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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 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 September 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 Six Months Ended June 30, 2023

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. (“Stratford”) 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’s subsidiary 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 June 26, 2023, the Company was advised by Stratford that 12 of its employees filed a motion with the District Court of Tel Aviv (the “Court”), case no. 59931-06-23 (the “Temporary Trustee Motion”), to commence insolvency proceedings against Stratford. The motion was filed as a result of unpaid salaries and social benefits to those employees outstanding as of April 30, 2023, in the approximate US Dollar amount of $254,725 (NIS 945,604), not including additional amounts owing for pension and an educational savings plan. The motion further indicated the salary and benefits payable at the date of the filing had increased to a total approximate amount of $323,250 (NIS 1.2 million). In addition, the employees filed an ex-parte motion to appoint a temporary trustee in order to prevent concealment of assets.  In response to the Temporary Trustee Motion, the Court declined to make a ruling on the ex-parte motion and ordered Stratford to file its response with the Court no later than July 2, 2023. If no objection is filed by Stratford, a temporary trustee will be immediately appointed from a list of three nominees offered by the local Ministry of Justice. Stratford did not file an objection to the Temporary Trustee Motion and on July 20, 2023 a Trustee was appointed by the Court and all remaining employees of Stratford were effectively terminated, including the Company’s CFO Efrat Reinhardt, whose employment contract was originally entered into with Stratford directly with services to be provided to each of Stratford and the Company.  On termination of the employees the Company declined to enter into a new contract with Ms. Reinhardt directly.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 1 - NATURE OF OPERATIONS (Continued)

Concurrent with the appointment of the Trustee on July 20, 2023 (the “Effective Date”),  the Company ceased to have effective control over Stratford as a result of the expectation of imminent liquidation proceedings, and therefore on the Effective Date, the Company will deconsolidate its subsidiary, Stratford.  The Company has provided proforma information with respect to the deconsolidation in Note 10, Subsequent Events.

On June 27, 2023, each of Mr. Jonah Meer and Mr. James A. Brodie resigned as directors of Stratford.

The Company is currently in the process of reviewing several suitable acquisition targets with revenue generating operations with the intent to complete an acquisition in the fourth quarter of fiscal 2023. The Company has no agreements, commitments or understanding either in writing or verbally with respect thereto. There is no assurance that the Company will successfully identify a suitable acquisition target. Even if a suitable acquisition target is identified, there is no assurance that any definitive agreement will be agreed upon and entered into, or that any transaction will be consummated on the terms or timeframe currently contemplated, or at all.

The Company anticipates that it will conclude a reverse stock split of its issued and outstanding shares of common stock at a ratio of 1-for-75 (the “Reverse Split”) and anticipates that it will file a Certificate of Amendment to the Company’s Certificate of Incorporation in order to effect the Reverse Split prior to such Reverse Split.  The Reverse Split is expected to become effective after the market closes on September 27, 2023, Eastern Time.  Assuming the Reverse Split becomes effective after the market closes on September 27, 2023, beginning with the opening of trading on September 28, 2023, the Company’s common stock will continue to trade on the OTC under the symbol “WOWI,” but will trade on a split-adjusted basis. The Certificate of Amendment will also reduce the number of authorized shares of common stock under the Company’s Certificate of Incorporation from 600 million shares authorized to 35 million shares authorized (the “Share Reduction”).

The Company’s stockholders approved the reverse stock split and the Share Reduction on February 28, 2023.  In connection with approving the reverse stock split, the Company’s stockholders granted authority to the Company’s Board of Directors (the “Board”) to determine, in its sole discretion, the exact ratio of the reverse stock split within the range of 1-for-25 to 1-for-100. The Board approved the reverse stock split on February 23, 2023, and the exact ratio of 1-for-75 on August 4, 2023. The Reverse Split has not been consummated.

If the Reverse Split is consummated, every 75 pre-split shares of common stock outstanding will automatically combine into one new share of common stock without any action on the part of the holders and with no change in the par value of $0.0001 per share. The Reverse Split will proportionately reduce the number of shares of common stock available for issuance under the Company’s stock incentive plan and proportionately reduce the number of shares of common stock issuable upon the exercise or conversion of stock options and warrants outstanding immediately prior to the effectiveness of the Reverse Split.

If consummated the Reverse Split will reduce the number of shares of the Company’s issued and outstanding common stock from approximately 273.7 million pre-Reverse Split shares to approximately 3.6 million post-Reverse Split shares. No fractional shares will be issued as a result of the Reverse Split. Fractional shares that would have resulted from the Reverse Split will be rounded up to the next whole number. In addition, stockholders who would own less than 100 shares as a result of the Reverse Split will have their total ownership amount rounded up to exactly 100 shares.

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 generated modest revenues to date from the operations of its wholly owned subsidiary.  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, increasing its current revenue generating operations or expanding the Company’s 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 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 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. During the three months ended June 30, 2023, the Company received an additional $100,000 in unsecured, non-interest bearing advances from a third party.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 2 – GOING CONCERN (Continued)

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 six months ended June 30, 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.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)

Basis of Consolidation

These consolidated financial statements include the accounts of the Company and its 100% controlled Israeli subsidiary, Stratford Ltd (“Stratford”) as of June 30, 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 six months ended June 30, 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.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)

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.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)

Impairment (Cont’d)

The Company reviews the valuation of long-lived assets, including property and equipment and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of long-lived assets or asset groups is calculated based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment testing is performed at the asset group level. 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:

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)

Revenue Recognition (Cont’d)

Subscription Revenues

Subscription revenues primarily consist of monthly fees for providing customers access to our software offerings including feature-based pricing models, where distinct packages are aligned to a specific type of customer persona based on its size, market segment and physical/online store presence. Each package is very different than the next with prices increasing as the functionality increases.

