As filed with the Securities and Exchange Commission on July 1, 2022November 27, 2023
Registration No. 333--262727333-275724
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3/AS-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Cuentas Inc.CUENTAS INC.
(Exact name of registrant as specified in its charter)
| Florida | 20-3537265 | |||
| (State or | Incorporation or Organization) | (I.R.S. Employer | ||
Identification |
235 Lincoln Rd., Suite 210
Miami Beach, Florida 33139
(800) 611-3622
(Address, including zip code, and telephone number, including area code,
of registrant’s principal executive offices)
Jeffery D. JohnsonShalom Arik Maimon
Chief Executive Officer
235 Lincoln Rd., Suite 210
Miami Beach, Florida 33139
(800) 611-3622 (Name,
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Please send a copy of all communicationsWith copies to:
Barry I. Grossman, Esq.
David Selengut, Esq.
Matthew Bernstein, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, New York 10105-030210105
Phone: (212) 370-1300
Fax: (212) 370-7889
Approximate date of commencement of proposed sale to the public: From time to timeAs soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |
| Emerging growth company | ☐ | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
________
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. WeThe selling shareholder named herein may not sell thethese securities until the Registration Statementregistration statement filed with the Securities and Exchange Commission of which this prospectus is a part, is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 1, 2022
Prospectus
$75,000,000
COMMON STOCK
PREFERRED STOCK
PURCHASE CONTRACTS
WARRANTS
SUBSCRIPTION RIGHTS
DEPOSITARY SHARES
DEBT SECURITIES
UNITS
| PRELIMINARY PROSPECTUS |
We may offer and sell these securities separately or together, in one or more series or classes and in amounts, at prices and on terms described in one or more offerings. We may offer securities through underwriting syndicates managed or co-managed by one or more underwriters or dealers, through agents or directly to purchasers. The prospectus supplement for each offering of securities will describe in detail the plan of distribution for that offering. For general information about the distribution of securities offered, please see “Plan of Distribution” in this prospectus. 
Each time our securities are offered, we will provide a prospectus supplement containing more specific information aboutCUENTAS INC.
1,275,747 Shares of Common Stock
Offered by the particular offering and attach it to this prospectus. The prospectus supplements may also add, update or change information contained in this prospectus. Selling Shareholders
This prospectus mayrelates to the resale of up to 1,275,747 shares of common stock, par value $0.001 per share, of Cuentas Inc. (“we,” “us,” “our,” “Cuentas” or the “Company”), consisting of (i) up to 1,232,606 shares issuable upon exercise of a warrant (the “Inducement Warrant”) to purchase shares of common stock at an exercise price of $3.30 per share issued by us to an institutional investor named herein as a selling shareholder on August 24, 2023 as an inducement to the exercise at a reduced exercise price of $3.30 per share of outstanding warrants to purchase a total of 616,303 shares of the Company’s common stock (the “Existing Warrants”), and (ii) up to 43,141 shares of common stock issuable upon exercise of warrants (the “August 2023 PA Warrants”) issued to the designees of H.C. Wainwright & Co. LLC (“Wainwright”), placement agent for the issuance of the Inducement Warrant, named herein as selling shareholders. The Existing Warrants included warrants to purchase 324,928 shares of common stock issued on August 8, 2022 having an initial exercise price of $7.67 per share and warrants to purchase 291,375 shares of common stock issued on February 8, 2023 having an initial exercise price of $17.16 per share.
This registration does not be used tomean that the selling shareholders will actually offer or sell securities without a prospectus supplement which includes a descriptionany of these shares. We will not receive any proceeds from the resale of any of the methodshares of common stock being registered hereby sold by the selling shareholders. However, we may receive proceeds from the exercise of the Inducement Warrant and terms of this offering.the August 2023 PA Warrants held by the selling shareholders.
Our common stock is listed on The NASDAQ Capital Market under the symbol “CUEN.” We also have a class of warrants that are listed on The NASDAQ Capital Market under the symbol “CUENW.” The last reported sale priceprices of our common stock and listed warrants on The NASDAQ Capital Market on June 24, 2022 was $0.6786November 21, 2023 were $1.55 per share and $0.22$0.039 per warrant. The aggregate market value
Following the effectiveness of our outstanding common stock held by non-affiliates is $7,297,829 based on 14,965,690 shares of outstanding common stock,the registration statement of which 7,085,271 shares are held by non-affiliates,this prospectus forms a part, the sale and a per share pricedistribution of $1.03securities offered hereby may be effected from time to time in one or more transactions that may take place on Nasdaq (or such other market or quotation system on which was the closing sale price of our common stock is then listed or quoted), including ordinary brokers’ transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as quoted onprincipals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling shareholders. The NASDAQ Capital Market on May 4, 2022. Duringselling shareholders and intermediaries through whom such securities are sold may be deemed “underwriters” within the 12 calendar month period that ends on,meaning of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the securities offered hereby, and includes,any profits realized or commissions received may be deemed underwriting compensation.
This prospectus describes the dategeneral manner in which shares of common stock may be offered and sold by any selling shareholders. When the selling shareholders sell shares of common stock under this prospectus, we have not offeredmay, if necessary and sold any of our securities pursuant to General Instruction I.B.6 of Form S-3.
If we decide to seekrequired by law, provide a listing of any preferred stock, purchase contracts, warrants, subscriptions rights, depositary shares, debt securities or units offered by this prospectus, the related prospectus supplement that will disclosecontain specific information about the exchangeterms of that offering. Any prospectus supplement may also add to, update, modify or market on which the securities will be listed, if any, or where we have made an application for listing, if any.
Investingreplace information contained in our securities involves certain risks. See “Risk Factors” beginning on page 38 and the risk factors in our most recent Annual Report on Form 10-K, which is incorporated by reference herein, as well as in any other recently filed quarterly or current reports and, if any, in the relevant prospectus supplement.this prospectus. We urge you to read carefully read this prospectus, and the accompanyingany prospectus supplement together with theand any documents we incorporate by reference describing the terms of these securitiesinto this prospectus before investing.you make your investment decision.
All share and per share information in this prospectus gives effect to a 1-for-13 reverse stock split effected on March 24, 2023.
Investing in our common stock is highly speculative and involves a significant degree of risk. See “Risk Factors” beginning on page 6 of this prospectus and in the documents incorporated by reference in this prospectus for a discussion of information that should be considered before making a decision to purchase our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacydetermined if this prospectus is truthful or accuracy of this prospectus.complete. Any representation to the contrary is a criminal offense.
The date of this Prospectusprospectus is ___________, 2023
TABLE OF CONTENTS
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This prospectus is part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission, or SEC, utilizing a “shelf” registration process. Under this shelf registration process, we may offer and sell, either individually or in combination, in one or more offerings, any of the securities described inPlease read this prospectus for total gross proceedscarefully. It describes our business, our financial condition and our results of up to $75,000,000. This prospectus provides you with a general description of the securities we may offer. Each time we offer securities underoperations. We have prepared this prospectus weso that you will provide a prospectus supplement to this prospectus that will contain more specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to these offerings. The prospectus supplement and any related free writing prospectus that we may authorize to be provided to you may also add, update or change any ofhave the information contained in this prospectus or in the documents that we have incorporated by reference into this prospectus.
We urge younecessary to read carefully this prospectus, any applicable prospectus supplement and any free writing prospectuses we have authorized for use in connection with a specific offering, together with the information incorporated herein by reference as described under the heading “Incorporation of Documents by Reference,” before investing in any of the securities being offered.make an informed investment decision. You should rely only on the information contained in or incorporated by reference into, this prospectus and any applicable prospectus supplement, along with the information contained in any free writing prospectuses we have authorized for use in connection with a specific offering.prospectus. We have not authorized anyone to provide you with differentany information or additional information. This prospectus is an offer to sell onlymake any representations about us, the securities being offered hereby, but only under circumstancespursuant to this prospectus or any other matter discussed in this prospectus, other than the information and representations contained in jurisdictions where itthis prospectus. If any other information or representation is lawful to do so.given or made, such information or representation may not be relied upon as having been authorized by us.
The information appearingcontained in this prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate only as of the date on the front of the document and any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference,this prospectus, regardless of the time of delivery of this prospectus any applicable prospectus supplement or any related free writing prospectus, orof any sale of a security.our common stock. Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus. This prospectus will be updated and made available for delivery to the extent required by the federal securities laws.
This prospectus contains summaries of certain provisions containedWe further note that the representations, warranties and covenants made by us in some of the documents described herein, but referenceany document that is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed will be filed or will be incorporated by reference as exhibitsan exhibit to the registration statement of which this prospectus is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and you may obtain copiesshould not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of those documentsthe date when made. Accordingly, such representations, warranties and covenants should not be relied on as described below underaccurately representing the section entitled “Where You Can Find Additional Information.”current state of our affairs.
This prospectus contains, or incorporates by reference, trademarks, tradenames, service marks and service names of Cuentas Inc.
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus and any accompanying prospectus supplement and the documents incorporated herein by reference herein may contain forward lookingforward-looking statements that involve risks and uncertainties. Allwithin the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements other than statements of historical fact contained in this prospectus and any accompanying prospectus supplement and the documents incorporated by reference herein, including statements regarding future events,include information concerning our future results of operations and financial performance, businessposition, strategy and plans, and objectives of managementour expectations for future operations,operations. Forward-looking statements include all statements that are forward-looking statements. We have attempted to identify forward-looking statementsnot historical facts and, in some cases, can be identified by terminology including “anticipates,terms such as “anticipate,” “believes,” “can,“believe,” “continue,” “could,” “estimates,“design,” “expects,“estimate,” “intends,“expect,” “intend,” “may,” “plans,“plan,” “possible,” “potential,” “predicts,“predict,” “project,” “seek,” “should,” or “will”“target,” “will,” “would” or the negative version of these terms or other comparable terminology. Thesewords and similar expressions.
Forward-looking statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that couldmay cause our actual results, levels of activity, performance or achievementachievements to differbe materially different from thoseany future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors” included elsewhere in this prospectus and in the documents that are incorporated by reference herein. Given these uncertainties, you should not place undue reliance on these forward-looking statements. AlthoughAlso, forward-looking statements represent our beliefs and assumptions only as of the date of this prospectus, or, in the case of any document incorporated by reference herein in this prospectus, as of the date of such document. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we do not make forward looking statements unlesswill achieve our objectives and plans in any specified time frame, or at all. You should read this prospectus and the documents incorporated by reference herein completely and with the understanding that our actual future results may be materially different from what we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. expect.
These forward-looking statements include, but are not limited to, statements about:concerning the following:
| ● | our ability to implement our business |
| ● | our ability to attract key personnel; |
| ● | our ability to operate profitably; |
| ● | our ability to efficiently and effectively finance our operations; |
| ● | our ability to raise additional financing for working capital; |
| ● | our ability to efficiently manage our operations; |
| ● | that our accounting policies and methods may require management to make estimates about matters that are inherently uncertain; |
| ● | changes in the legal, regulatory and legislative environments in the markets in which we operate; and |
| ● | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing |
| ● | our ability to upgrade the Cuentas Mobile App and digital distribution system and make it completely functionable; and |
| ● | our ability to maintain our listing on NASDAQ. |
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this prospectus, and the documents incorporated by reference herein, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a highly regulated, very competitive, and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long term business operations, and financial needs. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this prospectus, and in particular, the risks discussed below and under the heading “Risk Factors” and those discussed in other documents we file with the SEC. The following discussion should be read in conjunction with the consolidated financial statements for the fiscal years ended December 31, 2021 and 2020 and notes incorporated by reference herein. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statement.
You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this prospectus to conform our statements to actual results or changed expectations. Any forward-looking statement you read in this prospectus any prospectus supplement or any document incorporated by reference reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, operating results, growth strategy and liquidity. You should not place undue reliance on these forward-looking statements because such statements speak only as to the date when made. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future, except as otherwise required by applicable law. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-Q, 8-K and 10-K filed with the SEC. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
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This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain allprospectus and the information that you should consider before investing in our Company. You should carefully read the entire prospectus, including all documents incorporated by reference herein. In particular, attention should be directed toherein, including our “Risk Factors,” “Information With Respect to the Company,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and theconsolidated financial statements and related notes thereto contained hereinnotes. You should carefully consider, among other things, the matters discussed in the sections entitled “Risk Factors” included in or otherwise incorporated by reference hereto, before making an investment decision.
As used herein, and any amendment or supplement hereto, unlessin this prospectus. Unless the context requires otherwise, indicated,references in this prospectus to “we,” “us,” “our,” the “Company,” “Cuentas,” “CUEN”“our company,” or similar terminology meansrefer to Cuentas Inc. All share and per share information in this prospectus gives effect to a 1-for-13 reverse stock split effected on March 24, 2023.
The CompanyOverview of Our Business
The Company was incorporated under the laws of FloridaOur business is mainly focused on September 21, 2005, and currently focuses on the business of using proprietary fintech technologytechnologies to provide e-bankingintegrate FinTech (Financial Technology), e-finance and e-commerce services for deliveringinto solutions that deliver mobile banking,financial services, prepaid debit and digital content services to the unbanked, underbankedunder-banked and underserved Latino, Hispanicpopulations nationally in the USA. The Cuentas Platform integrates Cuentas Mobile, the Company’s Telecommunications solution, with its core financial services offerings to help entire communities enter the modern financial marketplace. Our General Purpose Reloadable (GPR) “Debit Card allows customers to purchase prepaid products and immigrant communities. The Company’s proprietary software platformservices, including third party digital content, gift cards, remittances, mobile phone topups and other digital services. An agreement with Interactive Communications International, Inc. (“InComm”) a leading processor of general purpose reloadable (“GPR”) debit cards, enables us to market and distribute a line of prepaid digital content and gift cards targeted towards the Latin American market. Cuentas is able to purchase InComm’s prepaid digital content and gift cards at a discount and resell these same products in real time through its mobile app and through the Cuentas SDI network of over 31,000 bodegas. Cuentas is able to offer comprehensive financial servicesthese digital products to the public through its mobile app and robust functionality that is absent from other Mobile Apps through the use of our Prepaid Debit Mastercard®/General-Purpose Reloadable cards (“GPR”).
Properties. The Company’s principal offices are located in Miami Beach, Florida.
Our Business
The Company’s Mobile App & GPR card are integrated into a proprietary fintech ecosystem that protects customers by depositing their funds in an FDIC insured bank account at Sutton Bank, the issuing bank.
The comprehensive financial services currently available include:
WU and Cuentas Bridge Digital and Retail Money Transfer Worlds for Latino Community
On or about March 8, 2022, the Company has integrated Western Union’s (“WU”) domestic and international money transfer capabilities into the Cuentas mobile banking app. The integration enables the Company’s customers to send money to 200 countries and territories via the Cuentas mobile app. Leveraging Western Union’s leading global cross-border, cross-currency platform, The Company’s customers can conveniently move money to friends and family almost anywhere across the world using the Cuentas mobile app. Once sent, receivers can pick up their remittance in cashSDI distribution network, many at any Western Union retail location.
A major factor that provides technical strength and reliability to Cuentas’ project is the fintech ecosystem that it has developed. The foundation of Cuentas’ ecosystem is the fintech-exclusive, royalty-free, perpetual platform license and source code from CIMA Telecom, Inc. (“CIMA”) that Cuentas acquired for an aggregate value of $9 million of capital stock of the Company. We believe that this platform has been proven to be a robust, reliable transactional, marketing, financial and predictive, Tier-1 transactional platform. Cuentas’ ecosystem integrates the proprietary CIMA platform via dedicated APIs with Sutton Bank (the issuing bank), IDology (AML & KYC) and InComm (Processor, Load Network & 3rd Party Digital Products).
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Cuentas’ Mobile App includes a Mobile Wallet (“Wallet”), Digital Store (“Store”) and is linked with a Prepaid Mastercard® which can be used for ATM withdrawals, online purchases and in-person purchases.
Account holders may deposit funds to their account via (a) no-cost Direct Deposit, (b) no-cost fund transfers from other Cuentas account holders, or (c) fordiscounted prices, while making a small charge, using InComm’s VanillaLoad network in over 200,000 locations at major retailers like Walmart, CVS, Walgreens, Dollar General,profit margin which varies from product to product. The prepaid digital content and more.
Once account holders have available funds, they can use their Cuentas Prepaid Mastercard® wherever prepaid Mastercards are accepted worldwide and at most ATMs in the U.S., and many international ATMs.
Account holders may use the funds in their wallet to purchase discounted gift cards in the Cuentas Digital Store. Product categories in the Digital Store include Digital Gift Cards, Transit Cards, Mobile Phone Recharges (the “TopUps”) and Western Union International Remittances. Digital gift cards include Amazon Cash, Sony Playstation, Xbox,XBox, PlayStation, Nintendo, Karma Koin, Transit System Loads & Reloads (LA TAP, NY Transit, Grand Rapids, CT GO), Burger King, Cabela’s, Bass Pro Shops, and more. Transit products include or will include OMNY in New York, TAP in Los Angeles, GoCT in Connecticut and The Rapid from Grand Rapids, Michigan. Additional transit products will be available as InComm rolls them out. Cuentas account holders may purchase TopUps which allow them to recharge their own or someone else’s Verizon, AT&T, orVerizon, Mango Mobile, Black Wireless and other mobile phonesprepaid wireless carriers in the U.S. or in many foreign countries – in real time. Account holders may make real phone calls using the Cuentas ILD Rewards balance (Loyalty Program) or funds in their wallet - actual phone calls that are made directly from their phone to any mobile phone or land line worldwide.
The Latino Market United States.
TheSince the first quarter of 2023, we have made a number of equity investments in real estate projects in Florida under the name “Cuentas”Cuentas Casa. Cuentas Casa partners with leading edge developers and construction technology companies to create sustainable, inclusive and affordable residential communities specifically designed to provide high quality housing alternatives at extremely competitive pricing. Our goal is to source land zoned and ready for development of multi-family buildings in strategic areas where rental prices are increasing dramatically, placing financial stress and pressure on working class families. Our real estate investments are intended to broaden our reach into the unbanked, underbanked and underserved communities by using a Spanish wordpatented, low cost, sustainable technology that has multiple meanings and was chosen for strategic reasons,should allow us to develop a close relationship with the Spanish speaking population. It means “Accounts” asprovide reasonably priced rental apartments to working class residents who have been priced out of rental communities due to severe rent hikes in “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” (rendición de cuentas), “to be accountable” (rendir cuentas)Florida and other significant meanings.
The 2020 U.S. Census showedareas in the Hispanic Latino population at over 62 million and at 18.7%United States. Cuentas has made investments in affordable housing projects for the development of the total U.S. population. The FDIC defines the “unbanked” “as those adults without an account at a bank or other financial institution and are consideredapproximately 1,550 apartments. We believe that providing affordable apartments to be outside the mainstream for one reason or another. The Company believes that the Hispanic and Latino demographic generally have had more identification, credit, and former bank account issues more so than any other U. S. minority group leading to more difficulty in obtaining a traditional bank account.
Cuentas Mobile App and Wallet The Cuentas Mobile App and Wallet are positioned to service the Hispanic Latino and other immigrant demographics with comprehensive financial products. Additionally, we are ablecommunities in Florida will enable us to accept various forms of U.S.introduce them our fintech solutions and some foreign government issued identification to confirm qualification for opening an account with the Cuentas App. The Cuentas App is able to accept SSN or ITIN with U.S. identification, Matricula Consular or other qualified government issued forms of identification.generate revenue.
The Cuentas Prepaid Mastercard® - General-Purpose Reloadable (GPR) Card
The Cuentas Prepaid GPR Card allows each account holder to have a personalized Cuentas Mastercard®Our wholly-owned subsidiary, Meimoun and an associated Cuentas Account with the Mobile App, Digital Wallet, Digital Store and Long Distance Telecom services included. It acts as a comprehensive banking solution which enables access to the U.S. financial system for those who are unbanked or underbanked, while also enabling greater functionality than a traditional bank account. The cardholders’ deposited funds are protected in an FDIC-insured bank account at Sutton Bank.
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The Cuentas Business Model
The Cuentas business model provides or, we expect will provide, for multiple revenue sources, many of which are synergistic market segments and provide unified financial and social functionality to forgotten segments of society.
The Cuentas Mobile Wallet has several potential revenue streams. We expect that the Company will receive monthly maintenance fees, reload fees, ATM fees and commissions for products sold as well as interchange and network fees from Mastercard & Pulse. Cuentas’ strategy is to provide excellent value to consumers while charging reasonable fees and commissions to produce profitability. We believe that monthly fees of $4.50 which we will charge per user will generate reasonable revenue. Cuentas provides account recharge capabilities to account holders via the nationwide VanillaLoad network owned by InComm as it is available in many big box retailer chains such as Walmart, Walgreens, CVS, Dollar Store and others.
We expect that The Cuentas Digital Store will produce revenue each time that consumers purchase third party gift cards, digital access, mass transit tickets and mobile phone top-ups (U.S. and international). Additionally, International remittances provided by the industry-leader Western Union “by Cuentas” are available and International Bill Pay should be available in 2022. Both services should be major revenue driving factors for Cuentas as they provide reliable, low-cost solutions to our target audience.
Cuentas expects to offer rewards for free long distance calling to its account holders (“Cuentas Rewards”) who are given credits upon activation to be able to make real international calls to land lines or mobile phone worldwide, not like internet calling which can be unreliable and poor quality. If successful, we can expand the Rewards program in the future. 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 accountholders, which should help to maintain and solidify valuable relationships with them.
Prepaid Debit Card Market Overview
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.”
Cuentas is strategically positioned in the prepaid marketplace with a focus on the Hispanic, Latino and immigrant demographics.
Cuentas has identified Activation Fees as an important issue to our target demographic, so we offer “no-cost” registration and activation with a personalized Prepaid Mastercard® sent directly to the consumer, and we charge a monthly fee of $4.50 fifteen days after activation and every thirty days thereafter. As previously mentioned, we also model our offering with empathy and consideration for our target demographic, keeping fees and costs reasonably low so they will be able to justify and appreciate the benefits provided by the Cuentas Mobile App, Wallet & Prepaid Mastercard®.
The Cuentas Technology platform
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 has 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.
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The 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 provides 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”) 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, and digital wallet management.
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.
Strategic Partners
Sutton Bank (“Sutton”)
Cuentas has a 5 year Prepaid Card Program Management Agreement with Sutton Bank as the issuer of the Cuentas Prepaid Mastercard® - Debit/GPR card which is effective through October 2026 with automatic 1 year renewals. Sutton insures account holders’ funds through the FDIC and provides direct deposit capabilities, early pay functionality and account balance functionality for the Cuentas Mobile App and Mobile Wallet. Sutton coordinates Know Your Client (“KYC”), Office of Foreign Asset Control (“OFAC”), Politically Exposed Persons (“PEP”) and Anti-Money Laundering (“AML”) compliance with Cuentas and IDology. Each applicant must have either a Social Security number or an ITIN. During the registration process, IDology compares each applicant’s personal information with known KYC, OFAC and PEP databases, and if required, can request certain forms of identification to confirm their identity. These forms of identification may include but are not limited to: Passport, Driver’s License, Matricula Consular and U.S. residency documentation. Only applicants that reach a certain score that is coordinated between Sutton and IDology, are approved to receive a Cuentas Prepaid Mastercard® associated with their Cuentas Mobile App & Wallet account.
Interactive Communications International, Inc. (“InComm”)
Cuentas has multiple agreements with InComm including: (a) Processing services, (b) Resale of 3rd party Digital gift cards , (c) Resale of InComm Digital Solutions, and (d) Reload Commission Agreement. The agreements are effective through July 2024 and then renew automatically for 1 year periods. InComm is an instrumental partner of Cuentas as it provides the operational core of Cuentas’ transaction processing platform, the cash reload component and access to many third party products and services.
On July 23, 2019, the Company entered into a 5 year Prepaid Services Agreement with InComm (the “InComm PSA”) to power and expand the Company’s Mobile App, Mobile Wallet and GPR card. InComm is a supplier of 3rd party gift and digital content cards and Cuentas currently resells a variety of these products through its Mobile App’s Digital Store and Cuentas-SDI distribution network, with possible expansion in the future.
Under the InComm PSA, InComm is the prepaid card processor and through its VanillaLoad network, allows the Company’s cardholders, for a small fee, to reload their Cuentas Mobile Wallet through a nationwide network of retailers including Walmart, 7-Eleven, Walgreens, CVS Pharmacy, Rite Aid, Dollar General and many more. In addition, the Company plans to extend the cash reload component of the Wallet through a select number of “bodegas” in the Cuentas-SDI network to increase its market penetration and profitability.
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Under the InComm PSA, InComm provides processing services, telephone support, data storage services, account servicing, reporting, output and hot carding services to the Company. Processing services consist mainly of authorization and transaction processing services. InComm also processes authorizations for transactions made with or on prepaid products, along with any payments or adjustments made to prepaid products. InComm also processes the Company’s data and post entries in accordance with the specifications. Data storage services 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 also provides Web/API services for prepaid Cuentas GPR applications and transactions.
TheCuentas Ecosystem
Cuentas’ goal is to offer the consumer a one-stop shop, easy to use, Mobile App & Mobile wallet with Mastercard® rails that can provide new, important financial services and solve many of their daily needs and desires while saving the users time and money.
Approved Cuentas accountholders will have a Prepaid Mastercard® acceptable wherever Mastercard® debit cards are accepted and can have their paychecks or certain government benefits checks directly deposited to their account associated with the card, with funds available for use on the card up to 2 days earlier than standard direct deposits. Furthermore, the Cuentas card has ATM access through the nationwide Pulse Network which provides access to over 500,000 ATMs in the U.S. and many more worldwide. (source: pulsenetwork.com)
The Cuentas Digital Store in the Mobile App will allow accountholders to purchase certain mainstream gift cards for use in a variety of stores, online portals and transit agencies – many at discounted prices. Accountholders can also “Top Up” or prepay their mobile phone accounts and also do the same for friends & family living in the U.S. or overseas.
Cuentas Mobile
Cuentas Mobile is our Mobile Virtual Network Operator (“MVNO”) trade name, which provided Cuentas Mobile branded mobile phones along with attractively priced prepaid voice, text, and data mobile phone services to a limited customer base. Cuentas, through M&M, is negotiating to sell mobile services as an MVNO through an operator on the largest 5G nationwide network from one of the top 3 mobile carriers. Cuentas Mobile will continue to operate a virtual telecommunications network providing mobile voice, text, and data services with essentially the same quality as other MVNOs such as Cricket, Boost, Simple, Ultra, Mint and Lyca Mobile, which have been successful at creating brands, without owning the towers, hardware or network. Cuentas is currently reactivating distribution 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.
We believe that our potential customers will migrate away from legacy telephone and banking systems to enhanced mobility solutions. The Company’s technological advantage and the synergies created by its combination of a reloadable debit card and a holder of mobile virtual network operator rights will make its products increasingly useful to unbanked, under-banked, under-served and other emerging niche markets.
Meimoun& Mammon LLC
Meimoun & Mammon, LLC (“M&M”), provides wholesale and retail telecommunications services. Tel 3, a division of our company, is a retail provider of domestic and international long-distance voice, text, and data telephony serviceslong distance calling platform which provides prepaid calling cards to consumers in the United Statesdirectly 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. Tel3 has been a prepaid long distance provider for many years and provides direct and indirect access to Latino and immigrant communities across the US as it provides them with quality international communications services. The majority of revenue generated by the company so far has come from this division.
Regulatory Compliance
We operate in an ever-evolving and complex legal and regulatory environment. We, the products and services 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 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 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 subsidiary M&M is 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. M&M is also subject to certain foreign jurisdiction communications laws and regulations as it provides limited access to its prepaid calling platform internationally. 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.
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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 operation, decrease our operating revenues and disrupt our business. Sutton bank performs routine AML, KYC, OFAC in consultation with Cuentas and IDology and other compliance review and searches throughout Cuentas’ registration and operational processes. 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.
Most states regulate the business of 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 money transmittal businesses of bank agents or do not extend exemptions to non-branch bank agents. In those states where we are required to be licensed, we are subject to direct supervision and regulation by the relevant state banking departments or similar agencies charged with enforcement of the money transmitter statutes and must comply with various restrictions and requirements, such as those related to the 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 products subject to licensure, recordkeeping and reporting, and disclosures to consumers. We are also subject to periodic examinations by the relevant licensing authorities, which may include reviews of 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 our business. As a regulated entity, Cuentas may incur significant costs associated with regulatory compliance. We anticipate that compliance costs and requirements will increase in the future for our regulated subsidiaries and that additional subsidiaries will need to 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 a timely manner, our business, resultscomplimentary space as M&M. We also own 50% of operations and financial condition could be materially and adversely affected.
Marketing
The Cuentas Mobile App, Mobile Wallet and Prepaid Mastercard® will be predominantly marketed via digital and traditional media channels. Cuentas expects to use a combination of internal resources as well as third parties for our marketing efforts.
The digital marketing placements will include social media, SEO (Search Engine Optimization), internet, geo fencing, online streaming providers, influencers, and other digital providers. Traditional marketing efforts include media such as radio, TV, print, billboards, bus wraps, bus benches, TV, radio, etc.
Media spend is distributed amongst these marketing vehicles and adjusted as acquisition data is received. Our initial program is designed to test creative, geo targeting and formats. Once feedback is analyzed, spending will be optimized to enhance efficiency and cost of acquisition. Vertical market integration and partnerships will also be developed to augment growth and stability.
Marketing strategies for customer acquisition will focus on key markets, targeted audiences, lifestyle fit, brand awareness, key metrics and go-to-market plans. The proposed acquisition of the SDI companies will expand the current target demographic of unbanked, underbanked and underserved Hispanic and Latino groups to also include the Asian, African, Middle East and European immigrant populations in the U.S.
Marketing to Hispanic & Latino groups will initially concentrate on those populations that have settled in Southern California, Texas, New York, Florida, Arizona and New Mexico.
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Entry into a Joint-Venture Agreement with WaveMAX Corporation (“WaveMax”)
On July 21, 2021, the Company and WaveMAX entered into a Definitive Joint-Venture Agreement (the “Agreement”). Pursuant to the Agreement, the Company and WaveMax formed CuentasMaxCUENTASMAX LLC, on Dec 8, 2021, a joint venture (“CUENTASMAX”) which would installinstalls WiFi6 shared network (“WSN”) systems in up to 1,000 retail locations in the New York metropolitan tristate area using access points and small cells to provide users with access to the WSN (the “JV Project”). The WSN will allow CUENTASMAXWSN.
Recent Developments
Efforts to generate location-based advertising configured by advertisers using WaveMAX’s advertising dashboardUpgrade our Technology Platform and Increase Sales of our Fintech Products and Services Through Cuentas-SDI and Introduction of New Fintech Solutions
In April 2023, CIMA, which provided maintenance and support services for our technology directly to users over the WSN, could permit users to pay a service fee for ad-freeplatform, shut down access to the WSN.platform as we were transitioning to a new, improved platform. During the first quarter of 2023, we reduced product availability to Cuentas-SDI to allow Cuentas-SDI to catch up on its payments and during the second quarter of 2023 we curtailed all services to Cuentas-SDI and marketing initiatives with Cuentas-SDI due to its inability to reduce its debt significantly. These disruptions to our fintech solutions and technology business were a major reason for the decline in revenue between the Q1-Q2 periods in 2022 and 2023.
In May 2023, The ownershipOLB Group (NASDAQ: OLB) (“OLB”) terminated a Software Licensing and management of CUENTASMAX shall be as follows: 50% toTransaction Sharing Agreement with the Company 25% to WaveMAXfor the purpose of upgrading the Cuentas Mobile App and 25% to Consultoria y Asesoria de Redes, S.A. de C.V. (“Execon”). Execon currently manages approximately 20,000 WiFi endpoints with WaveMax in Mexico. Eachdigital distribution system. In June 2023, OLB acquired 80.01% of Cuentas-SDI. In July 2023, the Company and WaveMAX agreedCuentas-SDI settled certain payment issues and renewed discussions and cooperation to fund $120,000 (for a total of $240,000) initially upon execution of the Agreement. In addition, each of the Company and WaveMAX has agreed to fund an additional $127,500 over the succeeding five months, in each case, subject to approval of each party’s board of directors. The expenses of the JV Project shall include acquiring the Access Points hardware, the installation and configuration of the Access Points hardware for use with the broadband internet service at each Retail Location, entering into the necessary agreements with the Retail Locations, instore marketing and promotion of the WSN program, and expenses relating to commercialization ofre-open the digital advertising program. The Board of Directors of CUENTASMAX shall initially be comprised of four persons, two designated by the Company, one designated by WaveMAX, and one designated by Execon. The officers of CUENTASMAX shall be the persons from time to time designated by mutual agreement of the Company and WaveMAX, with the initial officers to be determined. It is hoped that up to 1,000 high traffic, prime location convenience stores and “bodegas” (small community markets) will be signed up in conjunction with the Company’s distribution network that sells prepaid debit card, e-store, e-wallet and digital services. A feesystems through Cuentas-SDI’s convenience store distribution network of 2% (two percent) ofover 31,000 locations, including many across the net revenue of CUENTASMAX will be paid by CUENTASMAX on a monthly basis as a commission to Innovateur Management SAPI de CV. WaveMAX grants CUENTASMAX exclusive rights to useNew York, New Jersey and deploy the WaveMAX Technology, including any and all patents owned or to be owned by WaveMAX and any and all related enhancements or applications of the WaveMAX Technology and any and all prior and subsequent improvements and/or new technology developed by WaveMAX solely in the Company’s BODEGAS network throughout the United States. The parties have agreed to expand CUENTASMAX to other areas of the U.S. once the current deployment is in progress or has been completed. As of December 31.2021, the Company has funded CUENTASMAX an amount of $40,000 and, in agreement with the other parties, funded CunetasMax $40,000 in February of 2022. The parties have agreed to make the third installment by April 15, 2022. The joint venture has begun the initial sales and marketing for the JV and expects to produce revenue initially in Q2 of 2022. Connecticut tri-state area.
Investments in Real Estate Developments in Florida
Entry into a Joint-Venture Agreement with Benelisha Group, Inc. (“Benelisha”)Lakewood Village
On August 4, 2021,March 7, 2023 the Company acquired a six percent (6%) equity interest in Lakewood Village from Core Development Holdings Corporation (“Core”), pursuant to a Membership Interest Purchase Agreement (“MIPA”), in exchange for 295,282 shares of Common Stock, representing approximately19.99% of the then outstanding shares of Common Stock. Core holds approximately 29.3% of 4280 Lakewood Road Manager, LLC (“Lakewood Manager”), which in turn owns 86.45% of the membership interests in 4280 Lakewood Road, LLC (“4280 Project”), an affordable multi-family real estate project located in Lake Worth, Florida. As a result of the transaction, the Company acquired $700,000 of equity in the Lakewood Manager. Lakewood Manager, an affiliate of RENCo USA, Inc. (“Renco”), is constructing the 4280 Lakewood Project with RENCO Structural Building System, a proprietary composite structural system distributed by Renco. Lakewood Village is the first sustainable rental housing project developed in the US using a patented MCFR Mineral Composite Fiber Reinforced Construction Technology that has been approved for hurricane-prone areas as such in Florida. The Lakewood Village project is an affordable multi-family real estate development located in Lake Worth, Palm Beach County, Florida, consisting of 96 apartments that have two and three bedrooms. An independent appraisal valued the project, once completed, at approximately $25 million, equating the Company’s equity position at approximately $1.5 million.
Supply Agreement with Renco USA
In March 2023, the Company entered a 10 year supply agreement with Renco to provide Renco’s patented building materials for new, sustainable rental housing projects. Renco’s patented MCFR (Mineral Composite Fiber Reinforced) Construction System provides cost efficiency, reduced build time, and sustainable benefits. Renco’s system is hurricane proof up to Category 5, which is a major benefit for developing housing projects in the South Florida market and other hurricane prone areas where we are planning to develop projects. Renco’s system is also earthquake resistant. Renco has the exclusive rights in the USA to the patented building process. The Renco Wall, Floor and Roofing System is a unique MCFR Building System that creates interlocking, fiber reinforced, composite building blocks and other construction related products that can be connected in an almost limitless variety of designs. Renco’s system can be used to create homes, apartment buildings, hotels, office buildings, warehouses, infrastructure products and more.
Operating Agreement with Brookville Development Partners, LLC
On April 13, 2023, the Company entered into an Operating Agreement to be a majority member in Brooksville Development Partners, LLC (“Brooksville”) with two minority members for the purpose of acquiring land for the development of a residential apartment community consisting of approximately 360 apartments. All real and personal property owned by Brooksville will be owned by Brooksville as an entity. One of the minority members will be the manager of the project.
On April 28, 2023, the Company and Benelisha enteredminority partners in Brooksville closed on the transaction to acquire a 21.8 acre site for development of the Brooksville project. The Company deposited as an initial capital contribution $2,000,000 into a Definitive Marketing and Promotion Agreement (the “Benelisha Agreement”). Pursuanttitle insurance escrow account which was released from escrow by the Title Agent to fund the Benelisha Agreement, the Company and Benelisha will market and promote Cuentas GPR cards and the mobile phone application (“DC/MA”) products to Benelisha customers. During the termbalance of the Benelisha Agreement, Benelisha’s goal is to register Benelisha customers to become active users of the Cuentas DC/MA products. The Company hopes to complete technical and program integration to be able to launch in Q3 of 2022.
If Benelisha reaches these milestone goals, it will be rewarded with Most Favored Nation (MFN) status along with compensation consisting of 32% of Net Revenue from new cardholders that Benelisha registers and maintains on the Cuentas GPR Platform. After year 3, Benelisha may continue to maintain MFN status by registering 50,000 new cardholders each year. If Benelisha does not maintain MFN status, it will still receive compensation of 32% of net revenue for the active cardholders it maintains.
Proposed Acquisition
On January 5, 2022, we signed a Binding Letter of Intent (the “Original LOI”) with Mango Tel LLC (“Mango Tel”), SDI Black, and Sohel Kapadia and Sahedabanu Kapadiai (collectively the “Owners”), for the potential acquisition of 100% of the assets of Mango Tel LLC and SDI Black 011, LLC for a purchase price of $3.2 million. On February 11, 2022, we signed an amended Binding Letterthe vacant land, together with a $3.05 million bank loan from Republic Bank of Intent (the “First Amendment”) amendingChicago. Brooksville owns the Original LOI to reflect that we would only purchase SDI Black (and not purchase Mango Tel which determination was made following our initial due diligence review of Mango Tel) for a purchase price of $2.976 million. On April 27, 2022, we signed a second amendment (the “Second Amendment”) to the Binding Letter of Intent amending the Original LOI as amended by the First Amendment (collectively, the “LOI”).
The LOI provides that a definitive Asset Purchase Agreement (APA), subject to Cuentas Board of Director approval, will be signed by May 8, 2022 detailing the assets which will be acquired by Cuentas. Following our entry into the MIPA (as defined below), this date was extended to July 7, 2022, subject to an additional 30 day extension. It also provides that if the Board of Directors of Cuentas does not approve the APA, then “the parties shall be released from any and all obligations thereunder including the termination penalty”. As required in the LOI, Cuentas deposited $1 Million into an escrow account while a definitive purchase and sale agreement is drafted and negotiated. On or before five (5) business days before the Closing Date, Cuentas shall pay into the escrow trust account of its Escrow Agent, the remaining Purchase Price of $1,976,000 (the “Remaining Purchase Price”). At the Closing, Owners shall transfer one hundred percent (100%) of the Purchased Assetsvacant land, free and clear of any liens, claims and encumbrances with the sole exception being the Republic Bank loan. The Company is currently a 63% interest holder in Brooksville but that may change in the future if the Company is not able to Cuentas.raise sufficient financing to complete the project.
On or before eight (8) business days following the execution of the Second Amendment by the parties, Owners shall pay into the escrow trust account of the Seller’s Escrow Agent, $1 Million to be held in trust under the terms and conditions of the Escrow Agreement as defined in the Second Amendment.
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February Offering and Private Placement
On February 8, 2023, the Company sold to Armistice Capital Master Fund Ltd., an institutional investor, in a registered direct offering (the “Registered Offering”), an aggregate of (i) 163,344 shares of the Company’s common stock (“Common Stock”) and (ii) pre-funded warrants to purchase up to 128,031 shares of Common Stock (the “Pre-Funded Warrants” and such shares of Common Stock issuable upon exercise of the Pre-Funded Warrants, the “Pre-Funded Warrant Shares”) pursuant to a Securities Purchase Agreement dated February 6, 2023 (the “Purchase Agreement”). In a concurrent private placement, the Company sold to Armistice Capital Master Fund Ltd. warrants (the “Purchase Warrants”) to purchase 291,375 shares of Common Stock (the shares of Common Stock issuable upon exercise of the Purchase Warrants, the “Purchase Warrant Shares”). The combined purchase price per Share and Purchase Warrant was $17.16 and the combined purchase price per Pre-Funded Warrant and Purchase Warrant was $17.16.
The Pre-Funded Warrants were sold, in lieu of shares of Common Stock, to any investor whose purchase of shares of Common Stock in the Registered Offering would otherwise result in such investor, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at such investor’s option upon issuance, 9.99%) of the Company’s outstanding Common Stock immediately following the consummation of the Registered Offering. Each Pre-Funded Warrant represented the right to purchase one share of Common Stock at an exercise price of $0.0001 per share. Armistice Capital Master Fund Ltd. exercised 67,800 Pre-Funded Warrants on February 8, 2023 and the remaining 60,231 Pre-Funded Warrants on March 13, 2023.
The Purchase Warrants, which had an exercise price of $17.16 per share, were exercisable commencing on August 8, 2023 and were to expire on August 6, 2028. On August 24, 2023, the exercise price of the Purchase Warrants was reduced to $3.30 pursuant to the Inducement Letter, described below.
H.C. Wainwright & Co., LLC (“Wainwright”) acted as exclusive placement agent for the February Offering pursuant to an engagement agreement between the Company and Wainwright dated as of December 13, 2022. As compensation for such placement agent services, the Company paid Wainwright an aggregate cash fee equal to 7.0% of the gross proceeds received by the Company from the offering, plus a management fee equal to 1.0% of the gross proceeds received by the Company from the offerings, a non-accountable expense of $65,000 and $15,950 for clearing expenses. The Company also issued to designees of Wainwright warrants to purchase 20,396 shares of Common Stock (the “February 2023 PA Warrants” and the shares of Common Stock issuable upon exercise of the February 2023 PA Warrants, the “February 2023 PA Warrant Shares”). The February 2023 PA Warrants, which have an exercise price of $23.17 per share, became exercisable on August 8, 2023 and will expire on February 6, 2028.
The Purchase Warrant Shares and the February 2023 PA Warrant Shares were registered for sale by the selling shareholders in a registration statement on Form S-1 filed on August 1, 2023 and declared effective on August 9, 2023. The net proceeds to the Company from the Registered Offering and concurrent private placement, after deducting the Placement Agent’s fees and expenses and the Company’s offering expenses, were approximately $4.3 million.
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On or before five (5) business days followingInducement Letter for the executionExercise of the Second AmendmentExisting Warrants in Consideration for the Issuance of the Inducement Warrant
On August 21, 2023, the Company offered to reduce the exercise price of warrants to purchase 616,303 shares of Common Stock held by one of the parties,selling shareholders (the “Existing Warrants”), including warrants to purchase 324,928 shares of Common Stock that initially had an exercise price of $7.67 per share, issued on August 8, 2022, and warrants to purchase 291,375 shares of Common Stock that initially had an exercise price of $17.16 per share, issued on February 8, 2023, to $3.30 per share as an inducement to the Escrow Agents shall obtainexercise of the Existing Warrants, provided the selling shareholder agreed to exercise for cash the Existing Warrants in consideration for the Company’s agreement to issue a new warrant (the “Inducement Warrant”) to purchase 1,232,606 shares of Common Stock (the “Warrant Exercise and Inducement Transaction”). On August 24, 2023, the selling shareholder exercised the Existing Warrants and in consideration for such exercise the Company issued the Inducement Warrant to the selling shareholder. The Inducement Warrant has an exercise price of $3.30 per share, subject to certain anti-dilution adjustments, is exercisable for five and a half years commencing on the date shareholders of the Company approve the issuance of the Inducement Warrant (“Shareholder Approval”) under applicable rules of Nasdaq, or if such Shareholder Approval is not required, commencing on the date of issuance.
Wainwright acted as the exclusive placement agent in connection with the Warrant Exercise and Inducement Transaction. The Company paid Wainwright a cash fee of $142,366 (7.0% of the gross proceeds received from the SBA a payoff estoppel letter setting forth the outstanding loan balance, including principal, interest and applicable charges due under the applicable SBA loan documents with a per diem interest amount that will allow the parties to calculate the payoff amount necessary to satisfy in full the indebtedness owed by Seller to the SBA (the “SBA Indebtedness”) and obtain a releaseexercise of the recorded liens and security interest and UCC-1s, and wiring instructions setting forth the financial account that SBA where it wants the payoff funds transferred to at the Closing (“SBA Wiring Instructions”). On the Closing Date, the parties shall provideExisting Warrants) as well as a written notice signed by allmanagement fee of $20,338 (1.0% of the parties directing the Escrow Agents to wire to the SBA $2,976,000 plus the $1,000,000gross proceeds from the Owners, for a total of $3,976,000, to satisfy in full the SBA Indebtedness and obtain the release of any and all liens, claims, and encumbrancesexercise of the SBA againstExisting Warrants). In addition, the Purchased Assets.Company paid Wainwright $65,000 for non-accountable expenses and $15,950 as a closing fee. The Company also issued to designees of Wainwright warrants (the “August 2023 PA Warrants”) to purchase up to 43,141 shares of Common Stock which have the same terms as the Inducement Warrant, except for an exercise price equal to $4.455 per share.
The Company will use the net proceeds from the exercise of the Existing Warrants, and the Inducement Warrant and the August 2023 PA Warrants when exercised, for general corporate and working capital purposes or for other purposes that the Board of Directors, in its good faith, deems to be in the best interest of the Company.
Reverse Stock Split
On April 29, 2022, Cuentas sentMarch 24, 2023, the standard form bulk sale notice to all creditors listed by owners setting forth the proposed sale and providing an address for creditors to make an inquiry or claim against the Seller or the assetsCompany completed a 1-for-13 reverse stock split of its Common Stock. As a result of the Seller. It shall bereverse stock split, the responsibilityfollowing changes have occurred (i) every thirteen shares of Common Stock have been combined into one share of Common Stock; (ii) the Sellernumber of authorized shares of Common Stock was proportionately reduced; (iii) the number of shares of Common Stock underlying each common stock option or common stock warrant have been proportionately decreased on a 1-for-13 basis, and Owners to resolve any(iv) the exercise price of each such outstanding stock option and all claims filed within the 20-day notice period (“Bulk Sale Notice”) either through a writing signed by the claimant releasing the Seller and the assets from any further claims, or through escrow of sufficient funds to cover the amount of the claim as alleged by the creditor. The parties shall review all claims, and the resolution or escrow by Seller to satisfy all claims filed, no later than May 18, 2022, and if Cuentas, at its sole discretion, is satisfied that each asserted claimcommon warrant has been resolved byproportionately increased on a writing signed by1-for-13 basis. Accordingly, all option numbers, share numbers, warrant numbers, share prices, warrant prices, exercise prices and losses per share have been adjusted in this prospectus, including the creditor, or an acceptable escrow amount is deposited by Seller in its attorney’s trust accountconsolidated financial statements included herein, on a retroactive basis, to cover all unreleased alleged claims, the parties shall proceedreflect this 1-for-13 reverse stock split. The reverse split was effected to closing of the asset purchase transaction on or before the Closing Date. If any creditors provide timely notice ofcure a claim against Seller or the Purchased Assets, then as a condition precedentfailure to closing the Seller and Owners shall reduce the Purchase Price or escrow additional fundscomply with the Escrow Agent sufficient to fully satisfy all such asserted claims as determined by Cuentas at its reasonable discretion. If the aggregate funds on deposit with the Escrow Agent aggregating $3,976,000.00 are insufficient to satisfy in full the SBA Loan Obligation as set forth in the estoppels letter to be provided by the SBA/lender, then Owners shall deposit any additional funds as determined by the Escrow Agent as necessary to satisfy in full the outstanding SBA Loan Indebtedness then the Owners shall fund the additional deposit by five (5) business days before the Closing.minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2) for continued listing.
If after execution of the APA, Seller and Owners fail to satisfy the conditions to closing, Cuentas at its sole discretion may terminate this APA with written notice to the Seller and the Owners and the Escrow Agents. Upon receipt of the written notice of termination as set forth immediately above, Seller’s Escrow Agent shall deposit from the Seller’s Escrow Funds the $250,000 liquidation damages in the registry of a court of competent jurisdiction in Westchester County, New York and commence an interpleader action naming the parties and affording them notice to appear to determine their respective rights in the $250,000 liquidation damages and promptly return the remaining Seller’s Escrow Funds, less the $250,000 liquidating damages, to the Seller and Cuentas’s Escrow Agent may promptly return Cuentas’s Escrowed Funds to Cuentas. If after execution of the APA, Cuentas fails to fund the Remaining Purchase Price, the Owners may terminate the APA with written notice to Cuentas and the Escrow Agents. Upon receipt of the written notice of termination as set forth immediately above, Cuentas’s Escrow Agent shall deposit from the Cuentas’s Escrow Funds the $250,000 liquidation damages in the registry of a court of competent jurisdiction in Miami-Dade County, Florida and commence an interpleader action naming the parties and affording them notice to appear to determine their respective rights in the $250,000 liquidation damages and promptly return the remaining Cuentas’s Escrow Funds to Cuentas and Owners’ Escrow Agent may promptly return the Owners’ Escrowed Funds to Owners.
The parties stipulate that the $250,000 liquidating damages is an approximate estimate of the costs and expenses incurred by each party in pursuing this transaction and is intended solely as an estimate of reimbursable costs and expenses and is not intended to be a penalty. Venue for any dispute over whether a party properly terminated the APA shall be on the county where the $250,000 liquidation damages are on deposit in the court registry. In any such interpleader, the parties agree to that their respective Escrow Agent is authorized to accept service of the interpleader complaint and summons and they waive any right to a jury trial on any and all issues.
Seller and Owners and their officers and directors and all of its shareholders including Owners, separately and severally, agree that, for a period of two (2) years after closing, they will not, directly or indirectly, own, manage, operate, join in, control, or participate in the ownership, management, operation, or control of, or be connected with in any manner, any entity engaged in the business of Fintec and Telcom anywhere in the world.
SDI Black and the Owners have agreed to indemnify and hold us harmless from and against any liability for any amount owing to SDI Black’s creditors with respect to the Purchased Assets or the business operation of SDI Black being transferred to us pursuant to the LOI, which liability arose prior to the transfer of the Purchased Assets and business operations from SDI Black to us. We have agreed to indemnify and hold SDI Black harmless from and against any liability for any amount owing with respect to the Purchased Assets and business operations of SDI Black transferred by SDI Black to us pursuant to the LOI, which liability arises subsequent to the transfer of the Purchased Assets and business operations from SDI Black to use under the LOI. We have also agreed to offer employment agreements to certain Fisk/SDI key employees.Corporate Information
We were incorporated in Florida on September 21, 2005. Our principal executive offices are currently continuinglocated at 235 Lincoln Rd., Suite 210, Miami Beach, Florida 33139, and our due diligence reviewtelephone number is (800) 611-3622. Our corporate website address is www.cuentas.com. The information contained on or accessible through our website is not a part of SDI and have not yet began negotiating the terms of a definitive purchase and sale agreement. Accordingly, we cannot provide any assurance that we will effect a transaction with SDI Black on the terms described above or at all or, if we are able to consummate such a transaction, that the terms of any such transaction will be favorable to our stockholders. See “Risk Factors” for further discussion surrounding the LOIthis prospectus, and the transactions contemplated thereby. See also “SDI Black Financial Statements” for further discussion surrounding SDI Black.
On May 27, 2022, we entered into a Membership Interest Purchase Agreement (the “MIPA”) with SDI Black, the holdersinclusion of all the membership interests of SDI Black and Cuentas SDI, LLC, a Florida limited liability company (“Cuentas SDI”), for the acquisition of 19.99% of the membership interests of Cuentas SDIour website address in exchange for $750,000. Cuentas also has the right to close on the potential acquisition of the remaining 80.01% of the membership interests of Cuentas SDI within 60 days (with a potential 30 day extension, the “Potential Acquisition Period”) in exchange for a purchase price ofthis prospectus is an additional $2.459,000. SDI Black previously transferred all of its assets including the platform, portals, domain names, and related software necessary to conduct its business to Cuentas SDI.
The MIPA further provides that during the Potential Acquisition Period, the Company will invoice and Cuentas SDI will pay invoices on a seven-net-ten day basis and during this same period, Cuentas SDI will allow the Company to realize 40% of the Cuentas SDI gross revenues and reflect 40% of the gross revenues on its books and records.
