The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Cuentas, Inc. (the “Company”) together with its subsidiaries, is focused on financial technology (“FINTECH”) services, delivering mobile banking, online banking, prepaid debit and digital content services to unbanked, underbanked and underserved communities. The Company derives its revenue from the sales of prepaid and wholesale calling minutes. The Company’s exclusivity with CIMA’s proprietary software platform enables Cuentas to offer comprehensive financial services and additional robust functionality that is absent from other General-Purpose Reloadable Cards (“GRP”). Additionally, The Company has an agreement with Interactive Communications International, Inc. (“InComm”) a leading processor of ~~GPR~~general purpose reloadable (“GPR”) debit cards, to market and distribute a line of GPR cards targeted towards the Latin American market.

The Company was incorporated under the laws of the State of Florida on September 21, 2005 to act as a holding company for its subsidiaries. Its subsidiaries are Meimoun and Mammon, LLC (100% owned) (“M&M”), Next Cala, Inc. (94% owned -was dissolved on July 3, 2020) (“Cala”), NxtGn, Inc. (65% owned-was dissolved on August 24, 2020) (“NxtGn”) and Cuentas ~~Fintech Card stores products purchased in the Virtual Market Place where Tier-1 retailers, gaming currencies, amazon cash, and wireless telecom prepaid minutes “top ups”~~Mobile LLC (formerly Next Mobile 360, LLC. - 100% owned). Additionally, ~~well-known brand name restaurants~~Next Cala, Inc. had a 60% interest in NextGlocal Inc. (“NextGlocal”), a subsidiary formed in May 2016 and which was dissolved on September 27, 2019. Tel3, a business segment of Meimoun and Mammon, LLC provides prepaid calling cards to consumers directly and operates in a complimentary space as Meimoun and Mammon, LLC. On October 23, 2017, the ~~marketplace automatically discount purchases at POS when~~Company acquired 100% of the ~~customer pays~~outstanding shares in Limecom, Inc., (“Limecom” and such acquisition, the ~~bill~~“Limecom Acquisition”) from Heritage Ventures Limited (“Heritage”). On January 30, 2019, the Company exercised a right to rescind the Limecom Acquisition, principally in an effort to reduce the Company’s continuing debt obligations associated with the ~~Cuentas Card.~~Limecom Acquisition.

On December 6, 2017, the Company completed its formation of SDI NEXT DISTRUBUTION LLC (“SDI Next”) in which the Company owns a 51% membership interest, previously announced August 24, 2017 in a letter of intent with Fisk Holdings, LLC (“Fisk Holdings”). Per the Operating Agreement of SDI Next, the Company and Fisk Holdings will serve as the Managing Members of SDI Next and the Company will contribute a total of $500,000, to be paid per an agreed-upon schedule over a twelve-month period. Fisk Holdings will contribute 30,000 active point of sale locations for distribution of retail telecommunications and prepaid financial products and services to include, but not be limited to: prepaid GPR cards, prepaid gift cards, prepaid money transfer, prepaid utility payments, and other prepaid products. The completed formation of an established distribution business for third-party gift cards, digital content, mobile top up, financial services and digital content, which presently includes more than 31,600 U.S. active Point of Sale locations, including store locations, convenience stores, bodegas, store fronts, etc. The parties agreed that additional product lines may be added with unanimous decision by the Managing Members of SDI Next. During 2018, it was agreed between the parties to distribute the Company’s recently announced CUENTAS GPR card and mobile banking solution aimed to the unbanked, underbanked and financially underserved consumers, making them available to customers at the more than 31,600 retail locations SDI Next presently serves. SDI Next was dissolved on August 22, 2020.

On December 31, 2019, the Company entered into a series of integrated transactions to license the Platforms from CIMA, through CIMA’s wholly owned subsidiaries Knetik, and Auris (the “Transaction Closing”) pursuant to that certain Platform License Agreement, dated December 31, 2019 by and among (i) the Company, (ii) CIMA, (iii) Knetik and (iv) Auris (the “License Agreement”) and the various other agreements listed below. Under the License Agreement Cima ~~Group~~ received a ~~1-time~~one-time licensing fee in the amount of $9,000 in the form of a convertible note that may be converted, at the option of Cima, into up to 25% of the total shares of Common Stock of the Company, par value $0.001 per share (the “Common Stock”) on a fully diluted basis as of December 31, 2019. On December 31, 2019, CIMA exercised its option to convert the Convertible Promissory Note into ~~1,757,478~~702,992 shares of Common Stock of the Company. Upon the conversion of the Series B Preferred shares into common stock, CIMA received an additional 5five million shares pursuant to their anti-dilution warrant agreement.

The acquired intangible assets that consisted of perpetual software license had an estimated fair value of $9,000. The Company will amortize the intangible assets on a straight-line basis over their expected useful life of 60 months. Identifiable intangible assets were recorded as follows:

On March 5, 2021, the Company purchased the domain www.cuentas.com in consideration of $47,000. The Company will amortize the intangible assets on a straight-line basis over their expected useful life of 60 months. Identifiable intangible assets were recorded as follows:

Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed periodically for impairment.

Amortization of intangible assets for each of the next five years and thereafter is expected to be as follows:

Amortization expense was ~~$1,350~~$452 and $0$450 for the periods ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Amortization expense for each period is included in operating expenses.

Pursuant to the License Agreement, the Company shall pay CIMA annual fees for the maintenance and support services in accordance with the following schedule: (i) for the first (1st) calendar year from the Effective Date, $300 ~~to be~~were paid ~~on June 30,~~in 2020; (ii) for the second (2nd) calendar year from the Effective Date, $500 to be paid on December 31, 2020; (iii) for the third (3rd) calendar year from the Effective Date, $700 to be paid on December 31, 2021; (iv) for the fourth (4th) calendar year from the Effective Date, $1,000 to be paid on December 31, 2022; (v) for the fifth (5th) calendar year from the Effective Date, $640 to be paid on December 31, 2022; and (vi) for each calendar year thereafter, $640 to be paid on the anniversary date.

On ~~August 21, 2020, in connection with the Special Meeting (as defined below),~~February 2, 2021, the Company ~~filed with the Secretary~~completed a reverse stock split of ~~State~~its common stock. As a result of the ~~State of Florida~~reverse stock split, the ~~Company’s Amended~~following changes have occurred (i) every two and ~~Restated Articles of Incorporation (the “Amended and Restated Articles”) to, among other things, cause all outstanding~~a half shares of ~~Series B Preferred Stock, par value $0.001~~common stock have been combined into one share of common stock; (ii) the number of shares of common stock underlying each common stock option or common stock warrant have been proportionately decreased on a 2.5-for-1 basis, and the exercise price of each such outstanding stock option and common warrant has been proportionately increased on a 2.5-for-1 basis. Accordingly, all option numbers, share numbers, warrant numbers, share prices, warrant prices, exercise prices and losses per share ~~(the “Preferred Stock”)~~have been adjusted within these consolidated financial statements, on a retroactive basis, to ~~be converted into shares of~~reflect this 2.5-for-1 reverse stock split.

On February 2, 2021 the Company’s common stock ~~par value $0.001 per share (the “Common Stock”)~~and warrants began trading on ~~a one-to-one basis. Additionally,~~The Nasdaq Capital Market under the ~~Company amended~~symbols “CUEN” and restated its bylaws (the “Amended and Restated Bylaws”) to improve and enhance the Company’s corporate governance guidelines, to simplify the Bylaws, and to provide the Company with the flexibility necessary to carry out its business plans.“CUENW,” respectively.

~~On August 17, 2020 a Special Meeting of the Shareholders of Cuentas was held (the “~~~~Special Meeting~~~~”). At the Special Meeting, the Company’s shareholders approved the following two proposals:~~

First Proposal: The adoption of the Amended and Restated Articles in order to, effective as of the date the Amended and Restated Articles are filed with the Secretary of State of the State of Florida, cause all outstanding shares of Preferred B Stock to be converted into shares of Common Stock on a one-to-one basis (the “Articles Proposal”). ~~The affirmative vote of a majority of each of the Common Stock holders and Preferred Stock holders, voting as a separate group was needed to pass the Articles Proposal.~~

Second Proposal: The adoption of the Amended and Restated Bylaws of the Company in order to improve and enhance the Company’s corporate governance structure, to simplify the Bylaws and to provide the Company with the flexibility necessary to carry out its business plan (the “Bylaws Proposal”). The affirmative vote of a majority of the shares of Common Stock and Preferred Stock entitled to vote, voting as a single class, was required to pass the Bylaws Proposal.

On May 16, 2020, the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL Loan is $83, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue only on funds actually advanced. Installment payments, including principal and interest, are due monthly beginning May 16, 2021 (twelve months from the date of the SBA Note (defined below)) in the amount of $83. The balance of principal and interest is payable thirty years from the date of the SBA Note. In connection therewith, the Company received a $10 advance, which does not have to be repaid. In connection therewith, the Company executed (i) a note for the benefit of the SBA (the “SBA Note”), which contains customary events of default and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of Maimon and Maimon, which also contains customary events of default (the “SBA Security Agreement”).

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, as well as our business and operations. The extent to which COVID-19 impacts our business and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our business and results of operations may be materially adversely affected.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As of September 30, 2020, the Company had approximately $343 in cash and cash equivalents, approximately $3,846 in negative working capital and an accumulated deficit of approximately $24,543. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Company’s ability to continue as a going concern is dependent upon raising capital from financing transactions and revenue from operations. Management anticipates their business will require substantial additional investments that have not yet been secured. Management is continuing in the process of fund raising in the private equity and capital markets as the Company will need to finance future activities. These financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.

The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements presented herein have not been audited by an independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the for ~~nine-months~~three-months ended ~~September 30, 2020.~~March 31, 2021. However, these results are not necessarily indicative of results for any other interim period or for the year ended December 31, ~~2020.~~2021. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates.

Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, filed with the SEC on March ~~30, 2020~~25, 2021 (the “Annual Report”). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

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.

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. Estimates are used when accounting for ~~intangible assets, going concern and~~ stock-based compensation.

Deferred revenue is comprised mainly of unearned revenue related to prepayments from retail consumers for telecommunications minutes. The following table represents the changes in deferred revenue for the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021:

Revenue allocated to remaining performance obligations represent contracted revenue that has not yet been recognized (“contracted not recognized”). Contracted not recognized revenue was ~~$611~~$676 as of ~~September 30, 2020,~~March 31, 2021, of which the Company expects to recognize 100% of the revenue over the next 12 months.

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.

Fair value of certain of the Company’s financial instruments including cash, accounts receivable, accounts payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.

Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity.

~~In August 2018, the FASB~~New pronouncements issued ~~ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments apply to reporting entities that~~but not effective as of March 31, 2021 are required to make disclosures about recurring or nonrecurring fair value measurements and should improve the cost, benefit, and effectiveness of the disclosures. ASU 2018-13 categorized the changes into those disclosures that were removed, those that were modified, and those that were added. The primary disclosures that were removed related to transfers between Level 1 and Level 2 investments, along with the policy for timing of transfers between levels. In addition, disclosing the valuation processes for Level 3 fair value measurements was removed. The amendments are effective for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company notes that this guidance will impact its disclosures beginning January 1, 2020.

In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. In November 2018, FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”, which amends the scope and transition requirements of ASU 2016-13. Topic 326 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. Topic 326 will originally become effective for the Company beginning January 1, 2020, with early adoption permitted, on a modified retrospective approach. As a smaller reporting company, the effective date for the Company has been delayed until fiscal years beginning after December 15, 2022, in accordance with ASU 2019-10, although early adoption is still permitted. This standard is not expected to have a material impact toon the Company’s consolidated financial ~~statements after evaluation.~~statements.

~~In December 2019,~~Other accounting standards that have been issued or proposed by 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 earlyor other standards-setting bodies that do not require adoption ~~is permitted, including adoption in any interim period for which financial statements have not yet been issued. This standard is~~until a future date are not expected to have a material impact ~~to the Company’s consolidated~~on our financial statements ~~after evaluation.~~upon adoption.

The following table summarizes all stock option activity for the nine months ended ~~September 30, 2020:~~March 31, 2021:

The following table discloses information regarding outstanding and exercisable options at ~~September 30, 2020:~~March 31, 2021:

On March 30, 2020, the Company issued 198,000 options to its Chief Executive Officer and President of the Company. The options carry an exercise price of $5.74 per share. All the options were vested immediately. The Options are exercisable until March 30, 2022. The Company has estimated the fair value of such options at a value of $456 at the date of issuance using the Black-Scholes option pricing model using the following assumptions:

On September 15, 2020, the Company issued a promissory note to Labrys Funds LP for $605 (the “Labrys Note”). The Labrys Note bears interest at a rate of 12% per annum, mature on September 14, 2021. The interest is paid monthly. Payment of principle starts after 3 months with ability to extend for up to 2 months and the loan principal become payable on maturity. The Labrys Note bears an original issue discount in the amount of $60, and the issuing expenses were $40, resulting with net proceeds of $505. The Company also issued 141,812 shares of its Common Stock pursuant to the Labrys Note. Out of those, 33,000 shares of Common Stock were issued in consideration of Commitment fee and the balance are subject to return to the Company once the Labrys Note will be paid in full if there were no defaults.

The following summarizes the Common Stock activity for the three months ended ~~September 30, 2020:~~March 31, 2021:

On January 3, 2020 Dinar Zuz provided an additional amount of $300 to the Company which was be provided in a form of the Optima Convertible Note pursuant to a securities purchase agreement between the Company and Optima, dated July 30, 2019. Additionally, on January 3, 2020,February 2, 2021, the Company issued ~~100,000~~20,000 shares of its Common Stock to ~~Dinar Zuz LLC, as~~its Chief Financial Officer, 40,000 shares of its Common Stock to a ~~result of a conversion~~member of the ~~Dinar Convertible Note in~~Board of Directors of the ~~amount~~Company and 3,334 shares of ~~$300.~~its Common Stock to a former employee. The fair market value of the shares was $245.

On ~~January 9,~~February 2, 2021 the Company’s common stock and warrants began trading on The Nasdaq Capital Market under the symbols “CUEN” and “CUENW,” respectively. On February 4, 2020 the Company sold an aggregate of 2,790,697 units at a price to the public of $4.30 per unit (the “Offering”), each unit consisting of one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and a warrant exercisable for five years to purchase one share of Common Stock at an exercise price of $4.30 per share (the “Warrants”), pursuant to that certain Underwriting Agreement, dated as of February 1, 2021 (the “Underwriting Agreement”), between the Company and Maxim Group LLC (the “Representative” or “Maxim”), as representative of the sole underwriter. In addition, pursuant to the Underwriting Agreement, the Company granted Maxim a 45-day option to purchase up to 418,604 additional shares of Common Stock, and/or 418,604 additional Warrants, to cover over-allotments in connection with the Offering. The Common Stock and the Warrants were offered and sold to the public pursuant to the Company’s registration statements on Form S-1 (File Nos. 333-249690 and 333-252642), filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), on October 28, 2020, as amended, and which became effective on February 1, 2021. The Company received gross proceeds of approximately $12.0 million, before deducting underwriting discounts and commissions of 8% of the gross proceeds and estimated Offering expenses. Pursuant to the Underwriting Agreement, the Company also agreed to issue to Maxim warrants (the “Underwriter’s Warrants”) to purchase up to a total of 223,256 shares of Common Stock (8% of the shares of Common Stock sold in the Offering). The Underwriter’s Warrants are exercisable at $5.375 per share of Common Stock and have a term of five years. The Underwriter’s Warrants are subject to a lock-up for 180 days from the commencement of sales in the Offering, including a mandatory lock-up period in accordance with FINRA Rule 5110(e), and will be non-exercisable for six months after February 1, 2021. The total expenses of the offering are estimated to be approximately $1.4 million, which included Maxim’s expenses relating to the offering.

On March 4, 2021 and pursuant to the Underwriting Agreement, Maxim exercised its 45-day option to purchase up to 418,604 additional Warrants, to cover over-allotments in connection with the Offering.

On March 17, 2021, the Company issued ~~40,000~~10,000 shares of its Common Stock pursuant to a service Agreement between the Company and a service provider, dated ~~June 3,~~May 16, 2019. The fair market value of the shares at the issuance date was ~~$240.~~$38.

On January 14, 2020, the Company issued 58,334 shares of Common Stock to employees. All shares were issued pursuant to the Company’s Share and Options Incentive Enhancement Plan (2016). The Company has estimated the fair value of such shares at $332.

~~On February 10, 2019, the Company issued 10,000 shares of its Common Stock pursuant to a securities purchase agreement between the Company and a private investor, dated October 25, 2018.~~

On March 3, 2020, Dinar Zuz provided an additional amount of $450 to the Company which was be provided in a form of the Dinar Zuz Convertible Note pursuant to a securities purchase agreement between the Company and Dinar Zuz, dated July 30, 2019. The Company issued 1,157,478 shares of its Common Stock to Dinar Zuz LLC, as a result of a conversion of the Dinar Convertible Note in the amount of $700.

~~On April 2, 2020, the Company issued 70,000 shares of its Common Stock pursuant to a securities purchase agreement between the Company and a private investor, dated October 25, 2018.~~

On May 22, 2020, the Company issued 42,819 shares of its Common Stock pursuant to a cashless conversion of warrants to purchase up to 73,080 shares of its Common Stock at an exercise price equal to $3.25 per share.

~~On August 20, 2020, the Company issued 50,000 shares of its Common Stock pursuant to a settlement of stock-based liabilities. The fair market value of the shares was $180.~~

On August 27, 2020, the Company converted all the outstanding shares of Series B Preferred Stock, par value $0.001 per share to 10,000,000 shares of the Company’s common stock, par value $0.001 per share.

~~On September 17, 2020, the Company issued 5,000,000 of its Common Stock par value $0.001 per share to each of Dinar Zuz and Cima Telecom Inc., Under a warrant dated December 31, 2019.~~

On September 17, 2020, the Company issued 141,812 shares of its Common Stock pursuant to promissory note, dated September 15, 2020. The fair market value of the shares at the issuance date was $390. Out of those, 33,000 shares of Common Stock were issued in consideration of Commitment fee and the balance are subject to return to the Company once the promissory note will be paid in full.

On September 30, 2020, the Company issued 100,000 of its Common Stock par value $0.001 per share to a private investor in consecration of cancellation of warrants to purchase up to 99,334 shares of its Common Stock at an exercise price equal to $3.25 per share.

On July 1, 2020 and Pursuant to section 1 (e) of the Side Letter Agreement, dated December 31, 2019, it was agreed by and among Dinar Zuz, Cima, Arik Maimom and Michael De Prado that the Company will borrow up to $462 from Dinar Zuz LLC under the second Dinar Zuz Note. As of September 30, 2020, the Company borrowed $355,000 under the second Dinar Note.

On July 24, 2020, the Compensation Committee of the Board of Directors of the Company approved the “Amended and Restated” employment agreements with each of Arik Maimon, the Company’s Chief Executive Officer (“Maimon”), and Michael De Prado, the Company’s President (“De Prado,” and together with Maimon, the “Executives,” each an “Executive”), the “New Employment Agreements”. The New Employment Agreements shall supersede the terms of the Pre-existing Employment Agreements. Pursuant to the terms of the New Employment Agreements, among other things:

On August 25, 2020 and Pursuant to section 1 (e) of the Side Letter Agreement, dated December 31, 2019, it was agreed by and among Dinar, Cima, Arik Maimon and Michael De Prado that the Company will borrow up to $50 from Arik Maimon at an annual interest rate of nine percent (9.0%). On September 30, 2020, the Company fully repaid its loan to Arik Maimon.

Related party balances at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 consisted of the following:

On February 24, 2021, the employment agreement dated July 24, 2020 for Arik Maimon expired in accordance with its terms and as previously disclosed by the Company. As a result of the expiration of the employment agreement, Mr. Maimon was no longer employed as the Chief Executive Officer of the Company, but he continued to act as Chairman of the Board of Directors of the Company. On February 25, 2021, the Board appointed Mr. Maimon to act as interim Chief Executive Officer, which position will terminate upon the earlier of August 25, 2021 or the date on which his successor is duly elected and appointed by the Board of the Company.

On February 24, 2021, the employment agreement dated July 24, 2020 for Michael De Prado expired in accordance with its terms and as previously disclosed by the Company. As a result of the expiration of the employment agreement, Mr. De Prado is no longer the President of the Company but has become the Vice Chairman of the Board.

On March 5, 2021 and pursuant to the Side Letter Agreement, the Board of Directors of the Company approved a special bonus in the amount of $500 to each of Mr. Maimon and Mr. De Prado due to the successful up-listing of the Company’s shares on the Nasdaq Capital Markets. Half of the bonus ($250) was paid in cash and half will be paid in Common shares of the Company.

The Company did not have any one customer account for more than 10% of its revenues during the three months ended March 31, 2021 and 2020, respectively.

~~On February 12, 2018,~~From time to time, the Company ~~was served with a complaint from Viber Media, Inc. (“Viber”) for reimbursement~~may become involved in various lawsuits and legal proceedings which arise in the ordinary course of ~~attorney’s fees and costs totalling $528 arising from a past litigation with Viber. The Company is vigorously defending their rights in this case as the Company believe this demand is premature as~~business. However, litigation is ~~ongoing. On June 15, 2020, the claims against the Company~~subject to inherent uncertainties, and ~~its subsidiary were dismissed.~~

~~On July 6, 2017, the Company received notice~~ an ~~existing legal claim against Accent InterMedia (“AIM”) had been amended~~adverse result in these or other matters may arise from time to include claims against the Company. The claims brought against the Company include failure to comply with certain judgments for collection of funds by the plaintiff while having a controlling interest in AIM via its ownership of Transaction Processing Products (“TPP”). On April 17, 2019, the Company entered into a settlement agreement (the “SVS Settlement Agreement”) with Comdata, Inc. d/b/a Stored Value Solutions (“SVS”) whereby the Company will pay a total of $37 over 7 months, starting July 1, 2019. Only in the eventtime that ~~the Company defaults by failing to make timely payments, SVS~~ may ~~file in Kentucky for the judgment of $70. On February 13, 2020, the Company completed the payments in accordance with the SVS Settlement Agreement and the case was dismissed.~~harm our business.

On December 20, 2017, a ~~Complaint~~complaint was filed by J. P. Carey Enterprises, Inc., (“JP Carey”) alleging a claim for ~~$473~~$473,000 related to ~~the~~ Franjose Yglesias-Bertheau, ~~filed lawsuit against PLKD listed above.~~a former Vice President of PLKD. Even though the Company made the agreed payment of ~~$10~~$10,000 on January 2, 2017, and issued ~~12,002~~6,001 shares of Common Stock as conversion of the ~~$70~~$70,000 note as agreed in ~~the~~its settlement agreement, ~~the Plaintiff~~JP Carey alleges damages ~~which~~that the Company claims are without merit because ~~they~~JP Carey received full compensation as agreed. The Company is in the process of defending itself against these claims. The Company has not accrued losses related to this claim due to the early stages of litigation. On January 29, 2019, the Company was served with aanother complaint by ~~J.P.~~JP Carey ~~Enterprises, Inc., (“JP Carey”) which was filed in Fulton County, Georgia~~ claiming similar issues as to the previous complaint, with the new claimed damages totaling ~~$1,108.~~$1,108,037.85. JP Carey and the Company filed ~~a motion~~motions for a summary ~~judgement.~~judgment. On June 23, 2020, the case was transferred to the Business Court at the request of the Superior Court Judge previously assigned to the case. Judge Ellerbe from the Business Court has been assigned as the new judge. On June 29, 2020, the Business Court held a status conference to review the status of the case, the pending motions, and to set a case schedule. At the status conference, the Court indicated that it would review the pending cross-motions for summary judgment and the Company’s motion to strike JP Carey’s late-disclosed expert and contact the parties about setting an oral hearing on both motions at a later date. On October 1, 2020, the ~~Superior Court judge entered a~~court granted the Company’s motion for summary judgment ~~in favor of Cuentas~~ and denied JP Carey’s motion for summary judgment. On October 30, 2020, JP Carey filed a notice of appeal to the trial court’s October 1 and 7, 2020 orders granting summary judgment in favor of Cuentas. The briefing in the appeal was completed during the first quarter of 2021. Oral argument held on April 13, 2021 but no decision has been rendered yet. On November 16, 2020, Cuentas filed a motion seeking payment from JP Carey of $140,970.82 in attorney fees and costs accrued as of November 13, 2020. JP Carey’s response brief was due on December 21, 2020 and thereafter Cuentas may reply. The trial court has not yet set a date to hear this motion.

On ~~September 28,~~October 23, 2018, the Company was ~~notified~~served by Telco Cuba Inc. for an amount in excess of $15,000 but the total amount was not specified. The Company was served on December 7, 2018, with a complaint alleging damages including unspecified damages for product, advertising and other damages in addition to $50,000 paid to the Defendants. The Company retained an attorney and has taken steps to defend itself vigorously in this case. Depositions are in process of being scheduled.

On October 25, 2018, the Company was served with a complaint by former company Chief Financial Officer, Michael Naparstek, claiming breach of contract for 833,333 shares (pre-2018 reverse stock split), $25,554 of compensation and $8,823 of expenses. This case was withdrawn in Palm Beach County and on January 11, 2019, a similar complaint was filed ~~against it by a former supplier.~~in Miami-Dade County. During the recent mediation, the Parties reached an understanding of full settlement amount of $2,500. The Company has ~~not yet received formal service~~deposited the settlement amount to an escrow account of its counsel until a stipulation of settlement will be executed by both parties.

On November 7, 2018, the Company and its now former subsidiary, Limecom, were served with a complaint ~~and is awaiting such service at which time it can fully assess~~by IDT Domestic Telecom, Inc. for telecommunications services provided to Limecom during 2018 in the ~~complaint.~~amount of $50,000. The Company has ~~not accrued any losses~~no accrual expenses as of ~~September 30, 2020~~December 31, 2019, related to the complaint given the early nature of the process.

~~On November 7, 2018,~~ Limecom was a subsidiary of the Company during this period but since the Limecom Acquisition was ~~served with a complaint by IDT Domestic Telecom, Inc. vs~~rescinded on January 30, 2019, and Limecom agreed to indemnify and hold harmless the Company from this and ~~its subsidiary Limecom, Inc. for telecommunications services provided to the Subsidiary during 2018 in the amount of $50.~~other debts. The Company has no accrual as of September 30, 2020 related to the complaint given the early nature of the process. The Company intends to file a motion to dismiss the Company as a defendant since the Company has no contractual relationship with the plaintiff.retained an attorney and is defending itself vigorously in this case. A court ordered mandatory arbitration session took place and the arbitration findings were issued on June 19, 2020, and a request for trial de novo was filed on July 16, 2020, in order to have the matter docketed on the calendar. The court came to the determination that while not indicative of success at trial, the court denied Plaintiff’s motion for summary judgment. As of this time, a trial date was set for July 6, 2021.

On May 1, 2019, the Company received a ~~Notice~~notice of ~~Demand~~demand for ~~Arbitration (the “Demand”)~~arbitration from Secure IP Telecom, Inc. (“Secure IP), who allegedly had a Reciprocal Carrier Services Agreement ~~(RCS)~~(“RCS”) exclusively with Limecom and not with Cuentas. The ~~Demand~~arbitration demand originated from ~~a Demand~~another demand for ~~Arbitration~~arbitration that Secure IP received from VoIP Capital International (“VoIP”) in March 2019, demanding ~~$1,053~~$1,052,838.09 in damages allegedly caused by unpaid receivables that Limecom assigned to VoIP based on the RCS. On June 5, 2020, ~~Secure IP Telecom, Inc. (“SecureIP”)~~SecureIP filed a complaint against Limecom, ~~Inc., (“Limecom”),~~ Heritage Ventures Limited (“Heritage”), an unrelated third party and owner of Limecom, and the ~~Compasny.~~Company. The complaint primarily concerns alleged indebtedness owed SecureIP by Limecom. SecureIP also alleges that Cuentas received certain transfers of funds which it alleges may be an avoidable transfer under Florida Statute §725.105 up to ~~$1,053.~~$1,052,838.09. Cuentas is contemplating filing a motion to dismiss the complaint and disputes that it received the alleged ~~$1,053~~$1,052,838.09 from Limecom. Moreover, to the extent Cuentas has exposure for any transfers from Limecom, both Limecom and Heritage have indemnified Cuentas for any such liability. The Company will vigorously defend its position to be removed as a named party in this action due to the fact that Cuentas rescinded the Limecom ~~acquisition~~Acquisition on January 30, 2019.

On January 24, 2020, the Company received a Corrected Notice of Hearing regarding Qualtel SA de CV, a Mexican Company vs Next Communications, Inc. for a “Plaintiff’s Motion for Order to Show Cause and/or for Contempt as to Non-Party, Cuentas, Inc.” The Company retained a counsel and will vigorously defend its position.

On ~~October 28, 2020~~April 1, 2021 the Company ~~has filed~~executed a ~~registration statement (File No. 333-249690) with the Securities Exchange Commission~~lease for ~~the offering, and~~office space effective April 1, 2019. The lease requires monthly rental payments of $7.

On April 20, 2021 the Company ~~intends~~paid off its loan and accrued interest in the amount of $260 to ~~file a further prospectus with respect~~Arie Gresonie. The Company paid an amount equal to $125 plus $ 5, which represents the ~~offering. Maxim Group LLC will act as~~amount of interest accrued on such $125 since the ~~lead underwriter for~~date on which the ~~offering.~~loan was made under the Note through April 16, 2021. In addition, The Company issued 30,233 shares of Common Stock of the Company.

The following discussion and analysis provide information which management of the Company believes to be relevant to an assessment and understanding of the Company’s results of operations and financial condition. This discussion should be read together with the Company’s financial statements and the notes to the financial statements, which are included in this report.

This Report contains forward-looking statements that relate to future events or our future financial performance. Some discussions in this report may contain forward-looking statements that involve risk and uncertainty. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this Report. Forward-looking statements are often identified by words like “believe,” “expect,” “estimate,” “anticipate,” “intend,” “project” and similar words or expressions that, by their nature, refer to future events.

In some cases, you can also identify forward-looking statements by terminology such as “may,” “will,” “should,” “plans,” “predicts,” “potential,” or “continue,” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements in an effort to conform these statements to actual results.

~~Cuentas Inc. (the “Company” or “Cuentas”)~~The Company is a corporation ~~formed~~incorporated under the laws of Florida on September 21, 2005, which focuses on the business of using proprietary technology to provide e-banking and e-commerce services delivering mobile banking, online banking, prepaid debit and digital content services to the unbanked, underbanked and underserved communities. The Company’s exclusivity with CIMA’s proprietary software platform enables Cuentas to offer comprehensive financial services and additional robust functionality that is absent from other ~~general-purpose reloadable cards~~General-Purpose Reloadable Cards (“GPR”).

Cuentas is a Fintech (Financial Technology) company utilizing technical innovation together with existing and emerging technologies to deliver accessible, efficient and reliable mobile, new-era and traditional financial services to consumers. Cuentas is proactively applying technology and compliance requirements to improve the availability, delivery, reliability and utilization of financial services especially to the unbanked, underbanked and underserved segments of today’s society. Its products are supported by its core methods, procedures, contracts and intellectual property. The Company has extensive experience in the communications field, will provide consumers with an end-to-end array of financial and lifestyle applications, processes, products and solutions that have previously been impossible to deliver. CUEN’s strategically integrated solutions platform is hoped to reshape and improve the financial services industry for the mobility and remittance sectors and digital content for emerging markets.

The Cuentas mobile application (the “Cuentas App”), available for download now on the Apple App Store and on the Google Play Store for Android, allows consumers to easily activate their prepaid Cuentas Mastercard^®, a GPR debit card program (the “Cuentas Mastercard”), review their account balance and conduct financial transactions. Cuentas introduced free card to card transfers from one Cuentas card to other Cuentas cards, which is a very useful and competitive feature.

The Cuentas Mastercard could act as a comprehensive banking solution for the 20+ million unbanked U.S. Latino community, enabling access to the U.S. financial system to those without the necessary paperwork to bank at a traditional financial institution while enabling greater functionality than a traditional bank account. Funds deposited to the proprietary general-purpose reloadable card are FDIC insured and, with the Cuentas App, provide features such as ATM withdrawals, direct deposit, cash reload, free Cuentas card to Cuentas card transfers and other mobile banking capabilities. Additional key features are available such as purchasing discounted gift cards and adding “mass transit credits” to digital accounts (available in Connecticut and Michigan with the expected addition of other regional transit agencies including Los Angeles and other cities,). Upcoming Cuentas App upgrades are expected to include international remittance, international bill pay and other services.

People can register from their home with instant approval, and a Prepaid Cuentas Mastercard will be sent to their address in a few days, so they can purchase products and services online from the safety of their home.

Operating Subsidiaries. The Company’s business operations are conducted primarily through its subsidiaries, described elsewhere in this report. Its subsidiaries are Meimoun and Mammon, LLC (100% owned), Next Cala, Inc (94% owned-was dissolved on July 3, 2020), NxtGn, Inc. (65% owned-was dissolved on August 24, 2020) and Next Mobile 360, Inc. (100% owned), SDI Next Distribution LLC (51% owned was dissolved on August 22, 2020).

~~On August 21, 2020,~~Properties. The Company’s headquarters are located in connection with the Special Meeting (as defined below), we filed with the Secretary of State of the State of Florida the Company’s Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) to, among other things, cause all outstanding shares of Series B Preferred Stock, par value $0.001 per share (the “Preferred Stock”) to be converted into shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) on a one-to-one basis. Additionally, the Company amended and restated its bylaws (the “Amended and Restated Bylaws”) to improve and enhance the Company’s corporate governance guidelines, to simplify the Bylaws, and to provide the Company with the flexibility necessary to carry out its business plans.Miami, Florida.

~~First Proposal:~~ The adoption of the Amended and Restated Articles in order to, effective as of the date the Amended and Restated Articles are filed with the Secretary of State of the State of Florida, cause all outstanding shares of Preferred B Stock to be converted into shares of Common Stock on a one-to-one basis (the “Articles Proposal”). ~~The affirmative vote of a majority of each of the Common Stock holders and Preferred Stock holders, voting as a separate group was needed to pass the Articles Proposal.~~

On August 21, 2020, in connection with the shareholders meeting (the “Shareholders Meeting”), the Company filed with the Secretary of State of the State of Florida the Company’s Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) to, among other things, cause all outstanding shares of Series B Preferred Stock, par value $0.001 per share (the “Preferred Stock”) to be converted into 10,000,000 shares of the Company’s common stock, on a one-to-one basis.

Cuentas Mobile is our MVNO, which provides prepaid voice, text, and data mobile phone services designed for Cuentas’ target market that should enhance and reinforce its marketing campaigns and consumer affinity. Cuentas Mobile operates this business pursuant to contracts with Sprint Corporation which was recently acquired by T-Mobile. This new relationship could provide additional network capabilities and capacity to allow Cuentas Mobile to provide better, more complete services.

During the year ended December 31, 2016, the Company acquired a business segment, Tel3, from an existing corporation. Tel3 was merged into Meimoun and Mammon, LLC effective January 1, 2017. Meimoun & Mammon LLC (“M&M”), our subsidiary,Fintech Card is a retail provider of domestic and international long-distance voice, text, and data telephony services to consumers in the United States and throughout the world. M&M holds International and Domestic Section 214 authority issued by the Federal Communications Commission (“FCC”). M&M operates the retail Tel3 business as a separate division. M&M uses both private and public Internet services to function as the backbone of the M&M network.

~~The Cuentas Fintech App (“Fintech App”) is a mobile application that when combined with the Prepaid Cuentas Mastercard~~^®~~integrates~~GPR integrated into a proprietary robust ecosystem that ~~provides many services typically not available through prepaid debit cards or other mobile apps. Cuentas~~ protects customers by depositing their funds in aan FDIC insured bank account ~~insured by the Federal Deposit Insurance Corporation (“FDIC”)~~ at the ~~issuing bank.~~Issuing Bank. The comprehensive financial services include:

The ~~Ecosystem~~ecosystem includes a mobile wallet for digital currency, stored value card balances, prepaid telecom minutes, loyalty reward points, and purchases made in the ~~Company’s virtual marketplace (the “Cuentas~~Cuentas Virtual ~~Marketplace”).~~Marketplace. The Fintech Card is integrated with the Los Angeles Metro, Connecticut Transit Authority and Grand Rapids Transit system to store mass transit currency and pay for transit access via ~~a digital wallet (the “Cuentas~~the Cuentas Digital ~~Wallet”). Additional regional transit systems such as Los Angeles Metro are expected to be added to the offerings in the near future.~~Wallet

The Fintech ~~App allows cardholders to store and manage their~~Card stores products purchased in the Cuentas Virtual Market Place where Tier-1 retailers, virtual in-game currencies, Amazon Cash, and cellular telecom prepaid minutes “top ups” ~~can be purchased, usually at discounted prices.~~. Additionally, ~~Cuentas cardholders can purchase~~well-known brand name restaurants sell discounted prepaid gift cards ~~from well-known brand name restaurants~~ in the Cuentas ~~marketplace.~~

~~Properties.~~ ~~The Company’s headquarters are located in Miami, Florida.~~Virtual Marketplace.

The name “Cuentas” is a Spanish word that has multiple meanings and was chosen for strategic reasons, to develop a close relationship with the Spanish speaking population. It means “Accounts” as in ~~bank accounts~~“bank accounts” and it can also mean “You can count on me” as in “Cuentas conmigo”. Additionally, it can be used to “Pay or settle accounts” (saldar cuentas), ~~accountability~~“accountability” (rendición de cuentas), to“to be ~~accountable~~accountable” (rendir cuentas), and other significant meanings.

The U.S. Latino population numbers 43.8 million U.S. ~~Immigrants,~~immigrants, according to the 2017 FDIC Survey. It excludes immigrants, illegal aliens and undocumented individuals. The FDIC defines the “unbankable” as those adults without an account at a bank or other financial institution and are considered to be outside the mainstream for one reason or another. The Federal Reserve estimated that there were approximately 55 million unbanked or underbanked adult Americans in 2018, which account for 22 percent of U.S. households. The Latino demographic is more distrusting of banking institutions and generally have more identification, credit, and former bank account issues more so than any other U. S. ~~minority.~~minority group.

The Fintech Card is ~~uniquely~~ positioned to service the Latino demographic with comprehensive financial products that do not require any visits to bank branches, and our fees are completely transparent via the Cuentas Digital Wallet and online banking. Most importantly our strategic banking partner, Sutton Bank, is able to use various forms of U.S. and some foreign government issued identification to confirm qualification.

The Cuentas Mastercard acts as a comprehensive banking solution marketed toward the over 20 ~~million+~~million unbanked U.S. Latino ~~community (The unbanked~~community. The “unbanked” is described by the FDIC as those adults without an account at a bank or other financial institution and are considered to be outside the mainstream for one reason or another. The ~~Federal Reserve estimated that there were approximately 55 million unbanked or underbanked adult Americans in 2018, which account for 22 percent of U.S. households). The~~ Cuentas Mastercard is ~~uniquely~~ enabling access to the U.S. financial system to those without the necessary paperwork to bank at a traditional financial institution while enabling greater functionality than a traditional bank account. This proprietary GPR card allows consumers that reside in the U.S. to acquire a Cuentas Mastercard using their SSN or ITIN together with their U.S. or Foreign Passport, Driver’s License, Matricula Consular or certain ~~US Residency~~U.S. residency documentation. The Cuentas Mastercard’s funds are protected in an FDIC-insured bank account at the Issuing Bank. Functionality includes ATM withdrawals, direct deposit, cash reload, fee free Cuentas App to Cuentas App fund transfers and mobile banking capabilities, among other key features such as purchasing discounted gift cards and adding “mass transit credits” to digital accounts (available in California, Connecticut, Michigan and other cities in the future). Upcoming Cuentas App upgrades should also include international remittance and other services. Consumers are able to use funds in their account to purchase ~~3rd~~third party digital and gift cards (many at discounted prices), U.S. and ~~International~~international mobile phone top-ups, mass transportation and tolling access ~~(select~~(available in select markets - ~~CT,~~Connecticut, Grand ~~Rapids-MI, LA,~~Rapids, MI, Los Angeles, CA, etc.) as well as digital content for virtual gaming, dining, shopping and cash reloads.