Monthly subscriptions to our software packages include routine customer support and unspecified software updates and upgrades released when and if available during the term. Revenues are generally recognized monthly over the contract term beginning on the date that our service is made available to the customer, which we believe best reflects the manner in which our customers utilize our subscription offerings. Customers pay monthly for the services in advance, and if payments are not collected, the access to the service terminates. Arrangements with customers do not provide the customer with the right to take possession of the software supporting application service at any time and, as a result, are accounted for as a service contract.

Customized Service Revenues

Customized service contract revenues primarily consist of fees for deployment, configuration, and optimization services, and potentially, training. The majority of our professional services contracts are billed on a fixed price basis, and revenues are recognized over time based on a proportional performance methodology which utilizes input methods. A portion of our customized service contracts may be billed on a time and materials basis and revenues are recognized over time as the services are performed.

Stock-Based Compensation

We account for stock options granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model.

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

For the three and six months ended June 30, 2023 and 2022, stock-based compensation and other equity instrument related expenses and expenditures recognized in the consolidated statements of operations is as follows:

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 3 – SUMMARY OF ACCOUNTING POLICIES (Continued)

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 six months ended June 30, 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 June 30, 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.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

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 June 30, 2023, are below:

As of June 30, 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.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 5 – DEBT

The following table provides additional information regarding the 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.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 5 – DEBT(Continued)

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. 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.

Advances

During the period ended June 30, 2023, the Company received funds from a minority shareholder in the amount of $100,000 as an unsecured, non-interest bearing advance for operational expenses.

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

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.

There were no shares issued during the three months ended June 30, 2023.

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 a total of 13,714,547 shares of common stock as loan bonus’ to Noteholders in conjunction with the terms of certain loan agreements. (Ref: Note 5 – Debt).

On June 30, 2023, and December 31, 2022, the Company had 273,718,580 and 271,635,247 shares of common stock issued and outstanding, respectively.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 6 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)

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 June 30, 2023:

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 6 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)

Stock Options

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

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 6 – CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)

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

The following table summarizes information about stock options outstanding and exercisable at June 30, 2023:

The following table summarizes information about stock options outstanding and exercisable at June 30, 2022:

Unamortized compensation expense associated with unvested options is $0 and $183,380 as of June 30, 2023 and December 31, 2022, respectively. The weighted average period over which these costs are expected to be recognized is approximately 0 years.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

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:

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

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 June 30, 2023, accounts payable and accrued liabilities included $43,000 ($0 – December 31, 2022) of management fees with respect to key management of Metro One, 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.

On May 11, 2023, the Company’s subsidiary, Stratford, entered into an employment agreement with Efrat Reinhardt to serve as the Chief Financial Officer of both the Company and Stratford. 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. Ms. Reinhardt is entitled to a monthly car allowance.  As a result of an insolvency proceeding commenced by certain unpaid employees of Stratford in June 2023, Ms. Reinhardt’s employment was discontinued after June 30, 2023, when a Trustee for Stratford was appointed by the Court (Refer to Note 1). Concurrently, Ms. Reinhardt ceased to serve as the Company’s Chief Financial Officer. Employment of Mr. Ami Bukris, CEO of Stratford, was also discontinued concurrent with the appointment of a Trustee for Stratford.

Transactions with the Company’s CEO and President, and Companies controlled by him

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 $4,340 and $0 in each of the three and six months ended June 30, 2023 and 2022.  At June 30, 2023 a total of $13,144 in accrued interest remained due and payable.

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 June 30, 2023 and is included in accounts payable and accrued liabilities. (ref: 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.

During the six months ended June 30, 2023, the Company’s CEO, Elchanan Maoz and corporations controlled by him advanced approximately $41,700 for operational expenses as they came due, and was reimbursed $21,000.

Metro One Telecommunications, Inc.

Notes to Condensed Consolidated Financial Statements

For The Six Months Ended June 30, 2023

NOTE 9 – OTHER EVENTS

On June 26, 2023, the Company was advised by Stratford that 12 of its employees filed a motion with the District Court of Tel Aviv (the “Court”), case no. 59931-06-23 (the “Temporary Trustee Motion”), to commence insolvency proceedings against Stratford (Refer to Notes 1 and 10).

On June 27, 2023, each of Mr. Jonah Meer and Mr. James A. Brodie resigned as directors of Stratford.

NOTE 10 – SUBSEQUENT EVENTS

Deconsolidation of Subsidiary Stratford Ltd.

Further to the Temporary Trustee Motion described above in Notes 1 and 9 to these financial statements, on July 20, 2023, a Trustee was appointed by the Court and all remaining employees of Stratford were effectively terminated.  Concurrent with the appointment of the Trustee the Company ceased to have effective control over Stratford as a result of the expectation of imminent liquidation proceedings.  The Company has provided proforma information with respect to the anticipated deconsolidation of Stratford and loss in investment in Stratford below: