A.
Reserved.
B.
Capitalization and Indebtedness
Not
applicable.
C.
Reasons for the offer and use of proceeds
Not
applicable.
D.
Risk Factors
You
should consider carefully the risks described below making an investment decision. Additional risks not presently known to us or that
we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could
be materially and adversely affected by any of these risks. The trading price and value of our ordinary shares could decline due to any
of these risks, and you may lose all or part of your investment. This annual report also contains forward-looking statements that involve
risks and uncertain. Our actual results could differ materially from those anticipated in these forward-looking statements as a result
of certain factors, including the risks faced by us described below and elsewhere in this annual report.
Risks
Relating to our business and industry
Our
financial situation creates doubt whether we will continue as a going concern.
There
can be no assurances that we will ever be able to achieve a level of revenues adequate to generate sufficient cash flow from operations
or obtain additional financing through private placements, public offerings and/or bank financing necessary to support our working capital
requirements. To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient,
we will have to raise additional working capital and no assurance can be given that additional financing will be available, or if available,
will be on acceptable terms. These conditions raise substantial doubt about our ability to continue as a going concern. If adequate working
capital is not available, we may be forced to discontinue operations, which would cause investors to lose their entire investment.
Our
consolidated financial statements for the year ended December 31, 2021 were prepared assuming that we would continue as a going concern,
which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying financial
statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that
might be necessary should the Company be unable to continue as a going concern.
The
report of our independent registered public accounting firm on our audited consolidated financial statements as of December 31, 2021 and
2020 and for each of the two years then ended includes an explanatory paragraph regarding substantial doubt about our ability to continue
as a going concern based upon our recurring losses, cash used in operations and accumulated deficit.
We
are solely dependent on one customer. If we fail to acquire new customers or retain existing customers in a cost-effective manner, our
business, financial condition and results of operations may be materially and adversely affected.
As
of the date of this annual report, we only have one customer in Israel, Galileo
Tech Ltd. (“Galileo”). For the year ended December 31, 2021, this customer accounted for all of our revenues, an aggregate
of NIS 100,000, or approximately 100% of our sales for said year.
Our
ability to cost-effectively attract new customers and retain our sole existing customer is crucial to driving net revenues growth and
achieving profitability. We have invested significantly in branding, sales and marketing to acquire and retain customers since our inception.
For example, we attend domestic and international expos and exhibitions in marketing our products and attracting new customers. We also
expect to continue to invest significantly to acquire new customers and retain our sole customer. There can be no assurance that new customers
will stay with us, or the net revenues from new customers we acquire will ultimately exceed the cost of acquiring those customers. In
addition, if our existing customer no longer finds our products appealing, or if our competitors offer more attractive products, prices,
discounts or better customer services, our customers may lose interest in us, decrease their orders or even stop ordering from us. If
we are unable to retain our existing customer or acquire new customers in a cost-effective manner, our revenues may decrease, and our
results of operations will be adversely affected.
In
the past, our sole customer was not able to provide us with all the cash payments in a timely manner in the amounts and dates agreed for
the license granted to the customer. If our customer is once again not able to pay us in a timely manner, this will have a material negative
impact on our financial condition. We will not be able to market our services and therefore our revenues will decrease.
If
the market for digital payments does not continue to grow, our business will be adversely affected.
The
market for digital payments may not continue to grow. Continued growth of this market will depend, in large part, upon:
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• |
the
continued expansion of Internet usage and the number of organizations adopting or expanding intranets; |
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• |
the
continued adoption of “cloud” infrastructure by organizations; |
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• |
the
ability of the infrastructures implemented by organizations to support an increasing number of users and services; |
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• |
the
continued development of new and improved services for implementation across the Internet and between the Internet and intranets; |
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• |
the
adoption of data security measures as it pertains to data encryption and data loss prevention technologies; |
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• |
continued
access to mobile API’s, APPs and application stores with Apple, Google and Microsoft, etc.; |
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• |
government
regulation of the Internet and governmental and non-governmental requirements and standards with respect to data security and privacy;
and |
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• |
general
economic conditions in the markets in which we, our customers and our suppliers operate. |
In
2021, global and regional economies around the world and financial markets remained volatile as a result of a multitude of factors, including
COVID-19 pandemic, economic and political uncertainty, terrorism, governmental instability and other factors. During this period, many
organizations limited their expenditures and a significant portion of such organizations have remained reluctant to increase expenditures.
If challenging conditions continue or worsen, it may cause our customers to reduce or postpone their technology spending significantly,
which could result in reductions in sales of our products, longer sales cycles, slower adoption of new technologies and increased price
competition.
Further,
if the necessary infrastructure or complementary products and services are not developed in a timely manner and, consequently, the enterprise
security, data security, Internet or intranet markets fail to grow or grow more slowly than we currently anticipate, our business, results
of operations and financial condition may be materially adversely affected.
We
may not be able to successfully compete, which could adversely affect our business and results of operations.
The
digital payment market is profoundly shifting in the Covid-19 pandemic context. The crisis has affected the way people think about payments
and financial services, with the use of cash declining and the rise of contactless encouraged by many countries. All the actors are being
impacted by this move towards a cashless society, including retailers, merchants, consumers, governments, financial institutions, and
service providers.
The
market for digital payment is intensely competitive and we expect that competition will continue to increase in the future. Our competitors
include big tech companies, such as Google, Apple and PayPal who are eagerly looking to grab an increasing share in the digital payment
market. Apple launched its digital payment service, Apple Pay, in Israel on May 5, 2021, which may substantially impact our ability to
compete for customers in our primary market. In addition, Google launched its digital payment service, Google Pay, in Israel on December
7, 2021, which may substantially impact our ability to compete for customers in our primary market. We also compete with several other
companies, including wallet factory and dejamobile, with respect to digital wallets that we offer. In addition, there are hundreds of
small and large companies that offer digital payment products that we may compete with from time to time.
Some
of our current and potential competitors have various advantages over us, including longer operating histories; access to larger customer
bases; significantly greater financial, technical and marketing resources; a broader portfolio of products, applications and services;
and larger patent and intellectual property portfolios. As a result, they may be able to adapt better than we can to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the promotion and sale of their products. Furthermore, some of
our competitors with more diversified product portfolios and larger customer bases may be better able to withstand a reduction in spending
on digital payment solutions, as well as a general slowdown or recession in economic conditions in the markets in which they operate.
In addition, some of our competitors have greater financial resources than we do, and they have offered, and in the future may offer,
their products at lower prices than we do, or may bundle digital payment products with their other offerings, which may cause us to lose
sales or to reduce our prices in response to competition.
In
addition, consolidation in the markets in which we compete may affect our competitive position. This is particularly true in circumstances
where customers are seeking to obtain a broader set of products and services than we are able to provide.
The
markets in which we compete also include many niche competitors, generally smaller companies at a relatively early stage of operations,
which are focused on specific digital payment needs. These companies’ specialized focus may enable them to adapt better than we
can to new or emerging technologies and changes in customer requirements in their specific areas of focus. In addition, some of these
companies can invest relatively large resources on very specific technologies or customer segments. The effect of these companies’
activities in the market may result in price reductions, reduced gross margins and loss of market share, any of which will materially
adversely affect our business, results of operations and financial condition.
We
may not be able to continue competing successfully against our current and future competitors, and increased competition within the market
may result in price reductions, reduced gross margins and operating margins, reduced net income, and loss of market share, any or all
of which may materially adversely affect our business, results of operations and financial condition.
We
may not be able to maintain and improve the network effects of our digital economy, which could negatively affect our business and prospects.
Our
ability to maintain a healthy and vibrant digital economy that creates strong network effects among financial institutions, consumers,
merchants, brands, retailers and other participants is critical to our success. The extent to which we are able to maintain and strengthen
these network effects depends on our ability to:
|
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● |
offer
secure and open platforms for all participants and balance the interests of these participants; |
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|
● |
provide
a wide range of high-quality product, service and content offerings to consumers; |
|
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|
● |
attract
and retain consumers, merchants, brands and retailers of all sizes; |
|
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|
|
● |
provide
effective technologies, infrastructure and services that meet the evolving needs of financial institutions, consumers, merchants, brands, retailers
and other businesses; |
|
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|
|
● |
secure
and trusted digital payment services; |
|
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|
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|
|
● |
address
user concerns with respect to data security and privacy measures; |
|
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● |
attract
and retain third-party service providers that are able to provide quality services on commercially reasonable terms to our customers; |
|
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● |
maintain
the quality of our customer service; and |
|
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● |
continue
adapting to the changing demands of the digital payment market. |
In
addition, changes to current operations we may make to enhance and improve our digital economy or to comply with regulatory requirements
may be viewed positively from one participant group’s perspective, such as our customers, but may have negative effects from another
group’s perspective, such as the clients of our customers. If we fail to balance the interests of all participants in our digital
economy, our customers may spend less time, mind-share and resources on our Platform and may conduct fewer transactions or use alternative
platforms, any of which could result in a material decrease in our revenue and net income.
Raising
additional capital and the conversion of our outstanding preferred shares owned by our majority controlling shareholder would cause significant
dilution to our existing shareholders and may affect the rights of existing shareholders.
We
will have to seek additional capital through a combination of private and public equity offerings, debt financing and collaborations and
strategic and licensing arrangements. To the extent that we raise additional capital through the issuance of equity or convertible debt
securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect
your rights as a holder of our shares.
In
addition, Mr. Shalom, our principal executive officer, a director and majority shareholder, owns 10,000,000 preferred shares, with each
share being convertible at any time by Mr. Shalom to 100 ordinary shares. Accordingly, if Mr. Shalom would convert some or all his preferred
shares, your ownership interest in the Company will be further diluted.
We
may not be able to introduce products acceptable to customers and we may not be able to improve the technology used in our current systems
in response to changing technology and end-user needs.
The
markets in which we operate are subject to rapid and substantial innovation, regulation and technological change, mainly driven by technological
advances and end-user requirements and preferences, as well as the emergence of new standards and practices. Even if we are able to complete
the development of our products, our ability to compete in the digital market will depend, in large part, on our future success in enhancing
our existing products and developing new systems that will address the varied needs of prospective end-users, and respond to technological
advances and industry standards and practices on a cost-effective and timely basis to otherwise gain market acceptance.
Even
if we successfully introduce our existing products in development, it is likely that new systems and technologies that we develop will
eventually supplant our existing systems or that our competitors will create systems that will replace our systems. As a result, any of
our products may be rendered obsolete or uneconomical by our or others’ technological advances.
We
may need to change our pricing models to compete successfully.
The
intense competition we face in the sales of our products and services and general economic and business conditions can put pressure on
us to change our prices. If our competitors offer deep discounts on certain products or services or develop products that the marketplace
considers more valuable, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such changes
may reduce margins and could adversely affect results of operations.
If
our products fail to protect against attacks and our customers experience security breaches, our reputation and business could be harmed.
Hackers
and other malevolent actors are increasingly sophisticated, often affiliated with organized crime and operate large scale and complex
attacks. In addition, their techniques change frequently and generally are not recognized until launched against a target. If we fail
to identify and respond to new and increasingly complex methods of attack and to update our products to detect or prevent such threats
in time to protect our customers’ high-value business data, our business and reputation will suffer.
In
addition, an actual or perceived security breach or theft of the sensitive data of one of our customers, regardless of whether the breach
is attributable to the failure of our products, could adversely affect the market’s perception of our products. Despite our best
efforts, there is no guarantee that our products will be free of flaws or vulnerabilities, and even if we discover these weaknesses we
may not be able to correct them promptly, if at all. Our customers may also misuse our products, which could result in a breach or theft
of business data.
Defects
in products could give rise to product returns or product liability, warranty or other claims that could result in material expenses,
diversion of management time and attention, and damage to our reputation.
Even
if we are successful in introducing our products to the market, our products may contain undetected defects or errors that, despite testing,
are not discovered until after a product has been used. This could result in delayed market acceptance of those products, claims from
distributors, end-users or others, increased end-user service and support costs and warranty claims, damage to our reputation and business,
or significant costs to correct the defect or error. We may from time to time become subject to warranty or product liability claims that
could lead to significant expenses as we need to compensate affected end-users for costs incurred related to product quality issues.
Any
claim brought against us, regardless of its merit, could result in material expense, diversion of management time and attention, and damage
to our reputation, which could cause us to fail to retain or attract customers. Currently, we do not maintain product liability insurance,
which will be necessary prior to the commercialization of our products. It is likely that any product liability insurance that we will
have in the future will be subject to significant deductibles and there is no guarantee that such insurance will be available or adequate
to protect against all such claims, or we may elect to self-insure with respect to certain matters. Costs or payments made in connection
with warranty and product liability claims and product recalls or other claims could materially affect our financial condition and results
of operations.
We
expect that we will need to raise substantial additional capital before we can expect to become profitable from sales of our products.
This additional capital may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may
force us to delay, limit or terminate our product development efforts or other operations.
We
expect that we will require substantial additional capital to commercialize our products. In addition, our operating plans may change
as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future
capital requirements will depend on many factors, including but not limited to:
the
scope, rate of progress, results and cost of product development, and other related activities;
the
cost of establishing commercial supplies of our products;
the
cost and timing of establishing sales, marketing, and distribution capabilities; and
the
terms and timing of any collaborative, licensing, and other arrangements that we may establish.
Any
additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop
and commercialize our products. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms
acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders
and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price
of our shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to
agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire,
sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise
would be desirable, and we may be required to relinquish rights to some of our technologies or products or otherwise agree to terms unfavorable
to us, any of which may have a material adverse effect on our business, operating results and prospects. Even if we believe that we have
sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we
have specific strategic considerations.
If
we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our
research or development programs or the commercialization of our products or be unable to expand our operations or otherwise capitalize
on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
Since
we are solely dependent on Amazon Cloud, our business, financial condition and results of operations may be materially and adversely affected
if this agreement is terminated or if there are service issues with the cloud that affects our application and operations.
As
of the date of this annual report, Amazon Cloud (also known as Amazon Web Services) is our sole cloud provider. Our entire technology
was developed in Amazon’s cloud environment and is currently deployed on it. Our reliance on a single vendor for our business involves
high risks. Our agreement with Amazon was not negotiated but the standard, boilerplate agreement which Amazon utilizes with all its customers.
Amazon has the ability to terminate its services to us at any time. Accordingly, if Amazon terminates the agreement, our business may
be severely interrupted, and our financial condition and results of operations may be materially and adversely affected. In addition,
all our software and code are held in Amazon cloud and could be subject to attacks, deletion or other bad effects.
If
our relationships with other suppliers for our products and services were to terminate or our software development arrangements were to
be disrupted, our business could be interrupted.
Our
products depend on certain third-party technology, and we purchase component parts that are used in our products from third-party suppliers,
some of whom may compete with us. For example, we developed our products via a software company situated in India. Our reliance
on a single or limited number of vendors involves several risks, including:
| |
• |
potential shortages
of some key personnel or talented developers; |
| |
• |
developers
performance shortfalls, if traceable to particular persons since the developers of our software cannot readily be replaced; |
| |
• |
discontinuation of service and talent-pool on
which we rely; |
| |
• |
potential insolvency of these vendors; and |
| |
• |
reduced control over delivery schedules, quality
and costs. |
If
certain suppliers were to decide to discontinue their service with us, the unanticipated change in the availability of supplies, or unanticipated
supply limitations, could cause delays in, or loss of, developments, integrations, sales, increased production or related costs and consequently
reduced margins, and damage to our reputation. If we were unable to find a suitable supplier on time, we could be required to modify our
existing development and production settings or the end-solution that we offer to our customers.
A
significant interruption in the operations of our third-party suppliers could potentially disrupt our operations.
We
have limited control over the operations of our third-party suppliers and other business partners and any significant interruption in
their operations may have an adverse impact on our operations. For example, a significant interruption in the operations of the India
software company, one of our suppliers, may cause interruption to our business. If we could not solve the impact of the interruptions
of operations of our third-party suppliers, our business operations and financial results may be materially and adversely affected.
Mr.
Menachem Shalom, our principal executive officer and a member of our board of directors, beneficially owns 100% of our outstanding preferred
shares and his interests may differ from the interests of other shareholders, which could cause a material decline in the value of our
shares.
Mr.
Menachem Shalom, our principal officer and a member of our board of directors, currently beneficially owns 100% of our outstanding preferred
shares and 87% of the outstanding ordinary shares. Accordingly, he has a significant influence on determining the outcome of any matters
submitted to the shareholders for approval, including mergers, consolidations, the election of directors and other significant corporate
actions. Without his consent, we may be prevented from entering into transactions that could be beneficial to us or our minority shareholders.
His interest may differ from the interests of our other shareholders. The concentration in the ownership of our shares may cause a material
decline in the value of our shares.
We
cannot assure you that Mr. Shalom will act in the best interests of all of our shareholders given Mr. Shalom’s ability to control
the Company. See “Related Party Transactions”.
We
are dependent upon our Mr. Shalom and we cannot assure his retention.
Our
success depends, in part, upon the continued services of Mr. Shalom, whose knowledge of the market, our business and our Company represents
a key strength of our business, which cannot be easily replicated. The success of our business strategy and our future growth also depend
on our ability to attract, train, retain and motivate skilled managerial, sales, administration, development and operating personnel.
Even though we have a management agreement with Mr. Shalom, there is no required time period in which he needs to be employed by us.
There
can be no assurance that our existing personnel will be adequate or qualified to carry out our strategy, or that we will be able to hire
or retain experienced, qualified employees to carry out our strategy. The loss of Mr. Shalom or the failure to attract and retain additional
key personnel, could have a material adverse effect on our business, financial condition and results of operations.
If
we fail to adopt new technologies to evolving customer needs or emerging industry standards, our business may be materially and adversely
affected.
To
remain competitive, we must continue to stay abreast of the constantly evolving industry trends and to enhance and improve our technology
accordingly. Our success will depend, in part, on our ability to identify, develop, acquire or license leading technologies useful in
our business. There can be no assurance that we will be able to use new technologies effectively or meet customer’s requirements.
If we are unable to adapt in a cost-effective and timely manner in response to changing market conditions or customer preferences, whether
for technical, legal, financial or other reasons, our business may be materially and adversely affected.
We
may experience significant liability claims or complaints from customers, or adverse publicity involving our products and our services.
We
face an inherent risk of liability claims or complaints from our customers. We take our customers’ complaints seriously and endeavor
to reduce such complaints by implementing various remedial measures. Nevertheless, we cannot assure you that we can successfully prevent
or address all customer complaints.
Any
complaints or claims against us, even if meritless and unsuccessful, may divert management attention and other resources from our business
and adversely affect our business and operations. Customers may lose confidence in us and our brand, which may adversely affect our business
and results of operations. Furthermore, negative publicity including but not limited to negative online reviews on social media and crowd-sourced
review platforms, industry findings or media reports related to safety and quality of our products, whether or not accurate, and whether
or not concerning our products, can adversely affect our business, results of operations and reputation.
We
may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
We
cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate intellectual
property rights held by third parties. We have not but in the future may be, subject to legal proceedings and claims relating to the intellectual
property rights of others. There could also be existing intellectual property of which we are not aware that our products may inadvertently
infringe. We cannot assure you that holders of intellectual property purportedly relating to some aspect of our technology or business,
if any such holders exist, would not seek to enforce such intellectual property against us in Israel, or any other jurisdictions. If we
are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities
or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our
own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our
business and operations to defend against these infringement claims, regardless of their merits. Successful infringement or licensing
claims made against us may result in significant monetary liabilities and may materially disrupt our business and operations by restricting
or prohibiting our use of the intellectual property in question, and our business, financial position and results of operations could
be materially and adversely affected.
Further,
the application and interpretation of Israel’s patent laws and the procedures and standards for granting patents in Israel are still
evolving and are uncertain, and we cannot assure you that the courts or regulatory authorities in Israel would agree with our analysis.
We
may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
Although
we regard our know-how, proprietary technologies, and similar intellectual property as critical to our success, we have no patents or
trademarks protecting our intellectual property. We may become an attractive target to intellectual property attacks in the future with
the increasing recognition of our brand. Any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated,
or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, there can be no assurance
that (i) all of our intellectual property rights will be adequately protected, or (ii) our intellectual property rights will not be challenged
by third parties or found by a judicial authority to be invalid or unenforceable.
Because
we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that
are applicable to other public companies that are not “emerging growth companies.”
We
are an “emerging growth company” as defined under the Jumpstart our Business Startups Act (“JOBS Act”). We will
remain an “emerging growth company” for up to five years, or until the earliest of:
| (i) |
the last day of the
first fiscal year in which our total annual gross revenues exceed $1.07 billion, |
| (ii) |
the date that we become
a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our
ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second
fiscal quarter, or |
| (iii) |
the date on which we
have issued more than $1 billion in non-convertible debt during the preceding three-year period. |
As
an “emerging growth company”, we may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not “emerging growth companies” including, but not limited to:
| ● |
not being required
to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act (“Sarbanes Oxley”) (we also
will not be subject to the auditor attestation requirements of section 404(b) as long as we are a “smaller reporting company”,
which includes issuers that had a public float of less than $75 million as of the last business day of their most recently completed second
fiscal quarter); |
| ● |
reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements; and |
| ● |
exemptions from the
requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments
not previously approved. |
In
addition, section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition
period provided in section 7(a)(2)(B) of the Securities Act of 1933 (the “Securities Act”) for complying with new or revised
accounting standards. Under this provision, an “emerging growth company” can delay the adoption of certain accounting standards
until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition
period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards
is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition
period for complying with new or revised accounting standards is irrevocable.
The
nature of our business requires the application of complex revenue recognition rules. Significant changes in U.S. generally accepted accounting
principles, or GAAP, including the adoption of the new revenue recognition rules, could materially affect our financial position and results
of operations.
We
prepare our financial statements in accordance with GAAP, which is subject to interpretation or changes by the Financial Accounting Standards
Board, or FASB, the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting
pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future, which may have
a significant effect on our financial results. For example, pursuant to the new revenue recognition rules, effective as of January 1,
2018, an entity recognizes sales and usage-based royalties as revenue only when the later of the following events occurs: (1) the subsequent
sale or usage occurs or (2) the performance obligation to which some or all of the sales-based or usage-based royalty allocated has been
satisfied (or partially satisfied). Recognizing royalty revenue on a lag time basis is not permitted. As a result, the royalties we generate
from customers is based on royalty of units shipped during the quarter as estimated by our customers, not a quarter in arrears that we
previously report. Adoption of this standard and any difficulties in implementation of changes in accounting principles, including uncertainty
associated with royalty revenues for the quarter based on estimates provided by our customer, could cause us to fail to meet our financial
reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.
Risks
Related to Our Proposed Non-Bank Loan Business Activity
Our
credit standards and on-going credit assessment processes might not protect us from significant credit losses.
Having
obtained a non-bank lending license, we intend to engage in the non-bank credit field by extending loans to consumers and/or other business.
We envision managing credit risk in our loans through a program of underwriting standards, the review of certain credit decisions and
an ongoing process of assessment of the quality of the credit already extended. While these procedures will be designed to provide
us with the information needed to implement policy adjustments where necessary and to take appropriate corrective actions, there can be
no assurance that such measures will be effective in avoiding future undue credit risk, and credit losses may occur in the future.
The
amount of our future loan losses could be influenced by changes in economic, operating and other conditions, including changes in interest
rates, which may be beyond our control, and these losses may exceed current estimates. While the risk of nonpayment is inherent in providing
financing, we could experience greater nonpayment levels than we anticipate. Deterioration in the quality of our loan portfolio could
cause our interest income and net interest margin to decrease and our provisions for loan losses to increase further, which could adversely
affect our results of operations and financial condition.
Our
allowance for loan losses may not be adequate to cover actual losses, which could materially and adversely affect our operating results.
We
intend to maintain an allowance for loan losses that is appropriate to provide for any potential losses in our loan portfolio. The allowance
is based upon factors such as the credit risk of specific customers, historical trends and experience, ongoing review of the quality,
size and diversity of our loan portfolio, the amount and quality of collateral securing the loans, current economic conditions, geographic
and industry loan concentrations and other information which we believe adequately covers all anticipated losses in respect of trade receivables.
There can be no assurance that this allowance will be adequate.
Our
business will be subject to interest rate risk, and variations in interest rates may negatively affect financial performance.
Changes
in the interest rate environment may reduce our profits. Loan volume and yields are affected by market interest rates on loans, and rising
interest rates generally are associated with a lower volume of loan originations. We cannot ensure that we can minimize our interest rate
risk. While an increase in the general level of interest rates may increase the loan yield and the net interest margin, it may adversely
affect the ability of certain borrowers with variable rate loans to pay the interest and principal of their obligations. Accordingly,
changes in levels of market interest rates could materially and adversely affect the net interest spread, asset quality, loan origination
volume and our overall profitability.
Our
proposed lending business will also subject us to specific Israeli laws and regulations.
If
we commence operations to extend credit to consumers and businesses, there are numerous Israeli laws and regulations specifically affecting
non-bank lenders. These requirements relate to, among other things:
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Minimum shareholder equity; |
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Annual and periodic reporting; |
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Limitations on marketing and solicitation of customers; |
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Prohibition on misleading or fraudulent communications
with our current or prospective customers; |
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Prohibition on false or misleading advertisements
and solicitations; |
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Prohibition on linking the Company’s credit
products with its other products; and |
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Prohibition on extending credit to minors and
other consumer-protection limitations. |
Failure
to comply with any of these laws and regulations may expose us to fines, penalties, and enforcement actions which would materially and
adversely impact our business.
Over
the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional
banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it
cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit
extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory
supervision of us or otherwise adversely affect our business.
Risks
relating to legal uncertainty and doing business in Israel
Conditions
in Israel could materially and adversely affect our business.
Our
executive offices are located in Israel. In addition, our sole officer and all of the members of our board of directors are residents
of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business
and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and
its neighboring countries, as well as terrorist acts committed within Israel, the Palestinian Authority areas and Lebanon by hostile elements.
Civil
unrest and political turbulence has occurred in many other countries in the region, including those which share a common border with Israel,
and is affecting the political stability of those countries. This instability and any intervention may lead to deterioration of the political
and economic relationships that exist between the State of Israel and some of these countries and may have the potential for additional
conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran
is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, and Hezbollah in Lebanon. Iran
is known to support the government of Syria in its battles against various rebel militia groups in Syria.
Any
future armed conflict, political instability, continued violence in the region or restrictions could have a material adverse effect on
our business, operating results and financial condition. While such hostilities did not in the past have a material adverse impact on
our business, we cannot guarantee that hostilities will not be renewed and have such an effect in the future. The political and security
situation in Israel may result in parties with whom we have contracts claiming that they are not obligated to perform their commitments
under those agreements pursuant to force majeure provisions.
Any
hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could adversely
affect our operations and could make it more difficult for us to raise capital or obtain components used in our products. Since o our
facility is located in Israel,
we could experience serious disruptions if acts associated with this conflict result in any serious damage to our facilities. Any future
armed conflict or political instability in the region could negatively affect business conditions and harm our results of operations.
Our
commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli
government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure
you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred
by us could have a material adverse effect on our business.
Furthermore,
several countries still restrict trade with Israeli companies and additional countries may impose such restrictions as a result of changes
in the military and/or political conditions in Israel and/or the surrounding countries, which may limit our ability to make sales in,
or purchase components from, those countries. In addition, such boycott, restrictive laws, policies, or practices may change over time
in unpredictable ways, and could, individually or in the aggregate, have a material adverse effect on our business in the future. Should
the BDS Movement, the movement for boycotting, divesting and sanctioning Israel and Israeli institutions (including universities) and
products become increasingly influential in the United States, Europe and around the world, this may also adversely affect our business
and financial condition.
In
addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year
until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event
of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant
call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could
be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely
affect our business, prospects, financial condition and results of operations.
The
legislative power of the State of Israel resides in the Knesset, a unicameral parliament that consists of 120 members elected by nationwide
voting under a system of proportional representation. Israel has held four general elections in the last three years (on April 9,
2019, September 17, 2019, March 2, 2020, and March 23, 2021) due to the difficulty of forming a stable government under the
conditions of Israel’s parliamentary system. The uncertainty surrounding future elections and/or the results of such elections in
Israel may continue and the political situation in Israel may further deteriorate. Actual or perceived political instability in Israel
or any negative changes in the political environment, may individually or in the aggregate adversely affect the Israeli economy and, in
turn, our business, financial condition, results of operations and prospects.
It
may be difficult to enforce a U.S. judgment against us, our officer and director or to assert U.S. securities laws claims in Israel or
serve process on our officers and directors.
