting the Company with its follow-on-offering registration statements,
which, as of December 31, 2021, is expected to be provided until December 31, 2022. The Company estimated the fair value of the shares
issued based on the share price at the agreement date (which was $),
at $
Between
August and October 2021, the Company and certain investors entered into subscription agreements for a private placement of units of the
Company securities (the 2021 Private Placements”) where each unit (a “Unit” and collectively the “Units”)
is comprised of (i) one (1) share of the Company’s Common Stock and (ii) one common stock purchase warrant to purchase an additional
share of the Company’s Common Stock through the second anniversary thereof at a per share exercise price of $
| F-18 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except share and per share data)
NOTE 8 – SHAREHOLDERS’ EQUITY (continue)
On
November 10, 2021, the Company entered into an agreement with a consultant with a term of 12 months under which it undertook to issue
to the Consultant restricted stock for services rendered during the initial six months, representing $value of the stock based on a 10 day moving average.
Following a public offering of its stock the Company undertook to pay to the Consultant $
On
November 11, 2022, the Board of Director of the Company approved the issuance of share of common stock of the Company $par value, to a principal shareholder of CrossMobile
in consideration for his efforts to complete the CrosssMobile transaction (see Note 15). The Company estimated the value of the shares
issued based on the share price of the Company as of the date of the agreement at $
On
December 3, 2021 the Company issued shares of common stock, par value $, to a consultant in respect of business
development consulting services. The Company estimated the fair value of the shares issued at $
On June 21, 2021, the board of directors of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”) pursuant to which the Company may issue awards, from time to time, consisting of non-qualified stock options, restricted stock grants and restricted stock units. In addition, stock option awards that qualify under Section 102 of the Israeli Tax Ordinance (New Version) 1961 (the “ITO”), and/or under Section 3(i) of the ITO, may be granted.
On June 28, 2021, the Board of Directors of the Company approved the issuance of options to purchase shares of the Company’s Common Stock with an exercise price of $, to three members of its advisory board, under the Company’s 2021 Plan. Options to purchase shares of Common Stock shall vest on the first anniversary of the agreement and the remaining options shall vest quarterly, over additional years. The grant is subject the approval of the Board of Directors of the Company.
The fair value of the options was determined using the Black-Scholes pricing model, assuming a risk free rate of %, a volatility factor of %, dividend yields of % and an expected life of years and was estimated at $.
SCHEDULE OF COMPANY’S STOCK OPTION ACTIVITY
Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at December 31,2020 | ||||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited or expired | ||||||||
| Outstanding at December 31, 2021 | ||||||||
| Number of options exercisable at December 31, 2021 | ||||||||
The aggregate intrinsic value of the awards outstanding as of December 31, 2021 is . These amounts represent the total intrinsic value, based on the Company’s stock price of $as of December 31, 2021, less the weighted exercise price. This represents the potential amount received by the option holders had all option holders exercised their options as of that date.
| F-19 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except share and per share data)
NOTE 9 - STOCK OPTIONS (continue)
SCHEDULE OF STOCK OPTION OUTSTANDING RANGE OF EXERCISE PRICE
| Exercise price | Stock options outstanding | Weighted average remaining contractual life – years | Stock options vested | |||||||||
| As of December 31, 2021 | ||||||||||||
Compensation expense recorded by the Company in respect of its stock-based compensation awards for the year ended December 31, 2021 was $and are included in General and Administrative expenses in the Statements of Operations.
NOTE 10 – RESEARCH AND DEVELOPMENT EXPENSES
SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSES
| Year ended December 31 | ||||||||
| 2021 | 2020 | |||||||
| Salaries and related expenses | ||||||||
| Professional fees and other development costs | ||||||||
| Depreciation and amortization | ||||||||
| Vehicle maintenance | ||||||||
| Rent and office maintenance | ||||||||
| Total Research and Development Expenses | ||||||||
NOTE 11 – GENERAL AND ADMINISTRATIVE EXPENSES
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
| Year ended December 31 | ||||||||
| 2021 | 2020 | |||||||
| Salaries and related expenses | ||||||||
| Professional services | ||||||||
| Rent and office maintenance | ||||||||
| Office expenses | ||||||||
| Depreciation and amortization | ||||||||
| Advertising | ||||||||
| Doubtful debts | ||||||||
| Other expenses | ||||||||
| Total general and administrative expenses | ||||||||
| F-20 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars)
NOTE 12 – INCOME TAX
| A. |
Income
of the Israeli company is taxable from 2018 and onwards, at corporate tax rate of
The Company and its Israeli Subsidiary has not received final tax assessments since its inception.
