As filed with the Securities and Exchange Commission on September 7, 2022
Registration No. 333-262645
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996
REGISTRATION
Washington, D.C. 20549
AMENDMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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METRO ONE TELECOMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Metro One Telecommunications, Inc. |
(Exact name of registrant as specified in its charter) |
Delaware | 4899 | 93-0995165 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
30 North Gould Street
Suite 2990
Sheridan, WY 82801
Telephone No.: (307) 683-0855
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Copies to:
Ken Bart
Smith Eilers, PLLC
1213 Culbreth Drive
Wilmington, NC 28405
Telephone No.: (561) 379-1253
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement becomes effective.
registration statement.
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 check the following box: / /
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CALCULATION OF REGISTRATION FEE
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Underwriters' over-allotment option
(2) Estimated solelySecurities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the purposesame 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 computing the earlier effective registration fee
------------------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
2
METRO ONE TELECOMMUNICATIONS, INC.
CROSS REFERENCE SHEET SHOWING LOCATION
IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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. ☐
Calculation of Registration Fee
Title of Each Class of Securities to be Registered |
| Amount to be Registered |
| Proposed Maximum Offering Price Per Share |
|
| Proposed Maximum Aggregate Offering Price (1) |
|
| Amount of Registration Fee |
| |||
Common Stock (new shares to be sold) |
| 80,000,000 Shares |
| $ | 0.12 |
|
| $ | 9,600,000 |
|
| $ | 889.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Underlying Warrants (2) |
| 20,000,000 Shares |
| $ | 0.12 |
|
| $ | 3,000,000 |
|
| $ | 278.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Underlying Warrants (3) |
| 7,791,658 Shares |
| $ | 0.12 |
|
| $ | 934,999 |
|
| $ | 86.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock (4) |
| 25,079,999 Shares |
| $ | 0.12 |
|
| $ | 3,009,600 |
|
| $ | 278.99 |
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Common Stock Underlying Warrants (5) |
| 12,540,000 Shares |
| $ | 0.12 |
|
| $ | 1,504,800 |
|
| $ | 139.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock (6) |
| 126,614,436 Shares |
| $ | 0.12 |
|
| $ | 15,193,732 |
|
| $ | 1,408.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock (7) |
| 18,975,000 Shares |
| $ | 0.12 |
|
| $ | 2,277,000 |
|
| $ | 211.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock (8) |
| 22,647,751 Shares |
| $ | 0.12 |
|
| $ | 2,717,730 |
|
| $ | 251.93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Underlying Warrants (9) |
| 1,666,665 Shares |
| $ | 0.12 |
|
| $ | 200,000 |
|
| $ | 18.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock (10) |
| 6,714,547 Shares |
| $ | 0.12 |
|
| $ | 805,746 |
|
| $ | 74.69 |
|
|
|
|
|
|
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|
|
|
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|
|
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Total filing fee |
|
|
|
|
|
|
|
|
|
|
| $ | 3,637.87 |
|
(1) | Estimated solely for the purpose of calculating the registration fee under Rule 457(a) and (o) of the |
(2) | Consists of 1 warrant for each for 4 shares of common stock purchased as part of this offering. |
(3) | Consists of shares underlying warrants issued to CLOS Trading, Ltd. |
(4) | Consists of shares sold pursuant to our 2021 private investment in public equity (“PIPE”) offering. |
(5) | Consists of shares underlying warrants associated with the PIPE offering. |
(6) | Consists of shares of common stock issued pursuant to our offering related to simple agreements for future equity (“SAFE”). |
(7) | Consists Of 18,975,000 shares of which 13,313,062 are held by Everest Credit, LP. and |
(8) | Consists of |
(9) | Consists of |
(10) | Consists of |
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 Offering Price......... Underwriting
6. Dilution................................ Not Applicable
7. Selling Security Holders................ Principal and Selling Shareholders
8. Plan of Distribution.................... Underwriting
9. Description of Securities to be
Registered.............................. Description of Capital Stock
10. Interests of Named Experts and
Counsel................................. Not Applicable
11. Information with Respect to the
Registrant.............................. Prospectus Summary; The Company; Risk Factors;
Selected Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Business;
Management; Principal and Selling
Shareholders; Description of Capital Stock;
Shares Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 4, 1996
PROSPECTUS
2,000,000 Shares
LOGO
Common Stock
Of the 2,000,000 shares of Common Stock ("Common Stock") offered hereby,
1,000,000 shares are being sold by Metro One Telecommunications, Inc. ("Metro
One" or the "Company") and 1,000,000 shares are being sold by certain
shareholders of the Company (the "Selling Shareholders"). The Company will not
receive any proceeds from the sale of shares by the Selling Shareholders. See
"Principal and Selling Shareholders." Prior to this offering, there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price will be between $8.00 and $10.00 per
share. See "Underwriting" for information relating to the determination of the
initial public offering price. The Company has applied to have the Common Stock
quoted on the Nasdaq National Market under the symbol "MTON."
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
======================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(3)
- ------------------------------------------------------------------------------------------------------
Per Share........................ $ $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3)......................... $ $ $ $
======================================================================================================
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the Securities Act of 1933 or until the registration statement shall become effective on such date as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $800,000.
(3) The Selling Shareholders have grantedCommission, acting pursuant to the Underwriters a 30-day option to
purchase up to 300,000 additional shares on the same terms, solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ said section 8(a), $ and $ ,
respectively.
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may determine.
ii |
The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters, subject to prior sale, when, as and if delivered to and
accepted by them and subject to the right of the Underwriters to reject any
order in whole or in part. It is expected that certificates for the shares of
Common Stock will be available for delivery in New York, New York, on or about
, 1996.
---------------------
BLACK & COMPANY, INC.
The date of this Prospectus is , 1996
4
Photo 1 - A Metro One operator with Metro One logo.
The Company is currently subject to the periodic reporting requirement of the
Securities Exchange Act of 1934. The Company intends to furnish to its
shareholders annual reports containing financial statements audited by an
independent public accounting firm and quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
5
Diagram description
Map of the United States with all of Metro One's call center locations
indicated by Metro One logo in the appropriate cities. Representative photos of
Metro One's operations are superimposed on the map. Descriptions of the photos
follow:
Photo 1 - A call center with modular work centers.
Photo 2 - A personal computer and a Detroit training manual.
Photo 3 - A training session with three people.
Photo 4 - An Excel LNX 2000 switch and a Sun workstation.
Photo 5 - A Metro One operator.
6
Caption 1 -- Providing Enhanced Directory Assistance (EDA) through its national
network of call centers. Strategic locations enable EDA on both a
local and national basis.
Caption 2 -- Customized call center database systems and operator training in
each geographic area allow operators to provide local information
to callers.
7
Caption 3 -- On-going operator training in advanced search techniques, spelling
and etiquette leads to consistent, high-quality service.
Caption 4 -- Advanced technology -- Sun Microsystems servers and Excel LNX 2000
switches -- coupled with proprietary software. Delivering EDA
solutions with greater content and connectivity functionality.
Caption 5 -- Live friendly operators are available to assist callers throughout
each call. Just press the star (*) key to return to the operator at
any time.
8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Except as otherwise
indicated, all information in this Prospectus (i) assumes no exerciseprospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED SEPTEMBER ___, 2022 |
PROSPECTUS FOR
200,031,733 SHARES OF COMMON STOCK BY SELLING SHAREHOLDERS AND
21,998,323 SHARES OF COMMON STOCK UNDERLYING WARRANT EXERCISES BY OUR SELLING SHAREHOLDERS AND
80,000,000 SHARES OF COMMON STOCK TO BE SOLD AS PART OF THIS OFFERING AND
20,000,000 SHARES UNDERLYING WARRANTS TO BE SOLD AS PART OF THIS OFFERING
Our common stock is quoted on the OTC Pink Marketplace, under the symbol “WOWI.” The last reported sale price of our common stock on the Underwriters' over-allotment option and (ii) gives retroactive effect toOTC Pink Marketplace on August 31, 2022 was $0.10 per share.
Investing in our common stock involves a reverse splithigh degree of the Common Stockrisk. See “Risk Factors” beginning on page 8 of approximately 1-for-3.5 effected in
December 1995. See "Risk Factors"this prospectus for a discussion of certain factorsinformation that should be considered in connection with an investment in our common stock.
Neither the Company,
THE COMPANY
The CompanySecurities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a leading independent developer and providercriminal offense.
This primary offering of enhanced
directory assistance ("EDA") for the wireless telecommunications industry. The
Company contracts with wireless communications carriers to provide EDA to a
carrier's subscribers. The Company established its first EDA call center in 1989
in Portland, Oregon and presently operates call centers that serve the
Baltimore, Chicago, Denver, Detroit, Miami, Minneapolis, Philadelphia, Phoenix,
San Diego, Seattle and Portland, Oregon metropolitan areas. Additionally, the
Company has contracted to provide EDA to carrier subscribers in Milwaukee and
St. Louis. Service is provided to seven wireless telecommunications carriers,
including cellular and personal communications services ("PCS") providers, under
12 multiyear contracts. In 1995, the Company handled over 20 million requests
for directory assistance on behalf of its carrier customers.
In the competitive wireless telecommunications environment, carriers
confront increasing pressures to differentiate their products, establish brand
loyalty and increase usage. Enhanced directory assistance is a value-added
product that can differentiate a wireless provider's service. The Company's
delivery of quality enhanced directory assistance with a high level of personal
service represents a substantially different approach to that evidenced by the
trend in traditional directory assistance to minimize call processing times
through increased automation and reduced personalized service. Metro One gives
wireless carriers the ability to deliver feature-rich, personalized enhanced
directory assistance to their subscribers while providing features that promote
increased usage and airtime.
The Company's EDA offers enhancements to traditional directory assistance,
including an array of connectivity features and the ability to supply wireless
consumers with a broader range of information, including categorical search and
local event information. With the Company's EDA, carriers can offer customized
configurations of these value-added connectivity and content features. These
custom feature sets are marketed and delivered with private label branding,
enabling the carrier to establish a distinct identity for its services. In
addition, the Company believes that its connectivity features increase the call
completion rate, producing additional revenue for carriers through increased
billable airtime. The Company believes that carriers offering its EDA experience
greater wireless service usage and higher subscriber satisfaction and retention.
The Company's operating competencies, derived from the establishment and
operation of 11 call centers, allow it to provide carriers with a reliable,
quality directory assistance product. The Company's contracts with carriers
impose stringent performance standards. The Company strives to maintain this
high quality of service through various quality assurance programs, including
employee training, operator monitoring and periodic carrier quality evaluations.
The Company's national call center network enables carriers that operate in
multiple markets to offer a consistent EDA, which promotes greater system-wide
marketing and brand identification.
Wireless telecommunications has been among the fastest growing segments of
the telecommunications industry during the 1990s. Industry experts predict
annual revenues to increase from less than $10 billion in 1990 to $50 billion by
1999. Metro One's mission is to be the leading provider of EDA in this
marketplace. To achieve this, the Company intends to offer value-added EDA
products and features that set ever-increasing caller expectations for EDA,
expand into new geographic markets through existing and new carrier
relationships, leverage its existing infrastructure of call centers to provide
service to additional carriers and regional subscribers, achieve greater
operating efficiencies through the introduction of productivity enhancing
hardware and software and pursue opportunities to provide additional
operator-assisted products.
3
9
THE OFFERING
Common Stock offered by the Company....... 1,000,000 shares
Common Stock offered by the Selling
Shareholders............................ 1,000,000 shares
Common Stock outstanding after the
offering................................ 9,819,250(1)
Use of Proceeds........................... For working capital and other general corporate
purposes, including expansion of the Company's
call center network and sales and marketing
activities.
Proposed Nasdaq National Market symbol.... MTON
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND PER SHARE DATA)
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------------ ----------------------
1991 1992 1993 1994 1995 1995 1996
--------- -------------- --------- --------- --------- --------- ---------
STATEMENT OF OPERATIONS DATA:
Revenues....................... $ 752 $ 959 $ 1,442 $ 5,050 $ 13,074 $ 2,638 $ 4,228
Operating income (loss)........ (1,047) (1,932) (4,021) (4,011) (82) (635) 494
Net income (loss).............. (1,697) (2,112) (4,073) (5,035) (1,724) (908) 285
Net income (loss) per share.... $ (1.34) $ (0.85) $ (1.01) $ (1.00) $ (0.31) $ (0.17) $ 0.03
Shares used in per share
calculations(1).............. 1,269,355 2,474,989 4,023,233 5,039,272 5,562,959 5,213,418 8,118,107
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED(2)
------ --------------
BALANCE SHEET DATA:
Cash and cash equivalents......... $1,601 $10,265
Current assets.................... 5,070 13,734
Furniture, fixtures and
equipment....................... 4,230 4,230
Total assets...................... 9,776 18,440
Current liabilities............... 2,915 2,915
Long-term debt, less current
portion......................... 1,504 1,504
Shareholders' equity.............. $5,357 $14,021
- ---------------
(1) Excludes 1,785,039 shares of Common Stock issuable upon exercise of optionscommon stock and warrants outstandingis being made on May 30, 1996,a best-efforts basis, with an average exerciseno minimum required amount in order to close the offering. The price of
$6.74 per share (including options issued under the Company's 1994 Stock
Incentive Plan (the "Stock Incentive Plan") with an exercise price of $8.05
per share), ofat which options and warrants to purchase 1,458,672 shares were
exercisable on that date.
(2) Adjusted for effect of sale of 1,000,000 shares of Common Stock offered
herebywill be sold is listed below at an assumed initial public offering price of $9.00$0.12 per share, and the applicationwarrant exercise price for the warrants being sold in this offering is $0.15 per share. We do not expect this offering to last longer than 12 months.
|
| Per Share |
|
| Total |
| ||
Public offering price |
| $ | 0.12 |
|
| $ | 9,600,000 |
|
Warrant Exercise Price for Public Offering |
| $ | 0.15 |
|
| $ | 3,000,000 |
|
Proceeds to us, before expenses |
| $ |
|
| $ | 12,600,000 |
| |
iii |
Page No. | |
1 | |
7 | |
8 | |
16 | |
18 | |
23 | |
24 | |
24 | |
24 | |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION | 26 |
38 | |
44 | |
46 | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 48 |
49 | |
49 | |
53 | |
53 | |
53 | |
54 |
iv |
| Table of Contents |
You should rely only on the information contained in this prospectus or in any free writing prospectus that we may specifically authorize to be delivered or made available to you. We have not authorized anyone to provide you with any information other than that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, the net proceeds therefrom. See "Useany other information that others may give you. This prospectus may only be used where it is legal to offer and sell our securities. The information in this prospectus is accurate only as of Proceeds."
Assumes no options or warrants to purchase shares of Common Stock are
exercised after the date of this Prospectusprospectus, regardless of the time of delivery of this prospectus or any sale of our securities. Our business, financial condition, results of operations and priorprospects may have changed since that date. We are not making an offer of these securities in any jurisdiction where the offer is not permitted.
For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside must inform themselves about, and observe any restrictions relating to, the completionoffering of securities and the distribution of this prospectus outside the United States.
This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We believe that the data obtained from these industry publications and third-party research, surveys and studies are reliable. We are ultimately responsible for all disclosure included in this prospectus.
This summary highlights information contained elsewhere in this prospectus and does not contain all of the offering other than warrants forinformation that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our financial statements and the purchase of 305,877 shares of
Common Stock exercised by the Selling Shareholders.
FORWARD-LOOKING STATEMENTS
The Company believesrelated notes and the information set forth in this Prospectus under the captions "Prospectus Summary," "Management'sheadings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” in each case included elsewhere in this prospectus. In this prospectus, unless the context otherwise requires, the terms “we,” “us,” “our,” “Metro One Telecommunications, Inc.,” and "Business"“Metro One” refer to Metro One Telecommunications, Inc., and its consolidated subsidiaries.
Overview
Our Mission
We enable retailers to grow their business, using mobile commerce to better engage their customers, both in-store and online – no code required.
Location of Business Operations. While we maintain an office address in the United States, specifically at 30 North Gould Street, Suite 2990, Sheridan, WY 82801, our business operations are primarily managed and conducted out of our corporate location in Israel, located at Atrium Tower, 18th floor, Zeev Jabotinsky St 2, Ramat Gan, 5250501, Israel. We intend to expand our business operations to the United States in the future, but at this time we do not have definitive dates on which such expansion may occur.
Our Objective
Metro One Telecommunications, Inc. is focused on changing the way retailers integrate mobile commerce solutions within their business. Our multi-model, plug and play mobile commerce platform enables retailers to launch their own branded mobile application serving as an additional sales channel in a matter of a few hours – no code required.
Our recently incorporated Israeli tech company, Stratford, Ltd, merges the functionality of mobile technology, artificial intelligence (“AI”), and Machine learning enabling retailers to quickly and easily bring their business online to significantly:
· | Increase customer retention (60%) |
· | Increase average basket size (30%) |
· | Increase Upsell and Cross-sell x4 |
· | Increase customers lifetime value CLV – dramatic increase in repeat monthly purchases. |
| 1 |
| Table of Contents |
We have recently completed the transformation of our existing suite of products to a fully modular SaaS based platform. This will enable us to scale the company significantly, onboarding multiple retailers simultaneously without any additional integration costs.
|
It allows retailers to effortlessly build a complete mobile commerce platform from scratch, adding additional features as their business grows and needs advance. A modular stack of technology also enables us to target retailers who has an existing mobile commerce solution as they can merely plug into one our specific features enriching their offering. bile commerce suite, where the retailer can and as their business needs develop.
Principal products
Shelfy provides a mobile commerce platform that enables retailers to build their own branded mobile application in a matter of hours with intuitive drag and drop tools – no coding required. Adding mobile as an additional sales channel enables retailers to grow its customer loyalty and its revenues.
· | Mobile Commerce Merchant Platform: Enabling SMB retailers to launch a fully branded and functional mobile app with unique and patented features. Great for retailers with at least 200+ return customers. Our patented UX/UI features are available on both IOS and Android and include unique features such as voice search, shoppable videos, and barkers for upselling. |
· | Mobile Commerce Enterprise Platform: Enabling Enterprise retailers who own and operates both brick and mortar store as well as e-commerce platforms to better engage with their customer both online and in-store via the customer’s mobile application. |
· | Instore engagement Suite: providing a purely customer-centric approach to shopping. Our Scan, Pay & Go reduces the customer’s shopping time by approximately 40%. Imagine no more waiting in lengthy lines, no more time and effort spent on packing, unpacking and packing again … and for retailers, an effective way to reduce cost on hardware acquisition and maintenance. Additional instore features will include In-store navigation, in-store personalized shopping experience, and in-store customer loyalty program activation. During this phase, we might consider the M&A of small startups with unique technological features enriching our suite of products without having to develop from scratch. |
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Marketing, Sales and Customer Service Due to the dynamic nature of SaaS platforms and the market sector we are targeting, we have decided to focus on being a product-led company, merge the marketing, sales and customer success teams into one department, providing a complete customer-centric approach. This approach gives us a 360 view of the customer journey and ensures that we can act in real-time to acquire new customers and provide the relevant support when and where needed to retain the customers we have acquired. Using the latest marketing discipline called Product led Growth Hacking and automation we will be able to support and focus on rapid and optimized growth, consisting of both a process and a set of cross-disciplinary (digital) skills. Our goal is to regularly conduct testing that will lead to improving the customer journey and replicate and scale the ideas that work and modify or abandon the ones that don’t before spending vast amounts of resources. Once a plan has been validated, it is automated and the system works by itself reducing overheads and lowering the cost of customer acquisition (“CAC”).
To ensure we provide retailers the optimal results when using our platform our focus will not merely be on sales cycles but creating a community where they can learn and grow with plenty of engagement and educational information such as blogs, webinars, and affiliation programs. Competitive Strengths It is important to emphasize that we are not App developers -hence our direct competitors are not other app developers (which there are plenty off in the market). What we provide is a mobile commerce platform that provides retailers software that enables them (big and small, offline and online) to build their own application without one line of code or any development needed from their side. We differentiate our products primarily through functional points of difference between our products and those of our competitors, including: - Intuitive drag and drop dashboards that enable merchants to build their own branded mobile application - Patented single product display graphical user interface – called the shelf that makes mobile shopping truly mobile and is truly unique to our application - An advanced in-app marketing suite consisting of features such as shoppable videos and barkers, which has been shown to increase up-selling and cross selling threefold and increase product impression by 400%, based on recorded Shelfy performance in the Kruidvat health and beauty chain in the Netherlands versus commonly served retail shopping apps. |
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Market Analysis With the number of mobile users currently at 5.22 billion and growing, based on a report published by Oberlo, there’s nothing to indicate that mobile commerce growth will stop anytime soon. Not only is the number of mobile users increasing, but the total time spent on mobile devices marking a 24.5 percent increase in just five years., Mobile commerce share figures have also been on an upward trend. We currently have four (4) customers, three (3) of which are currently using our recently launched SaaS product. Our market analysis is based on published statistics and reports in the mobile commerce industry, as well as Shelfy’s recorded performance based on data collected from a former European client in Belgium and the Netherlands over a period of twelve months, prior to our acquisition of certain assets from Royal App. Business Model We have a purely Business to Business to Customer ("B2B2C") business model. We license our software direct to businesses who in turn sell their goods to the end user, the customer (our end user). We will charge retailers a monthly usage fee using a combination of persona-based and per-feature pricing models, where distinct packages align to a specific type of customer persona based on: • Gross merchandise value (GMV) • market segment • physical/online store presence. Experienced Leadership Team The combination of operating skills from our management team with the experience of successfully leading major retail and mobile commerce companies gives our organization a significant strength relative to most small- and medium-sized companies. Going Concern Our auditors have expressed, in their report to our audited financial statements for the year ended December 31, 2021, substantial doubt about our ability to continue as a going concern. Growth Strategies Our primary long-term goal is to become one of the market leaders within the Mobile Commerce sector, providing an additional sales channel which merchants and retailers of all sizes can add to their existing business. We intend to achieve this goal by driving organic growth through third-party integrated platforms, across all major retail channels where repeat purchases occur and in all major markets where e-commerce has been adopted and in markets where the use and launch of e-commerce shops are on the rise. Our key growth strategies include the following: | ||
● | developing a powerful, performance-oriented, and metric-driven organizational culture; | |
● | developing automated marketing, sales and customer service tool kits to empower our sales force network to engage with global customers; | |
● | developing brand/marketing tool kits for current and new products and segments, to make onboarding as efficient and seamless as possible; | |
● | Launching and expanding our SaaS products domestically and internationally; | |
● | strengthening our supply chain to achieve best in class costs, on-time/as promised products and customer service; | |
● | improving margins with improved efficiency, and improved net revenue per case with new products; | |
● | upgrading infrastructure, systems and processes with enterprise resource planning systems, improved financial reporting, operating expense control, and strengthened key metrics and accounting and control procedures; and | |
● | strengthening our financial foundation via accessing the capital markets, solidifying long-term banking partners and facilities, and pursuing transformative organic and external growth. | |
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Recent Developments On March 30, 2021, the Company announced that its newly-formed, wholly owned Israeli subsidiary, Stratford Ltd. had received notification of approval from the Lod District Court in Israel for its winning bid to acquire certain assets of Royal App, Ltd,. out of insolvency proceedings for approximately $2.4 million USD in cash as well as 8% equity in the Company on a diluted basis, post conversion of the Company’s preferred common stock and certain other proposed sales of common stock in order to raise the required funds to complete the acquisition, (the “Recapitalization”). Royal App, Ltd., is the developer of Shelfy, a white label, headless mobile commerce software platform that helps retailers and fast moving consumer goods companies become growth companies. The Shelfy product incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as supermarket chains, food and other clients. To finance the acquisition as well as general working capital, the Company proposed to raise up to $3.5 million commencing March 2021 in the form of puttable Simple Agreements for Future Equity (“SAFE”) from institutional investors and family offices. The terms of the SAFE require that they automatically convert into common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock. The Company’s intent was to undertake the conversion of preferred stock in the quarter ended September 30, 2021, following shareholder approval of certain proposed corporate restructure plans. Subsequent to the conversion of the preferred stock, and as part of the agreement for the acquisition of certain assets of Royal App, Ltd., the Company also agreed to issue common stock for commission fees of 2% of the Company’s common stock on a diluted basis, and to the employees of Stratford as to 8% of the Company on a diluted basis, under the terms of an Employee Stock Option Plan, once approved by Shareholders. Further, in order to undertake these issuances, the Company was required to increase the authorized common stock of the Company. Prior to our acquisition of certain assets from Royal App, Ltd., by our wholly owned Israeli subsidiary, Stratford Ltd., we were a shell company seeking a project of merit. On June 9, 2021, the Company announced a Stockholders’ meeting to be held on June 30, 2021 to approve the following actions: 1. An amendment to the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000. 2. An amendment to the articles of the Company to effect a reverse stock split on the basis of not less than 1 for 10 and not more than 1 for 100. Such ratio to be determined by the Board of Directors of the Company at such time as it is approved by the Board of Directors of the Company. 3. Approval of a 2021 Employee Stock Incentive Plan. The Plan will have available shares equity to 25% of the Company’s capitalization and a term of ten years from the effective date of the Plan. 4. Approval of the Company’s reorganization from Oregon to Delaware. The meeting was held on June 30, 2021, and the Company’s shareholders approved all of the actions detailed above, as well as the conversion of 1,000 outstanding shares of Company’s Series A convertible preferred stock whereby each 1 share of Preferred stock held is convertible into 71,683.25 shares of common stock. As a result, during the period ended September 30, 2021, the holders of the Company’s Series A convertible preferred stock successfully converted their holdings into 71,683,250 shares of Common Stock and the Board issued the remaining securities as agreed under the Acquisition Agreement including 22,647,751 shares to the Trustee as part of the asset acquisition costs and 5,661,938 shares to the agent as financing costs. Further a total of $3.25 million raised in the form of SAFES were converted into a total of 126,614,436 shares of common stock at $0.02567 per share. Risks Our business and ability to execute our growth strategies are subject to a number of risks of which you should be aware before you make an investment decision. In particular, you should consider the risks discussed in the “Risk Factors” section of this prospectus, including, but not limited to, the following: |
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● | we have incurred significant losses to date and may continue to incur losses; | |
● | we will need to raise additional capital; | |
● | growth of operations will depend on the acceptance of our products and consumer discretionary spending; | |
● | we have limited management resources and are dependent on key executives; | |
● | failure to achieve and maintain effective internal controls could have a material adverse effect on our business; | |
● | competition that we face is varied and strong; | |
● | We depend on a large volume of merchants and retailers paying us a small monthly usage fee which may mean a high cost of customer acquisition during the first 2-3 years of launching our new SaaS model. | |
● | In the first 4 years from launching our SaaS solution we are dependent on third-party eCommerce platforms such as Shopify to host our software. In the event that one of these platforms becomes redundant or completely changes some of their policies it may have a negative impact on our business and result in loss of business or existing customers | |
● | failure of third party vendors and platforms upon which we rely could adversely affect our business; and | |
● | litigation and publicity concerning product quality and other issues could adversely affect our results of operations, business and financial condition; |
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Common stock offered by us | 80,000,000 shares of our common stock, based on an assumed offering price of $0.12 per share. We are selling the shares and warrants on a “best-efforts” basis and cannot guarantee that all or any of the shares or warrants will be sold. | |||
Warrants offered by us | 20,000,000 warrants to purchase shares of common stock with an exercise price of $0.15 per share. | |||
Common stock offered by our selling shareholders Warrants offered by our selling shareholders. | 200,031,733 shares of common stock to be offered by our selling shareholders at a price of $0.12 per share. 41,998,323 shares of common stock underlying warrants held by our selling shareholders. | |||
Common stock to be outstanding immediately after this offering | 344,635,247 | |||
Use of proceeds | We estimate that the net proceeds from this offering will be approximately $12,600,000, which includes $9,600,000 if all 80,000,000 shares of common stock are purchased, and an additional $3,000,000 if all warrants offered as part of the public offering are exercised. We intend to use substantially all of the net proceeds from this offering to fund business operations, including the development and sale of our products, and for working capital and general corporate purposes. See “Use of Proceeds” for a more complete description of the intended use of proceeds from this offering. | |||
Risk Factors | You should read the “Risk Factors” section of this prospectus beginning on page 8 for a discussion of factors to consider carefully before deciding to invest in shares of our common stock. | |||
OTC Pink trading symbol | “WOWI” | |||
The number of shares of our common stock that will be outstanding immediately after this offering excludes: | ||||
● | 23,940,721 shares of our common stock pursuant to issuances of stock options under our 2021 Stock Incentive Plan and 41,998,323 warrants to purchase common stock. | |||
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Any investment in our securities involves a high degree of risk. Investors should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase our common stock. Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere in this prospectus.
Risks Related to our Financial Condition
We have incurred significant losses to date and may continue to incur losses.
We have incurred net losses since we commenced operations. For the six-month period ended June 30, 2022, our operating loss was $1,345,360. We have incurred net losses in each fiscal year since our inception. We had net losses of $3,341,980 and $53,236 for the years ended December 31, 2021 and 2020, respectively.
These losses have had, and likely will continue to have, an adverse effect on our working capital, assets, and equity. In order to achieve and sustain such revenue growth in the future, we must significantly expand our market presence and revenues from existing and new customers. We may continue to incur losses in the future and may never generate revenues sufficient to become profitable or to sustain profitability. Continuing losses may impair our ability to raise the additional capital required to continue and expand our operations.
Our auditors have expressed doubt about our ability to continue as a going concern.
The Report of our Independent Registered Public Accounting Firm with respect to our December 31, 2021 consolidated financial statements, includes "forward-looking statements"an explanatory paragraph stating that the recurring losses, an accumulated deficit and a working capital deficit at December 31, 2021 raise substantial doubt about our ability to continue as a going concern for the previous standalone company.
We will need to raise additional capital.
We are currently completing additional development with respect to the intellectual property assets acquired from Royal App, Ltd. We will continue to incur research and development and other associated expenses up until our secondary product launch is complete. Any failure of the secondary product launch to generate revenues or sustain positive cash flows in sufficient amounts to fund our business operations may result in the need to secure additional financing beyond this offering in order to support our operations. We can provide no assurances that any additional sources of financing will be available to us on favorable terms, if at all. Our forecast of the period of time through which our current financial resources will be adequate to support our operations and the costs to support our general and administrative, selling and marketing and research and development activities are forward-looking statements and involve risks and uncertainties.
We may also need to raise additional capital to expand our business to meet our long-term business objectives. Additional financing, which is not in place at this time, may come from the sale of equity or convertible or other debt securities in a public or private offering, from an additional credit facility or strategic partnership coupled with an investment in us or a combination of both. We may be unable to raise sufficient additional financing on terms that are acceptable to us, if at all. Our failure to raise additional capital and in sufficient amounts may significantly impact our ability to expand our business. For further discussion of our liquidity requirements as they relate to our long-term plans, see the section entitled “Liquidity and Capital Resources — Capital Resources and Expenditure Requirements”.
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Risks Related to our Business
The requirements of being a public company may strain our resources and distract management.
As a result of filing the registration statement, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). These requirements are extensive. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
We may incur significant costs associated with our public company reporting requirements and costs associated with applicable corporate governance requirements. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
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Ineffective internal controls could impact the Company’s business and operating results.
The Company’s internal control over financial reporting may not prevent or detect misstatements because of the inherent limitations of internal controls, including the possibility of human error, the circumvention or overriding of controls, poorly designed or ineffective controls, or fraud. Internal controls that are deemed to be effective can provide only reasonable assurance with respect to the preparation and fair presentation of the Company’s financial statements. If the Company fails to maintain the adequacy of its internal controls, including the failure to implement new or improve existing controls, or fails to properly execute or properly test these controls, the Company’s business and operating results could be negatively impacted and the Company could fail to meet its financial reporting obligations.
Changing economic conditions and other effects of the such changes caused by the coronavirus disease 2019 (Covid-19).
The Company’s operations may be affected by the recent and ongoing outbreak of Covid-19 which has been declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however it may result in a material adverse impact on the Company’s combined financial position, operations and cash flows. Possible areas that may be affected include, but are not limited to, disruption to the ability of our management team to provide services to us, unavailability of supplies or third party consulting services used in operations, and the decline in value of assets held by the Company, including, property held by the Company, as well as the availability of capital and the ability for retailers to purchase our products. The Covid-19 pandemic and mitigation measures have had and may continue to have, and any future epidemic disease outbreak may have, an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our ability to raise capital when needed. The extent to which the Covid-19 pandemic impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
Growth of operations will depend on the acceptance of our products by our retail clients.
The acceptance by our customers of our newly acquired Shelfy application, as well as additional mobile product offerings under development is critically important to our success. Shifts in user preferences away from the functionality of our mobile applications, our inability to develop effective mobile application products that appeal to consumers, or changes in our products that eliminate product attributes popular with some consumers could harm our business. Our success depends significantly on meeting the specific needs of our retail clients on an ongoing basis, competitive pricing and ease of use by the end consumer. And inability to continuously meet these needs may have material adverse effects on our sales, results of operations, business and financial condition.
We cannot be certain that the products that we offer will become, or continue to be, appealing and as a result there may not be any demand for these products and our sales could decrease, which would result in a loss of revenue. Additionally, there is no guarantee that interest in our products will continue, which could adversely affect our business and revenues.
Demand for products which we sell depends on many factors, including:
● | the number of customers we are able to attract and retain over time; | |
● | the competitive environment in the mobile commerce industry, as well as the mobile application industry as a whole, may force us to reduce prices below our desired pricing level or increase promotional spending; and | |
● | the ability to anticipate changes in user preferences and to meet customers’ needs in a timely cost effective manner; |
All of these factors could result in immediate and longer term declines in the demand for the products we plan to offer, which could adversely affect our sales, cash flows and overall financial condition. An investor could lose his or her entire investment as a result.
We have limited management resources and are dependent on key executives.
We are currently relying on key individuals to continue our business and operations and, in particular, the professional expertise and services of Elchanan (Nani) Maoz, acting chief executive officer, president and director, Jonah Meer, secretary and director, and James Alexander Brodie, treasurer and director, as well as key members of our executive management team and others in key management positions. We plan to appoint additional independent directors in order to comply with NASDAQ requirements in the future, however, until any potential additional directors or officers are appointed, we may not have sufficient managerial resources to successfully manage the increased business activity envisioned by our business strategy. In addition, our future success depends in large part on the continued service of our current management team. We have not entered into employment agreements with our management team. If our officers and directors chose not to serve or if they are unable to perform their duties, and we are unable to retain a replacement qualified individual or individuals, this could have an adverse effect on our business operations, financial condition and operating results if we are unable to replace the current officers and directors with other qualified individuals.
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Failure to achieve and maintain effective internal controls could have a material adverse effect on our business.
If we cannot provide reliable financial reports, our operating results could be harmed. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Based on our evaluation, our management concluded that there was a material weakness in our internal control over financial reporting for the year ended December 31, 2021. The material weakness identified did not result in the restatement of any previously reported financial statements or any related financial disclosure, nor does management believe that it had any effect on the accuracy of our financial statements for the year ended December 31, 2021. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We believe that the lack of internal accounting staff resulted in a lack of segregation of duties and the accounting technical expertise necessary for an effective system of internal control. Because of the material weakness described above, management concluded that, as of December 31, 2021, our internal control over financial reporting was not effective. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Failure to achieve and maintain an effective internal control environment could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. Failure to comply with Section 404 could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.
Competition that we face is varied and strong.
Our products and industry as a whole are subject to competition. There is no guarantee that we can develop or sustain a market position or expand our business. We anticipate that the intensity of competition in the future will increase.
We compete with a number of entities in providing products to our customers. Such competitor entities include: (1) a variety of large multinational corporations engaged in the mobile commerce industry, including but not limited to companies that have established loyal customer bases over several decades; (2) mobile commerce companies that have an established customer base, and have the same or a similar business plan as we do and may be looking to expand nationwide; and (3) a variety of other local and national mobile commerce and mobile application companies with which we either currently or may, in the future, compete.
Many of our current and potential competitors are well established and have longer operating histories, significantly greater financial and operational resources, and greater name and brand recognition than we have. As a result, these competitors may have greater credibility with both existing and potential customers. They also may be able to offer more products and more aggressively promote and sell their products. Our competitors may also be able to support more aggressive pricing than we will be able to, which could adversely affect sales, cause us to decrease our prices to remain competitive, or otherwise reduce the overall gross profit earned on our products.
Our industry requires the attraction and retention of talented employees.
Success in the mobile commerce and mobile application industry, specifically as it relates to our platform and products, does and will continue to require the acquisition and retention of highly talented and experienced individuals. Due to the growth in the market segment targeted, such individuals and the talent and experience they possess is in high demand. There is no guarantee that we will be able to attract and maintain access to such individuals. If we fail to attract, train, motivate and retain talented personnel, our business, financial condition, and operating results may be materially and adversely impacted, which could result in the loss of your entire investment.
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We will depend on a large volume of merchants and retailers paying us a small monthly usage fee which may mean a high cost of customer acquisition during the first 2-3 years of our operation
Our SaaS software will target thousands of potential independent merchants and retail customers across multiple markets and in various locations. Each of these customers will pay us a small monthly usage fee for the use of our SaaS offering. As a result, in the first several years of our operation, customer acquisition costs and set up fees may be high in relation to subscription fees collected over the launch period. The Company expects a period of 2-3 years to reach suitable subscription levels to offset customer acquisition fees.
We currently depend on third party platforms for a portion of our business.
A portion of our sales revenue in the first four years will be dependent on third-party eCommerce platforms such as Shopify to host our software. As independent companies, providers of the third party platforms make their own business decisions. In the event that one of these platforms becomes redundant or completely changes some of their policies it may have a negative impact on our business and result in loses of business or existing customers. Their financial condition could also be adversely affected by conditions beyond our control, and our business could suffer as a result. Deteriorating economic conditions could negatively impact the financial viability of third party platform providers. Any of these factors could negatively affect our business and financial performance.
We may fail to comply with applicable government laws and regulations.
We are subject to a variety of federal, state and local laws and regulations in the U.S. These laws and regulations apply to many aspects of our business including the advertising and sale of our products. Violations of these laws or regulations in the manufacture, safety, labeling, transportation and advertising of our products could damage our reputation and/or result in regulatory actions with substantial penalties. In addition, any significant change in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations, could result in increased compliance costs or capital expenditures.
Risks Related to our Intellectual Property
It is difficult and costly to protect our proprietary rights.
Our commercial success will depend in part on obtaining and maintaining trademark protection and trade secret protection of our products and brands, as well as successfully defending these trademarks against third-party challenges. We will only be able to protect our intellectual property related to our trademarks, patents and brands to the extent that we have rights under valid and enforceable trademarks, patents or trade secrets that cover our products and brands. Changes in either the trademark or patent laws or in interpretations of trademark or patent laws in the U.S. and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our issued trademarks or in third-party patents. The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
We may face intellectual property infringement claims that could be time-consuming and costly to defend, and could result in our loss of significant rights and the assessment of treble damages.
From time to time we may face intellectual property infringement, misappropriation, or invalidity/non-infringement claims from third parties. Some of these claims may lead to litigation. The outcome of any such litigation can never be guaranteed, and an adverse outcome could affect us negatively. For example, were a third party to succeed on an infringement claim against us, we may be required to pay substantial damages (including up to treble damages if such infringement were found to be willful). In addition, we could face an injunction, barring us from conducting the allegedly infringing activity. The outcome of the litigation could require us to enter into a license agreement which may not be under acceptable, commercially reasonable, or practical terms or we may be precluded from obtaining a license at all. It is also possible that an adverse finding of infringement against us may require us to dedicate substantial resources and time in developing non-infringing alternatives, which may or may not be possible. In the case of diagnostic tests, we would also need to include non-infringing technologies which would require us to re-validate our tests. Any such re-validation, in addition to being costly and time consuming, may be unsuccessful.
Finally, we may initiate claims to assert or defend our own intellectual property against third parties. Any intellectual property litigation, irrespective of whether we are the plaintiff or the defendant, and regardless of the outcome, is expensive and time-consuming, and could divert our management’s attention from our business and negatively affect our operating results or financial condition.
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We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Although we try to ensure that we, our employees, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we, our employees, or independent contractors have used or disclosed intellectual property in violation of others’ rights. These claims may cover a range of matters, such as challenges to our trademarks, as well as claims that our employees or independent contractors are using trade secrets or other proprietary information of any such employee’s former employer or independent contractors. As a result, we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
Risks Related to our Common Stock and this Offering
The market price of our common stock may be volatile and adversely affected by several factors.
The market price of our common stock could fluctuate significantly in response to various factors and events, including:
● | our ability to integrate operations, products and services; | |
● | our ability to execute our business plan; | |
● | operating results below expectations; | |
● | our issuance of additional securities, including debt or equity or a combination thereof, which will be necessary to fund our operating expenses; | |
● | announcements of new or similar products by our competitors; | |
● | economic and other external factors; and | |
● | period-to-period fluctuations in our financial results. |
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
There currently is a limited liquid trading market for our common stock and we cannot assure investors that a robust trading market will ever develop or be sustained for our common stock.
To date there has been a limited trading market for our common stock on the OTC Pink Marketplace. We cannot predict how liquid the market for our common stock may become. A lack of an active market may impair investors’ ability to sell their shares at the time they wish to sell them or at a price they consider reasonable. The lack of an active trading market may impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies by using our common stock as consideration. For companies whose securities are traded in the OTC Pink Marketplace, it is generally more difficult to obtain accurate quotations, to obtain coverage for significant news events (because major media channels generally do not publish press releases about such companies) and to obtain needed capital.
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The trading in the Company shares will be regulated by Securities and Exchange Commission Rule 15g-9 which established the definition of a “penny stock.” The effective result is that fewer purchasers are qualified by their brokers to purchase its shares, and therefore a less liquid market for the investors to sell their shares. Therefore, you may have a difficult time selling your shares, or you may not be able to sell your shares at all, which could result in the loss of your investment.
The shares being offered are defined as a penny stock under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and rules of the SEC. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with spouse), or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser’s written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may make it difficult or impossible for you to resell any shares you may purchase.
Our directors and officers will continue to exercise significant control over our operations.
As of the date of this prospectus, our management and board of directors, currently hold approximately 33.82% of the voting power of our common stock and will hold approximately 26% of the voting power of our common stock following this offering, assuming all shares are sold, but excluding the exercise of warrants. Accordingly, our executive officers and directors will continue to have a significant influence in determining the outcome of all corporate transactions, including the election of directors, approval of significant corporate transactions, changes in control of the Company or other matters that could affect your ability to ever resell your Shares. Their interests may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous to other stockholders.
A significant portion of our total outstanding shares of common stock may be sold into the public market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the market perception that the holders of a large number of shares of common stock intend to sell shares of common stock, could reduce the market price of our common stock. After this offering, we will have up to 344,635,247shares of common stock outstanding excluding shares underlying warrants.
We may issue Preferred Stock with voting and conversion rights that could adversely affect the voting power of the holders of common stock.
Although we presently have no intention to do so without stockholder approval, which may be obtained solely through the votes of its management and board of directors, the Board may issue preferred stock with voting and conversion rights that could adversely affect the voting power of the holders of common stock. Any such provision may be deemed to have a potential anti-takeover effect, and the issuance of preferred stock in accordance with such provision may delay or prevent a change of control of the Company. The board of directors also may declare a dividend on any outstanding shares of preferred stock. All outstanding shares of preferred stock are fully paid and non-assessable.
| 14 |
| Table of Contents |
Provisions of our charter documents could discourage an acquisition of our company that would benefit our stockholders and may have the effect of entrenching, and making it difficult to remove, management.
Provisions of our Articles of Incorporation and By-laws may make it more difficult for a third party to acquire control of us, even if a change in control would benefit our stockholders. In particular, shares of our preferred stock may be issued in the future without further stockholder approval and upon such terms and conditions, and having such rights, privileges and preferences, as our board of directors may determine, including, for example, rights to convert into our common stock. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any of our preferred stock that may be issued in the future. The issuance of our preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire control of us. This could limit the price that certain investors might be willing to pay in the future for shares of our common stock and discourage these investors from acquiring a majority of our common stock. Further, the existence of these corporate governance provisions could have the effect of entrenching management and making it more difficult to change our management.
We have not, and may never pay dividends to shareholders.
We have not declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. If we do not pay dividends, our common stock may be less valuable because a return on an investor’s investment will only occur if our stock price appreciates.
If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.
The public offering price of our common stock will be substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. To the extent additional shares of common stock are subsequently issued, you will incur further dilution. Based on an assumed public offering price of $0.12 per share and a fully subscribed offering, you will experience immediate dilution of $0.094 per share, representing the difference between our as adjusted net tangible book value per share at June 30, 2022, after giving effect to this offering, and the assumed initial public offering price.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
We cannot specify with certainty all of our potential uses for the estimated net proceeds we will receive from this offering. Our management will have broad discretion in the application of the net proceeds. Accordingly, you will have to rely upon the judgment of our management with respect to the use of the proceeds, with only limited information concerning management’s specific intentions. Our management may spend a portion or all of the net proceeds from this offering in ways that our stockholders may not desire or that may not yield a favorable return. The failure by our management to apply these funds effectively could harm our business. Pending its use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.
The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The price of our common stock could decline if one or more equity analyst downgrades our stock or if analysts downgrade our stock or issue other unfavorable commentary or cease publishing reports about us or our business.
| 15 |
| Table of Contents |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains projections and statements relating to us that constitute “forward-looking statements.” These forward-looking statements may be identified by the use of predictive, future-tense or forward-looking terminology, such as “intends,” “believes,” “anticipates,” “expects,” “estimates,” “may,” “will,” “might,” “outlook,” “could,” “would,” “pursue,” “target,” “project,” “plan,” “seek,” “should,” “assume,” or similar terms or the negatives thereof, although not all forward-looking statements contain those identifying words. Such statements speak only as of the
date of such statement, and we undertake no ongoing obligation to update such statements. These statements appear in a number of places in this prospectus and include statements regarding the intent, belief or current expectations of the Company with respect to, among other things:
● | trends affecting our financial condition, results of operations or future prospects; | |
● | our growth strategies; | |
● | our financing plans and forecasts; | |
● | the factors that we expect to contribute to our success and our ability to be successful in the future; | |
● | our business model and strategy for realizing positive results when sales begin; | |
● | competition, including our ability to respond to such competition and its expectations regarding continued competition in the market in which we compete; | |
● | expenses; | |
● | our expectations with respect to continued disruptions in the global capital markets and reduced levels of user spending and the impact of these trends on its financial results; | |
● | our ability to meet our projected operating expenditures and the costs associated with development of new projects; | |
● | our ability to pay dividends or to pay any specific rate of dividends, if declared; | |
● | the impact of new accounting pronouncements on its financial statements; | |
● | our market risk exposure and efforts to minimize risk; | |
● | development opportunities and its ability to successfully take advantage of such opportunities; | |
● | regulations, including anticipated taxes, tax credits or tax refunds expected; and | |
● | the outcome of tax audits and assessments, should they occur, including appeals thereof, timing of resolution of such audits, our estimate as to the amount of taxes that will ultimately be owed and the impact of these audits on our financial statements. |
| 16 |
| Table of Contents |
● | Potential investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that, should conditions change or should any one or more of the risks or uncertainties materialize or should any of the underlying assumptions prove incorrect, actual results may differ materially from those projected in the forward-looking statements as a result of various factors, some of which are unknown. The factors that could adversely affect the actual results and performance of the Company include the fact that: |
● | growth of operations will depend on the acceptance of our products and consumer discretionary spending; | |
● | we have limited management resources and are dependent on key executives; | |
● | competition that we face is varied and strong; | |
● | we depend on a small number of large retailers for a significant portion of our sales; | |
● | we may fail to comply with applicable government laws and regulations; | |
● | we face various operating hazards that could result in the reduction of our operations; and |
● | Potential investors are urged to carefully consider such factors. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements and the “Risk Factors” described herein. |
| 17 |
| Table of Contents |
We estimate that the proceeds from our issuance and sale of shares of our common stock in this offering will be approximately $12,600,000, prior to deduction of offering costs, assuming a public offering price of $0.12 per share and the exercise of underlying warrants with an exercise price of $0.15 per warrant share.
We intend to use substantially all of the net proceeds from this offering to fund business operations, including the development and sale of our products, and for working capital and general corporate purposes.
The shares of common stock to be sold will be sold at a fixed price of $0.12 per share until such time as our shares are listed on a national securities exchange or quoted on the OTC Bulletin Board, OTCQX or OTCQB, at which time the shares may be sold at prevailing market prices or in privately negotiated transactions.
This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds from this offering.
USE OF PROCEEDS (1)
|
|
| 100% |
|
|
| 75% | $ |
|
| 50% |
|
|
| 25% |
|
|
| 10% |
Ongoing R&D and product development |
| $ | 6,350,000 |
|
| $ | 4,762,500 |
|
| $ | 3,175,000 |
|
| $ | 1,587,500 |
|
| $ | 750,000 |
Sales and Marketing |
| $ | 2,730,000 |
|
| $ | 2,047,500 |
|
| $ | 1,365,000 |
|
| $ | 682,500 |
|
| $ | 150,000 |
Executive salary and management costs |
| $ | 1,540,000 |
|
| $ | 1,155,000 |
|
| $ | 770,000 |
|
| $ | 385,000 |
|
| $ | 200,000 |
Office, support personnel and overhead |
| $ | 950,000 |
|
| $ | 712,500 |
|
| $ | 475,000 |
|
| $ | 237,500 |
|
| $ | 75,000 |
Professional fees and services |
| $ | 915,000 |
|
| $ | 686,250 |
|
| $ | 457,500 |
|
| $ | 228,750 |
|
| $ | 75,000 |
Miscellaneous |
| $ | 115,000 |
|
| $ | 86,250 |
|
| $ | 57,500 |
|
| $ | 28,750 |
|
| $ | 10,000 |
|
| $ | 12,600,000 |
|
| $ | 9,450,000 |
|
| $ | 6,300,000 |
|
| $ | 3,150,000 |
|
| $ | 1,260,000 |
(1) | Offering expenses expected to be $133,544 will be borne by the Company and not deducted from Gross proceeds. |
If we require additional funding, we will seek such funds through a Notes offering conducted under Regulation S, and loans from officers, directors and business associated and entities controlled by them in order to continue our operations. As with any form of financing, there are uncertainties concerning the availability of such funds on terms acceptable to us, as we have not received any firm commitments or indications of interest from our friends, family members, or business acquaintances regarding potential investments in our Company.
PLAN OF DISTRIBUTION; TERMS OF THE OFFERING
This Prospectus relates to the resale of 200,031,733shares of common stock by the selling stockholders and 21,998,323 shares of common stock underlying warrants held by our selling stockholders. The table below sets forth information with respect to the resale of shares of common stock by the selling stockholders. We will not receive any proceeds from the resale of common stock by the selling stockholders for shares currently outstanding, but we will receive proceeds from the sale of our newly issued common shares, as well as any exercise of warrants to be issued to new investors, as well as the exercise of warrants held by our selling shareholders. Except as described in footnotes below, none of the selling stockholders have had a material relationship with us since our inception.
| 18 |
| Table of Contents |
Selling Shareholders
Name |
| Common Stock Beneficially Owned Before Resale |
|
| Amount Offered (Assuming all shares sold separately) |
|
| Common Stock Beneficially Owned After Resale |
| |||
Asaf Talmor Wertheimer(1) |
|
| 3,999,999 |
|
|
| 3,999,999 |
|
|
| -- |
|
S.B Meger Consulting, Management and Investment(1)(2) |
|
| 1,500,000 |
|
|
| 1,500,000 |
|
|
| -- |
|
Eran Sela(1) |
|
| 4,000,000 |
|
|
| 4,000,000 |
|
|
| -- |
|
David Kyte(1) |
|
| 3,000,000 |
|
|
| 3,000,000 |
|
|
|
|
|
Roberta P Dubrow Marital Trust(1)(3) |
|
| 1,000,000 |
|
|
| 1,000,000 |
|
|
| -- |
|
Pareto Optimum, LP(1)(4) |
|
| 15,000,000 |
|
|
| 15,000,000 |
|
|
| -- |
|
Dolder investments LTD(1)(5) |
|
| 720,000 |
|
|
| 720,000 |
|
|
| -- |
|
Oras Capital(1)(6) |
|
| 2,000,000 |
|
|
| 2,000,000 |
|
|
| -- |
|
Leader & co Finance (2001) Ltd(1)(7) |
|
| 200,000 |
|
|
| 200,000 |
|
|
| -- |
|
Erez Haver Adv. Law Firm(1)(8) |
|
| 1,000,000 |
|
|
| 1,000,000 |
|
|
| -- |
|
Moni Bar-El(1) |
|
| 600,000 |
|
|
| 600,000 |
|
|
| -- |
|
Ofer Shalev(1) |
|
| 1,000,000 |
|
|
| 1,000,000 |
|
|
| -- |
|
Shay Feldman(1) |
|
| 600,000 |
|
|
| 600,000 |
|
|
| -- |
|
Eli Menik(1) |
|
| 600,000 |
|
|
| 600,000 |
|
|
| -- |
|
Ruby Hersh(1) |
|
| 600,000 |
|
|
| 600,000 |
|
|
| -- |
|
Miri and Shahar Cohen(1) |
|
| 600,000 |
|
|
| 600,000 |
|
|
| -- |
|
Tereze Ben Soshan(1) |
|
| 600,000 |
|
|
| 600,000 |
|
|
| -- |
|
Tom Uliel(1) |
|
| 600,000 |
|
|
| 600,000 |
|
|
| -- |
|
Aron (Aharon) Cohen(9) |
|
| 9,739,572 |
|
|
| 9,739,572 |
|
|
| -- |
|
Asaf Talmor Wertheimer(9) |
|
| 7,791,658 |
|
|
| 7,791,658 |
|
|
| -- |
|
Marital T/I Roberta P. Dubrow(9)(3) |
|
| 2,921,872 |
|
|
| 2,921,872 |
|
|
| -- |
|
David Kyte(9) |
|
| 15,583,315 |
|
|
| 15,583,315 |
|
|
| -- |
|
Galnir Management and Investments Ltd.(9)(10) |
|
| 5,843,743 |
|
|
| 5,843,743 |
|
|
| -- |
|
Iris Vermouth(9) |
|
| 3,895,829 |
|
|
| 3,895,829 |
|
|
| -- |
|
Jonny Kaye(9) |
|
| 9,739,572 |
|
|
| 9,739,572 |
|
|
| -- |
|
Oras Capital Ltd(9)(6) |
|
| 5,843,743 |
|
|
| 5,843,743 |
|
|
| -- |
|
Zwi Williger(9) |
|
| 7,791,658 |
|
|
| 7,791,658 |
|
|
| -- |
|
Schachaf Ohana(9) |
|
| 3,895,829 |
|
|
| 3,895,829 |
|
|
| -- |
|
Eran Sela(9) |
|
| 3,895,829 |
|
|
| 3,895,829 |
|
|
| -- |
|
Ritz Investments Limited(9)(11) |
|
| 7,791,657 |
|
|
| 7,791,657 |
|
|
| -- |
|
GT Ventures Ltd.(9)(12) |
|
| 30,192,673 |
|
|
| 30,192,673 |
|
|
| -- |
|
Erez Haver Adv. Law Firm(9)(8) |
|
| 1,947,914 |
|
|
| 1,947,914 |
|
|
| -- |
|
Smith Family Descendants Trust(9)(13) |
|
| 9,739,572 |
|
|
| 9,739,572 |
|
|
| -- |
|
CLOS Trading, Ltd.(14) |
|
| 7,791,658 |
|
|
| 7,791,658 |
|
|
| -- |
|
Everest Credit, LP(15) |
|
| 71,683,250 |
|
|
| 13,313,062 |
|
|
| 58,370,188 |
|
Everest Corporate Finance Ltd. (15) |
|
| 5,661,938 |
|
|
| 5,661,938 |
|
|
| -- |
|
Yaron Elhawi TR UA 02/01/2021 Yaron Elhawi Trust Royal App, Ltd in Liquidation(16) |
|
| 22,647,751 |
|
|
| 22,647,751 |
|
|
| -- |
|
Rosario Capital Ltd.(17)(18) |
|
| 208,333 |
|
|
| 208,333 |
|
|
| -- |
|
David Kyte (18) |
|
| 625,000 |
|
|
| 625,000 |
|
|
| -- |
|
Jonny Kaye (18) |
|
| 416,666 |
|
|
| 416,666 |
|
|
| -- |
|
Aron (Aharon) Cohen (18) |
|
| 416,666 |
|
|
| 416,666 |
|
|
| -- |
|
David Kyte (19) |
|
| 1,575,000 |
|
|
| 1,575,000 |
|
|
| -- |
|
Everest Credit LP (15)(19) |
|
| 717,269 |
|
|
| 717,269 |
|
|
| -- |
|
Asaf Wertheimer Talmor (19) |
|
| 700,000 |
|
|
| 700,000 |
|
|
| -- |
|
Maoz Everest Fund Management Limited (19)(21) |
|
| 497,840 |
|
|
| 497,840 |
|
|
| -- |
|
Jonny Kaye (19) |
|
| 728,000 |
|
|
| 728,000 |
|
|
| -- |
|
Aron (Aharon) Cohen (19) |
|
| 728,000 |
|
|
| 728,000 |
|
|
| -- |
|
Rosario Capital Ltd. (18)(19) |
|
| 368,438 |
|
|
| 368,438 |
|
|
| -- |
|
Yaron Hason (19) |
|
| 350,000 |
|
|
| 350,000 |
|
|
| -- |
|
Yariv Hason (19) |
|
| 350,000 |
|
|
| 350,000 |
|
|
| -- |
|
Ehud Gabrieli Advocate (19) |
|
| 119,000 |
|
|
| 119,000 |
|
|
| -- |
|
Seligsohn Gabrieli Benshafrut Ltd. (19) (20) |
|
| 462,000 |
|
|
| 462,000 |
|
|
| -- |
|
Nahum Gabrieli Advocate (19) |
|
| 119,000 |
|
|
| 119,000 |
|
|
| -- |
|
1) | Consists of shares of common stock and shares of common stock underlying warrants sold as part of the 2021 PIPE offering. Each purchaser received shares of common stock as well as one half warrant for each share of common stock purchased, all of which are being registered. The shares of common stock were purchased at a price of $0.075 per share, and the warrants have an exercise price of $0.0975 per share. |
| 19 |
| Table of Contents |
2) | The control persons for S.B. Meger Consulting, Management and Investment are Sagiv and Bianca Meger. | |
3) | The control person for the selling shareholder is Julie Duncan. | |
4) | The control person for the selling shareholder is Shay Shalom. | |
5) | The control person for the selling shareholder is Shai Podoshin. | |
6) | The control person for the selling shareholder is Eyal Sheratzky. | |
7) | The control person for the selling shareholder is Shay Ben Yakar. | |
8) | The control person for the selling shareholder is Erez Haver. | |
9) | Represents shares issued pursuant to the conversion of our preferred stock pursuant to our 2021 SAFE offering. |
10) | The control person for the selling shareholder is Nir Sheratzky. | |
11) | The control person for the selling shareholder is Daniele Rudich. | |
12) | The control person for the selling shareholder is Trident Chambers. | |
13) | The control person for the selling shareholder is Marnie Naiburg-Smith. | |
14) | Consists of shares underlying warrants issued to CLOS Trading, Ltd. The control person for CLOS Trading, Ltd. Is Itay Strum. | |
15) | Consists of shares issued to Everest Credit, LP and Everest Corporate Finance Ltd. The control person for each of Everest Credit, LP and Everest Corporate Finance Ltd. is Elchanan Maoz. | |
16) | Consists of shares of common stock issued pursuant to our acquisition of Royal App, Ltd. The control person for the shareholder is Yaron Elhawi. | |
17) | The Control person for the selling shareholder is Ros-ario Securities Ltd., whose sole shareholder is Mr. Ruben Eblagon. | |
18) | Represents common shares underlying warrants issued in connection with a Note Offering, with an exercise price of $0.12 per share. | |
19) | Represents shares of common stock issued pursuant to a Note and Securities Purchase Agreement. | |
20) | The Control person for the selling shareholder is Nahum Gabrieli. | |
21) | The control person for Maoz Everest Fund Management Limited is Elchanan Maoz. |
| 20 |
| Table of Contents |
All shares included in the original registration statement were issued pursuant to Regulation S or Section 4(a)(2).
Our common stock is currently traded on the OTC Pink Marketplace under the symbol “WOWI”.
The Offering price of the shares has been arbitrarily determined by us based on estimates of the price that purchasers of speculative securities, such as the shares offered herein, will be willing to pay considering the nature and capital structure of our Company, the experience of the officers and Directors, and the market conditions for the sale of equity securities in similar companies. The Offering price of the shares bears no relationship to the assets, earnings or book value of our Company, or any other objective standard of value. We believe that only a small number of shares, if any, will be sold by the selling shareholders, prior to the time our common stock is quoted on the OTCQB at which time the selling shareholders will sell their shares based on the market price of such shares. Until such time, the shares will be sold at a fixed price of $0.12 per share.
The Selling Security Holders may pledge their shares to their brokers under the margin provisions of customer agreements. If a Selling Security Holder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares.
The anti-manipulation provisions of Regulation M under the Securities Exchange Act of 1934 will apply to purchases and sales of shares of Common Stock by the Selling Security Holders. Additionally, there are restrictions on market-making activities by persons engaged in the distribution of the shares. Neither Selling Security Holders nor their agents shall bid for, purchase, or attempt to induce any person to bid for or purchase shares of our Common Stock while they are distributing shares covered by this Prospectus.
Accordingly, the Selling Security Holders are not permitted to cover short sales by purchasing shares while the distribution is taking place. We will advise the Selling Security Holders that if a particular offer of Common Stock is to be made on terms materially different from the information set forth in this Plan of Distribution, then a post-effective amendment to the accompanying Registration Statement must be filed with the Securities and Exchange Commission.
Broker-dealers engaged by the Selling Security Holders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Security Holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. It is not expected that these commissions and discounts will exceed what is customary in the types of transactions involved.
The Selling Security Holders may be deemed to be an “underwriter” within the meaning of Section 27A of the Securities Act in connection with such sales. Therefore, any commissions received by such broker-dealers or agents and any profit on the resale of 1933, as amended (the "Securities Act"),the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
Penny Stock Regulation
Our Common Shares are not quoted on any stock exchange or quotation system. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange system).
| 21 |
| Table of Contents |
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, that:
· | contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; | |
· | contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties; | |
· | contains a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the bid and ask price; | |
· | contains a toll-free telephone number for inquiries on disciplinary actions; | |
· | defines significant terms in the disclosure document or in the conduct of trading penny stocks; and, | |
· | contains such other information and is in such form (including language, type, size, and format) as the SEC shall require by rule or regulation. |
The broker-dealer also must provide the customer with the following, prior to proceeding with any transaction in a penny stock:
· | bid and offer quotations for the penny stock; | |
· | details of the compensation of the broker-dealer and its salesperson in the transaction; | |
· | the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and, | |
· | monthly account statements showing the market value of each penny stock held in the customer’s account. |
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling those securities.
Offering Period and Expiration Date
This Offering will start on the safe
harbor createddate this Registration Statement is declared effective by that section. Certain factors that could cause results to
differ materially from those projectedthe SEC and continue for a period of 365 days. We may extend the offering period for an additional 90 days, unless the Offering is completed or otherwise terminated by us.
| 22 |
| Table of Contents |
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is quoted on the OTC Pink market, under the symbol “WOWI”.
The following table sets forth the range of high and low bid prices of our common stock as reported and summarized on the OTC Pink market, as applicable, for the periods indicated. These prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.
|
| Fiscal Year 2022 |
| |||||
|
| High |
|
| Low |
| ||
First Quarter |
| $ | 0.14 |
|
| $ | 0.05 |
|
Second Quarter |
| $ | 0.14 |
|
| $ | 0.06 |
|
|
| Fiscal Year 2021 |
| |||||
|
| High |
|
| Low |
| ||
First Quarter |
| $ | 0.03 |
|
| $ | 0.01 |
|
Second Quarter |
| $ | 0.37 |
|
| $ | 0.06 |
|
Third Quarter |
| $ | 0.17 |
|
| $ | 0.02 |
|
Fourth Quarter |
| $ | 0.18 |
|
| $ | 0.07 |
|
|
|
|
|
|
|
|
|
|
|
| Fiscal Year 2020 | ||||||
|
| High |
|
| Low |
| ||
First Quarter |
| $ | 0.05 |
|
| $ | 0.006 |
|
Second Quarter |
| $ | 0.02 |
|
| $ | 0.006 |
|
Third Quarter |
| $ | 0.02 |
|
| $ | 0.004 |
|
Fourth Quarter |
| $ | 0.02 |
|
| $ | 0.004 |
|
|
|
|
|
|
| |||
|
| Fiscal Year 2019 | ||||||
|
| High |
|
| Low |
| ||
First Quarter |
| $ | 0.03 |
|
| $ | 0.004 |
|
Second Quarter |
| $ | 0.03 |
|
| $ | 0.01 |
|
Third Quarter |
| $ | 0.02 |
|
| $ | 0.006 |
|
Fourth Quarter |
| $ | 0.02 |
|
| $ | 0.004 |
|
Holders of Our Common Stock
As of the date of this prospectus, we have 64 registered holders of common stock and there are 264,635,247 shares of our common stock outstanding.
| 23 |
| Table of Contents |
We have never declared or paid any cash dividends on our common stock and we do not anticipate paying any cash dividends on our common stock for the foreseeable future. The payment of dividends on common stock, if any, in the forward-looking statements are set
forthfuture is within the discretion of our board of directors and will depend on our earnings, capital requirements and financial condition and other relevant facts. We currently intend to retain all future earnings, if any, to finance the development and growth of our business.
The following table presents a summary of our cash and cash equivalents and capitalization as of June 30, 2022:
● | on an actual basis; and | |
● | on an as adjusted basis to give effect to the issuance and sale of 80,000,000 shares of our common stock in this offering at the assumed public offering price of $0.12 per share. |
The unaudited as adjusted information below is prepared for illustrative purposes only and our capitalization following the completion of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. You should read the following table in "Risk Factors," "Management'sconjunction with “Selected Financial Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” and "Business."
4
10
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. The Company
believes that the information set forthhistorical financial statements and related notes thereto included elsewhere in this Prospectus underprospectus.
|
| June 30, 2022 On an actual basis |
|
| Offering * |
|
| June 30, 2022 As adjusted |
| |||
|
|
|
|
|
|
|
|
|
| |||
Assets |
|
|
|
|
|
|
|
|
| |||
Current assets: |
|
|
|
|
|
|
|
|
| |||
Cash and cash equivalents# |
| $ | 495,268 |
|
| $ | 9,600,000 |
|
| $ | 10,095,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued and outstanding |
|
| 264,635,247 |
|
|
| 80,000,000 |
|
|
| 344,635,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net value per share |
| $ | 0.0019 |
|
| $ | 0.12 |
|
| $ | 0.0292 |
|
# Includes cash proceeds of $369,000 received in August 2022 for which common shares have been issued as part of a Note and Securities Purchase Agreement.
*Assumes Offering is fully subscribed for total gross proceeds for $9,600,000 from the captions
"Prospectus Summary," "Management's Discussion and Analysissale of Financial
Condition and Results of Operations" and "Business" includes "forward-looking
statements" within80,000,000 at $0.12 per shares.
If you purchase shares in this offering your interest will be diluted immediately to the meaning of Section 27Aextent of the Securities Actdifference between the assumed public offering price of 1933,$0.12 per share and the as amended (the "Securities Act") and is subjectadjusted net tangible book value per share of our common stock immediately following this offering. Net tangible book value dilution per share to new investors represents the safe harbor createddifference between the amount per share paid by that
section. Certain factors that could cause results to differ materially from
those projected in the forward-looking statements are set forth in "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." In addition to the other informationpurchasers in this Prospectus, the following risk factors should be considered carefully in
evaluating an investment in the shares of Common Stock offered by this
Prospectus.
LIMITED OPERATING HISTORY; PRIOR LOSSES
The Company was formed in 1989 and to date has focused on developing,
test-marketing and refining EDA services that it believes possess significant
long-term market potential as well as expanding into new markets. Accordingly,
the Company's financial results have been characterized by low but increasing
revenues, relatively high levels of expenses, and net losses. The Company
incurred net losses of $1,724,067, $5,035,090, and $4,072,646 for the years
ended December 31, 1995, 1994, and 1993, respectively. The three months ended
March 31, 1996 was the first fiscal quarter in which the Company reported net
income, and as of March 31, 1996, although the Company had shareholders' equity
of approximately $5,357,000, it had an accumulated deficit of approximately
$16,152,000. The Company's operations continue to be subject to all the risks
inherent in the establishment of a new business enterprise. These include, but
are not limited to, factors relating to competition, complications and setbacks
in the further development of its EDA and other servicesoffering and the cost of
establishing call centers to service new markets. No assurance can be given that
the Company will be profitable in the future or that past revenue growth rates
will continue or be repeated in any future period.
NEED FOR EXPANSION OF SERVICES TO ADDITIONAL LOCATIONS AND MULTIPLE CUSTOMERS
The Company believes that achievement of a substantial and sustainable
level of profitability is dependent on its ability to deliver EDA to additional
customers in new markets and multiple customers at each call center. Although
the Company has a number of contracts for delivery of its EDA and other
services, there is no assurance that the Company will be successful in expanding
its services to a sufficient number of new customers or markets to achieve
substantial and sustainable profitability or that it will be able to sustain
past growth rates. Additionally, there is no assurance that the Company will
retain its customers for extended periods of time or at existing price levels.
See "Expiration of Enhanced Directory Assistance Agreements."
CONCENTRATION OF BUSINESS; LIMITED CUSTOMER BASE
Although the Company seeks to increase the number of its EDA contracts with
cellular and other wireless carriers, the nature of ownership and/or operational
control of the major cellular markets limits the Company's potential customers
in those markets. Only two cellular carriers, one owned or controlled by a
landline telephone company and one originally owned or controlled by a
non-landline company, generally serve each geographic cellular market.
Furthermore, 10 entities dominate the national cellular market, including AT&T
Wireless Services, GTE Mobilnet, the Regional Bell Operating Companies ("RBOC")
owned or affiliated cellular companies and several independents. Three of these
10 dominant entities represented approximately 72% and 81% of the Company's
revenues in fiscal 1995 and 1994, respectively. There is no assurance that the
Company will maintain satisfactory relationships with these significant
customers. Any failure of the Company to maintain a satisfactory relationship
with any of these significant customers could have a material adverse effect on
the Company's business, financial conditions and results of operation. See
"Business -- Customers and Markets."
5
11
EXPIRATION OF ENHANCED DIRECTORY ASSISTANCE AGREEMENTS
The Company has 12 significant EDA contracts with seven different carriers
to provide EDA in 13 metropolitan markets. Of these contracts, four expire in
1997, seven expire in 1998, and one expires in 2000. There is no assurance that
any of these contracts will be renewed. During the first quarter of 1996, the
Company's contract with AirTouch Cellular in the San Diego market expired.
Although the Company participated in a competitive bidding process, the Company
was unable to secure renewal on terms and conditions that were acceptable to the
Company. During the negotiations, the carrier sought rates below prior contract
rates and an exclusivity commitment in markets served by the carrier.
In July 1994, AirTouch Cellular and US West NewVector announced their
intention to combine their cellular properties in a multi-phase transaction.
AirTouch Cellular has also formed a partnership, called TOMCOM, L.P., with Bell
Atlantic and NYNEX to develop common service standards, pursue national
marketing strategies, develop information technology, create a national
distribution strategy and implement joint purchasing arrangements. Unlike the
AirTouch Cellular/US West NewVector partnership, however, TOMCOM does not
contemplate a merger of cellular properties. Two of the Company's contracts with
certain of those TOMCOM participants are up for renewal in 1997, with three in
subsequent years.
While the implications of the non-renewal of the AirTouch Cellular EDA
contract for its San Diego market are unclear, the Company believes this
decision may serve as a precedent for AirTouch Cellular and the other TOMCOM
participants as they establish or consider the renewal of EDA contracts in other
markets in the future. Accordingly, there can be no assurance that the Company
will renew its contracts with US West NewVector or any other TOMCOM participant
or that the Company will have the opportunity to obtain new contracts with any
of these carriers in the future. If these contracts are not renewed, there is no
assurance that the Company will be able to replace these contracts with
contracts with other carriers. Contracts with TOMCOM participants accounted for
approximately 50% of the Company's revenues in 1995. Consequently, the failure
of the Company to obtain the renewal of these contracts or to obtain replacement
contracts would have a material adverse effect on the Company's business,
financial condition and results of operation. The Company intends to provide its
EDA under its current contracts with TOMCOM participants through their
respective termination dates upon which it will seek renewal on acceptable
terms. See "Business -- Customers and Markets."
RAPIDLY CHANGING TELECOMMUNICATIONS MARKET
Recent events, including the PCS license auctions and the passage of the
Telecommunications Act of 1996, are expected to result in an increasing number
of telecommunications providers operating in each market. This may result in
competitive situations which could unfavorably impact the Company, such as the
withdrawal of a customer from a market that the Company services or the
acquisition or merger of a major customer, where the acquiror or surviving
entity provides its directory assistance or enhanced directory assistance
through arrangements other than with the Company or exerts substantial influence
on the contract negotiation process. In addition, the creation of alliances and
joint ventures among telecommunications providers, such as the TOMCOM, L.P.
alliance discussed above, may increase the negotiating leverage for these
carriers as they deal with providers of enhanced directory assistance such as
the Company. Although the Company believes that an increase in the number of
providers generally will be beneficial to the Company as the providers look for
ways to differentiate their services, no assurance can be given that the
Company, either directly or indirectly, will not be adversely impacted by the
potential changes in the marketplace.
COMPETITION
The Company expects competition in the enhanced directory assistance market
to intensify as the public's demand for more comprehensive, easy-to-use
directory assistance information increases and as new technologies and systems
are developed to deliver this information in a cost-effective and convenient
manner. The Company faces current or potential competition from RBOC and
non-RBOC owned or affiliated landline and cellular carriers, and independent
companies. Although the Company believes that none of these competitors
presently offers enhanced directory assistance that incorporates all the
connectivity and content
6
12
features of the Company's EDA, these competitors and some entities with which
the Company may compete in the future have substantially greater financial,
technical and marketing resources than the Company. In addition, although the
Company believes that it has developed and implemented various computer
hardware-, software- and telecommunications-based tools that provide it certain
competitive advantages, barriers to entry in the EDA market are relatively low
and the Company may face competition in the future from new market entrants.
There is no assurance that the Company will be able to compete effectively
against such competitors. There is also no assurance that the Company will be
able to continue to price its EDA services competitively in the EDA marketplace.
See "Business -- Competition."
TECHNOLOGICAL CHANGE
Telecommunications and the related directory assistance market are
currently characterized by rapid technological change, frequent introductions of
new and enhanced products and services, and changing consumer demands. As
competition in this industry from a broader range of competitors increases, the
pace of technological change will accelerate. Although the Company is not aware
of any existing enhanced directory assistance services that it believes are
superior to the Company's EDA, new services may be developed, or existing
services refined, so as to render the Company's EDA technologically or
economically obsolete or less marketable. Additionally, information services
provided by others, no matter how dissimilar to the Company's EDA, may be
perceived by end users as being equal or superior to the Company's product
offerings. The Company's success will be dependent, in part, upon its ability to
anticipate changes in technology and industry standards and to successfully
develop and introduce new and improved EDA and other telecommunications
services, which may require substantial expenditures. There is no assurance that
the Company will be able to do so, that it will have adequate financial
resources to undertake such development, or that it will not encounter technical
or other difficulties that could delay the introduction of its services or
enhancements thereof.
UNCERTAINTY OF MARKET ACCEPTANCE OF ENHANCED DIRECTORY ASSISTANCE
Traditional directory assistance simply provides callers with the phone
numbers of specific parties listed in the directory assistance provider's
database. By contrast, enhanced directory assistance supplies a broader range of
information. The EDA market is relatively new and evolving and it is difficult
to predict the future growth rate and size of the market. Market acceptance of
the Company's EDA will depend in part on the Company's ability to demonstrate to
carriers the benefits to be derived by them from providing EDA to carrier
subscribers, on the marketing efforts of carriers to promote EDA usage and on
the subscribers' acceptance of EDA in volumes and at rates that render the
service profitable. No assurance can be given that present levels of market
acceptance will be sustained, that the carriers' subscribers will not prefer
traditional directory assistance at a lower price, that markets for enhanced
directory assistance will develop further or, if they do, that the Company's EDA
will achieve further market acceptance. The Company's operating revenues have
been and can be expected to continue to be derived exclusively from EDA. Failure
of the Company's EDA to achieve further market acceptance could have a material
adverse effect on the Company's business, financial condition and results of
operation.
INTELLECTUAL PROPERTY
The Company believes that its success in the enhanced directory assistance
market is due in part to its significant emphasis on the development and
implementation of various computer, hardware-, software- and
telecommunications-based tools. To a limited extent, the Company relies upon a
combination of trade secret, patent and other intellectual property law,
non-disclosure agreements and other protective measures to preserve its rights
pertaining to its EDA, but there is no assurance that the Company can
meaningfully protect its intellectual property. Thus, such protection may not
preclude competitors from developing services competitive with those of the
Company. In the general telecommunications environment where patents cannot
easily be obtained, the Company depends to a greater extent on its development
and marketing capabilities and its ability to configure and maintain available
software and hardware technologies to its strategic advantage, which the Company
considers its trade secrets.
7
13
In the wireless market, the Company relies on the technologies of carriers
and on their technical interface with landline carriers. To remain competitive,
the Company must adapt and improve upon its current technology in response to
changes in the technologies in both the wireless and general landline
telecommunications systems. There is no assurance that the Company will be
successful in making such improvements or adaptations on a timely basis or at
all. The Company is not aware of any pending or threatened claims that affect
any of the Company's intellectual property rights. If any infringement claim is
asserted against the Company, the Company may seek to obtain a license of the
other party's intellectual property rights. There is no assurance that a license
would be available on reasonable terms or at all. Litigation with respect to
patents or other intellectual property matters could result in substantial costs
and diversion of management and other resources and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON KEY PERSONNEL
The success of the Company will depend to a large extent on the abilities
and continued participation of certain key employees. The loss of these key
employees could have a material adverse effect on the business of the Company.
Although the Company holds key person life insurance on the lives of its
President, Timothy A. Timmins, and its Executive Vice President, Patrick M. Cox,
and has entered into employment contracts with each of them, no assurance can be
given that the Company will not be adversely impacted in the future by the loss
of one or more of these or other key employees. The Company's future success and
ability to manage future growth will also depend in part upon its ability to
attract and retain additional qualified employees. As the Company competes with
other organizations for such employees, there is no assurance that it will be
successful in hiring or retaining such employees.
QUALITY AND AVAILABILITY OF DATA
The Company's operations are dependent upon access to names, telephone
numbers and other information supplied to callers directly or used in providing
call completion. The Company obtains such data from a variety of sources,
including purchase from RBOCs, purchase from commercial vendors, electronic
access for a fee and printed material. Such data vary widely across geographic
regions as to availability, quality and usefulness for the Company's purposes.
Inadequate data may delay operator responsiveness to a caller inquiry or prevent
that inquiry from being serviced effectively. Additionally, due to individual
and business mobility or address or telephone number changes, such data degrade
over time and need to be updated periodically. The frequency and completeness of
such updating may also affect the quality of the Company's EDA services and its
operational efficiency. Ultimately, satisfaction of the Company's carrier
customers is dependent upon the quality of service being provided to the
carrier's subscribers. Although the Company believes that it obtains its data in
a manner that allows it to provide quality service to its customers, there is no
assurance that the Company will have access to sufficient and quality data or
that the Company can obtain and update data in a manner and at prices that allow
the Company to successfully and economically maintain or improve current service
levels.
RELIANCE ON THIRD PARTY PROGRAMMERS
The Company provides its EDA services through the use of sophisticated
switching equipment. Currently, the Company retains the services of one
engineering firm to assist in programming these switches. As a result, this firm
has significant familiarity with the technological method by which the Company
delivers its EDA. Although the Company believes that such programming services
are available from multiple sources, if the Company was unable to obtain the
services of this firm, the Company might be required to obtain similar services
from other parties or devote its own resources to such programming. The
development of such an alternative approach could involve significant time and
expense and diminish the Company's ability to provide quality service or even
delay the Company's ability to provide its EDA to its customers. Any such
decrease or delay in service could have a material adverse effect on the
Company's business, financial condition and results of operations.
POTENTIAL FOR UNIONIZATION; STAFFING
The telecommunications industry, particularly with respect to larger
telecommunications companies, is characterized by widespread union membership
among its operators and other workers. Although the
8
14
Company believes that its relations with its employees are good, no assurance
can be given that unionization will not occur in the future. The occurrence of
such an event would likely have a material adverse effect on the Company's
business, financial condition, and results of operations. Furthermore, the
Company is dependent upon the available labor pool for its operators and no
assurance can be given that the Company will be able to continue to attract
qualified staff at competitive wages.
RESCISSION RIGHTS OF CERTAIN SHAREHOLDERS
Between 1989 and 1993, the Company financed its activities through
offerings of its Common Stock and debt securities that were converted into
shares of its Common Stock, which securities were sold directly to approximately
560 persons. During a review of these past financing activities in 1993, the
Company's management was unable to conclude that all applicable state and
federal securities laws had been complied with in all material respects in
connection with these offerings.
In 1994, the Company voluntarily executed a Consent Order with the State of
Oregon Division of Finance and Corporate Securities in which the Company agreed
to cease and desist from participating in any violations of Oregon securities
laws and paid a civil penalty of $20,000. In 1995, the Company offered to each
holder of its Common Stock as of March 31, 1995 who resided in Oregon the right
to rescind the holder's purchase of shares of the Company's Common Stock. Sales
of 135,414 shares of the Company's Common Stock were rescinded pursuant to the
rescission offering, resulting in payment by the Company of approximately
$738,660 to certain of its former shareholders, which included interest of
approximately $124,900.
The Company believes that its potential rescission liability to
shareholders who received the rescission offer for possible violations of Oregon
and federal law has been effectively eliminated as a result of the rescission
offer or the running of applicable statutes of limitation. However, the
Securities and Exchange Commission ("SEC") takes the position that liabilities
under the federal securities laws are not terminated by the making of a
rescission offering.
In addition, the rescission offer was made to holders of 119,843 shares of
the Company's Common Stock who resided in states in which the Company did not
register its rescission offer, and the rescission offer was not made to holders
of 528,215 shares of the Company's Common Stock who resided in states whose
securities laws do not permit rescission offerings or impose terms and
conditions on such offerings which were unacceptable to the Company. These
holders of 648,058 shares of Common Stock originally purchased such shares from
the Company at prices ranging from $0.88 to $8.05 a share; 515,064 of these
shares were purchased for $4.38 aadjusted net tangible book value per share or less. Although the Company also
believes that its potential rescission liability to many of these shareholders
may have been eliminated by the running of applicable statutes of limitation,
there can be no assurance that claims asserting violations of federal or state
securities laws will not be asserted against the Company or that certain holders
will not prevail against the Company in the assertion of such claims, thereby
compelling the Company to repurchase their shares. If all of these holders
successfully asserted claims that the Company repurchase their shares, the
Company believes it would be required to pay to these holders approximately
$2,049,162, plus approximately $525,000 in statutory interest, to repurchase
648,358 shares of the Company's Common Stock, representing an average repurchase
price of approximately $3.16 a share. Even if the Company were successful in
defending any securities law claims, the assertion of such claims against the
Company additionally could result in costly litigation and significant
diversions of effort by the Company's management. See "Business -- Securities
Law Issues" and "-- Legal Proceedings."
UNCERTAIN ABILITY TO MANAGE FUTURE GROWTH
Future growth by the Company will require it to increase the scale of its
operations and to address infrastructure and other requirements. Additionally,
each new market the Company enters or each new carrier which contracts for the
Company's EDA may present new and different challenges to the Company's growth.
Even if the Company successfully anticipates these challenges, there is no
assurance that the Company can accomplish the measures necessary for successful
growth. Moreover, technological change and customer demand may require the
Company to expand and develop other products and services. As the Company
expands, it may encounter various constraints that detrimentally affect its
ability to satisfy such demand.
9
15
Failure to manage growth effectively could adversely affect the Company's
business, financial condition and results of operation.
REGULATION
The services provided by the Company to its carrier customers are not
presently subject to direct government regulation. The Company's business
depends upon relationships with companies that are regulated by the Federal
Communications Commission ("FCC") or state public utility commissions ("PUCs").
Such regulation applies to all communications common carriers, including AT&T,
other long distance carriers, the RBOCs, and other local exchange carriers.
Enhanced service companies such as the Company are either unregulated or subject
to various levels of regulation on a state-by-state basis. In order to conduct
business, the Company must send information over the regulated public switched
network. The FCC regulates the telecommunications industry pursuant to the
Communications Act of 1934, as amended, and its authority extends to all
interstate and foreign communication by wire or radio. The FCC requires common
carriers to furnish communication service for a fee upon reasonable request in a
nondiscriminatory manner to any member of the public who requests it and is
qualified to receive it. The FCC also regulates rates of common carriers by
tariff to ensure that charges for telecommunication services are "fair and
reasonable." The FCC licenses common carriers, and state PUCs license carriers
for intrastate activities. Thus, the FCC and state PUCs have tremendous
influence over the suppression or promotion of competition. No assurance can be
given that the Company's business may not become subject to increased government
regulation in the future. See "Business -- Regulation."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock. There is no assurance that an active trading market will be
sustainedstock immediately after completion of this offeringoffering.
Our net tangible book value (negative) as of June 30, 2022 was approximately $(269,357), or thatapproximately ($0.00102) per share. Net tangible book value per share represents our total tangible assets less total tangible liabilities, excluding goodwill and customer relationship intangibles, divided by the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price of the Common Stock will be determined through
negotiations between the Company and the representative of the Underwriters. The
market for securities of small market capitalization companies has been highly
volatile in recent years, often as a result of factors unrelated to those
companies' operations. The Company believes quarterly fluctuations in its
financial results and factors not directly related to the Company's operating
performance, such as announcements of new developments relating to the
telecommunications market, could contribute to the volatility of the price of
its Common Stock, causing it to fluctuate significantly. These factors, as well
as general economic conditions, such as recessions or high interest rates, may
adversely affect the market price of the Common Stock. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of common stock outstanding as of September 1, 2022.
| 24 |
| Table of Contents |
After giving effect to the Common Stock in the public
market following this offering could adversely affect the market pricesale of the
Common Stock and the Company's ability to raise capital in the future in the
equity markets. Upon completion of this offering, there will be 9,819,250 shares of Common Stock outstanding, assuming no exercise of the Underwriters'
over-allotment option or of outstanding warrants or outstanding options under
the Company's Stock Incentive Plan after the date of this Prospectus. In
addition to the 2,000,000 shares soldour common stock in this offering approximately 1,425,387
shares not subject to lock-up agreements will be eligible for immediate resale
without restriction under Rule 144(k) of the Securities Act. An additional
163,377 shares held for more than two but less than three years by shareholders
who are not affiliates of the Company and who are not subject to lock-up
agreements are eligible for sale under Rule 144 of the Securities Act, subject
to the volume and other limitations thereunder. Upon expiration of lock-up
agreements with the representative of the Underwriters 180 days after the date
of this Prospectus (or earlier with the consent of Black & Company, Inc.),
2,134,026 shares will be eligible for immediate resale subject to the
limitations of Rule 144 and 2,960,144 shares will be eligible for resale
immediately without restriction pursuant to Rule 144(k). In addition, after this
offering, holders of 1,649,521 shares of Common Stock will have the right to
require the Company to register their shares of Common Stock under the
Securities Act, which would under certain circumstances permit such holders to
resell their shares without complying with
10
16
Rule 144. If the Company registers any of its securities under the Securities
Act, holders of options and warrants to purchase 458,164 shares of its Common
Stock will have the right to require the Company to register under the
Securities Act their shares of Common Stock purchasable upon the exercise of
their options or warrants subject to certain conditions and limitations, which
would under certain circumstances permit such holders to resell their shares
without restriction. As of the date of this Prospectus, options to purchase
1,162,598 shares of Common Stock have been granted under the Stock Incentive
Plan. See "Management -- Stock Incentive Plan," "Description of Capital Stock"
and "Shares Eligible for Future Sale."
POTENTIAL ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER EFFECT OF OREGON LAW
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock, and the Board of Directors has the authority to fix the preferences,
limitations and relative rights of those shares without any vote or action by
the shareholders. The potential issuance of Preferred Stock may delay or prevent
a change in control of the Company, may discourage bids for the Common Stock at a premium over the market price of the Common Stock and may adversely affect the
market price of, and the voting and other rights of the holders of, Common
Stock. The Oregon Control Share Act and the Business Combination Act limit the
ability of parties who acquire a significant amount of voting stock to exercise
control over the Company. These provisions may have the effect of lengthening
the time required for a person to acquire control of the Company through a proxy
contest or the election of a majority of the Board of Directors and may deter
efforts to obtain control of the Company. See "Description of Capital Stock."
DISCRETION AS TO USE OF PROCEEDS
As of the date of this Prospectus, the Company has not allocated to
specific uses the estimated net proceeds of this offering. Accordingly, the
Company's management will retain broad discretion to allocate the net proceeds
of this offering to uses that the shareholders may not deem desirable, and there
is no assurance that the proceeds can or will yield a significant return. See
"Use of Proceeds."
11
17
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of 1,000,000
shares of Common Stock offered hereby (assuming an initial public offering price of $9.00$0.12 per share, our as adjusted net tangible book value as of June 30, 2022, would have been $9,330,643, or $0.02707 per share. This represents an immediate increase in as adjusted net tangible book value of approximately $0.02809 per share to our existing stockholders, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses) are estimatedan immediate dilution of $0.09293 per share to be $7,570,000. The
Company intends to use the net proceeds frompurchasers of shares in this offering, for working capital
and other general corporate purposes, including the expansion of its call center
network and sales and marketing activities. A portion of the net proceeds may
also be used to acquire or invest in complementary businesses or to obtain the
right to use complementary technologies, although the Company has no
understandings, commitments or agreements, and has no current plans or
intentions, regarding any such acquisitions or investments. Pending the use of
the net proceeds for the above purposes, the Company intends to invest such
funds in investment-grade obligations, including interest-bearing investment
grade securities with maturities of one year or less. The Company will not
receive any of the proceeds from the sale of Common Stock by the Selling
Shareholders. The Company anticipates that 305,877 shares of the Common Stock to
be sold by Selling Shareholders will be obtained by the exercise of warrants
held by the Selling Shareholders. The Company anticipates that it will receive
proceedsas illustrated in the amount of $1,094,151 from the exercise of those warrants. See
"Principal and Selling Shareholders."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company intends to retain earnings from operations for use in the operation
and expansion of its business and does not anticipate paying cash dividends with
respect to the Common Stock in the foreseeable future. Furthermore, the
Company's existing line of credit agreement prohibits the payment of cash
dividends during the term thereof.