The Cuentas App is available for download now on the Apple App Store and on the Google Play Store for ~~Android,~~Android. The Cuentas App allows consumers to easily activate their Cuentas Mastercard, review their account balance and conduct certain financial transactions. Cuentas is introducing fee free fund transfers to friends, family and vendors that have their own Cuentas App, which will be a very useful feature to compete with other popular ~~Apps~~apps that ~~charges~~charge fees for immediate fund transfers and availability on the same day.

The Cuentas business model leverages profitability from multiple revenue sources, many of which are synergistic market segments.

The Cuentas Mastercard has several revenue centers. The Company ~~will receive~~receives a one-time activation charge for each activated Cuentas Mastercard and a monthly recurring charge. These charges were designed to be very reasonable to both consumers and the Company. In addition to these charges, Cuentas will receive a commission each time funds are loaded and reloaded to the Cuentas Mastercard. ~~Additional fees as seen in the following short form table are designed to cover costs and potentially provide another revenue stream.~~

The Cuentas Digital Wallet produces recurring ~~profits~~revenue and is an integral part of the Cuentas offering. It will produce revenue each time that consumers purchase third party gift cards, digital access, mass transit tickets and mobile phone ~~topups~~top-ups (U.S. and ~~International)~~international) with most at discounted prices. The actual discount is shown to the consumer and is immediately applied to their purchase, so smart shoppers will be able to get everyday products and services at discounted prices.

~~The~~In 2021 the Cuentas Digital Wallet is projected to add several new, profitable, mass market services including bill pay and international remittances.

Cuentas also offers rewards for free long distance calling to its cardholders (“Cuentas Rewards”) who earn value with certain transactions. Our target demographic uses both internet and prepaid calling services to communicate with family members around the U.S. and in their country. This added benefit is designed, at a very low cost, to provide extra benefits to our cardholders, which should help to maintain and solidify valuable relationships with them.

The Research and Markets report titled “Prepaid Card Market: Payment Trends, Market Dynamics, and Forecasts 2020 - 2025” released in January 2020 states that, “[i]n the United States, prepaid cards remain the preferred choice for the unbanked market segment....” It also states that “[t]he move towards a cashless society is substantial, further driving the prepaid card market.”

Major competitors to Cuentas are Green Dot, American Express Serve, Netspend Prepaid, Starbucks Rewards, Walmart Money card and Akimbo Prepaid.

Cuentas is strategically positioned in the marketplace to have a lower monthly fee and lower reload fees than most cards. Additional benefits and features should move the Cuentas Mastercard ahead of other offerings as consumers realize the value of the Cuentas Digital Wallet and the Cuentas Rewards program.

The Cuentas technology platform is comprised of CIMA Group’s Knetik and Auris software platforms (the “CIMA Licensed Technology”). The platform is built on a powerful integrated component framework delivering a variety of capabilities accessible by a set of industry standard REST-based API endpoints. In addition to handling electronic transactions such as deposits and purchasing, the platform will have the capability of organizing virtual currencies into wallets, essentially future proofing it in today’s evolving financial environment. It enables the organizing of the user’s monetary deposits into a tree-based set of wallets, through strictly enforced user permissions, to delineate proper controls in a tiered monetary asset organizational structure, thus providing a sound basis for family and/or corporate control and distribution of funds across individuals.

The ~~Platform~~platform also contains a sound and proven gamification engine, capable of driving user behaviors in a manner that entices and rewards using incentivization based on proven behavioral science patterns. At the heart of this gamification engine lies a proven and robust rules engine that can easily integrate and modify process flows and orchestrations between disparate platforms, allowing for a quick and easy integration of complex, orchestrated integrations between internal process automation and invocations of external systems. The platform will provide Android and iOS software for users to execute a wide variety of transactions including, but not limited to, account balances, account transfers and in-app purchases. User messaging are also integrated and are achieved via SMS, email, in-app messaging, and voice.

The user management application uses rich metadata CRM and ~~single-Sign-On (SSO)~~single sign-on (“SSO”) to track user behavior and personalize the user experience. It is fully integrated with our Strategic Partners, scalable and manages the digital ecosystem entitlements. The platform can process both physical and virtual goods, digital assets, real time currency value exchange, virtual currency support with current exchange rates and support nontraditional assets, in addition to credit card, POS, ~~Debits,~~debits, and digital wallet management.

~~The user management application uses rich metadata CRM and single-Sign-On (SSO) to track user behavior and personalize the user experience.~~ The unique rules engine is capable of all aspects of gamification: badging, questing, leveling, points consumption, leader boards, loyalty and reward points and personalization with tracking and messaging to support behavior management. Business intelligence is used for reporting and communication of product management via Rate Deck Management, Pinless ANI Recognition, IV and Call Flows and Access Number Management. The platform has redundant reporting for enhanced billing and fraud control and integrates customer service with Business Intelligence and platform ~~integrity~~integrity.

On December 6, 2017, the Company completed its formation of SDI NEXT Distribution LLC (“SDI NEXT”) in which it owns a 51% membership interest, previously announced August 24, 2017 as a Letter of Intent with Fisk Holdings, LLC. As Managing Member of the newly formed LLC, the Company will contribute a total of $500,000, to be paid per an agreed-upon schedule over a twelve-month period. Fisk Holdings, LLC will contribute 30,000 active Point of Sale locations for distribution of retail telecommunications and prepaid financial products and services to include, but not be limited to: prepaid General Purpose Reload (“GPR”) cards, prepaid gift cards, prepaid money transfer, prepaid utility payments, and other prepaid products. The completed formation of an established distribution business for third-party gift cards, digital content, mobile top up, financial services and digital content, which presently includes more than 31,600 U.S. active Point of Sale locations, including store locations, convenience stores, bodegas, store fronts, etc. The parties agreed that additional product lines may be added with unanimous decision by the Managing Members of the LLC. During 2018, it was agreed between the parties to distribute the Company’s recently announced CUENTAS GPR card and mobile banking solution aimed to the unbanked, underbanked and financially underserved consumers, making them available to customers at the more than 31,600 retail locations SDI NEXT presently serves. It was also agreed between the parties to renegotiate the terms of the Company’s investment in SDI NEXT once the development of the GPR card and the retail stores system are completed and the GPR card is ready for distribution in the retail locations of SDI NEXT.

The graphic below illustrates Cuentas’ strategic agreements with Sutton Bank and InComm, Sutton Bank is the ~~Issuer~~issuer of the Cuentas Mastercard while the InComm “Processor” relationship provides access to many third party products and services.

Sutton is our issuing bank for the Fintech Card. Sutton provides online banking, direct deposit, bank accounts, and debit functionality for our Cuentas Mastercards. Sutton is responsible for know your client ~~(KYC)~~(“KYC”) and ~~AML (Anti Money Laundering)~~Anti-Money Laundering (“AML”) compliance and enables customers to open Cuentas Prepaid Mastercard accounts electronically with non-conventional documentation that may not be accepted at traditional banks. They accept over 13 forms of identification, which, when used together with either Social Security or ITIN, can be used for confirmation of ~~identity:~~identity. These forms of identification include: Passport, Driver’s License, Matricula Consular ~~US Residency~~and U.S. residency documentation, among others.

On July 23, 2019, the Company entered into ~~the~~a Prepaid Services Agreement with InComm ~~PSA with InComm~~(the “InComm PSA”) to power and expand the Company’s GPR card network. InComm distributes gift and GPR cards through many major U.S. retailers and has long standing partnerships with over 1,000 of the most recognized brands that are eligible for Cuentas’ Discount Purchase Platform.

Under the InComm PSA, InComm will act as prepaid card processor and through its VanillaDirect network, expand the Company’s ability for cardholders to reload their Prepaid Cuentas Mastercards through a nationwide network of retailers. VanillaDirect is currently available at major retailers such as: Walmart, 7-Eleven, Walgreens, CVS Pharmacy, Rite Aid and many more. In addition, the Company is planning to implement the ~~VanillaDirect cash~~Vanillacash reload services into up to 31,600 U.S. locations through which it has ~~access..~~access.

Under the InComm PSA, InComm will provide processing services, telephone support, data storage services, account ~~Servicing,~~servicing, reporting, output and hot carding services to the Company. Processing services will consist mainly of authorization and transaction processing services whereby InComm will process authorizations for transactions made with or on a prepaid product, ~~and~~along with any payments or adjustments made to a prepaid product. InComm will also process the Company’s data and post entries in accordance with the specifications. Data storage services will consist mainly of storage of the Company’s data in a format that is accessible online by the Company through APIs designated by InComm, subject to additional API and data sharing terms and conditions. InComm will also provide Web/API services for prepaid Cuentas GPR applications and transactions.

In consideration for InComm’s services the ~~company will~~Company agreed to pay an initial program setup and implementation fees in the amount of $500,000, of which, $300,000 ~~has already been~~was paid in 2020. Cuentas will then pay $50,000 each year at the beginning of the second, third, fourth and fifth anniversary of the agreement. In addition, the Company ~~will~~agreed to pay a minimum monthly fee of $30,000 starting October 2020, $50,000 during the second year following the launch of the Cuentas Mastercard and $75,000 thereafter. The Company ~~will~~ also agreed to pay 0.25% of all funds added to the Cuentas Mastercards, excluding ~~Vanilla Direct~~VanillaDirect Reload Network and an API Services fee of $0.005 per transaction. The Company may pay other fees as agreed between the Company and InComm.

Cuentas is currently offering discounted prices to its cardholders, through the Cuentas Wallet for the digital products and services illustrated in the graphic below. We intend to work to increase the quantity of offerings considerably in the future.

The below graphic illustrates the elements that Cuentas has strategically developed to provide marketplace advantages.

Cuentas’ strategic overview to augment growth and minimize churn is illustrated in the graphic below. The goal is to offer the consumer a ~~One Stop Shop,~~one-stop shop, easy to use, mobile wallet that can solve many of their daily needs and desires while saving them time and money.

~~We have initiated discussions towards corporation~~On December 8, 2020, the Company entered into an Agency Agreement with ~~The~~ Western Union whereby the Company (“is appointed as Western ~~Union”).~~Union’s delegate and authorized to offer Western Union Money Transfer Services. This cooperation would allow Cuentas cardholders to transfer money internationally via the Western Union network directly from the Cuentas Mobile App. Western Union has been providing money transfer services around the world for more than a century and currently has more than 500,000 ~~Agent~~agent locations worldwide. ~~We hope to realize its plans for international remittance services through this potential relationship.~~

On December 31, 2019, the Company entered into a Platform Exclusive License Agreement with CIMA Telecom, Inc. (“CIMA”) and two subsidiaries of CIMA (the “CIMA License Agreement”). Pursuant to the CIMA License Agreement, the Company has an exclusive, non-transferable, non-sublicensable, royalty-free license to access and use the CIMA Licensed Technology in the form provided to the Company via the Hosting Services (as defined in the CIMA License Agreement) and solely within the Fintech space for the Company’s business purposes. Under the CIMA License Agreement, CIMA received a one-time licensing fee in the amount of $9,000,000 in the form of a convertible note that may be converted, at the option of CIMA, into up to 25% of the total shares of Common Stock of the Company on a fully diluted basis as of December 31, 2019. The transactions with CIMA closed on December 31, 2019 (the “CIMA Transaction Closing”). Pursuant to the CIMA License Agreement, the Company shall pay CIMA annual fees for the maintenance and support services in accordance with the following schedule: (i) for the first calendar year from the CIMA Transaction Closing, $300,000 to be paid on June 30, 2020; (ii) for the second calendar year from the CIMA Transaction Closing, $500,000 to be paid on December 31, 2020; (iii) for the third calendar year from the CIMA Transaction Closing, $700,000 to be paid on December 31, 2021; (iv) for the fourth) calendar year from the CIMA Transaction Closing, $1,000,000 to be paid on December 31, 2022; (v) for the fifth calendar year from the CIMA Transaction Closing, $640,000 to be paid on December 31, 2022; and (vi) for each calendar year thereafter, $640,000 to be paid on the anniversary date.

Contemporaneously with the CIMA Transaction Closing, the Company entered into a Note and Warrant Purchase Agreement (the “Purchase Agreement”) by and between the Company, CIMA and Dinar Zuz LLC (“Dinar”), pursuant to which the Company made and sold (i) to CIMA a 3% convertible promissory note (the “CIMA Convertible Promissory Note”) in the principal amount of $9,000,000 and (ii) a warrant to each of CIMA and Dinar (as described below). The Purchase Agreement contained customary representations, warranties, covenants, and conditions, including indemnification. Among other conditions to closing, the Company has agreed to take all necessary steps to amend and restate its Articles of Incorporation and to amend and restate its Bylaws.

On December 31, 2019 and pursuant to the CIMA Convertible Promissory Note, CIMA exercised its option to convert the CIMA Convertible Promissory Note into 702,992 shares of Common Stock of the Company.