Since
our directors and officers are not residents of the United States and all of our assets are located outside the United States, service
of process upon us or our non-U.S. resident director and officers may be difficult to obtain within the United States. We have been informed
by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in
Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear
a claim based on a violation of U.S. securities laws against us or our non-U.S. officer and director because Israel may not be the most
appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law
and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved
as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There
is little binding case law in Israel addressing the matters described above. Additionally, Israeli courts might not enforce judgments
obtained in the United States against us or our non-U.S. directors and executive officers, which may make it difficult to collect on judgments
rendered against us or our non-U.S. officers and directors.
Moreover,
an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments
of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of
Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given
in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal
in Israel at the time the foreign action was brought. For more information, see "Enforceability of civil liabilities."
Your
rights and responsibilities as our shareholder are governed by Israeli law, which may differ in some respects from the rights and responsibilities
of shareholders of U.S. corporations.
We
are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our articles of
association and the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders
in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an Israeli company has to act in good faith
and in a customary manner in exercising his or her rights and fulfilling his or her obligations toward the company and other shareholders
and to refrain from abusing his or her power in the company, including, among other things, in voting at the general meeting of shareholders
on amendments to a company's articles of association, increases in a company's authorized share capital, mergers and certain transactions
requiring shareholders' approval under the Companies Law. In addition, a controlling shareholder of an Israeli company or a shareholder
who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint or prevent the appointment
of a director or officer in the company or has other powers toward the company has a duty of fairness toward the company. However, Israeli
law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the implications
of these provisions that govern shareholder behavior.
We
are not in compliance with certain corporate governance requirements under the Companies Law.
The
Companies Law imposes various corporate governance requirements upon public companies, including the requirement to establish an audit
committee and compensation committee, appoint two external directors, and retain an internal auditor. As of the date of this Annual Report,
we are not in compliance with these requirements. As a result of this non-compliance, we are at risk of fines, penalties, and enforcement
actions by the Israel Securities Authority (ISA), which may materially and adversely affect our business. While we intend to remediate
these corporate governance failures prior to being listed on any share exchange, there can be no guarantee that the ISA will not enforce
these requirements before we achieve compliance, or that the ISA will penalize us for past non-compliance even after we achieve compliance.
Provisions
of Israeli law and our articles of association may delay, prevent or make undesirable an acquisition of all or a significant portion of
our shares or assets.
Provisions
of Israeli law and our articles of association could have the effect of delaying or preventing a change in control and may make it more
difficult for a third-party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing
so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the
future for our ordinary shares. Among other things:
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Israeli corporate law
regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased; |
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Israeli corporate law
does not provide for shareholder action by written consent, thereby requiring all shareholder actions to be taken at a general meeting
of shareholders; |
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our articles of association
divide our directors into three classes, each of which is elected once every three years; |
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our articles of association
generally require a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter
at a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the
provision dividing our directors into three classes, requires a vote of the holders of at least 65% of the total voting power of our shareholders; |
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our articles of association
do not permit a director to be removed except by a vote of the holders of at least 65% of the total voting power of our shareholders and
any amendment to such provision requires the approval of at least 65% of the total voting power of our shareholders; and |
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our articles of association
provide that director vacancies may be filled by our board of directors. |
Further,
Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence
does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax.
We
may be exposed to liabilities under the U.S. Foreign Corrupt Practices Act and other U.S. and foreign anti-corruption anti-money laundering,
export control, sanctions and other trade laws and regulations, and any determination that we violated these laws could have a material
adverse effect on our business.
We
are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations
and various economic and trade sanctions regulations administered by the U.S. Treasury Department's Office of Foreign Assets Control.
We are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C.
§ 201, the U.S. Travel Act, the USA PATRIOT Act, the United Kingdom Bribery Act 2010, the Proceeds of Crime Act 2002, Chapter 9
(sub-chapter 5) of the Israeli Penal Law, 1977, the Israeli Prohibition on Money Laundering Law—2000 and possibly other anti-bribery
and anti-money laundering laws in countries outside of the United States in which we conduct our activities. Compliance with these laws
has been the subject of increasing focus and activity by regulatory authorities, both in the United States and elsewhere, in recent years.
Anti-corruption laws are interpreted broadly and prohibit companies and their employees and third-party intermediaries from authorizing,
promising, offering, providing, soliciting or accepting, directly or indirectly, improper payments or benefits to or from any person whether
in the public or private sector.
Noncompliance
with anti-corruption, anti-money laundering, export control, sanctions and other trade laws could subject us to whistleblower complaints,
investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other
civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges,
reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are launched, or governmental
or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations
and financial condition could be materially harmed. Responding to any action will likely result in a materially significant diversion
of management's attention and resources and significant defense and compliance costs and other professional fees. In addition, regulatory
authorities may seek to hold us liable for successor liability for violations committed by companies in which we invest or that we acquire.
As a general matter, enforcement actions and sanctions could harm our business, results of operations and financial condition.
Risks
relating to our ordinary shares
An
active trading market for our ordinary shares may not develop and the trading price for our shares may fluctuate significantly.
We
have not yet received consent to have our shares of ordinary stock quoted on the OTCQB. Even upon obtaining such approval from FINRA,
there has been no public market for our ordinary shares, and we cannot assure you that a liquid public market for our shares will develop.
If an active public market for our shares does not develop, the market price and liquidity of our shares may be materially and adversely
affected.
Our
Ordinary Shares are subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which
makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.
Rule
15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s
account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction,
setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions
in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b)
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer
must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock
market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms
that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less
willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors
to dispose of our common stock and cause a decline in the market value of our common stock. Disclosure also has to be made about
the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the
broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an
investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in penny stocks.
The
trading price of our shares is likely to be volatile, which could result in substantial losses to investors.
