WORLD
HEALTH ENERGY HOLDINGS, INC .
CONDENSED
CONSOLIDATED BALANCE SHEETS
(U.S.
dollars except share and per share data)
The
accompanying notes are an integral part of the condensed consolidated financial statements.
WORLD
HEALTH ENERGY HOLDINGS, INC .
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(U.S.
dollars except share and per share data)
The
accompanying notes are an integral part of the condensed consolidated financial statements.
WORLD
HEALTH ENERGY HOLDINGS, INC .
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(U.S.
dollars, except share and per share data)
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
Preferred
Stock, $0.0007, Par Value | | |
Preferred
Stock B, $0.0007, Par Value | | |
Common
Stock,
$0.0007, Par Value | | |
Additional
paid-in capital | | |
Foreign
currency translation adjustments | | |
Accumulated
deficit | | |
Total
Company’s
stockholders’
equity | |
| | |
Number
of Shares | | |
Amount | | |
Number
of Shares | | |
Amount | | |
Number
of Shares | | |
Amount | | |
| | |
| | |
| | |
| |
| BALANCE
AT JANUARY 1, 2021 | |
| 5,000,000 | | |
| 3,500 | | |
| 3,870,000 | | |
| 2,709 | | |
| 89,789,407,996 | | |
| 62,852,585 | | |
| (63,339,224 | ) | |
| (5,495 | ) | |
| (1,496,637 | ) | |
| (1,982,562 | ) |
| CHANGES
DURING THE PERIOD OF THREE MONTHS ENDED MARCH 31, 2021: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Comprehensive
loss for three month ended March 31, 2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (266,091 | ) | |
| (266,091 | ) |
| BALANCE
AT MARCH 31, 2021 (Unaudited) | |
| 5,000,000 | | |
| 3,500 | | |
| 3,870,000 | | |
| 2,709 | | |
| 89,789,407,996 | | |
| 62,852,585 | | |
| (63,339,224 | ) | |
| (5,495 | ) | |
| (1,762,728 | ) | |
| (2,248,653 | ) |
The
accompanying notes are an integral part of the condensed consolidated financial statements.
WORLD
HEALTH ENERGY HOLDINGS, INC .
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S.
dollars except)
The
accompanying notes are an integral part of the condensed consolidated financial statement
WORLD
HEALTH ENERGY HOLDINGS, INC .
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
1 – GENERAL
World
Health Energy Holdings, Inc., (the “Company” or “WHEN”), was formed on May 21, 1986, under the laws of the State
of Delaware. The Company has invested in and abandoned a variety of software programs that it strove to commercialize.
UCG,
INC. (the “UCG”) was incorporated on September 13, 2017, under the laws of the State of Florida. The Company wholly-owns
the issued and outstanding shares of RNA Ltd. (Hereinafter: “RNA”).
RNA
is primarily a research and development company that has been performing software design work for UCG in the field of cybersecurity under
the terms of development agreement between UCG and RNA. UCG is primarily engaged in the marketing and distribution of cybersecurity related
products.
In
anticipation of the transaction contemplated under the Merger Agreement, SG 77 Inc. a Delaware Corporation and a wholly-owned subsidiary
of UCG (“SG”), was incorporated on April 16, 2020 and all of the cybersecurity rights and interests held by UCG, including
the share ownership of RNA, were assigned to SG.
CrossMobile
investment agreement
On
March 22, 2022 the Company, CrossMobile S.P.Zoo, a company formed under the laws of Poland (“CrossMobile”) and the shareholders
of CrossMobile (of which Mr. Giora Rosenzweig, holds 40.67% and Mr. George Baumeohl holds 3.33%, of the issued preferred share capital
of CrossMobile), entered into an Investment Agreement (the “Agreement”) pursuant to which the Company is to purchase 26%
of the outstanding common share capital of CrossMobile on a fully diluted basis, in consideration of the issuance by the Company to CrossMobile
of 10,000,000,000 restricted shares of Company common stock (the “Initial Investment”). The acquisition is subject to the
registration with the Polish Companies Registrar of the shares issuable to the Company in respect of the Initial Investment, as required
under local law. Upon the registration of the Company shareholdings in CrossMobnile, the closing of the Initial Investment will be deemed
to have occurred and the 10,000,000,000 Company shares of common stock will be issued to CrossMobile.
CrossMobile
is a licensed mobile virtual network operator (“MVNO”) in Poland, providing the necessary licenses and key infrastructure
in the EU. With its involvement in CrossMobile, the Company expects to provide advanced cybersecurity solutions and other next-generation
value-added services to CrossMobile’s future product offerings.
In
addition, for 18 months following the date of the Agreement, the Company has the option to purchase additional shares of CrossMobile,
such that following such additional purchase, the Company shall hold approximately 51% of CrossMobile’s outstanding share capital
on a fully diluted basis. In the event the Company shall choose to exercise the option, the Company shall issue such number of restricted
shares of common stock of the Company calculated based on pre-money valuation of CrossMobile as determined by an independent appraiser
agreed between the Company and CrossMobile.
Under
the Agreement, upon the closing of the Initial Investment, Giora Rosenzweig, is to be appointed to the CrossMobile board of directors.
The Agreement provides that either party may terminate the Agreement and the transactions is the Initial Investment has not closed by
September 30, 2022.
The
preferred share capital of CrossMobile provides certain privileges, including the right to participate in CrossMobile shareholder meetings
at a rate of two votes for each preferred share and preference as to distribution of dividends at a rate equal to twice the dividends
distributed to the holders of the common shares in CrossMobile.
WORLD
HEALTH ENERGY HOLDINGS, INC .
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
1 – GENERAL (continue)
| B. | Going
concern uncertainty |
Since
inception, the Group has devoted substantially all its efforts to research and development. The Group is still in its development stage
and the extent of the Group’s future operating losses and the timing of becoming profitable, if ever, are uncertain. As of March
31, 2022, the Group had $385,957 of cash and cash equivalents, accumulated deficit of $7,730,246, working capital of $793,270 and net
losses of $1,636,796 during the three months ended March 31, 2022.
The
Group will need to secure additional capital in the future in order to meet its anticipated liquidity needs primarily through the sale
of additional Common Stock or other equity securities and/or debt financing. Funds from these sources may not be available to the Group
on acceptable terms, if at all, and the Group cannot give assurance that it will be successful in securing such additional capital (see
Note 3 in respect to subscription agreements signed during 2022).
These
conditions raise substantial doubt about the Company’s ability to continue to operate as a “going concern.” The Company’s
ability to continue operating as a going concern is dependent on several factors, among them is the ability to raise sufficient additional
funding.
The
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The
Group face a number of risks, including uncertainties regarding finalization of the development process, demand and market acceptance
of the Group’s products, the effects of technological changes, competition and the development of products by competitors. Additionally,
other risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Group’s
future results. In addition, the Group expects to continue incurring significant operating costs and losses in connection with the development
of its products and increased marketing efforts. As mentioned above, the Group has not yet generated significant revenues from its operations
to fund its activities, and therefore the continuance of its activities as a going concern depends on the receipt of additional funding
from its current stockholders and investors or from third parties.
The
COVID-19 pandemic continues to create business and economic uncertainty and volatility in the global markets. Many countries around the
world are experiencing further outbreaks of the pandemic, following which governments are once again imposing various restrictions. At
the same time, there is a recovery trend in the volume of economic activity around the world that leads on one hand, to significant demand
for certain products and services and on the other hand, disruptions to worldwide supply chain routes and some raw materials. The Group
continues to take measures to ensure the health and safety of its employees, suppliers, other business partners and the communities in
which it operates in order to ensure, among others, the operation level, the proper functioning of its facilities and to minimize the
pandemic’s potential impact on its business. Manufacturing continues at the Group’s sites without interruptions. However,
there is still a difficulty in assessing the future impacts of the pandemic on the Group’s operations, inter alia, in light of
the uncertainty of its duration, the extent of its intensity and effects on global supply chains and global markets, and additional countermeasures
that may be taken by governments and central banks.
WORLD
HEALTH ENERGY HOLDINGS, INC .
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Unaudited
Interim Financial Statements
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiary, prepared in
accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions
to Form 10-Q. In the opinion of management, the financial statements presented herein have not been audited by an independent registered
public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of the financial condition, results of operations and cash flows for the three-months ended
March 31, 2022. However, these results are not necessarily indicative of results for any other interim period or for the year ended December
31, 2022. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions
for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets,
liabilities, revenues and expenses. Actual amounts could differ from these estimates.
Certain
information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles
have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). These financial statements
should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on published
on the OTCIQ Alternative Reporting System, for the year ended December 31, 2022.
Principles
of Consolidation
The
consolidated financial statements are prepared in accordance with US GAAP. The consolidated financial statements of the Company include
the Company and its wholly-owned and majority-owned subsidiaries. All inter-company balances and transactions have been eliminated.
Use
of Estimates
The
preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain
revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results
could differ from those estimates. As applicable to these financial statements, the most significant estimates and assumptions relate
to the going concern assumptions.
WORLD
HEALTH ENERGY HOLDINGS, INC .
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continue)
Recent
Accounting Pronouncements
In
August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-06, “Debt –
Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic
815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The
guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to
separately present certain conversion features in equity. In addition, the amendments in the ASU 2020-06 also simplify the guidance in
ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied
in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives
accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use
of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share
settlement for instruments that may be settled in cash or other assets. The amendments in ASU 2020-06 are effective for the Company for
fiscal years beginning after December 15, 2021. Early adoption is permitted. The guidance must be adopted as of the beginning of the
fiscal year of adoption. The Company is currently evaluating the impact of this new guidance, but does not expect it to have a material
impact on its financial statements.
NOTE
3 – COMMON STOCK
Between
August and October 2021, the Company and certain investors entered into subscription agreements for a private placement of units of
the Company securities (the 2021 Private Placements”) where each unit (a “Unit” and collectively the
“Units”) is comprised of (i) one (1) share of the Company’s Common Stock and (ii) one common stock purchase
warrant to purchase an additional share of the Company’s Common Stock through the second anniversary thereof at a per share
exercise price of $0.0002.
The price per unit is $0.0001.
Subscription agreements for an aggregate of $900,000
provide that the investors are to remit the subscription proceeds at the time of investment and in three month intervals thereafter,
in each case in amounts equal to 20% of their committed amounts. During the three months ended March 31, 2022, the Company received
a total of $74,000
on account of these subscription and in consideration thereof issued 340,000,000
shares of Common Stock and warrants for an additional 340,000,000
shares of Common Stock and the balance is presented as proceeds on account of shares.
During
the three months ended March 31, 2022, the Company and certain investors entered into subscription agreements for a private placement
of units of the Company securities in an aggregated amount of $500,000, where each unit (a “Unit” and collectively the “Units”)
is comprised of (i) one (1) share of the Company’s Common Stock and (ii) one common stock purchase warrant to purchase an additional
share of the Company’s Common Stock through the second anniversary thereof at a per share exercise price of $0.0002. The price
per unit is $0.0001. As part of the subscription agreements, CrossMobile undertook to issue the investors up to 5% of the issued and
outstanding share capital of CrossMobile. During the three months ended March 31, 2022, the Company received a total of $500,000 on account
of these subscription and in consideration thereof issued 2,500,000,000 shares of Common Stock and warrants for an additional 2,500,000,000
shares of Common Stock and the balance is presented as proceeds on account of shares.
WORLD
HEALTH ENERGY HOLDINGS, INC .
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
4 - STOCK OPTIONS
On
June 21, 2021, the board of directors of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”) pursuant to
which the Company may issue awards, from time to time, consisting of non-qualified stock options, restricted stock grants and restricted
stock units. In addition, stock option awards that qualify under Section 102 of the Israeli Tax Ordinance (New Version) 1961 (the “ITO”),
and/or under Section 3(i) of the ITO, may be granted.
Mr.
Tromer, the CEO of CrossMobile, was appointed to the Company’s advisory board in February 2022. In connection with his service
on the advisory board, on February 14, 2022, he was awarded options under the Company’s 2021 Equity Incentive Plan to purchase
6,000,000,000 shares of the Company’s common stock, at a per share exercise price of $0.0001 per share, which the exercise price
for all grants to date to member of the Company’s advisory board. Mr. Tromer’s options vest as follows: 25% (i.e., 1,500,000,000)
option shares vest on the first anniversary of the appointment to the advisory board and the balance in increments of 400,000,000 shares
on each subsequent three (3) month anniversary.
On
January 1, 2022, the Company granted options to purchase 400,000,000 shares of the Company’s Common Stock to a member of its advisory
board, under the Company’s 2021 Plan. Options to purchase 100,000,000 shares of Common Stock shall vest on the first anniversary
of the agreement and the remaining options shall vest quarterly, over additional 3 years
The
fair value of the options was determined using the Black-Scholes pricing model, assuming a risk free rate between 1.12% - 1.85%, a volatility
factor between 391% - 397%, dividend yields of 0% and an expected life of 4 years and was estimated at $2,600,000.
The
following table presents the Company’s stock option activity during the three months ended March 31, 2022:
SCHEDULE
OF STOCK OPTION ACTIVITY
| | |
Number of Options | | |
Weighted Average Exercise Price | |
| Outstanding at December 31,2021 | |
| 6,800,000,000 | | |
| 0.001 | |
| Granted | |
| 6,400,000,000 | | |
| 0.001 | |
| Exercised | |
| - | | |
| - | |
| Forfeited or expired | |
| - | | |
| - | |
| Outstanding at March 31,2022 | |
| 13,200,000,000 | | |
| 0.001 | |
| Number of options exercisable at March 31, 2022 | |
| - | | |
| - | |
The
aggregate intrinsic value of the awards outstanding as of March 31, 2022 is zero. These amounts represent the total intrinsic value,
based on the Company’s stock price of $0.0005 as of March 31, 2022, less the weighted exercise price. This represents the potential
amount received by the option holders had all option holders exercised their options as of that date.
The
stock options outstanding as of March 31, 2022, have been separated into exercise prices, as follows:
SCHEDULE
OF STOCK OPTIONS OUTSTANDING RANGE OF EXERCISE PRICE
| Exercise price | | |
Stock options outstanding | | |
Weighted average remaining contractual
life – years | | |
Stock options vested | |
| | | |
As of March 31, 2022 | |
| | 0.001 | | |
| 13,200,000,000 | | |
| 3.55 | | |
| - | |
| | | | |
| 13,200,000,000 | | |
| 3.55 | | |
| - | |
The stock options outstanding as of December
31, 2021, have been separated into exercise prices, as follows:
| Exercise price | | |
Stock options outstanding | | |
Weighted average remaining contractual life – years | | |
Stock options vested | |
| | | |
As of December 31, 2021 | |
| | 0.001 | | |
| 6,800,000,000 | | |
| 3.49 | | |
| - | |
| | 0.001 | | |
| 6,800,000,000 | | |
| 3.49 | | |
| - | |
Compensation
expense recorded by the Company in respect of its stock-based compensation awards for the period of three months ended March 31, 2022
was $1,310,239 and are included in General and Administrative expenses in the Statements of Operations.
WORLD
HEALTH ENERGY HOLDINGS, INC .
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE
5 – RELATED PARTIES
A. Transactions
and balances with related parties
SCHEDULE
OF RELATED PARTY EXPENSES
| | |
| | | |
| | |
| | |
Three
months ended March
31 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| General
and administrative expenses: | |
| | | |
| | |
| Salaries
and fees to officers | |
| 960,772 | | |
| 39,413 | |
| (*)
of which share based compensation | |
| 919,465 | | |
| - | |
| | |
| | | |
| | |
| Research
and development expenses: | |
| | | |
| | |
| Salaries
and fees to officers | |
| 23,415 | | |
| 22,653 | |
B. Balances with related parties and
officers:
| | |
As of
March 31, | | |
As
of December 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Other
current assets | |
| 8,915 | | |
| 7,186 | |
| Other
accounts liabilities | |
| 120,000 | | |
| 120,000 | |
| Liability
for employee rights upon retirement | |
| 212,870 | | |
| 213,371 | |
| Long
term loan from related party | |
| 2,012,339 | | |
| 2,012,339 | |
NOTE 6 – SUBSEQUENT EVENTS
On May 15, 2022, the Company granted options under the 2021 Plan
(2021) to directors, employees and service providers to purchase an aggregate of 34,900,000,000 shares of Common Stock exercisable at
a per share exercise price of $0.0001. Of the options granted, 5,000,000,000 were issued to CEO. The options vest on an annual basis
with 25% of the option grant vesting on each anniversary of the option grant. Following vesting the options are exercisable through the
sixth month anniversary following the last instalment vesting date.
ITEM
2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking
Statements
The
following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Quarterly
Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the Securities
and Exchange Commission (the “SEC”) on April 14, 2022. Certain statements made in this discussion are “forward-looking
statements” within the meaning of the private securities litigation reform act of 1995,. These statements are based upon beliefs
of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s
management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak
only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,”
“forecast,” “future,” “intend,” “plan,” “predict,” “project,”
“target,” “potential,” “will,” “would,” “could,” “should,” “continue”
or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking
statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties,
assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations
and results of operations and the effects that the COVID-19 outbreak, or similar pandemics, could have on our business. Should one or
more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly
from those anticipated, believed, estimated, expected, intended, or planned.
The
full extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition
will depend on future developments that are uncertain, including as a result of new information that may emerge concerning COVID-19 and
the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers
and markets. We have made estimates of the impact of COVID-19 within our financial statements, and although there is currently no major
impact, there may be changes to those estimates in future periods. Actual results may differ from these estimates.
Although
the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the
United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our
financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments
and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments
and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of
the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial
statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion
should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.
Business
Overview
World
Health Energy Holdings, Inc. (“we” “us” “our” the “Company” or “WHEN”) WHEN
is a diversified energy, health, and cybersecurity technology company. On April 27, 2020, WHEN completed a reverse triangular merger
pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) among the Company, R2GA, Inc., a Delaware corporation
and a wholly owned subsidiary of the Company (“Sub”), UCG, Inc., a Florida corporation (“Seller”), SG 77 Inc.,
a Delaware corporation and wholly-owned subsidiary of Seller (“SG”), and RNA Ltd., an Israeli company and a wholly owned
subsidiary of SG (“RNA”). Under the terms of the Merger Agreement, R2GA merged with and into SG, with SG remaining as the
surviving corporation and a wholly-owned subsidiary of the Company (the “Merger”). The Merger became effective as of April
29, 2020. Each of Gaya Rozensweig and George Baumeohl, directors of the Company, are also the sole shareholders and directors of UCG.
RNA
is primarily a research and development company that has been performing software design services in the field of cybersecurity. SG is
primarily engaged in the marketing and distribution of cybersecurity related products. In anticipation of the transaction contemplated
under the Merger Agreement, SG was formed and all of the cybersecurity rights and interests held by UCG, including the share ownership
of RNA, were assigned to SG.
Following
the closing, each of SG 77 and RNA became wholly-owned subsidiaries of the Company.
Recent
Developments
(i) On
March 22, 2022 the Company, CrossMobile Sp zoo, a company formed under the laws of Poland (“CrossMobile”) and the
shareholders of CrossMobile (of which our CEO, Giora Rosenzweig, holds 40.67% and George Baumeohl, a director, holds 3.33%, of the
issued preferred share capital of CrossMobile), entered into an Investment Agreement (the “Agreement”) pursuant to which
the Company is to purchase 26% of the outstanding common share capital of CrossMobile on a fully diluted basis, in consideration of
the issuance by the Company to CrossMobile of 10,000,000,000 restricted shares of Company common stock (the “Initial
Investment”). The acquisition is subject to the registration with the Polish Companies Registrar of the shares issuable to the
Company in respect of the Initial Investment, as required under local law. Upon the registration of the Company shareholdings in
CrossMobnile, the closing of the Initial Investment will be deemed to have occurred and the 10,000,000,000 Company shares of common
stock will be issued to CrossMobile. In addition, for 18 months following the date of the Agreement, the Company has the option to
purchase additional shares of CrossMobile, such that following such additional purchase, the Company shall hold approximately 51% of
CrossMobile’s outstanding share capital on a fully diluted basis. In the event the Company shall choose to exercise the
option, the Company shall issue such number of restricted shares of common stock of the Company calculated based on pre-money
valuation of CrossMobile as determined by an independent appraiser agreed between the Company and CrossMobile.
Under
the Agreement, upon the closing of the Initial Investment, Giora Rosenzweig, is to be appointed to the CrossMobile board of directors.
The Agreement provides that either party may terminate the Agreement and the transactions is the Initial Investment has not closed by
September 30, 2022.
The
preferred share capital of CrossMobile provides certain privileges, including the right to participate in CrossMobile shareholder meetings
at a rate of two votes for each preferred share and preference as to distribution of dividends at a rate equal to twice the dividends
distributed to the holders of the common shares in CrossMobile.
We
believe that the acquisition of CrossMobile provides an opportunity in our evolution and provides us with a strong foothold in the European
market. CrossMobile is part of a limited group of licensed operators in the EU. CrossMobile is planning to roll-out a comprehensive suite
of value-added services for B2B and B2C customers in the telecom industry.
With
our involvement in CrossMobile, we expect to provide advanced cybersecurity solutions and other next-generation value-added services
to CrossMobile’s future product offerings as well the access to the EU market for our CyberSecurity products.
Key
Financial Terms and Metrics
The
following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial
statements.
Revenues
We currently
generate revenues primarily from software license fees.
Research
and Development Expenses
The
process of researching and developing our product candidates is lengthy, unpredictable, and subject to many risks. We expect to continue
incurring substantial expenses through 2023 as we continue to develop our product offerings and adapt them to our new MVNO business.
We are unable, with any certainty, to estimate either the costs or the timelines in which those expenses will be incurred..
Our
research and development costs include costs are comprised of:
●
internal recurring costs, such as personnel-related costs (salaries, employee benefits, equity compensation and other costs), materials
and supplies, facilities and maintenance costs attributable to research and development functions; and
●
fees paid to external parties who provide us with contract services, such as preclinical testing, manufacturing and related testing and
clinical trial activities.
Marketing
Marketing
expenses consist primarily of salaries, employee benefits, equity compensation, and other personnel-related costs associated with executive
and other support staff. Other significant marketing expenses include the costs associated with professional fees to develop our marketing
strategy.
General
and Administrative Expenses
General
and administrative expenses consist primarily of salaries, employee benefits, equity compensation, and other personnel-related costs
associated with executive, administrative and other support staff. Other significant general and administrative expenses include the
costs associated with professional fees for accounting, auditing, insurance costs, consulting and legal services, along with facility
and maintenance costs attributable to general and administrative functions.
Financial
Expenses
Financial
expenses consist primarily impact of exchange rate derived from re-measurement of monetary balance sheet items denominated in non-dollar
currencies. Other financial expenses include bank’s fees and interest on long term loans.
Comparison
of the Three Months Ended March 31, 2022 to the Three Months Ended March 31, 2021
The
following table presents our results of operations for the three months ended March 31, 2022 and 2021
| | |
Three Months Ended | |
| | |
March 31 | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Revenues | |
| 32,542 | | |
| 32,649 | |
| Operating Expenses | |
| - | | |
| - | |
| Research and development expenses | |
| (123,506 | ) | |
| (172,771 | ) |
| General and administrative expenses | |
| (1,549,128 | ) | |
| (124,485 | ) |
| Operating loss | |
| (1,640,092 | ) | |
| (264,607 | ) |
| Financing income (expenses), net | |
| 3,296 | | |
| (1,484 | ) |
| Net loss | |
| (1,636,796 | ) | |
| (266,091 | ) |
Revenues.
Revenues for the three months ended March 31, 2022 and 2021 were $32,542 and $32,649, respectively. Revenues were
comprised primarily of software license fees.
Research
and Development. Research and development expenses consist of salaries and related expenses, consulting fees, service providers’
costs, related materials and overhead expenses. Research and development expenses decreased to
$123,506 in the three months ended March 31, 2022 from $172,771 during the corresponding period in 2021. The decrease resulted
primarily from salaries and related expenses.
General
and Administrative Expenses. General and administrative expenses consist primarily of share
base compensation expenses, salaries and related expenses and other non-personnel related. General and administrative expenses increased
to $1,549,128 for the three months ended March 31, 2022 from $124,485 during the corresponding period in 2021. The increase
is primarily attributable to the increase in share base compensation expenses.
Financing
Expenses, Net. Financing income, net for the three months ended March 31, 2022 amounted to $3,296. Financing expenses,
net for the three months ended March 31, 2021 amounted to $1,484. The increase is mainly due to currency exchange differences
between the Dollar and the New Israeli Shekel.
Net
Loss. Net loss for the three months ended March 31, 2022 was $1,636,796 and is primarily
attributable to research and development and general and administrative expenses.
Financial
Condition, Liquidity and Capital Resources
Liquidity
is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. At March 31 and 2022 and
2021, we had current assets of $1,551,868 and $202,433 respectively, and total assets of $1,815,794 and $483,459 respectively. The increase
in total assets is due to an increase in Prepaid share based payment to service providers balance offset by decrease in right of use asset
arising from operating lease. We had current liabilities of $758,598 as compared to $592,050 as of March 31, 2022 and 2021, respectively
and total liabilities of $3,087,605 as compared to $2,440,712 as of March 31, 2022 and 2021, respectively. The increase is mainly attributed
to the increase in the balance of employees and related institutions, accrued expenses, and increase in loans received from a related
party offset by decrease in right of use liabilities arising from operating lease.
At
March 31, 2022, we had a cash balance of $385,957 compared to the cash balance of $46,022 as of December 31, 2021.
We have no cash equivalents.
At
March 31, 2022, we had a working capital of $793,270 as compared with a working capital of $547,972 at December 31, 2021.
During
March 2022, the Company and certain investors entered into subscription agreements for a private placement of units of the Company securities
in an aggregated amount of $500,000, where each
unit (a “Unit” and collectively the “Units”) is comprised of (i) one (1) share of the Company’s Common
Stock and (ii) one common stock purchase warrant to purchase an additional share of the Company’s Common Stock through the second
anniversary thereof at a per share exercise price of $0.0002. The price per unit is $0.0001. In consideration thereof the holders are
entitled to 5,000,000,000 shares of Common Stock and warrants for an additional 5,000,000,000 shares of Common Stock, of which to date
2,500,000,000 shares of Common Stock and warrants for an additional 2,500,000,000 shares of Common Stock have been issued.
We
expect that our existing cash and cash equivalents as well as expected revenues will enable us to fund our operations and capital expenditure
requirements through year end 2022. Our requirements for additional capital during this period will depend on many factors.
We
may seek to raise any necessary additional capital through a combination of private or public equity offerings, debt financings, collaborations,
strategic alliances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional
capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third
parties, we may have to relinquish valuable rights, future revenue streams, or product candidates or to grant licenses on terms that
may not be favorable to us. If we raise additional capital through private or public equity offerings, the ownership interest of our
existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely
affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting
or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. We have a stockholders’
deficit of $1,271,811 and a working capital of $793,270 at March 31, 2022 as well as negative operating cash flows.
These conditions raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not
include any adjustments that might be necessary if we are unable to continue as a going concern.
Off-Balance
Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.