As
of December 31, 2021, the Company and its Israeli Subsidiary has carryforward losses for tax purposes of approximately $
| B. | The following is reconciliation between the theoretical tax on pre-tax income, at the tax rate applicable to the Company (federal tax rate) and the tax expense reported in the financial statements: |
SCHEDULE OF EFFECTIVE INCOME TAX EXPENSE
| Year ended December 31 | ||||||||
| 2021 | 2020 | |||||||
| Pretax loss | ||||||||
| Federal tax rate | % | % | ||||||
| Income tax computed at the ordinary tax rate | ( | ) | ( | ) | ||||
| Non-deductible expenses | ||||||||
| Stock-based compensation | - | |||||||
| Tax in respect of differences in corporate tax rates | ( | ) | ( | ) | ||||
| Losses and timing differences in respect of which no deferred taxes were generated | ||||||||
| Income tax expense benefit | - | - | ||||||
| C. | Deferred taxes result primarily from temporary differences in the recognition of certain revenue and expense items for financial and income tax reporting purposes. Significant components of the Company’s future tax assets are as follows: |
SCHEDULE OF DEFERRED TAX ASSETS
| Year ended December 31 | ||||||||
| 2021 | 2020 | |||||||
| Composition of deferred tax assets: | ||||||||
| Provision for employee related obligation | ||||||||
| Allowance for doubtful accounts | ||||||||
| Non capital loss carry forwards | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| - | - | |||||||
| F-21 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except share and per share data)
Basic loss per share is computed by dividing net loss by the weighted average number of shares outstanding during the year. The weighted average number of shares of Common Stock used in computing basic and diluted loss per ordinary share for the years ended December 31, 2021 and 2020, are as follows:
| Year ended December 31 | ||||||||
| 2021 | 2020 | |||||||
| Number of shares | ||||||||
| Weighted average number of shares of Common Stock outstanding attributable to ordinary shareholders | ||||||||
NOTE 14 – RELATED PARTIES
SCHEDULE OF RELATED PARTY EXPENSES
| A. | Transactions and balances with related parties |
| 2021 | 2020 | |||||||
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| General and administrative expenses: | ||||||||
| Salaries and fees to officers (*) | ||||||||
| (*) of which share based compensation | - | |||||||
| Research and development expenses: | ||||||||
| Salaries and fees to officers | ||||||||
| B. | Balances with related parties and officers: |
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Other current assets | ||||||||
| Other accounts liabilities | ||||||||
| Liability for employee rights upon retirement | ||||||||
| Long term loan from related party | ||||||||
| F-22 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except share and per share data)
NOTE 14 – RELATED PARTIES (continue)
| C. | On
October 21, 2020, RNA Ltd., the Company’s subsidiary, and Giora Rozensweig, the Company’s
interim Chief Executive Officer, entered into an employment agreement providing for the employment
(the “Giora Employment Agreement”) of Mr. Giora Rozensweig as RNA’s Chief
Executive Officer, with retroactive application to July 1, 2020. Under the Giora Employment
Agreement, Mr. Rozensweig is paid an annual gross salary of the current New Israeli
Shekel equivalent of $ |
| D. | On
October 21, 2020, RNA Ltd., the Company’s subsidiary, and Gaya Rozensweig entered into
an employment agreement providing for the employment (the “Gaya Employment Agreement”)
of Ms. Gaya Rozensweig as RNA’s controller, with retroactive application to July 1,
2020. Under the Gaya Employment Agreement, Ms. Rozensweig is paid an annual gross
salary of the current New Israeli Shekel equivalent of $ |
| E. | Giora
Rozensweig and our subsidiary SG entered into an Irrevocable License and Royalty Agreement
as of December 31, 2020 pursuant to which Mr. Rozensweig granted to SG an irrevocable worldwide
license to certain technologies and the related intelelctual rights. In consideration of
such license, Mr. Rozensweig is entitled to |
| F-23 |
WORLD HEALTH ENERGY HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except share and per share data)
NOTE 15 – SUBSEQUENT EVENTS
| 1. | CrossMobile investment agreement |
On
March 22, 2022 the Company, CrossMobile S.P.Zoo, a company formed under the laws of Poland (“CrossMobile”) and the
shareholders of CrossMobile (of which Mr. Giora Rosenzweig, holds
CrossMobile is a licensed mobile virtual network operator (“MVNO”) in Poland, providing the necessary licenses and key infrastructure in the EU. With its involvement in CrossMobile, the Company expects to provide advanced cybersecurity solutions and other next-generation value-added services to CrossMobile’s future product offerings.