12
18
CAPITALIZATION
following table:
Assumed public offering price per share |
|
|
|
| $ | 0.12 |
| |
Net tangible book value per share as of June 30, 2022 |
| $ | (0.00102 | ) |
|
|
|
|
Increase per share attributable to new investors |
| $ | 0.02809 |
|
|
|
|
|
As adjusted net tangible book value per share after this offering |
|
|
|
|
| $ | 0.02707 |
|
Dilution per share to new investors in the offering |
|
|
|
|
| $ | 0.09293 |
|
The following table sets forth the capitalizationdifference between the offering price of the Company as of
March 31, 1996 and as adjusted to reflect the issuance of 305,877 shares of our Common Stock upon the exercise of certain of the Company's outstanding stock
purchase warrants on or prior to the offering in consideration of $1,094,151 in
cash and pro forma as adjusted to further reflect the sale of the 1,000,000
shares of Common Stock offered herebybeing sold by the Company, at an assumed initial
public offering price of $9.00the net tangible book value per share, and the receiptnet tangible book value per share after giving effect to the Offering by us, assuming that 100%, 75%, 50%, 25% and 10% of the offered shares are sold. Net tangible book value per share represents the amount of total tangible assets less total liabilities divided by the number of shares outstanding as of June 30, 2022. Totals may vary due to rounding. Note - the table below does not reflect offering costs estimated net
proceeds therefrom.
to be $133,544 which will be borne by the Company and not deducted from gross proceeds.
| 100% of offered shares are sold | 75% of offered shares are sold | 50% of offered shares are sold | 25% of offered shares are sold | 10% of offered shares are sold |
Offering Price | $0.12 per share | $0.12 per share | $0.12 per share | $0.12 per share | $0.12 per share |
Net tangible book value at June 30, 2022 (1) | $(0.00102) per share | $(0.00102) per share | $(0.00102) per share | $(0.00102) per share | $(0.00102) per share |
Net tangible book value after giving effect to the Offering proceeds | $0.02707 per share | $0.02135 per share | $0.01487 per share | $0.00749 per share | $0.00253 per share |
Increase in net tangible book value per share attributable to cash payments made by new investors | $0.02809 per share | $0.02237 per share | $0.01589 per share | $0.00850 per share | $0.00355 per share |
Per Share Dilution to New Investors | $0.09293 per share | $0.09865 per share | $0.10513 per share | $0.11251 per share | $0.11747 per share |
Percent Dilution to New Investors | 77% | 82% | 88% | 94% | 98% |
(1) | The number of shares |
● | 23,940,721shares of our common stock pursuant to issuances of stock options under our 2021 Stock Incentive Plan and 41,998,323 shares |
| 25 |
| Table of Contents |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “Selected Financial Data” and our financial statements and related notes included elsewhere in this Information Statement. Some of the information contained in this discussion and analysis or set forth elsewhere in this Information Statement, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those described below. You should read the “Risk Factors” section of this Information Statement for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Our Mission.
We enable retailers to grow their business, using mobile commerce to better engage their customers, both in-store and online – no code required.
Our Objective
Metro One Telecommunications, Inc., is focused on changing the way retailers integrate mobile commerce solutions within their business. Our multi-model, plug and play mobile commerce platformenables retailers to launch their own branded mobile application serving as an additional sales channel in a matter of a few hours – no code required.
Through our recently acquired Israeli tech company, Stratford Ltd., the Company will continue to merge the functionality of mobile technology, artificial intelligence “AI”, and Machine learning enabling retailers to quickly and easily bring their business online to significantly:
· | Increase customer retention (60%) | |
· | Increase average basket size (30%) | |
· | Increase Up sell and Cross sell x4 | |
· | Increase customers lifetime value CLV – drastic increase in repeat monthly purchases |
Currently we are in the process of transforming our existing suite of products to a fully modular SaaS based platform. This will enable us to scale the company significantly, onboarding multiple retailers simultaneously without any additional integration costs.
Highlights
The Company is a leading independent providerfollowing are highlights of EDAour operating results for the wireless
telecommunications industry. In 1989,year ended December 31, 2021 and three and six months ended June 30, 2022:
● | Revenue. During the three and six-month periods ended June 30, 2022, we generated revenue of $18,937 and $38,143, respectively. During the year ended December 31, 2021, we generated revenue of $170,622. Our revenue for the respective periods is primarily attributed to license fees, subscriptions, and customized professional services related to our mobile commerce software platform. | |
● | Operating expenses. During the three and six months ended June 30, 2022, our operating expenses were $577,778 and 1,345,360, respectively. During the fiscal year ended December 31, 2021, our operating expenses were $3,512,602. Our operating expenses include management fees, research and development costs, general and administrative expenses, sales and marketing costs and costs associated with our recent sales of securities. | |
● | Net income (loss). During the three and six months ended June 30, 2022 and the fiscal year ended December 31, 2021, the Company reported a net loss of $558,841, $1,192,356 and $3,341,980, respectively, or a loss of approximately $0.00, $0.01 and $0.04 per share. |
As we continue to onboard additional customers for our current software offerings and complete the development of a secondary SaaS mobile suite, we believe that the recently acquired Shelfy software suite will generate increasing revenues period over period. Historically, the Company was incorporated, openednot generating revenue from its operations. We expect our operational expenses to continue to exceed incoming revenues until such time as our secondary product effectively launches its full suite of solutions, with Enterprise clients as our main target market, planned for the first call centerquarter of 2023. We expect to continue to onboard new customers during fiscal 2022 once our new software offering has had its initial launch. While we continue to develop and began testingexpand our primary business operations during fiscal 2022, our revenues are not expected to be sufficient to meet our ongoing expenses. The recently acquired mobile software assets generated revenue in the three and offering EDA services. In 1991,six-month periods ended June 30, 2022 of $18,937 and $38,143, respectively, with revenues of. $170,622I in the year ended December 31, 2021. We believe that by the close of fiscal 2023, our wholly owned operating subsidiary will generate revenue in a sufficient amount to meet our cash flow needs.
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| Table of Contents |
Recent Developments
On March 30, 2021, the Company entered intoannounced that its first contractnewly-formed, wholly owned Israeli subsidiary, Stratford Ltd. had received notification of approval from the Lod District Court in Israel for its winning bid to provide EDA services to a cellular
carrier's subscribersacquire certain assets of Royal App, Ltd. out of insolvency proceedings for approximately $2.4 million USD in cash as well as 8% equity in the Company on a chargediluted basis, post conversion of the Company’s preferred common stock and certain other proposed sales of common stock in order to raise the required funds to complete the acquisition, (the “Recapitalization”).
Royal App, Ltd., is the developer of Shelfy, a white label, headless mobile commerce software platform, among other assets, that helps retailers and fast moving consumer goods companies become growth companies. The Shelfy product incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as supermarket chains, food and other clients.
To finance the acquisition as well as general working capital, the Company proposed to raise up to $3.5 million commencing March 2021 in the form of puttable Simple Agreements for Future Equity (“SAFE”) from institutional investors and family offices. The terms of the SAFE require that they automatically convert into common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock. The Company’s intent was to undertake the conversion of preferred stock in the quarter ended September 30, 2021, following shareholder approval of certain proposed corporate restructure plans.
Subsequent to the conversion of the preferred stock, and as part of the agreement for the acquisition of certain assets of Royal App, Ltd., the Company also agreed to issue common stock for commission fees of 2% of the Company’s common stock on a diluted basis, and to the employees of Stratford as to 8% of the Company on a diluted basis, under the terms of an Employee Stock Option Plan, once approved by Shareholders. Further, in order to undertake these issuances, the Company was required to increase the authorized common stock of the Company.
On June 9, 2021, the Company announced a Stockholders’ meeting to be held on June 30, 2021 to approve the following actions:
· | An amendment to the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000. | |
· | An amendment to the articles of the Company to effect a reverse stock split on the basis of not less than 1 for 10 and not more than 1 for 100. Such ratio to be determined by the Board of Directors of the Company, at such time as it is approved by the Board of Directors of the Company. | |
· | Approval of a 2021 Employee Stock Incentive Plan. The Plan will have available shares equity to 25% of the Company’s capitalization and a term of ten years from the effective date of the Plan. | |
· | Approval of the Company’s reorganization from Oregon to Delaware. |
The meeting was held on June 30, 2021, and the Company’s shareholders approved all of the actions detailed above, as well as the conversion of 1,000 outstanding shares of Company’s Series A convertible preferred stock whereby each 1 share of Preferred stock held is convertible into 71,683.25 shares of common stock. As a result, during the period ended September 30, 2021, the holders of the Company’s Series A convertible preferred stock successfully converted their holdings into 71,683,250 shares of Common Stock and the Board issued the remaining securities as agreed under the Acquisition Agreement including 22,647,751 shares to the Trustee as part of the asset acquisition costs and 5,661,938 shares to the agent as financing costs. Further a total of $3.25 million raised in the form of SAFES were converted into a total of 126,614,436 shares of common stock at $0.02567 per call basis.share.
During the year ended December 31, 2021, the Company closed an additional $1,881,000 as part of our PIPE offering, by way of the sale of an additional 25,080,000 Units at $0.075 per Unit, each Unit consisting of one share of common stock and one-half warrant for exercise at $0.0975 per share. The Company currently has 12
significant EDA contracts with seven different carrierspaid agent commissions on $1.376 M in proceeds at 4.25% for a total of $58,480 in financing costs.
The Company granted 7,791,658 Stock Purchase Warrants to provide EDA in 13
metropolitan markets from 12 call centers, one of which is under development.its financing agents, exercisable for a period of two years from the date of grant at $0.02567 per share. The Company provides EDA under contracts with terms ranging from one to
five years. Underrecorded $854,632 in financing costs.
| 27 |
| Table of Contents |
During the EDA contracts, carriers generally agree to route all local
directory assistance calls toyear ended December 31, 2021, the Company billgranted the following stock options under its subscribers for EDA calls
and market the service. These contracts generally permit the Company to offer
its EDA services to competing carriers in the same market. Metro One provides
EDA to a carrier's subscribers under a brand name designated by the carrier,
such as "AT&T Connect." Although each carrier establishes its own EDA fee
structure for its subscribers, Metro One charges carriers directly for its
service on a per call basis and the carrier is obligated for the charges
regardless of whether it is paid by its subscriber. Generally, these per call
charges remain fixed for the term of the contract, subject only to consumer
price index adjustments.
The Company derives substantially all of its revenues from its 12 contracts
with wireless carriers. Revenue growth for the Company principally has resulted
from three factors: growth in call volumes from existing customer's subscribers
served by existing call centers, new carrier customers served by existing call
centers, and new customers served by new call centers. The Company's direct
operating costs are comprised entirely of costs associated with call center
operators and supervisory personnel and data costs. The Company's general and
administrative costs include corporate and call center management personnel,
facilities expenses including rental and maintenance costs, and depreciation.
The Company typically opens a new call center to service a carrier customer
in a new geographic market. The Company historically has experienced significant
costs in connection with the establishment of a new call center, including costs
associated with hiring and training of operators and facility preparation.
Initial call volumes at new call centers are typically low relative to the
subscriber base. Call volumes usually increase rapidly in the first year of
operation. Personnel productivity is generally low during initial months of a
call center's operation but improves as operators become more experienced and
efficient. In addition, personnel utilization improves at a call center as call
volumes rise due principally to increased scheduling efficiencies. Consequently,
as call volumes and labor productivity increase over time, a call center's
profitability improves.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated selected items of
the Company's statements of operations as a percentage of its revenues:
2021 Stock Incentive Plan:
- | 9,000,000 fully vested incentive stock options to directors, officers and | |
- | 7,077,422 qualified employee stock options to certain officers, directors and | |
- | 11,465,424 qualified employee stock options to certain officers and employees of the Company’s wholly owned subsidiary, Stratford Ltd., with an exercise price of $0.02567 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date, with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of May 2, 2021. |
During the three months ended March 31, 19962022, the Company received a total of $400,000 in proceeds from $2.6 millionShort Term Promissory Notes (the “Notes”) with each Note having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash commencing on May 1, 2022. Further each Noteholder received a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date. The Company issued a total of 1,666,665 warrants in respect to the same periodaforementioned Notes.
In June 2022, the Company received $100,000 in the prior year. Revenuesform of a short-term promissory note from existing call centers grew 46.8%a company controlled by our President, with a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash.
In June 2022 the Company accepted a further $70,000 in proceeds in the form of Short-Term Promissory Notes from a company controlled by our President, having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash. The Noteholder received a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date. The Company issued a total of 291,667 warrants in respect to the aforementioned Notes, which warrants were subsequently canceled.
During the six months ended June 30, 2022, the Company granted a total of 1,500,414 qualified stock options to certain employees of controlled subsidiary Stratford and accounted for $1.2 million1,415,484 options were forfeit upon termination of this increase
while revenuescertain employment agreements. After June 30, 2022, the Company issued an additional 1,833,334 qualified stock options to certain employees of controlled subsidiary Stratford, and a further 5,414,228 options were forfeit upon termination of certain employment agreements.
On August 1, 2022, the Company officially launched its updated mobile commerce platform on the Shopify App Store, with its first user. The Shelfy app is now open to all merchants on the Shopify marketplace and can be accessed at https://apps.shopify.com/shelfy.
During August 2022, the Company received a total of $369,000 in cash proceeds from one new call center accounted for $.4 millioncertain Note and Securities Purchase Agreements (the “August Notes”), and rolled over $570,000 of revenues inpreviously incurred debt under certain notes entered into during the first quarter, including accrued interest (the “New Notes”), with each of 1996.
Direct the August Notes and New Notes having a term of 15 months from issue date, bearing interest at a rate of 10% per annum, with accrued interest payable monthly in arrears in cash commencing on October 1, 2022. Further the Company issued a total of 6,714,547 shares of common stock to the Noteholders in conjunction with the terms of the agreements.
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| Table of Contents |
Uncertainties in our Business
We believe that the key uncertainties in our business are as follows:
● | We believe that expanding our marketing team, which may result in significant advertising expenses, will be necessary in order to increase product awareness in order to compete with our competitors, including large and well established brands with access to significant capital resources | |
● | Customer trends and tastes can change for a variety of reasons including government regulations and variation in demographics. We will need to be able to adapt to changing preferences in the future. | |
● | Our sales growth is dependent upon maintaining our relationships with existing and future customers, which includes sales to large retailers. |
Results of Operations
Three Months Ended June 30, 2022 and 2021
Revenue
We have generated $18,937 in revenue during the three months ended June 30, 2022 compared to $49,983 during the three months ended June 30, 2021.
Net Loss
We had a net loss of $558,841 in the three months ended June 30, 2022 compared to a net loss of $833,433 in the three months ended June 30, 2021, as follows:
|
| Three months ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Revenues |
| $ | 18,937 |
|
| $ | 49,983 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
| $ |
|
| $ |
| ||
General and administrative |
|
| 398,375 |
|
|
| 231,454 |
|
Management Fees |
|
| 120,578 |
|
|
| 69,441 |
|
Research and Development |
|
| - |
|
|
| 181,736 |
|
Sales and Marketing |
|
| 20,365 |
|
|
| 34,845 |
|
Finance Costs |
|
| 38,460 |
|
|
| 365,940 |
|
Total operating expenses |
|
| 577,778 |
|
|
| 883,416 |
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (558,841 | ) |
| $ | (833,433 | )) |
| 29 |
| Table of Contents |
Operating Costs
DirectExpenses
Total operating costs increased 11.6% to $2.0 millionexpenses for the three months ended March 31, 1996 from $1.8 million for the same period in the prior year.
The increase in directJune 30, 2022 were $577,778 compared to total operating costs was due primarily to the costexpenses of operating an additional call center during the first quarter of 1996. As a
percentage of revenues, direct operating costs declined to 47.2%$883,416 for the three months ended March 31, 1996 from 67.8% for the same periodJune 30, 2021. The decrease in the prior year.
This decline primarily resulted from higher call volumes and operating efficiencies due to improved personnel utilization and the introduction of new
technology designed to enhance productivity.
General and Administrative Costs
General and administrative costs increased 17.1% to $1.7 million for the
three months ended March 31, 1996 from $1.5 million for the same period in the
prior year. This increase in costs was due primarily to higher overall salary
expenses and costs associated with the operation of an additional call center
during the first quarter of 1996. As a percentage of revenues, general and
administrative costs declined to 41.1% for the three months ended March 31, 1996
from 56.3% for the same period in the prior year. This decline resulted
primarily from the achievement of substantially higher revenues in the first
quarter of 1996 compared with the same period in the prior year. Depreciation
and amortization increased by 9.9% to $269,964 for the three months ended March
31, 1996 from $245,505 for the same period in the prior year due primarily to
the acquisition of new equipment for the new call center.
Net Interest Expense
Net interest expense declined 41.2% to $162,290 for the three months ended
March 31, 1996 from $276,053 for the same period in the prior year. This decline
was attributable solely to the reduction in average debt outstanding to $3.6
million from $8.5 million for the three months ended March 31, 1996 and 1995,
respectively.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Revenues
Revenues increased 158.8% to $13.1 million for fiscal 1995 from $5.1
million for fiscal 1994. Revenues from the six call centers opened during 1994
grew to $8.2 million for fiscal 1995 from $1.8 million for fiscal 1994,
accounting for $6.4 million of this increase. Revenues from the three call
centers opened prior to 1994 grew 48.0% and accounted for $1.5 million of this
increase. Revenues from the one call center opened during 1995 accounted for $.1
million of revenues for 1995.
Direct Operating Costs
Direct operating costs increased 49.3% to $7.2 million for fiscal 1995 from
$4.8 million for fiscal 1994. This increase in direct operating costs was
primarily due to the greater number of call centers in operation for a full year
in 1995 as compared to 1994. As a percentage of revenues, direct operating costs
declined to 54.7% for fiscal 1995 from 94.9% for fiscal 1994. This decline
resulted primarily from increased call volumes generating higher revenues, while
costs increased less rapidly due to operating efficiencies arising from improved
personnel utilization and the introduction of new technology.
16
22
General and Administrative Costs
General and administrative costs increased 40.6% to $6.0 million for fiscal
1995 from $4.3 million for fiscal 1994. This increase in general and
administrative costs was due primarily to higher expenses associated with the
operation for the full year in 1995 of additional call centers opened during
1994. As a percentage of revenues, general and administrative costs declined to
45.9% for fiscal 1995 from 84.5% for fiscal 1994. This decline resulted
primarily from the achievement of substantially higher revenues in fiscal 1995
as compared with the prior year. Depreciation and amortization increased by
34.3% for fiscal 1995 to $996,834 from $742,135 for fiscal 1994 due primarily to
the acquisition of new equipment for new call centers.
Net Interest Expense
Net interest expense increased 63.1% to $1,371,936 for fiscal 1995 from
$841,407 for fiscal 1994. This increase was attributable to the increase of
average debt outstanding to $7,316,615 from $5,316,078 for fiscal 1995 and 1994,
respectively, resulting primarily from the Company's completion of an 8%
Convertible Secured Note financing during 1995 and interest paid in connection
with the Company's 1995 rescission offering. See "Risk Factors -- Rescission
Rights of Certain Shareholders" and "Business -- Securities Law Issues."
Debt Conversion Expense
The Company recognized $384,071 of expenses related to the conversion of
its 8% Convertible Secured Notes during 1995. No similar expenses were
recognized during the prior year.
YEARS ENDED DECEMBER 31, 1994 AND 1993
Revenues
Revenues increased 250.2% to $5.1 million for fiscal 1994 from $1.4 million
for fiscal 1993. Revenues from the call centers opened prior to 1994 grew to
$3.2 million for fiscal 1994 from $1.1 million for fiscal 1993, accounting for
$2.1 million of this increase. Revenues from the call centers opened during 1994
accounted for $1.8 million of revenues in fiscal 1994.
Direct Operating Costs
Direct operating costs increased 123.9% to $4.8 million for fiscal 1994
from $2.1 million for fiscal 1993. This increase in direct operating costs was
due primarily to the greater number of call centers in operation during 1994 as
compared to 1993. As a percentage of revenues, direct operating costs declined
to 94.9% for fiscal 1994 from 148.4% for fiscal 1993. This decline resulted
primarily from higher revenues and operating efficiencies due to improved
personnel utilization and higher call volumes.
General and Administrative Costs
General and administrative costs increased 28.5% to $4.3 million for fiscal
1994 from $3.3 million for fiscal 1993. This increase in general and
administrative costs was due primarily to higher expenses associated with the
operation of the new call centers opened in 1994 and the operation for the full
year in 1994 of the call centers opened during 1993. As a percentage of
revenues, general and administrative costs declined to 84.5% for fiscal 1994
from 230.4% for fiscal 1993. This decline resulted primarily from the
achievement of substantially higher revenues for fiscal 1994 as compared with
the prior year. Depreciation and amortization increased by 95.3% to $742,135 for
fiscal 1994 from $379,904 for fiscal 1993 primarily due to the acquisition of
new equipment for new call centers.
Net Interest Expense
Net interest expense increased 889.9% to $841,407 for fiscal 1994 from
$85,003 for fiscal 1993. This increase was primarily attributable to the
increase of average debt outstanding to $5,316,078 from $780,915 for 1994 and
1993, respectively, resulting from the Company's completion of a 10%
Subordinated Note financing,
17
23
completion of a portion of the 8% Convertible Secured Note financing and an
increase in equipment lease financing associated with the opening of new call
centers.
QUARTERLY INFORMATION
The following tables set forth certain unaudited quarterly statement of
operations data for the five quarters ended March 31, 1996, as well as data
expressed as a percentage of the Company's revenues for the periods indicated.
These data have been derived from unaudited financial statements, and in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such information.
Such statement of operations data should be read in conjunction with the
Company's audited financial statements and notes thereto.
QUARTERS ENDED
-------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1995 1995 1995 1995 1996
--------- -------- --------- -------- ---------
(IN THOUSANDS)
Revenues.................................. $ 2,638 $3,042 $ 3,479 $3,916 $ 4,228
Direct operating costs.................... 1,787 1,824 1,634 1,912 1,994
General and administrative costs.......... 1,486 1,367 1,503 1,644 1,740
Income (loss) from operations............. (635) (149) 342 360 494
Interest and loan fees.................... 276 334 474 289 162
Net income (loss)......................... $ (908) $ (364) $ (127) $ (325) $ 285
The following table sets forth certain quarterly financial information of
the Company for each of the Company's last five fiscal quarters expressed as a
percent of total revenues for the periods indicated.
QUARTERS ENDED
-------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1995 1995 1995 1995 1996
--------- -------- --------- -------- ---------
Revenues.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Direct operating costs.................... 67.7 60.0 47.0 48.8 47.2
General and administrative costs.......... 56.3 44.9 43.2 42.0 41.2
Income (loss) from operations............. (24.1) (4.9) 9.8 9.2 11.7
Interest and loan fees.................... 10.5 11.0 13.6 7.4 3.8
Net income (loss)......................... (34.4)% (12.0)% (3.7)% (8.3)% 6.7%
Variable Operating Results
The Company's results of operations have fluctuated and may continue to do
so in the future depending upon a variety of factors, including opening of new
call centers, timing of expenditures in anticipation of future contracts or
product enhancements and renewal or expiration of existing contracts. Total
revenue of the Company increased in each quarter presented, primarily as a
result of growth in call volumes from existing call centers. Over the quarterly
periods shown, direct operating costs have generally declined as a percentage of
revenue as the Company has increased personnel productivity. In the third
quarter of 1995, personnel productivity measured on a company-wide basis
increased approximately 23%, the largest quarterly increase for the periods
presented. In the fourth quarter of 1995, the Company recognized certain costs
related to the conversion of its 8% Convertible Secured Notes, contributing to
the loss for that period.
18
24
LIQUIDITY AND CAPITAL RESOURCES
The Company has consistently used external sources of funds, primarily from
the issuance of equity and debt securities, to fund the Company's operating
needs and capital expenditures. For the three months ended March 31, 1996, the
Company generated net income of $285,179; however, the Company generated net
losses of $1,724,067, $5,035,090, and $4,072,646 in fiscal 1995, 1994, and 1993,
respectively. As of March 31, 1996, the Company's accumulated deficit was
approximately $16.2 million. Cash flow solely from operations has been
insufficient to fund all of the Company's capital and other non-operating needs.
As of March 31, 1996, the Company had approximately $1,601,000 in cash and cash
equivalents and approximately $2,155,000 in working capital.
In addition to cash from operations, the Company's principal source of
liquidity is a $3.0 million bank line of credit. Availability under the line of
credit is subject to borrowing base requirements and compliance with loan
covenants. Under the terms of the agreement, outstanding borrowings bear
interest at the prime rate plus 1.25 percent and all assets of the Company are
pledged to the bank as collateral. The agreement contains minimum net worth and
working capital requirements as well as certain other restrictive covenants and
prohibits the payment of cash dividends by the Company. As of April 30, 1996,
the Company was eligible to borrow $1,584,000 under and had no borrowings
against this line of credit. The Company also has a credit facility under which
the Company may borrow up to $1.0 million to finance purchases of capital
equipment. Borrowings bear interest at the prime rate plus 1.75 percent and are
secured by the purchased equipment. As of April 30, 1996, the Company had no
borrowings against this line of credit.
Cash Flow from Operations. Net cash from operations for the three months
ended March 31, 1996 was $364,066, resulting primarily from the operating and
net income for that period. No new call centers were opened and most existing
call centers operated profitably and contributed to cash flow from operations during the three months ended March 31, 1996.
Net cash used by operations was $2,255,035, $4,403,703June 30, 2022 is predominantly the result of a decrease in Finance costs over the period. The Company expended $398,375 in the current three months ended June 30, 2022 compared to $231,454 in the prior three month period ended June 30, 2021 on general and $3,653,316administrative expenses, including salaries, $20,265 on sales and marketing compared to $34,845 in fiscal 1995, 1994,the prior comparative three month period, and 1993, respectively. In fiscal 1994 and 1993,$120,578 on management fees compared to $69,441 in the Company
expanded its operations into six andprior comparative three new markets, respectively, which
required the usemonths. Finance costs of cash$38,460 related to fund start-up costs for new call centers. The
reductionwarrants issued in use of cash by operations in 1995 was primarily duerespect to the Company's effortsissuance of certain notes payable in the current three month period, as compared to reducefinance costs and increase efficiency through more effective
personnel utilization and technology enhancements, allowing faster call
processing without compromise of quality of service and the opening of only one
new call center and to the growth$365,940 in revenues in existing call centers in that
year. Concurrently with these efforts, the Company elected to open only one call
center in 1995. Additionally, revenues grew in existing markets, further
improving the Company's liquidity and capital resources. Although the Company
continues its focus on efficient operations, quality of service remains a high
priority and, if necessary, the efficiencies of scheduling will be adjusted in
order to maintain the desired quality, which could have an adverse effect on
cash flow from operations and liquidity.
Cash Flow from Investing Activities. Cash used in investing activities was
$65,778 for the three months ended March 31, 1996June 30, 2021 related primarily to capital
expenditurescertain commission fees paid and costs related to the issuance of agent warrants.
Six Months Ended June 30, 2022 and 2021
Revenue
We have generated $38,143 in revenue during the six months ended June 30, 2022, compared to $49,983 during the six months ended June 30, 2021.
Net Loss
We had a net loss of $1,192,356 in the six months ended June 30, 2022 compared to a net loss of $911,133 in the six months ended June 30, 2021, as follows:
|
| Six months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Revenues |
| $ | 38,143 |
|
| $ | 49,983 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
General and administrative |
| $ | 805,726 |
|
| $ | 297,154 |
|
Management Fees |
|
| 256,548 |
|
|
| 81,441 |
|
Research and Development |
|
| - |
|
|
| 181,736 |
|
Sales and Marketing |
|
| 101,795 |
|
|
| 34,845 |
|
Finance Costs |
|
| 181,291 |
|
|
| 365,940 |
|
Total operating expenses |
|
| 1,345,360 |
|
|
| 961,116 |
|
|
|
|
|
|
|
|
|
|
Income tax refund |
|
| 114,861 |
|
|
| - |
|
Net Loss |
| $ | (1,192,356 | ) |
| $ | (911,133 | ) |
| 30 |
| Table of Contents |
Operating Expenses
Total operating expenses for system redundancy capabilitiesthe six months ended June 30, 2022 were $1,345,360 compared to total operating expenses of $961,116 for the six months ended June 30, 2021. The increase in operating expenses during the six months ended June 30, 2022 is predominantly the result of a substantial increase to general and equipment upgrades foradministrative costs and management fees over the current period. The Company expended $805,726 in the current six months ended June 30, 2022 compared to $297,154 in the prior six month period ended June 30, 2021 on general and administrative expenses, including salaries, $101,795 on sales and marketing compared to $34,845 in the prior comparative six month period, and $256,548 on management fees compared to $81,441 in the prior comparative six months. Finance costs of $181,291 related to warrants issued in respect to the issuance of certain existing locations. Innotes payable in the current six month period, as compared to finance costs of $365,940 in the three months ended March 31, 1996, additional
capital equipmentJune 30, 2021 related to certain commission fees paid in respect to a financing, and costs related to the issuance of agent warrants.
Operating Activities
Net cash used in operating activities was $709,951 for the same purposessix months ended June 30, 2022 compared to net cash used in operating activities of $426,855 for the six months ended June 30, 2021. Net cash used in operating activities for the six months ended June 30, 2022 was acquired throughprimarily the result of the net loss, offset by non-cash financing fees of $165,602, stock based compensation of $388,954, depreciation of $2,452 and non-cash lease financing in
the amountexpenses of $374,015.$652, as well as changes to operating assets and liabilities, including a decrease to accounts receivable of $939, a decrease to prepaid expenses of $19,057, and a decrease to accounts payable of $95,251. Net cash provided or (used) by investingoperating activities for the six months ended June 30, 2021 was $100,616,
$(914,974),primarily the result of the net loss, offset by non-cash financing fees of $283,096, and $(1,293,289) in fiscal 1995, 1994,changes to operating assets and 1993, respectively. liabilities, including an increase to accounts payable of $288,038, an increase to accounts receivable of $52,241 and an increase to prepaid expenses of $34,615.
| 31 |
| Table of Contents |
Investing Activities
The Company's call center expansion in 1994Company purchased assets for a cash value of $17,503 and 1993 requiredcapitalized certain intangible assets of $847,206 during the use of proceeds
for capital equipment. In 1994 and 1993, capital equipment acquired through
lease financing was $1,929,810 and $95,680, respectively.
Cash Flow from six months ended June 30, 2022. During the comparative six months ended June 30, 2021 the Company capitalized certain intangible assets totaling $2,140,288.
Financing Activities. Activities
Net cash provided by financing activities during the six months ended June 30, 2022 totaled $570,000 in proceeds from certain short term notes payable as compared to $3,250,000 in proceeds from the sale of restricted common shares at $0.02567 under our SAFE offering in the six months ended June 30, 2021.
For the years ended December 31, 2021 and December 31, 2020
Results of Operations
Revenue
During the years ended December 31, 2021 and 2020, we generated $170,622 and $0 of revenue, respectively.
Operating Expenses
For the years ended December 31, 2021 and 2020 we had the following operating expenses:
|
| Years Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Operating expenses |
|
|
|
|
|
| ||
General and administrative |
| $ | 1,718,058 |
|
| $ | 5,236 |
|
Management Fees |
|
| 294,101 |
|
|
| 48,000 |
|
Sales and Marketing |
|
| 205,467 |
|
|
| - |
|
Finance Costs |
|
| 1,294,976 |
|
|
| - |
|
Total operating expenses |
|
| 3,512,602 |
|
|
| 53,236 |
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (3,341,980 | ) |
| $ | (53,236 | ) |
Total operating expenses for the three monthsyear ended MarchDecember 31, 1996 was $154,531, resulting
primarily from2021 were $3,512,602 compared to $53,236 for the exerciseyear ended December 31, 2020. During the year ended December 31, 2021 the Company incurred $1,718,058 in general and administrative expenses including salaries, office rent, consulting fees, professional fees and other operating expenses. In addition, the Company reported a total of $294,101 in management fees paid to officers, directors and executives, $205,467 in sales and marketing costs and $1,294,976 in finance costs related to cash payments and the issuance of warrants to purchase 247,621 sharescertain agents in respect to our SAFE and PIPE offerings. Comparatively, during the year ended December 31, 2020, the Company incurred $48,000 in directors fees and $5,236 in general and administrative expenses.
Net Loss
We had a net loss of$3,341,980 in the Company's Common Stock resultingyear ended December 31, 2021 compared to a net loss of $53,236 in the year ended December 31, 2020.
Statement of Cash Flows
The following table summarizes our cash flows for the period presented:
|
| For the Year ended December 31, |
| |||||
|
| 2021 |
|
|
| 20 |
| |
Net cash provided (used by) operating activities |
| $ | (805,402 | ) |
| $ | 22,961 |
|
Net cash provided from (used by) investing activities |
|
| (3,417,237 | ) |
|
| - |
|
Net cash provided from financing activities |
|
| 5,131,000 |
|
|
| - |
|
Increase (decrease) in cash and cash equivalents |
| $ | 908,361 |
|
| $ | 22,961 |
|
| 32 |
| Table of Contents |
Cash Provided by (Used in) Operating Activities
During the year ended December 31, 2021, net cash proceedsused in operating activities totaled $805,402, which consists of our net loss of $3,341,980, offset by noncash adjustments of $1,137,728 in financing costs, $1,144,077 in stock-based compensation, noncash operating lease expenses of $556 and depreciation of $328. Changes in operating assets included an increase to accounts receivable of $18,238, an increase to prepaid expenses of $229,982 and an increase to accounts payable of $502,109. During the year ended December 31, 2020 cash provided by operating expenses totaled $22,961and consisted of our net loss of $53,236 offset by a decrease in prepaid costs of $27,000 as prior issued deposits were returned to the Company, and an increase to accounts payable of $497,397, offset$49,197.
Cash Provided by $96,972Investing Activities
Cash used in principal payments relatedinvesting activities in the year ended December 31, 2021 totaled $3,417,237 as compared to current notes
payable$0 in the year ended December 31, 2020 and $245,894 in payments relatedinclude $7,331 for the purchase of property and equipment and $3,409,906 with respect to existing capital lease obligations.
Net cashthe acquisition of certain intangible assets through a bankruptcy proceeding.
Cash Provided by Financing Activities
Cash provided by financing activities was $2,993,050, $5,328,596, and
$4,749,679 in fiscal 1995, 1994, and 1993, respectively.
19
25
In 1995, the Company issued $3,860,000 in principal amount of its 10%
Subordinated Notes to certain private investors to refinance similar notes
maturing in 1995, resulting in net cash proceeds to the Company of $250,000. In
1995, the Company also issued $3,050,000 in principal amount of its 8%
Convertible Secured Notes to certain private investors, resulting in net cash
proceeds to the Company of $3,050,000. During 1995, warrants for the purchase of
327,412 shares of the Company's Common Stock were exercised, resulting in net
cash proceeds to the Company of approximately $1,088,080. In 1995, the Company
also repurchased 135,414 shares of its Common Stock pursuant to a rescission
offer, which resultedtotaled $5,131,000 in the use of $738,660 in cash.
In 1994, the issuance of debt and equity resulted in the following net cash
proceeds to the Company: (i) the 1994 10% Subordinated Notes provided $3,610,000
in net cash proceeds; (ii) the initial offering of the Company's 8% Convertible
Secured Notes resulted in $1,950,000 in net cash proceeds; and (iii) warrants
and options to purchase shares of Common Stock were exercised resulting in
proceeds to the Company of $338,089.
In 1993, the Company issued and sold 667,062 shares of its Common Stock to
various private investors, resulting in net cash proceeds to the Company of
$4,733,534.
Future Capital Needs and Resources. The primary uses of capital are
expected to be the expansion of existing call centers, funding of start-up
operating losses for newly opened call centers, principal and interest payments
on indebtedness, and the purchase of equipment for the improvement of existing
and furnishing of new call centers.
In late 1995 and in the first quarter of 1996, the debt obligations of the
Company were significantly reduced through the exchange of $3,210,000 in
principal amount of its 10% Subordinated Notes for 611,440 shares of Common
Stock and conversion of $5,000,000 in principal amount of its 8% Convertible
Secured Notes into 2,164,402 shares of Common Stock. From July 1996 through
January 1997, the outstanding 10% Subordinated Notes will mature, resulting in
an obligation of the Company to make principal payments of $650,000, to the
extent that these Notes are not converted into Common Stock of the Company.
Although the Company currently has no material commitments for capital
expenditures, it anticipates that its capital expenditures will be up to
approximately $3,000,000 through the end of 1996, resulting primarily from
projected expansion and discretionary planned improvements. The Company believes
its existing cash and cash equivalents, credit facilities and cash from
operations, together with the net proceeds of this offering, will be sufficient
to fund its operations through the end of fiscal 1997. However, because the
Company's growth may require the opening of new call centers in addition to
those projected, the Company's capital requirements cannot be predicted with
certainty and there is no assurance that the Company will not require additional
financing during this period. There is no assurance that any required additional
financing will be available on terms satisfactory to the Company or not
disadvantageous to the Company's shareholders, including those purchasing shares
in this offering.
Effect of Inflation. The effect of inflation was not a material factor
affecting the Company's business during fiscal 1995, 1994, or 1993 or the three
monthsyear ended MarchDecember 31, 1996.
20
26
BUSINESS
The Company is a leading independent developer and provider of EDA for the
wireless telecommunications industry. The Company contracts with wireless
telecommunications carriers to provide enhanced directory assistance to a
carrier's subscribers. In 1989, the Company was incorporated, opened its first
call center and began testing and offering EDA services. In 1991, the Company
entered into its first contract to provide EDA services to a cellular carrier's
subscribers on a charge-per-call basis. The Company presently operates call
centers in the Baltimore, Chicago, Denver, Detroit, Miami, Minneapolis,
Philadelphia, Phoenix, San Diego, Seattle and Portland, Oregon metropolitan
areas. The Company additionally has contracted to provide EDA to carrier
subscribers in Milwaukee and St. Louis. Service is provided to seven wireless
telecommunications carriers, including cellular and PCS providers, under 12
multiyear contracts. In 1995, the Company handled over 20 million requests for
directory assistance on behalf of carriers.
The Company's EDA provides callers with personalized, easy-to-use directory
assistance. The Company's operators provide EDA with a high level of efficient,
personalized service. The Company's EDA includes several features in addition to
those provided by traditional directory assistance, including call completion,
categorical search and local event information. Call completion allows a caller
to be directly connected with the number requested, thus completing the call
without the need for redialing. The Company's StarBack feature enables a
subscriber to return to an operator at any time during a call. The Company is
developing additional EDA features including a broader array of connectivity
features and increased content. The Company believes that its EDA offers the
wireless consumer a feature-rich, user-friendly alternative to traditional
directory assistance.
In addition to addressing the needs of the wireless subscriber, the Company
believes that its EDA offers wireless carriers the opportunity to differentiate
their service by providing a high quality, value-added product to subscribers,
thereby assisting carriers in meeting heightened competition in the
telecommunications industry. The Company's array of connectivity features and
informational content, which can be offered to subscribers in various
configurations, allow the wireless carrier to distinguish its services from
competitors and establish a separate identity in the marketplace. The Company
believes that its EDA also increases carriers' revenues through expanded call
volumes and from the increased billable air time attributable to its EDA's
connectivity features. The Company has contracts with six of the 10 largest
domestic cellular carriers to deliver EDA to their subscribers in one or more of
their service areas, and with one of the nation's first PCS providers.
INDUSTRY BACKGROUND
Wireless telecommunications has been among the fastest growing segments of
the telecommunications industry during the 1990s. Industry experts predict
annual revenues to increase from less than $10 billion in 1990 to $50 billion by
1999. This growth stems largely from technological advances that provide
customers with affordable, high quality mobile services. Cellular is currently
the most widespread wireless technology with more than 33 million domestic
subscribers at the end of 1995, and is projected to grow to 47 million
subscribers by the year 2000. Other types of wireless communications
technologies, such as PCS and specialized mobile radio ("SMR"), are expected to
compete with cellular in the near future and enjoy rapid expansion. For example,
the number of PCS subscribers is projected to reach almost 15 million by the
year 2000.
Telecommunications carriers face increasing competitive pressures arising
from the deregulation of the domestic telecommunications industry. Landline
carriers which once enjoyed monopoly status in local markets now confront
competition from multiple providers. For example, the enactment of the
Telecommunications Act of 1996 effectively allows AT&T and other long-distance
providers to compete in local markets or Local Access Transport Areas ("LATAs").
Competition is especially pervasive in the wireless telecommunications
marketplace. The FCC has issued licenses to two cellular providers in every
domestic market and may issue as many as six licenses in each market to PCS
providers.
Because of this increasingly competitive environment, local, regional and
national telecommunications carriers confront intense pressure to differentiate
their products and establish brand loyalty. These pressures
21
27
are particularly acute for wireless carriers who seek to increase market
penetration of their services and increase revenues while confronting
competition from rival carriers and new technologies. As the quality of wireless
services improves and achieves relative parity with competing services, wireless
providers must differentiate themselves by incorporating value-added features
into their services.
Carriers additionally face increased competitive pressures with respect to
the pricing of their services. In response to these pressures, carriers have
reduced airtime rates and increased their call volumes by targeting new
subscribers who use wireless services on a more limited basis. These trends are
reflected in the decline of average monthly service revenue per subscriber from
$74.10 in 1991 to $59.08 in 1995, causing carriers to pursue strategies that
increase the frequency and duration of use.
Increasingly, carriers are re-evaluating their existing services and
seeking opportunities that will allow them to compete more effectively and
increase usage. Directory assistance is one such feature that wireless carriers
can offer to differentiate their services. Traditional landline directory
assistance provides a customer with a requested party's phone number, but only
if specific identifying information, including name, spelling, and possibly
address, are supplied by the caller. To reduce labor costs and to achieve
greater operating efficiencies, carriers in recent years have consolidated
directory assistance operations and reduced reliance on operators through the
increased use of automated systems. These directory assistance operations strive
to decrease call processing times by limiting customer connect time.
Wireless subscribers need convenient and practical directory assistance in
which they are not hampered by the limited functionality of automated operators
or required to write down or memorize phone numbers. Wireless subscribers
benefit from an enhanced directory assistance that can deliver features beyond
mere phone listings, such as call connectivity and helpful information such as
categorical searches, local events and movie listings. In turn, carriers benefit
from increased subscriber loyalty and the revenues derived from more frequent
usage.
THE METRO ONE SOLUTION
Metro One gives wireless carriers the ability to deliver feature-rich,
easy-to-use personalized enhanced directory assistance to their subscribers. The
Company's EDA offers enhancements to traditional directory assistance, including
an array of connectivity features and the ability to supply wireless consumers
with a broader range of information, including categorical search and local
event information. With the Company's EDA, carriers can offer customized
configurations of these value-added connectivity and content features. These
custom feature sets are marketed and delivered with private label branding,
enabling the carrier to establish a distinct identity for its services. In
addition, the Company's connectivity features increase the call completion rate,
producing additional revenue for carriers through increased billable airtime.
The Company believes that carriers offering its EDA experience greater service
use and higher subscriber satisfaction and retention.
The Company's operating competencies, derived from the establishment and
operation of 11 call centers, allow it to provide carriers with a reliable, high
quality directory assistance product. The Company's contracts with carriers
impose stringent performance standards. The Company strives to maintain its high
quality of service through various quality assurance programs, including
employee training, operator monitoring and periodic carrier quality evaluations.
The Company's national call center network enables carriers which operate in
multiple markets to offer a consistent EDA, which promotes greater system-wide
marketing and brand identification.
METRO ONE'S STRATEGY
Metro One's mission is to be the leading provider of operator-assisted
information services. The key elements of Metro One's strategy for fulfilling
that mission are:
Continuously offer value-added products and features. Metro One is
defining a new standard for directory assistance by delivering directory
assistance solutions which meet the particular needs of wireless
telecommunications consumers. Metro One is enhancing and expanding its feature
offerings to include new
22
28
advanced connectivity capabilities, including operator return and messaging, and
is improving its database systems to include additional local event information
and more and different types of useful information. Through continuous expansion
of its feature sets, enrichment of its database and enhancement of its search
capabilities, Metro One believes it will attract and retain carriers and set an
ever increasing expectation for value-added enhanced directory assistance.
Expand into new geographic markets. Metro One expects to continue to
expand its national network of call centers into new geographic markets served
by existing carrier customers, which increasingly demand consistent service
across their national networks. Metro One intends to build on these existing
carrier relationships to rapidly increase its share of the wireless
telecommunications directory assistance market. The Company also plans to offer
enhanced directory assistance from these new call centers to additional cellular
carriers and to PCS carriers as that technology is introduced. Metro One's
operational competencies and extensive experience developing and maintaining its
existing call center network will help the Company to penetrate these new
geographic markets successfully.
Leverage existing infrastructure. Metro One intends to exploit its
national call center network to provide service to additional wireless carriers
and regional subscribers from existing call centers. By leveraging its
established call center network, Metro One expects to expand call volumes
particularly by providing EDA to regional subscribers who can now be served more
readily2021 as a result of the deregulationsale of the telecommunications industry.
Metro One also intends to further leverage its directory assistance database
systems to provide national directory assistancecommon shares and national call connectivity.
Achieve greater operating efficiencies. Metro One is developing and
implementing software enhancements and adding new hardware to its EDA systems to
increase the productivity of its operators. These improvements are expected to
give operators the ability to perform more sophisticated information searches
with faster data retrieval, and provide them with the ability to efficiently
query multiple data bases. Coupled with improved personnel training programs and
operator monitoring capabilities, these enhancements are expected to permit the
Company to deliver its EDA to carrier subscribers more efficiently while
increasing call center profitability.
Pursue opportunities to provide additional operator-assisted
services. Metro One intends to expand its product offerings to include
information services that complement its enhanced directory assistance. The
Company is exploring such offerings as direction services, messaging and
concierge services. The development and implementation of these services are
intended to generate incremental revenue for the Company while raising consumer
expectation for operator assisted information services.
23
29
CUSTOMERS AND MARKETS
The Company provides its EDA to six of the nation's largest cellular
carriers in a portion of their service areas and to one of the first carriers to
establish domestic PCS service.
The following table identifies the 25 largest domestic cellular markets,
based on estimated total subscribers, and sets forth the two licensed cellular
carriers in those markets. Carriers who have contracted with Metro One to
provide EDA services in those markets are indicated in bold-faced type.