Competition Section
Cuentas has strategically established its fee structure to be attractive to the unbanked, underbanked and undeserved population with no activation fee, no-cost direct deposit, no-cost Cuentas card to Cuentas card transfers, low cost for reloads, reasonable ATM fees and No dormancy fee.inactive textual reference only.
84
This pricing strategy places Cuentas in an attractive, reasonably priced category which coupled with the products & services it offers to its competitiveness.The Offering
| FEES | CUENTAS | Net Spend | Chime | Green Dot | Amex Serve | Amex Bluebird | My Bambu |
| Card Issuance/ Activation | $0.00 | $0.00 | $0 | $1.95 | $0 Online Up to $3.95 in retail | $0 Online / Up to $5 in retail | $0 |
| Monthly Fee | $4.50 | Pay-As-You-Go Plan $0 Monthly Plan $9.95 per mo. | $0 | $7.95 | $6.95 ($0 with $500+ Direct Deposit) | $0 | $0 |
| Reload Fee | $3.95 | Netspend Reload Network Location Up to $3.95 | N/A | $5.95 | Up to $3.95 (fee varies by retailer) | $0 (Walmart) other Retailers $3.95 | $3.95 |
| Domestic ATM Withdrawal | $1.50 | Pay-As-You-Go Plan $2.95 / Monthly Plan $2.95 | $2.50; free through MoneyPass | $3.00 | $0 at MoneyPass® ATMs $2.50 at non-MoneyPass ATMs. | $0 MoneyPass® ATMs, $2.50 non-MoneyPass ATMs | $2.00 |
| Over the Counter Cash Withdraw | $1.50 | $2.95 Withdrawal Fee at a Financial Institution/ 1% w/ $9.95 min | $2.50 per transaction | $3.00 | N/A | N/A | N/A |
| ATM Inquiry Fee | $0.75 | $0.50 | $0.50 | N/A | $0.50 | ||
| ATM Decline Fee | $0.50 | $1.00 | N/A | N/A | $0.75 | $0.00 | N/A |
| Card to Card Transfer | $0.00 | Website $0 / CS Agent $4.95 / Me-to-Me Transfer – $3.00 | N/A | N/A | N/A | N/A | N/A |
| Balance Inquiry Live Agent | $0.00 | $0.00 | N/A | N/A | $0 | $0.00 | $0.00 per call |
| Replacement Card (Standard Delivery) | $5.00 | $9.95 | N/A | $5.00 | $5.00 | $0.00 | $5 |
| Inactivity Fee / Dormancy Fee | $0.00 | $5.95 per mo. (after 90 days w/no trans.) | N/A | $9.95 After 90 days | $0 | $0.00 | $3 / Month, After 12 mo. No transactions |
| Remote Deposit Capture | N/A | Greater of 2% of total check amount or $5.00 | Funds in minutes - 1% or 5% of check ($5 min) | Funds in minutes - 1% or 5% of check ($5 min fee) | Funds in minutes - 1% or 5% of check ($5 min fee) | ||
| Remittance Fee | N/A | UP to $16.99 (fee depends on the transfer amount) | $5.50 | ||||
| Fee Schedule | https:// | https:// | https:// | https:// | https:// | https:// | https:// |
| Website | https:// | www.netspend.com | www,chime.com | https:// | www.serve.com | www.bluebird.com | https:// |
9
| Common Stock Outstanding: | 2,730,058 shares | |
| Common Stock Offered by Selling Shareholders: | 1,275,747 shares | |
| Common Stock Outstanding After the Offering: | 4,005,805 shares (assuming the exercise of the Inducement Warrant and the August 2023 PA Warrants). | |
| Use of Proceeds: | We will not receive any proceeds from the sale of the Common Stock by the selling shareholders. We may receive proceeds upon the exercise of the Inducement Warrant or the August 2023 PA Warrants (to the extent the registration statement of which this prospectus is a part is then effective and, if applicable, the “cashless exercise” provision is not utilized by the holder). Any proceeds will be used for general corporate and working capital or for other purposes that the Board of Directors, in its good faith, deems to be in the best interest of the Company. There can be no assurance that the Inducement Warrant or any of the August 2023 PA Warrants will be exercised. See “Use of Proceeds.” | |
| Listing of Securities: | Our Common Stock is listed on the Nasdaq Capital Market under the symbol “CUEN.” A class of our warrants is listed on the Nasdaq Capital Market under the symbol “CUENW” (the “Public Warrants”). | |
| Risk Factors: | An investment in our company is highly speculative and involves a significant degree of risk. See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our securities. |
Risks Associated with Our Business
Our business is subject to many significant risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary. You should read and carefully consider these risks, together with the risks set forth under the section entitled “Risk Factors” and all of the other information in this prospectus, including the financial statements and the related notes included elsewhere in this prospectus, as well as the documents incorporated by reference into this prospectus, before deciding whether to invest in our common stock. If any of the risks discussed in or incorporated by reference into this prospectus actually occur, our business, financial condition or operating results could be materially and adversely affected. In particular, our risks include, but are not limited to, the following:
| ● | our ability to implement our business |
| ● | our ability to attract key personnel; | |
| ● | our ability to operate profitably; | |
| ● | our ability to efficiently and effectively finance our operations; | |
| ● | our ability to raise additional financing for working capital; | |
| ● | our ability to efficiently manage our operations; | |
| ● | that our accounting policies and methods may require management to make estimates about matters that are inherently uncertain; | |
| ● | our ability to consummate future acquisitions or strategic | |
| transactions; |
| ● | changes in the legal, regulatory and legislative environments in the markets in which we operate; | |
| ● | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing |
Nasdaq Deficiency
On June 21, 2022, we received notice from The NASDAQ Stock Market indicating that, because the closing bid price for the Company’s common stock has fallen below $1.00 per share for 31 consecutive business days, the Company no longer complies with the minimum bid price requirement for continued listing on the Nasdaq Capital Market under Rule 5550(a)(2) of Nasdaq Listing Rules.
Nasdaq’s notice has no immediate effect on the listing of the Company’s common stock on the Nasdaq Capital Market. Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has been provided an initial compliance period of 180 calendar days, or until December 19, 2022, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days prior to December 19, 2022.
If the Company does not regain compliance by December 19, 2022, the Company may be eligible for an additional grace period. To qualify, the Company would be required to meet the continued listing requirements for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and provide written notice of its intention to cure the minimum bid price deficiency during the second compliance period. If the Company meets these requirements, the Nasdaq staff will grant an additional 180 calendar days for the Company to regain compliance with the minimum bid price requirement. If the Nasdaq staff determines that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible for such additional compliance period, Nasdaq will provide notice that the Company’s common stock will be subject to delisting. The Company would have the right to appeal a determination to delist its common stock, and the common stock would remain listed on the Nasdaq Capital Market until the completion of the appeal process.
10
SDI BLACK 011, LLC
FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
11
SDI BLACK 011, LLC
INDEX TO FINANCIAL STATEMENTS
12
Leonard Friedman
To the Members
SDI Black 011, LLC
We have audited the accompanying combined balance sheets of SDI Black 011, LLC, (the “Company”) as of December 31, 2021 and 2020 and related statements of operations and members’ equity and cash flows for the years then ended and related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statement is free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the combined financial statement, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the combined financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
385 Old Westbury Road, East Meadow, New York 11554 Tel: (516) 735-0824 Fax: (516) 735-6301
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Opinion
In our opinion, the combined financial statements referred to above presents fairly, in all material respects, the financial position of SDI Black 011, LLC as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America
Supplementary Information
The accompanying supplementary information included in the schedules I on page 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from, and relates directly to, the underlying accounting and other records used to prepare the financial statements.
The supplementary information for the years ended December 31, 2021 and 2020 has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
Certified Public Accountant
East Meadow, New York
February 2, 2022
385 Old Westbury Road, East Meadow, New York 11554 Tel: (516) 735-0824 Fax: (516) 735-6301
14
BALANCE SHEETS
| DECEMBER 31, | 2021 | 2020 | |||||
| ASSETS | |||||||
| Current Assets | |||||||
| Cash | $ | 62,707 | 2,035,456 | ||||
| Accounts receivable | 52,168 | 45,739 | |||||
| Total Current Assets | 114,875 | 2,131,226 | |||||
| Property and Equipment | 312,764 | 221,876 | |||||
| Other Assets | |||||||
| Goodwill paid, net | 808,439 | 1,077,771 | |||||
| Deferred financing costs | 344,001 | 382,224 | |||||
| 1,152,440 | 1,459,995 | ||||||
| TOTAL ASSETS | $ | 1,580,079 | $ | 3,813,097 | |||
See independent auditor’s review report.
15
SDI BLACK 011 LLC
BALANCE SHEETS
| DECEMBER 31, | 2021 | 2020 | ||||||
LIABILITIES AND MEMBERS’ EQUITY Current Liabilities | ||||||||
| Accounts payable | $ | 240,421 | $ | 392,560 | ||||
| Accrued expenses | 1,700 | 46,581 | ||||||
| Advances from customers | 135,678 | 158,884 | ||||||
| Escrow deposits | 33,500 | |||||||
| Bank term-loan payable, current maturities | 331,967 | 275,304 | ||||||
| SBA loan payable, current maturities | 25,984 | 4,730 | ||||||
| Total Current Liabilities | 769,250 | 878,059 | ||||||
| Long-Term Liabilities | ||||||||
| Bank loan payable | 3,411,037 | 3,724,696 | ||||||
| SBA loan payable | 487,796 | 148,072 | ||||||
| 3,898,833 | 3,872,768 | |||||||
| Total Liabilities | 4,668,083 | 4,750,827 | ||||||
| Commitments and contingencies (Note 4 ) | ||||||||
| Members’ Equity | ||||||||
| Accumulated deficit | (3,088,004 | ) | (937,730 | ) | ||||
| Total Members’ Equity | (3,088,004 | ) | (937,730 | ) | ||||
| TOTAL LIABILITIES & MEMBERS’ EQUITY | $ | 1,580,079 | 3,813,097 | |||||
See independent auditor’s review report.
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STATEMENTS OF OPERATIONS & ACCUMULATED DEFICIT
| FOR THE YEARS ENDED DECMBER 31, | 2021 | 2020 | ||||||
| Revenue | $ | 8,270,286 | $ | 10,937,561 | ||||
| Cost of Revenues | 6,907,848 | 8,971,102 | ||||||
| Gross Profit | 1,362,438 | 1,966,459 | ||||||
| Operating Expenses | 1,296,183 | 1,845,145 | ||||||
| Net income from Operations | 66,255 | 121,314 | ||||||
| Other Income/ (Expenses) | ||||||||
| PPP forgiveness income | 70,463 | 59,872 | ||||||
| Interest expenses | (243,374 | ) | (118,705 | ) | ||||
| Taxes, other | (4,773 | ) | (3,000 | ) | ||||
| Depreciation and amortization | (321,823 | ) | (283,711 | ) | ||||
| Total Other Income/(Expenses) | (499,507 | ) | (345,544 | ) | ||||
| Net Loss | (433,252 | ) | (224,230 | ) | ||||
| Accumulated Deficit - Beginning | (937,730 | ) | (347,520 | ) | ||||
| Members’ Distributions | (1,717,022 | ) | (365,980 | ) | ||||
| Accumulated Deficit - Ending | $ | (3,088,004 | ) | $ | (937,730 | ) | ||
See independent auditor’s review report.
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STATEMENTS OF CASH FLOWS
| FOR THE YEARS ENDED DECMBER 31, | 2021 | 2020 | ||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | (433,252 | ) | $ | (224,230 | ) | ||
| Adjustments to reconcile net loss to net cash provided by/ (used in) operating activities | ||||||||
| Depreciation and amortization | 321,823 | 283,711 | ||||||
| Accrued interest payable | 29,600 | 2,802 | ||||||
| Changes in current assets and liabilities: | ||||||||
| Accounts receivable | (6,429 | ) | 1,834 | |||||
| Inventory | 50,031 | (50,031 | ) | |||||
| Accounts payable and accrued expenses | (197,020 | ) | (354,639 | ) | ||||
| Advances from customers | (23,206 | ) | (59,667 | ) | ||||
| Escrow deposits received | 33,500 | |||||||
| Net Cash Used In Operating Activities | (224,953 | ) | (400,220 | ) | ||||
| Cash flows from Investing Activities | ||||||||
| Acquisition of property and equipment | (105,156 | ) | ||||||
| Net Cash Used in Investing Activities | (105,156 | ) | ||||||
| Cash flows from Financing Activities | ||||||||
| Loans payable - Bank | (275,618 | ) | 4,000,000 | |||||
| Proceeds from SBA Loan payable | 350,000 | 150,000 | ||||||
| Payment for Loan acquisition costs | (382,224 | ) | ||||||
| Proceeds/(repayment) of advances from affiliates | (1,047,000 | ) | ||||||
| Distributions to members | (1,717,022 | ) | (365,980 | ) | ||||
| Net Cash Used in Financing Activities | (1,642,640 | ) | 2,354,796 | |||||
| Net Decrease in Cash | (1,972,749 | ) | 1,954,576 | |||||
| Cash - Beginning of the Year | 2,035,456 | 80,880 | ||||||
| Cash - End of the Year | $ | 62,707 | $ | 2,035,456 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | 213,775 | $ | 115,761 | ||||
See independent auditor’s review report.
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NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2021 AND 2020
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SDI Black 01, LLC (the “Company”) was incorporated in the State of New York in January 2013 and is engaged in the business of electronic distribution and sales of virtual products via its Black 011 portal located at Yonkers, NY. Its electronic products range from prepaid wireless SIM activation, International mobile recharge services and international long distance phone services. During 2020, the company also started sales of general merchandise to its retail reseller customers.
A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:
Cash and cash equivalents include all cash and highly liquid investments with an original maturity of three months or less.
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company reduces credit risk by placing its temporary cash and investments with major financial institutions with high credit ratings. At times, such amounts may exceed federally insured limits. The Company reduces credit risk related to accounts receivable by routinely assessing the financial strength and performing evaluations of the credit risk related to specific customers and maintaining an appropriate allowance for doubtful accounts based on its history of write-offs and current economic conditions of its customers.
Accounts receivables are generally due within 15-30 days and are stated at amounts due from customers net of allowance for doubtful accounts. Accounts outstanding, longer than the contractual payment terms are considered as past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible. Accordingly, the allowance for doubtful accounts was $0 at December 31, 2021 and 2020.
Property and equipment are stated at cost. Depreciation and amortization are provided for using straight-line and accelerated methods, in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Leased property under capital leases is amortized over the shorter of the service lives of the assets or the term of the lease. Repairs and maintenance are charged to operations as incurred.
19
SDI BLACK 011, LLC
NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2021 AND 2020
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In February 2014, the FASB issued ASU 2014-02, Intangibles - Goodwill and Other (FASB ASC Topic 350). Under the amendments in this update, an entity that elects the accounting alternative within GAAP should amortize goodwill on a straight-line basis over 10 years, or less than 10 years if the entity demonstrates that another useful life is more appropriate. An entity that elects this accounting alternative is required to make an accounting policy decision to test goodwill for impairment at either the entity level or the reporting unit level. Goodwill must be tested for impairment when a triggering event occurs that indicates that the fair value of an entity (or a reporting unit) may be below its carrying amount. If it is determined that the fair value of the reporting unit is less than the book value, the recorded goodwill is impaired to its implied fair value with a charge to operating expenses.
Effective January 1, 2015, the Company elected to adopt this accounting alternative. No triggering events have been identified by the Company that would indicate that the fair value of the entity may be below its carrying amount; therefore, management has determined that no impairment has been sustained for the year ended December 31, 2021 and 2020.
The company amortizes goodwill paid on a straight-line basis over 10 years and accordingly the amortization expense for the years ended December 31, 2021 and 2020 was $269,422 and $269,442 respectively.
The Company accounts for its revenues under Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments thereto (collectively referred to as Accounting Standards Codification, or “ASC” 606). The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and the guidance defines a five-step process to achieve this core principle. The five-step process is as follows: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract(s), (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract(s), and (v) recognize revenue when, or as, the entity satisfies a performance obligation.
Inventory consists of general merchandise that the company sells to its retail reseller customers. It is stated at the lower of cost or market, with cost determined by the first-in, first-out method.
20
SDI BLACK 011, LLC
NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2021 AND 2020
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred financing costs consists of amounts paid for the acquisition of the bank loan on December 30, 2020. These costs are being amortized using the straight-line method over the period of the loan. Total amount paid was $382,224 and amortization for the year ended December 31, 2021 and 2020 was $38,222 and $0 respectively
Direct cost of revenues consists primarily of termination and origination costs, toll-free costs, and network costs—including customer/carrier interconnect charges and fiber circuit charges. These costs include an estimate of charges for which invoices have not yet been received, and estimated amounts for pending disputes with other carriers. Direct cost of revenues also includes the cost of airtime top-up minutes. Direct cost of revenues excludes depreciation and amortization expense.
As a limited liability company, the Company is treated as a partnership for Federal and state income tax purposes. Accordingly, no provision has been made for income taxes in the accompanying financial statements, since all items of income or loss are required to be reported on the income tax returns of the members who are responsible for any taxes thereon.
The Company recognizes and measures its unrecognized tax benefits in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes. Under that guidance, management assesses the likelihood that tax positions will be sustained upon examination based on the facts, circumstances and information, including the technical merits of those positions, available at the end of each period. The measurement of unrecognized tax benefits is adjusted when new information is available or when an event occurs that requires a change.
Management has evaluated the Company’s tax positions and has concluded that the Company has taken no uncertain tax positions that require any adjustments to the financial statements.
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.
21
SDI BLACK 011, LLC
NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2021 AND 2020
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Topic 606, with several clarifying updates issued subsequently. In conjunction with Topic 606, a new subtopic, ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers, was also issued. The updated standard replaces most existing revenue recognition and certain cost guidance under accounting principles generally accepted in the United States of America (“U.S. GAAP”). Collectively, we refer to Topic 606 and Subtopic 340-40 as “ASC 606.” ASC 606 amends existing accounting standards for revenue recognition and establishes principles for recognizing revenue upon the transfer of promised goods or services to customers based on the expected consideration to be received in exchange for those goods and services.
The Company adopted ASC 606 effective January 1, 2020 using the modified retrospective transition method. The adoption of ASU 2014-09 did not have an impact on the Company’s financial statements but required enhanced footnote disclosures.
The Company evaluated the events and transactions subsequent to its December 31, 2021 balance sheet date and, in accordance with FASB ASC 855-10-50, “Subsequent Events’, determined there were no significant events to report through February 2, 2022, which is the date the financial statements were available to be issued.
NOTE 2 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following on December 31, 2021, and 2020:
| Estimated useful life (years) | 2021 | 2020 | ||||||||
| Computer Software | 5 | $ | 442,957 | $ | 442,957 | |||||
| Transportation Equipment | 5 | 105,157 | ||||||||
| Leasehold Improvements | 39 | 24,800 | 24,800 | |||||||
| 572,914 | 467,757 | |||||||||
| Less: Accumulated depreciation | (260,150 | ) | (245,881 | ) | ||||||
| $ | 312,764 | $ | 221,876 | |||||||
Depreciation on property and equipment for the year ended December 31, 2021, and 2020 was $14,269 and $14,269 respectively.
22
SDI BLACK 011, LLC
NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2021 AND 2020
NOTE 3 – NOTES PAYABLE
Bank Term Loan
On December 30, 2020, the company entered into a loan agreement with Newtek Small Business Finance LLC for a ten-year (10 years) term loan facility in the amount of $4,000,000 to fund its working capital requirements and repay outstanding loans from affiliates. The facility is guaranteed by the SBA (Small Business Administration) and secured by all current and future assets of the Company. The loan is also personally guaranteed by all members of the company and has security interest in certain assets owned by the members.
The term-loan provides for a variable interest rate of the bank’s prime rate plus two and three-quarters (2.75%) percentage points. Initial interest rate is 6% per annum and monthly installment is $44,408.21 which includes principal and interest. The first payment was due two (2) months after the date of disbursement of loan.
Amount paid to the bank and other closing costs paid on acquisition of the loan have been capitalized as Deferred financing costs and are being amortized over the period of the loan.
As at December 31, 2021, balance due was $3,724,382 and interest paid was $231,808. SBA Economic Injury Disaster Loan (“EIDL”)
As a part of COVID-19 relief efforts, US government’s Small Business Administration department granted long-term loans to businesses under Economic Injury Disaster Loan Advance Program (“the EIDL loan”). On May 15, 2020, the company received an EIDL loan in the amount of $150,000, payable over thirty (30) years at an interest rate of three and three-quarters (3.75%) percentage points. The loan is secured by all assets of the company and first installment is due twenty four (24) months after the receipt of the loan.
On July 27, 2021, pursuant to an application filed by the company with the SBA under the EIDL program, the company received an additional amount of $350,000 in EIDL loans bringing the combined total to $500,000. Monthly payments payable on the total loan is $2,517 which includes principal and interest. Interest accrued through December 31, 2021 was $13,780 and the balance due at December 31, 2021 was $513,780.
23
SDI BLACK 011, LLC
NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2021 AND 2020
NOTE 3 – NOTES PAYABLE (continued)
As of December 31, 2021, loan maturities for the subsequent years are summarized as follows:
| Year ending December 31: | Bank Term Loan | SBA EIDL Loan | ||||||
| 2022 | $ | 331,967 | 25,984 | |||||
| 2023 | 337,687 | 9,397 | ||||||
| 2024 | 358,515 | 9,756 | ||||||
| 2025 | 380,627 | 10,129 | ||||||
| 2026 | 404,103 | 10,514 | ||||||
| Thereafter | 1,930,105 | 448,000 | ||||||
| $ | 3,743,004 | $ | 513,780 | |||||
Loans Payable — Affiliate
The company paid the balance due including interest in full on December 30, 2020.
On December 30, 2020, the company paid an amount of $466,440 which included principal and interest. Balance due including interest to date of $83,740 was assumed by the member of the company.
NOTE 4 – RELATED PARTY TRANSACTIONS
The Company purchases services and inventory from vendors that are related to the member of the Company. Total purchases from these vendors, for the year ended December 31, 2021 and 2020, amounted to $190,330 and $1,412,745. Balance due to these vendors at December 31, 2021 and 2020 amounted to $7,297 and $50,245 respectively.
The company also rents its office space from a company owned by its member on a month-to-month basis. Rent paid to this company for the years ended December 31, 2021, and 2020 amounted to $48,000 and $96,000 respectively. Balance due to this vendor at December 31, 2021 and 2020 amounted to $8,500 and $0 respectively.
24
SDI BLACK 011, LLC
NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2021 AND 2020
NOTE 5 – PAYCHECK PROTECTION PROGRAM (“PPP”)
On May 7, 2020, the Company received loan proceeds of $55,872 under the Paycheck Protection Program (the “PPP”). The PPP, which was established as part of the Coronavirus Aid, Relief, and Economic Security Act provides for loans to qualifying businesses for amounts up to 2.5 times certain average monthly payroll expenses of the qualifying business. The loan and accrued interest, or a portion thereof, may be forgiven after 24 weeks (“applicable covered period”) so long as the borrower uses the loan proceeds for eligible purposes including payroll, benefits, rent, mortgage interest and utilities, and maintains its payroll levels. Not more than 40% of the amount forgiven can be attributable to non-payroll costs.
The PPP loan, net of any loan forgiveness, matures on April 15, 2022, and accrues interest at a fixed rate of 1%. Payment is deferred until (a) the date that the Small Business Administration remits the loan forgiveness amount to the lender, provided that loan forgiveness application was submitted to the lender within 10 months following the last day of the applicable covered period, or (b) the date that is 10 months following the last day of the applicable covered period if the loan forgiveness application was not timely submitted. Interest accrual begins as of the date of disbursement.
The Company had timely applied for the forgiveness of the loan and on June 10, 2021, received notification from the SBA that the entire amount and accrued interest thereon was forgiven and the loan satisfied. Accordingly, the PPP loan amount was recorded as other income.
NOTE 6 – UNCERTAINTY DUE TO COVID-19
During the calendar year 2020, the World Health Organization declared COVID-19 to constitute a “Public Health Emergency of International Concern.” The Company’s business operations were disrupted through mandated and voluntary temporary. Given the uncertainty of the situation, including, among other things, additional outbreaks of the virus or other strains of the virus or additional mandated shutdowns or quarantines, future related financial impact cannot be reasonably estimated at this time.
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SUPPLEMENTAL SCHEDULES OF OPERATING EXPENSES
| FOR THE YEARS ENDED DECMBER 31, | 2021 | 2020 | ||||||
| Salaries and related costs | $ | 322,343 | $ | 357,787 | ||||
| Advertising and promotion | 48,215 | 28,555 | ||||||
| Automobile expenses | 25,227 | 19,598 | ||||||
| Bad debts | 95,807 | |||||||
| Bank service charges | 13,832 | 21,387 | ||||||
| Commission expenses | 387,573 | 586,273 | ||||||
| Computer and internet expenses | 12,903 | 23,452 | ||||||
| Consulting expenses | 7,372 | 9,761 | ||||||
| Customer service fees | 48,840 | 77,672 | ||||||
| Credit card processing fees | 155,665 | 181,495 | ||||||
| Dues and subscriptions | 1,100 | 937 | ||||||
| Equipment rental | 6,140 | 1,298 | ||||||
| Health insurance | 47,376 | 47,024 | ||||||
| Insurance expenses | 3,681 | 10,592 | ||||||
| Legal and professional fees | (1,454 | ) | 114,622 | |||||
| Meals and entertainment | 1,736 | 9,680 | ||||||
| Office supplies and expenses | 8,576 | 10,752 | ||||||
| Payroll taxes | 31,294 | 27,704 | ||||||
| Payroll processing fees | 3,207 | 2,564 | ||||||
| Postage and delivery | 9,100 | 10,859 | ||||||
| Printing and reproduction | 6,792 | 1,450 | ||||||
| Rent expense | 48,000 | 96,000 | ||||||
| Repairs and maintenance | 5,947 | 25,287 | ||||||
| Software maintenance costs | 72,000 | 72,000 | ||||||
| Telephone expenses | 8,479 | 7,404 | ||||||
| Travel expenses | 1,604 | |||||||
| Utilities | 20,635 | 5,185 | ||||||
| Total Operating Expenses | $ | 1,296,183 | $ | 1,845,145 | ||||
26
Leonard Friedman
INDEPENDENT ACCOUNTANT’S REVIEW REPORT
To the Members of
Cuentas SDI, LLC
We have reviewed the accompanying financial statements of Cuentas SDI, LLC (the “Company”) which comprises of Balance Sheet as of March 31, 2022 and the related Statement of Operations and Member’s Equity and Statement of Cash Flows and related Notes to the Financial Statements for the three months then ended. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of Company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error.
Accountant’s Responsibility
Our responsibility is to conduct the review engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.
Accountant’s Conclusion
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying combined financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.
385 Old Westbury Road, East Meadow, New York 11554 Tel: (516) 735-0824 Fax: (516) 735-6301
27
Supplementary Information
The supplementary information included on page 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from, and relates directly to, the underlying accounting and other records used to prepare the financial statements. The supplementary information has been subjected to the review procedures applied in our reviews of the basic financial statements. We are not aware of any material modifications that should be made to the supplementary information. We have not audited the supplementary information, and do not express an opinion on such information.
Adoption of New Accounting Pronouncements
As discussed in Note 1 to the financial statements, the Company adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), as of January 1, 2019, using the modified retrospective transition method. Our conclusion and opinion is not modified with respect to this matter.
 | |
385 Old Westbury Road, East Meadow, New York 11554 Tel: (516) 735-0824 Fax: (516) 735-6301
28
CUENTAS SDI, LLC
FINANCIAL STATEMENTS
MARCH 31, 2022
29
CUENTAS SDI, LLC
INDEX TO FINANCIAL STATEMENTS
| NASDAQ. |
BALANCE SHEET
MARCH 31, 2022
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 143,411 | ||||||
| Accounts receivable | 3,771 | |||||||
| Due from affiliates | 200,061 | |||||||
| Total Current Assets | 347,243 | |||||||
| Fixed Assets | ||||||||
| Computer software | 442,957 | |||||||
| Less: ccumulated depreciations | (268,398 | ) | ||||||
| Total Fixed Assets | 174,559 | |||||||
| TOTAL ASSETS | $ | 521,802 | ||||||
| LIABILITIES AND MEMBER’S EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 277,219 | ||||||
| Accounts payable - related party | 39,902 | |||||||
| Accrued expenses | 36,334 | |||||||
| Advances from customers | 91,514 | |||||||
| Total Current Liabilities | 444,969 | |||||||
| Commitments and contingencies (Notes 4 and 5) | ||||||||
| Member’s Equity | ||||||||
| Member’s equity | 76,833 | |||||||
| Total Member’s Equity | 76,833 | |||||||
| TOTAL LIABILITIES & MEMBER’S EQUITY | $ | 521,802 | ||||||
See independent auditor’s review report.
31
STATEMENTS OF OPERATIONS AND MEMBER’S EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022
| Revenue | $ | 1,751,095 | ||
| Cost of Revenues | 1,476,702 | |||
| Gross Profit | 274,393 | |||
| Operating Expenses | 197,039 | |||
| Net income from Operations | 77,354 | |||
| Other Income/(expenses) | ||||
| Depreciation and amortization | (11,074 | ) | ||
| Total Other Income/(expenses) | (11,074 | ) | ||
| Net income | 66,280 | |||
| Member’s equity - Beginning | - | |||
| Member’s contributions | 10,553 | |||
| Member’s equity - Ending | $ | 76,833 |
See independent auditor’s review report.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2022
| Cash Flows from Operating Activities | ||||||||
| Net profit | $ | 66,280 | ||||||
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 11,074 | |||||||
| Changes in current assets and liabilities: | ||||||||
| Accounts receivable | (3,771 | ) | ||||||
| Accounts payable and accrued expenses | 353,455 | |||||||
| Advances from customers | 91,514 | |||||||
| Net Cash Provided by Operating Activities | 518,552 | |||||||
| Cash flows from Investing Activities | ||||||||
| Advances to affiliates | (385,694 | ) | ||||||
| Net Cash Used in Investing Activities | (385,694 | ) | ||||||
| Cash flows from Financing Activities | ||||||||
| Cash contribution by parent | 10,553 | |||||||
| Net Cash Provided by Financing Activities | 10,553 | |||||||
| Net Increase in Cash | 143,411 | |||||||
| Cash - Beginning of the period | - | |||||||
| Cash - End of the period | $ | 143,411 | ||||||
| SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Net assets contributed by parent on business combination | $ | 185,633 |
See independent auditor’s review report.
33
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cuentas SDI, LLC (the “Company”) was incorporated in the State of Florida on January 4, 2022 and is a wholly owned subsidiary of SDI Black 011, Inc. (“SDI Black011”). On the same date, SDI Black011 transferred all of its electronic distribution business to the Company. In addition, the Company also acquired the business of Black Wireless Inc. (“SDI Wireless”), a business 100% owned by the Members of the company.
The company is engaged in the business of electronic distribution and sales of virtual products via its Black 011 portal located at Yonkers, NY. Its electronic products range from prepaid wireless SIM activation, International mobile recharge services and international long distance phone services.
A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:
Cash and cash equivalents include all cash and highly liquid investments with an original maturity of three months or less.
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company reduces credit risk by placing its temporary cash and investments with major financial institutions with high credit ratings. At times, such amounts may exceed federally insured limits. The Company reduces credit risk related to accounts receivable by routinely assessing the financial strength and performing evaluations of the credit risk related to specific customers and maintaining an appropriate allowance for doubtful accounts based on its history of write-offs and current economic conditions of its customers.
Accounts receivables are generally due within 15-30 days and are stated at amounts due from customers net of allowance for doubtful accounts. Accounts outstanding, longer than the contractual payment terms are considered as past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible. Accordingly, the allowance for doubtful accounts was $0 at March 31, 2022.
34
CUENTAS SDI, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Computer software is stated at cost. Depreciation and amortization are provided by using straight-line and accelerated methods, in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Leased property under capital leases is amortized over the shorter of the service lives of the assets or the term of the lease. Repairs and maintenance are charged to operations as incurred.
The Company accounts for its revenues under Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments thereto (collectively referred to as Accounting Standards Codification, or “ASC” 606). The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and the guidance defines a five-step process to achieve this core principle. The five-step process is as follows: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract(s), (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract(s), and (v) recognize revenue when, or as, the entity satisfies a performance obligation.
Direct cost of revenues consists primarily of termination and origination costs, toll-free costs, and network costs—including customer/carrier interconnect charges and fiber circuit charges. These costs include an estimate of charges for which invoices have not yet been received, and estimated amounts for pending disputes with other carriers. Direct cost of revenues also includes the cost of airtime top-up minutes. Direct cost of revenues excludes depreciation and amortization expense.
As a limited liability company, the Company is treated as a disregarded entity for Federal and state income tax purposes. Accordingly, no provision has been made for income taxes in the accompanying financial statements, since all items of income or loss are required to be reported on the income tax returns of the parent.
The Company recognizes and measures its unrecognized tax benefits in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes. Under that guidance, management assesses the likelihood that tax positions will be sustained upon examination based on the facts, circumstances and information, including the technical merits of those positions, available at the end of each period. The measurement of unrecognized tax benefits is adjusted when new information is available or when an event occurs that requires a change.
35
CUENTAS SDI, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Management has evaluated the Company’s tax positions and has concluded that the Company has taken no uncertain tax positions that require any adjustments to the financial statements.
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 2 – BUSINESS COMBINATION
On January 4, 2022, the company’s parent contributed certain assets belonging to its electronic distribution business to the company. In addition, as of that date, it also merged the assets of one to the companies owned by its parent’s members. The following are the assets and liabilities transferred on January 4, 2022:
| Description | SDI Black011 | SDI Wireless | Total | |||||||||
| Cash | $ | 62,707 | $ | 10,553 | $ | 73,260 | ||||||
| Accounts receivable | 52,168 | - | 52,168 | |||||||||
| Computer software, net | 185,633 | - | 185,633 | |||||||||
| Due from parent | 77,291 | - | 76,158 | |||||||||
| Total assets | 377,799 | 10,553 | 388,352 | |||||||||
| Accounts payable | 225,532 | - | 225,532 | |||||||||
| Accrued expenses | 16,589 | - | 16,589 | |||||||||
| Customer advances | 135,678 | - | 135,678 | |||||||||
| Member’s equity | - | 10,553 | 10,553 | |||||||||
| Total liabilities | $ | 377,799 | $ | 10.553 | $ | 388,352 | ||||||
NOTE 3 – RELATED PARTY TRANSACTIONS
The Company purchases services from vendors that are related to the member of the Company. Total purchases from these vendors, for the three months ended March 31, 2022, amounted to $110,233. Balance due to these vendors at March 31, 2022 amounted to $19,902.
The company leases its premises from an entity owned by its Member. Rent paid for the three months ended March 31, 2022 was $12,000 and balance due was $20,000.
CUENTAS SDI, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
NOTE 4 – COMMITMENTS AND CONTINGENCIES
Loan Guarantees
The company is a guarantor to a bank loan received by its parent in the amount of $4,000,000. All assets of the company have been pledged to a bank to secure the loan. Balance due on the loan at March 31, 2022 was $3,646,162.
NOTE 5 – SUBSEQUENT EVENTS
On April 27, 2022, the Company’s parent entered into a binding Letter of Intent for the sale of 100% of the Company’s stock to an entity in the same industry as the Company. The Company agreed to sell 100% of its stock to the buyer for a total value of $3,209,000. The closing was to take place on or about May 20, 2022 with conditional penalties if either party failed to close.
On May 27, 2022, the buyer, after negotiating a ninety-day extension for a complete consummation of the transaction, acquired 19.99% of the Company from its parent for a cash payment of $517,000 and $233,000 of debt reduction for payment owed to the buyer by the company; total $750,000 with the ability to acquire the remaining 80.01% within the next 90 days for a total purchase price of $2,459,000.
37
Investing in our securitiescommon stock involves a high degree of risk. Before deciding whether to invest in our securities, youYou should carefully consider the risk factors we describe below, in any prospectus supplement and in any related free writing prospectus for a specific offering of securities, as well as those incorporated by reference into this prospectus or such prospectus supplement. You should also carefully consider other information contained and incorporated by reference in this prospectus and any applicable prospectus supplement, including our financial statements and the related notes thereto incorporated by reference in this prospectus. The risks and uncertainties described hereinbelow and in our Registration Statement on Form S-1 (File No. 333-273552) filed on August 1, 2023 and declared effective on August 9, 2023, and the applicableother documents incorporated into this prospectus supplement and ourin their entirety, together with all of the other filings with the SECinformation contained in this prospectus or any document incorporated by reference herein. The risks described in this prospectus or any document incorporated by reference herein are not the only ones we face. Additional risks and uncertainties not presently known tofacing us, orbut those that we currently consider immaterialto be material. There may also adversely affect us.be other unknown or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse effects on our future results. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. If any of the describedthese risks occur,actually occurs, our business, financial condition, or results of operations or cash flow could be materially harmed. In such case,adversely affected, which could cause the valuetrading price of our securities couldCommon Stock to decline, and you may loseresulting in a loss of all or part of your investment.
While we have entered intoOur failure to meet the continued listing requirements of Nasdaq could result in a binding letterde-listing of intent with SDI Black, we have not entered into negotiations for a purchase and sale agreement therewith and we cannot assure you that the transactions contemplated by our letter of intent (as amended on April 27, 2022 by that certain Second Amendment to Binding Letter of Intent) will be consummated or, that if such transactions are consummated, they will be accretive to stockholder value.Common Stock.
If we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance, minimum closing bid price or minimum shareholders’ equity requirements, Nasdaq may take steps to de-list our securities. Such a de-listing would likely have a negative effect on the price of our Common Stock and would impair your ability to sell or purchase our Common Stock when you wish to do so. In the event of a de-listing, we would take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our Common Stock to become listed again, stabilize the market price or improve the liquidity of our Common Stock, prevent our Common Stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s other continued listing requirements. We effected a 1-for 13 reverse stock split of our Common Stock on March 24, 2023 to bring us in compliance with Nasdaq’s minimum bid price requirements.
On May 27, 2022,August 18, 2023, we closed underreceived a deficiency letter from Nasdaq Regulation stating that based upon our Quarterly Report on Form 10-Q for the MIPAperiod ended June 30, 2023 which reported shareholders’ equity of $1,471,000, we were not in compliance with Nasdaq Marketplace Rule 5550(b)(1) which requires us to maintain shareholders’ equity of not less than $2,500,000 for continued listing on The Nasdaq Capital Market (the “Minimum Shareholders’ Equity Requirement”). Under Nasdaq Rules the Company had until October 2, 2023 to submit a plan to regain compliance.
On October 3 2023, the Company received a Staff Determination Letter from Nasdaq Regulation stating that due to the Company’s failure by October 2, 2023, to submit a plan to regain compliance with Nasdaq Listing Rule 5550(b)(1), the Minimum Shareholders’ Equity Requirement, the Company would be subject to delisting unless it timely requests a hearing before a Nasdaq Hearings Panel (the “Panel”). The Company filed a request for a hearing before the Panel which has been scheduled to be held on December 7, 2023. The hearing request will stay any suspension or delisting action through the hearing and acquied 19.99%the expiration of any additional extension granted by the Panel following the hearing. In that regard, pursuant to the Nasdaq Listing Rules, the Panel has the discretion to grant the Company an extension not to exceed April 1, 2024. Notwithstanding, there can be no assurance that the Panel will grant the Company an extension or that the Company will ultimately regain compliance with all applicable requirements for continued listing on The Nasdaq Capital Market.
We will not receive any proceeds from the sale of the membership interests of Cuentas SDI, which as explained above now is operating business formerly operatedCommon Stock by SDI Black, and Cuentas also has the right to acquireselling shareholders. We may receive proceeds upon the remaining 80.01%exercise of the membership interestsInducement Warrant and the 2023 August PA Warrants (to the extent the registration statement of Cuentas SDI within 60 days (withwhich this prospectus is a potential 30 day extension,part is then effective and, if applicable, the “Potential Acquisition Period”)“cashless exercise” provision is not utilized by the holder). Any proceeds will be used for general corporate and working capital or for other purposes that the Board of Directors, in exchangeits good faith, deems to be in the best interest of the Company. There can be no assurance that the Inducement Warrant or any of the August 2023 PA Warrants will be exercised.
We have never declared or paid any cash dividend on our capital stock. We do not anticipate paying any cash dividends in the foreseeable future and we intend to retain all of our earnings, if any, to finance our growth and operations and to fund the expansion of our business. Payment of any dividends will be made in the discretion of our Board of Directors, after its taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for a purchaseexpansion. Any dividends that may be declared or paid on our Common Stock, must also be paid in the same consideration or manner, as the case may be, on our shares of preferred stock, if any.
DETERMINATION OF OFFERING PRICE
The selling shareholders will offer Common Stock at the prevailing market prices or privately negotiated prices.
The offering price of an additional $2.459,000. We are currently continuing our due diligence reviewCommon Stock by the selling shareholders does not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of SDI Blackvalue. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market.
In addition, there is no guaranteeassurance that weour Common Stock will agree to close on the purchasetrade at market prices in excess of the remaining 80.01% interest underoffering price as prices for common stock in any public market will be determined in the MIPAmarketplace and may be influenced by many factors, including the depth and liquidity.
7
The following table sets forth certain information concerning the selling shareholders and the shares of Common Stock owned by them and offered by them in this prospectus. Except as thatindicated in the acquisitionfootnotes to the following table, each of the remaining 80.01% interest will be favorableselling shareholders named in the table has sole voting and investment power with respect to the shares set forth opposite its name. The percentage of ownership of the selling shareholders in the following table is based upon 2,730,058 shares of Common Stock outstanding as of November 17, 2023.
The shares of Common Stock being registered for resale hereby include 1,232,606 shares issuable upon exercise of the Inducement Warrant issued to one of the selling shareholders on August 24, 2023 in consideration for exercise of outstanding warrants to purchase shares of Common Stock that initially had an exercise price of $7.67 per share issued on August 8, 2022, and warrants to purchase shares of Common Stock that initially had an exercise price of $17.16 per share, issued on February 8, 2023 (together, the “Existing Warrants”). On August 24, 2023 the selling shareholder exercised for cash the Existing Warrants to purchase an aggregate of 616,303 shares of Common Stock at a reduced exercised price of $3.30 per share, in consideration for the Inducement Warrant. We are registering the shares issuable upon exercise of the Inducement Warrant pursuant to our stockholders atagreement to do so in the Inducement Letter. We will pay the expenses relating to such registration, other than brokerage commissions in connection with the sale of those shares by the selling shareholder. In addition, we are registering for resale the August 2023 PA Warrants to purchase up to 43,141 shares of Common Stock issued to the designees of Wainwright which have the same terms as the Inducement Warrant, except for an exercise price equal to $4.455 per share.
Except as set forth in this prospectus and except for certain ownership of our securities, the selling shareholders have not had any material relationship with us within the past three years.
All information with respect to share ownership has been furnished by the selling shareholders. The Common Stock being offered is being registered to permit secondary trading of the shares and the selling shareholders may offer all or part of the Common Stock owned by them for resale from time we need to close undertime. Other than as described in the MIPAfootnotes below, the selling shareholders do not have any family relationships with our officers, directors or that wecontrolling shareholders.
The term “selling shareholder” also includes any transferees, pledges, donees, or other successors in interest to the selling shareholder named in the table below. To our knowledge, subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the Common Stock set forth opposite such person’s name. We will befile a supplement to this prospectus (or a post-effective amendment hereto, if necessary) to name successors to any named selling shareholder who is able to close within time frame or inuse this prospectus to resell the manner required by the MIPA.securities registered hereby.
We may engage in future acquisitions or strategic transactions, including the transaction with SDI Black, which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management.
As described herein, we have recently entered into a LOI to acquire the Purchased Assets from SDI Black which enables us to conduct due diligence and negotiate the terms of a definitive purchase and sale agreement. In the event we engage in an acquisition or strategic transaction, we may need to acquire additional financing (particularly, if the acquired entity is not cash flow positive or does not have significant cash on hand). Obtaining financing through the issuance or sale of additional equity and/or debt securities, if possible, may not be at favorable terms and may result in additional dilution to our current stockholders. Additionally, any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, an acquisition or strategic transaction may entail numerous operational and financial risks, including the risks outlined above and additionally:
| Name of Selling Shareholder | Number of Shares Owned Prior to Offering(1) | Maximum Number of Shares to be Sold Pursuant to this Prospectus(1) | Number of Shares Owned After Offering(2) | Percentage of Shares Owned After Offering(3) | ||||||||||||
| Armistice Capital Master Fund Ltd. (4) | 1,232,606 | 1,232,606 | 0 | -- | ||||||||||||
| Michael Vasinkevich (5) | 243,429 | 40,743 | 202,686 | 7.32 | % | |||||||||||
| Noam Rubinstein (5) | 119,577 | 20,012 | 99,565 | 3.62 | % | |||||||||||
| Craig Schwabe (5) | 12,811 | 2,144 | 10,667 | * | ||||||||||||
| Charles Worthman (5) | 3,797 | 636 | 3,161 | * | ||||||||||||
| (2) | Assumes the sale of all shares offered pursuant to this prospectus. The shares owned after the completion of this offering, issuable upon exercise of warrants previously issued, have been registered for resale pursuant to registration statements on Form S-3 (File No. 333-267268) declared effective on September 22, 2022 and Form S-1 (File No. 333-273552) declared effective on August 7, 2023. |
| (3) | The warrants owned by each selling shareholder are subject to a 4.99% beneficial ownership limitation, which limitations prohibits the selling shareholder from exercising any portion of the warrants if, following such exercise, the selling shareholder’s ownership of our shares of Common Stock would exceed the applicable ownership limitation. |
| (4) | The securities to be sold pursuant to this prospectus consist of 1,232,606 Warrant Shares, all of which are directly held by Armistice Capital Master Fund Ltd. (the “Master Fund”), a Cayman Islands exempted company, and may be deemed to be indirectly beneficially owned by Armistice Capital, LLC (“Armistice”), as the investment manager of the Master Fund; and (ii) Steven Boyd, as the Managing Member of Armistice Capital. Armistice and Steven Boyd disclaim beneficial ownership of the reported securities except to the extent of their respective pecuniary interest therein. The Inducement Warrant is subject to a 4.99% beneficial ownership limitation, which limitations prohibit the Master Fund from exercising any portion of the Inducement Warrant if, following such exercise, the Master Fund’s ownership of our shares of Common Stock would exceed the beneficial ownership limitation. The address of the Master Fund is c/o Armistice Capital, LLC, 510 Madison Avenue, Seventh Floor, New York, NY 10022. |
| (5) | The selling shareholder is affiliated with H.C. Wainwright & Co., LLC, a registered broker dealer, and has a registered address of c/o H.C. Wainwright & Co., LLC, 430 Park Ave, 3rd Floor, New York, NY 10022. H.C. Wainwright & Co., LLC acted as placement agent in the Warrant Exercise and Inducement Transaction and earned the August 2023 PA Warrants as part of its compensation related to the Private Placement. The selling shareholder acquired the August 2023 PA Warrant in the ordinary course of business and, |
We are registering the shares issuable upon exercise of the Inducement Warrant and the August 2023 PA Warrants to permit the resale of these shares of Common Stock by the holders thereof (and such holders’ successors and assigns) from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling shareholders of the shares of Common Stock. We will bear all fees and expenses incident to our obligation to register the shares of Common Stock.
The selling shareholders may sell all or a portion of the shares of Common Stock owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of Common Stock are sold through underwriters or broker-dealers, the selling shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of Common Stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,
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Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, and any transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects.
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Unless otherwise indicated in a prospectus supplement, we intend to use the net proceeds from these sales for general corporate purposes and working capital. The amounts and timing of these expenditures will depend on numerous factors, including the development of our current business initiatives.
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We may sell the securities from time to time to or through underwriters or dealers, through agents, or directly to one or more purchasers. A distribution of the securities offered by this prospectus may also be effected through the issuance of derivative securities, including without limitation, warrants, rights to purchase and subscriptions. In addition, the manner in which we may sell some or all of the securities covered by this prospectus includes, without limitation, through:
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; | |
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A prospectus supplement or supplementsaccordance with respect to each series of securities will describe the terms of the offering, including, to the extent applicable:
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The offer and sale of the securities described in this prospectus by us, the underwriters or the third parties described above may be effected from time to time in one or more transactions, including privately negotiated transactions, either:
| ● | broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a | |
Only underwriters named in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement.
Underwriters and Agents; Direct Sales
If underwriters are used in a sale, they will acquire the offered securities for their own account and may resell the offered securities from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. We may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate.
Unless the prospectus supplement states otherwise, the obligations of the underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting agreement. Subject to certain conditions, the underwriters will be obligated to purchase all of the securities offered by the prospectus supplement, other than securities covered by any over-allotment option. Any public offering price and any discounts or concessions allowed or re-allowed or paid to dealers may change from time to time. We may use underwriters with whom we have a material relationship. We will describe in the prospectus supplement, naming the underwriter, the nature of any such relationship.
We may sell securities directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities, and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
We may authorize agents or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts in the prospectus supplement.
Dealers
We may sell the offered securities to dealers as principals. The dealer may then resell such securities to the public either at varying prices to be determined by the dealer or at a fixed offering price agreed to with us at the time of resale.
Institutional Purchasers
We may authorize agents, dealers or underwriters to solicit certain institutional investors to purchase offered securities on a delayed delivery basis pursuant to delayed delivery contracts providing for payment and delivery on a specified future date. The applicable prospectus supplement or other offering materials, as the case may be, will provide the details of any such arrangement, including the offering price and commissions payable on the solicitations.
We will enter into such delayed contracts only with institutional purchasers that we approve. These institutions may include commercial and savings banks, insurance companies, pension funds, investment companies and educational and charitable institutions.
Indemnification; Other Relationships
We may provide agents, underwriters, dealers and remarketing firms with indemnification against certain civil liabilities, including liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to these liabilities. Agents, underwriters, dealers and remarketing firms, and their affiliates, may engage in transactions with, or perform services for, us in the ordinary course of business. This includes commercial banking and investment banking transactions.
Market-Making; Stabilization and Other Transactions
There is currently no market for any of the offered securities, other than our common stock, which is quoted on The NASDAQ Capital Market. If the offered securities are traded after their initial issuance, they may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar securities and other factors. While it is possible that an underwriter could inform us that it intends to make a market in the offered securities, such underwriter would not be obligated to do so, and any such market-making could be discontinued at any time without notice. Therefore, no assurance can be given as to whether an active trading market will develop for the offered securities. We have no current plans for listing of the debt securities, preferred stock, warrants or subscription rights on any securities exchange or quotation system; any such listing with respect to any particular debt securities, preferred stock, warrants or subscription rights will be described in the applicable prospectus supplement or other offering materials, as the case may be.
Any underwriter may engage in over-allotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Over-allotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum price. Syndicate-covering or other short-covering transactions involve purchases of the securities, either through exercise of the over-allotment option or in the open market after the distribution is completed, to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a stabilizing or covering transaction to cover short positions. Those activities may cause the price of the securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time.
Any underwriters or agents that are qualified market makers on The NASDAQ Capital Market may engage in passive market making transactions in our common stock on The NASDAQ Capital Market in accordance with Regulation M under the Exchange Act, during the business day prior to the pricing of the offering, before the commencement of offers or sales of our common stock. Passive market makers must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded. Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time.
Fees and Commissions
If 5% or more of the net proceeds of any offering of securities made under this prospectus will be received by a FINRA member participating in the offering or affiliates or associated persons of such FINRA member, the offering will be conducted in accordance with FINRA Rule 5121.
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DESCRIPTION OF SECURITIES WE MAY OFFER
General
This prospectus describes the general terms of our capital stock. The following description is not complete and may not contain all the information you should consider before investing in our capital stock. For a more detailed description of these securities, you should read the applicable provisions of Florida law and our certificate of incorporation and our bylaws. When we offer to sell a particular series of these securities, we will describe the specific terms of the series in a supplement to this prospectus. Accordingly, for a description of the terms of any series of securities, you must refer to both the prospectus supplement relating to that series and the description of the securities described in this prospectus. To the extent the information contained in the prospectus supplement differs from this summary description, you should rely on the information in the prospectus supplement.
The total number of shares of capital stock we are authorized to issue is 410,000,000 shares, of which (a) 360,000,000 are common stock and (b) 50,000,000 are preferred stock.
We, directly or through agents, dealers or underwriters designated from time to time, may offer, issue and sell, together or separately, up to $75,000,000 in the aggregate of:
We may issue the debt securities as exchangeable for or convertible into shares of common stock, preferred stock or other securities that may be sold by us pursuant to this prospectus or any combination of the foregoing. The preferred stock may also be exchangeable for and/or convertible into shares of common stock, another series of preferred stock or other securities that may be sold by us pursuant to this prospectus or any combination of the foregoing. When a particular series of securities is offered, a supplement to this prospectus will be delivered with this prospectus, which will set forth the terms of the offering and sale of the offered securities.
Common Stock
As of June 24, 2022, there were 14,965,690 shares of common stock issued and outstanding, held of record by approximately 128 stockholders. Subject to preferential rights with respect to any outstanding preferred stock, all outstanding shares of common stock are of the same class and have equal rights and attributes. Under the terms of certificate of incorporation, holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of directors, and do not have cumulative voting rights. The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as our board of directors from time to time may determine. Our common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably among the holders of our common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
Preferred Stock
Our certificate of incorporation empowers our board of directors, without action by our shareholders, to issue up to 50,00,000 shares of preferred stock from time to time in one or more series, which preferred stock may be offered by this prospectus and supplements thereto. As of June 24, 2022, there were no shares of preferred stock designated, issued or outstanding. Our board may fix the rights, preferences, privileges, and restrictions of our authorized but undesignated preferred shares, including:
We will fix the rights, preferences, privileges and restrictions of the preferred stock of each series in the certificate of designation relating to that series. We will file as an exhibit to the registration statement of which this prospectus is a part, or will incorporate by reference from a current report on Form 8-K that we file with the SEC, the form of any certificate of designation that describes the terms of the series of preferred stock we are offering before the issuance of the related series of preferred stock. This description will include any or all of the following, as required:
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If we issuethe selling shareholders effect such transactions by selling shares of preferred stock underCommon Stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholders or commissions from purchasers of the shares of Common Stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of Common Stock or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of Common Stock in the course of hedging in positions they assume. The selling shareholders may also sell shares of Common Stock short and deliver shares of Common Stock covered by this prospectus after receiptto close out short positions and to return borrowed shares in connection with such short sales. The selling shareholders may also loan or pledge shares of payment therefor, the shares will be fully paid and non-assessable.Common Stock to broker-dealers that in turn may sell such shares.
The Florida corporate statutes provide thatselling shareholders may pledge or grant a security interest in some or all of the holdersshares of preferred stock will have the right to vote separately as a class on any proposal involving fundamental changesCommon Stock owned by them and, if they default in the rightsperformance of holderstheir secured obligations, the pledgees or secured parties may offer and sell the shares of that preferred stock. This right is in additionCommon Stock from time to any voting rights provided for in the applicable certificate of designation.
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. Preferred stock could be issued quickly with terms designed to delay or prevent a change in control of our Company or make removal of management more difficult. Additionally, the issuance of preferred stock could have the effect of decreasing the market price of our common stock.
Purchase Contracts
We may issue purchase contracts, representing contracts obligating holders to purchase from us, and us to sell to the holders, a specific or varying number of common stock, preferred stock, warrants, depositary shares, debt securities, warrants or any combination of the above, at a future date or dates. Alternatively, the purchase contracts may obligate us to purchase from holders, and obligate holders to sell to us, a specific or varying number of common stock, preferred stock, warrants, depositary shares, debt securities, or any combination of the above. The price of the securities and other property subject to the purchase contracts may be fixed at the time the purchase contracts are issued or may be determined by reference to a specific formula set forth in the purchase contracts.
The purchase contracts may be issued separately or as a part of a unit that consists of (a) a purchase contract and (b) one or more of the other securities that may be sold by us pursuant to this prospectus or any combination of the foregoing, which may secure the holders’ obligations to purchase the securities under the purchase contract. The purchase contracts may require us to make periodic payments to the holders or require the holders to make periodic payments to us. These payments may be unsecured or prefunded and may be paid on a current or on a deferred basis. The purchase contracts may require holders to secure their obligations under the contracts in a manner specified in the applicable prospectus supplement.
We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from a current report on Form 8-K that we file with the SEC, forms of the purchase contracts and purchase contract agreement, if any. The applicable prospectus supplement will describe the terms of any purchase contracts in respect of which this prospectus is being delivered, including, to the extent applicable, the following:
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Warrants
We may issue warrants to purchase our securities or other rights, including rights to receive payment in cash or securities based on the value, rate or price of one or more specified commodities, currencies, securities or indices, or any combination of the foregoing. Warrants may be issued independently or together with any other securities that may be sold by us pursuantamendment to this prospectus under Rule 424(b)(3) or any combinationother applicable provision of the foregoingSecurities Act, amending, if necessary, the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer and may be attached to,donate the shares of Common Stock in other circumstances in which case the transferees, donees, pledgees or separate from, such securities. To the extent warrants that we issue are to be publicly-traded, each series of such warrantsother successors in interest will be issued under a separate warrant agreement to be entered into between us and a warrant agent.the selling owners for purposes of this prospectus.
We will file as exhibits toThe selling shareholders and any broker-dealer participating in the registration statement of which this prospectus is a part, or will incorporate by reference from a current report on Form 8-K that we file with the SEC, formsdistribution of the warrantshares of Common Stock may be deemed to be “underwriters” within the meaning of the Securities Act, and warrant agreement, if any. The prospectus supplement relatingany commission paid, or any discounts or concessions allowed to, any warrants that wesuch broker-dealer may offer will containbe deemed to be underwriting commissions or discounts under the specific termsSecurities Act. At the time a particular offering of the warrants and a descriptionshares of the material provisions of the applicable warrant agreement, if any. These terms may include the following:
Exercise of Warrants. Each warrant will entitle the holder of warrants to purchase the amount of securities or other rights, at the exercise price stated or determinable in the prospectus supplement for the warrants. Warrants may be exercised at any time up to the close of business on the expiration date shown in the applicable prospectus supplement, unless otherwise specified in such prospectus supplement. After the close of business on the expiration date, if applicable, unexercised warrants will become void. Warrants may be exercised in the manner described in the applicable prospectus supplement. When the warrant holder makes the payment and properly completes and signs the warrant certificate at the corporate trust office of the warrant agent, if any, or any other office indicated in the prospectus supplement, we will, as soon as possible, forward the securities or other rights that the warrant holder has purchased. If the warrant holder exercises less than all of the warrants represented by the warrant certificate, we will issue a new warrant certificate for the remaining warrants.
Subscription Rights
We may issue rights to purchase our securities. The rights may or may not be transferable by the persons purchasing or receiving the rights. In connection with any rights offering, we may enter into a standby underwriting or other arrangement with one or more underwriters or other persons pursuant to which such underwriters or other persons would purchase any offered securities remaining unsubscribed for after such rights offering. In connection with a rights offering to holders of our capital stockCommon Stock is made, a prospectus supplement, if required, will be distributed to such holders onwhich will set forth the record date for receiving rights in the rights offering set by us.
We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from a current report on Form 8-K that we file with the SEC, forms of the subscription rights, standby underwriting agreement or other agreements, if any. The prospectus supplement relating to any rights that we offer will include specific terms relating to the offering, including, among other matters:
Each right would entitle the holder of the rights to purchase the principal amount of securities at the exercise price set forth in the applicable prospectus supplement. Rights may be exercised at any time up to the close of business on the expiration date for the rights provided in the applicable prospectus supplement. After the close of business on the expiration date, all unexercised rights will become void.
Holders may exercise rights as described in the applicable prospectus supplement. Upon receipt of payment and the rights certificate properly completed and duly executed at the corporate trust office of the rights agent, if any, or any other office indicated in the prospectus supplement, we will, as soon as practicable, forward the securities purchasable upon exercise of the rights. If less than all of the rights issued in any rights offering are exercised, we may offer any unsubscribed securities directly to persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, including pursuant to standby underwriting arrangements, as described in the applicable prospectus supplement.
Depositary Shares
General. We may offer fractional shares of preferred stock, rather than full shares of preferred stock. If we decide to offer fractional shares of our preferred stock, we will issue receipts for depositary shares. Each depositary share will represent a fraction of a share of a particular series of our preferred stock,Common Stock being offered and the applicable prospectus supplement will indicate that fraction. The shares of preferred stock represented by depositary shares will be deposited under a deposit agreement between us and a depositary that is a bank or trust company that meets certain requirements and is selected by us. The depositary will be specified in the applicable prospectus supplement. Each owner of a depositary share will be entitled to all of the rights and preferences of the preferred stock represented by the depositary share.
The depositary shares will be evidenced by depositary receipts issued pursuant to the deposit agreement. Depositary receipts will be distributed to those persons purchasing the fractional shares of our preferred stock in accordance with the terms of the offering. We will file as exhibits tooffering, including the registration statementname or names of which this prospectus is a part,any broker-dealers or will incorporate by referenceagents, any discounts, commissions and other terms constituting compensation from a current report on Form 8-K that we file with the SEC, forms of the deposit agreement, form of certificate of designation of underlying preferred stock, form of depositary receiptsselling shareholders and any other related agreements.discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.
DividendsUnder the securities laws of some states, the shares of Common Stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of Common Stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and Other Distributions. The depositary will distribute all cash dividends or other cash distributions received by it in respect of the preferred stock to the record holders of depositary shares relating to such preferred shares in proportion to the numbers of depositary shares held on the relevant record date.is complied with.
In the event of a distribution other than in cash, the depositaryThere can be no assurance that any selling shareholder will distribute securitiessell any or property received by it to the record holders of depositary shares in proportion to the numbers of depositary shares held on the relevant record date, unless the depositary determines that it is not feasible to make such distribution. In that case, the depositary may make the distribution by such method as it deems equitable and practicable. One such possible method is for the depositary to sell the securities or property and then distribute the net proceeds from the sale as provided in the case of a cash distribution.
Redemption of Depositary Shares. Whenever we redeem the preferred stock, the depositary will redeem a number of depositary shares representing the same number of shares of preferred stock so redeemed. If fewer than all of the depositary shares are to be redeemed, the depositary shares to be redeemed will be selected by lot, pro rata or by any other equitable method as the depositary may determine.
Voting of Underlying Shares. Upon receipt of notice of any meeting at which the holders of our preferred stock of any series are entitled to vote, the depositary will mail the information contained in the notice of the meeting to the record holders of the depositary shares relating to that series of preferred stock. Each record holder of the depositary shares on the record date will be entitled to instruct the depositary as to the exercise of the voting rights represented by the number of shares of preferred stock underlying the holder’s depositary shares. The depositary will endeavor, to the extent it is practical to do so, to vote the number of whole shares of preferred stock underlying such depositary shares in accordance with such instructions. We will agree to take all action that the depositary may deem reasonably necessary in order to enable the depositary to do so. To the extent the depositary does not receive specific instructions from the holders of depositary shares relating to such preferred shares, it will abstain from voting such shares of preferred stock.
Withdrawal of Shares. Upon surrender of depositary receipts representing any number of whole shares at the depositary’s office, unless the related depositary shares previously have been called for redemption, the holder of the depositary shares evidenced by the depositary receipts will be entitled to delivery of the number of whole shares of the related series of preferred stock and all money and other property, if any, underlying such depositary shares. However, once such an exchange is made, the preferred stock cannot thereafter be re-deposited in exchange for depositary shares. Holders of depositary shares will be entitled to receive whole shares of the related series of preferred stock on the basis set forth in the applicable prospectus supplement. If the depositary receipts delivered by the holder evidence a number of depositary shares representing more than the number of whole shares of preferred stock of the related series to be withdrawn, the depositary will deliver to the holder at the same time a new depositary receipt evidencing the excess number of depositary shares.
Amendment and Termination of Depositary Agreement. The form of depositary receipt evidencing the depositary shares and any provision of the applicable depositary agreement may at any time be amended by agreement between us and the depositary. We may, with the consent of the depositary, amend the depositary agreement from time to time in any manner that we desire. However, if the amendment would materially and adversely alter the rights of the existing holders of depositary shares, the amendment would need to be approved by the holders of at least a majority of the depositary shares then outstanding.
The depositary agreement may be terminated by us or the depositary if:
Resignation and Removal of Depositary. The depositary may resign at any time by delivering to us notice of its election to do so. We may remove a depositary at any time. Any resignation or removal will take effect upon the appointment of a successor depositary and its acceptance of appointment.
Charges of Depositary. We will pay all transfer and other taxes and governmental charges arising solely from the existence of any depositary arrangements. We will pay all charges of each depositary in connection with the initial deposit of the preferred shares of any series, the initial issuance of the depositary shares, any redemption of such preferred shares and any withdrawals of such preferred shares by holders of depositary shares. Holders of depositary shares will be required to pay any other transfer taxes.
Notices. Each depositary will forward to the holders of the applicable depositary shares all notices, reports and communications from us which are delivered to such depositary and which we are required to furnish the holders of the preferred stock represented by such depositary shares.
Miscellaneous. The depositary agreement may contain provisions that limit our liability and the liability of the depositary to the holders of depositary shares. Both the depositary and we are also entitled to an indemnity from the holders of the depositary shares prior to bringing, or defending against, any legal proceeding. We or any depositary may rely upon written advice of counsel or accountants, or information provided by persons presenting preferred shares for deposit, holders of depositary shares or other persons believed by us to be competent and on documents believed by us or them to be genuine.
Debt Securities
As used in this prospectus, the term “debt securities” means the debentures, notes, bonds and other evidences of indebtedness that we may issue from time to time. The debt securities will either be senior debt securities, senior subordinated debt or subordinated debt securities. We may also issue convertible debt securities. Debt securities may be issued under an indenture (which we refer to herein as an Indenture), which are contracts entered into between us and a trustee to be named therein. The Indenture has been filed as an exhibitCommon Stock registered pursuant to the registration statement, of which this prospectus forms a part. We may issue debt securities and incur additional indebtedness other than through the offering of debt securities pursuant to this prospectus. It is likely that convertible debt securities will not be issued under an Indenture.
The debt securitiesselling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may be fullylimit the timing of purchases and unconditionally guaranteed on a secured or unsecured senior or subordinated basis by one or more guarantors, if any. The obligationssales of any guarantor under its guarantee will be limited as necessary to prevent that guarantee from constituting a fraudulent conveyance under applicable law. In the event that any series of debt securities will be subordinated to other indebtedness that we have outstanding or may incur, the terms of the subordination will be set forthshares of Common Stock by the selling shareholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the prospectus supplement relatingdistribution of the shares of Common Stock to engage in market-making activities with respect to the subordinated debt securities.shares of Common Stock. All of the foregoing may affect the marketability of the shares of Common Stock and the ability of any person or entity to engage in market-making activities with respect to the shares of Common Stock.
We may issue debt securities from time to time in one or more series, in each case with the same or various maturities, at par or at a discount. Unless indicated in a prospectus supplement, we may issue additional debt securities of a particular series without the consent of the holders of the debt securities of such series outstanding at the time of the issuance. Any such additional debt securities, together with all other outstanding debt securities of that series, will constitute a single series of debt securitiesOnce sold under the applicable Indenture and will be equal in ranking.
Should an Indenture relate to unsecured indebtedness, in the event of a bankruptcy or other liquidation event involving a distribution of assets to satisfy our outstanding indebtedness or an event of default under a loan agreement relating to secured indebtedness of our company or its subsidiaries, the holders of such secured indebtedness, if any, would be entitled to receive payment of principal and interest prior to payments on the unsecured indebtedness issued under an Indenture.
Each prospectus supplement will describe the terms relating to the specific series of debt securities. These terms will include some or all of the following:
Unless otherwise specified in the applicable prospectus supplement, we do not anticipate the debt securities will be listed on any securities exchange. Holders of the debt securities may present registered debt securities for exchange or transfer in the manner described in the applicable prospectus supplement. Except as limited by the applicable Indenture, we will provide these services without charge, other than any tax or other governmental charge payable in connection with the exchange or transfer.
Debt securities may bear interest at a fixed rate or a variable rate as specified in the prospectus supplement. In addition, if specified in the prospectus supplement, we may sell debt securities bearing no interest or interest a t a rate that at the time of issuance is below the prevailing market rate, or at a discount below their stated principal amount. We will describe in the applicable prospectus supplement any special federal income tax considerations applicable to these discounted debt securities.
We may issue debt securities with the principal amount payable on any principal payment date, or the amount of interest payable on any interest payment date, to be determined by referring to one or more currency exchange rates, commodity prices, equity indices or other factors. Holders of such debt securities may receive a principal amount on any principal payment date, or interest payments on any interest payment date, that are greater or less than the amount of principal or interest otherwise payable on such dates, depending upon the value on such dates of applicable currency, commodity, equity index or other factors. The applicable prospectus supplement will contain information as to how we will determine the amount of principal or interest payable on any date, as well as the currencies, commodities, equity indices or other factors to which the amount payable on that date relates and certain additional tax considerations.
Units
We may issue units consisting of any combination of the other types of securities offered under this prospectus in one or more series. We may evidence each series of units by unit certificates that we may issue under a separate agreement. We may enter into unit agreements with a unit agent. Each unit agent, if any, may be a bank or trust company that we select. We will indicate the name and address of the unit agent, if any, in the applicable prospectus supplement relating to a particular series of units. Specific unit agreements, if any, will contain additional important terms and provisions. We will file as an exhibit to the registration statement, of which this prospectus isforms a part, or will incorporate by reference from a current report that we file with the SEC, the formshares of unit and the form of each unit agreement, if any, relating to units offered under this prospectus.
If we offer any units, certain terms of that series of unitsCommon Stock will be describedfreely tradable in the applicable prospectus supplement, including, without limitation, the following, as applicable:hands of persons other than our affiliates.
Florida Anti-Takeover Law and Provisions of our Amended and Restated Articles of Incorporation and BylawsLEGAL MATTERS
Florida Anti-Takeover Law
As a Florida corporation, we are subject to certain anti-takeover provisions that apply to public corporations under Florida law. Pursuant to Section 607.0901 of the Florida Business Corporation Act, or the FBCA, a publicly held Florida corporation may not engage in a broad range of business combinations or other extraordinary corporate transactionsCertain legal matters with an interested shareholder without the approval of the holders of two-thirds of the voting shares of the corporation (excluding shares held by the interested shareholder), unless:
An interested shareholder is defined as a person who, together with affiliates and associates, beneficially owns more than 10% of a corporation’s outstanding voting shares. We have not made an election in our Amended and Restated Articles to opt out of Section 607.0901.