Contemporaneously with the CIMA Transaction Closing, the Company made and sold a warrant to each of (a) CIMA (the “CIMA Warrant”) and (b) Dinar (the “Dinar Warrant”), each in accordance with the Purchase Agreement. Pursuant to the CIMA Warrant and Dinar Warrant, upon exercise, each of CIMA and Dinar shall be entitled to purchase from the Company, in the aggregate, an amount of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock equal to 25% of total outstanding shares of the Company on a fully-diluted basis (taking into account any warrants, options, debt convertible into shares or other rights underlying shares of the Company) as of the conversion date; provided, however, that each of the CIMA Warrant and Dinar Warrant shall increase to include 25% of any additional shares (or warrants, options, debt convertible into shares or other rights underlying shares of the Company) of the Company only to the extent such shares are issued in breach of the Voting Agreement (as defined below). Pursuant to their terms, the CIMA Warrant and Dinar Warrant were exercisable, in whole and not in part during the term commencing on December 31, 2019 and ending on the earlier of (a) thirty days following the date on which the Company amends and restates its Articles of Incorporation, which is amendment and restatement is filed with and accepted by the Secretary of State of the State of Florida or (b) upon a Change of Control, as defined in such warrants. At that point, the Warrants are automatically exercised. On September 17, 2020, the Company issued 2,000,000 of its Common Stock to each of Dinar and CIMA, under the automatic exercise of the warrants.

Contemporaneously with the CIMA Transaction Closing, on December 31, 2019, the Company, CIMA, Dinar, Arik Maimon and Michael De Prado entered into a Voting Agreement (the “Voting Agreement”). Pursuant to the Voting Agreement, each of CIMA, Dinar and Mr. De Prado shall have the right to designate one director to the Board, and Mr. Maimon will have the right to designate two directors to the Board as promptly as practicable after the CIMA Transaction Closing. At each meeting of the Company’s shareholders at which the election of directors is to be considered, each of CIMA, Dinar, Mr. Maimon and Mr. De Prado shall have the right to designate one nominee for election at such meeting. Additionally, the Company has granted CIMA board observer rights whereby CIMA shall have the right to invite one representative to attend all meetings of the Board in a non-voting observer capacity. The size of the Board and appointee rights are subject to change in the event that the Company’s shares of Common Stock become listed on Nasdaq. Furthermore, pursuant to the Voting Agreement, each of Mr. Maimon and Mr. De Prado appointed each of CIMA and Dinar as their proxy and attorney-in-fact, with full with full power of substitution and resubstitution, to vote or act by written consent with respect to the shares of Voting Stock (as defined in the Voting Agreement) representing each individual’s pro rata percentage of the CIMA Proxy Stock and Dinar Proxy Stock (each as defined in the Voting Agreement), as may be recalculated from time to time subject to the terms and conditions of the Voting Agreement until the CIMA Warrant and Dinar Warrant are exercised, respectively. CIMA’s rights under the Voting Agreement automatically terminate upon the earliest to occur of: (a) the termination of the CIMA License Agreement; (b) the payment in full of all outstanding principal, accrued and unpaid interest, and all other amounts required to be paid by the Company to CIMA under the Debenture in cash and not as a result of the conversion of the debenture in the principal amount of $9,000,000 that is convertible into Common Stock of the Company; or (c) after the conversion of the Debenture into Common Stock of the Company, the date on which CIMA ceases to own 5% or more of the issued and outstanding Common Stock of the Company. Dinar’s rights under the Voting Agreement automatically terminate when Dinar ceases to own 5% or more of the issued and outstanding Common Stock of the Company.

The Company also entered into an Asset Pledge Agreement with CIMA (the “Pledge Agreement”) pursuant to which the Company unconditionally and irrevocably pledged all of its rights, title and interest in and to the Licensed Technology and any rights and assets granted pursuant to the CIMA License Agreement to CIMA as a guarantee for the full and punctual fulfillment of its obligations under certain provisions of the Voting Agreement, which terms expire upon the exercise of the CIMA Warrant and Dinar Warrant, respectively, and the issuance of the securities under the CIMA Convertible Promissory Note and the CIMA Warrant. This occurred on September 21, 2020 and the Pledge Agreement expired.

Contemporaneously with the CIMA Transaction Closing, the Company, Mr. Maimon, Mr. De Prado, Dinar and CIMA entered into a side letter agreement (the “CIMA Side Letter”), dated December 31, 2019. Pursuant to the CIMA Side Letter, for as long as the CIMA License Agreement is in effect, the convertible promissory note (the “CIMA Convertible Note”) is outstanding and unpaid, or CIMA is a shareholder of the Company and owns at least 5% of the Company’s Common Stock, in addition to any other vote or approval required under the Company’s Articles of Incorporation, Bylaws, or any other agreement, each as amended from time to time, the Company has agreed not to take certain actions without certain approval thresholds of the directors appointed by CIMA, Dinar, Mr. Maimon and Mr. De Prado. These negative covenants restrict, among other things, the Company’s ability to incur additional debt, alter certain employment agreements currently in place, enter into any consolidation, combination, recapitalization or reorganization transactions, and issue additional capital stock. Additionally, pursuant to the CIMA Side Letter, upon conversion of the CIMA Convertible Note by CIMA, Cuentas shall have the primary right of first refusal, and each of Dinar, Mr. De Prado and Mr. Maimon have a secondary right of first refusal, to purchase any shares of Common Stock that CIMA intends to sell to the bona fide third party purchaser on the same terms and conditions as CIMA would have sold such shares of the Common Stock to any third party purchaser. Further, CIMA has a co-sale right to participate in a sale of shares of the Common Stock, in the event that Mr. De Prado, Mr. Maimon or any other director or officer of the Company holding greater than 1% of the Common Stock (on a fully diluted basis) proposes to sell any of his, her or its shares of Common Stock. In addition, CIMA and/or Dinar have been granted certain information rights, subject to their continued ownership of the CIMA Convertible Note or of 5% or more shares of the Company’s issued and outstanding Common Stock. Furthermore, pursuant to the CIMA Side Letter, upon a successful up-listing of the Company’s shares on Nasdaq, and once the market capitalization of the Company is greater than $50 million for a period of 10 consecutive trading days, each of Mr. Maimon and Mr. De Prado will have a right to earn a special bonus in the amount of $500,000 each.

Cuentas Mobile is our Mobile Virtual Network Operator (“MVNO”), which provided NextMobile branded mobile phones and prepaid voice, text, and data mobile phone services to a customer base currently consisting of approximately 1,000 subscribers. The brand name of these services is being migrated to Cuentas Mobile. Cuentas Mobile operates this business pursuant to contracts with Sprint Corporation, which allow Cuentas Mobile to use T-Mobile’s (formerly Sprint)’s network infrastructure to operate a virtual telecommunications network providing voice, text, and data services of essentially the same quality as those Sprint provides to its own retail subscribers. MVNOs such as Cricket, Boost, Simple and Lyca Mobile have been successful at creating brands, without owning the towers, hardware or network. Cuentas is currently reactivating distribution projects through grass roots retailers that normally interact with Cuentas’ target audience, specifically offering low-cost mobile phone service with the ability to make international calls to specific Spanish speaking countries in Central and South America.

Graphic Description: Sample of creative message planned for future advertising campaign.

We believe that our potential customers worldwide will migrate away from legacy telephone and banking systems to enhanced mobility solutions, the Company’s technological advantage and the synergies created by its unique combination of reloadable bank card and mobile virtual network operator rights will make its products increasingly useful to unbanked, under-banked, under-served and other emerging niche markets.

~~Results of operations for the nine months ended September 30, 2020 and 2019~~Meimoun & Mammon LLC

~~Revenue~~Meimoun & Mammon LLC (“M&M”) is a retail provider of domestic and international long-distance voice, text, and data telephony services to consumers in the United States and throughout the world. M&M holds International and Domestic Section 214 authority issued by the FCC. M&M operates the retail Tel3 business as a separate division.

~~Revenues during~~M&M uses both private and public Internet services to function as the ~~nine months ended September 30, 2020 totaled $385,000 compared to $811,000 for~~backbone of the ~~nine months ended September 30, 2019. The Company generated revenues through~~M&M Network.

We operate in an ever-evolving and complex legal and regulatory environment. We, the ~~sale and distribution of prepaid telecom minutes, digital products and other related telecom services. The Company have begun to generate sales from its Fintech~~ products and services ~~during~~that we offer and market, and those for which we provide processing services, are subject to a variety of federal, state and foreign laws and regulations, including, but not limited to: federal communications laws and regulations; foreign jurisdiction communications laws and regulations; federal anti-money laundering laws and regulations, including the ~~third quarter~~Patriot Act, the BSA, anti-terrorist financing laws and anti-bribery and corrupt practice laws and regulations in the U.S., and similar international laws and regulations, including the Proceeds of ~~2020.~~Crime (Money Laundering) and Terrorist Financing Act in Canada; state unclaimed property laws and money transmitter or similar licensing requirements; federal and state consumer protection laws, including the CARD Act, and the Dodd-Frank Act, and regulations relating to privacy and data security; and foreign jurisdiction payment services industry regulations.

Our subsidiaries Cuentas Mobile and M&M are subject to regulation by the FCC and other government agencies and task forces. M&M holds International and Domestic Section 214 licenses issued by the FCC, which may be suspended or revoked by the FCC if M&M does not strictly comply with all applicable regulations and the terms and conditions under which the International and Domestic Section 214 licenses were issued. Cuentas Mobile and M&M are also subject to foreign jurisdiction communications laws and regulations. We believe that we, including our subsidiaries, are currently operating in compliance with all applicable laws and regulations, but there is no certainty that laws and regulations affecting our business will not change. Any such change of laws and regulations applicable to our business might adversely affect our ability to execute our business plan and achieve profitable operating results.

~~Costs~~At the federal level, Congress and federal regulatory agencies have enacted and implemented new laws and regulations that affect the prepaid industry, such the CARD Act and FinCEN’s Prepaid Access Rule. Moreover, there are currently proposals before Congress that could further substantially change the way banks, including prepaid card issuing banks and other financial services companies, are regulated and are permitted to offer their products to consumers. Non-bank financial services companies, including money transmitters and prepaid access providers, are now regulated at the federal level by the Consumer Financial Protection Bureau (the “CFPB”), which began operations in July 2011, bringing additional uncertainty to the regulatory system and its impact on our business. We are increasingly facing more stringent anti-money laundering rules and regulations, compliance with which may increase our costs of ~~Revenue~~operation, decrease our operating revenues and disrupt our business. Abuse of our prepaid products for purposes of financing sanctioned countries, terrorist funding, bribery or corruption could cause reputational or other harm that could have a material adverse effect on our business, results of operations and financial condition. Failure to comply with, or further expansion of, consumer protection regulations could have a material adverse effect on our business, results of operations and financial condition. Failure by us to comply with federal banking regulation may subject us to fines and penalties and our relationships with our issuing banks may be harmed.

~~Cost~~Most states regulate the business of ~~revenues during~~sellers of traveler’s checks, money orders, drafts and other monetary instruments, which we refer to collectively as money transmitters. While many states expressly exempt banks and their agents from regulation as money transmitters, others purport to regulate the ~~nine months ended September 30, 2020 totaled $620,000 compared~~money transmittal businesses of bank agents or do not extend exemptions to ~~$617,000 for~~non-branch bank agents. In those states where we are required to be licensed, we are subject to direct supervision and regulation by the ~~nine months ended September 30, 2019. Cost of revenue consists mainly~~relevant state banking departments or similar agencies charged with enforcement of the ~~purchase of wholesale minutes for resale, related telecom platform costs~~money transmitter statutes and ~~purchase of digital products. Since the soft launch of the Company’s GPR Product during the second Quarter of 2020, Cost of revenue also consisted from cost~~must comply with various restrictions and requirements, such as those related to the ~~sale~~maintenance of certain levels of net worth, surety bonding, selection and oversight of our authorized delegates, permissible investments in an amount equal to our outstanding payment obligations with respect to some of the ~~Company’s GPR Card in~~products subject to licensure, recordkeeping and reporting, and disclosures to consumers. We are also subject to periodic examinations by the ~~amount~~relevant licensing authorities, which may include reviews of ~~$195,000.~~

~~Operating expenses totaled $4,683,000 during the nine months ended September 30, 2020 compared~~our compliance practices, policies and procedures, financial position and related records, various agreements that we have with our issuing banks, retail distribution partners and other third parties, privacy and data security policies and procedures, and other matters related to ~~$1,663,000 during the nine months ended September 30, 2019 representing~~our business. As a ~~net increase of $3,020,000. The~~regulated entity, Cuentas may incur significant costs associated with regulatory compliance. We anticipate that compliance costs and requirements will increase in the ~~operating expenses is mainly due~~future for our regulated subsidiaries and that additional subsidiaries will need to ~~the increase~~become subject to these or new regulations. If we fail to maintain our existing money transmitter licenses or permits, or fail to obtain new licenses or permits in ~~the amortization expense~~a timely manner, our business, results of ~~intangible assets in the amount of $1,350,000~~operations and financial condition could be materially and adversely affected.

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other ~~income~~parts of ~~$383,000 during~~ the ~~nine months ended September~~world, including the United States. On January 30, 2020, ~~compared to an income $2,349,000 during~~ the ~~nine months ended September 30, 2019. The net change from~~World Health Organization declared the ~~prior period is mainly due to the change in our stock-based liabilities and other income in the amount of approximately $2,362,000 due to the satisfaction~~outbreak of the ~~Company’s obligation under the Approved Plan~~coronavirus disease (COVID-19) a “Public Health Emergency of ~~the Reorganization~~International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for ~~Next Communications, Inc., that was approved by~~ the United States ~~Bankruptcy Court Southern District~~to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. A significant outbreak of ~~Florida Miami Division on January 29, 2019 pursuant~~COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, as well as our business and operations. The extent to which ~~we paid $600,000~~COVID-19 impacts our business and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to ~~satisfy~~contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an ~~obligation~~extensive period of ~~approximately $2,962,000. Gain from Change in Fair Value~~time, our business and results of stock-based liabilities for the nine-month period ended September 30, 2020 was $307,000 as compared to a loss of $133,000 for the nine-month period ended September 30, 2019. The gain (loss) is attributable to the decrease in the Fair Value of our stock-based liabilities mainly due to the decrease (increase) in the price of share of our common stock.operations may be materially adversely affected.

