METRO ONE TELECOMMUNICATIONS INC - Quarter Report: 2023 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2023

For the transition period from __________ to __________

(Commission File Number) 000-27024

(307) 683-0855

(Registrant’s telephone number, including area code) 

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 20, 2023, there were 273,718,580 shares of the registrant’s common stock issued and outstanding.

Metro One Telecommunications Inc.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Index to Unaudited Condensed Consolidated Financial Statements

Metro One Telecommunications, Inc.

Condensed Consolidated Balance Sheets

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

Metro One Telecommunications, Inc.

Condensed Consolidated Statements of Operations

and Other Comprehensive Income

(Unaudited)

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

Metro One Telecommunications, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

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

Metro One Telecommunications, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Three Months Ended March 31, 2023 and 2022

NOTE 1 - NATURE OF OPERATIONS

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. 

During the quarter ended June 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, the “Recapitalization”.

Royal App, Ltd., is the developer of Shelfy, a white label, headless mobile enterprise 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. Concurrent with the acquisition of the Shelfy software assets, management determined the technological feasibility of proposed enterprise software product modifications, including functions, features, and technical performance requirements to relaunch the software as a SaaS product offering, initially integrated on key reseller platforms, with the intent of repositioning the software with an entirely new and much larger market base. An easy to use, fully customizable mobile commerce app for download by consumers across all industry segments for a base monthly subscription fee, and readily available add on features for additional monthly fees based on individual consumer selections.

On February 9, 2022, the Company filed a Registration Statement on Form S-1 with the Securities and Exchange Commission (“SEC”) 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. The Company received notice of effect from the SEC on December 1, 2022.  Further the Company registered a total of 200,031,733 shares of common stock and 21,998,323 shares of common stock underlying warrant exercises for certain selling stockholders. Subsequent to December 31, 2022 the Company received its first subscription under the offering for $250,000.

During the year ended December 31, 2022 the Company launched its upgraded SaaS Shelfy.io Mobile App Builder. The Shelfy mobile app, which launched on August 1, 2022, is open to all merchants on the Shopify marketplace and can be accessed at https://apps.shopify.com/shelfy. The Shelfy mobile app also launched on WooCommerce on September 1, 2022 and is available to all WooCommerce developers, online stores, brands, and retailers at https://he.wordpress.org/plugins/shelfy-mobile-commerce-platform/.

On February 28, 2023, the holders of a majority of the outstanding shares of common stock, par value $0.0001 per share (“Common Stock”), of the Company executed a written consent in lieu of a special meeting (the “Written Consent”) approving the form of an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of Common Stock, at a ratio to be determined by the Company’s Board of Directors (the “Board”) within the range of 25-for-1 to 100-for-1 (the “Reverse Stock Split”) and to reduce the Company’s total authorized shares of Common Stock from 600,000,000 shares to 35,000,000 shares (the “Proposed Charter Amendment”). The Proposed Charter Amendment was unanimously approved by the Board on February 23, 2023, subject to approval by the stockholders, which was obtained as described above.

The Reverse Stock Split and the reduction of the Company’s total authorized number of shares of Common Stock will be effectuated within the next 12 months. The Reverse Stock Split will not become effective until it has been processed and approved by the Financial Industry Regulatory Authority (“FINRA”). In the event that FINRA does not approve the Reverse Stock Split, the Board may determine, in its sole discretion, not to effect the Reverse Stock Split nor file the Proposed Charter Amendment with the Secretary of State of the State of Delaware.  The Company’s application to FINRA is currently under review and has not yet received approval.

The effective time of the Reverse Stock Split will be the date and time the Proposed Charter Amendment is filed with the Secretary of State of the State of Delaware or such later time as is specified therein; provided, however, that in no event will the Reverse Stock Split become effective until it has been processed and approved by FINRA. The exact timing of the Reverse Stock Split will be determined by the Board at a later date based on its evaluation as to when such action will be the most advantageous to the Company and its stockholders, and the effective date will be publicly announced by the Company. The Board will also determine the exact ratio and terms of the Reverse Stock Split at a later date. Notwithstanding the foregoing, the Reverse Stock Split will be effectuated within the next 12 months; provided, however, that the Reverse Stock Split and the reduction of the Company’s total authorized number of shares of Common Stock may be delayed or abandoned without further action by the stockholders at any time prior to the effectiveness of the Proposed Charter Amendment if the Board, in its sole discretion, determines that it is in the best interests of the Company and its stockholders to delay or abandon such actions.