If
we are successful at developing a market for our shares, the trading price of our shares is likely to be volatile and could fluctuate
widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and
fluctuation of the market prices of other companies with business operations located mainly in Israel that have listed their securities
in the United States. In addition to market and industry factors, the price and trading volume for our shares may be highly volatile for
factors specific to our own operations, including the following:
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variations in our revenues,
earnings and cash flow; |
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announcements of new
investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; |
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announcements of new
offerings, solutions and expansions by us or our competitors; |
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changes
in financial estimates by securities analysts; |
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detrimental
adverse publicity about us, our services or our industry; |
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additions
or departures of key personnel; |
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sales
of additional equity securities; and |
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potential
litigation or regulatory investigations. |
Any
of these factors may result in large and sudden changes in the volume and price at which our shares will trade.
In
the past, shareholders of public companies have often brought securities class action suits against those companies following periods
of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount
of our management’s attention and other resources from our business and operations and require us to incur significant expenses
to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our
reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be
required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
Our
majority shareholder and principalofficer has substantial influence over our company and his interests may not be aligned with the interests
of our shareholders.
Menachem
Shalom, our majority shareholder and principal officer, currently owns all the total voting power of our outstanding preferred shares
and 87% of the issued and outstanding ordinary shares. As a result, he maintains substantial influence over our business, including significant
corporate actions such as mergers, consolidations, sales of all or substantially all of our assets, election of directors and other significant
corporate actions.
Mr.
Shalom may take actions that are not in the best interest of our other shareholders. This concentration of ownership may discourage, delay
or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares
as part of a sale of our company and may reduce the price of the shares. These actions may be taken even if they are opposed by our other
shareholders. In addition, the significant concentration of share ownership may adversely affect the trading price of the shares due to
investors’ perception that conflicts of interest may exist or arise. For more information regarding our principal shareholders and
their affiliated entities, see “Principal Shareholders.”
If
securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations
regarding our shares, the market price for our shares and trading volume could decline.
The
trading market for our shares will be influenced by research or reports that industry or securities analysts publish about our business.
If one or more analysts who cover us downgrade our shares, the market price for our shares would likely decline. If one or more of these
analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn
could cause the market price or trading volume for our shares to decline.
If
we are successful at creating a market for our shares, the sale or availability for sale of substantial amounts of our shares could adversely
affect their market price.
Sales
of substantial amounts of our shares in the public market, or the perception that these sales could occur, could adversely affect the
market price of our shares and could materially impair our ability to raise capital through equity offerings in the future. Shares held
by our existing shareholders may now or in the future be sold in the public market. There are 2,282,124 ordinary shares outstanding, of
which 282,124 are freely tradeable without any restrictions. In addition, there are 10,000,000 preferred shares outstanding, all owned
by Mr. Shalom, which are convertible into an aggregate of up to 1,000,000,000 of our ordinary shares at the option of the holder and may
be resold as restricted shares in the future or be registered for resale without restriction. We cannot predict what effect, if
any, market sales of securities held by Mr. Shalom or any other shareholder or the availability of these securities for future sale will
have on the market price of our shares.
Negative
publicity may harm our brand and reputation and have a material adverse effect on our business.
Negative
publicity about us, including our services, management, business model and practices, compliance with applicable rules, regulations and
policies, or our network partners may materially and adversely harm our brand and reputation and have a material adverse effect on our
business. We cannot assure you that we will be able to defuse any such negative publicity within a reasonable period of time, or at all.
Additionally, allegations, directly or indirectly against us, may be posted on the internet by anyone on a named or anonymous basis, and
can be quickly and widely disseminated. Information posted may be inaccurate, misleading and adverse to us, and it may harm our reputation,
business or prospects. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be
negatively affected as a result of the public dissemination of negative and potentially inaccurate or misleading information about our
business and operations, which in turn may materially adversely affect our relationships with our customers, employees or business partners,
and adversely affect the price of our shares.
Because
we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our shares for return on your investment.
We
currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our
business. In addition, the Companies Law imposes restrictions on our ability to declare and pay dividends. As a result, we do not
expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our shares as a source
for any future dividend income.
Subject
to applicable law and the provisions of our articles of association, our board of directors has complete discretion as to whether to distribute
dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any,
will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any,
received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board
of directors. Accordingly, the return on your investment will likely depend entirely upon any future price appreciation of our shares.
There is no guarantee that our shares will appreciate in value or even maintain the price at which you purchased the shares. You may not
realize a return on your investment in our shares and you may even lose your entire investment in our shares.
We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to United States domestic public companies.
Because
we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations
in the United States that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing
of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; (ii) the sections of the Exchange Act regulating the solicitation
of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange
Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from
trades made in a short period of time; and (iv) the selective disclosure rules by issuers of material nonpublic information under Regulation
FD.
We
will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. However, the information
we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the
SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available
to you, were you investing in a U.S. domestic issuer.
We
are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We
are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements
applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we are an emerging growth company
until the earliest of (a) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion;
(b) the last day of our fiscal year following the fifth anniversary of the completion of our public offering; (c) the date on which we
have, during the preceding three-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are
deemed to be a “large accelerated filer” under the Exchange Act, which would occur if the market value of our Shares that
are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter.
We
may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As
discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and
current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business
day of an issuer's most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to
us on June 30, 2022. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding
voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents,
or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer
status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are
more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal
proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and
recovery provisions of Section 16 of the Exchange Act. As a U.S. listed public company that is not a foreign private issuer, we will
incur significant additional legal, accounting, SEC reporting, and other expenses that we will not incur as a foreign private issuer.
If
we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or
comply with applicable regulations could be impaired.
As
a small business company, we have limited accounting personnel and other resources with which to address our internal controls and procedures.
Our management has not completed an assessment of the effectiveness of our internal controls over financial reporting, and our independent
registered public accounting firm has not conducted an audit of our internal control over financial reporting. In the course of auditing
our consolidated financial statements for the years ended December 31, 2021 and 2020, we identified several material weaknesses in our
internal control over financial reporting and other control deficiencies as of December 31, 2021. 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.