~~We incurred a net loss of $5,153,000 for the nine-month period ended September 30, 2020, as compared to a net income of $853,000 for the nine-month period ended September 30, 2019.~~

~~Results of operations for the three months ended September 30, 2020 and 2019~~

~~Revenues during the three months ended September 30, 2020 totaled $134,000 compared~~Amendment to $247,000 for the three months ended September 30, 2019. The Company generated revenues through the sale and distribution of prepaid telecom minutes, digital products and other related telecom services. The Company have begun to generate sales from its Fintech products and services during the third quarter of 2020.

Cost of revenues during the three months ended September 30, 2020 totaled $237,000 compared to $150,000 for the three months ended September 30, 2019. Cost of revenue consists mainly of the purchase of wholesale minutes for resale, related telecom platform costs and purchase of digital products. Cost of revenue also consisted from cost related to the sale of the Company’s GPR Card in the amount of $118,000 due to additional developments and testing that the Company conducted on its GPR product.

Operating expenses totaled $983,000 during the three months ended September 30, 2020 compared to $663,000 during the three months ended September 30, 2019 representing a net increase of $320,000. The increase in the operating expenses is mainly due to the increase in the amortization expense of intangible assets in the amount of $450,000.

~~The Company recognized other loss of $53,000 during the three months ended September~~On December 30, 2020, ~~compared~~in connection with the Company’s IPO, the Company amended its Bylaws to, ~~a loss of $126,000 during the three months ended September 30, 2019.~~

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allow a majority of the directors to have the power to determine and declare whether a director was nominated in accordance with the prescribed procedures;

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allow a majority of the directors to have the power to determine and declare whether a business proposal was made in accordance with the prescribed procedures;

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allow the directors to appoint the chairman for each meeting of the shareholders;

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require that committees of the board be comprised of at least three members, each of whom must be independent; and

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allow for the compensation committee to review and approve compensation.

~~Net Income (Loss)~~Reverse Split

~~We incurred~~On January 28, 2021, the Company filed Articles of Amendment to the Articles of Incorporation of the Company with the Secretary of State of Florida, pursuant to which, effective as of February 2, 2021, the Company effected a ~~net loss~~1-for-2.5 reverse split of ~~$1,754,000 for~~its authorized and issued and outstanding shares of Common Stock. No fractional shares will be issued as a result of the ~~three-month period ended September 30, 2020, as compared to~~reverse stock split. Fractional shares will be rounded up the nearest whole share, after aggregating all fractional shares held by a ~~net loss of $692,000 for the three-month period ended September 30, 2019.~~stockholder.

~~Inflation~~On February 4, 2021 the Company sold an aggregate of 2,790,697 units at a price to the public of $4.30 per unit (the “Offering”), each unit consisting of one share of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), and ~~Seasonality~~a warrant exercisable for five years to purchase one share of Common Stock at an exercise price of $4.30 per share (the “Warrants”), pursuant to that certain Underwriting Agreement, dated as of February 1, 2021 (the “Underwriting Agreement”), between the Company and Maxim Group LLC (the “Representative” or “Maxim”), as representative of the sole underwriter. In addition, pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option to purchase up to 418,604 additional shares of Common Stock, and/or 418,604 additional Warrants, to cover over-allotments in connection with the Offering. The Company received gross proceeds of approximately $12.0 million, before deducting underwriting discounts and commissions of 8% of the gross proceeds and estimated Offering expenses. Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter warrants (the “Underwriter’s Warrants”) to purchase up to a total of 223,256 shares of Common Stock (8% of the shares of Common Stock sold in the Offering). The Underwriter’s Warrants are exercisable at $5.375 per share of Common Stock and have a term of five years.

~~In management’s opinion, our results~~The total expenses of ~~operations have not been materially affected by inflation or seasonality,~~the offering were approximately $1.4 million, which included Maxim’s expenses relating to the offering.

On March 4, 2021 and ~~management does not expect that inflation risk or seasonality would cause material impact on our operations~~pursuant to the Underwriting Agreement, Maxim exercised its 45-day option to purchase up to 418,604 additional Warrants, to cover over-allotments in connection with the ~~future.~~Offering.

~~Liquidity~~Entry into and ~~Capital Resources~~Repayment of a Short-Term Loan with Labrys Funds LP

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

As of September 30, 2020, we had cash and cash equivalents of $343,000 as compared to $16,000 as of December 31, 2019. As of September 30, 2020, we had a working capital deficit of $3,846,000 thousand, as compared to a deficit of $3,752,000 as of December 31, 2019. The increase in our working capital deficit was mainly attributable to the increase of $521,000 in our Accounts Payables and $354,000 in our loans from related parties which mitigated by decrease of $727,000 in our stocked based liabilities.

Net cash used in operating activities was $1,372,000 for the nine-month period ended September 30, 2020, as compared to cash used in operating activities of $1,068,000 for the nine-month period ended September 30, 2019. The Company’s primary uses of cash have been for professional support and working capital purposes.

Net cash provided by financing activities was approximately $1,699,000 for the nine-month period ended September 30, 2020, as compared to net cash provided by financing activities was approximately $979,000 for the nine-month period ended September 30, 2019. We have principally financed our operations in 2020 through the sale of our common stock to private investors, issuance of convertible loans debt and loans from our shareholders. On September ~~11,~~2, 2020, the Company issued ~~a promissory note~~the Labrys Note to Labrys Funds LP (“Labrys”~~) for $605,000 (the “Labrys Note”~~). The Labrys Note bears interest at a rate of 12% per annum, and ~~matures~~was to mature on September 2, 2021. ~~Payment~~An amortized, monthly payment of ~~principle~~principal and interest ~~starts after 3 months~~in the sum of $67,760 started in December 2020, with ability to extend the starting date of such amortized payments for up to 2two months upon notice, and the remaining loan principal becomes payable on maturity. The Labrys Note ~~bears~~had an original issue discount in the amount of $60,500, and the issuing expenses were $40,000, resulting in net proceeds of $505,000. The Company also issued ~~141,812~~70,906 shares of its Common Stock to Labrys. Out of those, ~~33,000~~16,500 shares of Common Stock were issued in consideration of a ~~Commitment~~commitment fee and the balance are subject to return to the Company once the Labrys Note is paid in full, if there were no defaults. In the event of a default, as defined in the Labrys Note, Labrys ~~has~~would have the right, to convert all or any portion of the then outstanding and unpaid principal amount and interest into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the date of the Labrys Note, or any shares of capital stock or other securities of the Company into which such Common Stock shall be changed or reclassified, at the conversion price as set forth in the Labrys Note. On February 12, 2021, the Company prepaid its loan to Labrys and Labrys returned the Second Commitment shares to the Company.

Results of operations for the three months ended March 31, 2021 and 2020

Revenue

Revenues during the three months ended March 31, 2021 totaled $225,000 compared to $134,000 for the three months ended March 31, 2020. The Company generated most of its revenue through the sale and distribution of prepaid telecom minutes, digital products and other related telecom services. The Company have generated sales from its Fintech products and services in the amount of $18,000 during the first quarter of 2021.

Costs of Revenue

Costs of revenue consists of the purchase of wholesale minutes for resale and related telecom platform costs. Cost of revenues during the three months ended March 31, 2021 totaled $ 247,000 compared to $177,000 for the three months ended March 31, 2020. Cost of revenue consists mainly of the purchase of wholesale minutes for resale, related telecom platform costs and purchase of digital products. Cost of revenue also consisted from cost related to the sale of the Company’s GPR Card in the amount of $92,000 due to additional developments and testing that the Company conducted on its GPR product.

Gross Loss

Gross loss is the net loss existing after the cost of sales. Gross loss decreased to a loss of $22,000 for the quarter ended March 31, 2021, as compared to a loss of $47,000 for the same period in the prior year. The decrease in gross profit for the quarter ended March 31, 2021, as compared to the same period in the prior year, was primarily a result of higher profits in our telecom business.

Stock-based Compensation and shares issued for services

Stock-based compensation and shares issued for services expenses decreased to $276,000 from $1,125,000 as a result of fewer issuance of shares issued for employees and for service providers.

Other Selling, General and Administrative Expenses

Other selling, general and administrative expenses totaled $862,000 during the three months ended March 31, 2021 compared to $1,414,000 during the three months ended March 31, 2020 representing a net decrease of $552,000. The decrease in the operating expenses is mainly due to a one-time fee implantation fee in the amount of $300,000 that was paid to Incomm during the three months ended March 31, 2020

Amortization of Intangible assets

Amortization of Intangible assets totaled $452,000 for the quarter ended March 31, 2021 and $450,000 for the quarter ended March 31, 2020, respectively. The increase is due to the amortization of the domain cuemtas.com which was purchased by the Company during the quarter ended March 31, 2021 in consideration of approximately $47,000.

Operating Expenses

Operating expenses totaled $1,590,000 during the three months ended March 31, 2021 compared to $2,539,000 during the three months ended March 31, 2020 representing a net decrease of 945,000. The decrease in the operating expenses is mainly due to decrease in Stock based compensation and shares issued for services.

Other Income

The Company recognized other expense of $63,000 during the three months ended March 31, 2021 compared to an income $422,000 during the three months ended March 31, 2020. The net change from the prior period is mainly due to the change in our stock-based liabilities and interest expenses that we occurred. Gain from Change in Fair Value of stock-based liabilities for the three-month period ended March 31, 2021 was $56,000 as compared to a gain of $359,000 for the three-month period ended March 31, 2020. The gain (loss) is attributable to the decrease in the Fair Value of our stock-based liabilities mainly due to the decrease (increase) in the price of share of our common stock.

Net Income (Loss)

We incurred a net loss of $1,675,000 for the three-month period ended March 31, 2021, as compared to a net loss of $2,163,000 for the three-month period ended March 31, 2020.

We may incur future operating losses. To regain and sustain profitability, we must, among other things, incrementally grow and maintain our customer base, sell our GPR products to existing and new customers, implement successful marketing strategies, maintain and upgrade our technology and transaction-processing systems, provide superior customer service, respond to competitive developments, attract, retain and motivate personnel, and respond to unforeseen industry developments among other factors.

We believe that our success will depend in large part on our ability to (a) grow sales, (b) manage our operating expenses, (c) add customers to our client base, (d) meet evolving customer requirements and (e) adapt to technological changes in an emerging market. We continue to invest in our sales force and technology platforms to drive revenue growth.

Inflation and Seasonality

In management’s opinion, our results of operations have not been materially affected by inflation or seasonality, and management does not expect that inflation risk or seasonality would cause material impact on our operations in the future.

Liquidity and Capital Resources

As of March 31, 2021, the Company had $6,482,000 of cash, total current assets of $6,727,000 and total current liabilities of $3,249,000 creating a working capital of $3,478,000. As of December 31, 2020, the Company had $227,000 of cash, total current assets of $296,000 and total current liabilities of $6,480,000 creating a working capital deficit of $6,184,000. The increase in our working capital deficit was mainly attributable to the decrease in Accounts Payables in the amount of 1,952,000, decrease in our other Accounts Payables in the amount of 1,376,000 and increase in our Cash and Cash equivalents in the amount of $6,255,000.

On February 4, 2021 the Company sold an aggregate of 2,790,697 units at a price to the public of $4.30 per unit (the “Offering”), each unit consisting of one share of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), and a warrant exercisable for five years to purchase one share of Common Stock at an exercise price of $4.30 per share (the “Warrants”), pursuant to that certain Underwriting Agreement, dated as of February 1, 2021 (the “Underwriting Agreement”), between the Company and Maxim Group LLC (the “Representative” or “Maxim”), as representative of the sole underwriter. In addition, pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option to purchase up to 418,604 additional shares of Common Stock, and/or 418,604 additional Warrants, to cover over-allotments in connection with the Offering. The Company received gross proceeds of approximately $12.0 million, before deducting underwriting discounts and commissions of 8% of the gross proceeds and estimated Offering expenses. Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter warrants (the “Underwriter’s Warrants”) to purchase up to a total of 223,256 shares of Common Stock (8% of the shares of Common Stock sold in the Offering). The Underwriter’s Warrants are exercisable at $5.375 per share of Common Stock and have a term of five years. The total expenses of the offering were approximately $1.4 million, which included Maxim’s expenses relating to the offering.

On February 12 2021 the Company prepaid its loan to Labrys and Labrys returned the Second Commitment shares to the Company. The prepayment amount was approximately $635,000.

On March 5, 2021 the Company prepaid its loan to Dinar Zuz. The prepayment amount was approximately $378,000.

On April 20, 2021 the Company paid off its convertible promissory note and accrued interest in the amount of $260,000 to the private investor. The Company paid an amount equal to $125,000 plus $ 5,000, which represents the amount of interest accrued on such $125,000 since the date on which the loan was made under the Note through April 16, 2021. In addition, The Company issued 30,233 shares of Common Stock of the Company. The Company issued such shares in reliance on the exemptions from registration pursuant to Section 4(a)(2) of the Securities Act.