NOTE 2 – GOING CONCERN

The accompanying condensed, consolidated 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. The registration statement went effective on December 1, 2022. Further the Company entered into certain 15 months Term Promissory Notes and raised a total of $1,939,000 during the year ended December 31, 2022. During the three months ended March 31, 2023, the Company received its first subscription under its offering for $250,000 and obtained a short-term loan for operations of its subsidiary of ILS 250,000 (approximately US $69,000) from a local bank in Israel, such loan secured by a guarantee from our CEO.

There are no assurances the Company will succeed in implementing its plans. 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.  Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.

COVID-19 Pandemic and other factors

While it appears the COVID-19 pandemic has subsided and the global economy is focused on recovery, the impact of COVID-19 could continue to have an impact on the Company going forward. COVID-19 caused significant disruptions to the global financial markets, which may continue to impact the Company’s ability to raise additional capital and to pursue certain acquisitions. Although the COVID-19 pandemic has driven an increase in mobile commerce penetration, it is uncertain whether or the extent to which this trend will continue after the impact of the COVID-19 pandemic subsides Additional factors which may impact the Company’s ongoing operations include inflation, the addition and retention of suitable employees as a result of the ongoing recovery from the COVID-19 pandemic, the recent war in the Ukraine, climate change and others. These events may have serious adverse impact on domestic and foreign economies which may impact the Company’s operations as a result of a variety of factors including the potential for reduced consumer spending.  The Company is unable to predict the ongoing impact of these factors on the Company’s consolidated financial operations. There are no assurances that the Company will be able to meet its ongoing obligations or raise additional funds.

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. 

NOTE 3 – 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 by the Company in accordance with GAAP, and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished in the consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the SEC’s rules and regulations. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s 2022 Form 10-K as filed with the SEC on April 18, 2023 and Form 10-K/A as filed on May 2, 2023.

Basis of Consolidation

These consolidated financial statements include the accounts of the Company and its 100% controlled Israeli subsidiary, Stratford Ltd (“Stratford”) as of March 31, 2023 and 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” expenses on the Company’s consolidated statements of operations.

Translation of amounts from Israeli Shekel (ILS) into U.S. Dollar has been made at the following exchange rates for the three months ended March 31, 2023 and 2022

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:

Intangible Assets

The Company recognizes assets for customer relationships, developed technology, post-technological feasibility software development costs, patents and finite-lived trade names. 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 $3.4 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 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 the future estimated value of certain customer relationships. We initially record acquired intangible assets at their estimated fair values and we review these assets periodically for impairment.  The Company is amortizing these assets over a five-year straight-line basis, or their estimated useful life.

Software Research and Development Expenditures

Software development expenditures consist primarily of costs associated with the on-going modifications to certain 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 incurred pre-technological feasibility are expensed as incurred. Post-technological feasibility expenditures are capitalized as incurred. In the period ended December 31, 2021, the company recorded assets acquired in the cumulative amount of approximately $3.4 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 development expenditures incurred post-technological feasibility, and $28,483 in patent related expenditures.

During the year ended December 31, 2022, we capitalized an additional $1 million in ongoing development expenditures as we continued to complete the programming required for the transfer of iOS and Android operating systems to Flutter, and integrate our SaaS product with the major online retailing platforms Shopify and WooCommerce. The Company is amortizing these assets over a five-year straight-line basis.

Impairment

We account for intangible assets using the accounting guidance in ASC 350. The Company tests for impairment annually, or more frequently if events or circumstances indicate the asset might be impaired, by comparing the fair value of the assets to their carrying amount. Alternatively, the Company’s management may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative assessment. The Company presently has one reporting unit; and all intangible assets are included in this single reporting unit, therefore, all of its intangible assets are associated with the entire company. As a result, the Company presently 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. There was no impairment of assets at December 31, 2022 or 2021.

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:

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 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:

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.