ESTIMATED CELLULAR LICENSEE
TOTAL CELLULAR --------------------------------------------------
RANK METROPOLITAN MARKET SUBSCRIBERS A B
- ---- ----------------------- -------------- ------------------------ ------------------------
1 Los Angeles, CA........ 1,640,946 Bell South AirTouch Cellular
2 New York, NY........... 1,260,885 AT&T Wireless Bell Atlantic NYNEX
Mobile
3 Chicago, IL............ 1,188,043 Southwestern Bell Mobile AMERITECH CELLULAR
4 Washington, D.C./
Baltimore, MD.......... 935,529 Southwestern Bell Mobile BELL ATLANTIC NYNEX
MOBILE
5 Miami, FL/West Palm
Beach, FL.............. 863,645 AT&T Wireless BELLSOUTH CELLULAR
6 Detroit, MI............ 746,113 AirTouch Cellular/AT&T AMERITECH CELLULAR
Wireless
7 SAN FRANCISCO, CA/
SAN JOSE, CA........... 744,135 AT&T WIRELESS/AIRTOUCH GTE MOBILNET
CELLULAR
8 BOSTON, MA............. 686,384 SOUTHWESTERN BELL MOBILE BELL ATLANTIC NYNEX
MOBILE
9 PHILADELPHIA, PA....... 654,617 COMCAST CELLULAR BELL ATLANTIC NYNEX
COMMUNICATIONS MOBILE
10 Atlanta, GA............ 609,145 AirTouch Cellular BellSouth Cellular
11 Dallas, TX............. 583,191 AT&T Wireless Southwestern Bell Mobile
12 Houston, TX............ 560,691 AT&T Wireless/Bell South GTE Mobilnet
13 Seattle, WA............ 425,975 AT&T WIRELESS US WEST NEWVECTOR
14 San Diego, CA.......... 380,545 GTE MOBILNET AirTouch Cellular
15 Tampa, FL.............. 349,251 AT&T Wireless GTE Mobilnet
16 Minneapolis, MN........ 347,999 AT&T WIRELESS US WEST NEWVECTOR
17 Phoenix, AZ............ 346,017 Bell Atlantic NYNEX US WEST NEWVECTOR
Mobile
18 St. Louis, MO.......... 328,658 AMERITECH CELLULAR Southwestern Bell Mobile
19 Denver, CO............. 324,904 AT&T WIRELESS US WEST NEWVECTOR
20 Sacramento, CA......... 309,395 AT&T Wireless AirTouch Cellular
21 San Antonio, TX........ 293,141 AT&T Wireless Southwestern Bell Mobile
22 Cleveland, OH.......... 292,888 New Par GTE Mobilnet
23 Portland, OR........... 276,779 AT&T WIRELESS US West NewVector
24 Orlando, FL............ 272,390 AT&T Wireless BellSouth Cellular
25 Kansas City, MO........ 250,250 AT&T Wireless Southwestern Bell Mobile
The Company believes that these major metropolitan areas represent its
greatest opportunities for future growth. Cellular usage in these markets has
attained sufficient levels to provide profitable call volumes. Competition among
carriers for these subscribers increases carrier need for features that can
differentiate their services. The Company targets all domestic cellular carriers
and carriers developing and offering emerging
24
30
telecommunications technologies in market areas where it presently offers EDA.
The Company strives to expand relationships with existing carrier customers and
to establish relationships with new carrier customers in markets where the
Company's EDA presently is not offered.
The Company provides substantially all of its EDA services under 12
separate contracts that range in term from two to five years. Under the EDA
contracts, the carrier generally agrees to route all local directory assistance
calls to the Company. However, these contracts generally allow the Company to
offer EDA services to competing carriers. The Company contractually agrees to
staff its EDA operations centers 24 hours a day, seven days a week, 365 days a
year, with a sufficient number of operators to perform the contracted services
within specified performance requirements.
The Company offers its services on behalf of the carrierunits under a brand name
selected by that carrier. For example,SAFE and PIPE during the Company presently offers its EDAyear, as compared to AT&T Wireless subscribers in various markets as "AT&T Connect." The carrier is
responsible for all aspects of marketing, including advertising and related
costs. Although each carrier establishes its own fee structure with its
subscribers, Metro One charges carriers for its service on a per call basis and
the carrier is obligated for the charges regardless of whether it is paid by the
subscriber. Generally, these per call charges remain fixed for the term of the
contract, subject only to consumer price index adjustments.
In 1995, seven customers accounted for substantially all of the Company's
$13.0 million in revenues. The Company's three largest customers, US West
NewVector, Ameritech Cellular and Bell Atlantic NYNEX Mobile, accounted for
approximately 72 percent of revenues in 1995. In 1994, six customers accounted
for all of the Company's revenues and the top three customers, US West
NewVector, BellSouth Cellular and AirTouch Cellular, accounted for approximately
81 percent of revenues.
During the first quarter of 1996, the Company's contract with AirTouch
Cellular$0 in the San Diego market expired. Although the Company participated in a
competitive bidding process, the Company was unable to secure renewal on termsprior comparative year ended December 31, 2020.
Liquidity and conditions that were acceptable to the Company. During the negotiations, the
carrier sought rates below prior contract rates and an exclusivity commitment in
markets served by the carrier. Capital Resources
As at June 30, 2022, we had cash of May 6, 1996, another vendor began handling
calls for the carrier$126,268. We are in the San Diego market from remote call centers. The
Company continues to serveearly stage of development having recently acquired certain assets through a competing carrier in the San Diego market.
In July 1994, AirTouch Cellular and US West NewVector announced their
intention to combine their cellular properties in a multi-phase transaction.
AirTouch Cellular has also formed a partnership, called TOMCOM, L.P., with Bell
Atlantic and NYNEX to develop common service standards, pursue national
marketing strategies, develop information technology, create a national
distribution strategy and implement joint purchasing arrangements. Unlike the
AirTouch Cellular/US West NewVector partnership, however, TOMCOM does not
contemplate a merger of cellular properties. Two of the Company's contracts with
certain of those TOMCOM participants are up for renewal in 1997, with three in
subsequent years.
While the implications of the non-renewal of the AirTouch Cellular EDA
contract for its San Diego market are unclear, the Company believes this
decision may serve as a precedent for AirTouch Cellular and the other TOMCOM
participants as they establish or consider the renewal of EDA contracts in other
markets in the future. Accordingly, there can be no assurancebankruptcy proceeding that the Company will be provided the opportunityhas only recently begun to renew its contracts with US West NewVector
or any other TOMCOM participant or that the Company willoperate. We have the opportunityexperienced net losses to obtain new contracts with any of these carriersdate and have generated modest revenue from operations in the future. Ifthree and six months ended June 30, 2022, which raises substantial doubt about our ability to continue as a going concern. While we have raised additional proceeds totaling $570,000 in the six months ended June 30, 2022 and a further $369,000 subsequent to June 30, 2022 by way of short term notes payable and certain note and securities purchase agreements, these contractsfunds are not renewed, there is no assurance that the Company will be able
to replace these contracts with contracts with other carriers. Contracts with
TOMCOM participants accounted for approximately 50% of the Company's revenues in
1995. The failure of the Company to obtain renewal of those contracts or to
obtain replacement contracts would have a material adverse effect on the
Company's business, financial condition and results of operation.
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PRINCIPAL PRODUCT AND PRODUCT FEATURES
Enhanced Directory Assistance. Metro One delivers its EDA using a
customized array of hardware and software and the Company's database and search
engines. The Company receives incoming calls by means of contractually assigned
directory assistance numbers, typically 411 or 555-1212. Calls are answered by
the Company's operators, identifying the EDA service using the carrier's brand
name. Upon receiving information requests from subscribers, Company operators
search the Company's local database utilizing various search engines. The
Company's EDA system allows the operator to connect the caller to a party or, if
requested, supply the subscriber with a telephone number, address, or other
information, including local events or businesses of a certain type within a
specific locality. The fee for this service is fixed by the carrier, and
typically ranges from $.50 to $.75 plus airtime charges. The Company's system
compiles billing information that is, in some cases, furnished to the carrier
for subscriber billing and collection.
Connectivity features. The Company's EDA incorporates connectivity
features at no additional charge to carriers, which are engineered to
address specific needs of mobile users. The Company's call completion
feature directly connects a subscriber to a requested business or residence
without the requirement of additional dialing. This feature is particularly
useful to the mobile consumer because it eliminates the need to write down
or memorize a phone number. Metro One's StarBack feature allows a caller to
return immediately to an operator simply by pressing the (*) key once on
their telephone. This feature allows a caller immediate access to an
operator if a call is unanswered or if the number is busy, permitting the
caller to request alternate connections.
Content features. The Company's database and search engine
development activities have focused on the creation of valuable features
which distinguish the Company's EDA from traditional directory assistance.
The Company's database system is derived from a variety of sources,
including data purchased from RBOCs, independent telephone companies and
other commercial sources. The Company supplements this information with
localized information, including information relating to local events and
amenities. Unlike traditional directory assistance, the Company's EDA
permits categorical searches of its database, allowing operators to provide
more comprehensive information to callers. For example, a party may request
the identities, addresses and telephone numbers of a business of a certain
type in a specific locale. The Company has the capability to customize a
local database to include specialized information at the request of a
carrier customer. The Company believes that these features are of
particular value to wireless subscribers who often seek information while
in transit.
New features and products. The Company is developing features which
complement the Company's current array of connectivity and content features
while providing additional utility and value to the wireless subscriber. The
Company believes that the development of new features is an important component
of its strategy to define a new standard for directory assistance and to thereby
widen customer acceptance of enhanced directory assistance. The Company has
experienced delays in the development of new features in the past, and there can
be no assurance that the Company will successfully complete the development or
introduction of new features and products on a timely basis or that such
features and products will achieve market acceptance.
Search engines. The Company is upgrading its database system and
search engines to broaden the categorical search capabilities employed by
its operators. When implemented, these search engines are intended to
permit additional keyword, phonetic and logical search capabilities. It is
anticipated that these new software tools will be introduced in the
Company's call centers throughout 1996. The Company believes that these
tools will improve EDA search times, resulting in faster call processing.
Connectivity features. The Company plans to introduce several new
connectivity features during 1996 which will further differentiate its EDA
from traditional directory assistance. These additional features are
expected to include AutoBack--the ability to automatically return a caller
to an operator if a busy signal or no answer is detected; NumberBack--the
ability to deliver the digits of a called number to a caller in several
formats; MessageBack--the ability to deliver a caller's message to the
called party at a later time if connection is not initially established;
and CallBack--the ability to connect the called party to the calling party
at a later time.
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National database access and inter-LATA connectivity. The Company is
upgrading its call center work stations to allow operators to efficiently query
both their local database and other databases throughout the Company's national
call center network. When completed, the Company's databases are expected to be
accessible from any call center, thereby creating a national database of
directory assistance information. This development, coupled with the ability of
operators to effectively connect calls to any domestic phone number in its
database, will allow carriers to provide their subscribers with a superior
national EDA.
Operator-assisted services. The Company also intends to expand its product
offerings to include information services that complement its EDA. The Company
is exploring such offerings as direction services -- providing point-to-point
directional information to callers; messaging -- delivering alpha-numeric
messages to the desired party's digital handset; and concierge
services -- providing operator-assisted concierge information for the
hospitality industry and other corporate customers.
OPERATIONS
Call centers. The Company presently maintains call centers in the
Baltimore, Chicago, Denver, Detroit, Miami, Minneapolis, Philadelphia, Phoenix,
San Diego, Seattle and Portland, Oregon metropolitan areas. Call center premises
are leased by the Company and range in size from approximately 3,000 to 11,000
square feet. The Company seeks to match the terms of these leases to the terms
of its contracts with carriers at each site, obtaining renewal rights where
possible. In its call center site selection process, the Company works with
carriers to identify locations which provide easy access to T1 and T3
transmission facilities. In addition, the Company seeks to obtain locations
which are readily accessible to its workforce.
Call centers typically are configured using modular work stations, such
that each operator has a station for their terminal and related database
materials. Because the Company's call centers are operational 24 hours a day,
work stations may be used by three or more operators during a business day.
Database, database management system and search engines. The Company
develops a principal database for each call center, obtaining data from a
variety of sources including RBOCs, independent telephone companies and other
commercial sources. The Company's local database is augmented by access to
supplemental databases on a subscription basis. The Company has developed a
database management system that it uses to maintain and update directory
listings in its database. The Company receives periodic updates from certain of
its data sources which are incorporated into its databases on a regular basis.
The Company has developed search engines to access information within its
databases. The Company currently is upgrading its database management system and
search engines to broaden the categorical search capabilities enjoyed by
operators. When implemented, the search engines are expected to enable
additional key word, phonetic and logical search capabilities. The Company
anticipates that these software enhancements will be introduced in its call
centers throughout 1996.
EDA system. Metro One's EDA system incorporates programmable switching
equipment, host computers, voice response units and database servers. The
Company contracts with value-added resellers to assist in programming its
switches and host computer systems. This software enhances its call handling and
billing capabilities and provides the basis for the Company's connectivity
features.
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[Call Routing Diagram]
Diagram of a typical Metro One EDA system including the database management
system (DBMS), the Sun Microsystems server, the router, the voice response unit
(VRU), the Excel Switch, the electronic white pages (EWP), and the
interconnections between these subsystems and Metro One's operators and a
carrier customer. Interconnects include T1 and T3 transmission facilities, a
wide area network (WAN) and a data network.
A subscriber call is routed to a Metro One call center over T1 or T3
transmission facilities between a carrier's switching center and the call
center. The call is processed by Metro One's switch and routed to an operator. A
voice response unit greets the caller with a message recorded by the specific
operator to whom the call is routed. At the conclusion of the greeting, the
operator attends to the caller's directory assistance request, generally by
utilizing Metro One's computerized database system and search engines.
Once the requested information is provided to the caller, the caller is
connected directly to the requested number. Because the subscriber's call is
routed through Metro One's switch, the caller can use the StarBack feature to be
immediately returned to an operator at any time during the call. This call
processing configuration permits the Company to offer additional connectivity
features through the programming of its switch and host computer.
Quality assurance. Particularly because the Company's EDA is provided to
subscribers on a branded basis, the Company believes that the quality and
reliability of its EDA services are important considerations in a carrier's
decision to offer the Company's EDA. The Company provides carriers broad EDA
options, including system design, configuration and feature sets. Once a new
call center is operational, the Company and carrier subject the center to
extensive testing before service is initiated.
In addition to supplying billing information to carriers, the Company
monitors call center performance for compliance with contract performance
standards and reports this information to carriers on a periodic basis. The
Company conducts weekly, monthly and quarterly reviews of call center
performance, including operator monitoring. The Company has centralized its
employee training which allows it to achieve more uniform performance throughout
its call center network. Metro One solicits performance evaluations from its
customers on a quarterly basis. The Company's systems maintenance and support
personnel are accessible to customers on a 24-hour basis.
MARKETING
The Company markets directly to telecommunications carriers. Sales and
technical support personnel are based at the Company's corporate headquarters in
Beaverton, Oregon. In addition, the Company's regional managers, who oversee the
Company's call center network, are also a key element in the maintenance and
development of carrier relationships.
The Company's major marketing programs focus on product awareness
principally through trade shows, marketing materials, including brochures and
videotape presentations, and direct contacts with telecommunications carriers.
There are several major industry conferences that are keystones to the Company's
marketing program. These include the annual Cellular Telecommunications Industry
Association and the annual Personal Communications Industry Association
conferences. The Company maintains communications with its existing carrier
customers through its quality assurance and customer service programs, which
afford the Company the opportunity to receive information regarding evolving
carrier needs.
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By receiving input from carriers, the Company is able to design its
products to effectively serve their needs and those of their subscribers. If
carriers have particular needs which cannot be met by the Company's standard
system configuration, the Company strives to customize the system and its EDA
productsufficient to meet their specific needs.
COMPETITION
The enhanced directory assistance market is characterized by rapidly
changing market forces, technological advancementsongoing operations expenses. We will require substantial additional funds for operations in order to meet our software development and increasing competition
from large carrier-affiliated companiesbusiness expansion objectives in fiscal 2022 and small, independent companies. The
Company's principal competitors include RBOC-owned or -affiliated carriers or
non-RBOC affiliated carriers, including GTE. In addition to traditional
directory assistance, many of these competitors offer a directory assistance
call completion feature. Although the Company believes that none of these
competitors presently offers a form of enhanced directory assistance that
incorporates all the connectivity and content features of the Company's EDA,
these competitors have substantially greater financial, technical and marketing
resources than the Company and may be able to do so in the future. The Company
also faces competition in various markets from independent companies seeking to
offer forms of enhanced directory assistance.
The Company believes that the principal competitive factors in the enhanced
directory assistance market are quality of product, available features,
technological innovation, experience, responsiveness to customers, and price.
Historically, the Company has sought to distinguish itself from competitors
based on the quality of its product, the development of useful features and its
experience derived from successfully establishing a national network of call
centers. Although the Company has not experienced widespread competitive
pressures with respect to the pricing of its product, there can be no assurance
that the Company will not experience price or margin pressures in the future.
The Company believes, however, that its future growth will depend on its ability
to maintain and improve the quality of its product, and to develop and
successfully introduce new connectivity features and content.
INTELLECTUAL PROPERTY
The Company regards certain aspects of its products and their features and
processes as proprietary and relies on a combination of trademark, patent and
trade secrets laws and confidentiality procedures to protect its proprietary
rights. The Company has applied for five patents covering certain aspects of the
Company's product features and processes.beyond. There can be no assurance that patentsfinancing, whether debt or equity, will issue with respectbe available to us in the amount required at any of these applications. The Company's policy has
been to enter into confidentiality agreements with all employees and limit
access to its documentation and other information related to its intellectual
property. Despite these activities, however, no assuranceparticular time or for any particular period or, if available, that it can be given that the
steps takenobtained on terms favorable to us. If additional funds are raised by the Companyissuance of equity securities, then existing stockholders will provide adequate protectionexperience dilution of its proprietary
product featurestheir ownership interest. If additional funds are raised by the issuance of debt or processes or that competitors will not develop similar or
functionally equivalent product features or processes.
The Company believes that its product development and marketing
capabilities have been of greater importance to the Company's business than
legal intellectual property protection. Likewise, although the Company believes
that obtaining patent protection may provide benefits to the Company, the
Company does not believe that its business is dependent on obtaining patent
protection or successfully defending any such patents thatother equity instruments, we may be obtained
against infringement by others.
The Company has obtained service mark registrationssubject to certain limitations in the United States
for the names "StarBack," "Metro One," "EDA," "Enhanced Directory Assistance,"our operations, and "the Enhanced Directory Assistance People." "AutoBack," "NumberBack,"
"SureConnect," "MessageBack," "CallBack," and "TeleConcierge" are also service
marksissuance of such securities may have rights senior to those of the Company. Service mark registration applications are pending inthen existing stockholders. We currently have no agreements, arrangements or understandings with any person or entity to obtain funds through bank loans, lines of credit or any other sources.
As we monitor the United States with respect to these marks used by the Company. This Prospectus
also includes trademarks and tradenames of companies other than Metro One.
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GOVERNMENT REGULATION
The Company's business depends upon relationships with companies that are
regulated by the FCC or state PUCs. Such regulation applies to all
communications common carriers, such as AT&T, RBOCs and other long distance and
local exchange carriers. Enhanced service companies such as the Company are
subject to various levels of regulation or are completely unregulated on a
state-by-state basis.
EMPLOYEES
As of March 31, 1996, the Company had approximately 500 employees. Nonefull impact of the Company's employees are subject to a collective bargaining agreement.
ManagementCOVID-19 outbreak, we continue exploring sources of the Company considers its relationship with its employees to be
good.
PROPERTIES
The Company leases its principal executivedebt and administrative offices at
8405 S.W. Nimbus Avenue, Beaverton, Oregon, comprising approximately 15,400
square feet, for a remaining term of six years with a renewal option. The
Company also leases office facilities for its EDA operations in the Baltimore,
Chicago, Denver, Detroit, Miami, Minneapolis, Philadelphia, Phoenix, St. Louis,
San Diego, Seattle and Portland, Oregon metropolitan areas.equity financings as well as available grants. There are 13
facility leases in effect at May 31, 1996 with remaining terms ranging from one
to six years.
The Company believes that its facilities are suitable and adequate for its
presently anticipated requirements and that it is not dependent upon any
individual leased premises.
SECURITIES LAW ISSUES
Between 1989 and 1993, the Company financed its activities through
offerings of its Common Stock and debt securities that were converted into
shares of its Common Stock. Such securities were sold directly to approximately
560 persons. During a review of these past financing activities in 1993, the
Company's management was unable to conclude that all applicable state and
federal securities laws had been complied with in all material respects in
connection with these offerings. A violation of state or federal securities laws
in connection with an offering of securities generally gives the purchaser the
right to rescind the transaction and obtain from the issuer the original
purchase price for the securities or, if the securities have been subsequently
disposed of, the difference between the price paid for the securities and the
amount obtained on disposition, plus interest at a statutory rate from the date
of purchase. The blue sky laws of Oregon and some other states permit an issuer
to extinguish the rights of a purchaser of securities to bring a suit based on
violation of the state's blue sky laws by offering to rescind the transaction
and pay the purchaser the amount of damages that he would have been entitled to
receive, as explained in the previous sentence. However, the SEC takes the
position that liabilities under the federal securities laws are not terminated
by the making of a rescission offering.
In 1994, the Company voluntarily executed a Consent Order with the State of
Oregon Division of Finance and Corporate Securities in which the Company agreed
to cease and desist from participating in any violations of Oregon securities
laws and paid a civil penalty of $20,000.
In 1995, the Company offered to each holder of its Common Stock as of March
31, 1995 who resided in Oregon the right to rescind the holder's purchase of
shares of the Company's Common Stock. Sales of 135,414 shares of the Company's
Common Stock were rescinded pursuant to the rescission offering, resulting in
payment by the Company of approximately $738,660 to certain of its former
shareholders, which included interest of approximately $124,900.
The Company believes that its potential rescission liability to
shareholders who received the rescission offer for possible violations of Oregon
and federal law has been effectively eliminated as a result of the rescission
offer or the running of applicable statutes of limitation.
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In addition, the rescission offer was made to holders of 119,843 shares of
the Company's Common Stock who resided in states in which the Company did not
register its rescission offer, and the rescission offer was not made to holders
of 528,215 shares of the Company's Common Stock who resided in states whose
securities laws do not permit rescission offerings or impose terms and
conditions on such offerings which were unacceptable to the Company. These
holders of 648,058 shares of Common Stock originally purchased such shares of
Common Stock from the Company at prices ranging from $0.88 to $8.05 a share;
515,064 of these shares were purchased for $4.38 a share or less. Although the
Company also believes that its potential rescission liability to many of these
shareholders may have been eliminated by the running of applicable statutes of
limitation, there can be no assurance that claims asserting violations of
federal or state securities lawsthe necessary financing will not be asserted against the Company or
that certain holders will not prevail against the Companyavailable to meet our timeline. We expect to continue to onboard additional customers for our existing software suite and our new software offering once launched in the assertionfall of such claims, thereby compellingfiscal 2022, however we do not believe revenues from operations in fiscal 2022 will be sufficient to meet our operational overhead. Without additional financing, we do not believe our resources will be sufficient to meet our operating and capital needs beyond the Company to repurchase their shares. If allthird quarter of these holders successfully asserted claims2022.
Additional financing
During the six months ended June 30, 2022 we received $400,000 in proceeds from certain short term notes payable and a further $170,000 in short term notes payable from companies controlled by our President, Mr. Elchanan Maoz.
| 33 |
| Table of Contents |
Working Capital
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Current assets |
| $ | 503,181 |
|
| $ | 1,558,768 |
|
Less: current liabilities |
|
| 1,019,050 |
|
|
| 582,155 |
|
Working capital (deficit) |
| $ | (515,869 | ) |
| $ | 976,613 |
|
Current assets are primarily comprised of cash, customer accounts receivable, prepaid expenses and other current assets including refundable taxes (VAT).
Current liabilities consist of short term notes payable, accounts payable and accrued liabilities and the current portion of lease liabilities.
Going Concern
Our financial statements have been prepared assuming that the Company repurchase their
shares, the Company believes it would be required to pay to these holders
approximately $2,049,162, plus approximately $525,000 in statutory interest, to
repurchase $648,358 shares of the Company's Common Stock, representing an
average repurchase price of approximately $3.16 a share. Even if the Company
were successful in defending any securities law claims, the assertion of such
claims against the Company additionally could result in costly litigation and
significant diversions of effort by the Company's management.
LEGAL PROCEEDINGS
In May 1993,we will continue as a means of rapidly responding to a market opportunity in
Arizona with US West NewVector, the Company entered into a Leasinggoing concern and, Business
Transfer Agreement (the "Leasing Agreement") with Metro Direct Information
Services of Phoenix ("Arizona Direct"), an unaffiliated third party and former
licensee of the Company's initial value-added EDA product. The Leasing Agreement
provided financing for the Company of substantially all required equipment and
furniture in its Arizona operations center and is similar, in some respects, to
a joint venture agreement. The Leasing Agreement provided for a formula-based
profit sharing arrangement between the Company and Arizona Direct, which was to
become effective after the Company had recouped all start-up costs from the
Arizona operation. At the earliest appropriate time, at the Company's
discretion, the Company was obligated to request that its rights under the US
West NewVector contract for Arizona be transferred to Arizona Direct. If such a
transfer had occurred, the profit sharing arrangement was to be replaced by a
royalty arrangement under which the Company would have received a royalty for
each cellular call handled by Arizona Direct. If the transfer had been denied or
otherwise didaccordingly, do not occur, the formula-based profit sharing arrangement was to
govern the business relationship between the Company and Arizona Direct until
the transfer or the end of the US West NewVector agreement. In December, 1994,
the Company notified Arizona Direct that it believed Arizona Direct was in
default of its obligations under the Leasing Agreement. The Company has declared
the Leasing Agreement terminated. Arizona Direct has given the Company notice of
its belief that the Company has breached the Leasing Agreement as well. The
Company has denied those allegations.
In connection with the Leasing Agreement, the Company and several of its
officers have been named as defendants in a complaint filed in U.S. District
Court for the District of Arizona in June 1994 by Arizona Direct (and the
purported principal shareholders of Arizona Direct). The complaint alleges,
among other things, that the Company and its officers defrauded the plaintiffs
by entering into the Leasing Agreement and, further, violated securities laws as
the plaintiffs believe the Leasing Agreement to constitute a security as that
term is used in state and federal securities regulations. Additionally, the
complaint alleges that the Company and several of its officers violated
securities laws by selling securities in the plaintiff companyinclude adjustments relating to the individual
plaintiffsrecoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in the amount of $507,000 and otherwise causing the individual
plaintiffs to invest in Arizona Direct. The complaint seeks damages, including
punitive damages, in an amount to be determined by the court. The Company and
its officers answered the complaint denying liability, and moved to dismiss
certain aspects of the suit and to change the venueoperation. Our report from Arizona to Oregon. The
court granted these motions, transferred the case to the U.S. District Court for
the District of Oregon and gave Arizona Direct leave to re-plead. Arizona Direct
filed an amended complaint in March, 1995 which did not substantially alter the
claims previously made. The Company moved to dismiss certain claims, which
motions were granted in part. The Company has counterclaimed for breach of the
Leasing Agreement and for tortious interference with the Leasing
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Agreement against Arizona Direct's principal shareholders. In October 1995,
Arizona Direct filed an action against the Company in the U.S. District Court
for the District of Oregon seeking, among other things, damages for alleged
breach of the Leasing Agreement. This action has been consolidated with the
pending case originally filed in Arizona and subsequently transferred to Oregon.
Discovery is ongoing in both cases. The Company believes the allegations to be
without merit. No assurance can be given that the Company or any of its officers
will be successful in defending this legal action.
On May 20, 1996, two shareholders filed a civil action in the Superior
Court of the State of Washington for King County in which the plaintiffs allege
that the Company violated securities laws of the State of Washington by selling
to the plaintiffs 147,200 shares of the Common Stock of the Company in 1993
which had not beenour independent registered under Washington law and by omitting material
facts and making untrue statements in connection with those sales. See "Risk
Factors -- Rescission Rights of Certain Shareholders" and "Securities Law
Issues." In its complaint, the plaintiffs seek damages in the amount of the
consideration paid for the shares, $332,560, together with interest at the
Washington statutory rate of 8% per annum. The Company believes that it has
meritorious defenses to the plaintiffs' claims and intends to vigorously defend
the litigation.
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MANAGEMENT
The following table sets forth certain information with respect to the
directors and executive officers of the Company.
NAME AGE POSITION
- ----------------------------------------- --- ------------------------------------------------
Timothy A. Timmins....................... 39 President, Chief Executive Officer and Director
Patrick M. Cox........................... 34 Executive Vice President, Chief Operating
Officer, Secretary and Director
Kevin S. Anderson........................ 32 Senior Vice President -- Directory Assistance
Services
Stebbins B. Chandor, Jr.................. 36 Senior Vice President and Chief Financial
Officer
Gary E. Henry............................ 39 Vice President -- Field Operations
Karen L. Johnson......................... 46 Vice President -- Controller
Michael A. Kepler........................ 33 Vice President -- Information Systems
A. Jean de Grandpre...................... 75 Chairman of the Board
G. Raymond Doucet........................ 53 Director
William D. Rutherford.................... 57 Director
TIMOTHY A. TIMMINS serves as President, Chief Executive Officer and
Director of the Company. He served as the Company's Executive Vice President and
Chief Financial Officer from 1993 to 1995. From 1985 to 1993, Mr. Timmins served
in various capacities within the Investment Banking Division of Kemper
Securities, Inc. and predecessor firms, ultimately as Senior Vice President. Mr.
Timmins is a certified public accountant and holds a Bachelor of Science degree
in Business Administration from Portland State University and a Masters degree
in Business Administration from the University of Southern California.
PATRICK M. COX serves as Executive Vice President, Chief Operating Officer,
Secretary and Director of the Company. Since the Company's inception in 1989
through October 1993, Mr. Cox served as Chairman of the Board of Directors,
President and Chief Executive Officer or similar positions. From 1986 to 1989,
Mr. Cox was a Director and Vice President of Line One Telecommunications, Inc.,
a company that installed and serviced private communications networks and served
as a sales, service and repair center for Cellular One. Mr. Cox is a member of
the National Association of Radio and Telecommunications Engineers and is a
NARTE Certified Engineer Class One.
KEVIN S. ANDERSON serves as Senior Vice President -- Directory Assistance
Services of the Company. Since its inception in 1989, Mr. Anderson has served in
various capacities including President and Executive Vice President. From 1988
to 1989, Mr. Anderson served as Vice President of Operations for Line One
Telecommunications, Inc. Mr. Anderson holds a Bachelor of Science degree in
Business Administration from Oregon State University.
STEBBINS B. CHANDOR, JR. joined the Company in September 1995 and serves as
Senior Vice President and Chief Financial Officer of the Company. From 1985 to
1995, Mr. Chandor served in various corporate finance capacities with BA
Securities, Inc., a wholly-owned subsidiary of BankAmerica Corporation, and
affiliated or predecessor firms including Bank of America N.A. and Continental
Bank N.A. He specialized in structured finance/asset securitization and
mezzanine debt financing. Mr. Chandor holds a Bachelor of Science degree in
Chemical Engineering from Tufts University and a Masters degree in Business
Administration from the University of Southern California.
GARY E. HENRY joined the Company in 1993 and serves as Vice
President -- Field Operations. Prior to joining the Company, Mr. Henry was
Senior Vice President, Corporate Services Director for Imperial Corporation of
America, Inc., a financial institution, with whom he had been employed since
1985. He holds a Bachelor of Arts degree in Public Administration from San Diego
State University.
KAREN L. JOHNSON joined the Company in November 1993 as Controller. From
1989 to 1993, she was Financial Operations Manager for Care Medical Equipment,
Inc. and Care Ambulance, Inc. Ms. Johnson is a
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certified public accountant with a Bachelor of Arts degree from St. Olaf
College, and she performed post-graduate work in accounting and business
administration at Portland State University.
MICHAEL A. KEPLER has served as Vice President of Information Systems for
the Company since 1993. From 1989 to 1993 he held a similar position as Director
of Information Systems. From March 1989 until joining the Company, Mr. Kepler
was a programmer with ComLink West, a computer services company that performed
contract programming for the Company. During 1988 and early 1989, he was an
Engineering Technician with Single Board Systems and an Assembly and Testing
Technician with Hewlett-Packard.
A. JEAN DE GRANDPRE is Chairman of the Board of Directors of the Company.
Mr. de Grandpre is the founding Director and Chairman Emeritus of Bell Canada
Enterprises. He currently serves on the boards of the Canadian Advisory Board of
BJB International Management Textron Canada Ltd., Thera Technologies and the
Jeanne Sauve Youth Foundation. He is a former Director of Bell Canada, Northern
Telecom Limited, Chrysler Corporation, Chrysler Canada Ltd., and the
International Advisory Board of The Chemical Bank, New York. Mr. de Grandpre is
a Life Member of the Canadian Bar Association, Emeritus Member of the Canadian
Association of Canadian General Counsel, Member of the Bar of the Province of
Quebec and former Chancellor of McGill University. Mr. de Grandpre is a lawyer,
appointed Queen's Counsel, a Companion of the Order of Canada, the highest
honour granted a private citizen. Mr. de Grandpre is the recipient of the
Honourary Associate Award of the Conference Board of Canada and is an inductee
into the Canadian Business Hall of Fame.
G. RAYMOND DOUCET serves as a Director of the Company. Mr. Doucet is the
President and Chief Executive Officer of TeleZone Corporation, a Toronto-based
telecommunications company. He is also is President and Chief Executive Officer
of Douserv Management Inc., a Montreal-based holding Company. From 1984 to 1991,
he was the Chairman and Chief Executive Officer of Radcel Communications Inc.
which was purchased by Rogers Communications, Inc. Prior to that, he was
President of Douserv Group Inc., a company offering consulting, marketing and
operational services to the telecommunications industry. From 1965 to 1974, Mr.
Doucet was the Director of Technical Services with Bell Canada where he was
responsible for the planning and development of transmission and distribution
networks. Mr. Doucet serves on the boards of directors of Doucet & Associates
Consultants Inc., Servco Quebec Inc. and TeleZone Inc.
WILLIAM D. RUTHERFORD was elected to the Board of Directors of the Company
at a Special Meeting of the Shareholders on November 29, 1995. Mr. Rutherford
was a principal with Macadam Partners, a Portland-based investment firm. He was
formerly the Treasurer of the State of Oregon, where he was responsible for the
State's then $14 billion investment program and the state's then $7.5 billion in
indebtedness and during which service he was elected Chairman of the Oregon
Investment Council. He also served for seven years as a Member of the Oregon
House of Representatives. From 1994 to 1995, Mr. Rutherford served as Director
of Special Projects for Metallgesellschaft Corp., a multi-billion dollar
international trading company. From 1990 through 1993, Mr. Rutherford was
President and a director of Societe Generale Touche Remnant Corporation (U.S.),
an international asset management company. From 1987 to 1990, Mr. Rutherford was
President and Chief Executive Officer of ABD International Management
Corporation, an international asset management company. Mr. Rutherford formerly
practiced law and served as the Chief Executive Officer of a regional investment
firm. A U.S. Army veteran, Mr. Rutherford received a Bachelor of Science in
History from the University of Oregon in 1961 and an LL.B. from Harvard
University Law School in 1964.
Pursuant to the Company's Second Restated Articles of Incorporation, at any
time when the Board of Directors consists of six or more members, the Board of
Directors is divided into three classes serving staggered three-year terms.
Directors are otherwise elected to serve one-year terms. Executive officers are
appointed by and serve at the discretion of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors appointed a Compensation Committee in 1995. The
Compensation Committee reviews executive compensation and makes recommendations
to the full Board regarding changes in compensation, and also administers the
Company's stock option plans. The members of the Compensation Committee are
Messrs. de Grandpre and Doucet. The Board of Directors appointed a standing
Audit
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Committee in 1996. The Audit Committee reviews the scope of the independent
annual audit, the independent public accountants' letter to the Board of
Directors concerning the effectiveness of the Company's internal financial and
accounting controls and facilitates the preparation of the Board of Directors'
response to that letter, if deemed necessary. The members of the Audit Committee
are Messrs. de Grandpre, Doucet and Rutherford. The Board of Directors acts as a
nominating committee for selecting nominees for election as directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Restated Articles of Incorporation eliminate, to the fullest
extent permitted by Oregon law, liability of a director to the Company or its
shareholders for monetary damages for conduct as a director. While liability for
monetary damages has been eliminated, equitable remedies such as injunctive
relief or rescission remain available. In addition, a director is not relieved
of his or her responsibilities under any other law, including the federal
securities laws.
The Company's Restated Articles of Incorporation require the Company to
indemnify its directors to the fullest extent not prohibited by law. The Company
has also entered into indemnification agreements with each of the Company's
directors. The Company believes that the limitation of liability provisions in
its Restated Articles and indemnity agreements may enhance the Company's ability
to attract and retain qualified individuals to serve as directors.
DIRECTORS' COMPENSATION AND OTHER ARRANGEMENTS
Generally, directors who are not employees of the Company receive $500 plus
expenses for each Board meeting attended locally or via telephone and $2,500
plus expenses for each meeting attended in person for which substantial travel
is required. Directors who are not employees of the Company have been granted
non-qualified options to purchase 57,140 shares of Common Stock of the Company
at a price of $8.05 per share; such options vest over a four-year period, which
vesting may be accelerated under certain conditions. In addition, Mr. de
Grandpre receives $2,000 a month for his service as Chairman of the Board.
The Company entered into a two-year consulting agreement with G. Raymond
Doucet, a director, in December 1994, pursuant to which Mr. Doucet will advise
the Company on (i) enhancing the profitability of its EDA, (ii) technical and
personnel matters, and (iii) financial and budgetary matters. In addition to
receiving a consulting fee of $5,000 per month, the Company has granted Mr.
Doucet an option to purchase up to 85,710 shares of its Common Stock at an
exercise price of $2.31 per share.
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EXECUTIVE COMPENSATION
The following table sets forth,firm for the fiscal year ended December 31, 1995, certain summary information concerning compensation2021 includes an explanatory paragraph stating the Company has recurring losses and limited operations which raise substantial doubt about its ability to continue as a going concern. If the Company is unable to obtain adequate capital, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
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Off-Balance Sheet Arrangements
As of June 30, 2022, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated under which it has:
● | a retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit; | |
● | liquidity or market risk support to such entity for such assets; | |
● | an obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument; or | |
● | an obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to us, where such entity provides financing, liquidity, market risk or credit risk support to or engages in leasing, hedging, or research and development services with us. |
Effects of Inflation
We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our consolidated financial statements included herein for the quarter ended June 30, 2022 and the year ended December 31, 2021.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the persons servingprimary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel.
Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s consolidated statements of cash flows. Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in “General and Administrative” on the Company’s consolidated statements of operations.
Goodwill
Goodwill represents the excess of the purchase price of the acquisition over the net fair value of identifiable assets acquired and liabilities assumed. Goodwill amounts are not amortized.
Intangible Assets
The Company generally recognizes assets for customer relationships, developed technology, and finite-lived trade names from an acquisition. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets, generally from 3 to 8 years. Amortization for developed technology is recognized in cost of revenue. Amortization for trade names is recognized in sales and marketing expenses.
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In the year ended December 31, 2021, the Company recorded assets acquired in the cumulative amount of approximately $3.47 million (cash proceeds, share based consideration and the assumption of certain repayable grants issued by the government of Israel which financed certain development activities related to the intellectual property) purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation, which we recorded as intangible assets. Intangible assets acquired included (1) goodwill; and (2) intellectual property and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property. We initially record acquired intangible assets at their estimated fair values and we review these assets periodically for impairment.
Software Research & Development Expenditure
Software research and development expenditures consist primarily of costs associated with the on-going development of software acquired from Royal App including employee compensation and certain stock based compensation associated with certain employee contracts, as well as other expenses for research and development, personnel, supplies and development materials, costs for consultants and related contract research and facility costs. Expenditures relating to research and development are capitalized as incurred. In the period ended December 31, 2021, the company recorded assets acquired in the cumulative amount of approximately $3.47 million purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation, which we recorded as intangible assets. During the year ended December 31, 2021, we capitalized approximately $990,000 in ongoing research and development expenditures and $28,483 in patent related expenditures. During the six months ended June 30, 2022, we capitalized an additional $952,000 in ongoing research and development expenditures.
Impairment
The valuation of goodwill at the reporting unit level is reviewed annually during the fourth fiscal quarter or more frequently if facts or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. The Company presently has one reporting unit; therefore, all of its goodwill is associated with the entire company.
Management has the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the Company is less than the carrying amount, including goodwill. If it is determined that it is more likely than not that the fair value of the Company is less than the carrying amount, a quantitative assessment is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company also has the option to bypass the qualitative assessment and perform the quantitative assessment.
The Company reviews the valuation of long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment testing is performed at the asset group level.
Revenue Recognition
The Company has adopted the requirement of Accounting Standards Update, or ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).
We derive our revenues primarily from subscription fees for access to our software offerings, collected monthly, as well as from limited sales of customized professional services. We recognize revenues when a perceived contract exists between the Company and a customer and upon transfer of control of promised products or services to such customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenues are recognized net of allowances and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We determine revenue recognition through the following steps:
· | Identification of the contract, or contracts, with a customer; |
· | Identification of the performance obligations in the contract; |
· | Determination of the transaction price; |
· | Allocation of the transaction price to the performance obligations in the contract; and, |
· | Recognition of revenues when, or as, the Company satisfies a performance obligation. |
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Subscription Revenues
Subscription revenues primarily consist of monthly fees for providing customers access to our software apps including feature-based pricing models, where distinct packages are aligned to a specific type of customer persona based on its size, market segment and physical/online store presence. Each package is different than the next with prices increasing as the Company's Chief Executive Officer (the "Named Executive Officers"). No
other executive officer received compensation exceeding $100,000.
SUMMARY COMPENSATION TABLE
Monthly subscriptions to our software packages include routine customer support and unspecified software updates and upgrades released when and if available during the term. Revenues are generally recognized monthly over the contract term beginning on the date that our service is made available to the customer, which we believe best reflects the manner in which our customers utilize our subscription offerings. Customers pay monthly for the services in advance, and if payments are not collected, the access to the service terminates. Arrangements with customers do not provide the customer with the right to take possession of the software supporting application service at any time and, as a result, are accounted for as a service contract.
Customized Professional Service Revenues
Customized service contract revenues primarily consist of fees for deployment, configuration, and optimization services, and potentially, training. The majority of our professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods. A portion of our customized service contracts may be billed on a time and materials basis and revenues are recognized over time as the Company's Presidentservices are performed.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and Chief Executive Officerthat may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on July 20, 1995. Mr. Timmins was electedits financial position or results of operations.
Acquisition
On March 30, 2021, the Company announced that its newly-formed, wholly owned Israeli subsidiary, Stratford Ltd. had received notification of approval from the Lod District Court in Israel for its winning bid to acquire certain assets of Royal App, Ltd. out of insolvency proceedings for approximately $2.4 million USD in cash, the assumption of certain repayable government grants with an approximate value of $200,000 USD, as well as 8% equity in the Company's PresidentCompany on a diluted basis, post conversion of the Company’s preferred common stock and Chief Executive Officer on July 28, 1995.
OPTION GRANT TABLEcertain other proposed sales of common stock in order to raise the required funds to complete the acquisition.
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Royal App, Ltd., is the original developer of Shelfy, a white label, headless mobile commerce software platform that helps retailers and fast moving consumer goods companies become growth companies, among other IP. The Shelfy product incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as supermarket chains, food and other clients.
To finance the acquisition as well as general working capital, the Company proposed to raise up to $3.5 million commencing March 2021 in the form of puttable Simple Agreements for Future Equity (“SAFE”) from institutional investors and family offices. The terms of the SAFE required that they automatically converted into common stock of the Company following table provides information regarding options to purchase
Common Stock granted to the Named Executive Officers pursuant to the Company's
Stock Incentive Plan (the "Plan")conversion of all outstanding convertible preferred stock into common stock.
As a result, during the year ended December 31, 1995.
OPTIONS GRANTS IN LAST FISCAL YEAR
As of the date of this prospectus, no additional shares shall be issued to the Trustee as part of the asset acquisition, and no additional “anti-dilution” shares were issued to the Trustee as part of the PIPE or SAFE offerings, and no additional anti-dilution shares will be issued as part of this offering. There will be no anti-dilution that will occur as part of this offering due to the acquisition transaction described above.
Capital Expenditures
Other Capital Expenditures
We expect to incur research and development costs, as well as marketing expenses in connection with the expansion of our business and the development of our products.
Future Contractual Obligations and Commitment
We incur contractual obligations and financial commitments in the normal course of our operations and financing activities. Contractual obligations include future cash payments required under existing contracts, such as debt and lease agreements. These obligations may result from both general financing activities and from commercial arrangements that are directly supported by related operating activities.
As of June 30, 2022, we have approximately $173,000 in repayable Israeli government grants which are recorded on our balance sheets as an accrued liability. The grants have no specific terms of repayment and are payable as revenues are generated from our acquired assets at a rate of 3.00% of gross sales proceeds.
Overview
Our Mission.
We enable retailers to grow their business, using mobile commerce to better engage their customers, both in-store and online – no code required.
Our Objective
Metro One Telecommunications, Inc. is focused on changing the way retailers integrate mobile commerce solutions within their business. Our multi-model, plug and play mobile commerce platform enables retailers to launch their own branded mobile application serving as an additional sales channel in a matter of a few hours – no code required.
Through our recently acquired Israeli tech company, Stratford, Ltd, the company will continue to merge the functionality of mobile technology, AI, and Machine learning enabling retailers to quickly and easily bring their business online with a goal to significantly:
· | Increase customer retention (60%) | |
· | Increase average basket size (30%) | |
· | Increase Upsell and Cross-sell x4 | |
· | Increase customers lifetime value CLV – drastic increase in repeat monthly purchases |
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Corporate History
Metro One was originally incorporated in the state of Oregon in 1995. On August 9, 2021, the Company reorganized and filed articles of conversion to be registered under the laws of the state of Delaware.
On April 16, 2008, we were notified by The Nasdaq Stock Market that we were not in compliance with Nasdaq Marketplace Rule 4310(c)(4) (the “Minimum Bid Price Rule”) because shares of our common stock had closed at a per share bid price of less than $1.00 for 30 consecutive business days. In accordance with Marketplace Rule 4310(c)(8)(D), we had been provided 180 calendar days, or until October 13, 2008, to regain compliance with the Minimum Bid Price Rule. In addition, on May 22, 2008, we were notified by The Nasdaq Stock Market that we no longer were in compliance with Nasdaq Marketplace Rule 4310(c)(3) and were subject to delisting from the Nasdaq Capital Market. Marketplace Rule 4310(c)(3) requires that we maintain stockholders’ equity of at least $2.5 million, or a market value of our listed securities of at least $35.0 million, or have net income from continuing operations of at least $500,000 during the last fiscal year or two of the last three fiscal years. On July 25, 2008, we received a Nasdaq staff determination letter rejecting the plan we had submitted to evidence our ability to achieve compliance with the requirements for continued listing on The Nasdaq Capital Market set forth in Nasdaq Marketplace Rule 4310(c)(3). We appealed the Nasdaq staff’s determination to delist our securities from The Nasdaq Capital Market effective August 5, 2008, and were scheduled for a hearing before a NASDAQ Listing Qualifications Panel (the “Panel”) on September 18, 2008. However, on September 16, 2008, we notified the Panel that we were withdrawing our appeal of the July 25, 2008 Nasdaq staff determination. Accordingly, our common stock was suspended from trading effective at the timeopen of grant (ten years). Potential gains are netbusiness on Friday, September 19, 2008. The common stock was subsequently delisted on October 7, 2008, when the SEC completed its formal notification of removal from listing. On March 5, 2009 the company filed a Form 15 terminating its registration under Section 12(g) of the exercise price but
before taxes associated with the exercise. Amounts represent hypothetical
gains that could be achieved for the respective options if exercised atSecurities Exchange Act.
During fiscal 2009 through the end of fiscal 2020, the Company determined to wind-down its former operations and subsequently began seeking a viable project of merit. Upon the recent acquisition of the assets of Royal App in early 2021, the Company has returned to active operations.
Our principal executive offices are located at 30 North Gould Street, Suite 2990, Sheridan, WY 82801, our phone number is (307)-683-0855, our corporate website is www.metro1telecomm.com and our product website is www.shelfy.io.
We currently have one subsidiary, Stratford, Ltd., incorporated in Israel.
Principal products
· | Mobile Commerce Merchant Platform: Enabling SMB retailers to launch a fully branded and functional mobile app with tons of unique and patented features. Great for retailers with at least 200+ return customers. Our patented UX/UI features are available on both IOS and Android and include unique features such as voice search, shoppable videos, and barkers for upselling. Our Mobile Commerce Merchant Platform is operational. | |
· | Mobile Commerce Enterprise Platform: Enabling Enterprise retailers who own and operates both brick and mortar store as well as e-commerce platforms to better engage with their customer both online and in-store via the customer’s mobile application. Our Mobile Commerce Enterprise Platform is not yet operational, but we expect to launch this product during the fourth quarter of 2022. |
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· | Instore Engagement Suite: providing a purely customer-centric approach to shopping. Our Scan, Pay & Go reduces the customer’s shopping time by approximately 40%. Imagine no more waiting in lengthy lines, no more time and effort spent on packing, unpacking and packing again … and for retailers, an effective way to reduce cost on hardware acquisition and maintenance. Additional instore features will include In-store navigation, in-store personalized shopping experience, and in-store customer loyalty program activation. During this phase, we might consider the M&A of small startups with unique technological features enriching our suite of products without having to develop from scratch. Our Instore engagement Suite is not yet operational, but we expect to launch this product during the second quarter of 2023. |
Competitive Strengths
It is important to emphasize that we are not app developers -hence our direct competitors are not other app developers. What we provide is a mobile commerce platform that provides retailers software that enables them to build their own application without one line of code or any development needed from their side.
We differentiate our products primarily through functional points of difference between our products and those of our competitors, including:
- | Intuitive drag and drop dashboards that enable merchants to build their own branded mobile application | |
- | Patented single product display graphical user interface – called the shelf that makes mobile shopping truly mobile and is truly unique to our application | |
- | An advanced in app marketing suite consisting of features such as shoppable videos and barkers, significantly increasing up selling and cross selling. |
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Marketing, Sales and Customer Service
Due to the dynamic nature of SaaS platforms and the market sector we are targeting, we have decided to focus on being a product-led company, and merge the marketing, sales and customer success teams into one department, providing a complete customer-centric approach. This approach gives us a 360 view of the customer journey and ensures that we can act in real-time to acquire new customers and provide the relevant option term.support when and where needed to retain the customers we have acquired. Using the latest marketing discipline called Product led Growth Hacking and automation we will be able to support and focus on rapid and optimized growth. Consisting of both a process and a set of cross-disciplinary (digital) skills. The assumed 5%goal is to regularly conduct A/B testing that will lead to improving the customer journey and 10% ratesreplicate and scale the ideas that work and modify or abandon the ones that don’t before spending vast amounts of stock
appreciation are basedresources. Once a plan has been validated, it is automated and the system works by itself reducing overheads and lowering the cost of customer acquisition (CAC).
To ensure we give retailers the optimal results when using our platform, our focus will not merely be on appreciationsales cycles but creating a community where they can learn and grow with plenty of engagement and educational information such as blogs, webinars, and affiliation programs.
Experienced Leadership Team
The combination of operating skills from the exercise price per share
established at the relevant grant date. These rates are provided in
accordanceour management team with the rulesexperience of successfully leading major retail and mobile commerce companies gives our organization a significant strength relative to most small- and medium-sized companies.
Growth Strategies
Our primary long-term goal is to become one of the SECmarket leaders within the mobile commerce sector, providing an additional sales channel which merchants and do not representretailers of all sizes can add to their existing business. We intend to achieve this goal by driving organic growth through our third-party integrated platforms, across all major retail channels where repeat purchases occur and in all major markets where e-commerce has been adapted and in markets where the Company's
estimate or projectionuse and launch of e-commerce shops are on the rise.
Our key growth strategies include the following:
· | developing a powerful, performance-oriented, and metric-driven organizational culture; |
· | developing automated marketing, sales and customer service tool kits to empower our sales force network to engage with global customers; |
· | developing brand/marketing tool kits for current and new products and segments, to make onboarding as efficient and seamless as possible; |
· | launching and expanding our SaaS products domestically and internationally; |
· | strengthening our supply chain to achieve best in class costs, on-time/as promised products and customer service; |
· | improving margins with improved efficiency, and improved net revenue per case with new products; |
· | upgrading infrastructure, systems and processes with enterprise resource planning systems, improved financial reporting, operating expense control, and strengthened key metrics and accounting and control procedures; and |
· | strengthening our financial foundation via accessing the capital markets, solidifying long-term banking partners and facilities, and pursuing transformative organic and external growth. |
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Recent Developments
In May 2022 the Company received approval to publish its mobile commerce platform on the Shopify App Store. Shopify is a leading global commerce company, providing retailers with trusted tools to start, grow, market, and manage their businesses.
In June 2022, the Company received approval to publish its mobile commerce platform on WordPress.ORG as a WooCommerce Plugin. WordPress, currently in use by 43% of all websites, is one of the future Common Stock price. Actual gains, if
any,most popular open-source content management system solutions according to W3 Techs. WooCommerce, a WordPress plugin, offers flexible, open-source commerce solutions for WordPress websites, empowering small and medium-sized businesses to build the store they want and sell online. With more than 5 million active installations of the WooCommerce plugin reported on wordpress.org, statista.comindicates WooCommerce commands more than 23% of the global eCommerce market share. Shelfy.io is a patented mobile app builder plugin for WooCommerce.
On August 1, 2022, the Company officially launched its fully updated mobile commerce platform on the stock option exercises are dependentShopify App Store, with its first user. The Shelfy app is now open to all merchants on the Shopify marketplace and can be accessed at https://apps.shopify.com/shelfy.
Sales and Marketing
We currently have an in-house sales and merchandising team whose compensation is highly variable and highly performance-based. Each sales person has individual targets for increasing “base” volume through distribution expansion, and “incremental” volume. As distribution to new major customers, new major channels, or new major markets increases, we will expand the sales and marketing team on a variable basis.
We market our products using a range of marketing mediums including in-store merchandising and promotions, experiential marketing, events, and sponsorships, digital marketing and social media, direct marketing, and traditional media including print, radio, outdoor, and TV.
Competition
The mobile commerce industry is highly competitive. We face intense competition from very large, international corporations, as well as from local and national companies. In addition, we face competition from well-known companies that have large market share.
The intensity of competition in the future is expected to increase and no assurance can be provided that we can sustain our market position or expand our business.
Many of our current and potential competitors are well established and have longer operating histories, significantly greater financial performanceand operational resources, and name recognition than we have. However, we believe that with our specialized platform and considering that the mobile commerce sector is growing we will have the ability to obtain a large market share, and continue to generate sales and compete in this industry.
Patents and Trademarks
We hold various trademarks and patents in various jurisdictions, all of which were acquired through the liquidation proceedings for Royal App, Ltd. Any encroachment upon our proprietary information, including the unauthorized use of our brand name, the use of a similar name by a competing company or a lawsuit initiated either by us or against us for infringement upon proprietary information or improper use of a trademark, may affect our ability to create brand name recognition, cause customer confusion and/or have a detrimental effect on our business due to the cost of defending any potential litigation related to infringement. Litigation or proceedings before the U.S. or International Patent and Trademark Offices may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and/or to determine the validity and scope of the Company, overall market conditionsproprietary rights of others. Any such litigation or adverse proceeding could result in substantial costs and the option
holders' continued employment through the vesting period. This table does
not take into account any appreciationdiversion of resources and could seriously harm our business operations and/or results of operations.
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Our patents and trademarks are set out below:
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Government and Industry Regulation
We are subject to a variety of federal, state and local laws and regulations in the priceU.S. These laws and regulations apply to many aspects of our business including the Common Stock frommanufacture, safety, labeling, transportation, advertising and sale of our products. Violations of these laws or regulations in the dateadvertising of grant of this Prospectus, other than the columns reflecting
assumed rates of appreciation of 5% and 10%.
(2) The options vest over a period of four years and the term of each option is
10 years. The options may terminate before their expiration dates if the
optionee's status as an employee is terminated our products could damage our reputation and/or upon the optionee's death
or disability.
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(3) Mr. Cymbala resigned as the Company's President and Chief Executive Officer
on July 20, 1995. Mr. Cymbala's options expired on November 20, 1995.
YEAR-END OPTION TABLE
The following table provides information regarding exercises of options
during 1995 and unexercised options held as of December 31, 1995, by the Named
Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
ACQUIRED UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
ON VALUE OPTIONS AT YEAR-END YEAR-END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------- ----------- -------- ------------------------- -------------------------
Timothy A. Timmins......... -- -- 249,988/149,993 (1)
Robert J. Cymbala.......... -- -- (2) (1)(2)
- ---------------
(1) There is no established public trading market for the Company's Common
Stock. The Value of Unexercised In-the-Money Options is the difference
between the fair market value of the Common Stock at December 31, 1995 and
the applicable exercise price. This difference was estimated to be less than
or equal to zero.
(2) Mr. Cymbala resigned as the Company's President and Chief Executive Officer
on July 20, 1995. Mr. Cymbala's options expired on November 20, 1995.
The Company has entered into employment contractsresult in regulatory actions with Messrs. Timmins and
Cox that allow for a base annual compensation and increases based upon
achievement of certain corporate goals and upon a formula tiedsubstantial penalties.
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We will also subject to the profitability ofSecurities Act, the CompanySecurities and for employment of them for five-year periods
ending in July of 2000. The agreements provide for annual base salaries that are
eligible for a one-time increase based upon the occurrence of (i) a public
offering of the Company's Common Stock at certain minimum levels or (ii) sale or
merger of the Company resulting in a certain minimum consideration per share or
(iii) upon the achievement of certain minimum earnings levels coupled with the
trading of the Company's Common Stock at a certain minimum price per share. The
employment agreements provide for annual bonuses of up to 100% of adjusted base
salary based upon the earnings level in the year in which net earnings are first
achieved for the entire fiscal year and based upon growth in earnings in
subsequent years. The employment agreements also provide for payment to Messrs.
Timmins and Cox of certain amounts in the event of the termination of their
respective employment. Under the employment agreements, Messrs. Timmins and Cox
have been granted certain indemnification rights. In addition, the employment
agreements prevent Messrs. Timmins and Cox from competing with the Company or
soliciting the employment of other individuals employed by the Company during
Messrs. Timmins' and Cox's respective employment and for a period of one year
thereafter. Under the employment agreements, Messrs. Timmins or Cox may not
disclose the Company's confidential information to outsiders during their
respective employment and for a period of two years thereafter.
1994 STOCK INCENTIVE PLAN
The Stock Incentive Plan was adopted by the Board of Directors on November
30, 1994 for a 10-year term. The Stock Incentive Plan was approved by a vote of
the shareholders at a Special Meeting of the Shareholders of Record on November
29, 1995. The purposes of the Stock Incentive Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to the employees and Consultants of the Company and to
promote the success of the Company's business.
The Stock Incentive Plan is administered by the Compensation Committee (the
"Committee"). Transactions under the Stock Incentive Plan are intended to comply
with all applicable conditions of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In additionand Delaware General Corporation Law. We will also be subject to determining who will be
granted options, the Committee has the authoritycommon business and discretion to determine
when options will be granted and the number of options to be granted. The
Committee may determine which options
37
43
may be intended to qualify ("Incentive Stock Options") for special treatment
under the Internal Revenue Code of 1986, as amended from time to time (the
"Code") or whether options are Non-Qualified Options ("Non-Qualified Stock
Options") which are not intended to so qualify. The Committee also may determine
the time or times when each option becomes exercisable, the duration of the
exercise period for options and the form or forms of the instruments evidencing
options granted under the Stock Incentive Plan. The Committee may adopt, amend
and rescind suchtax rules and regulations as in its opinion may be advisable for
the administration of the Stock Incentive Plan. The Committee also may construe
the Stock Incentive Plan and the provisions in the instruments evidencing option
granted under the Stock Incentive Plan to employee and officer participants and
is empowered to make all other determinations deemed necessary or advisable for
the administration of the Stock Incentive Plan
The Stock Incentive Plan contains provisions for proportionate adjustment
of the number of shares for outstanding options and the option price per share
in the event of stock dividends, recapitalizations resulting in stock splits or
combinations or exchanges of shares. In addition, the Stock Incentive Plan
provides for adjustments in the purchase price and exercise period by the
Committee in the event of a proposed dissolution or liquidation of the Company,
or any corporate separation or division, including, but not limited to,
split-up, split-off or spin-off, or a merger or consolidation of the Company
with another corporation, or in the event there is a change in constitution of
the Common Stock of the Company.
Participants in the Stock Incentive Plan may be selected by the Committee
from employees, officers, directors and consultants of the Company. In
determining the persons to whom options will be granted and the number of shares
to be covered by each option, the Committee will take into account the duties of
the respective persons, their present and potential contributionspertaining to the successoperation of the Company andour business, such other factors as the Committee deems relevant to
accomplish the purposes of the Stock Incentive Plan.
Only employees of the Company as the term "employees" is defined for the
purposes of Code will be entitled to receive Incentive Stock Options. Incentive
Stock Options granted under the Stock Incentive Plan are intended to satisfy all
requirements for incentive stock options under Section 422 of theUnited States Internal Revenue Tax Code and the Treasury Regulations thereunder.
Each option granted underDelaware State Tax Codes, as well as international tax codes. We will also be subject to proprietary regulations such as United States Trademark and Patent Law as it applies to the Stock Incentive Planintellectual property of third parties. We believe that the effects of existing or probable governmental regulations will be evidenced by a
written option agreement between the Company and the optionee. The option priceadditional responsibilities of management to ensure that we are in compliance with securities regulations as they apply to our products as well as ensuring that we do not infringe on any Incentive Stock Option may be not less than 100%proprietary rights of the fair market value
per share on the date of grant of the option; provided, however, thatothers with respect to our products. We will also need to maintain accurate financial records in order to remain compliant with securities regulations as well as any Incentive Stock Option granted under the Stock Incentive Plan to a person owning
more than ten percent of the total combined voting power of the Common Stock
will have an option price of not less than 110% of the fair market value per
share on the date of grant of the Incentive Stock Option. Each Non-Qualified
Stock Option granted under the Stock Incentive Plan will be at an exercise price
no less than 85% of the fair market value per share on the date of grant or
authorization of sale thereof, unless otherwise expressly determined by the
Board of Directors. Fair market value on the date of grant is defined as a value
determined in the discretion of the Board; provided, however, that where there
is a public market for the Common Stock, the fair market value per share shall
be the closing price of the Common Stock for the date of grant or authorization
of sale, as reported in The Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation (NASDAQ) System) or, in the event the Common Stock is listed on a
stock exchange, the fair market value per share shall be the closing price on
such exchange on the date of grant of the option or authorization of sale, as
reported in The Wall Street Journal.
The exercise period of options granted under the Stock Incentive Plan
generally may not exceed 10 years from the date of grant thereof. Incentive
Stock Options granted to a person owning more than 10 percent of the total
combined voting power of the Common Stock of the Company will be for no more
than five years. The Committee will have the authority to accelerate or extend
the exercisability of any outstanding option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. However, no
exercise period may be extended to increase the term of the option beyond 10
years from the date of grant.
To exercise an option, the optionee must pay the full exercise price in
whole or in part consisting of (i) cash; (ii) check; (iii) promissory note; (iv)
transfer to the Company of shares having a fair market value at the time of such
exercise equal to the option exercise price; or (v) delivery of instructions to
the Company
38
44
to withhold from the shares that would otherwise be issued on the exercise of
that number of shares having a fair market value at the time of such exercise
equal to the option exercise price, subject to determination by the Board.
An option may not be exercised unless the optionee then is an employee,
officer, director or consultant of the Company, and unless the optionee has
remained continuously as an employee, officer, director or consultant of the
Company since the date of grant of the option. If the optionee ceases to be an
employee, officer, director or consultant of the Company, all options which are
not vested under the Stock Incentive Plan by the time of death, disability,
retirement or termination of employment, immediately terminate. All options
granted to such optionee that are fully vested to such optionee but not yet
exercised, will terminate (i) 12 months after the date the optionee ceases to be
an employee, officer or director of the Company by reason of death or
disability; or (ii) three months after termination of employment for any other
reason.
If an optionee dies while an employee, officer, director or consultant, or
is terminated by reason of disability, all options theretofore granted to such
optionee, unless earlier terminated in accordance with their terms, may be
exercised at any time within one year after the date of death or disability of
said optionee, by the optionee or by the optionee's estate or by a person who
acquired the right to exercise such options by request or inheritance, but only
to the extent of the right to exercise ascorporate tax liability we incur.
Employees
As of the date of death or disability.
Options granted underthis prospectus, Metro One has no employees, our acting Chief Executive Officer, Mr. Elchanan Maoz, and our board of directors, acting as consultants manage our operating activities. Our operating subsidiary, Stratford Ltd., has 15 full time employees 2 full-time subcontractors and 3 part time consultants, managed by its Chief Executive Officer, Ami Bukris.
Property
Our operations internationally are registered at Raoul Wallenberg 18, Building D, 6th Floor, Ramat Hachayal, Tel Aviv, Israel. Stratford Ltd. has several short-term lease agreements with Regus Co-Working Offices with month to month and six-month durations. The location of the Stock Incentive Planleased offices is Atrium Tower, 18th floor, Zeev Jabotinsky St 2, Ramat Gan, 5250501, Israel. The cumulative monthly lease fees are not transferable other
than byapproximately $10,770 USD for a total of approximately 600 square feet... Our principal executive offices are located at 30 North Gould Street, Suite 2990, Sheridan, WY 82801, for which we pay $30.00 per month on a month-to-month basis. We consider the current space to be adequate and will orreassess our needs based upon future growth.
Directors are elected by the lawsstockholders to a term of descentone year and distribution. Options may be
exercised duringserve until their successors are elected and qualified. Officers are appointed by the lifetimeboard of directors to a term of one year and serve until their successors are duly appointed and qualified, or until the officer is removed from office.
The name, age and position of our officers and directors is set forth below:
Name | Age | Position(s) | ||
Bianca Meger | 39 | Chief Executive Officer* | ||
Elchanan (Nani) Maoz | 55 | President, Director, Acting Chief Executive Officer | ||
Jonah Meer | 66 | Secretary, Director | ||
James Alexander Brodie | 68 | Treasurer, Director |
*Resigned effective July 19, 2022
Bianca Meger – Chief Executive Officer (Resigned July 19, 2022)
Mrs. Meger brings more than 18 years of experience to the Metro One team, having gained extensive global experience in marketing, business development and sales and a proven track record of establishing data-driven, customer-centric companies. She started her career-launching and managing Motorola’s mobile distribution in Angola, Africa. From there she transitioned to the real estate industry, leading the leasing and marketing department of London-listed Plaza Center in Central Eastern Europe, specializing in shopping center development, leasing, and operations, and working with leading global retail brands. Over the past nine years she served as the Chief Marketing Officer for various leading tech companies in Israel, which led to her nomination for the renowned Globes 40 under 40 award. Originally from Africa, she strongly believes in the notion of “it takes a village”, and is convinced that sophisticated technology, unique business models and a proactive regulatory approach can make financial inclusion a reality for all. Mrs. Meger holds a Bachelor of Commerce -BCom Marketing.
Elchanan (Nani) Maoz – Acting Chief Executive Officer, President and Director
Mr. Elchanan (Nani) Maoz has been the chairman of Metro One since December 2018. Maoz is the Chairman and Founder of Tel Aviv-based Everest Group. As an active manager of private funds, Mr. Maoz has executed over 30 investments in American, European and Israeli companies, playing an active role in cases that included turnarounds and restructuring. Mr. Maoz has been active in special situations, both in and out of bankruptcy, as a change agent, a director or an active shareholder/debt holder in order to unlock value for investors. The majority of the optionee or,cases were very favorably resolved for the investors/funds he represented, including Actrade Financial, Gyrodyne, Concord Camera, ICTS, Simon Worldwide, Limoneira, and Livermore. Mr. Maoz has served as chair of equity committees, chair of liquidation trust committees and as an active participant in major legal settlements and proceedings, monetizing assets (including intellectual property) related to distressed equity and debt, both locally and internationally. He currently serves on the board of Metro One Telecommunications, on the Israeli Board of the America Israel Friendship League, and is a director of private medical management service providers, as well as on boards of the various Everest Group companies. Mr. Maoz received his B.Sc. in engineering from King’s College of the University of London in 1993. Between 1984 and 1988, Mr. Maoz served as commanding officer and a team leader in the eventIsraeli Special Forces.
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Jonah Meer – Secretary and Director
Mr. Meer is an attorney, accountant and entrepreneur. His career spans four decades in the legal, accounting, financial and investment world, both in public and private companies, where he has held numerous executive and fiduciary positions. This includes a dozen years as Chief Operating Officer of incapacitation, only bya NYSE member firm. For the optionee's legal guardian or legal representative.
An optioneelast twenty-five years he has no rightsserved as Managing Member of Trade Global LLC a fintech company providing cross border capital markets services. In September 2016 he co-founded and serves as Chief Executive Officer of Qrons Inc. (OTCQB:QRON), an innovative biotechnology company dedicated to developing biotech products, treatments and technologies to combat neuronal diseases. Mr. Meer received his Master of Law degree from New York University School of Law, in addition to holding juris doctor and accounting degrees.
James Alexander Brodie – Treasurer and Director
James Brodie is a successful businessman who has added significant value in many business sectors including healthcare both products and services, wine importation and distribution, air ambulance services, inflight entertainment and strategic consulting. He has formed and led teams that have successfully started and grown small businesses and as a shareholder with respectresult has extensive M & A experience. Currently serving as a strategic advisor to any shares covered byCitadel America Asset Group based in NYC. The group purchases and restores B grade apartment complexes across the southern tier of the US. The group has ~1500 units and is actively seeking additional properties. The group has about $150 million under management. James is also a partner in the development of a family business J Wilder Importers that designs and imports bespoke shoes, premium leather belts and hand loomed textiles. Products are sourced from Spain, Argentina, Morocco, Tunisia, Greece, Turkey, India and Australia. Other leadership experience includes being the founding partner of a New York Stock exchange brokerage firm, a board member of the Pink Sheets, and a managing director of Tocqueville Asset Management. He also served as a managing director in the turnaround of a family officer and trading firm that made markets in over 400+ stocks. Finally, he served as an option until the option has been exercised.
The Company,advisor to the extent permittedlargest operating charity [revenue ~$150] on Long Island, NY where he worked to grow or required by law, will deduct a
sufficient numbermerge their foundation with smaller charitable foundations.
Corporate Governance
As soon as practicable following the closing of shares duethis offering, our board of directors plans to the optionee upon exercise of the option to
allow the Company to pay federal, stateestablish an audit committee, compensation committee and local taxes of any kind required by
law to be withheld upon the exercise otherwise due to the optionee. The Company
is not obligated to advise any optionee of the existence of any tax or the
amount which the Company will be required to withhold.nominating and corporate governance committee. As of the date of this Prospectus, optionswe do not have any such committees. Each committee will operate under a charter, to purchase 1,162,598 sharesbe approved by our board of directors in connection with this offering. Following this offering, copies of each charter will be posted in the Investors section of our website. We expect the functions of our committees, once established, shall be as described below.
Audit Committee
The functions of the Company's Common Stock have been granted underAudit Committee will be to (i) review the Stock Incentive Plan,
with a weighted average exercise price of $8.05 per share, and 265,902 shares
were available for future grants.
39
45
CERTAIN TRANSACTIONS
During 1994, G. Raymond Doucet and A. Jean de Grandpre, both of whom are
now directorsqualifications of the independent auditors, our annual and interim financial statements, the independent auditor’s report, significant reporting or operating issues and corporate policies and procedures as they relate to accounting and financial controls; and (ii) to consider and review other matters relating to our financial and accounting affairs.
Compensation Committee
The function of the Compensation Committee will be to discharge the Board’s responsibilities relating to compensation of the Company’s directors and executive officers, to produce an annual report on executive compensation for inclusion in the Company’s Proxy Statement, as necessary, and to oversee and advise the Board on the adoption of policies that govern the Company’s compensation programs including stock incentive and benefit plans.
Nominating and Governance Committee
The function of the Nominating and Governance Committee is to (i) make recommendations to the Board regarding the size of the Board, (ii) make recommendations to the Board regarding criteria for the selection of director nominees, (iii) identify and recommend to the Board for selection as director nominees individuals qualified to become members of the Board, (iv) recommend committee assignments to the Board, (v) recommend to the Board corporate governance principles and practices appropriate to the Company, purchased 8% Convertible Secured Notes ("Notes")and (vi) lead the Board in an annual review of its performance.
Director Independence
The Company is quoted on the OTC Pink Marketplace, which does not require director independence requirements. However, NASDAQ requires that a majority of the board of directors must be comprised of Independent Directors as defined in Rule 5605(a)(2). For purposes of determining director independence, we have applied the definitions set forth in the NASDAQ guidelines which state, generally, that a director is not considered to be independent if he or she is, or at any time during the past three years was an employee of the Company; or if he or she (or his or her family member) accepted compensation from the Company in excess of $120,000 during any twelve month period within the principal amountsthree years preceding the determination of $250,000independence. Our current directors are not “independent” directors as such term is defined under the NASDAQ rules and $150,000, respectively,
through investment companies controlled by them, as part of a convertible
secured note financingthe related rules of the Company (the "Secured Note Financing"). SEC.
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Board of Director’s Role in Risk Oversight
The Notes
were convertedBoard is responsible for overseeing our management and operations, including overseeing our risk assessment and risk management functions. We believe that our directors provide effective oversight of risk management functions. On a regular basis we perform a risk review wherein the management team evaluates the risks we expect to face in the upcoming year and over a longer term horizon. From this risk assessment plans are developed to deal with the risks identified. The results of this risk assessment are provided to the Board for their consideration and review. In addition, members of our management periodically present to the Board the strategies, issues and plans for the areas of our business for which they are responsible. While the Board oversees risk management, our management is responsible for day-to-day risk management processes. Additionally, the Board requires that management raise exceptional issues to the Board. We believe this division of responsibilities is the most effective approach for addressing the risks we face and that the Board leadership structure supports this approach.
Code of Business Conduct and Ethics
We have not adopted a written Code of Business Conduct and Ethics that applies to our directors, officers and employees. The Board and our management group plan to adopt a written Code of Business Conduct and Ethics as soon as practicable following the closing of this offering.
Summary Compensation Table
The following table provides certain information regarding compensation awarded to, earned by or paid to our Chief Executive Officer and any other executive officer with compensation exceeding $100,000 during each of fiscal 2021 and 2020 (each a “Named Executive Officer”):
Name and Principal | Fiscal Year Ended | Salary | Bonus | Stock Awards | Option Awards | All Other | Total |
Position | 12/31 | ($) | ($) | ($) | ($) | ($) | ($) |
Bianca Meger Chief Executive Officer* (1)(2) | 2021 | 71,415 | - | - | 68,543 | - | 139,958 |
2020 | - | - | - | - | - | - | |
Elchanan Maoz Acting Chief Executive Officer (3)(5), President and Director | 2021 | - | - | - | 440,000 | 30,000 | 470,000 |
2020 | - | - | - | - | 24,000 | 24,000 | |
Jonah Meer, Secretary and Director (4) | 2021 | - | - | - | 220,000 | 15,000 | 235,000 |
2020 | - | - | - | - | 12,000 | 12,000 | |
James Alexander Brodie, Treasurer and Director(4) | 2021 | - | - | - | 220,000 | 15,000 | 235,000 |
2020 | - | - | - | - | 12,000 | 12,000 |
(1) Ms. Meger entered into Common Stock ofconsulting agreements with the Company during the fourth quarterand its wholly owned subsidiary, Stratford Ltd., respectively effective September 5, 2021 through her controlled corporation SB Meger Consulting, Management and Investment for total cumulative monthly consideration of 1995.
On May 31, 1996, the lenders in the Secured Note Financing, including MDL
Investments, Mr. Doucet and Mr. Grandpre (the "Lenders"), and the Company
entered intoNIS58,220 (approximately $18,630 USD). Ms. Meger resigned July 19, 2022.
(2) Represents a Shareholder Rights Agreement, pursuant to which the Company
granted to the Lenders certain registration rights with respect to shares of
Common Stock of the Company held by the Lenders and a right of first refusal
with respect to future sales of Common Stock, preferred stock or other
securities issued by the Company. The Shareholder Rights Agreement provides for
the termination of this right of first refusal upon the consummation of an
underwritten public offering of the Common Stock of the Company in which the
Company receives cash proceeds of not less than $10 million based on a per share
price of at least $10.50.
The Company has entered into a two-year consulting agreement with Mr.
Doucet and granted him a five-yearfour-year option to purchase up to 85,7105,095,744 shares of its
Common Stockcommon stock at an exercise price of $2.31$0.123 per share. See
"Management -- Directors' Compensationshare, with 25% vesting one year from grant date (October 26, 2021), and Other Arrangements."
a further 6.25% vesting each three months thereafter and the amortized portion of the grant date fair value computed in accordance with ASC Topic 718. Such options expired unexercised upon Ms. Meger’s resignation in July 2022.
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(3) Represents a four-year option to purchase 4,000,000 shares of common stock at an exercise price of $0.02567 per share, exercisable on October 1, 2021 and the grant date fair value computed in accordance with ASC Topic 718
(4) Represents a four-year option to purchase 2,000,000 shares of common stock at an exercise price of $0.02567 per share, exercisable on October 1, 2021 and the grant date fair value computed in accordance with ASC Topic 718
(5) Mr. Maoz was appointed acting Chief Executive Officer upon the resignation of Ms. Meger on July 19, 2022.
Employment Agreements
We currently have no employment agreements with our officers or directors.
On July 20, 1995, Robert J. CymbalaSeptember 5, 2021, we, and our wholly owned subsidiary, Stratford, Ltd., entered into Consulting Agreements with our Chief Executive Officer, Bianca Meger through her controlled corporation SB Meger Consulting, Management and Investment. Pursuant to the consulting agreements, Mrs. Meger is to receive total cumulative monthly consideration of NIS58,220 (approximately $18,630 USD). Ms. Meger resigned as the Company's PresidentCEO of Stratford on April 1, 2022, and Chief Executive Officer. In connection with that resignation, the Company and
Mr. Cymbala entered into an agreement, dated July 20, 1995, wherein the Company
agreed to pay Mr. Cymbala the amount of $108,000, representing nine months
compensation which amount was paid to Mr. Cymbala in biweekly installments
ending April 19, 1996. The agreement also included a release of claims by Mr.
Cymbala and a covenant prohibiting Mr. Cymbala from competing with the Company
for a period of one year.
From time to time the Company has made cash advances to its officers,
employees and consultants. At December 31, 1995, the Company carried several
unsecured notes receivable, bearing interest at rates ranging from 7.89% to
9.01%, from certain of its officers, employees, consultants and a former
employee. Although these notes have matured and are due, some of these notes may
be forgiven at future dates, resulting in additional payroll tax liability for
the Company and additional income tax liability for the makers of the notes. The
following table lists individuals for whom the Company carried aggregate
outstanding balances greater than $60,000 at any time during 1994 or 1995.
Equity Compensation Plan Information
On June 30, 2021, we approved the amountMetro One Telecommunications, Inc. 2021 Stock Incentive Plan (“the Plan”). The Plan provides for the granting of $175,000, represented byincentive stock options, and options that do not qualify as incentive stock options. The Plan allows for an issuance of a demand note bearing interest at 7.89%, and
collateralized bymaximum of up to 77,137,410 shares of our common stock.
Outstanding Equity Awards at Fiscal Year End
Elchanan Maoz holds 4,000,000 options to purchase shares of common stock at an exercise price of $0.02567 per share, which vested on October 1, 2021. Jonah Meer holds 2,000,000 options to purchase shares of common stock at an exercise price of $0.02567 per share, which vested on October 1, 2021. James Alexander Brodie holds 2,000,000 options to purchase shares of common stock at an exercise price of $0.02567, which vested on October 1, 2021. Bianca Meger holds 5,095,744 options to purchase shares of common stock at an exercise price of $0.123 per share, which vest as to 25% on the Company's Common Stock. Mr. Smith paid this
principal balance plus accrued interest in 1994.
The Company believes allfirst anniversary of the foregoing transactionsVesting Commencement Date with an additional 6.25% vesting at the end of each three (3) month period until fully vested on the fourth anniversary of the Vesting Commencement Date. All options were fairissued pursuant to the CompanyCompany’s 2021 Stock Incentive Plan. Ms. Meger’s options expired unexercised in July 2022 concurrent with her resignation.
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Compensation of Directors
The board of directors has the authority to fix the compensation of directors. During the fiscal years ended December 31, 2021, and in its best interests. As a matter of policy, all future
transactions between the Company and any of its officers, directors or principal
shareholders or2020 our board members received compensation for their affiliates will continue to be approved by a majority of
the disinterestedservices as members of the Board of Directors will continue to be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties, and will continue to be for bona fide business purposes of the Company.
40
46
PRINCIPALas follows:
Name |
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Elchanan Maoz |
| $ | 30,000 |
|
| $ | 24,000 |
|
Jonah Meer |
| $ | 15,000 |
|
| $ | 12,000 |
|
James Brodie |
| $ | 15,000 |
|
| $ | 12,000 |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND SELLING SHAREHOLDERS
MANAGEMENT
The following table sets forth as of May 24, 1996, certain information
regarding the ownership of the Company's Common Stock by (i) each person known
by the Company to own beneficially more than 5% of the Common Stock, (ii) each
director of the Company, (iii) each Named Executive Officer, (iv) all executive
officers and directors as a group and (v) each Selling Shareholder. Except as
otherwise indicated, the Company believes the that persons listed below have
sole investment and voting power with respect to the beneficial ownership of the Company’s voting securities as of June 30, 2022, by each person or group of affiliated persons known to the Company to beneficially own 5% or more of such class of voting securities, each director, each named executive officer, and all of its directors and named executive officers as a group. As of June 30, 2022, there were 264,635,247 shares of Common Stock
owned by them.
The following table gives effect to the outstanding Common Stock
(1) Beneficial ownership is determined in accordance with rulesshares of the
Securities and Exchange Commission, and includes voting power and investment
power with respect to shares. Sharescommon stock issuable within 60 days of January 31, 2022, upon the exercise of outstandingall options and other rights beneficially owned by the indicated stockholders on that date. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all shares beneficially owned.
|
| Number of Shares of Common Stock Beneficially |
|
| Percentage of Shares of Common Stock Beneficially |
|
| Percentage of Voting Power of Common and Preferred Stock Before |
|
| Percentage of Voting Power of Common Stock After |
| ||||
Beneficial Owner |
| Owned |
|
| Owned |
|
| Offering(2)(3) |
|
| Offering |
| ||||
Five Percent Stockholders: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Yaron Elhawi TR UA 02/01/2021 Yaron Elhawi Trust Royal App Ltd in Liquidation (1) |
|
| 22,647,751 |
|
|
| 8.6 | % |
|
| — |
|
|
| 6.6 | % |
GT Ventures Ltd (2) |
|
| 30,192,673 |
|
|
| 11.4 | % |
|
| — |
|
|
| 8.8 | % |
Pareto Optimum, LP(6) |
|
| 15,000,000 |
|
|
| 5.7 | % |
|
|
|
|
|
|
|
|
David Kyte |
|
| 20,783,315 |
|
|
| 7.9 | % |
|
| — |
|
|
| 4.3 | % |
Executive Officers and Directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bianca Meger (beneficially owned by SB Meger Consulting) (resigned July 19, 2022) |
|
| 1,000,000 |
|
|
| 0.4 | % |
|
| — |
|
|
| 0.3 | % |
Elchanan Maoz(3) |
|
| 84,548,399 |
|
|
| 31.9 | % |
|
| — |
|
|
| 24.5 | % |
Jonah Meer(4) |
|
| 2,000,000 |
|
|
| 0.76 | % |
|
| — |
|
|
| 0.6 | % |
James Alexander Brodie(5) |
|
| 2,000,000 |
|
|
| 0.76 | % |
|
| — |
|
|
| 0.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Officers and Directors as a Group (4 persons) |
|
| 89,548,399 |
|
|
| 33.82 | % |
|
| — |
|
|
| 26.0 | % |
(1)The address for Yaron Elhawi TR UA 02/01/2021 Yaron Elhawi Trust Royal App Ltd in Liquidation is 20 Haharash Street, Tel Aviv, Israel 676131. The trustee of the trust is Yaron Elhawi.
(2) The address for GT Ventures, Ltd. Is PO Box 146, Road Town, Tortola, British Virgin Islands. The control person for GT Ventures, Ltd. is Trident Chambers.
(3) Includes 497,840 common shares held by Maoz Everest Fund Management Limited, 72,400,519 common shares held in the name of Everest Credit LP, 1,130,000 common shares held by Everest Fund LP, 5,661,938 common shares held by Everest Corporate Finance Ltd., and 858,102 common shares held by Everest Special Situations LP, all entities controlled by the Elchanan Maoz, as well as 4,000,000 options to purchase common stock pursuant to the Company’s 2021 Stock Incentive Plan, which may be exercised within the next sixty days.
(4) Consists of options thatto purchase common stock issued pursuant to the Company’s 2021 Stock Incentive Plan, which are currently exercisable or become exercisable within 60 days from May 24, 1996 are considered outstanding for
the purpose of calculating the percentage of Common Stock owned by such
person but not for the purpose of calculating the percentage of Common Stock
owned by any other person. The number of shares that are issuable upon the
exercisedays.
(5) Consists of options thatto purchase common stock issued pursuant to the Company’s 2021 Stock Incentive Plan, which are currently exercisable or exercisable within 60 days of May 24, 1996days.
(6) The address for Pareto Optimum LP is as follows: Patrick M. Cox -- 199,991 shares; G.
Raymond Doucet -- 96,424 shares; A. Jean de Grandpre -- 10,714 shares;
William D. Rutherford -- 7,143 shares; Timothy A. Timmins -- 300,063 shares;Ahad Ha’am 14, Tel Aviv, Israel control person for the selling shareholder is Shay Shalom. Includes 5,000,000 share purchase warrants for exercise at $0.075 per share.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 5, 2021, we, and All directors and officers as a group -- 793,616 shares. The number of
shares that are issuable upon the exercise of warrants and options that are
currently exercisable or exercisable within 60 days of May 24, 1996 by
Selling Shareholders is as follows: Banque Scandinave en Suisse -- 57,140
shares; Ed Perlenfein -- 85,715 shares; Shane Smith -- 100,016 shares; Dore
Smith -- 90,317 shares; Richard Boudreau -- 34,284 shares; William
Clark -- 22,856 shares; John Cavanaugh -- 5,714 shares; Ken
Chamberlin -- 22,856 shares; Richards Family Trust -- 17,142 shares; Steve
Perlenfein -- 11,428 shares; William MacHugh -- 11,428 shares; David
Rosencrantz -- 11,428 shares; James Huddart -- 13,714 shares; Harold and
Marilyn Fogelquist -- 22,856 shares; Harold Roitenberg Trust -- 22,856
shares; Virginia Bolin -- 11,428 shares; Sharon L. Kimbell Family
Trust -- 11,428 shares; David and Susan Lindsey -- 11,428 shares; J.J.
Dragovich -- 5,714 shares; Sagax Investment Fund,our wholly owned subsidiary, Stratford, Ltd. -- 11,428 shares; and
John Bolin -- 1,144 shares.
(2) Assumes that the Underwriters' over-allotment option is not exercised.
(3) Mr. Cymbala resigned as the Company's President and, entered into Consulting Agreements with our Chief Executive Officer, on July 20, 1995.
(4) Includes 85,710 sharesBianca Meger through her controlled corporation SB Meger Consulting, Management and Investment. Pursuant to the consulting agreements, Mrs. Meger is to receive total cumulative monthly consideration of Common Stock issuable upon exerciseNIS58,220 (approximately $18,630 USD). In addition, each consulting agreement may be terminated (i) by either party, at any time and for any or no reason, with sixty days prior written notice, (ii) by the respective company, immediately with no prior notice for cause, with cause being due to embezzlement of an
outstanding stock option exercisablefunds, a charge of a criminal offense involving moral turpitude, acts or omissions which constitute a breach of duties and obligations, or a violation of obligations related to intellectual property rights and non-disparagement. Mrs. Meger is to provide at a priceleast 136 hours of $2.31 per share grantedservice monthly pursuant to G. Raymond Doucet as partthe Stratford Ltd., consulting agreement, and 46 hours of hisservice monthly pursuant to the consulting agreement with the Company.
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public entity. Mrs. Meger may not participate in any activities that infringe on, or are inconsistent with, her obligations under each respective consulting agreement. Ms. Meger resigned as an officer of owned subsidiary Stratford on April 1, 2022, and as an officer of the Company on July 19, 2022.
DESCRIPTION OF CAPITAL STOCK
TheSECURITIES
Common Stock
Our authorized capital stock of the Company consists of 490,000,000600,000,000 shares of Common Stockcommon stock, no par value per share. The holders of our common stock (i) have equal ratable rights to dividends from funds legally available therefore, when, as and 10,000,000 sharesif declared by its board of Preferred Stock.
COMMON STOCK
As of May 24, 1995, 8,513,373 shares of Common Stock were outstanding, held
of record by approximately 564 shareholders. After this offering, 9,819,250
shares will be outstanding. Holders of Common Stockdirectors; (ii) are entitled to receive
dividends as may from timeshare in all of its assets available for distribution to time be declared by the Boardholders of Directorscommon stock upon liquidation, dissolution or winding up of the
Company out of funds legally available therefor. See "Dividend Policy." Holders
of Common Stockits affairs; (iii) do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights; and (iv) are entitled to one non-cumulative vote per share on all matters on which the
holders of Common Stock are entitled to vote and do not have any cumulative
voting rights. Holders of Common Stock have no preemptive, conversion,
redemption or sinking fund rights. In the event of a liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share equally
and ratably in the assets of the Company, if any, remaining after the payment of
all liabilities of the Company and the liquidation preference of any outstanding
class or series of Preferred Stock. The outstanding shares of Common Stock are,
and the shares of Common Stock offered by the Company hereby when issued will
be, fully paid and non-assessable.
The rights, preferences and privileges of holders of Common Stock are
subject to any series of Preferred Stock that the Companystockholders may issue in the
future, as described below.
PREFERRED STOCK
The Board of Directors has the authority to issue Preferred Stock in one or
more series and to fix the number of shares constituting any such series and the
preferences, limitation and relative rights, including dividend rights, dividend
rate, voting rights, terms of redemption, redemption price or prices, conversion
rights and liquidation preferences of the shares constituting any series,
without any further vote or action by the shareholders of the Company. The
issuance of Preferred Stock by the Board of Directors could adversely affect the
rights of holders of Common Stock.
The potential issuance of Preferred Stock may have the effect of delaying
or preventing a change in control of the Company, may discourage bids for the
Common Stock at a premium over the market price of the Common Stock and may
adversely affect the market price of, and the voting and other rights of the
holders of, Common Stock. The Company has no plans to issue shares of Preferred
Stock.
WARRANTS
The Company has outstanding warrants to purchase 563,408 shares of Common
Stock, 301,702 of which are exercisable through June 30, 1997 at an exercise
price of $5.25 per share, and 261,706 of which are exercisable through March 31,
1998 at an exercise price of $2.31 per share. The warrants were issued in
connection with the issuance of the Company's 10% Subordinated Notes to 32
purchasers of the Notes. To prevent dilution of the rights of the warrant
holders, the exercise price and the number of shares of Common Stock issuable
upon the exercise of the warrants are subject to the adjustment. The Company has
committed to register for resale the shares issuable on exercise of the
warrants. See "-- Registration Rights."
The Company also has outstanding a warrant to purchase 104,933 shares of
Common Stock, exercisable through September 10, 1996 at an exercisable price of
$1.75 per share, which price is subject to adjustment to prevent dilution. The
warrant was issued in connection with consulting services provided to the
Company by Daniel M. Smith, and the Company has agreed to register the shares
underlying these warrants. See "-- Registration Rights."
The Company anticipates that 305,877 shares of the Common Stock to be sold
by Selling Shareholders will be obtained by the exercise of warrants held by the
Selling Shareholders.