Cash Flows

Net cash used in operating activities was $3,356,000 for the three-month period ended March 31, 2021, as compared to cash used in operating activities of $738,000 for the three-month period ended March 31, 2020. The Company’s primary uses of cash have been for professional support and working capital purposes.

Net cash used in investing activities was $47,000 for the three-month period ended March 31, 2021. Net cash used in investing activities was $0 for the three-month period ended March 31, 2020.

Net cash provided by financing activities was approximately $9,658,000 for the three-month period ended March 31, 2020, as compared to net cash provided by financing activities was approximately $743,000 for the three-month period ended March 31, 2020.

Due to our operational losses, we have principally financed our operations through the sale of our Common Stock and the issuance of convertible debt.

~~Despite the Capital raise that we~~We have ~~conducted the above conditions raise substantial doubt about~~principally financed our ~~ability to continue as a going concern. Although we anticipate that cash resources will be available to the Company through its current~~ operations ~~it believes existing cash will not be sufficient to fund planned operations and projects investments~~ through the ~~next 12 months. Therefore, we are still striving~~sale of our Common Stock to ~~increase~~private investors, issuance of convertible loans debt and loans from our sales, attain profitability and raise additional funds for future operations. Any meaningful equity or debt financing will likely result in significant dilution to our existing stockholders. There is no assurance that additional funds will be available on terms acceptable to us, or at all. shareholders.

Since inception, we have financed our cash flow requirements through issuance of common stock, related party advances and debt. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations. Additionally, we anticipate obtaining additional financing to fund operations through common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital. In the future we need to generate sufficient revenues from sales in order to eliminate or reduce the need to sell additional stock or obtain additional loans. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.

On October 28, 2020 the Company has filed a registration statement (File No. 333-249690) with the Securities Exchange Commission for the offering, and the Company intends to file a further prospectus with respect to the offering. Maxim Group LLC will act as the lead underwriter for the offering.

~~We anticipate that we will incur operating losses in the next twelve months.~~ Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth.

To address these risks, we must, among other things, implement and successfully execute our business and marketing strategy surrounding ~~our~~the Cuentas ~~braded general-purpose reloadable cards,~~Mastercard, continually develop and upgrade our website, respond to competitive developments, lower our financing costs and specifically our accounts receivable factoring costs, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

Off-Balance Sheet Arrangements

As at ~~September 30, 2020,~~March 31, 2021, we had no off-balance sheet arrangements of any nature.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. Note 3 to our consolidated audited financial statements filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 describes the significant accounting policies and methods used in the preparation of our financial statements. We consider our critical accounting policies to be those related to ~~intangible assets, going concern~~ share-based payments because they are both important to the portrayal of our financial condition and require management to make judgments and estimates about uncertain matters.

~~Recent~~Recently Issued Accounting Standards ~~announced~~

~~Recently adopted accounting pronouncements~~

~~The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2019 are applied consistently in these financial statements.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, we are not required to provide the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, and as discussed in greater detail below, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, disclosure controls and procedures are not effective:

	●	to give reasonable assurance that the information required to be disclosed in reports that are file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and

	●	to ensure that information required to be disclosed in the reports that are file or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our CEO and our Treasurer, to allow timely decisions regarding required disclosure.

Based on that evaluation, management concluded that, during the period covered by this report, such internal controls and procedures were not effective due to the following material weakness identified:

●

Lack of appropriate segregation of duties,

●

Lack of information technology (“IT”) controls over revenue,

●

Lack of adequate review of internal controls to ascertain effectiveness,

●

Lack of control procedures that include multiple levels of supervision and review, and

Implemented or Planned Remedial Actions in response to the Material Weaknesses

We will continue to strive to correct the above noted weakness in internal control once we have adequate funds to do so. We believe appointing a director who qualifies as a financial expert will improve the overall performance of our control over our financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.

Management is in the process of determining how best to change our current system and implement a more effective system to ensure that information required to be disclosed has been recorded, processed, summarized and reported accurately. Our management acknowledges the existence of this issue, and intends to develop procedures to address it to the extent possible given limitations in financial and human resources in and to remediate all the material weaknesses by the end of the fiscal quarter ending ~~September 30, 2020.~~March 31, 2021.

Changes in Internal Controls over Financial Reporting

Our management, with the participation of our CEO and CFO, performed an evaluation to determine whether any change in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the ~~nine-month~~three-month period ended ~~September 30, 2020.~~March 31, 2021. Based on that evaluation, our CEO and our CFO concluded that no change occurred in the Company’s internal controls over financial reporting during the ~~nine-month~~three-month period ended ~~September 30, 2020~~March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

On July 6, 2017, the Company received notice an existing legal claim against Accent InterMedia (“AIM”) had been amended to include claims against the Company. The claims brought against the Company include failure to comply with certain judgments for collection of funds by the plaintiff while having a controlling interest in AIM via its ownership of Transaction Processing Products (“TPP”). On April 17, 2019, the Company entered into a settlement agreement (the “SVS Settlement Agreement”) with Comdata, Inc. d/b/a Stored Value Solutions (“SVS”) whereby the Company will pay a total of $37,500 over 7 months, starting July 1, 2019. Cuentas made its final payment to Comdata in Feb 2020 and received an Agreed Judgment of Dismissal from the court dated Feb 13, 2020.

On December 20, 2017, a complaint was filed by J. P. Carey Enterprises, Inc. (“~~J.P~~JP Carey” ~~or “Plaintiff”~~) alleging a claim for $473,000 related to ~~the~~ Franjose Yglesias-Bertheau, a former Vice President of ~~PLKD who filed a lawsuit against PLKD listed above.~~PLKD. Even though the Company made the agreed payment of $10,000 on January 2, 2017, and issued ~~12,002~~6,001 shares of Common Stock as conversion of the $70,000 note as agreed in ~~the~~its settlement agreement, ~~the Plaintiff~~JP Carey alleges damages ~~which~~that the Company claims are without merit because ~~the Plaintiff~~JP Carey received full compensation as agreed. The Company is in the process of defending itself against these claims. The Company has not accrued losses related to this claim due to the early stages of litigation. On January 29, 2019, the Company was served with aanother complaint by ~~J.P.~~JP Carey ~~Enterprises, Inc., (“JP Carey”)~~ claiming similar issues as to the previous complaint, with the new claimed damages totaling $1,108,037.85. JP Carey and the Company filed motions for a summary judgement. On June 23, 2020, the case was transferred to the Business Court at the request of the Superior Court Judge previously assigned to the case. Judge Ellerbe from the Business Court has been assigned as the new judge.judgment. On October 1, 2020, the Superior Court ~~judge entered a~~of Fulton County, State of Georgia granted the Company’s motion for summary judgment ~~in favor of Cuentas~~ and denied JP Carey’s motion for summary judgment.

On ~~February 12, 2018,~~October 30, 2020, JP Carey filed a notice of appeal to the ~~Company~~trial court’s October 1 and 7, 2020 orders granting summary judgment in favor of Cuentas. The briefing in the appeal was ~~served with~~completed during the first quarter of 2021. Oral argument held on April 13, 2021 but no decision has been rendered yet. On November 16, 2020, Cuentas filed a ~~complaint~~motion seeking payment from ~~Viber for reimbursement~~JP Carey of ~~attorney’s~~$140,970.82 in attorney fees and costs ~~totaling $528,000 arising.~~accrued as of November 13, 2020. JP Carey’s responded brief was filed on or about December 21, 2020 and thereafter Cuentas filed its reply. The ~~Company is vigorously defending their rights in~~trial court has not yet set a date to hear this ~~case as we believe this demand is premature as litigation is ongoing. On June 15, 2020, the claims against Company and its subsidiary were dismissed.~~ motion.

On October 23, 2018, Cuentas was served by Telco Cuba Inc. for an amount in excess of $15,000 but the total amount was not specified. The Company was served on ~~Dec.~~December 7, 2018, with a complaint alleging damages including unspecified damages for product, advertising and other damages in addition to $50,000 paid to Defendants. Cuentas has hired an attorney and has taken steps to defend itself vigorously in this case. Depositions are in process of being scheduled.

On October 25, 2018, the Company was served with a complaint by former company ~~CFO,~~Chief Financial Officer, Michael Naparstek, claiming breach of contract for ~~1,666,666~~833,333 shares ~~(pre-split)~~(pre-2018 reverse stock split), $25,554 of compensation and $8,823 of expenses. This case was withdrawn in Palm Beach County and on January 11, 2019, a similar complaint was filed in Miami-Dade ~~county.~~County. During the recent mediation, the Company and Mr. Naparstek reached an understanding of full settlement amount of $2,500. The Company has ~~hired~~deposited the settlement amount to an ~~attorney and has taken steps to defend itself vigorously in this case.~~escrow account of its counsel until a stipulation of settlement will be executed by both parties.

On November 7, 2018, the Company and its now former subsidiary, Limecom, were served with a complaint by IDT Domestic Telecom, Inc. for telecommunications services provided to Limecom during 2018 in the amount of $50,000. The Company has no accrual expenses as of December 31, 2019, related to the complaint given the early nature of the process. Limecom was a subsidiary of the Company during this period but since the ~~Stock Purchase Agreement with~~ Limecom Acquisition was rescinded on January 30, 2019, and Limecom agreed to indemnify and hold harmless Cuentas from this and other ~~debts,~~debts. Cuentas hired an attorney and is defending itself vigorously in this case. A court ordered mandatory arbitration session took place and the arbitration findings were issued on June 19, 2020, and a request for trial de novo was filed on July 16, 2020, in order to have the matter docketed on the calendar. The motion for summary judgment filed by Cuentas Inc. with the New Jersey Superior Court initially set for October 16, 2020 was heard on October 30, 2020 after being rescheduled by the court. Oral arguments were held over the phone via conference call. The court came to the determination that while not indicative of success at trial, the court denied Plaintiff’s motion for summary judgment. Presently, there is a current trial date set for July 6, 2021.

On May 1, 2019, the Company received a ~~Notice~~notice of ~~Demand~~demand for ~~Arbitration (the “Demand”)~~arbitration from Secure IP Telecom, Inc. (“Secure ~~IP)~~IP”), who allegedly had a Reciprocal Carrier Services Agreement ~~(RCS)~~(“RCS”) exclusively with Limecom and not with Cuentas. The ~~Demand~~arbitration demand originated from ~~a Demand~~another demand for ~~Arbitration~~arbitration that Secure IP received from VoIP Capital International (“VoIP”) in March 2019, demanding $1,052,838.09 in damages allegedly caused by unpaid receivables that Limecom assigned to VoIP based on the RCS. On June 5, 2020, ~~Secure IP Telecom, Inc. (“SecureIP”)~~SecureIP filed a complaint against Limecom, ~~Inc., (“Limecom”),~~ Heritage Ventures Limited (“Heritage”), an unrelated third party and owner of Limecom, and the ~~Compasny.~~Company. The complaint primarily concerns alleged indebtedness owed SecureIP by Limecom. SecureIP also alleges that Cuentas received certain transfers of funds which it alleges may be an avoidable transfer under Florida Statute §725.105 up to $1,052,838.09. Cuentas is contemplating filing a motion to dismiss the complaint and disputes that it received the alleged $1,052,838.09 from Limecom. Moreover, to the extent Cuentas has exposure for any transfers from Limecom, both Limecom and Heritage have indemnified Cuentas for any such liability. The Company will vigorously defend its position to be removed as a named party in this action due to the fact that Cuentas rescinded the Limecom ~~acquisition~~Acquisition on January 30, 2019.

On ~~January 24, 2020,~~April 1, 2021 the Company ~~received~~executed a ~~Corrected Notice~~lease for office space effective April 1, 2019. The lease requires monthly rental payments of Hearing regarding Qualtel SA de CV, a Mexican Company vs Next Communications, Inc. for a “Plaintiff’s Motion for Order to Show Cause and/or for Contempt as to Non-Party, Cuentas, Inc.” The Company retained a counsel and will vigorously defend its position.

$7.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On ~~August 20, 2020,~~February 2, 2021, the Company issued ~~50,000~~20,000 shares of its Common Stock ~~pursuant~~to its Chief Financial Officer, 40,000 shares of its Common Stock to a ~~settlement~~member of ~~stock-based liabilities.~~the Board of Directors of the Company and 2,933 shares of its Common Stock to a former employee. The fair market value of the shares was ~~$180,000.~~$459,000. We issued such shares in reliance on the exemptions from registration pursuant to Section 4(a)(2) of the Securities Act.

On August 27, 2020, the Company converted all the outstanding shares of Series B Preferred Stock, par value $0.001 per share to 20,000,000 shares of the Company’s common stock, par value $0.001 per share in connection with the Company’s Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) which was adopted on AugustMarch 17, 2020 to cause all outstanding shares of Series B Preferred Stock, par value $0.001 per share to be converted into shares of the Company’s common stock, par value $0.001 per share on a one-to-one basis.

~~On August 20, 2020,~~2021, the Company issued ~~50,000~~10,000 shares of its Common Stock pursuant to a ~~settlement of stock-based liabilities. The fair market value of the shares was $180.~~

~~On September 17, 2020,~~service Agreement between the Company ~~issued 5,000,000 of its Common Stock par value $0.001 per share to each of Dinar Zuz~~ and ~~Cima Telecom Inc., Under~~ a ~~warrant~~service provider, dated ~~December 31,~~May 16, 2019.

~~On September 17, 2020, the Company issued 141,812 shares of its Common Stock pursuant to promissory note, dated September 15, 2020.~~ The fair market value of the shares at the issuance date was ~~$350,000. Out of those, 33,000~~$38,000. We issued such shares ~~of Common Stock were issued in consideration of Commitment fee and the balance are subject to return to the Company once the promissory note will be paid in full.~~

Each of the transactions described in this Item II give effect to the Reverse Stock Split (as defined below) and were exempt from the registration requirements of the Securities Act of 1933, as amended (“Securities Act”), in reliance ~~upon~~on the exemptions from registration pursuant to Section 4(a)(2) of the Securities ~~Act, Regulation D promulgated~~Act.

On April 20, 2021 the Company paid off its loan and accrued interest in the amount of $260,000 to private investor. The Company paid an amount equal to $125,000 plus $ 5,000, which represents the amount of interest accrued on such $125,000 since the date on which the loan was made under the ~~Securities Act and,~~Note through April 16, 2021. In addition, The Company issued 30,233 shares of Common Stock of the Company. We issued such shares in reliance on the ~~case~~exemptions from registration pursuant to Section 4(a)(2) of ~~sales to investors who are non-US persons, Regulation S promulgated under~~ the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR DEBT

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

On July 24, 2020, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of Cuentas Inc. (the “Company”) approved the “Amended and Restated” employment agreements with each of Arik Maimon, the Company’s Chief Executive Officer (“Maimon”), and Michael De Prado, the Company’s President (“De Prado,” and together with Maimon, the “Executives,” each an “Executive”), the “New Employment Agreements”. The New Employment Agreements shall supersede the terms of the Pre-existing Employment Agreements.None

~~Pursuant to the terms of the New Employment Agreements, among other things:~~

~~(1)~~

De Prado will receive the following compensation: (1) (a) a base salary of $265,000 per annum; (b) a Funding Bonus equal to 0.5% of the amount of the funding that exceeds the Funding Threshold; (c) a change of control bonus, if applicable; (d) participation in the Company’s employee benefits plan;

~~(2)~~

Maimon will receive the following compensation: (a) a base salary of $295,000 per annum (b) a Funding Bonus equal to 0.5% of the amount of the funding that exceeds the Funding Threshold; (c) a change of control bonus, if applicable; (d) participation in the Company’s employee benefits plan;

~~(3)~~

For each Executive, the term of the Agreement shall end on the earlier of (i) the date that is four (4) months following the Effective Date or (ii) the date that the Company appoints a new president or chief operating officer but the Company can extend the Employment Term on a month to month basis with the approval of both Dinar and CIMA until a new president or chief operating officer is appointed. Upon expiration of the Employment Term (other than a termination by the Company for “Cause”), the Executive will entitled to a special board compensation package with annual compensation equal to the Annual Base Salary (pro-rated for any partial year of service), beginning on the Expiration or Termination Date and ending eighteen (18) months later, provided that such payments will cease if the Executive resigns as a member of the Board during such period. The Board Compensation Period may be extended from year to year for an additional 12 months (for up to 36 months in total) if two of three of the then-current chief executive officer of the Company, Dinar and CIMA agree to extend the period for an additional 12 months. The Executive’s right to receive the Special Board Compensation shall be subject to the Board’s determination that he has complied with his obligations under this Agreement. The Executive will remain on the Board until he resigns, is not re-elected or is removed from the Board in accordance with the Company’s practice for removal of directors.

~~(4)~~

Pursuant to the terms of the New Employment Agreements, the Executives are entitled to severance in the event of certain terminations of his employment. The Executives are entitled to participate in the Company’s employee benefit, pension and/or profit-sharing plans, and the Company will pay certain health and dental premiums on their behalf.

~~(5)~~

~~Each of the Executives are entitled to Travel and expense reimbursement;~~

~~(6)~~

~~The Executives have agreed to a one year non-competition agreement following the termination of their employment.~~

ITEM 6. EXHIBITS

Exhibit No.	Description	Location
10.1	~~Amended and Restated Agreement with Michael A. De Prado, dated July 24, 2020~~	~~Form 8-K filed at~~ ~~July 30, 2020~~
~~10.2~~	~~Amended and Restated Agreement with Arik Maimon, dated July 24, 2020~~	~~Form 8-K filed at~~ ~~July 30, 2020~~
~~10.3~~	~~$605,000~~ Amendment to Convertible Promissory Note ~~dated September 15, 2020, issued by the Company to Labrys Fund, LP.~~	~~Filed herewith~~
~~10.4~~	~~Securities Purchase~~and Payoff Agreement ~~and to the $605,000 Promissory Note, dated September 15, 2020, by and between the Company and Labrys Fund, LP.~~	Filed herewith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Filed herewith

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Cuentas, Inc.
	(Registrant)

Date: ~~November 13, 2020~~May 5, 2021	By:	/s/ Arik Maimon
		Interim Chief Executive Officer

	By:	/s/ Ran Daniel
		Chief Financial Officer

Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, par value $0.001 per share	CUEN	The Nasdaq Stock Market LLC

Warrants, each exercisable for one share of Common Stock	CUENW	The Nasdaq Stock Market LLC

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
~~None~~

	Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

Balance Sheets as of ~~September 30, 2020~~March 31, 2021 (Unaudited) and December 31, ~~2019~~2020	2

Statements of Operations and Comprehensive Loss for the ~~nine and~~ three-months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (Unaudited)	3

Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (Unaudited)	4

Notes to Condensed Consolidated Financial Statements	5-13

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
	Unaudited			Audited			Unaudited			Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		343			16			6,482			227
Accounts Receivables								40			-
Marketable securities		2			1			52			3
Trade account receivables		2			-
Related parties		56			54			-			54
Other current assets		2			94			153			12
Total current assets		405			165			6,727			296

Property and Equipment, net		5			5			4			4
Intangible assets		7,650			9,000			6,795			7,200
Total assets		8,060			9,170			13,526			7,500

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		2,044			1,525			1,402			2,354
Other accounts liabilities		700			741			819			2,195
Deferred revenue		611			537			676			652
Notes and Loan payable (note 4)		514			109
Notes and Loan payable								94			93
Convertible Note		-			250			250			719
Related parties’ payables		12			10			-			365
Loans from related parties		355			-
Derivative liability		-			3
Stock based liabilities		15			742			8			102
Total current liabilities		4,251			3,917			3,249			6,480

LONG TERM LIABILITY:
EIDL Loan		89			-
Total long-term liabilities		89			-
Other long-term loans								89			89

TOTAL LIABILITIES		4,340			3,917			3,338			6,569

STOCKHOLDERS’ EQUITY

Series B preferred stock, $0.001 par value, designated 10,000,000; 0 issued and outstanding as of September 30, 2020 and 10,000,000 issued and outstanding as of December 31, 2019		0			10
Common stock, authorized 360,000,000 shares, $0.001 par value; 26,475,916 and 4,639,139 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		26			5
Common stock, authorized 360,000,000 shares, $0.001 par value; 13,829,601 and 10,590,491 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively								14			11
Additional paid in capital		28,237			25,246			39,340			28,411
Accumulated deficit		(24,543	)		(19,390	)		(29,166	)		(27,491	)
Total Cuestas Inc. stockholders’ equity		3,720			5,871

Non-controlling interest in subsidiaries		-			(618	)
Total stockholders’ equity		3,720			5,253			10,188			931
Total liabilities and stockholders’ equity		8,060			9,170			13,526			7,500

	Nine Months Ended September 30,						Three Months Ended September 30,
	2020			2019			2020			2019

REVENUE		385			811			134			247

COST OF REVENUE		620			617			237			150

GROSS PROFIT (LOSS)		(235	)		194			(103	)		97

OPERATING EXPENSES

Amortization of Intangible Assets		1,350			-			450			-
General and administrative		3,333			1,663			533			663
TOTAL OPERATING EXPENSES		4,683			1,663			983			663

OPERATING LOSS		(4,918	)		(1,469	)		(1,086	)		(566	)

OTHER INCOME (LOSS)
Other income (expense)		97			2,523			16			(16	)
Interest expense		(24	)		(71	)		(17	)		(2	)
Gain on derivative liability		3			30			-			5
Gain (loss) from Change in fair value of stock-based liabilities		307			(133	)		(52	)		(113	)
TOTAL OTHER INCOME (LOSS)		383			2,349			(53	)		(126	)

NET INCOME (LOSS) BEFORE CONTROLLING INTEREST		(4,535	)		880			(1,139	)		(692	)

NET LOSS ATTRIBUTILE TO NON-CONTROLLING INTEREST		(618	)		(27	)		(615	)		(-	)
NET INCOME (LOSS) ATTRIBUTILE TO CUENTAS INC.		(5,153	)		853			(1,754	)		(692	)

Net income (loss) per basic share		(0.60	)		0.41			(0.12	)		(0.31	)
Net income (loss) per diluted share		(0.60	)		0.34			(0.12	)		(0.31	)

Weighted average number of basic common shares outstanding		8,535,767			2,098,997			14,125,811			2,221,645
Weighted average number of diluted common shares outstanding		8,535,767			2,527,327			14,125,811			2,221,645

	Three Months Ended March 31,
	2021			2020

REVENUE		225			134

COST OF REVENUE		247			177

GROSS LOSS		(22	)		(43	)

OPERATING EXPENSES

Amortization of Intangible assets		452			450
General and administrative		1,138			2,089
TOTAL OPERATING EXPENSES		1,590			2,539

OPERATING LOSS		(1,612	)		(2,582	)

OTHER INCOME (EXPENSES)
Other Income		53			63
Interest expense		(172	)		(3	)
Gain on derivative liability		-			3
Gain from Change in fair value of stock-based liabilities		56			359
TOTAL OTHER INCOME (EXPENSES)		(63	)		422

NET LOSS BEFORE CONTROLLING INTEREST		(1,675	)		(2,160	)

NET LOSS ATTRIBUTILE TO NON-CONTROLLING INTEREST		-			(3	)
NET LOSS ATTRIBUTILE TO NET INCOME (LOSS) ATTRIBUTILE TO CUENTAS INC.		(1,675	)		(2,163	)

Net loss per basic share		(0.13	)		(1.03	)
Net loss per diluted share		(0.13	)		(1.03	)
Weighted average number of basic and diluted common shares outstanding		12,474,008			2,100,539

Asset	Amount		Life (months)
Intangible Assets	$	9,000		60
Total	$	9,000		60

Year ended December 31,
2020	$	1,800
2021		1,800	$	1,810
2022		1,800		1,810
2023		1,800		1,810
2024		1,800		1,810
2025				7
Total	$	9,000	$	7,247

	Deferred Revenue
Balance at December 31, 2019	$	537
Change in deferred revenue		74
Balance at September 30, 2020	$	611

	Deferred Revenue
Balance at December 31, 2020	$	652
Change in deferred revenue		24
Balance at March 31, 2021	$	676

	Balance as of September 30, 2020								Balance as of March 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Marketable securities		2		-		-		2		52		-		-		52
Total assets		2		-		-		2		52		-		-		52

Liabilities:
Stock based liabilities		15		-		-		15		8		-		-		8

Total liabilities		15		-		-		15		8		-		-		8

	Balance as of December 31, 2019								Balance as of December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Marketable securities		1		-		-		1		3		-		-		3
Total assets		1		-		-		1		3		-		-		3

Liabilities:
Stock based liabilities		742		-		-		742		102		-		-		102
Short term derivative value		3		-		-		3

Total liabilities		745		-		-		745		102		-		-		102

	Shares		Weighted- Average Exercise Price Per Share
Outstanding, December 31, 2019		212,044	$	12.79
Granted		198,000		5.74
Forfeited		72,044		32.45
Outstanding, September 30, 2020		338,000	$	4.47

	Shares		Weighted- Average Exercise Price Per Share
Outstanding, December 31, 2020		135,200	$	11.18
Granted		-		-
Forfeited		-		-
Outstanding, March 31, 2021		135,200	$	11.18

~~Common stock price~~	~~2.54~~
~~Dividend yield~~	0	%
~~Risk-free interest rate~~	~~1.89~~	%
~~Expected term (years)~~	3
~~Expected volatility~~	~~328~~	%

		Outstanding						Exercisable
Exercise Prices		Number of Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)		Number of Option Shares		Weighted Average Exercise Price
$	14.35		79,200	$	14.35		3.99		79,200	$	14.35
	7.50		36,000		7.50		3.46		36,000		7.50
	5.23		20,000		5.23		2.99		20,000		5.23
			135,200	$	11.18		3.43		135,200	$	11.18

Direct ACH Deposits	ATM Cash Withdrawal	Bill Pay and Online Purchases
Debit Card Network Processing	Peer to Peer Payments	Cash Reload at over 50,000 retailers
Online banking	Major Transit Authority Tokens	Discounted Gift Cards

Summary of common stock activity for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021	Outstanding shares
Balance, December 31, ~~2019~~2020		~~4,639,139~~10,590,491
Shares issued for Common Stock		~~80,000~~2,790,697
Shares issued due to conversion of ~~Convertible Promissory Note~~Warrants		~~1,257,478~~418,604
~~Settlement~~Return of ~~stock-based liabilities~~commitment shares		~~66,334~~(43,525
~~Shares issued to a lender~~		~~141,812~~	)
Shares issued for services		~~90,000~~10,000
Shares issued to employees		~~58,334~~
~~Shares issued due to conversion of 20,000,000 Series B preferred stock, $0.001 par value shares~~		~~20,000,000~~
~~Shares issued due to conversion of Warrants~~		~~142,819~~63,334
Balance, ~~September 30, 2020~~March 31, 2021		~~26,475,916~~13,829,601

	September 30, 2020		December 31, 2019
	(dollars in thousands)

(a) Next Cala 360		56		54

Total Due from related parties		56		54