Compensation expense is recognized on a graded-vesting method over the requisite service period. Forfeitures are accounted for as they occur.

For the three months ended March 31, 2023 and 2022, stock-based compensation and other equity instrument related expenses and expenditures recognized in the consolidated statements of operations is as follows:

Leases

The Company determines if a contractual arrangement represents or contains a lease at inception. Operating leases with lease terms greater than 12 months 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.

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 months ended March 31, 2023 and 2022 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 36,719,661 and 30,998,323 potentially dilutive securities outstanding at March 31, 2023 and 2022, respectively, in relation to vested and exercisable stock options and exercisable share purchase warrants.  

Recent Accounting Pronouncements

The Company has reviewed all recently issued accounting pronouncements. The pronouncements that have already been adopted, did not have a material effect on our financial condition, results of operations, cash flows or reporting thereof. Since the fiscal year end December 31, 2022, there have been no recent accounting pronouncements or changes in accounting pronouncements that have been issued but not yet adopted that are of significance, or potential significance, to the Company.

NOTE 4 – INTANGIBLE ASSETS

The following table provides additional information regarding the Company’s intangible assets:

During the quarter ended September 30, 2022 the Company completed the upgraded SaaS software application which has been launched commercially for download on each of Shopify and WooCommerce. The majority of the Company’s intangible assets relate to one asset group, our Shelfy.io Mobile App Builder SaaS software app and related trademarks and patents. Assets are amortized over a five year straight line basis from commercial launch.

Details of amortization of our intangible assets by group for the period August 1, 2022 (commercial launch) through March 31, 2023, are below:

As of March 31, 2023, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows:

Amortization for developed technology is recognized in general and administrative expense.

NOTE 5 – DEBT

Notes payable

During the three months ended March 31, 2022, the Company received a total of $400,000 in proceeds from short term promissory notes with each short term promissory 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 short term promissory 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 a 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 short term promissory 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 short term promissory 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. 

In June 2022, the Company received an additional $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.

Between June and December 31, 2022, the Company received a further $1,369,000 in cash proceeds from certain Note and Securities Purchase Agreements ( the “SPA Notes”) and rolled over $570,000 of previously incurred debt under certain short term promissory notes entered into prior to June 30, 2022, including accrued interest (the “New Notes”), with each of the SPA 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 13,714,547 shares of common stock as loan bonuses to the noteholders in conjunction with the SPA Notes and New Notes. The fair value of the loan bonus shares was $990,542, which amount was recorded as financing costs.

Concurrent with the issuance of the New Notes a total of 291,667 warrants previously issued to a company controlled by our CEO in June 2022 were cancelled. In addition, in conjunction with the New Notes and SPA Notes, a company controlled by our CEO received cash commissions of approximately $48,800 and invoiced an additional $27,349 in commission fees, which remains unpaid.

Bank loan payable

On March 15, 2023, Stratford Ltd. received a short-term (3 month) loan of approximately $69,156 (NIS250,000) from Bank Hapoalim in Israel for ongoing operations.  The loan is secured by a personal guarantee from our CEO and President.

The following table provides additional information regarding the financing costs associated with the aforementioned notes:

The following table provides additional information regarding accrued interest payable with respect to the aforementioned notes and loan, included in accounts payable:

NOTE 6 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL

The Company has authorized 600,000,000 shares of common stock, with a par value of $0.0001 per share.

During the three months ended March 31, 2023, the Company received proceeds of $250,000 from an investor in the form of a subscription under our current offering at $0.12 per unit for a total of 2,083,333 common shares and 520,822 common stock purchase warrants for exercise at $0.15 per share with an exercise term of one (1) year from issue date.

During the year ended December 31, 2022, the Company issued the following shares of common stock:

On March 31, 2023, and December 31, 2022, the Company had 273,718,580 and 271,635,247 shares of common stock issued and outstanding, respectively.

Stock Purchase Warrants

During the year ended December 31, 2022, the Company issued a total of 1,958,333 stock purchase warrants with respect to certain short term promissory notes payable 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. Concurrent with the issuance of the New Notes, a total of 291,667 warrants issued to a company controlled by our CEO in June 2022 were cancelled.