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REGISTRATION RIGHTSvote. As of the date of this Prospectus, holders of 2,928,443prospectus, there are 264,635,247 shares of Common
Stock (including sharesour common stock issued and outstanding.
Warrants
The warrants currently outstanding to CLOS Trading Ltd., the warrants issuable under this Offering, the warrants issued pursuant to an offering of Common Stock issuable upon conversion or exercise of
outstandingshort term notes, and the warrants and options) are entitledissued pursuant to certain rights with respectour PIPE financing, contain the following material provisions:
The warrants issued pursuant to the registrationPIPE financing are exercisable for a period of two years from the date of such shares for offer and sale under the Securities Act.
Under the termswarrant, at an exercise price of $0.0975 per share. The exercise price of the Shareholder Rights Agreement dated as of May 28,
1996 between the Companywarrants shall be on a cash, and not a cashless, basis, and the purchaserswarrants may be exercised in full or in part. The exercise price of its 8% Convertible Secured Notes
(the "8% Noteholders"), allthe warrants is subject to adjustment pursuant to any stock-split, reclassification, reorganization, or consolidation of which Notes have been converted into Common
Stock, if the Company proposes to register anycompany. No fractional shares shall be issued as part of its securities under the
Securities Act, the 8% Noteholders may require the Company to include in such
registration any shares of common stock resulting from thea conversion of the 8%
Notes subjectwarrants.
The warrants issued to certain conditions and limitations. The 8% Noteholders may
demand that the Company register their shares an unlimited numberCLOS Trading Ltd., are exercisable for a period of times on
Form S-3, provided that the Company is eligible to use Form S-3 and that such
shares would have an aggregate expected selling price of at least $500,000. The
Company will not be obligated to effect more than one demand registration in any
12-month period. As oftwo years from the date of this Prospectus, these rights are enjoyed by
holderssuch warrant, at an exercise price of 2,164,402 shares of the Company's Common Stock.
Under the terms of warrants issued to purchasers of the Company's 10%
Subordinated Notes, and to Silicon Valley Bank, Daniel M. Smith, and G. Raymond
Doucet (the "Warrant Holders"), if the Company proposes to register any of its
securities under the Securities Act, the Warrant Holders may require the Company
to include in such registration any shares owned by them pursuant to$0.02567 per share. The exercise of the warrants shall be on a cash, and not a cashless, basis, and the warrants may be exercised in full or in part. The exercise price of the warrants is subject to certain conditions and limitations. All expenses
incurred in connection with the registration ofadjustment pursuant to any Common Stockstock-split, reclassification, reorganization, or consolidation of the Companycompany. No fractional shares shall be borne byissued as part of a conversion of the Company exceptwarrants.
The warrants issued in conjunction with our offering of short-term notes are exercisable for underwriting discounts and commissions
and attorneys' fees related to the Warrant Holders' shares. Asa period of one year from the date of this Prospectus, these rights are enjoyed by holderssuch warrant, at an exercise price of options and warrants to
purchase 764,041 shares$0.12 per share. The exercise price of the Company's Common Stock.warrants shall be on a cash, and not a cashless, basis, and the warrants may be exercised in full or in part. The Company anticipates
that 305,877 sharesexercise price of the Common Stock to be sold by Selling Shareholders will
be obtained by the exercise of warrants held by the Selling Shareholders.
OREGON CONTROL SHARE AND BUSINESS COMBINATION STATUTES
Upon completion of this offering, the Company will becomeis subject to the
Oregon Control Share Act (the "Control Share Act"). The Control Share Act
generally provides that a person (the "Acquiror") who acquires voting stock of
an Oregon corporation in a transaction that results in the Acquiror holding more
than 20%, 33 1/3%adjustment pursuant to any stock-split, reclassification, reorganization, or 50%consolidation of the total voting powercompany. No fractional shares shall be issued as part of a conversion of the corporation (a
"Control Share Acquisition") cannot vote the shares it acquires in the Control
Share Acquisition ("control shares") unless voting rights are accorded to the
control shares by (i) a majority of each voting group entitled to votewarrants.
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Transfer Agent and (ii)
the holders of a majority of the outstanding voting shares, excluding the
control shares held by the Acquiror and shares held by the Company's officers
and inside directors. The term "Acquiror" is broadly defined to include persons
acting as a group.
The Acquiror may, but is not required to, submit to the Company a statement
setting forth certain information about the Acquiror and its plans with respect
to the Company. The statement may also request that the Company call a special
meeting of shareholders to determine whether voting rights will be accorded to
the control shares. If the Acquiror does not request a special meeting of
shareholders, the issue of voting rights of control shares will be considered at
the next annual meeting or special meeting of shareholders. If the Acquiror's
control shares are accorded voting rights and represent a majority or more of
all voting power, shareholders who do not vote in favor of voting rights for the
control shares will have the right to receive the appraised "fair value" of
their shares, which may not be less than the highest price paid per share by the
Acquiror for the control shares.
Upon completion of this offering, the Company will become subject to
certain provision of the Oregon Business Corporation Act that govern business
combinations between corporations and interested shareholders (the "Business
Combination Act"). The Business Combination Act generally provides that if a
person or entity acquires 15% or more of the voting stock of an Oregon
corporation (an "Interested Shareholder"), the corporation and the Interested
Shareholder, or any affiliated entity of the Interested Shareholder, may not
engage in certain business combination transactions for three years following
the date the person became an
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Interested Shareholder. Business combination transactions for this purpose
include (a) a merger or plan of share exchange, (b) any sales, lease, mortgage
or other disposition of 10% or more of the assets of the corporation and (c)
certain transactions that result in the issuance of capital stock of the
corporation to the Interested Shareholder. These restrictions do not apply if
(i) the Interested Shareholder, as a result of the transaction in which such
person became an Interested Shareholder, owns at least 85% of the outstanding
voting stock of the corporation (disregarding shares owned by directors who are
also officers and certain employee benefit plans), (ii) the board of directors
approves the share acquisition or business combination before the Interested
Shareholder acquires 15% or more of the corporation's voting stock or (iii) the
board of directors and the holders of at least two-thirds of the outstanding
voting stock of the corporation (disregarding shares owned by the Interested
Shareholder) approve the transaction after the Interested Shareholder acquires
15% or more of the corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
Registrar
The transfer agent and registrar for our common stock is Computershare U.S., located at 150 Royall Street, Canton, MA 02021.
Stock Market Listing
Our common stock is quoted on the Common StockOTC Pink Marketplace, under the symbol “WOWI.”
Offer Restrictions Outside the United States
Other than in the United States, no action has been taken by us that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is First Interstate
Bankrequired. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of Oregon, N.A., Seattle, Washington.
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SHARES ELIGIBLE FOR FUTURE SALE
Priorany such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this offering, thereprospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Australia
This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (1) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (2) this prospectus is made available in Australia only to those persons as set forth in clause (1) above, and (3) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (1) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any public marketof the securities sold to the offeree within 12 months after its transfer for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices.
Upon completion ofofferee under this offering, there willprospectus.
Canada
The securities may be 9,819,250 shares of Common
Stock outstanding. Of these shares, the 2,000,000 shares sold in this offering
(or 2,300,000 shares if the over-allotment option is exercisedCanada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in full) will be
freely tradable without restriction underNational Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act unless purchased
by an "affiliate"(Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Company, assecurities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that term is definedthe remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
China
The information in Rule 144this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”
European Economic Area — Belgium, Germany, Luxembourg and the Netherlands
The information in this document has been prepared on the basis that all offers of common stock will be made pursuant to an exemption under the Securities Act. Approximately 7,819,250 shares outstanding upon completionDirective 2003/71/EC (“Prospectus Directive”), as implemented in Member States of thisthe European Economic Area (each, a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.
An offer to the public of common stock has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:
● | to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
● | to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet of more than €43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii) an annual net turnover of more than €50,000,000 (as shown on its last annual unconsolidated or consolidated financial statement); | |
● | to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)I of the Prospectus Directive) subject to obtaining the prior consent of the company or any underwriter for any such offer; or | |
● | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of common stock shall result in a requirement for the publication by the company of a prospectus pursuant to Article 3 of the Prospectus Directive. |
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France
This document is not being distributed in the context of a public offering will be "restricted securities" ("Restricted Shares"of financial securities (offre au public de titres financiers) in France within the meaning of Rule 144Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The common stock has not been offered or sold and will not be eligibleoffered or sold, directly or indirectly, to the public in France.
This document and any other offering material relating to the common stock has not been, and will not be, submitted to the AMF for sale pursuantapproval in France and, accordingly, may not be distributed or caused to Rule 144distributed, directly or Rule
701 subjectindirectly, to certain lock-up agreements described below. Salesthe public in France.
Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D. 744-1, D.754-1 and D.764-1 of sharesthe French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs non-qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the common stock cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
Ireland
The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public market, oroffering of securities in Ireland within the availability of such shares for sale, could adversely
affect the market pricemeaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The common share.
Upon completionstock has not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of thisa public offering, approximately 1,425,387 shares held for
moreexcept to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than three years by shareholders100 natural or legal persons who are not affiliates ofqualified investors.
Israel
The common stock offered by this prospectus have not been approved or disapproved by the Company and
who are not subject to the lock-up agreements described below will be eligible
for immediate sale in the public market without restriction pursuant to Rule
144(k). Approximately 163,377 shares held for more than two but less than three
years by shareholders who are not affiliates of the Company and who are not
subject to the lock-up agreements described below are eligible for immediate
sale in the public market subject to Rule 144, and approximately 25,034
additional shares held for more than two years by shareholders who are not
affiliates of the Company and who are not subject to the lock-up agreements
described below will become eligible for immediate sale in the public market
without restriction subject to Rule 144 during the 180 days following the
completion of this offering.
The holders of approximately 6,190,432 shares of Common StockIsraeli Securities Authority (the ISA), or ISA, nor have agreed
with the Underwriters pursuant to lock-up agreements not to offer to sell,
contract to sell or otherwise sell or dispose of Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent of
Black & Company, Inc. Upon expiration of these lock-up agreements, approximately
2,960,144 of those shares will be eligiblesuch common stock been registered for sale in the public market without
restriction pursuant to Rule 144(k) and approximately 2,134,026 willIsrael. The shares may not be eligible
for sale subject to the limitations of Rule 144.
Upon the completion of this offering, there will be approximately 871,776
options granted under the Stock Incentive Plan and 458,164 warrants and other
options immediately exercisable for shares of Common Stock. Holders of stock
options granted under the Stock Incentive Plan could exercise their options and
sell certain of the shares issued upon exercise as described below. Shares of
Common Stock issued on the exercise of warrants and other options would be
subject to the limitations of Rule 144. However, the holders of these warrants
could require the Company to register the shares underlying these warrants for
resale under the Securities Act. See "Description of Capital
Stock -- Registration Rights."
In general under Rule 144, a person, including an affiliate, who has
beneficially owned restricted shares for at least two years is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of Common Stock (approximately
98,193 shares immediately following this offering)offered or the average weekly trading
volume of the Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are subject to certain manner of sale limitations, notice
requirements and the availability of current public information about the
Company. Rule 144(k) provides that a person who is not an "affiliate" of the
issuer at any time during the three months preceding a sale and who has
beneficially owned shares for at least three years is entitled to sell those
shares at any time without compliance with the public information, volume
limitation, manner of sale and notice provisions of Rule 144.
As of the date of the Prospectus, options to purchase 1,162,598 shares of
Common Stock were outstanding under the Stock Incentive Plan. Holders of options
granted pursuant to the Stock Incentive Plan may be entitled to rely on the
resale provisions of Rule 701 ("Rule 701") under the Securities Act in
connection with the resale of shares issued upon exercise of these options. Rule
701 permits affiliates to sell Rule 701 shares under Rule 144 without compliance
with the holding period requirements of Rule 144. Rule 701 provides that
non-affiliates may sell such shares in reliance on Rule 144 without compliance
with the
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52
public information, volume limitationsold, directly or notice provisions of Rule 144. In both
cases, a holder of Rule 701 shares is required to wait 90 days after the date of
this Prospectus before selling such shares.
The Company intends to file a registration statement on Form S-8 under the
Securities Act covering shares of Common Stock reserved for issuance under the
Stock Incentive Plan. Based on the number of options expected to be outstanding
upon completion of this offering and shares reserved for issuance under the
Stock Incentive Plan, such registration statement would cover approximately
1,428,500 shares. See "Management -- Stock Option Plans." Such registration
statement is expected to be filed approximately 180 days after the date of this
Prospectus and will automatically become effective upon filing. Accordingly,
shares registered under such registration statement will, subject to Rule 144
volume limitations applicable to affiliates, be available for sale in the public
market, unless such shares are subject to limitations on the ability to exercise
or the lockup agreement described above.
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UNDERWRITING
Under the terms and subject to the conditions of the Underwriting
Agreement, the Underwriters named below, for whom Black & Company, Inc. is
acting as representative (the "Representative"), have severally agreed to
purchase from the Company and the Selling Shareholders, and the Company and the
Selling Shareholders have agreed to sell to each Underwriter, the aggregate
number of shares of Common Stock set forth opposite their respective names in
the table below. The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Common Stock are
subject to certain conditions precedent and that the Underwriters are committed
to purchase and pay for all shares if any shares are purchased.
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------ ----------
Black & Company, Inc........................................
---------
Total............................................. 2,000,000
=========
The Company has been advised by the Representative that the Underwriters
propose initially to offer the shares of Common Stockindirectly, to the public atin Israel, absent the offering price set forth on the cover pagepublication of this Prospectus and to certain
dealers (who may include the Underwriters) at such price less a concessionprospectus. The ISA has not in excess of $ per share. The Underwriters may allow, and such dealers
may reallow, a concession to certain other dealers (who may include the
Underwriters) not in excess of $ per share. After the initial offering
to the public, the offering price and other selling terms may be changed by the
Representative.
The Selling Shareholders have granted an option to the Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to a maximum of 300,000 shares of Common Stock at the initial public
offering price per share, less the underwriting discounts and commissions, set
forth on the cover page of this Prospectus. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of the
Common Stock offered hereby. To the extent the Underwriters exercise such
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares of Common Stock to be purchased by such
underwriter as shown in the above table bears to the total shown.
In the Underwriting Agreement, the Company and the Selling Shareholders
have agreed to indemnify the Underwriters against certain liabilities that may
be incurred in connection with this offering, including liabilities under the
Securities Act,issued permits, approvals or to contribute payments that the Underwriters may be required
to make in respect thereof.
The Representative has advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The Company, its directors, officers and certain shareholders have agreed
that, without the prior written consent of Black & Company, Inc., they will not
directly or indirectly offer to sell, sell, or otherwise dispose of shares of
Common Stock or any securities convertible or exchangeable therefor, for a
period of 180 days after the date of this Prospectus, subject to certain limited
exceptions.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined by
negotiations between the Company and the Representative. Among the factors to be
considered in such negotiations are the history of and prospects for the Company
and the industry in which it competes, an assessment of the Company's
management, its past and present operations and financial performance, the
present state of the Company's development, the general condition of the
securities markets at the time of the offering and the market prices of and
demand for publicly traded common stock of comparable companies in recent
periods.
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LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Ater Wynne Hewitt Dodson & Skerritt, LLP,
Portland, Oregon. Certain legal matterslicenses in connection with the offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the common stock being offered. Any resale in Israel, directly or indirectly, to the public of the common stock offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
Italy
The offering of the common stock in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Società e la Borsa, “CONSOB”) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the common stock may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:
● | to Italian qualified investors, as defined in Article 100 of Decree no. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and | |
● | in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended. |
Any offer, sale or delivery of the common stock or distribution of any offer document relating to the common stock in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
● | made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and | |
● | in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws. |
Any subsequent distribution of the common stock in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such common stock being declared null and void and in the liability of the entity transferring the common stock for any damages suffered by the investors.
Japan
The common stock has not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”) pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the common stock may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires common stock may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of common stock is conditional upon the execution of an agreement to that effect.
| 51 |
| Table of Contents |
Portugal
This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The common stock has not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the common stock has not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of common stock in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Sweden
This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the common stock be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of common stock in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Switzerland
The common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the common stock may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering material relating to the common stock has been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of common stock will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA).
This document is personal to the recipient only and not for general circulation in Switzerland.
United Arab Emirates
Neither this document nor the common stock have been approved, disapproved or passed uponon in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor have we received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the common stock within the United Arab Emirates. This document does not constitute and may not be used for the Underwriterspurpose of an offer or invitation. No services relating to the common stock, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by Stoel Rives LLP, Portland, Oregon. Certain
legal mattersus.
No offer or invitation to subscribe for common stock is valid or permitted in the Dubai International Financial Centre.
United Kingdom
Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the common stock. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the common stock may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances that do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the offeringissue or sale of the common stock has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to us.
In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
| 52 |
| Table of Contents |
The validity of the securities being offered by this prospectus has been passed upon for the
Selling Shareholdersus by Perkins Coie, Portland, Oregon.
Smith Eilers, PLLC, Wilmington, North Carolina.
The financial statements of Metro One Telecommunications, Inc. as of December 31, 1995 and for the year ended December 31, 1995 included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing. The financial statements of Metro One Telecommunications, Inc. as of
December 31, 1994June 30, 2022, and for each of the two years in the period ended December 31, 19942021 and 2020 included in this Prospectusthe Registration Statement as it applies to us, have been so included in reliance on the report (whichof Gries & Associates, PLLC, an independent registered public accounting firm, (the report on the financial statements contains an explanatory paragraph relating to the Company'sregarding our ability to continue as a going concern) of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
The Company replaced its previous auditors, Price Waterhouse LLP, with
Deloitte & Touche LLP in November 1995. The decision to change accounting firms
was approved by the Company's Board of Directors. During the Company's two most
recent fiscal years preceding the replacement of Price Waterhouse LLP, the
report of Price Waterhouse LLP on the Company's financial statements expressed
an unqualified opinion on the financial statements for those years and included
an explanatory paragraph describing that the financial statements had been
prepared assuming that the Company would continue as a going concern. There were
no disagreements with Price Waterhouse LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope of
procedure, which disagreements, if not resolved to the satisfaction of such
accountants, would have caused them to make reference to the subject matter of
the disagreements in connection with their report. Before engaging Deloitte &
Touche LLP as its new independent auditors, the Company did not previously
consult with them regarding any matters related to the application of accounting
principles, the type of audit opinion that might be rendered on the Company's
financial statements or any other such matters.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The Company has
We have filed with the Securities and Exchange Commission, (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1 under the Securities Act, with respecta registration statement on Form S-1 relating to the Common Stockshares of common stock offered hereby. This Prospectus omits certainprospectus does not contain all of the information set forth in the Registration Statementregistration statement and the exhibits and schedules thereto. For further information with respect to theour Company and the Common Stock offered hereby, reference is made to such
Registration Statement, exhibits and schedules. Statements contained inshares we are offering by this Prospectus asprospectus you should refer to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document files as an exhibit to the Registration
Statement, each suchregistration statement, being qualified in all respects by such
reference. The Registration Statement, including the exhibits and schedules filed therewith,thereto. You may be inspectedinspect a copy of the registration statement without charge at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W. Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained at prescribed rates from the Public Reference Section of the commission,Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Judiciary Plaza,, Washington, D.C. 20549. The Companypublic may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission. The Securities and Exchange Commission also maintains an Internet site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission. The Securities and Exchange Commission’s World Wide Web address is currently subject tohttp://www.sec.gov.
We will, upon effectiveness of the registration statement, file periodic reporting requirementreports, proxy statements and other information with the Securities and Exchange Commission in accordance with requirements of the Exchange Act. These periodic reports, proxy statements and other information are available for inspection and copying at the regional offices, public reference facilities and Internet site of the Securities and Exchange ActCommission referred to above.
Information contained on our website is not a prospectus and does not constitute a part of 1934. The Company intendsthis prospectus.
You should rely only on the information contained in or provided in this prospectus. We have not authorized anyone else to furnish to its
shareholders annual reports containing financial statements audited byprovide you with different information. We are not making an independent public accounting firm and quarterly reports foroffer of these securities in any state where the first three
quartersoffer is not permitted. You should not assume the information in this prospectus is accurate as of each fiscal year containing unaudited financial information.
49
55
any date other than the date on the front of this prospectus.
53 |
| Table of Contents |
METRO ONE TELECOMMUNICATIONS, INC.
INDEX TO THE FINANCIAL STATEMENTS
Page | |
For the Six Months Ended June 30, 2022 | |
F-2 | |
F-3 | |
F-4 | |
Condensed Consolidated Statements of Cash Flows for the three | F-5 |
Notes to Unaudited Consolidated Condensed Financial Statements (unaudited) | F-6 |
For the Years Ended December 31, | |
F-23 | |
F-24 | |
F-25 | |
F-26 | |
F-27 | |
F-28 |
54 |
| Table of Contents |
Metro One Telecommunications, Inc.
TABLE OF CONTENTS FOR UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022 and 2021
Page | |||
Condensed Consolidated Balance Sheets | F-2 | ||
Condensed Consolidated Statements of Operations | F-3 | ||
Condensed Consolidated Statements of Stockholders’ Equity | F-4 | ||
Condensed Consolidated Statements of Cash Flows | F-5 | ||
Notes to the Condensed Consolidated Financial Statements | F-6 |
| F-1 |
| Table of Contents |
Metro One Telecommunications, Inc.
Condensed Consolidated Balance Sheets
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Assets |
| (Unaudited) |
|
|
| |||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 126,268 |
|
| $ | 1,128,825 |
|
Accounts receivable |
|
| 15,884 |
|
|
| 18,865 |
|
Prepaid expenses |
|
| 160,315 |
|
|
| 180,808 |
|
Other current assets |
|
| 200,714 |
|
|
| 230,270 |
|
Total current assets |
|
| 503,181 |
|
|
| 1,558,768 |
|
|
|
|
|
|
|
|
|
|
Property and equipment. net |
|
| 20,604 |
|
|
| 7,244 |
|
Intangible assets |
|
| 5,374,897 |
|
|
| 4,422,352 |
|
Operating lease right-of-use assets |
|
| 24,384 |
|
|
| 34,432 |
|
Other assets |
|
| 19,476 |
|
|
| 21,911 |
|
Total assets |
| $ | 5,942,542 |
|
| $ | 6,044,707 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity (Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 437,251 |
|
| $ | 569,320 |
|
Debt |
|
| 570,000 |
|
|
| - |
|
Current portion of operating lease liabilities |
|
| 11,799 |
|
|
| 12,835 |
|
Total current liabilities |
|
| 1,019,050 |
|
|
| 582,155 |
|
|
|
|
|
|
|
|
|
|
Other liability |
|
| 173,242 |
|
|
| 194,898 |
|
Operating lease liabilities |
|
| 13,710 |
|
|
| 22,173 |
|
Total liabilities |
|
| 1,206,002 |
|
|
| 799,226 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit) |
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 600,000,000 shares authorized 257,920,700 shares issued and outstanding |
|
| 25,792 |
|
|
| 25,792 |
|
Additional paid in capital |
|
| 141,678,606 |
|
|
| 140,858,794 |
|
Accumulated deficit |
|
| (136,809,383 | ) |
|
| (135,617,027 | ) |
Other comprehensive income |
|
| (158,475 | ) |
|
| (22,078 | ) |
Stockholders’ equity (deficit) |
|
| 4,736,540 |
|
|
| 5,245,481 | ) |
Total Liabilities and Stockholders’ Deficit |
| $ | 5,942,542 |
|
| $ | 6,044,707 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
| Table of Contents |
Metro One Telecommunications, Inc.
Condensed Consolidated Statements of Operations
and Other Comprehensive Income
(Unaudited)
|
| Three months ended June 30, |
|
| Six months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues |
| $ | 18,937 |
|
| $ | 49,983 |
|
| $ | 38,143 |
|
| $ | 49,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
General and administrative |
|
| 398,375 |
|
|
| 231,454 |
|
|
| 805,726 |
|
|
| 297,154 |
|
Management Fees |
|
| 120,578 |
|
|
| 69,441 |
|
|
| 256,548 |
|
|
| 81,441 |
|
Research and Development |
|
| - |
|
|
| 181,736 |
|
|
| - |
|
|
| 181,736 |
|
Sales and Marketing |
|
| 20,365 |
|
|
| 34,845 |
|
|
| 101,795 |
|
|
| 34,845 |
|
Finance Costs |
|
| 38,460 |
|
|
| 365,940 |
|
|
| 181,291 |
|
|
| 365,940 |
|
Total operating expenses |
|
| 577,778 |
|
|
| 883,416 |
|
|
| 1,345,360 |
|
|
| 961,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax refund |
|
| - |
|
|
| - |
|
|
| 114,861 |
|
|
| - |
|
Net Loss |
| $ | (558,841 | ) |
| $ | (833,433 | ) |
| $ | (1,192,356 | ) |
| $ | (911,133 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share |
| $ | (0.00 | ) |
| $ | (0.13 | ) |
| $ | (0.01 | ) |
| $ | (0.15 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares – basic and diluted |
|
| 257,920,700 |
|
|
| 6,233,326 |
|
|
| 257,920,700 |
|
|
| 6,233,3226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (558,841 | ) |
| $ | (833,433 | ) |
| $ | (1,192,356 | ) |
| $ | (911,133 | ) |
Foreign currency translation adjustment |
|
| (109,152 | ) |
|
| (5,826 | ) |
|
| (136,397 | ) |
|
| (5,826 | ) |
|
| $ | (658,693 | ) |
| $ | (839,259 | ) |
| $ | (1,575,652 | ) |
| $ | (916,959 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
| Table of Contents |
Metro One Telecommunications, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated Other Comprehensive |
|
| Accumulated |
|
| Total Stockholders’ Equity |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income (loss) |
|
| Deficit |
|
| (Deficit) |
| ||||||
Balance at December 31, 2021 |
|
| 257,920,700 |
|
| $ | 25,792 |
|
| $ | 140,858,794 |
|
| $ | (22,078 | ) |
| $ | (135,617,027 | ) |
| $ | 5,245,481 |
|
Stock warrants granted as financing costs |
|
| - |
|
|
| - |
|
|
| 140,767 |
|
|
| - |
|
|
| - |
|
|
| 140,767 |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| 241,514 |
|
|
| - |
|
|
| - |
|
|
| 241,514 |
|
Capitalized stock-based compensation |
|
| - |
|
|
| - |
|
|
| 157,602 |
|
|
| - |
|
|
| - |
|
|
| 157,602 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (27,245 | ) |
|
| - |
|
|
| (27,245 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (633,515 | ) |
|
| (633,515 | ) |
Balance at March 31, 2022 |
|
| 257,920,700 |
|
|
| 25,792 |
|
|
| 141,398,677 |
|
|
| (49,323 | ) |
|
| (136,250,542 | ) |
|
| 5,124,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrants granted as financing costs |
|
| - |
|
|
| - |
|
|
| 24,835 |
|
|
| - |
|
|
| - |
|
|
| 24,835 |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| 147,440 |
|
|
| - |
|
|
| - |
|
|
| 147,440 |
|
Capitalized stock-based compensation |
|
| - |
|
|
| - |
|
|
| 107,654 |
|
|
| - |
|
|
| - |
|
|
| 107,654 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (109,152 | ) |
|
| - |
|
|
| (109,152 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (558,841 | ) |
|
| (558,841 | ) |
Balance at June 30, 2022 |
|
| 257,920,700 |
|
| $ | 25,792 |
|
| $ | 141,676,542 |
|
| $ | (158,475 | ) |
| $ | (136,809,383 | ) |
| $ | 4,736,540 |
|
|
| Preferred Shares* |
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated Other Comprehensive |
|
| Accumulated |
|
| Total Stockholders’ Equity |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income (loss) |
|
| Deficit |
|
| (Deficit) |
| ||||||||
Balance at December 31, 2020 |
|
| 1,000 |
|
| $ | 10,000,000 |
|
|
| 6,233,326 |
|
| $ | 623 |
|
| $ | 122,248,037 |
|
| $ | - |
|
| $ | (132,275,047 | ) |
| $ | (26,387 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (77,700 | ) |
|
| (77,700 | ) |
Balance at March 31, 2021 |
|
| 1,000 |
|
|
| 10,000,000 |
|
|
| 6,233,326 |
|
|
| 623 |
|
|
| 122,248,037 |
|
|
| - |
|
|
| (132,352,747 | ) |
|
| (104,087 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (5,826 | ) |
|
| - |
|
|
| (5,826 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| (833,433 | ) |
|
| (833,433 | ) |
Balance at June 30, 2021 |
|
| 1,000 |
|
| $ | 10,000,000 |
|
|
| 6,233,326 |
|
| $ | 623 |
|
| $ | 122,248,037 |
|
| $ | (5,826 | ) |
| $ | (133,186,180 | ) |
| $ | (943,346 | ) |
*Upon a recapitalization and a reorganization of the Company from Oregon to Delaware effective August 9, 2021, the Preferred stock was eliminated with the Series A Convertible Preferred stock having prior converted to shares of common stock.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
| Table of Contents |
Metro One Telecommunications, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| For Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Cash flows used in operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (1,192,356 | ) |
| $ | (911,133 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
| 2,452 |
|
|
| - |
|
Non-cash operating lease expense |
|
| 652 |
|
|
| - |
|
Financing costs |
|
| 165,602 |
|
|
| 283,096 |
|
Stock based compensation |
|
| 388,954 |
|
|
| - |
|
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 939 |
|
|
| (52,241 | ) |
Prepaid costs and other assets |
|
| 19,057 |
|
|
| (34,615 | ) |
Accounts payable and other liability |
|
| (95,251 | ) |
|
| 288,038 |
|
Net cash provided by (used in) operating activities |
|
| (709,951 | ) |
|
| (426,855 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (17,503 | ) |
|
| - |
|
Purchases of intangible asset |
|
| (847,206 | ) |
|
| (2,140,288 | ) |
Net cash (used in) investing activities |
|
| (864,709 | ) |
|
| (2,140,288 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from private placement |
|
| - |
|
|
| 3,250,000 |
|
Proceeds from short term debt |
|
| 570,000 |
|
|
| - |
|
Net cash provided by financing activities |
|
| 570,000 |
|
|
| 3,250,000 |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
| (1,004,660 | ) |
|
| 682,857 |
|
Foreign Exchange Gain (loss) |
|
| 2,103 |
|
|
| (5,826 | ) |
Cash and cash equivalents, beginning of year |
|
| 1,128,825 |
|
|
| 24,788 |
|
Cash and cash equivalents, end of year |
| $ | 126,268 |
|
| $ | 701,819 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash received (paid) for income taxes, net |
| $ | 114,861 |
|
| $ | - |
|
Cash paid for interest |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
Capitalized stock-based compensation |
| $ | 265,256 |
|
| $ | - |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-5 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 1 - NATURE OF OPERATIONS
Historical Information:
The Company was incorporated in the State of Oregon on February 8, 1989, as Metro One Direct Information Services Inc. On December 12, 1995, we changed our name to Metro One Telecommunications Inc. The Company was formerly in the business of providing directory assistance service to subscribers through carrier contracts starting with its first contract in 1991. Previously the Company was contracted with a number of wireless carriers, voice over internet protocol providers, cable companies and various other carriers both free and prepaid providing live operator directory assistance services to the carriers’ subscribers and users. Revenues were historically derived principally through fees charged to telecommunications carriers.
Starting in 2005, the Company went through a number of restructures of its business in an attempt to retain market share in a rapidly evolving technology and telecommunications industry.
In March 2008, the Company decided to exit the wholesale directory assistance business, but to continue to pursue growth in the Company’s small data services business which it had concurrently developed.
As of September 2008, the Company had closed all of its call centers and approximately 700 employees were terminated.
In conjunction with the closures, the Company sold a majority of its patent and trademarks to raise funds to continue operations.
Further, during 2008, the Company voluntarily deregistered its common stock under the Securities Exchange Act of 1934. With that action the Company moved from the OTC Markets Bulletin Board to the OTC Markets Pink Sheets.
The Company was unsuccessful in pursuing its then current business and ceased filing any current information reports with OTC Markets in fiscal 2009.
Current Information:
Certain of the officers and directors of the Company maintained the Company’s registration as an Oregon corporation while seeking other business opportunities for the Company and its stockholders between fiscal 2009 and August 9, 2021, when the Company redomiciled to Delaware.
On March 30, 2021, the Company announced that its newly-formed, wholly owned Israeli subsidiary, Stratford Ltd. had received notification of approval from the Lod District Court in Israel for its winning bid to acquire assets of Royal App Ltd. out of insolvency proceedings for approximately $2.4 million USD in cash, the assumption of $200,000 in repayable government grants, as well as 8% equity in the Company on a diluted basis, post conversion of the Company’s preferred common stock and certain other proposed sales of common stock in order to raise the required funds to complete the acquisition, the “Recapitalization”.
Royal App is the developer of Shelfy, a white label, headless mobile commerce software platform that helps retailers and fast-moving consumer goods companies become growth companies. Shelfy incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as supermarket chains, food and other clients. Prior to its recent insolvency filing, more than $20 million had been invested in Royal App.
If the Recapitalization of the Company was not approved by the shareholders and the 8% of the Company Capitalization was not issued to the bankruptcy trustee within 120 days from the date of the closing of the Acquisition, or April 26, 2021, the trustee, who held a pledge over the assets of Royal App purchased by Stratford, had the right to foreclose on such assets.
| F-6 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 1 - NATURE OF OPERATIONS (continued)
Current Information (continued)
Any foreclosure would result in the transfer of the ownership of Royal App assets purchased by Stratford, from Stratford to the trustee for the creditors of Royal App. The transactions as contemplated above were successfully completed during the year ended December 31, 2021, and the Trustee released its pledge over the assets.
To finance the acquisition as well as general working capital, the Company proposed to raise up to $3.5 million commencing March 2021 in the form of puttable Simple Agreements for Future Equity (“SAFES”) from institutional investors and family offices. The terms of the SAFES required that they automatically convert into common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock. The Company undertook the conversion of preferred stock in the year ended December 31, 2021, upon receipt of shareholder approval of certain proposed corporate restructure plans.
After the conversion of the preferred stock, and as part of the agreement for the acquisition of the assets of Royal App the Company also agreed to issue common stock for commission fees of 2% of the Company’s common stock on a diluted basis, and to the employees of Stratford as to 8% of the Company on a diluted basis, under the terms of an Employee Stock Option Plan approved by Shareholders. Further, in order to undertake these issuances, the Company was required to increase the authorized common stock of the Company.
On June 9, 2021, the Company announced a Stockholders’ meeting to be held on June 30, 2021, to approve the following actions:
1. | An amendment to the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000; |
2. | An amendment to the articles of the Company to effect a reverse stock split on the basis of not less than 1 for 10 and not more than 1 for 100. Such ratio to be determined by the Board of Directors of the Company; |
3. | Approval of a 2021 Employee Stock Incentive Plan. The Plan will have available shares equity to 25% of the Company’s capitalization and a term of ten years from the effective date of the Plan; |
4. | Approval of the Company’s reorganization from Oregon to Delaware. |
The meeting was held on June 30, 2021, and the Company’s shareholders approved all the actions detailed above, as well as the conversion of 1,000 outstanding shares of Company’s Series A convertible preferred stock whereby each 1 share of Preferred stock held was convertible into 71,683.25 shares of common stock. As a result, during the year ended December 31, 2021, the holders of the Company’s Series A convertible preferred stock successfully converted their holdings into 71,683,250 shares of Common Stock and the Board issued the remaining securities as agreed under the Acquisition Agreement including 22,647,751 shares to the Trustee as part of the asset acquisition costs and 5,661,938 shares to the agent as financing costs. Further a total of $3.25 million raised in the form of SAFES was converted into a total of 126,614,436 shares of common stock at $0.02567 per share. On August 9, 2021, the Company redomiciled and filed articles of conversion moving its registration to the State of Delaware.
During the year ended December 31, 2021, the Company undertook a second financing by way of Private Investment in Public Equity ("PIPE") in the form of unregistered Units at $0.075, each Unit consisting of a share of Common Stock and ½ share purchase warrant for exercise for a period of two years form the date of grant at $0.975 per share. The Company accepted subscriptions with respect to the sale of 25,080,000 for $1,881,000 in gross proceeds. Certain of the PIPE investments had agent fees payable at a rate of 4.25%.
| F-7 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 1 - NATURE OF OPERATIONS (continued)
Current Information (continued)
On February 9, 2022, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission to offer up to 80,000,000 Units consisting of one share of common stock and a ¼ warrant at $0.12 per Unit, with the associated warrants having an exercise price of $0.15 per share for a period of one year. Further the Company is registering a total of 193,317,186 shares of common stock and 20,331,658 shares of common stock underlying warrant exercises for certain selling stockholders.
During the six month period ended June 30, 2022, the Company entered into certain Short Term Promissory Notes (the “Notes”) with each Note having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash commencing on May 1, 2022. Further each Noteholder received a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date. The Company has received a total of $470,000 in proceeds ($70,000 of which was from a company controlled by our President) with respect to the Notes as at June 30, 2022 and issued a total of 1,958,333 warrants. In June 2022, the Company received a further $100,000 in the form of a short-term promissory note from a company controlled by our President, with a term of four (4) months from issue date, bearing interest at a rate of 12% per annum.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming the continuation of the Company as a going concern. The Company has recently acquired operating assets, is generating modest revenues, and is in the process of pursuing expansion of its new business venture. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s plans for the continuation of the Company as a going concern include financing the Company’s operations through issuance of its common stock, conducting revenue generating operations or expanding the Company’s existing business operations to acquire projects which generate additional revenue. If the Company is unable to complete its financing requirements or achieve net profits as projected, it will then modify its expenditures and plan of operations to coincide with the actual financing completed and actual operating revenues, if any. The Company is currently seeking a further equity financing of up to $10 million US Dollars to meet ongoing capital requirements and has filed a registration statement on Form S-1 for this purpose on February 9, 2022. Further the Company entered into certain Short Term Promissory Notes and raised a total of $400,000 during the quarter ended June 30, 2022 (Note 8).
There are no assurances the Company will succeed in implementing its plans. Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.
COVID-19
The ongoing COVID-19 pandemic could have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may impact the Company’s ability to raise additional capital and to pursue certain planned operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is subject to change. Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to estimate the ongoing effects of the COVID-19 outbreak on its operations or financial condition in the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise funds or complete planned software implementations.
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of these financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| F-8 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES
Fiscal Year end
The Company has selected December 31 as its fiscal year end.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (US GAAP). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature.
Basis of Consolidation
These condensed consolidated financial statements include the accounts of the Company and its 100% controlled Israeli subsidiary, Stratford Ltd (“Stratford”) as of June 30, 2022. All significant intercompany accounting transactions have been eliminated as a result of consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel.
Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s consolidated statements of cash flows. Transaction gains and losses are included in “General and Administrative” on the Company’s consolidated statements of operations.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) includes foreign currency translation adjustments related to the Company’s subsidiary in Israel and is excluded from the accompanying consolidated statements of operations.
Property and Equipment
Property and equipment, including leasehold improvements, are recorded at cost net of accumulated depreciation. Maintenance and repairs are expensed as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:
Computer and telephone equipment | 3 years |
| F-9 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Goodwill
Goodwill represents the excess of the purchase price of the acquisition over the net fair value of identifiable assets acquired and liabilities assumed. Goodwill amounts are not amortized.
Intangible Assets
The Company generally recognizes assets for customer relationships, developed technology, and finite-lived trade names from an acquisition. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets, generally from 3 to 8 years. Amortization for developed technology is recognized in cost of revenue. Amortization for customer relationships and trade names is recognized in sales and marketing expenses.
In the year ended December 31, 2021, the Company recorded assets acquired in the cumulative amount of approximately $3.47 million (cash proceeds, share based consideration and the assumption of certain repayable grants issued by the government of Israel which financed certain development activities related to the intellectual property) purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation (ref: Note 5), which we recorded as intangible assets. Intangible assets acquired included (1) goodwill; (2) intellectual property and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property; and (3) agreements (rights and obligations) with customers. We initially record acquired intangible assets at their estimated fair values and we review these assets periodically for impairment.
Software Research & Development Expenditure
Software research and development expenditures consist primarily of costs associated with the on-going development of software acquired from Royal App including employee compensation and certain stock based compensation associated with certain employee contracts, as well as other expenses for research and development, personnel, supplies and development materials, costs for consultants and related contract research and facility costs. Expenditures relating to research and development are capitalized as incurred. In the period ended December 31, 2021, the company recorded assets acquired in the cumulative amount of approximately $3.47 million purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation (ref: Note 5), which we recorded as intangible assets. During the year ended December 31, 2021, we capitalized approximately $990,000 in ongoing research and development expenditures and $28,483 in patent related expenditures. During the six months ended June 30, 2022, we capitalized approximately $952,000 in ongoing research and development expenditures.
Impairment
The valuation of goodwill at the reporting unit level is reviewed annually during the fourth fiscal quarter or more frequently if facts or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. The Company presently has one reporting unit; therefore, all of its goodwill is associated with the entire company.
Management has the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the Company is less than the carrying amount, including goodwill. If it is determined that it is more likely than not that the fair value of the Company is less than the carrying amount, a quantitative assessment is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company also has the option to bypass the qualitative assessment and perform the quantitative assessment.
| F-10 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Impairment (cont’d)
The Company reviews the valuation of long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment testing is performed at the asset group level.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:
● | Level 1: Observable inputs such as quoted prices in active markets; |
● | Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and; |
● | Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions |
The Company’s financial instruments include cash, accounts payable, related party loans and short term promissory notes. The carrying amounts of cash and accounts payable approximate their fair value, due to the short-term nature of these items.
Revenue Recognition
The Company has adopted the requirement of Accounting Standards Update, or ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).
We derive our revenues primarily from subscription fees for access to our software offerings, collected monthly, as well as from limited sales of customized professional services. We recognize revenues when a perceived contract exists between the Company and a customer and upon transfer of control of promised products or services to such customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenues are recognized net of allowances and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We determine revenue recognition through the following steps:
· | Identification of the contract, or contracts, with a customer; |
· | Identification of the performance obligations in the contract; |
· | Determination of the transaction price; |
· | Allocation of the transaction price to the performance obligations in the contract; and |
· | Recognition of revenues when, or as, the Company satisfies a performance obligation |
| F-11 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Revenue Recognition (cont’d)
Subscription Revenues
Subscription revenues primarily consist of monthly fees for providing customers access to our software offerings including feature-based pricing models, where distinct packages are aligned to a specific type of customer persona based on its size, market segment and physical/online store presence. Each package is very different than the next with prices increasing as the functionality increases.
Monthly subscriptions to our software packages include routine customer support and unspecified software updates and upgrades released when and if available during the term. Revenues are generally recognized monthly over the contract term beginning on the date that our service is made available to the customer, which we believe best reflects the manner in which our customers utilize our subscription offerings. Customers pay monthly for the services in advance, and if payments are not collected, the access to the service terminates. Arrangements with customers do not provide the customer with the right to take possession of the software supporting application service at any time and, as a result, are accounted for as a service contract.
Customized Service Revenues
Customized service contract revenues primarily consist of fees for deployment, configuration, and optimization services, and potentially, training. The majority of our professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods. A portion of our customized service contracts may be billed on a time and materials basis and revenues are recognized over time as the services are performed.
Stock-Based Compensation
We account for stock options granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model. We recognize compensation expense for stock option awards over the requisite or implied service period of the grant. Compensation expense is recognized on a graded-vesting method over the requisite service period. Forfeitures are accounted for as they occur.
| F-12 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
For the three and six months ended June 30, 2022 and 2021, stock-based compensation and other equity instrument related expenses and expenditures recognized in the consolidated statements of operations is as follows:
|
| Three months ended June 30, |
|
| Six months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Capitalized as software research and development expenditure |
| $ | 107,654 |
|
| $ | - |
|
| $ | 264,256 |
|
| $ | - |
|
Sales and marketing |
|
| (24,390 | ) |
|
| - |
|
|
| 3,967 |
|
|
| - |
|
General and administrative expenses |
|
| 171,830 |
|
|
| - |
|
|
| 384,987 |
|
|
| - |
|
Total stock-based compensation expense |
| $ | 255,094 |
|
| $ | - |
|
| $ | 654,210 |
|
| $ | - |
|
Leases
The Company determines if a contractual arrangement represents or contains a lease at inception. Operating leases with lease terms greater than twelvemonths are included in Operating lease right-of-use assets and Operating lease liabilities in the Consolidated Balance Sheets.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The right-of-use assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease arrangements that include both lease and non-lease components. The Company accounts for non-lease components separately from the lease component.
Income Taxes
Income taxes are recognized in accordance with ASC 740, “Income Taxes”, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Basic and Diluted Net Income (Loss) Per Share
In accordance with ASC Topic 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive.
| F-13 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Basic and Diluted Net Income (Loss) Per Share (continued)
Potential common stock consists of the incremental common stock issuable upon convertible notes, stock options and warrants and classes of shares with conversion features. The computation of basic loss per share for the three and six months ended June 30, 2022 and 2021 excludes potentially dilutive securities because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted losses per share.The Company had a total of 30,998,323 potentially dilutive securities outstanding at June 30, 2022 in relation to vested and exercisable stock options and exercisable share purchase warrants.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 5 – ACQUISITION OF ASSETS
During March 2021 the Company entered into an agreement, (the “Agreement”,) for the purchase of certain assets of Royal App Ltd., a corporation incorporated in Israel, through a liquidation proceeding approved by the Lod District Court (Israel) within the framework of Insolvency Case 53873-01-21. On April 26, 2021, the Company completed a cash payment to the trustee for the acquisition of the identified assets, and the assets were effectively transferred to the Company’s controlled subsidiary, Stratford Ltd. The acquired assets consist primarily of intellectual property which will form the basis of a re-developed SaaS software offering upon completion of development and launch by the Company.
Assets acquired included (1) goodwill and (2) intellectual property and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property. The Company also agreed to assume two customer service agreements using the original “Shelfy” application, with limited remaining life spans. Finally the Company acquired certain equipment and fixed assets which had been fully depreciated at the time of acquisition. Liabilities acquired included certain repayable government grants.
In consideration for the assets acquired the Company paid $2,140,288 (net of VAT), assumed approximately $200,000 USD in repayable government grants, which grants are repayable at a rate of 3% of gross sales until retired in full, and agreed to issue 8% of the Company’s issued and outstanding shares on a diluted basis, following the issuance of certain share capital in respect to the sale of common shares under SAFES, the conversion of 1,000 shares of Series A preferred stock to common stock and an estimate of shares expected to be issued for certain warrants and employee stock options during fiscal 2021. The consideration shares were to be issued to the bankruptcy trustee within 120 days from the date of the closing of the acquisition, April 26, 2021. The trustee, who holds a pledge over the assets of Royal App purchased by Stratford Ltd., may foreclose on such assets in the event the consideration shares were not issued as required under the terms of the Agreement. Any foreclosure would result in the transfer of the ownership of Royal
App assets purchased by Stratford, from Stratford to the trustee for the creditors of Royal App. The 22,647,751 consideration shares were issued to the trustee in August 2021 and were valued at the fair market value on the date of issue or $967,853 (net of VAT), as part of the acquisition consideration.
The Company has recorded the acquired assets on the Company’s balance sheets as Intangible Assets as of the date of acquisition. The Company has determined there is no impairment to the acquired assets or improvements at the year ended December 31, 2021, as the development of the upgraded software suite for SAAS applications is ongoing.
The Company also paid a transaction fee of 2% of the diluted share capital by way of the issuance of 5,661,938 common shares to Everest Corporate Finance Ltd., a company of which our President is an officer, director and shareholder. The shares were valued at fair market value or $283,096 which amount was expensed as a finance cost.
| F-14 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 6 – INTANGIBLE ASSETS
The following table provides additional information regarding the intangible assets acquired:
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Purchased assets – Royal App (Note 5) |
| $ | 3,403,228 |
|
| $ | 3,403,228 |
|
Capitalized patent application costs |
|
| 28,483 |
|
|
| 28,483 |
|
Capitalized software research and development expenditures |
|
| 1,943,186 |
|
|
| 990,641 |
|
Total intangible assets |
| $ | 5,374,897 |
|
| $ | 4,422,352 |
|
The Company has not yet completed the development of its upgraded software application which is expected to reach commercial viability in the third quarter of fiscal 2022.
NOTE 7 – PRIVATE PLACEMENT
Simple Agreements for Future Equity (“SAFES”)
Investor deposits consist of $3,250,000 of gross proceeds received in the form of puttable Simple Agreements for Future Equity (“SAFES”) from institutional investors and family offices during the period ended June 30, 2021. The terms of the SAFES required that they automatically convert into restricted, unregistered shares of common stock of the Company following the conversion of all outstanding convertible preferred stock into common stock at such price per share equal to the fully diluted capital post conversion of the preferred stock divided by $2,000,000, or $0.02567 per share. On August 20, 2021, 126,614,436 unregistered restricted shares of common stock were issued in exchange for 3.25M in proceeds from SAFES.
Private Investment in Public Equity (“PIPE”)
During the year ended December 31, 2021, the Company received gross proceeds of $1,881,000 from accredited investors in the form of PIPES and completed the sale of 25,080,000 units at a price of $0.075 per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each warrant is exercisable into one share of common stock at a price of $0.0975 expiring in two years from the date of issuance.
NOTE 8 – DEBT
During the three months ended March 31, 2022, the Company received a total of $400,000 in proceeds from Short Term Promissory Notes (the “Notes”) with each Note having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash commencing on May 1, 2022. Further each Noteholder shall receive a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date.
In June 2022 the Company accepted a further $70,000 in proceeds in the form of Short-Term Promissory Notes from a company controlled by our President, having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash. The Noteholder received a ½ warrant for each $1 in Note proceeds, exercisable at $0.12 per share for a term of one year from issue date.
The Company issued a total of 1,958,333 share purchase warrants in respect to the aforementioned Notes.
The Company valued these warrants using the Black Scholes model utilizing volatility ranging from 303.60% to 419.67%, and a risk-free rate of from 1.35% to 2.88%. The fair value of the warrants was $165,602, which amount was recorded as financing costs.
| F-15 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 8 – DEBT (continued)
During the three and six months ended June 30, 2022, the Company recorded interest expenses of $11,990 and $12,943, which amount was recorded as financing costs.
In June 2022, the Company received $100,000 in the form of a short-term promissory note from a company controlled by our President, with a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash. During the three and six months ended June 30, 2022, the Company recorded interest expenses of $933 and $933, which amount was recorded as financing costs.
NOTE 9 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
Common Stock and Preferred Stock
Up to August 9, 2021, Company had authorized 50,000,000 shares of Common stock, no par value and 10,000,000 shares of Preferred stock, no par value, of which 1,385 shares have been designated Series A convertible preferred stock with a liquidation preference of $10,000 per share. Holders of convertible preferred stock, when voting with the holders of our common stock, are entitled to an approximate 0.856 vote for each share of common stock into which the Series A convertible preferred stock registered in the shareholder’s name can be converted. Each share of Series A convertible preferred Stock is convertible into approximately 71,683.25 shares of common stock. In addition, the holders of the convertible preferred stock were entitled to elect a majority of the members of our Board of Directors. On August 9, 2021, the Company filed articles of conversion moving its registration to the State of Delaware and amending the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000, $0.0001 par value, and eliminating the Preferred stock.
During the year ended December 31, 2021, the Company issued the following shares of common stock:
- | 71,683,250 shares of unregistered restricted common stock upon conversion of 1,000 shares of the Series A convertible Preferred stock to its controlling shareholder, Everest Credit L.P., a company of which our President and Director is a beneficial owner; |
- | 5,661,938 shares of unregistered restricted common stock to Everest Corporate Finance Ltd., a company of which our President and Director is a beneficial owner, as commission fees in respect to the acquisition of the assets of Royal App Ltd; |
- | 22,647,751 shares of unregistered restricted common stock to the Trustee in Liquidation for Royal App as part of the agreed consideration under the acquisition agreement; |
- | 126,614,436 unregistered restricted shares of common stock in exchange for 3.25M in proceeds from SAFES from various accredited investors. |
- | 25,080,000 units at $0.075 each for gross proceeds of $1,881,000 in the form of PIPES. Each unit consists of one common share and one-half of one share purchase warrant. Each warrant will entitle the holder to purchase one common share for $0.0975 expired in two years. The Company paid agent commissions on $1.376 M in proceeds at 4.25% for a total of $58,480 in financing costs. The Company granted 7,791,658 Stock Purchase Warrants to one of its financing agents, exercisable for a period of two years from the date of grant at $0.02567 per share. The Company recorded $854,632 in financing costs. |
| F-16 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 9 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (continued)
The Company did not issue any shares of common stock during the six months ended June 30, 2022.
During the sic months ended June 30, 2022, Company issued a total of 1,958,333 stock purchase warrants in respect to certain notes for a period of One (1) year from grant date with an exercise price of $0.12 per share. The fair value of the warrants was $165,602, which amount was recorded as financing costs.
On June 30, 2022, and December 31, 2021, the Company had 257,920,700 shares of common stock issued and outstanding.
Stock Purchase Warrants
Warrant transactions are summarized as follows:
|
| Number of Warrants |
|
| Weighted Average Exercise Price ($) |
| ||
Balance, December 31, 2020 |
|
| - |
|
| $ | - |
|
Warrants issued |
|
| 20,331,658 |
|
|
| 0.07 |
|
Warrants expired |
|
| - |
|
|
| - |
|
Balance, December 31, 2021 |
|
| 20,331,658 |
|
|
| 0.07 |
|
Warrants issued |
|
| 1,958,333 |
|
|
| 0.12 |
|
Warrants expired |
|
| - |
|
|
| - |
|
Balance, June 30, 2022 |
|
| 22,289,991 |
|
| $ | 0.074 |
|
The following warrants were outstanding as at June 30, 2022:
Number of Warrants |
|
| Exercise Price ($) |
|
| Expiry Date | |||
| 1,333,333 |
|
|
| 0.0975 |
|
| September 09, 2023 | |
| 500,000 |
|
|
| 0.0975 |
|
| September 27, 2023 | |
| 7,791,658 |
|
|
| 0.02567 |
|
| October 1, 2023 | |
| 333,333 |
|
|
| 0.0975 |
|
| October 18, 2023 | |
| 5,666,667 |
|
|
| 0.0975 |
|
| October 19, 2023 | |
| 1,000,000 |
|
|
| 0.0975 |
|
| October 21, 2023 | |
| 240,000 |
|
|
| 0.0975 |
|
| October 24, 2023 | |
| 666,667 |
|
|
| 0.0975 |
|
| October 26, 2023 | |
| 666,667 |
|
|
| 0.0975 |
|
| October 28, 2023 | |
| 600,000 |
|
|
| 0.0975 |
|
| October 29, 2023 | |
| 800,000 |
|
|
| 0.0975 |
|
| November 01, 2023 | |
| 533,333 |
|
|
| 0.0975 |
|
| November 02, 2023 | |
| 200,000 |
|
|
| 0.0975 |
|
| November 19, 2023 | |
| 208,333 |
|
|
| 0.12 |
|
| March 16, 2023 | |
| 625,000 |
|
|
| 0.12 |
|
| March 22, 2023 | |
| 833,333 |
|
|
| 0.12 |
|
| March 27, 2023 | |
| 291,667 |
|
|
| 0.12 |
|
| June 20 27, 2023 | |
| 22,289,991 |
|
|
|
|
|
|
| |
| F-17 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 9 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (continued)
Stock Options
The Company granted the following Stock options under its 2021 Employee Stock Incentive Plan:
- | 9,000,000 fully vested incentive stock options to directors, officers and consultants of the Company for exercise at $0.0257 for a term of 4 years from grant. |
- | 7,077,422 qualified employee stock options to certain officers, directors and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.123 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of October 26, 2021. |
- | 11,465,424 qualified employee stock options to certain officers and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.02567 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of May 2, 2021. |
- | 1,500,414 qualified employee stock options to certain officers and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.103 per share for a period of five years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with vesting commencement dates between November 2021 and June 2022. |
Additional information with respect to the stock option activity is as follows:
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at December 31, 2021 |
|
| 27,542,845 |
|
| $ | 0.05068 |
|
|
| 3.60 |
|
| $ | - |
|
Granted |
|
| 1,500,414 |
|
|
| - |
|
|
| 5 |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Cancelled |
|
| (1,415,484 | ) |
|
| 0.123 |
|
|
| - |
|
|
| - |
|
Outstanding at June 30, 2022 |
|
| 27,627,775 |
|
| $ | 0.0498 |
|
|
| 3.18 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at June 30, 2022 |
|
| 9,000,000 |
|
| $ | 0.02567 |
|
|
| 3.25 |
|
| $ | - |
|
| F-18 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 9 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (continued)
Stock Options (cont’d)
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at December 31, 2020 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
Granted in 2021 |
|
| 27,542,845 |
|
| $ | 0.0507 |
|
|
| - |
|
|
| - |
|
Exercised in 2021 |
|
| - |
|
| $ | - |
|
|
| - |
|
|
| - |
|
Cancelled in 2021 |
|
| - |
|
| $ | - |
|
|
| - |
|
|
| - |
|
Outstanding at December 31, 2021 |
|
| 27,542,845 |
|
| $ | 0.05068 |
|
|
| 3.60 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2021 |
|
| 9,000,000 |
|
| $ | 0.02567 |
|
|
| 3.75 |
|
| $ | - |
|
The following table summarizes information about stock options outstanding and exercisable at June 30, 2022:
Range of Exercise Prices |
|
| Number of Shares Outstanding |
|
| Weighted Average Remaining in Contractual Life in Years |
|
| Outstanding Options Weighted Average Exercise Price |
|
| Number of Options Exercisable |
|
| Exercisable Options Weighted Average Exercise Price |
| ||||||
$0.02567 |
|
|
| 9,000,000 |
|
|
| 3.25 |
|
| $ | 0.02567 |
|
|
| 9,000,000 |
|
| $ | 0.02567 |
| |
$0.02567 |
|
|
| 11,465,423 |
|
|
| 2.84 |
|
| $ | 0.02567 |
|
|
| - |
|
| $ | - |
| |
$0.12300 |
|
|
| 5,661,938 |
|
|
| 3.32 |
|
| $ | 0.12300 |
|
|
| - |
|
| $ | - |
| |
$0.10300 |
|
|
| 1,500,414 |
|
|
| 4.92 |
|
| $ | 0.10300 |
|
|
| - |
|
| $ | - |
| |
$0.02567 ~ $0.12300 |
|
|
| 27,542,845 |
|
|
| 3.18 |
|
| $ | 0.0498 |
|
|
| 9,000,000 |
|
| $ | 0.02567 |
| |
Unamortized compensation expense associated with unvested options is $1,316,033 and $1,821,701as of June 30, 2022 and December 31, 2021, respectively. The weighted average period over which these costs are expected to be recognized is approximately 3.18 years.
NOTE 10 – COMMITMENT
Leases
In March 2022, we leased car in Israel with a lease term of 36 months expiring in July 2024.
We used a discount rate of 6.75% in determining our operating lease liabilities, which represented our incremental borrowing rate. Short-term leases with initial terms of twelve months or less are not capitalized.
We determine if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.
Right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. Certain lease agreements contain extension options; however, we have not included such options as part of right-of-use assets and lease liabilities because we originally did not expect
| F-19 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 10 – COMMITMENT (continued)
Leases (cont’d)
to extend the leases. We measure and record a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. In cases where the discount rate implicit in the lease is not known, we measure the right-of-use assets and lease liabilities using a discount rate equal to our estimated incremental borrowing rate for loans with similar collateral and duration.
Operating lease expense is comprised of the following:
|
| Three months ended June 30, |
|
| Six months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Operating lease cost |
| $ | 3,446 |
|
| $ | - |
|
| $ | 7,050 |
|
| $ | - |
|
Maturities of lease liabilities are as follows:
|
| Operating Leases |
| |
2022 |
| $ | 6,580 |
|
2023 |
|
| 13,159 |
|
2024 |
|
| 7,676 |
|
Total lease payments |
|
| 27,415 |
|
Less imputed interest |
|
| (1,906 | ) |
Total lease liabilities |
|
| 25,509 |
|
Less current portion of lease liabilities |
|
| (11,799 | ) |
Long-term lease liabilities |
| $ | 13,710 |
|
NOTE 11 – RELATED PARTY TRANSACTIONS
Key management compensation
Key management personnel are persons responsible for planning, directing, and controlling the activities of the entity, and include all directors and officers.
|
| Three months ended June 30, |
|
| Six months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Management fees |
| $ | 120,578 |
|
| $ | 69,441 |
|
| $ | 256,548 |
|
| $ | 81,441 |
|
At June 30, 2022, accounts payable and accrued liabilities included $6,236 ($22,139 – December 31, 2021) of management fees with respect to key management compensation.
Effective April 1, 2022, Ms. Bianca Meger, the Company’s CEO, transitioned to focus a larger portion of her efforts on the day-to-day operations of Metro One and as a result, resigned from her position as Co-CEO of Stratford Ltd.
| F-20 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Condensed Consolidated Financial Statements
For The Six Months Ended June 30, 2022 and 2021
NOTE 12 – SUBSEQUENT EVENTS
On July 19, 2022, the Company accepted the resignation of Ms. Bianca Meger as the Company’s Chief Executive Officer and Mr. Elchanan Maoz was appointed to serve as Interim Chief Executive Officer.
Subsequent to June 30, 2022, the Company issued a total of 1,833,334 qualified stock options to certain employees of controlled subsidiary Stratford, and a further 5,414,228 options were forfeit upon termination of certain employment agreements.
On August 1, 2022, the Company officially launched its fully updated mobile commerce platform on the Shopify App Store, with its first user. The Shelfy app is now open to all merchants on the Shopify marketplace and can be accessed at https://apps.shopify.com/shelfy.
During August 2022, the Company received a total of $369,000 in cash proceeds from certain Note and Securities Purchase Agreements (the “August Notes”), and rolled over $570,000 of previously incurred debt under certain notes entered into during the first quarter, including accrued interest (the “New Notes”), with each of the August Notes and New Notes having a term of 15 months from issue date, bearing interest at a rate of 10% per annum, with accrued interest payable monthly in arrears in cash commencing on October 1, 2022. Further the Company issued a total of 6,714,547 shares of common stock to the Noteholders in conjunction with the terms of the agreements. Concurrent with the New Notes a total of 291,667 warrants issued to a company controlled by our CEO in June 2022 were cancelled.
The Company has evaluated events for the period from June 30, 2022, through the date of the issuance of these financial statements and determined that there are no additional events requiring disclosure.
| F-21 |
| Table of Contents |
Metro One Telecommunications, Inc.
FINANCIAL STATEMENTS
Years ended December 31, 2021 and 2020
With Report of Independent Registered Public Accounting Firm
TABLE OF CONTENTS
Page | |
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F-26 | |
F-27 | |
F-28 |
| F-22 |
| Table of Contents |
| Gries & Associates, LLC Certified Public Accountants 501 S. Cherry Street Suite 1100 Denver, Colorado 80246 |
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Metro One Telecommunications, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Metro One Telecommunications, Inc. Portland, Oregon
We have audited the accompanying balance sheet of Metro One
Telecommunications, Inc. (formerly Metro One Direct Information Services, Inc.(the “Company”) as of December 31, 19952021 and 2020, and the related statementconsolidated statements of operations, shareholders'
equity (deficit),statements of stockholders’ deficit, and cash flows for each of the yeartwo years then ended. ended, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company'sentity’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditaudits in accordance with generally accepted auditing
standards.the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anmisstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit includesof its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes
assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects,presentation of the financial position of the Company at December 31, 1995, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Portland, Oregon
March 18, 1996
F-2
57
REPORT OF INDEPENDENT ACCOUNTANTS
February 6, 1995
To the Board of Directors and Shareholders of
Metro One Telecommunications, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of common stock subject to rescission and shareholders' deficit,
and of cash flows present fairly, in all material respects, the financial
position of Metro One Telecommunications, Inc. (formerly Metro One Direct
Information Services, Inc.) at December 31, 1994, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.statements. We believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the financial statements of Metro One
Telecommunications, Inc. for any period subsequent to December 31, 1994.
our opinion.
Going Concern Uncertainty
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring
losses from operations and, at December 31, 1994, has an accumulated deficit of
$14,713,210. In addition, as more fullyAs discussed in Note 9note 2 to the financial statements, the Company has filed with certain securities regulators
registration statements pertainingincurred losses since inception of $136,809,383. These factors create an uncertainty as to a planned rescission offering for certain
purchasers' equity securities because Company management cannot draw a
conclusion with certainty that all applicable state and federal securities laws
were complied with in all material respects in connection with the issuance of
such securities. Such factors raise substantial doubt about the Company'sCompany’s ability to continue as a going concern. Management'sManagement’s plans in regard to these matters are also described in the accompanying financial statements.note 2. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
PRICE WATERHOUSE LLP
Portland,this uncertainty.
Emphasis of Matters-Risks and Uncertainties
The Company is not able to predict the ultimate impact that COVID -19 will have on its business. However, if the current economic conditions continue, the pandemic could have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company plans to operate.
/s/ Gries & Associates, LLC | |
We have served as the Company’s auditor since 2022. | |
Denver, CO September 1, 2022 | |
blaze@griesandassociates.com
501 S. Cherry Street Suite 1100, Denver, Colorado 80246
(O)720-464-2875 (M)773-255-5631 (F)720-222-5846
| F-23 |
| Table of Contents |
Metro One Telecommunications, Inc.
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,128,825 |
|
| $ | 24,788 |
|
Accounts receivable |
|
| 18,865 |
|
|
| - |
|
Prepaid expenses |
|
| 180,808 |
|
|
| - |
|
Other current assets |
|
| 230,270 |
|
|
| - |
|
Total current assets |
|
| 1,558,768 |
|
|
| 24,788 |
|
|
|
|
|
|
|
|
|
|
Property and equipment. net |
|
| 7,244 |
|
|
| - |
|
Intangible assets |
|
| 4,422,352 |
|
|
| - |
|
Operating lease right-of-use assets |
|
| 34,432 |
|
|
| - |
|
Other assets |
|
| 21,911 |
|
|
| - |
|
Total assets |
| $ | 6,044,707 |
|
| $ | 24,788 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity (Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 569,320 |
|
| $ | 51,175 |
|
Current portion of operating lease liabilities |
|
| 12,835 |
|
|
| - |
|
Total current liabilities |
|
| 582,155 |
|
|
| 51,175 |
|
|
|
|
|
|
|
|
|
|
Other liability |
|
| 194,898 |
|
|
| - |
|
Operating lease liabilities |
|
| 22,173 |
|
|
|
|
|
Total liabilities |
|
| 799,226 |
|
|
| 51,175 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit) |
|
|
|
|
|
|
|
|
Preferred stock, no par value, 10,000,000 shares authorized: |
|
|
|
|
|
|
|
|
Series A convertible preferred stock, 1,385 shares authorized 0 and 1,000 shares issued and outstanding: liquidation preference of $0 and $10,000 per share, respectively* |
|
| - |
|
|
| 10,000,000 |
|
Common stock, $0.0001 par value; 600,000,000 shares authorized 257,920,700 and 6,233,326 shares issued and outstanding, at December 31, 2021 and 2020 respectively |
|
| 25,792 |
|
|
| 623 |
|
Additional paid in capital |
|
| 140,858,794 |
|
|
| 122,248,037 |
|
Accumulated deficit |
|
| (135,617,027 | ) |
|
| (132,275,047 | ) |
Other comprehensive income |
|
| (22,078 | ) |
|
| - |
|
Stockholders’ equity (deficit) |
|
| 5,245,481 |
|
|
| (26,387 | ) |
Total liabilities, redeemable preferred stock and Stockholders’ Deficit |
| $ | 6,044,707 |
|
| $ | 24,788 |
|
*Upon a recapitalization and a reorganization of the Company from Oregon F-3
58
METRO ONE TELECOMMUNICATIONS, INC.
BALANCE SHEETS
to Delaware effective August 9, 2021, the Preferred stock was eliminated with the Series A Convertible Preferred stock having prior converted to shares of common stock.
DECEMBER 31,
--------------------------- MARCH 31,
1994 1995 1996
------------ ------------ ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 310,191 $ 1,148,822 $ 1,601,641
Accounts receivable................................ 1,357,925 2,617,465 2,873,980
Notes receivable................................... 174,555 -- --
Current portion of notes receivable from
officers/shareholders........................... 903 2,900 3,114
Prepaid costs and other current assets............. 71,048 357,197 591,530
------------ ------------ ------------
Total current assets....................... 1,914,622 4,126,384 5,070,265
Furniture, fixtures and equipment, net............... 4,067,928 4,187,554 4,299,744
Notes receivable from officers/shareholders,
less current portion............................... 32,315 25,858 24,796
Other assets......................................... 283,917 376,682 381,083
------------ ------------ ------------
$ 6,298,782 $ 8,716,478 $ 9,775,888
============ ============ ============
LIABILITIES, COMMON STOCK SUBJECT TO POTENTIAL
RESCISSION AND ACCUMULATED DEFICITS
Current liabilities:
Current portion of capital lease obligations....... $ 518,849 $ 769,892 $ 760,125
Current portion of long-term debt.................. 400,000 2,045,897 748,925
Accounts payable and accrued expenses.............. 1,346,564 1,160,049 1,405,734
------------ ------------ ------------
Total current liabilities.................. 2,265,413 3,975,838 2,914,784
Capital lease obligations, less current portion...... 1,272,387 1,366,205 1,504,094
Long-term debt, less current portion................. 5,160,000 100,000 --
------------ ------------ ------------
8,697,800 5,442,043 4,418,878
------------ ------------ ------------
Commitments and contingencies (Notes 9 and 11)
Common stock subject to potential rescission;
5,210,871 shares issued and outstanding............ 12,314,191 -- --
------------ ------------ ------------
Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares
authorized, no shares issued or outstanding........ -- -- --
Common stock, no par value; 490,000,000 shares
authorized, 7,936,804 and 8,513,373 issued and
outstanding at December 31, 1995 and March 31,
1996, respectively................................. -- 19,711,711 21,509,107
Accumulated deficit.................................. (14,713,209) (16,437,276) (16,152,097)
------------ ------------ ------------
Net shareholders' equity (deficit)................... (14,713,209) 3,274,435 5,357,010
------------ ------------ ------------
$ 6,298,782 $ 8,716,478 $ 9,775,888
============ ============ ============
The accompanying notes are an integral part of these audited consolidated financial statements.
F-4
59
METRO ONE TELECOMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
| F-24 |
| Table of |
Metro One Telecommunications, Inc.
Consolidated Statements of Operations
and Other Comprehensive Income
|
| Years Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Revenues |
| $ | 170,622 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
General and administrative |
| $ | 1,718,058 |
|
| $ | 5,236 |
|
Management Fees |
|
| 294,101 |
|
|
| 48,000 |
|
Sales and Marketing |
|
| 205,467 |
|
|
| - |
|
Finance Costs |
|
| 1,294,976 |
|
|
| - |
|
Total operating expenses |
|
| 3,512,602 |
|
|
| 53,236 |
|
|
|
|
|
|
|
|
|
|
Loss |
| $ | (3,341,980 | ) |
| $ | (53,236 | ) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share |
| $ | (0.04 | ) |
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
Weighted average shares – basic and diluted |
|
| 94,175,874 |
|
|
| 6,233,326 |
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (loss) |
|
|
|
|
|
|
|
|
Net Loss |
| $ | (3,341,980 | ) |
| $ | (49,512 | ) |
Foreign currency translation adjustment |
|
| (22,078 | ) |
|
| - |
|
|
| $ | (3,364,058 | ) |
| $ | (49,512 | ) |
The accompanying notes are an integral part of these audited consolidated financial statements.
F-5
60
METRO ONE TELECOMMUNICATIONS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Metro One Telecommunications, Inc.
Consolidated Statements of Stockholders’ Equity (Deficit)
|
| Preferred Shares |
|
| Common Stock |
|
| Additional Paid-in |
|
| Accumulated Other Comprehensive |
|
| Accumulated |
|
| Total Stockholders’ Equity |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income (loss) |
|
| Deficit |
|
| (Deficit) |
| ||||||||
Balance at December 31, 2019 |
|
| 1,000 |
|
| $ | 10,000,000 |
|
|
| 6,233,326 |
|
| $ | 623 |
|
| $ | 122,248,037 |
|
| $ | - |
|
| $ | (132,221,811 | ) |
| $ | 26,849 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (53,236 | ) |
|
| (53,236 | ) |
Balance at December 31, 2020 |
|
| 1,000 |
|
|
| 10,000,000 |
|
|
| 6,233,326 |
|
|
| 623 |
|
|
| 122,248,037 |
|
|
| - |
|
|
| (132,275,047 | ) |
|
| (26,387 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares converted* |
|
| (1,000 | ) |
|
| (10,000,000 | ) |
|
| 71,683,250 |
|
|
| 7,168 |
|
|
| 9,992,832 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Share issuance under acquisition of assets |
|
| - |
|
|
| - |
|
|
| 22,647,751 |
|
|
| 2,265 |
|
|
| 1,130,123 |
|
|
| - |
|
|
| - |
|
|
| 1,132,388 |
|
Share issuance under private placement |
|
| - |
|
|
| - |
|
|
| 151,694,435 |
|
|
| 15,170 |
|
|
| 5,115,830 |
|
|
| - |
|
|
| - |
|
|
| 5,131,000 |
|
Share issuance as financing costs |
| �� | - |
|
|
| - |
|
|
| 5,661,938 |
|
|
| 566 |
|
|
| 282,530 |
|
|
| - |
|
|
| - |
|
|
| 283,096 |
|
Stock warrants granted as financing costs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 854,632 |
|
|
| - |
|
|
| - |
|
|
| 854,632 |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,144,077 |
|
|
| - |
|
|
| - |
|
|
| 1,144,077 |
|
Capitalized stock-based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 90,733 |
|
|
| - |
|
|
| - |
|
|
| 90,733 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (22,078 | ) |
|
| - |
|
|
| (22,078 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,341,980 | ) |
|
| (3,341,980 | ) |
Balance at December 31, 2021 |
|
| - |
|
| $ | - |
|
|
| 257,920,700 |
|
| $ | 25,792 |
|
| $ | 140,858,794 |
|
| $ | (22,078 | ) |
| $ | (133,842,610 | ) |
| $ | 5,245,481 |
|
*Upon a recapitalization and a reorganization of the Company from Oregon to Delaware effective August 9, 2021, the Preferred stock was eliminated with the Series A Convertible Preferred stock having prior converted to shares of common stock.
The accompanying notes are an integral part of these statements.
F-7
62
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. Theseaudited consolidated financial statements and related footnote
information as of March 31, 1996 and for the three months ended March 31, 1995
and 1996 are unaudited and in the opinion of management reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the Company's financial position as of such date and results of
operations for such periods. The results of operations for the interim periods
are not necessarily indicative of the results that may be expected for any other
interim period or for the full year.
NAME CHANGE. In 1995, the Board of Directors and shareholders approved an
amendment to the Restated Articles of Incorporation changing the name of the
Company to statements.
| F-26 |
| Table of Contents |
Metro One Telecommunications, Inc.(the "Company")
Consolidated Statements of Cash Flows
|
| Years Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Cash flows used in operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (3,341,980 | ) |
| $ | (53,236 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
| 328 |
|
|
|
|
|
Non-cash operating lease expense |
|
| 556 |
|
|
|
|
|
Financing costs |
|
| 1,137,728 |
|
|
| - |
|
Stock based compensation |
|
| 1,144,077 |
|
|
|
|
|
Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (18,238 | ) |
|
| - |
|
Prepaid costs and other assets |
|
| (229,982 | ) |
|
| 27,000 |
|
Accounts payable and other liability |
|
| 502,109 |
|
|
| 49,197 |
|
Net cash provided by (used in) operating activities |
|
| (805,402 | ) |
|
| 22,961 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (7,331 | ) |
|
| - |
|
Purchases of intangible asset |
|
| (3,409,906 | ) |
|
| - |
|
Net cash (used in) investing activities |
|
| (3,417,237 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from private placements |
|
| 5,131,000 |
|
|
| - |
|
Net cash provided by financing activities |
|
| 5,131,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
| 908,361 |
|
|
| 22,961 |
|
Foreign Exchange Gain (loss) |
|
| 195,676 |
|
|
| - |
|
Cash and cash equivalents, beginning of year |
|
| 24,788 |
|
|
| 1,827 |
|
Cash and cash equivalents, end of year |
| $ | 1,128,825 |
|
| $ | 24,788 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash received (paid) for income taxes, net |
| $ | - |
|
| $ | - |
|
Cash paid for interest |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
Royal App assets acquired by issuance of shares |
| $ | 967,853 |
|
| $ | - |
|
Other current assets acquired by issuance of shares |
| $ | 164,535 |
|
| $ | - |
|
Royal App assets acquired through assumption of repayable government grant |
| $ | 193,920 |
|
| $ | - |
|
The former nameaccompanying notes are an integral part of thethese audited consolidated financial statements.
| F-27 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 1 - NATURE OF OPERATIONS
Historical Information:
The Company was incorporated in the State of Oregon on February 8, 1989, as Metro One Direct Information Services Inc. NATURE OF OPERATIONS.On December 12, 1995, we changed our name to Metro One Telecommunications Inc. The Company provides enhancedwas formerly in the business of providing directory assistance service to subscribers through carrier contracts starting with its first contract in 1991. Previously the Company was contracted with a number of wireless carriers, voice over internet protocol providers, cable companies and various other carriers both free and prepaid providing live operator directory assistance services to telecommunications carriersthe carriers’ subscribers and their customers.users. Revenues arewere historically derived principally through fees charged to telecommunications carriers.
Starting in 2005, the Company went through a number of restructures of its business in an attempt to retain market share in a rapidly evolving technology and telecommunications industry.
In March 2008, the Company decided to exit the wholesale directory assistance business, but to continue to pursue growth in the Company’s small data services business which it had concurrently developed.
As of September 2008, the Company had closed all of its call centers and approximately 700 employees were terminated.
In conjunction with the closures, the Company sold a majority of its patent and trademarks to raise funds to continue operations.
Further, during 2008, the Company voluntarily deregistered its common stock under the Securities Exchange Act of 1934. With that action the Company moved from the OTC Markets Bulletin Board to the OTC Markets Pink Sheets.
The Company has call centers located throughoutwas unsuccessful in pursuing its then current business and ceased filing any current information reports with OTC Markets in fiscal 2009.
Current Information:
Certain of the United Statesofficers and directors of the Company maintained the Company’s registration as an Oregon corporation while seeking other business opportunities for the Company and its stockholders between fiscal 2009 and current date.
On March 30, 2021, the Company announced that its newly-formed, wholly owned Israeli subsidiary, Stratford Ltd. had received notification of approval from the Lod District Court in or near
metropolitan areas,Israel for its winning bid to acquire assets of Royal App Ltd. out of insolvency proceedings for approximately $2.4 million USD in cash, the assumption of $200,000 in repayable government grants, as well as 8% equity in the Company on a diluted basis, post conversion of the Company’s preferred common stock and certain other proposed sales of common stock in order to raise the required funds to complete the acquisition, the “Recapitalization”.
Royal App is the developer of Shelfy, a white label, headless mobile commerce software platform that helps retailers and fast moving consumer goods companies become growth companies. Shelfy incorporates sophisticated artificial intelligence and machine learning in its algorithms to markedly improve online shopping metrics through mobile phones for large consumer retailers such as Chicago; Baltimore; San Diego; Seattle; Ft.
Lauderdale; Detroit; Denver;supermarket chains, food and others.
CASH AND CASH EQUIVALENTS. Cashother clients. Prior to its recent insolvency filing, more than $20 million had been invested in Royal App.
| F-28 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and cash equivalents includes cash
deposits in banks and highly liquid investments maturing within approximately 90
days2020
NOTE 1 - NATURE OF OPERATIONS (continued)
Current Information (continued)
If the Recapitalization of purchase.
REVENUE RECOGNITION. Under existing contracts with telecommunications
carriers, the Company records as revenue charges for the amount of
telecommunications services rendered, generally as measuredwas not approved by the numbershareholders and the 8% of
calls processed. Revenue is recognized as services are provided.
MAJOR CUSTOMERS. In the three months ended March 31, 1996, thirteen
customers accounted for substantially all revenue reported and comprised
substantially the entire accounts receivable balance at March 31, 1996. In 1995,
twelve customers accounted for substantially all revenue reported and comprised
the entire accounts receivable balance at December 31. The Company's three
largest customers accounted for approximately 29%, 23%, and 20%, respectively,
of revenue in 1995. In 1994, six customers accounted for all revenue reported
and comprised the entire accounts receivable balance at December 31. In 1993,
five customers accounted for approximately 90% of revenue and also comprised the
entire accounts receivable balance at December 31, 1993. Historically the Company hasCapitalization was not incurred significant losses relatedissued to its accounts receivable.
FURNITURE, FIXTURES AND EQUIPMENT. Furniture, fixtures and equipment are
stated at cost and are depreciated over their estimated useful lives of three to
seven years using the straight-line method. Leasehold improvements are amortized
over the lesser of the remaining lease term or the useful life. Expenses for
repairs and maintenance are expensed as incurred, and renewals and betterments
are capitalized. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation are eliminatedbankruptcy trustee within 120 days from the accounts and the
resulting gains or losses are reflected in the statement of operations.
PER SHARE AMOUNTS. All share and per share amounts have been restated to
reflect a .2857-for-one (approximately a one-for-three and one-half) reverse
stock split. The effective date of the reverseclosing of the Acquisition, or April 26, 2021, the trustee, who holds a pledge over the assets of Royal App purchased by Stratford, had the right to foreclose on such assets. Any foreclosure would result in the transfer of the ownership of Royal App assets purchased by Stratford, from Stratford to the trustee for the creditors of Royal App. The transactions as contemplated above were successfully completed during the year ended December 31, 2021, and the Trustee released its pledge over the assets.
To finance the acquisition as well as general working capital, the Company proposed to raise up to $3.5 million commencing March 2021 in the form of puttable Simple Agreements for Future Equity (“SAFES”) from institutional investors and family offices. The terms of the SAFES required that they automatically convert into common stock splitof the Company following the conversion of all outstanding convertible preferred stock into common stock. The Company undertook the conversion of preferred stock in the year ended December 31, 2021, upon receipt of shareholder approval of certain proposed corporate restructure plans.
After the conversion of the preferred stock, and as part of the agreement for the acquisition of the assets of Royal App the Company also agreed to issue common stock for commission fees of 2% of the Company’s common stock on a diluted basis, and to the employees of Stratford as to 8% of the Company on a diluted basis, under the terms of an Employee Stock Option Plan approved by Shareholders. Further, in order to undertake these issuances, the Company was required to increase the authorized common stock of the Company.
On June 9, 2021, the Company announced a Stockholders’ meeting to be held on June 30, 2021, to approve the following actions:
1. | An amendment to the articles of the Company to increase the authorized shares of the Company from 50,000,000 to 600,000,000; |
2. | An amendment to the articles of the Company to effect a reverse stock split on the basis of not less than 1 for 10 and not more than 1 for 100. Such ratio to be determined by the Board of Directors of the Company; |
3. | Approval of a 2021 Employee Stock Incentive Plan. The Plan will have available shares equity to 25% of the Company’s capitalization and a term of ten years from the effective date of the Plan; |
4. | Approval of the Company’s reorganization from Oregon to Delaware. |
The meeting was held on June 30, 2021, and the Company’s shareholders approved all the actions detailed above, as well as the conversion of 1,000 outstanding shares of Company’s Series A convertible preferred stock whereby each 1 share of Preferred stock held was convertible into 71,683.25 shares of common stock. As a result, during the year ended December 12,
1995. The per share amounts are based on31, 2021, the weighted average numberholders of the Company’s Series A convertible preferred stock successfully converted their holdings into 71,683,250 shares of Common Stock and the Board issued the remaining securities as agreed under the Acquisition Agreement including 22,647,751 shares to the Trustee as part of the asset acquisition costs and 5,661,938 shares to the agent as financing costs. Further a total of $3.25 million raised in the form of SAFES was converted into a total of 126,614,436 shares of common stock outstanding duringat $0.02567 per share. On August 9, 2021, the Company redomiciled and filed articles of conversion moving its registration to the State of Delaware.
| F-29 |
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Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 1 - NATURE OF OPERATIONS (continued)
Current Information (continued)
During the year ended December 31, 2021, the Company undertook a second financing by way of Private Investment in Public Equity (“PIPE”) in the form of unregistered Units at $0.075, each Unit consisting of a share of Common Stock and ½ share purchase warrant for exercise for a period of computation. Commontwo years form the date of grant at $0.975 per share. The Company accepted subscriptions with respect to the sale of 25,080,000 common shares for $1,881,000 in gross proceeds. Certain of the PIPE investments have agent fees payable at a rate of 4.25%.
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming the continuation of the Company as a going concern. The Company has recently acquired operating assets, is generating modest revenues, and is in the process of pursuing expansion of its new business venture. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and is dependent on debt and equity financing to fund its operations. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s plans for the continuation of the Company as a going concern include financing the Company’s operations through issuance of its common stock, equivalents, including sharesconducting revenue generating operations or expanding the Company’s existing business operations to acquire projects which generate additional revenue. If the Company is unable to complete its financing requirements or achieve net profits as projected, it will then modify its expenditures and plan of operations to coincide with the actual financing completed and actual operating revenues, if any. The Company is currently seeking a further equity financing of up to $10 million US Dollars to meet ongoing capital requirements and has filed a registration statement on Form S-1 for this purpose, subsequent to the year ended December 31, 2021.
There are no assurances the Company will succeed in implementing its plans. Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.
COVID-19
The ongoing COVID-19 pandemic could have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may impact the Company’s ability to raise additional capital and to pursue certain planned operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is subject to debt conversion, warrants and options,
have been excluded fromchange. Management is actively monitoring the computation because their effect would be
antidilutive, except that pursuantsituation but given the daily evolution of the COVID-19 outbreak, the Company is not able to estimate the Securities and Exchange Commission
Staff Accounting Bulletins, common and common equivalent shares issued at prices
belowongoing effects of the anticipated public offering price during the twelve months immediately
preceding the initial filing date have been includedCOVID-19 outbreak on its operations or financial condition in the calculation as if
they were outstanding for all periods presented (using the treasury stock method
and the anticipated initial public offering price).
F-8
63
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PATENTS AND TRADEMARKS. Patents and trademarksnext 12 months. There are carried at cost less
accumulated amortization. Costs are amortized over the estimated useful lives of
the related assets of five to ten years. In the event that facts and
circumstances indicateno assurances that the cost of patents,Company will be able to meet its obligations, raise funds or trademarks may be impaired,
an evaluation of recoverability would be performed and the asset's carrying
amount would be reduced to market value or discounted cash flow value.
FAIR VALUEcomplete planned software implementations.
NOTE 3 - USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL INSTRUMENTS. Accounts receivable and payable as
reported on the accompanying balance sheets are collectible and payable,
respectively, within 60 days and, as a result, approximate fair value. The
Company's notes receivable and payable and subordinated notes bear interest
rates that approximate current market rates; thus, the recorded value of these
notes is considered to be at fair value.
USE OF ESTIMATES. STATEMENTS
The preparation of financial statements in conformity with generally accepted accounting principalsGenerally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that effectaffect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of thethese financial statements, and the reported amounts of revenuerevenues and expenses during the fiscal year.reporting period. Actual results could differ from those estimates.
RECLASSIFICATION. Certain balances in the 1993, 1994
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Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 19952020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES
Fiscal Year end
The Company has selected December 31 as its fiscal year end.
Basis of Presentation
The accompanying consolidated financial statements have been reclassifiedprepared in accordance with generally accepted accounting principles (US GAAP). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature.
Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its 100% controlled Israeli subsidiary, Stratford Ltd (“Stratford”) as of December 31, 2021. All significant intercompany accounting transactions have been eliminated as a result of consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to conformbe cash equivalents.
Foreign Currency Translation
The Company uses the U.S. Dollar as the reporting currency for its financial statements. Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the Company’s wholly owned subsidiary is the Israeli Shekel.
Assets and liabilities of the Company’s subsidiary are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income” as a separate component of stockholders’ equity, and in the “Effect of exchange rate changes on cash and cash equivalents,” on the Company’s consolidated statements of cash flows. Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in “General and Administrative” on the Company’s consolidated statements of operations.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) includes foreign currency translation adjustments related to the Company’s subsidiary in Israel and is excluded from the accompanying consolidated statements of operations.
Property and Equipment
Property and equipment, including leasehold improvements, are recorded at cost net of accumulated depreciation. Maintenance and repairs are expensed as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:
Computer equipment | 3 years |
| F-31 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (Continued)
Goodwill
Goodwill represents the excess of the purchase price of the acquisition over the net fair value of identifiable assets acquired and liabilities assumed. Goodwill amounts are not amortized.
Intangible Assets
The Company generally recognizes assets for customer relationships, developed technology, and finite-lived trade names from an acquisition. Finite-lived intangible assets are carried at acquisition cost less accumulated amortization. Such amortization is recorded on a straight-line basis over the estimated useful lives of the respective assets, generally from 3 to 8 years. Amortization for developed technology is recognized in cost of revenue. Amortization for customer relationships and trade names is recognized in sales and marketing expenses.
In the year ended December 31, 2021, the company recorded assets acquired in the cumulative amount of approximately $3.47 million (cash proceeds, share based consideration and the assumption of certain repayable grants issued by the government of Israel which financed certain development activities related to the intellectual property) purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation (ref: Note 5), which we recorded as intangible assets. Intangible assets acquired included (1) goodwill; (2) intellectual property and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property; and (3) agreements (rights and obligations) with 1996 presentations. Such
reclassificationscustomers. We initially record acquired intangible assets at their estimated fair values and we review these assets periodically for impairment.
Software, Research & Development Expenditure
Software, research and development expenditures consist primarily of costs associated with the on-going development of software acquired from Royal App including employee compensation and other expenses for research and development, personnel, supplies and development materials, costs for consultants and related contract research and facility costs. Expenditures relating to research and development are capitalized as incurred. In the period ended December 31, 2021, the company recorded assets acquired in the cumulative amount of approximately $3.47 million purchased through a liquidation proceeding from the trustee for Royal App Ltd., an Israeli corporation (ref: Note 5), which we recorded as intangible assets. During the year ended December 31, 2021, we capitalized approximately $990,000 in ongoing research and development expenditures and $28,483 in patent related expenditures.
Impairment
The valuation of goodwill at the reporting unit level is reviewed annually during the fourth fiscal quarter or more frequently if facts or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. The Company presently has one reporting unit; therefore, all of its goodwill is associated with the entire company. Management has the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the Company is less than the carrying amount, including goodwill. If it is determined that it is more likely than not that the fair value of the Company is less than the carrying amount, a quantitative assessment is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company also has the option to bypass the qualitative assessment and perform the quantitative assessment.
The Company reviews the valuation of long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment testing is performed at the asset group level.
| F-32 |
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Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value for applicable assets and liabilities, we consider the principal or most advantageous market in which we would transact and we consider assumptions market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:
● | Level 1: Observable inputs such as quoted prices in active markets; |
● | Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
● | Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions |
The Company’s financial instruments include cash, accounts payable, related party loans and a demand promissory note. The carrying amounts of cash and accounts payable approximate their fair value, due to the short-term nature of these items.
Revenue Recognition
The Company has adopted the requirement of Accounting Standards Update, or ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).
We derive our revenues primarily from subscription fees for access to our software offerings, collected monthly, as well as from limited sales of customized professional services. We recognize revenues when a perceived contract exists between the Company and a customer and upon transfer of control of promised products or services to such customer in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenues are recognized net of allowances and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We determine revenue recognition through the following steps:
· | Identification of the contract, or contracts, with a customer; |
· | Identification of the performance obligations in the contract; |
· | Determination of the transaction price; |
· | Allocation of the transaction price to the performance obligations in the contract; and |
· | Recognition of revenues when, or as, the Company satisfies a performance obligation |
Subscription Revenues
Subscription revenues primarily consist of monthly fees for providing customers access to our software apps including feature-based pricing models, where distinct packages are aligned to a specific type of customer persona based on its size, market segment and physical/online store presence. Each package is different than the next with prices increasing as the functionality increases.
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Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
Monthly subscriptions to our software packages include routine customer support and unspecified software updates and upgrades released when and if available during the term. Revenues are generally recognized monthly over the contract term beginning on the date that our service is made available to the customer, which we believe best reflects the manner in which our customers utilize our subscription offerings. Customers pay monthly for the services in advance, and if payments are not collected, the access to the service terminates. Arrangements with customers do not provide the customer with the right to take possession of the software supporting application service at any time and, as a result, are accounted for as a service contract.
Customized Professional Service Revenues
Customized service contract revenues primarily consist of fees for deployment, configuration, and optimization services, and potentially, training. The majority of our professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods. A portion of our customized service contracts may be billed on a time and materials basis and revenues are recognized over time as the services are performed.
Stock-Based Compensation
We account for stock options granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model. We recognize compensation expense for stock option awards over the requisite or implied service period of the grant. Compensation expense is recognized on a graded-vesting method over the requisite service period. Forfeitures are accounted for as they occur.
| F-34 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Stock-Based Compensation (continued)
For the years ended December 31, 2021 and 2020, stock-based compensation and other equity instrument related expenses and expenditures recognized in the consolidated statements of operations is as follows:
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Capitalized as software research and development expenditure |
| $ | 90,733 |
|
| $ | - |
|
Sales and marketing |
|
| 19,040 |
|
|
| - |
|
General and administrative expenses |
|
| 1,125,037 |
|
|
| - |
|
Total stock-based compensation expense |
| $ | 1,234,810 |
|
| $ | - |
|
Leases
The Company determines if a contractual arrangement represents or contains a lease at inception. Operating leases with lease terms greater than twelvemonths are included in Operating lease right-of-use assets and Operating lease liabilities in the Consolidated Balance Sheets.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The right-of-use assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease arrangements that include both lease and non-lease components. The Company accounts for non-lease components separately from the lease component.
Income Taxes
Income taxes are recognized in accordance with ASC 740, “Income Taxes”, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Basic and Diluted Net Income (Loss) Per Share
In accordance with ASC Topic 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had nobeen issued and if the additional shares of common stock were dilutive.
Potential common stock consists of the incremental common stock issuable upon convertible notes, stock options and warrants and classes of shares with conversion features. The computation of basic loss per share for the years ended December 31, 2021 and December 31, 2020 excludes potentially dilutive securities such as share purchase warrants, because their inclusion would be antidilutive. As a result, the computations of net loss per share for each period presented is the same for both basic and fully diluted.
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Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations or accumulated earnings
(deficit).
2. FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment by major classification are summarized as
follows:
NOTE 5 – ACQUISITION OF ASSETS
During March 2021 the Company issued
$5,000,000entered into an agreement, (the “Agreement”,) for the purchase of certain assets of Royal App Ltd., a corporation incorporated in 8% Convertible Secured Notes. The Convertible Secured Notes bore
interest at 8% per annum and were (i) securedIsrael, through a liquidation proceeding approved by the Company'sLod District Court (Israel) within the framework of Insolvency Case 53873-01-21. On April 26, 2021, the Company completed a cash payment to the trustee for the acquisition of the identified assets, (ii)
payable on June 30, 1996, and (iii) convertible into the Company's common stockassets were effectively transferred to the Company’s controlled subsidiary, Stratford Ltd. The acquired assets consist primarily of intellectual property which will form the basis of a re-developed SaaS software offering upon completion of development and launch by the Company.
Assets acquired included (1) goodwill and (2) intellectual property and trademarks, including rights in patents in so far as they exist and rights of claim (if and in so far as they exist and are transferrable) for infringement of the aforementioned intellectual property. The Company also agreed to assume two customer service agreements using the original “Shelfy” application, with limited remaining life spans. Finally the Company acquired certain equipment and fixed assets which had been fully depreciated at the time of acquisition. Liabilities acquired included certain repayable government grants.
In consideration for the assets acquired the Company paid $2,140,288 (net of VAT), assumed approximately $200,000 USD in repayable government grants, which grants are repayable at a rate of $2.31 per share. During3% of gross sales until retired in full, and agreed to issue 8% of the fourthCompany’s issued and outstanding shares on a diluted basis, following the issuance of certain share capital in respect to the sale of common shares under SAFES, the conversion of 1,000 shares of Series A preferred stock to common stock and an estimate of shares expected to be issued for certain warrants and employee stock options during fiscal 2021. The consideration shares were to be issued to the bankruptcy trustee within 120 days from the date of the closing of the acquisition, April 26, 2021. The trustee, who holds a pledge over the assets of Royal App purchased by Stratford Ltd., may foreclose on such assets in the event the consideration shares were not issued as required under the terms of the Agreement. Any foreclosure would result in the transfer of the ownership of Royal App assets purchased by Stratford, from Stratford to the trustee for the creditors of Royal App. The 22,647,751 consideration shares were issued to the trustee in August 2021 and were valued at the fair market value on the date of issue or $967,853 (net of VAT), as part of the acquisition consideration.
The Company has recorded the acquired assets on the Company’s balance sheets as Intangible Assets as of the date of acquisition. The Company’s management determined there is no impairment to the acquired assets or improvements at the year ended December 31, 2021, as the development of the upgraded software suite for SAAS applications is ongoing.
The Company also paid a transaction fee of 2% of the diluted share capital by way of the issuance of 5,661,938 common shares to Everest Corporate Finance Ltd., a company of which our President is an officer, director and shareholder. The shares were valued at fair market value or $283,096 which amount was expensed as a finance cost.
NOTE 6 – INTANGIBLE ASSETS
The following table provides additional information regarding the intangible assets acquired:
Purchased assets – Royal App (Note 5) |
| $ | 3,403,228 |
|
Capitalized patent application costs |
|
| 28,483 |
|
Capitalized software research and development expenditures |
|
| 990,641 |
|
Total intangible assets |
| $ | 4,422,352 |
|
| F-36 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 2020
NOTE 6 – INTANGIBLE ASSETS (continued)
The Company has not yet completed the development of its upgraded software application which is expected to reach commercial viability in the second quarter of 1995, these
Convertible Secured Notes were convertedfiscal 2022.
NOTE 7 – PRIVATE PLACEMENT
Simple Agreements for Future Equity (“SAFES”)
Investor deposits consist of $3,250,000 of gross proceeds received in the form of puttable Simple Agreements for Future Equity (“SAFES”) from institutional investors and family offices during the period ended June 30, 2021. The terms of the SAFES require that they automatically convert into 2,164,402restricted, unregistered shares of the Company's
common stock.
In connection with the conversion, the Company recognized a charge for
early conversion in the amount of $384,071, including the write-off of
approximately $128,000 in offering costs previously capitalized.
10% SUBORDINATED NOTES. In 1995, the Company issued $3,860,000 of new 10%
subordinated notes with warrants (the "1995 Subordinated Notes"), the proceeds
of which were primarily used to refinance $3,610,000 in subordinated notes
("1994 Subordinated Notes"). The 1995 Subordinated Notes have maturities of no
less than 18 months and bear interest at 10% per annum payable monthly. These
1995 Subordinated Notes can be paid before maturity at the optionstock of the Company with no penalty. Infollowing the eventconversion of an initial public offering,all outstanding convertible preferred stock into common stock at such price per share equal to the then
outstanding 1995 Subordinated Notes are convertible, at the optionfully diluted capital post conversion of the holder,preferred stock divided by $2,000,000, or $0.02567 per share. On August 20, 2021, 126,614,436 unregistered restricted shares of common stock in exchange for 3.25M in proceeds from SAFES.
Private Investment in Public Equity (“PIPE”)
During the year ended December 31, 2021, the Company received gross proceeds of $1,881,000 from accredited investors in the form of PIPES and completed the sale of 25,080,000 units at a price of $0.075 per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each warrant is exercisable into one share of common stock at a price equalof $0.0975 expiring in two years.
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
Common Stock and Preferred Stock
Up to 80%August 9, 2021, Company had authorized 50,000,000 shares of Common stock, no par value and 10,000,000 shares of Preferred stock, no par value, of which 1,385 shares have been designated Series A convertible preferred stock with a liquidation preference of $10,000 per share. Holders of convertible preferred stock, when voting with the holders of our common stock, are entitled to an approximate 0.856 vote for each share of common stock into which the Series A convertible preferred stock registered in the shareholder’s name can be converted. Each share of Series A convertible preferred Stock is convertible into approximately 71,683.25 shares of common stock. In addition, the holders of the initial public offering
price.
Issued with each note wasconvertible preferred stock were entitled to elect a warrant formajority of the purchasemembers of that numberour Board of Directors. On August 9, 2021, the Company filed articles of conversion moving its registration to the State of Delaware and amending the articles of the Company to increase the authorized shares of the Company's common stock equalCompany from 50,000,000 to 600,000,000, $0.0001par value, and eliminating the principal amount ofPreferred stock.
During the note
divided by $8.75. The exercise prices ofyear ended December 31, 2021, the warrants related toCompany issued the 1994
Subordinated Notes and the 1995 Subordinated Notes are $5.25 and $2.31,
respectively, and the warrants are exercisable at any time on or before three
years from the date of issuance.
In 1995, a certain noteholder exercised warrants for the purchase of
293,130following shares of the Company's common stock.
In 1996stock:
- | 71,683,250 shares of unregistered restricted common stock upon conversion of 1,000 shares of the Series A convertible Preferred stock to its controlling shareholder, Everest Credit L.P., a company of which our President and Director is a beneficial owner; |
- | 5,661,938 shares of unregistered restricted common stock to Everest Corporate Finance Ltd., a company of which our President and Director is a beneficial owner, as commission fees in respect to the acquisition of the assets of Royal App Ltd; |
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| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021 and 1995,2020
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (continued)
- | 22,647,751 shares of unregistered restricted common stock to the Trustee in Liquidation for Royal App as part of the agreed consideration under the acquisition agreement; |
- | 126,614,436 unregistered restricted shares of common stock in exchange for 3.25M in proceeds from SAFES from various accredited investors. |
- | 25,080,000 units at $0.075 each for gross proceeds of $1,881,000 in the form of PIPES. Each unit consists of one common share and one-half of one share purchase warrant. Each warrant will entitle the holder to purchase one common share for $0.0975 expired in two years. The Company paid agent commissions on $1.376 M in proceeds at 4.25% for a total of $58,480 in financing costs. The Company granted 7,791,658 Stock Purchase Warrants to one of its financing agents, exercisable for a period of two years from the date of grant at $0.02567 per share. The Company recorded $854,632 in financing costs. |
On December 31, 2021 and December 31, 2020, the Company extended an offer to holders of 1995
Subordinated Notes to convert their notes to common stock of the Company at
$5.25 per share. Principal in the amount of $3,210,000 was converted into
611,440 shares of the Company's common stock. The remaining 1995 Subordinated
Notes are due as follows: $550,000 in 1996had 257,920,700 and $100,000 in 1997.
5. LEASE OBLIGATIONS
The Company entered into $1,929,810, $1,066,249 and $374,016 of new capital
leases for the years ended 1994 and 1995, respectively, and during the three
months ended March 31, 1996. Interest paid for capital lease obligations was
approximately $0, $117,933 and $405,120 in 1993, 1994 and 1995, respectively.
The Company also leases office, operating facilities and equipment under
operating leases with unexpired terms of one to six years. Rental expense for
operating leases was approximately $313,000, $528,000 and
F-10
65
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
$780,000 for 1993, 1994 and 1995, respectively. Minimum annual rentals for the
five years subsequent to 1995 and in the aggregate thereafter are as follows:
DECEMBER 31, 1995 MARCH 31, 1996
----------------------------------- -----------------------------------
YEAR ENDING CAPITAL LEASES OPERATING LEASES CAPITAL LEASES OPERATING LEASES
- ---------------------------------- -------------- ---------------- -------------- ----------------
(UNAUDITED)
1997............................ $ 785,646 $ 849,687 $1,137,969 $ 842,385
1998............................ 525,871 742,270 867,153 843,318
1999............................ 377,450 632,405 607,913 721,635
2000............................ 56,547 494,901 352,124 620,697
2001............................ -- 270,081 84,461 385,223
Thereafter........................ -- -- -- 231,498
---------- ---------- ---------- ----------
Total minimum lease payments...... 2,873,470 $3,810,154 3,049,620 $3,644,756
========== ==========
Less interest portion............. 737,373 785,401
---------- ----------
Present value of net minimum lease
payments, capital leases........ 2,136,097 2,264,219
Less portion due within one
year............................ 769,892 760,125
---------- ----------
$1,366,205 $1,504,094
========== ==========
6. SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK. In 1995, the Company's Board of Directors and shareholders
approved a .2857-for-one (approximately a one-for-three and one-half) reverse
split of the Company's common stock. All share and per share amounts have been
restated to retroactively reflect the reverse stock split.
PREFERRED STOCK. In 1995, the Board of Directors and the shareholders
approved an amendment to the Restated Articles of Incorporation to increase the
number of authorized shares of preferred stock, without par value, from 10,000
to 10,000,000.
COMMON STOCK OPTIONS AND WARRANTS. The Company has issued nonqualified
stock options and/or warrants to certain shareholders, consultants and other
parties. Generally, these options and warrants vested immediately upon grant and
are exercisable at prices determined by the Board of Directors.
In 1994 and 1995, the Board of Directors and shareholders, respectively,
approved a Stock Incentive Plan (the "Plan"). The Plan provides for the award of
incentive stock options to key employees and the award of non-qualified stock
options, stock sales and grants to employees, outside directors, independent
contractors and consultants, with 1,428,5006,233,326 shares of common stock reserved for
issuance under the Plan. It is intended that the Plan will be used principally
to attractissued and retain key employees of the Company.
The option price per share of an incentive stock option may not be less
than the fair market value of a share of common stock as of the date such option
is granted. The option price per share of a non-qualified stock option may be at
any price established by the Board of Directors or a committee thereof
established for purposes of administering the plan. Options become exercisable
at the timesoutstanding, respectively, and subject to the conditions prescribed by the Board of Directors.
Generally, options vest over a period of four years0 and the term of each option
may not exceed ten years. Payment for shares purchased pursuant to options may
be made in cash or by delivery of1,000 shares of commonSeries A Preferred stock having a market value
equal to the exercise of the option. As of March 31, 1996, 365,230 incentive
optionsissued and 797,368 non-qualified options had been granted under the Plan, at an
exercise price of $8.05 per share of common stock. At March 31, 1996,
approximately 801,561 of the options granted under the Planoutstanding, respectively.
Stock Purchase Warrants
The following warrants were exercisable.
F-11
66
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Stock option and warrant activity is summarizedoutstanding as follows:
NUMBER OF SHARES PRICE RANGE
---------------- -------------
Balance at December 31,1992.................... 802,816 $.04 - 5.25
Granted...................................... 92,853 1.75 - 8.05
Canceled/Expired............................. -- --
Exercised.................................... (85,288) 1.75 - 3.50
---------------- -------------
Balance at December 31, 1993................... 810,381 .04 - 8.05
Granted...................................... 561,116 5.25 - 8.05
Canceled/Expired............................. -- --
Exercised.................................... (218,383) .04 - 1.75
---------------- -------------
Balance at December 31,1994.................... 1,153,114 1.75 - 8.05
Granted...................................... 1,756,340 8.05
Canceled/Expired............................. (208,918) 8.05
Exercised.................................... (327,412) 1.75 - 5.25
---------------- -------------
Balance at December 31, 1995................... 2,373,124 $1.75 - 8.05
---------------- -------------
Granted (Unaudited).......................... 60,020 8.05
Canceled/Expired (Unaudited)................. 858 8.05
Exercised (Unaudited)........................ 341,370 1.75 - 5.25
---------------- -------------
Balance at March 31, 1996 (Unaudited).......... 2,090,916 $1.75 - 8.05
============= ============
7. RELATED PARTIES
During 1994 and 1995, the Company entered into various capital lease
arrangements for furniture, fixtures and equipment with a company owned by a
shareholder of the Company. Minimum capital lease obligations to this related
party totaled $1,017,759 and $1,024,380 at December 31, 19942021:
Number of Warrants |
| Exercise Price ($) |
| Expiry Date |
1,333,333 |
| 0.0975 |
| September 09, 2023 |
500,000 |
| 0.0975 |
| September 27, 2023 |
7,791,658 |
| 0.02567 |
| October 1, 2021 |
333,333 |
| 0.0975 |
| October 18, 2021 |
5,666,667 |
| 0.0975 |
| October 19, 2021 |
1,000,000 |
| 0.0975 |
| October 21, 2021 |
240,000 |
| 0.0975 |
| October 24, 2021 |
666,667 |
| 0.0975 |
| October 26, 2021 |
666,667 |
| 0.0975 |
| October 28, 2021 |
600,000 |
| 0.0975 |
| October 29, 2021 |
800,000 |
| 0.0975 |
| November 01, 2021 |
533,333 |
| 0.0975 |
| November 02,2021 |
200,000 |
| 0.0975 |
| November 19,2021 |
20,331,658 |
|
|
|
|
Warrant transactions are summarized as follows:
|
| Number of Warrants |
|
| Weighted Average Exercise Price ($) |
| ||
Balance, December 31, 2020 |
|
| - |
|
| $ | - |
|
Warrants issued |
|
| 20,331,658 |
|
|
| 0.07 |
|
Warrants expired |
|
| - |
|
|
| - |
|
Balance, December 31, 2021 |
|
| 20,331,658 |
|
| $ | 0.07 |
|
| F-38 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)
Stock Purchase Warrants (cont’d)
The following weighted average assumptions were used for the Black-Scholes pricing model valuation of warrants issued during the year ended December 31, 2021 to allocate the proceeds between common stock and 1995,
respectively. There were no capital lease transactionsadditional paid-in capital:
2021 | |
Risk-free interest rate | 0.23% ~ 0.52% |
Expected life of warrants | 2 years |
Expected annualized volatility | 423.32% ~ 428.65% |
Dividend | Nil |
Forfeiture rate | 0% |
Stock Options
The Company granted the following Stock options under its 2021 Employee Stock Incentive Plan:
- | 9,000,000 fully vested incentive stock options to directors, officers and consultants of the Company for exercise at $0.0257 for a term of 4 years from grant. |
- | 7,077,422 qualified employee stock options to certain officers, directors and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.123 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of October 26, 2021. |
- | 11,465,424 qualified employee stock options to certain officers and employees of the Company’s wholly owned subsidiary, Stratford Ltd for exercise at $0.02567 per share for a period of four years from grant and vesting as to 25% (Twenty five percent) on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), with an additional 6.25% (six and one quarter percent) of the Option vesting at the end of each three (3) month period following the Cliff Date. The Options shall become fully vested by the fourth anniversary of the Vesting Commencement Date, with a vesting commencement date of May 2, 2021. |
Additional information with respect to the stock option activity is as follows:
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at December 31, 2020 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
Granted in 2021 |
|
| 27,542,845 |
|
| $ | 0.0507 |
|
|
|
|
|
|
|
|
|
Exercised in 2021 |
|
| - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
Cancelled in 2021 |
|
|
|
|
| $ | - |
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2021 |
|
| 27,542,845 |
|
| $ | 0.05068 |
|
|
| 3.60 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2021 |
|
| 9,000,000 |
|
| $ | 0.02567 |
|
|
| 3.75 |
|
| $ | - |
|
| F-39 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2021
NOTE 8 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
Stock Options (cont’d)
The following table summarizes information about stock options outstanding and exercisable at December 31, 2021:
Range of Exercise Prices |
| Number of Shares Outstanding |
|
| Weighted Average Remaining in Contractual Life in Years |
|
| Outstanding Options Weighted Average Exercise Price |
|
| Number of Options Exercisable |
|
| Exercisable Options Weighted Average Exercise Price |
| |||||
$0.02567 |
|
| 9,000,000 |
|
|
| 3.75 |
|
| $ | 0.02567 |
|
|
| 9,000,000 |
|
| $ | 0.02567 |
|
$0.02567 |
|
| 11,465,423 |
|
|
| 3.34 |
|
| $ | 0.02567 |
|
|
| - |
|
| $ | - |
|
$0.12300 |
|
| 7,077,422 |
|
|
| 3.82 |
|
| $ | 0.12300 |
|
|
| - |
|
| $ | - |
|
$0.02567 ~ $0.12300 |
|
| 27,542,845 |
|
|
| 3.60 |
|
| $ | 1.87 |
|
|
| 9,000,000 |
|
| $ | 0.02567 |
|
Unamortized compensation expense associated with unvested options is $1,821,701 as of December 31, 2021. The weighted average period over which these costs are expected to be recognized is approximately 3.6 years.
NOTE 9 – COMMITMENTS
Leases
We leased a car in Israel with the shareholderlease term in three36 months ended Marchto July 2024.
We used a discount rate of 6.75% in determining our operating lease liabilities, which represented our incremental borrowing rate. Short-term leases with initial terms of twelve months or less are not capitalized.
We determine if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.
Right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. Certain lease agreements contain extension options; however, we have not included such options as part of right-of-use assets and lease liabilities because we originally did not expect to extend the leases. We measure and record a right-of-use asset and lease liability based on the discount rate implicit in the lease, if known. In cases where the discount rate implicit in the lease is not known, we measure the right-of-use assets and lease liabilities using a discount rate equal to our estimated incremental borrowing rate for loans with similar collateral and duration.
Operating lease expense is comprised of the following:
|
| Year Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Operating lease cost |
| $ | 6,993 |
|
| $ | - |
|
| F-40 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to Consolidated Financial Statements
For The Years Ended December 31, 1996.
8.2021
NOTE 9 – COMMITMENTS (Continued)
Leases (Cont’d)
Maturities of lease liabilities are as follows:
|
| Operating Leases |
| |
2022 |
| $ | 14,804 |
|
2023 |
|
| 14,804 |
|
2024 |
|
| 8,637 |
|
Total lease payments |
|
| 38,245 |
|
Less imputed interest |
|
| (3,237 | ) |
Total lease liabilities |
|
| 35,008 |
|
Less current portion of lease liabilities |
|
| (12,835 | ) |
Long-term lease liabilities |
| $ | 22,173 |
|
NOTE 10 – RELATED PARTIES TRANSACTIONS
Key management compensation
Key management personnel are persons responsible for planning, directing and controlling the activities of the entity, and include all directors and officers.
|
| Years Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Management fees |
| $ | 294,101 |
|
| $ | 48,000 |
|
At December 31, 2021, accounts payable and accrued liabilities included $22,139 ($0 – December 31, 2020) of management fees with respect to key management compensation.
NOTE 11 – INCOME TAXES
In 1993, the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("FAS 109").
The Company recognizes deferred tax liabilitiesassets and assetsliabilities for the expected future tax consequenceseffects of
temporary differences between the book basisfinancial statement and tax basis of the Company's
assets and liabilities. The adoptionA valuation allowance is established to reduce the deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.
As of this statement had no effect on pre-tax
loss from continuing operations.
Deferred taxes are comprised of the following:
| F-41 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to offsetConsolidated Financial Statements
For The Years Ended December 31, 2021
NOTE 11 – INCOME TAXES (Continued)
The provision for (benefit from) income taxes consist of the following:
Year Ended December 31, 2021 | Year Ended December 31, 2020 | |||||||
Current | ||||||||
Federal | $ | - | $ | - | ||||
State | - | - | ||||||
| - | - | |||||||
Deferred | ||||||||
Federal | - | - | ||||||
State | - - | - - | ||||||
Total income tax provision (benefit) | $ | - | $ | - | ||||
A reconciliation of the provision for income taxes at the federal statutory rates of 21% to the Company’s provision for income tax is as follows:
|
| Year Ended December 31, 2021 |
|
| Year Ended December 31, 2020 |
| ||
U.S. Federal (tax benefit) provision at statutory rate |
| $ | (27,784,200 | ) |
| $ | (27,082,400 | ) |
Changes in valuation allowance |
|
| 27,784,200 |
|
|
| 27,082,400 |
|
Total |
| $ | - |
|
| $ | - |
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents the significant components of the Company’s deferred tax assets and liabilities for the periods presented:
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
Deferred Tax Assets |
|
|
|
|
|
| ||
Net operating losses |
|
| 701,800 |
|
|
| 11,200 |
|
Total deferred tax assets |
|
| 701,800 |
|
|
| 11,200 |
|
Valuation allowance |
|
| (701,800 | ) |
|
| (11,200 | ) |
Net deferred tax assets |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
| - |
|
|
| - |
|
Net deferred tax |
| $ | - |
|
| $ | - |
|
The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain. Due to the history of losses the Company has generated in future
years through their expirationthe past, the Company believes that it is not more likely than not that all of the deferred tax assets in 2004the U.S. can be realized as of December 31, 2021 and 2020, accordingly, the Company has recorded a full valuation allowance on its U.S. deferred tax assets.
| F-42 |
| Table of Contents |
Metro One Telecommunications, Inc.
Notes to 2010.Consolidated Financial Statements
For The issuanceYears Ended December 31, 2021
NOTE 11 – INCOME TAXES (Continued)
The Company files income tax returns in the United States on federal basis and various states. The Company is not currently under any international or any United States federal, state and local income tax examinations for any taxable years. All of common stock
since the Company's inception has resulted in changes in ownership which limit
the annual utilization of theseCompany’s net operating loss carryforwards.
9. POTENTIAL RESCISSION LIABILITY
In 1995,losses are subject to tax authority adjustment upon examination.
NOTE 12 – SUBSEQUENT EVENTS
Subsequent to December 31, 2021, the Company has filed a registration statementRegistration Statement on Form S-1 with the Securities and Exchange Commission and certain state securities regulators for a rescission
offering whereby it offered to certain holdersoffer up to 80,000,000 Units consisting of its common stock the right to
rescind their purchaseone share of shares of the Company's common stock and a ¼ warrant at $0.12 per Unit, with the associated warrants having an exercise price of $0.15 per share for a period of one year. Further the Company is registering a total of X shares for certain selling stockholders.
Subsequent to December 31, 2021, the Company has commenced an offering of Convertible Notes (the “Notes”) with each Note having a term of four (4) months from issue date, bearing interest at a rate of 12% per annum, with accrued interest payable monthly in arrears in cash commencing on May 1, 2022. Further each Noteholder shall receive a ½ warrant for each $1 in exchangeNote proceeds, convertible at $0.12 per share for a term of one year from issue date. The Company has received a total of $200,000 in proceeds with respect to the Notes.
The Company has evaluated events for the common stock relinquished to the Company, a payment equal to
the purchase price of such securities plus interestperiod from December 31, 2021, through the date of purchase at
the applicable statutory rate of the state in which they reside. The securities
intended to be the subject of the Rescission Offer included 4,699,539 shares of
common stock outstanding at March 31, 1995 and purchased or converted from debt
securities by persons who resided in Oregon and certain other states.
The rescission offer closed in July 1995. As a result of the rescission
offer, the sales of 135,414 shares of common stock were rescinded and such
shares were purchased by the Company for approximately $738,660, including
interest of approximately $124,900. In total, shareholders representing
approximately $1,877,500 and 528,215 shares of common stock outstanding at March
31, 1995 did not receive a rescission offer.
10. BENEFIT PLANS
During 1992, the Company established a deferred compensation savings plan
for the benefit of its eligible employees. The plan permits certain voluntary
employee contributions to be excluded from the employees' current taxable income
under the provisions of Internal Revenue Code Section 401(k). Upon reaching the
age of twenty-one, each employee becomes eligible to participate in the savings
plan six months following the initial date of employment. The employee must also
complete 1,000 hours of service in any twelve-month period. Under the plan, the
Company can make discretionary contributions to the plan as approved by the
Board of Directors. Participants' interest in Company contributions to the plan
vest over a four-year period. The Company has made no contributions since the
plan's inception.
11. COMMITMENTS AND CONTINGENCIES
The Company is party to various legal actions and administrative
proceedings arising in the ordinary course of business. The Company believes
that the dispositionissuance of these matters will not have a material adverse effect on
its financial position or resultsstatements and determined that there are no additional events requiring disclosure.
F-43 |
| Table of Contents |
Shares of its operations.
12. BANK LINECommon Stock
200,031,733 SHARES OF CREDIT
The Company entered into a $3,000,000 Secured Operating Line of Credit with
a commercial bank. Under the terms of the agreement, outstanding borrowings bear
interest at prime rate plus 1.25 percent and all assets of the Company are
pledged as collateral. The agreement contains minimum net worth and working
capital requirements as well as certain other restrictive covenants, as defined
by the agreement, and prohibits the payment of cash dividends. At March 31,
1996, the Company had no borrowings against this line of credit.
13. ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements with employees and
encourages (but does not require) compensation cost to be measured based
F-13
68
METRO ONE TELECOMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
on the fair market value of the equity instrument awarded. Companies are
permitted, however, to continue to apply Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees," which recognizes
compensation cost based on the intrinsic value of the equity instrument awarded.
The Company will continue to apply APB Opinion No. 25 to its stock based
compensation awards to employees and will disclose the required pro forma effect
on net income and earnings per share in its 1996 annual report.
F-14
69
METRO ONE TELECOMMUNICATIONS -- DELIVERING INNOVATIVE
SOLUTIONS FOR CALLERS WHO DESIRE ACCURATE, TIMELY INFORMATION
"AUTOBACK" "MESSAGEBACK" "NUMBERBACK"
We automatically return to Delivers the caller's Callers receive the called
a live operator upon a recorded message to the number by simply pressing
busy signal or ring-no called party or any other the [#] key once.
answer situation -- there desired party. A wake-up Configuration options
are no keys to press at or reminder service -- or provide automatic delivery
all. a tool for ensuring of called number at
communication with a initiation and/or
desired party. completion of a call.
"STARBACK" "CALLBACK"
Metro One created an Called party is connected
industry standard that back to the calling party
allows the caller to at a later time. Effective
return to a live operator tool for connecting two
by simply pressing the [*] parties with heavy phone
key once at any time usage patterns.
during the call. Allows
for additional caller
requests at no extra
charge to the carrier.
70
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZEDCOMMON STOCK BY THE COMPANY, BY THE SELLING SHAREHOLDERS ORAND
21,998,323 SHARES OF COMMON STOCK UNDERLYING WARRANT EXERCISES BY ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFEROUR SELLING SHAREHOLDERS AND
80,000,000 SHARES OF COMMON STOCK TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERYSOLD AS PART OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECTOFFERING AND
20,000,000 SHARES UNDERLYING WARRANTS TO BE SOLD AS PART OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
THIS OFFERING
PROSPECTUS
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.Other Expenses of Issuance and Distribution.
Expenses incurred or expected relating to this prospectus and distribution, all of which we will pay, are as follows:
SEC Registration Fee |
| $ | 3,544 |
|
Printing and Engraving Expenses |
| $ | 20,000 |
|
Legal Fees and Expenses |
| $ | 60,000 |
|
Accounting Fees and Expenses |
| $ | 35,000 |
|
Transfer Agent and Registrar Fees and Expenses |
| $ | 15,000 |
|
|
|
|
|
|
TOTAL |
| $ | 133,544 |
|
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the “Delaware Law”) authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, (including reimbursement for expenses incurred) arising under the Securities Act of 1933. The following table sets forthCertificate of Incorporation provides for indemnification of officers, directors and other employees of the costs and expenses, other than
underwriting discounts and commissions, expected to be incurred by the
Registrant in connection with the offering described in this Registration
Statement. All amounts, except the SEC registration fee, the NASD filing fee and
the NASDAQ National Market System listing fee are estimates.
Our Bylaws provide that the Corporation shall indemnify any liability relatedperson who was or is a party or is threatened to breach of the duty of
loyalty, actions not in good faith and certain other liabilities.
Section 60.387 et seq. of the OBCA allows corporationsbe made a party to indemnify their
directors and officers against liability where the directorany threatened, pending or officer has acted
in good faith and with a reasonable belief that actions taken were in the best
interests of the corporationcompleted action, suit or at least not adverse to the corporation's best
interests and, if in aproceeding, whether civil, criminal, proceeding, the individual had no reasonable
cause to believe the conduct in question was unlawful. Under the OBCA,
corporations may not indemnify against liability in connection with a claimadministrative or investigative (other than an action by or in the right of the corporation but may indemnify against the reasonable
expenses associated with such claims. Corporations may not indemnify against
breachesCorporation) by reason of the duty of loyalty. The OBCA provides for mandatory indemnification
of directors against all reasonable expenses incurred in the successful defense
of any claim madefact that he is or threatened whether or not such claim was by or in the right
of the corporation. Finally, a court may order indemnification if it determines
that the director or officer is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances whetherCorporation, or, not thewhile a director or officer metof the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with which action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable belief standardscause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct set out in the statute.
The OBCA alsowas unlawful.
Except as provided above, our Certificate of Incorporation provides that a director shall be liable to the statutory indemnification provisions are
not deemed exclusive of any other rights to which directors or officers may be
entitled under a corporation's articles of incorporation or bylaws, any
agreement, general or specific actionextent provided by applicable law, (i) for breach of the boarddirector’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware Law or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware hereafter is amended to authorize the further elimination or limitation of the liability of directors, votethen the liability of stockholders or otherwise.
Article Xa director of the Articles requires the Company to indemnify its directors
and officersCorporation, in addition to the fullest extent not prohibited by law. The Bylaws of the
Company (the "Bylaws") also require the Company to indemnify its directors and
officerslimitation on personal liability provided herein, shall be limited to the fullest extent permitted by the OBCA.
II-1
72
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Withinamended Delaware Law. Neither any amendment to or repeal of our Certificate of Incorporation, nor the last three years,adoption of any provision hereof inconsistent with our Certificate of Incorporation, shall adversely affect any right or protection of any director of the Company has sold securities without
registrationCorporation existing at the time of, or increase the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to or at the time of such amendment.
Neither our Bylaws, nor our Certificate of Incorporation include any specific indemnification provisions for our officer or directors against liability under the Securities Act of 1933, as amended (the “Act”). Additionally, insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the transactions and in reliance on the
exemptions from registration described below.
(a) The Company completed a recapitalization and reverse stock split
effective December 12, 1995, in which each share of Common Stock, without
par value, then outstanding was converted to .2857 Shares of Common Stock
(approximately a 1 for 3.5 reverse split). The issuance of shares in the
recapitalization was exempt from registration pursuant to Section 3(a)(9)opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and did not involveis, therefore, unenforceable.
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Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding the issuance and sales of securities during the previous three years. No such sales involved the use of an underwriter; no advertising or public solicitation was involved; the securities bear a restrictive legend; and no commissions were paid in connection with the sale of any securities.
(b) Between
In March and June 1993 and October 1993,2022, the Company soldissued a cumulative 1,958,332 warrants issued in conjunction with our offering of short-term notes are exercisable for a period of one year from the date of such warrant, at an aggregateexercise price of 325,137$0.12 per share. The exercise price of the warrants shall be on a cash, and not a cashless, basis, and the warrants may be exercised in full or in part. The exercise price of the warrants is subject to adjustment pursuant to any stock-split, reclassification, reorganization, or consolidation of the company. No fractional shares shall be issued as part of a conversion of the warrants. Subsequent to June 30, 2022, 291,667 of these warrants were canceled.
During August 2022, the Company received a total of $369,000 in cash proceeds from certain Note and Securities Purchase Agreements (the “August Notes”), and rolled over $570,000 of previously incurred debt under certain notes entered into during the first quarter, including accrued interest (the “New Notes”), with each of the August Notes and New Notes having a term of 15 months from issue date, bearing interest at a rate of 10% per annum, with accrued interest payable monthly in arrears in cash commencing on October 1, 2022. Further the Company issued a total of 6,714,547 shares of its Common Stock at $8.05 per sharecommon stock to 173 purchasers.
The salesthe Noteholders in conjunction with the terms of these shares may not have compliedthe agreements.
All of the above listed issuances were issued in all material respects
with all applicable state and federal securities laws and the exemptions
availablereliance upon an exemption provided by Regulation S and/or Section 4(2) promulgated under such laws. See "Business -- Securities Law Issues."
(c) Between January 1994 and July 1994, the Company sold an aggregate
of $3,610,000 of its 10% Subordinated Notes with Warrants (the "1994
Subordinated Notes") in private transactions with 28 purchasers, each of
whom the Company believes was on "accredited investor" within the meaning
of Rule 501 of the Securities Act.
16. Exhibits.
The sale of the 1994 Subordinated Notes
was exempt fromfollowing exhibits are included with this registration pursuant to Section 4(2) of the Securities
Act.
(d) Between November 1994 and July 1995, the Company sold an aggregate
of $5,000,000 of its 8% Convertible Secured Notes in private transactions
with 22 purchasers, each of whom the Company believes was an "accredited
investor" within the meaning of Rule 501 of the Securities Act. The sale of
the 8% Notes was exempt from registration pursuant to Section 4(2) of the
Securities Act.
(e) Between January 1995 and March 1995, the Company sold $3,860,000
of its 10% Subordinated Notes with Warrants (the "1995 Subordinated Notes")
in private transactions with 27 purchasers, each of whom the Company
believes was an "accredited investor" within the meaning of Rule 501 of the
Securities Act. The sale of the 1995 Subordinated Notes was exempt from
registration pursuant to Section 4(2) of the Securities Act.
(f) Between October 1995 and November 1995, the holders of the
Company's 8% Convertible Secured Notes converted an aggregate of $5,000,000
principal amount of such Notes into 2,164,402 shares of the Company's
Common Stock. The issuance of the Common Stock in the conversion was exempt
from registration pursuant to Section 4(2) of the Securities Act.
(g) Between January 1994 and March 1996, certain holders of the 1994
and 1995 Subordinated Notes exercised warrants to purchase an aggregate of
293,131 shares of the Company's Common Stock for an aggregate purchase
price of $1,003,080. The issuance of the Common Stock upon the exercise of
the warrants was exempt from registration pursuant to Section 4(2) of the
Securities Act.
(h) Between October 1995 and March 1996, $2,310,000 in principal
amount of the Company's 1995 Subordinated Notes were exchanged with the
Company for 440,010 shares of the Company's Common Stock. The issuance of
the Common Stock in the exchange was exempt from registration pursuant to
Section 3(a)(9) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
statement, or if previously filed, are incorporated herein by reference:
Exhibit | ||
Number | Description | |
Form of | ||
Form of |
Form of Warrant issued in connection with | ||
Form of Note Purchase Agreement and | ||
Form of Warrant issued in connection with Note Purchase Agreement March 2022 | ||
Promissory Note between the Company and Everest Credit LP dated June 6, 2022 | ||
| Form of Warrant issued to Warrant issued to Maoz Everest Fund Management Limited | ||
23.2 | Consent of | |
* To bePreviously filed by amendment.
(1) Filed as an Exhibit to the Company'spart of S-1 Registration Statement on Form SB-2
(Commission File No. 33-88926-LA) and incorporated herein by reference.
(2)February 11, 2022.
^ Filed as an Exhibit to the Company's Annual Report on Form 10-KSB
(Commission File No. 0-27024) and incorporated herein by reference.
(b) Financial Statement Schedules
ITEMherewith
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Item 17. UNDERTAKINGS.
(a) Undertakings.
The undersigned registrantRegistrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(b)undertakes:
A. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant haswe have 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
registrantus of expenses incurred or paid by aour 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, hereunder, the registrantwe will, unless in the opinion of itsour 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.
B. 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:
a. to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
b. 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) (Section 230.424(b) of Regulation S-K) 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
c. 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.
(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 the securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from the 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) If the registrant is relying on Rule 430B (Sec.230.430B of this chapter):
(a) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (Sec.230.424(b)(3) of this chapter) 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 424(b)(2), (b)(5), or (b)(7) (Sec.230.424(b)(2), (b)(5), or (b)(7) of this chapter) 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) (Sec.230.415(a)(1)(i), (vii), or (x) of this chapter) 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; or
(ii) If the registrant is subject to Rule 430C (Sec.230.430C of this chapter), 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 (Sec.230.430A of this chapter), 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 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;
(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:
(i) 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:
(a) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (Sec.230.424 of this chapter);
(b) 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;
(c) 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
(d) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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(6) The undersigned registrant hereby undertakes that:
(1)
(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.
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74
(2)
(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.
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75
The Registrant hereby additionally undertakes that:
(a) For purposes of determining any liability under the Securities Act, 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.
(b) For the purpose of determining any liability under the Securities Act 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. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have 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 us of expenses incurred or paid by our director, officer or controlling person 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, we will, unless in the opinion of our 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.
B. 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:
a. to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
b. 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) (Section 230.424(b) of Regulation S-K) 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
c. 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.
(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 the securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from the 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) If the registrant is relying on Rule 430B (Sec.230.430B of this chapter):
(a) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (Sec.230.424(b)(3) of this chapter) 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 424(b)(2), (b)(5), or (b)(7) (Sec.230.424(b)(2), (b)(5), or (b)(7) of this chapter) 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) (Sec.230.415(a)(1)(i), (vii), or (x) of this chapter) 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; or
(ii) If the registrant is subject to Rule 430C (Sec.230.430C of this chapter), 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 (Sec.230.430A of this chapter), 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 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;
(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:
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(i) 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:
(a) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (Sec.230.424 of this chapter);
(b) 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;
(c) 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
(d) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6) The undersigned registrant hereby undertakes that:
(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.
(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.
The Registrant hereby additionally undertakes that:
(a) For purposes of determining any liability under the Securities Act, 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.
(b) For the purpose of determining any liability under the Securities Act 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statementregistration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Citycity of Portland, State of
Oregon,Sheridan, Wyoming on the 4th day of June, 1996.
METRO ONE TELECOMMUNICATIONS, INC.
By: /s/ TIMOTHY A. TIMMINS
------------------------------------
Timothy A. Timmins
President and Chief Executive
Officer
September 7, 2022.
Metro One Telecommunications, Inc. | |||
By: | /s/ Elchanan Maoz | ||
Elchanan Maoz, CEO | |||
POWER OF ATTORNEY
KNOW ALL MENPERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy A. Timmins and Stebbins B. Chandor, Jr.
and each of them singly,Elchanan Maoz, as his true and lawful attorneys-in-factattorney-in-fact and agentsagent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement filed
herewith and any or all amendments (including post-effective amendments) to saidthis Registration Statement (including
post-effective amendments),on Form S-1 of Metro One Telecommunications, Inc. and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, grantinggrant unto said attorneys-in-factattorney-in-fact and agents andagent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fullfully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-factattorney-in-fact and agentsagent, or any of them, or his substitute,her substitutes, may lawfully do or cause to be done by virtue hereof.
Witness our hands on the date set forth below.
Pursuant to
In accordance with the requirements of the Securities Act of 1933, this Registration Statement has been dulywas signed by the following persons in the capacities indicatedand on June 4, 1996.
the dates stated.
/s/ Elchanan Maoz | Chief Executive Officer, | September 7, 2022 | ||
Elchanan Maoz | ||||
/s/ Jonah Meer | Secretary, Director | September 7, 2022 | ||
Jonah Meer | ||||
/s/ James Alexander Brodie | Treasurer, Director, Principal Accounting Officer | September 7, 2022 | ||
James Alexander Brodie |
Pursuant to the use inrequirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement of Metro One
Telecommunications, Inc.registration statement to be signed on Form S-1 of our report dated March 18, 1996,
appearingits behalf by the undersigned, thereunto duly authorized, in the Prospectus, which iscity of Sheridan, Wyoming on September 7, 2022.
By: | /s/ Elchanan Maoz | |
Elchanan Maoz | ||
Attorney-in-Fact |
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EXHIBIT INDEX
The following exhibits are included with this registration statement, or if previously filed, are incorporated herein by reference:
*Previously filed as part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/
- ---------------------
DELOITTE & TOUCHE LLP
Portland, Oregon
June 4, 1996
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78
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of thisS-1 Registration Statement on Form S-1 of our report dated February 6, 1995,
relating to the financial statements of Metro One Telecommunications, Inc.
(formerly Metro One Direct Information Services, Inc.), which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/
- --------------------
PRICE WATERHOUSE LLP
Portland, Oregon
June 3, 1996
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METRO ONE TELECOMMUNICATIONS, INC.
INDEX TO EXHIBITS
EXHIBIT
NUMBER IDENTIFICATION OF EXHIBITS PAGE NO.
- ------ -------------------------- --------
1.0 -- Form of Underwriting Agreement*...........................................
3.1 -- Second Restated Articles of Incorporation of Metro One Telecommunications,
Inc.(2)...................................................................
+3.2 -- Amended and Restated Bylaws of Metro One Telecommunications, Inc..........
4.0 -- Form of Common Stock Certificate of Metro One Telecommunications, Inc.*...
5.0 -- Opinion of Ater Wynne Hewitt Dodson & Skerritt, LLP as to the legality of
the securities being registered*..........................................
10.1 -- Form of Enhanced Directory Assistance Agreement(1)........................
10.2 -- 1994 Stock Incentive Plan(2)..............................................
10.3 -- Consulting Agreement with G. Raymond Doucet(1)............................
10.4 -- Loan and Security Agreement between Silicon Valley Bank and the Company
dated March 15, 1996(2)...................................................
10.5 -- 1995 Employment Agreement with Timothy A. Timmins(2)......................
10.6 -- 1995 Employment Agreement with Patrick M. Cox(2)..........................
10.7 -- Lease Agreement between and among Petula Associates, Ltd., Koll Creekside
Associates and the Company(1).............................................
23.1 -- Consent of Ater Wynne Hewitt Dodson & Skerritt, LLP (included in legal
opinion filed as Exhibit 5.0)*............................................
23.2 -- Consent of Deloitte & Touche LLP (See page II-7)..........................
23.3 -- Consent of Price Waterhouse LLP (See page II-8)...........................
24.0 -- Powers of Attorney (included in signature page in Part II of the
Registration Statement)...................................................
- ---------------
* To be filed by amendment.
+11, 2022.
^ Filed herewith.
(1) Filed as an Exhibit to the Company's Registration Statement on Form SB-2
(Commission File No. 33-88926-LA) and incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-KSB
(Commission File No. 0-27024) and incorporated herein by reference.