In addition, we are subject to Section 607.0902 of the FBCA which prohibits the voting of shares in a publicly held Florida corporation that are acquired in a control share acquisition unless (i) the Board of Directors approved such acquisition prior to its consummation or (ii) after such acquisition, in lieu of prior approval by the Board of Directors, the holders of a majority of the corporation’s voting shares, exclusive of shares owned by officers of the corporation, employee directors or the acquiring party, approve the granting of voting rights asrespect to the shares acquired in the control share acquisition. A control share acquisition is defined as an acquisition that immediately thereafter entitles the acquiring party to 20% or more of the total voting power in an election of directors.
Amended and Restated Articles and Bylaws
Our Amended and Restated Articles and Amended and Restated Bylaws contain provisions that could have the effect of discouraging potential acquisition proposals or tender offers or delaying or preventing a change of control of our company. These provisions are as follows:
Limitations of Liability for Officers and Directors
Pursuant to the Florida Statutes, our Amended and Restated Articles exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a director receives an improper personal benefit. This exclusion of liability does not limit any right which a director may have to be indemnified and does not affect any director’s liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a director if he acted in good faith and in a manner he believed to be in our best interests.
Indemnification of Officers and Directors
Our certificate of incorporation also contains provisions to indemnify the directors, officers, employees or other agents to the fullest extent permitted by the Florida corporate law. These provisions may have the practical effect in certain cases of eliminating the ability of shareholders to collect monetary damages from directors. We are also a party to indemnification agreements with each of our directors. We believe that these provisions will assist us in attracting or retaining qualified individuals to serve as our directors.
Disclosure of Commission Position on Indemnification for Securities Act Liabilities
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
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Each security may be represented either by a certificate issued in definitive form to a particular investor or by one or more global securities representing the entire issuance of securities. Certificated securities in definitive form and global securities will be issued in registered form. Definitive securities name you or your nominee as the owner of the security, and in order to transfer or exchange these securities or to receive payments other than interest or other interim payments, you or your nominee must physically deliver the securities to the trustee, registrar, paying agent or other agent, as applicable. Global securities name a depositary or its nominee as the owner of the debt securities, warrants or units represented by these global securities. The depositary maintains a computerized system that will reflect each investor’s beneficial ownership of the securities through an account maintained by the investor with its broker/dealer, bank, trust company or other representative, as we explain more fully below.
Registered Global Securities
We may issue the securities in the form of one or more fully registered global securities that will be deposited with a depositary or its nominee identified in the applicable prospectus supplement and registered in the name of that depositary or nominee. In those cases, one or more registered global securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal or face amount of the securities to be represented by registered global securities. Unless and until it is exchanged in whole for securities in definitive registered form, a registered global security may not be transferred except as a whole by and among the depositary for the registered global security, the nominees of the depositary or any successors of the depositary or those nominees.
The specific terms of the depositary arrangement with respect to any securities to be represented by a registered global security will be described in the prospectus supplement relating to those securities. We anticipate that the following provisions will apply to all depositary arrangements.
Ownership of beneficial interests in a registered global security will be limited to persons, called participants, that have accounts with the depositary or persons that may hold interests through participants. Upon the issuance of a registered global security, the depositary will credit, on its book-entry registration and transfer system, the participants’ accounts with the respective principal or face amounts of the securities beneficially owned by the participants. Any dealers, underwriters or agents participating in the distribution of the securities will designate the accounts to be credited. Ownership of beneficial interests in a registered global security will be shown on, and the transfer of ownership interests will be effected only through, records maintained by the depositary, with respect to interests of participants, and on the records of participants, with respect to interests of persons holding through participants. The laws of some states may require that some purchasers of securities take physical delivery of these securities in definitive form. These laws may impair your ability to own, transfer or pledge beneficial interests in registered global securities.
So long as the depositary, or its nominee, is the registered owner of a registered global security, that depositary or its nominee, as the case may be, will be considered the sole owner or holder of the securities represented by the registered global security for all purposes under the applicable indenture, warrant agreement or unit agreement.
Except as described below, owners of beneficial interests in a registered global security will not be entitled to have the securities represented by the registered global security registered in their names, will not receive or be entitled to receive physical delivery of the securities in definitive form and will not be considered the owners or holders of the securities under the applicable indenture, warrant agreement or unit agreement. Accordingly, each person owning a beneficial interest in a registered global security must rely on the procedures of the depositary for that registered global security and, if that person is not a participant, on the procedures of the participant through which the person owns its interest, to exercise any rights of a holder under the applicable indenture, warrant agreement or unit agreement. We understand that under existing industry practices, if we request any action of holders or if an owner of a beneficial interest in a registered global security desires to give or take any action that a holder is entitled to give or take under the applicable indenture, warrant agreement or unit agreement, the depositary for the registered global security would authorize the participants holding the relevant beneficial interests to give or take that action, and the participants would authorize beneficial owners owning through them to give or take that action or would otherwise act upon the instructions of beneficial owners holding through them.
Payments to holders with respect to securities represented by a registered global security registered in the name of a depositary or its nominee will be made to the depositary or its nominee, as the case may be, as the registered owner of the registered global security. None of the Company, the trustees, the warrant agents, the unit agents or any other agent of the Company, agent of the trustees, the warrant agents or unit agents will have any responsibility or liability for any aspect of the records relating to payments made on account of beneficial ownership interests in the registered global security or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests.
We expect that the depositary for any of the securities represented by a registered global security, upon receipt of any payment of principal, premium, interest or other payment or distribution to holders of that registered global security, will immediately credit participants’ accounts in amounts proportionate to their respective beneficial interests in that registered global security as shown on the records of the depositary. We also expect that payments by participants to owners of beneficial interests in a registered global security held through participants will be governed by standing customer instructions and customary practices, as is now the case with the securities held for the accounts of customers or registered in “street name,” and will be the responsibility of those participants.
If the depositary for any of these securities represented by a registered global security is at any time unwilling or unable to continue as depositary or ceases to be a clearing agency registered under the Exchange Act and a successor depositary registered as a clearing agency under the Exchange Act is not appointed by us within 90 days, we will issue securities in definitive form in exchange for the registered global security that had been held by the depositary. Any securities issued in definitive form in exchange for a registered global security will be registered in the name or names that the depositary gives to the relevant trustee, warrant agent, unit agent or other relevant agent of ours or theirs. It is expected that the depositary’s instructions will be based upon directions received by the depositary from participants with respect to ownership of beneficial interests in the registered global security that had been held by the depositary.
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Unless otherwise indicated in the applicable prospectus supplement, the validity of the securitiesCommon Stock offered by this prospectushereby will be passed upon for us by Ellenoff Grossman & Schole LLP, New York, New York. If legal matters in connection with offerings made by this prospectus are passed on by counsel for the underwriters, dealers or agents, if any, that counsel will be named in the applicable prospectus supplement.
The December 31, 2021 and 2020 financial statements of our company appearing in this prospectusCuentas Inc. as of December 31, 2022 and the year ended December 31, 2022 have been includedaudited by Yarel + Partners, Certified Public Accountants (ISR.), an independent registered public accounting firm, as stated in their report, which is incorporated herein in reliance upon the report (whichby reference, which report includes an explanatory paragraph relating to our ability to continue as a going concern)concern. Such financial statements have been incorporated by reference in this prospectus and registration statement in reliance on the report of such firm given upon their authority as experts in accounting and auditing.
The financial statements of Cuentas Inc. as of December 31, 2021 and the year ended December 31, 2021 have been audited by Halperin Ilanit, CPA, an independent registered public accounting firm, appearing elsewhereas stated in their report, which is incorporated herein by reference herein, which report includes an explanatory paragraph relating to our ability to continue as a going concern. Such financial statements have been incorporated by reference in this prospectus and registration statement in reliance upon the report of, and upon the authority of Halperin Ilanit, CPA as experts in accounting and auditing.
The December 31, 2021 and 2020 financial statements of SDI Black 011, LLC appearing in this prospectus have been included herein in reliance upon the report of Leonard Friedman CPA, an independent registered public accounting firm, appearing elsewhere herein, and upon the authority of Leonard Friedman CPA as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONALMORE INFORMATION
We file annual, quarterhave filed with the SEC this registration statement under the Securities Act of 1933, as amended (the “Securities Act”) covering the Common Stock to be offered and sold by this prospectus and any applicable prospectus supplement. This prospectus does not contain all of the information included in the registration statement, some of which is contained in exhibits to the registration statement. In addition, we are subject to the information and periodic and current reporting requirements of the Exchange Act, and in accordance therewith, we file periodic and current reports, proxy statements and other information with the SecuritiesSEC.
You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and Exchange Commission usingamendments or supplements to those reports and statements, filed with the Commission’s EDGAR system.SEC, free of charge at our website at www.cuentas.com or by means of the SEC’s website at www.sec.gov. The Commission maintainsinformation found on, or that can be accessed from or that is hyperlinked to, our website or the SEC’s website is not part of this prospectus and you should not rely on that information when making a web site that containsdecision to invest in our Common Stock.
Any statement made in this prospectus and any prospectus supplement, periodic and current reports, proxy and information statements and other information regarding registrants that file electronicallyfiled or furnished with the Commission. The addressSEC concerning the contents of any contract, agreement or other document is only a summary of the actual contract, agreement or other document. If we have filed any contract, document, agreement or other document as an exhibit to such sitefiling or furnishing, you should read the exhibit for a more complete understanding of the document or matter involved. Each statement regarding a contract, agreement or other document is http//www.sec.gov.qualified in its entirety by reference to the actual document.
Upon written or oral request, we will provide without charge to each person to whom a copy of the prospectus is delivered a copy of the documents incorporated by reference herein (other than exhibits to such documents unless such exhibits are specifically incorporated by reference herein). You may request a copy of these filings, at no cost, by writing or calling us at the contact information set forth below. We have authorized no one to provide you with any information that differs from that contained in this prospectus. Accordingly, we take no responsibility for any other information that others may give you. You should not assume that the information in this prospectus is accurate as of any date other than the date of the front cover of this prospectus.
Cuentas Inc.
235 Lincoln Rd., Suite 210
Miami Beach, Florida 33139
Telephone number: (800) 611-3622
INCORPORATION OF DOCUMENTSINFORMATION INCORPORATED BY REFERENCE
We are “incorporatingThe SEC allows us to “incorporate by reference” in this prospectus certain documentsthe information we file with the SEC,them, which means that we can disclose important information to you by referring you to those documents. The information in the documents incorporated by reference herein is considered to be part of this prospectus. Statements contained in documentsprospectus, and information that we file later with the SEC and that are incorporated by reference in this prospectus will automatically update and supersede this information. We incorporate by reference the documents listed below (except the information contained in this prospectus, including information in previously filedsuch documents or reports that have been incorporated by reference in this prospectus, to the extent the new information differs from or is inconsistent with the old information. We have filed or may file the following documents“furnished” and not “filed”) and any future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (except the information contained in such documents to the extent “furnished” and they are incorporated herein by reference as of their respective dates of filing.not “filed”):
| ● | our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023 filed with the SEC on May 15, 2023; for the second fiscal quarter ended June 30, 2023 filed with the SEC on August 14, 2023; and for the third fiscal quarter ended September 30, 2023 filed with the SEC on November 20, 2023; |
AllWe will provide without charge upon written or oral request a copy of any or all of the documents that we filed with the SEC pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act subsequent to the date of this registration statement and prior to the filing of a post-effective amendment to this registration statement that indicates that all securities offered underare incorporated by reference herein into this prospectus, have been sold, or that deregisters all securities then remaining unsold, will be deemed to beother than exhibits which are specifically incorporated in this registration statement by reference andherein into such documents. Requests should be directed to be a part hereof from the date of filing of such documents.Cuentas Inc., 235 Lincoln Rd., Suite 210, Miami Beach, Florida 33139. Our telephone number is (800) 611-3622.
Any statement contained in a document incorporated or deemed to be incorporated by reference inherein into this prospectus shall be deemed to be modified or superseded or replaced for the purposes of this prospectus to the extent that a statement contained in this prospectus (or in any document incorporated by reference herein therein) or in any other subsequently filed document that alsois or is deemed to be incorporated by reference inherein into this prospectus modifies supersedes or replacessupersedes such statement. Any statement so modified superseded or replacedsuperseded shall not be deemed, except as so modified superseded or replaced,superseded, to constitute a part of this prospectus. None of the information that we disclose under Items 2.02 or 7.01 of any Current Report on Form 8-K or any corresponding information, either furnished under Item 9.01 or included as an exhibit therein, that we may from time to time furnish to the SEC will
1,275,747 Shares
Common Stock
To be incorporated by reference into, or otherwise included in, this prospectus, except as otherwise expressly set forth in the relevant document. Subject to the foregoing, all information appearing in this prospectus is qualified in its entiretySold by the information appearing in the documents incorporated by reference.Selling Shareholders
You may requests, orally or in writing, a copy of these documents, which will be provided to you at no cost (other than exhibits, unless such exhibits are specifically incorporate by reference), by contacting the Company at Cuentas Inc., at 235 Lincoln Rd., Suite 210, Miami Beach, FL 33139, attention: Secretary. Our telephone number is (800) 611-3622. Information about us is also available at our website at http://www.cuentas.com/. However, the information in our website is not a part of this prospectus and is not incorporated by reference. PROSPECTUS
, 2023
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14.Item 14. Other Expenses of Issuance and Distribution.Distributions.
The Company is paying all expenses of the offering. The following table sets forth allthe expenses to be paidborne by Cuentas Inc. in connection with the registrant. All amounts shown are estimates except for the registration fee. offering described in this Registration Statement.
| SEC registration fee | $ | 6,952.50 | ||
| Legal fees and expenses | $ | 40,000 | ||
| Accounting fees and expenses | $ | 10,000 | ||
| Trustees’ Fees and Expenses | * | |||
| Warrant Agent Fees and Expenses | * | |||
| Miscellaneous | * | |||
| Total | $ | 56,952.50 |
| Registration fee – Securities and Exchange Commission | $ | 182 | ||
| Legal fees and expenses | 50,000 | * | ||
| Accounting fees and expenses | 10,000 | * | ||
| Total | $ | 60,182 | * |
| * | These fees are calculated based on the securities offered and the number of issuances and accordingly cannot be |
ItemITEM 15.Indemnification of Directors and Officers.
Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws both provide for the indemnification of our officers and directors to the fullest extent permitted by the Florida Business Corporation Act (the “FBCA”). The FBCA provides that a corporation may indemnify a director or officer against liability if the director or officer acted in good faith, the director or officer acted in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and in the case of any criminal proceeding, the director or officer had no reasonable cause to believe his or her conduct was unlawful. A corporation may not indemnify a director or an officer except for expenses and amounts paid in settlement not exceeding, in the judgment of the board of directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection with the defense or settlement of such proceeding, including any appeal thereof, where such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation.
The FBCA provides that a corporation must indemnify a director or officer who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the individual was a party because he or she is or was a director or officer of the corporation against expenses incurred by the individual in connection with the proceeding.
A corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse expenses incurred in connection with the proceeding by a director or an officer if the director or officer delivers to the corporation a signed written undertaking of the director or officer to repay any funds advanced if such director or officer is not entitled to indemnification.
These indemnification provisions may be sufficiently broad to permit indemnification of our officers, directors and other corporate agents for liabilities (including reimbursement of expenses incurred) arising under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
We have the power to purchase and maintain insurance on behalf of any person who is or was one of our directors or officers, or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other business against any liability asserted against the person or incurred by the person in any of these capacities, or arising out of the person’s fulfilling one of these capacities, and related expenses, whether or not we would have the power to indemnify the person against the claim under the provisions of the FBCA.
If the FBCA Law is amended to expand further the indemnification permitted to indemnitees, then we shall indemnify such persons to the fullest extent permitted by the FBCA, as so amended.
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Pursuant to the Florida Statutes, our Amended and Restated Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director’s liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.
Item
ITEM 16. Exhibits.Exhibits
The following exhibits are filed with this Registration Statement.
The agreements included or incorporated by reference as exhibits to this registration statement contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.
The undersigned registrant acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this registration statement not misleading.ITEM 17. Undertakings
| (a) | The undersigned registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Filing Fee Table” filed as an exhibit in the effective registration statement; and |
| (iii) | ||
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(4) |
| (i) | If the registrant is relying on Rule 430B, |
| (A) | Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
| (B) | Each prospectus required to be filed pursuant to Rule |
| (ii) | If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference herein into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
Item 17. Undertakings.
| (5) | The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference herein in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (6) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. |
(7) | The undersigned registrant hereby undertakes that: in a registration statement permitted by Rule 430A, |
| (i) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and |
| (ii) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
provided , however , that paragraphs (1)(i), (1)(ii) and (1)(iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability of the registrant under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering.
(d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act.
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Pursuant to the requirements of the Securities Act of 1933, as amended, the registrantCuentas Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing of a Registration Statement on Form S-3 and has duly caused this amendment to this Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida on this 1stthe 27th day of July, 2022.November, 2023.
| CUENTAS INC. | ||
| By: | /s/ | |
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below hereby constitutes and appoints Jeffery D. JohnsonArik Maimon as his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933 increasing the number of shares for which registration is sought, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, making such changes in this registration statement as such attorney-in-fact and agent so acting deem appropriate, with the SEC, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done with respect to the offering of securities contemplated by this registration statement, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ | Chief Executive Officer and | |||
| Executive Chairman of the Board of Directors | ||||
| (Principal Executive Officer) | ||||
| Chief Financial Officer | ||||
| (Principal Financial Officer and | ||||
| Principal Accounting Officer) | ||||
| Executive Vice Chairman of the Board of Directors and | ||||
| President | ||||
| Director | ||||
| Director | ||||
| Director | ||||
| *By: | /s/ Arik Maimon | ||
| Arik Maimon | November 27, 2023 | ||
| Attorney-in fact |
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