Warrant transactions are summarized as follows:

The following warrants were outstanding as at March 31, 2023:

Stock Options

The Company granted the following stock options under its 2021 Employee Stock Incentive Plan:

Additional information with respect to the stock option activity is as follows:

The following table summarizes information about stock options outstanding and exercisable at March 31, 2023:

The following table summarizes information about stock options outstanding and exercisable at March 31, 2022:

Unamortized compensation expense associated with unvested options is $557,162 and $183,380 as of March 31, 2023 and December 31, 2022, respectively. The weighted average period over which these costs are expected to be recognized is approximately 3.28 years.

NOTE 7 – COMMITMENTS

Leases

In March 2022, we leased a 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 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:

Maturities of lease liabilities are as follows:

NOTE 8 – 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.

At March 31, 2023, accounts payable and accrued liabilities included $18,478 ($0 – December 31, 2022) of management fees with respect to key management and director 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.  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.

On March 22, 2023, Eyal Pinto, resigned from his position as Chief Financial Officer and Mr. James Brodie, Treasurer and Director, was appointed to serve as interim Chief Financial Officer.

Transactions with the Company’s CEO and President

During the year ended December 31, 2022, companies controlled by our interim CEO provided loans in the amount of $170,000 for ongoing operations in conjunction with certain note payable agreements bearing interest at 10% per annum for a term of 15 months.  The Company accrued interest of $1,818 in the three months ended March 31, 2023, and paid interest of $1,818 in the year ended December 31, 2022 in respect to these loans.  A company controlled by the Company’s CEO invoiced commission fees of $76,149 during the year ended December 31, 2022, of which $27,349 remains unpaid at March 31, 2023 and is included in accounts payable and accrued liabilities. (Note 5) 

On March 15, 2023, Stratford Ltd. received a short-term (3 month) loan of approximately $69,156 (NIS250,000) from Bank Hapoalim in Israel for ongoing operations.  The loan is secured by a personal guarantee from Elchanan Maoz, our Interim CEO and President.

NOTE 9 – SUBSEQUENT EVENTS

On May 11, 2023, the Company entered into an employment agreement with Efrat Reinhardt to serve as the Chief Financial Officer of the Company and Stratford Ltd. Concurrently Mr. James Brodie resigned from his position as interim Chief Financial Officer. Pursuant to the Employment agreement Ms. Reinhardt will receive an annual base salary of 480,000 New Israeli Shekels (“NIS”), which as of the date of this filing equates to approximately US$131,380.  In accordance with terms of the employment agreement, Ms. Reinhardt was granted 2,000,000 stock options for exercise for a term of 5 years at $0.08472 per share, vesting as to 25% on the first anniversary of the Cliff Date, or May 11, 2024, with an additional 6.25% 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 or May 22, 2028.  Ms. Reinhardt is entitled to a monthly car allowance.

On May 22, 2023, the Company’s subsidiary, Stratford Ltd., received a legal warning letter from certain of its employees in Israel demanding approximately $262,667 (NIS 945,604) in unpaid wages, as well as certain required payroll remittances, interest and attorney’s fees be paid no later than 30 days from demand in order to avoid proceedings under 10(a)(1) of the Insolvency and Economic Rehabilitation Law of Israel.

On June 14, 2023 the Company retired a short term loan initially obtained on March 15, 2023 of approximately $69,156 (NIS250,000) from Bank Hapoalim in Israel for ongoing operations of subsidiary Stratford, Ltd., with proceeds from a new short term loan of the same face value. The new loan has a duration of 103 days expiring September 25, 2023 and accrues interest at a rate of 10.63% per annum.  The loan continues to be secured by a personal guarantee from Elchanan Maoz, our Interim CEO and President.

Subsequent to March 31, 2023 the Company’s CEO, Elchanan Maoz and corporations controlled by him advanced approximately $40,000 for operational expenses as they came due and was reimbursed $21,000.

The Company has evaluated events for the period from March 31, 2023, through the date of the issuance of these financial statements, June 20, 2023, and determined that there are no additional events requiring disclosure.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains predictions, estimates and other forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “intends,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on April 18, 2023 and our Form 10-K/A as filed on May 2, 2023, that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Report. You should read this Report with the understanding that our actual future results may be materially different from what we expect.