In addition, for 18 months following the date of the Agreement, the Company has the option to purchase additional shares of CrossMobile, such that following such additional purchase, the Company shall hold approximately of CrossMobile’s outstanding share capital on a fully diluted basis. In the event the Company shall choose to exercise the option, the Company shall issue such number of restricted shares of common stock of the Company calculated based on pre-money valuation of CrossMobile as determined by an independent appraiser agreed between the Company and CrossMobile.
Under the Agreement, upon the closing of the Initial Investment, Giora Rosenzweig, is to be appointed to the CrossMobile board of directors. The Agreement provides that either party may terminate the Agreement and the transactions is the Initial Investment has not closed by September 30, 2022.
The preferred share capital of CrossMobile provides certain privileges, including the right to participate in CrossMobile shareholder meetings at a rate of two votes for each preferred share and preference as to distribution of dividends at a rate equal to twice the dividends distributed to the holders of the common shares in CrossMobile.
| 2. | Mr. Tromer, the CEO of CrossMobile, was appointed to the Company’s advisory board in February 2022. In connection with his service on the advisory board, on February 14, 2022, he was awarded options under the Company’s 2021 Equity Incentive Plan to purchase shares of the Company’s common stock, at a per share exercise price of $per share, which the exercise price for all grants to date to member of the Company’s advisory board. Mr. Tromer’s options vest as follows: (i.e., ) option shares vest on the first anniversary of the appointment to the advisory board and the balance in increments of shares on each subsequent three (3) month anniversary. |
| 3. | On January 1, 2022, the Company granted options to purchase shares of the Company’s Common Stock to a member of its advisory board, under the Company’s 2021 Plan. Options to purchase shares of Common Stock shall vest on the first anniversary of the agreement and the remaining options shall vest quarterly, over additional years. |
| 4. | During February 2022,
the Company and certain investors entered into subscription agreements for a private placement of units of the Company securities
in an aggregated amount of $, where each unit (a “Unit” and collectively the “Units”) is comprised
of (i) one (1) share of the Company’s Common Stock and (ii) one common stock purchase warrant to purchase an additional share
of the Company’s Common Stock through the second anniversary thereof at a per share exercise price of $ |
| F-24 |
Exhibit 4.1
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934
General
We are currently authorized to issue up to 750,000,000,000 shares of Common Stock, and 10,000,000 shares of preferred stock, par value $0.00001 per share. As of April 10, 2022, there were 489,839,407,996 shares of common stock and 5,000,000 shares of preferred stock outstanding All of our issued and outstanding shares have been validly issued, fully paid and non-assessable.
Our bylaws permit the board of directors to issue the whole or any part of any unissued balance of the authorized capital stock. Our certificate of incorporation permits us to increase or decrease the number of authorized shares of Common Stock by the affirmative vote of the holders of a majority of the stock of the Company entitled to vote.
Common Stock
Voting Rights
Holders of our Common Stock are entitled to one vote for each share held on all matters submitted to a vote of our stockholders. Holders of our Common Stock have no cumulative voting rights. Further, holders of our Common Stock have no preemptive, conversion, redemption or subscription rights and there are no sinking fund provisions applicable to our Common Stock.
Liquidation Rights
In the event of our liquidation, dissolution or winding-up, holders of our Common Stock have the right under Section 281 of the Delaware General Corporation Law to a ratable portion of assets remaining after satisfaction in full of the prior rights of our creditors, all liabilities and the total liquidation preferences of any outstanding shares of preferred stock.
Dividends
Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of our Common Stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors, or board, out of our assets which are legally available.
Preferred Stock
Our Certificate of Incorporation authorizes 10,000,000 shares of preferred stock, par value $0.0001 per share, of which none were issued and outstanding as of the date of this registration statement. The board of directors is authorized to provide for the issuance of these unissued shares of preferred stock in one or more series, and to fix the number of shares and to determine the rights, preferences and privileges thereof. Accordingly, the board of directors may issue preferred stock which may convert into large numbers of shares of Common Stock and consequently lead to further dilution of other shareholders.
The Series A Preferred Stock were issued in August 2019 to each of Gaya Rozensweig and George Baumeohl. The Series A Preferred Stock is authorized to vote with the Common Stock in all stockholder meetings that the Common Stock may vote and each share has voting power equal to 10,000 votes per share.
Options
options to purchase 12,800,000,000 shares of our Common Stock, at a weighted average exercise price of $0.0001 per share
Anti-Takeover Provisions
The provisions of Delaware law, our Certificate of Incorporation and our Bylaws may have the effect of delaying, deferring or discouraging another person from acquiring control of the Company. These provisions, which are summarized below, may have the effect of discouraging takeover bids. They are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaw Provisions
Our amended and restated certificate of incorporation and our amended and restated bylaws include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our management team, including the following:
| ● | Board of directors’ vacancies. Our Certificate of Incorporation provides that vacancies on the board of directors may be filled only by the affirmative vote of a majority of the directors then in office, irrespective of whether there is a quorum, or by a sole remaining director. Additionally, the number of directors to serve on our board of directors is fixed solely and exclusively by resolution duly adopted by our board of directors. This would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our board of directors but promotes continuity of management. |
| ● | Special meetings of stockholders. Our Certificate of Incorporation currently provides that special meetings of our stockholders may be called by the board of directors acting pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office.. |
| ● | No cumulative voting. The Delaware General Corporation Law provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not provide for cumulative voting. |
| ● | Issuance of undesignated preferred stock. Our board of directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock, which may be converted into large numbers of shares of Common Stock, would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or other means. |
| ● | Delaware Business Combination Statute. The Company is subject to the “business combination” provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years following the date such person becomes an interested stockholder, unless the business combination or the transaction in which such person becomes an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person that, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, and the anti-takeover effect includes discouraging attempts that might result in a premium over the market price for the shares of our Common Stock. |
| ● | Exclusive forum. Unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. |
Transfer Agent and Registrar
The transfer agent and registrar for our Common Stock is Continental Stock Transfer and Trust Company, with a mailing address of One State Street Plaza, New York, NY 10004.
Exhibit 21.1
Subsidiaries
World Heath Energy, Inc., wholly owned subsidiary
FSC Solutions, Inc. wholly owned subsidiary
SG 77, Inc. wholly owned subsidiary
RNA Ltd. a direct wholly owned subsidairy of SG 77, Inc.
Exhibit 31
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934
I, Giora Rozensweig, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2021, of World Health Energy Holdings, 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 presented in this report;
4. I am 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 my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financing reporting, or caused such internal control over financial reporting to be designed under my 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 my 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 financial 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. 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 involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
April 14, 2022
| By: | /s/ Giora Rosenzweig | |
| Giora Rosenzweig | ||
| (Principal Executive Officer and Principal Financial and Accounting Officer) |
EXHIBIT 32
Certification of Periodic Financial Report by the Chief Executive Officer and
Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of World Health Energy Holdings, Inc. (the “Company”) for the for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “Report”), I, Giora Rozensweig, Interim Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or Section 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.
Date: April 14, 2022
| By: | /s/ Giora Rosenzweig | |
| Giora Rosenzweig | ||
| (Principal Executive Officer and Principal | ||
| Financial and Accounting Officer) |