All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.

The management’s discussion and analysis of our financial condition and results of operations are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements for the three months ended March 31, 2023, and the notes thereto appearing elsewhere in this Report and the Company’s audited financial statements for the fiscal year ended December 31, 2022 included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on April 18, 2023.

General Overview

Metro One Telecommunications, Inc. (together with its subsidiary “Metro One,” the “Company,” “we,” “our” or “us”) enables retailers to grow their business, using mobile commerce to better engage their customers, both in-store and online with no coding required.

We are 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 with no coding required.

Our operating subsidiary, Stratford, Ltd, operates the Shelfy.io Mobile App Builder (“Shelfy.io” or “Shelfy”) which merges the functionality of mobile technology, artificial intelligence (“AI”), and machine learning enabling retailers to quickly and easily bring their online business to significantly:

During the year ended December 31, 2022 we completed the transformation of our acquired suite of software products to a fully modular software as a service (“SaaS”) based platform. This will enable us to scale the company significantly, onboarding multiple retailers simultaneously without any additional integration costs.

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 with no coding required. Adding mobile as an additional sales channel enables retailers to grow its customer loyalty and its revenues.

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, mobile commerce suite, where the retailer can and as their business needs develop.

Our recently launched mobile commerce apps represent over 14 months of post feasibility development including reprogramming and industry required modifications to transform our suite of Shelfy enterprise commerce software applications from IOS and Android to flutter applications, among other modifications for initial integration with WooCommerce and Shopify reseller platforms. We believe that the re-developed Shelfy software suite, now a single format mobile commerce offering available to all industry users, and fully customizable by the user, will generate increasing revenues period over period through recurring monthly subscriptions.

Historically, the Company was not generating revenue from its operations. Upon acquisition of the Shelfy intellectual property in 2021, we acquired two legacy customer accounts, using the existing Shelfy enterprise commerce software, one of which customer contracts terminated prior to close of fiscal 2022.  As of December 31, 2022 the Company had one remaining client for its legacy enterprise software and during the most recent quarter ended March 31, 2023 we have been engaging with industry partners to market and sell our mobile commerce app. To date we have only onboarded seven new customers for our redeveloped “one-stop-shop” mobile commerce application.  We expect our operational expenses to continue to exceed incoming revenues until such time as our recently launched mobile software suite obtains sufficient customer subscriptions to meet our ongoing expenses.  We expect we will be required to support the sale of our downloadable mobile commerce app with substantial marketing expenditures. We expect to continue to onboard new customers on a monthly basis through 2023 as we focus on marketing our current software offering. While we continue to develop and expand our primary business operations during 2023, our revenues are not expected to be sufficient to meet our ongoing expenses.

Recent Developments

The Company has recently entered into licensing and marketing agreements with Cardcom Ltd. and Direct Accounting Management Ltd (“Invoice4U”) based in Israel whereby Stratford has granted licenses for third parties to market and sell Shelfy to their clients consisting of thousands of customers. Under the terms of the agreements our industry partners will manage the marketing and sales activity with their customers in exchange for a commission from the total receipts that Stratford receives from such sales.

Results of Operations

Three months ended March 31, 2023, compared to the three months ended March 31, 2022

Revenue

We have generated $17,815 in revenue during the three months ended March 31, 2023 compared to $19,206 during the three months ended March 31, 2022. The slight reduction in revenue during the three months ended March 31, 2023 is predominantly related to certain service fees charged in the three months ended March 31, 2022 which did not reoccur in the current quarter ended March 31, 2023.

Cost of Revenue

Cost of revenue in the current three months ended March 31, 2023 (2022 - $0) primarily consists of salaries paid to employees, certain share-based compensation expenses and software hosting costs related to our recently launched SaaS mobile commerce software.

Operating Expenses

For the three months ended March 31, 2023 and 2022 we had the following operating expenses:

Total operating expenses for the three months ended March 31, 2023 were $1,420,072 compared to total operating expenses of $624,751 for the three months ended March 31, 2022. The increase in operating expenses during the three months ended March 31, 2023 is predominantly the result of an increase to $291,297 in depreciation and amortization expenses predominantly related to our SaaS software with an estimated useful life of 5 years, which was launched commercially in August 2022, with only $845 in depreciation related to fixed assets in the comparative three months ended March 31, 2022 and an increase to stock based compensation in the period to $360,037 for the current three months ended March 31, 2023 as compared to $241,514 in the three months ended March 31, 2022, all of such costs included as a part of general and administrative expenditures. In addition, current period expenditures on research and development of $355,887 were substantially increased compared to $0 in the three months ended March 31, 2022.  Prior to commercial launch of the SaaS mobile software offerings applicable research and development expenditures were capitalized.   The Company expended $62,678 in the current three months ended March 31, 2023 as compared to $81,430 in the three months ended March 31, 2022 on sales and marketing costs and $100,968 and $92,171 on management fees, respectively in the three months ended March 31, 2023 and 2022.  

Other Income (Expenses)

Other expenses for the three months ended March 31, 2023 and 2022 totaled $49,215 and $27,970, respectively.  Finance costs including interest expense applicable to certain loans payable totaled $49,215 in the three months ended March 31, 2023 as compared to $142,831 in the three months ended March 31, 2022, including finance costs of $140,767.  During the three months ended March 31, 2022 other expenses were offset by $114,861 as a result of an income tax refund with no comparable result in the three months ended March 31, 2023.

Net Loss

We had a net loss of $1,451,472 during the three months ended March 31, 2023, compared to a net loss of $633,515 during the three months ended March 31, 2022.

Statement of Cash Flows

Three months ended March 31, 2023 and 2022

The following table summarizes our cash flows for the comparative three-month periods presented:

Cash used in operating activities:

Net cash used in operating activities was $534,563 for the three months ended March 31, 2023 compared to net cash used in operating activities of $329,959 for the three months ended March 31, 2022. Net cash used in operating activities for the three months ended March 31, 2023 was primarily the result of the net loss of $1,451,472, offset by non-cash  expenses including stock based compensation of $360,037, depreciation and amortization of $291,297 and non-cash lease expenses of $304, as well as changes to operating assets and liabilities, including a decrease to accounts receivable of $5,248, a decrease to prepaid expenses and other assets of $24,898, and an increase to accounts payable of $235,125. Net cash provided by operating activities for the three months ended March 31, 2022 was primarily the result of the net loss of $633,515, offset by non-cash financing fees of $140,767 as a result of the issuance of warrants in relation to certain loan agreements, stock based compensation of $241,514, depreciation and amortization of $845 and non-cash lease expenses of $336, and changes to operating assets and liabilities, including an increase to accounts payable of $102,890, an decrease to accounts receivable of $2,278, and an increase to prepaid costs and other assets of $185,074.

Cash used in investing activities:

The Company purchased assets for a cash value of $8,557 and capitalized certain intangible assets of $439,132 during the three months ended March 31, 2022, with no comparable results in the three months ended March 31, 2023.   Cash used in investing activities in the three months ended March 31, 2023 was $0 as compared to $447,689 in the three months ended March 31, 2022.

Cash provided by financing activities:

Net cash provided by financing activities during the three months ended March 31, 2023 totaled $319,156 comprised of $250,000 in proceeds from a subscription under our offering on Form S-1 and proceeds from a short term bank loan of $69,156.  Net cash provided by financing activities in the three months ended March 31, 2022 includes $400,000 in proceeds from short term loans.

Liquidity and Capital Resources

As of March 31, 2023, we had cash of $11,385. We are in the early stage of development having acquired certain intellectual property assets through a bankruptcy proceeding during fiscal year 2021 that the Company has only recently begun to operate during the third quarter of fiscal year 2022. We have experienced net losses to date and have generated modest revenue from operations during the year ended December 31, 2022 and three months to March 31, 2023, which raises substantial doubt about our ability to continue as a going concern. While we have raised additional proceeds totaling $319,156 during the current three months ended March 31, 2023, including $250,000 from investors in the form of subscriptions under our current offering at $0.12 per unit for a total of 2,083,333 shares of common stock and 520,822 common stock purchase warrants for exercise at $0.15 per share, and a further $69,156 (NIS 250,000) as a result of a short term loan from a local Israeli bank for operations of our subsidiary, Stratford Ltd., however, these funds are not sufficient to meet ongoing shortfalls in our operating expenses. We will require substantial additional funds for operations in order to meet our software marketing and business expansion objectives in fiscal year 2023 and beyond. There can be no assurance that financing, whether debt or equity, will be available to us in the amount required at any particular time or for any particular period or, if available, that it can be obtained on terms favorable to us. If additional funds are raised by the issuance of equity securities, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt instruments we may be subject to certain limitations in our operations, and issuance of such instruments may have rights senior to those of the then existing stockholders.

We continue exploring sources of additional capital as we expand our revenue base. There can be no assurance the necessary financing will be available to meet our timeline. We expect to continue to onboard additional customers for our existing software suite and our new software offering that launched during fiscal year 2023, however, we do not believe revenues from operations in fiscal year 2023 will be sufficient to meet our operational overhead. We currently believe that the Company’s cash requirement during the following twelve months is approximately $5,000,000. Without additional financing, we do not believe our resources will be sufficient to meet our operating and capital needs for fiscal year 2023.

Going Concern

The accompanying condensed, consolidated 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, which was initially filed on February 9, 2022. The registration statement went effective on December 1, 2022. Further the Company entered into certain 15-month Term Promissory Notes and raised a total of $1,939,000 during the year ended December 31, 2022. During the three months ended March 31, 2023, the Company received its first subscription under its offering for $250,000 and obtained a short-term loan for operations of its subsidiary of ILS 250,000 (approximately US $69,000) from a local bank in Israel, such loan secured by a guarantee from our CEO.

There are no assurances the Company will succeed in implementing its plans. 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.  Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.

COVID-19 Pandemic and other factors

While it appears the COVID-19 pandemic has subsided and the global economy is focused on recovery, the impact of COVID-19 could continue to have an impact on the Company going forward. COVID-19 caused significant disruptions to the global financial markets, which may continue to impact the Company’s ability to raise additional capital and to pursue certain acquisitions. Although the COVID-19 pandemic has driven an increase in mobile commerce penetration, it is uncertain whether or the extent to which this trend will continue after the impact of the COVID-19 pandemic subsides Additional factors which may impact the Company’s ongoing operations include inflation, the addition and retention of suitable employees as a result of the ongoing recovery from the COVID-19 pandemic, the recent war in the Ukraine, climate change and others. These events may have serious adverse impact on domestic and foreign economies which may impact the Company’s operations as a result of a variety of factors including the potential for reduced consumer spending. The Company is unable to predict the ongoing impact of these factors on the Company’s consolidated financial operations. There are no assurances that the Company will be able to meet its ongoing obligations or raise additional funds.

Off-Balance Sheet Arrangements

None.

Critical Accounting Estimates

We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements. Our significant accounting policies are described in Note 3 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Certain accounting policies involve significant judgments and assumptions by our management that can have a material impact on the carrying value of certain assets and liabilities. We consider such accounting policies to be our critical accounting policies. The judgments and assumptions used by our management in these critical accounting policies are based on historical experience and other factors that our management believes to be reasonable under the circumstances. Because of the nature of these judgments and assumptions, actual results could differ significantly from these judgments and estimates, which could have a material impact on the carrying values of our assets and liabilities and our results of operations. Our critical accounting policies are described below.

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 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:

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.

Compensation expense is recognized on a graded-vesting method over the requisite service period. Forfeitures are accounted for as they occur. 

Intangible Assets

The Company recognizes assets for customer relationships, developed technology, post-technological feasibility software development costs, patents and finite-lived trade names. 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.

Software Research and Development Expenditures

Software development expenditures consist primarily of costs associated with the on-going modifications to certain 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 incurred pre-technological feasibility are expensed as incurred. Post-technological feasibility expenditures are capitalized as incurred. Ongoing research and development expenses, post commercial release of our software suite, are expensed as incurred and included as a part of general and administrative expenses.

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” expenses on the Company’s consolidated statements of operations.

Impairment

We account for indefinite-lived intangible assets using the accounting guidance in ASC 350-30-35. The Company tests for impairment annually, or more frequently if events or circumstances indicate the asset might be impaired, by comparing the fair value of the assets to their carrying amount. Alternatively, the Company’s management may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative assessment. The Company presently has one reporting unit; and all intangible assets are included in this single reporting unit, therefore, all of its intangible assets are associated with the entire company. As a result the Company presently 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.

Recent Accounting Pronouncements

We have reviewed all recently issued accounting pronouncements. The pronouncements that we have already adopted, did not have a material effect on our financial condition, results of operations, cash flows or reporting thereof. Since the fiscal year end December 31, 2022, there have been no recent accounting pronouncements or changes in accounting pronouncements that have been issued but not yet adopted that are of significance, or potential significance, to us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company and are not required to provide this information.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.

As of March 31, 2023, we carried out an evaluation, with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective, as of March 31, 2023.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer [and principal financial officer], we conducted an evaluation of the effectiveness, as of March 31, 2023, of our internal control over financial reporting based on the framework in 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under this framework, our management concluded that our internal control over financial reporting was not effective as of March 31, 2023 due to material weaknesses in our internal control over financial reporting described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has concluded that material weaknesses existed as of March 31, 2023 as described below:

The material weaknesses did not result in any restatements of consolidated financial statements previously reported by us, there were no changes in previously released financial results and management concluded that the consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations, and cash flows for the periods presented, in conformity with accounting principles generally accepted in the United States.

Management has, and will continue to, allocate resources as available to its remediation plan, which include (i) the establishment of additional internal procedures with respect to the documentation of budget and forecasting process with respect to material assumptions or determinations, (ii) the implementation of additional processes to bolster accuracy of underlying assumptions and (iii) the implementation of more detailed month end and quarter close procedures for installation at our operating subsidiary location to enhance procedures currently in place. Management is committed to maintaining a strong internal control environment and allocating the necessary resources to remediate the  identified material weaknesses.

Changes in Internal Control over Financial Reporting

There was no change in our system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS

Please refer to the disclosure contained in “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC on April 18, 2023. The risks described in the 2022 Annual Report on Form 10-K are not the only risks that the Company faces. Additional risks and uncertainties not currently known to the Company, or that the Company currently deems to be immaterial, also may have a material adverse impact on the Company’s business, financial condition, or results of operations.

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

There were no sales of equity securities during the period covered by this Report that were not registered under the Securities Act and/or were not previously reported in a Current Report on Form 8-K filed by the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

On May 11, 2023, the Company entered into an employment agreement with Efrat Reinhardt to serve as the Chief Financial Officer of the Company and Stratford Ltd. Concurrently Mr. James Brodie resigned from his position as interim Chief Financial Officer. Pursuant to the employment agreement, Ms. Reinhardt will receive an annual base salary of 480,000 New Israeli Shekels (“NIS”), which as of the date of this filing equates to approximately US $131,380.  In accordance with terms of the employment agreement, Ms. Reinhardt was granted 2,000,000 stock options for exercise for a term of 5 years at $0.08472 per share, vesting as to 25% on the first anniversary of the Vesting Commencement Date (the “Cliff Date”), or May 11, 2024, with an additional 6.25% 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. Ms. Reinhardt is entitled to a monthly car allowance.

On May 22, 2023, the Company’s subsidiary, Stratford Ltd., received a legal warning letter from certain of its employees in Israel demanding approximately $262,667 (NIS 945,604) in unpaid wages, as well as certain required payroll remittances, interest and attorney’s fees be paid no later than 30 days from demand in order to avoid proceedings under 10(a)(1) of the Insolvency and Economic Rehabilitation Law of Israel.

On June 14, 2023 the Company retired a short term loan initially obtained on March 15, 2023 of approximately $69,425 (NIS250,000) from Bank Hapoalim in Israel for ongoing operations of subsidiary Stratford, Ltd., with proceeds from a new short term loan of the same face value. The new loan has a duration of 103 days expiring September 25, 2023 and accrues interest at a rate of 10.63% per annum. The loan continues to be secured by a personal guarantee from Elchanan Maoz, our Interim CEO and President.

ITEM 6. EXHIBITS

*Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.