The
material weaknesses identified to date relate to (i) a lack of accounting staff and resources with appropriate knowledge of generally
accepted accounting principles in the United States (“U.S. GAAP”) and SEC reporting and compliance requirements; (ii) a lack
of sufficient documented financial closing policies and procedures; (iii) a lack of independent directors and an audit committee; (iv)
lack of risk assessment in accordance with the requirement of COSO 2013 framework and (v) a lack of an effective review process by the
accounting manager which led to material audit adjustments to the financial statements.
Following
the identification of the material weaknesses and control deficiencies, we plan to continue to take remedial measures including (i) hiring
more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial
reporting function and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting
and financial reporting training programs for our accounting and financial reporting personnel; (iii) setting up an internal audit function
as well as engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement
of overall internal control; and (iv) appointing independent directors, establishing an audit committee, and strengthening corporate governance.
We
plan to take measures to remedy these material weaknesses. The implementation of these measures may not fully address the material weaknesses
in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct theses
material weaknesses or our failure to discover and address any other material weaknesses could result in inaccuracies in our financial
statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings
on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of
our Ordinary shares, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly
hinders our ability to prevent fraud. We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section
404 of the Sarbanes-Oxley Act of 2002, or Section 404 requires that we include a report from management on our internal control over financial
reporting in our annual report on Form 20-F beginning with this annual report. In addition, once we cease to be an “emerging growth
company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on
the effectiveness of our internal control over financial reporting. Our management may conclude in future reports on the effectiveness
of our internal control over financial reporting, as it has in the report for the year ending December 31, 2021, that our internal control
over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting
is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that
is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or
reviewed, or if it interprets the relevant requirements differently from us. In addition, after we cease to be an “emerging growth
company”, our additional reporting obligations may place an added strain on our management, operational and financial resources
and systems. We may be unable to timely complete our evaluation testing and any required remediation.
We
do not expect to pay any dividends in the foreseeable future.
We
have never declared or paid any dividends on our ordinary shares. We do not anticipate paying any dividends in the foreseeable future.
We currently intend to retain future earnings, if any, to finance operations and expand our business. Subject to applicable law and our
articles of association, our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay
dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general
financial condition, contractual restrictions and other factors that our directors may deem relevant. The Companies Law imposes restrictions
on our ability to declare and pay dividends. Payment of dividends may also be subject to Israeli withholding taxes. See "Taxation and
government programs" for more information.
ITEM
4. INFORMATION
ON THE COMPANY
| |
A. |
HISTORY AND DEVELOPMENT
OF THE COMPANY |
We
were originally incorporated under the name of P.M.E SAL Technologies Ltd. under the laws of the State of Israel on January 29, 2007.
In September 2008, we changed our name to Hold Me Ltd. by filing a Certificate of Amendment with the Registrar of Companies in Israel
to effect a name change. Initially we were engaged in providing website design and development services. We ceased conducting such business
activity in 2011 and had no significant business activity until 2018.
At
the beginning of 2018, we started to develop a mobile-wallet-as-a-service platform for organizations interested in launching mobile wallet
applications for their brand.
Today,
we are a software company offering a well-rounded platform that supports a wide range of digital payment services integrating into mobile
apps , which we refer to as our “Platform”. Our Platform enables the creation of applications and digital wallets for our
customers, including but not limited to financial institutions, brands, retailers, credit card companies, insurance companies and other
organizations, in a quick and cost-saving manner.
Innovation
has always been at the core of our fundamental philosophy, as it continuously pursues various new initiatives, including the commercial
applications of our Platform.
We
are committed to democratizing financial services to improve the financial health of individuals and to increase economic opportunity
for entrepreneurs and businesses of all sizes around the world. Our goal is to enable our customers and their clients to manage and move
their money anywhere in the world, anytime, on any platform, and using any device when sending payments or getting paid. By achieving
our goal, we will continue to expand our product offerings by adding additional services, functions and capabilities with our innovative
and evolving technologies, combined with our marketing efforts.
Our
web address is www.holdme.co.il. The information contained on our website or available through our website is not incorporated by reference
into and should not be considered a part of this annual report on Form 20-F, and the reference to our website in this annual report on
Form 20-F is an inactive textual reference only. The SEC also maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with the SEC. Our filings with the SEC will also be available
to the public through the SEC’s website at https://www.sec.gov. The Crone Law Group, P.C. is our agent in the United States and
its address is 500 Fifth Avenue, Suite 938, New York, NY 10110.
Our
Platform
We
started the research and development for the Platform in 2018 and offered its first commercial application in 2019. Our Platform provides
the technical infrastructure through Amazon cloud to our customers, using Application Programming Interface, or API. API is a computing
interface that defines interactions between multiple software intermediaries, which could be utilized and integrated by our customers
into their own mobile apps. It connects brands, merchants, retailers, financial institutions, insurance companies and other organizations
with their clients through our innovative digital payment solutions.
Our
Revenue Model
We
generate revenues primarily through license fees from our customers (currently consisting of one customer, Galileo). In general, the amount
of the license fee is determined by the range and type of API services offered and consumed on our platform and by the usage volume of
our customer on our API software – meaning number of end-users and transactions (API-calls) triggered on our platform.
For
the year ended December 31, 2021 and 2020, our revenues were NIS98,434 and NIS486,360, respectively.
Our
products
Our
current product portfolio consists of a digital wallet platform (used for commercial engagement of brands with their end-customers) and
a digital banking service that can be used for innovation and development purposes by financial institutions. For the year ended December
31, 2021 and 2020, the digital payment services generated NIS98,434 and NIS486,360, respectively, and digital banking services generated
no revenues.
Digital
Payment Services
Through
our Platform, we provide a digital platform that can support creation and operation of mobile wallets applications that allow our business
customers to stay engaged with their end clients through the application that include payments and loyalty functionalities.
Similar
to peer-to-peer money transfer applications we developed a platform that enables the transfer of payments between end users and between
end users and businesses.
We
will continue to be the active software provider of the digital payment market, while expanding the functionality offered through our
platform to include marketing and marketing automation tasks and capabilities, additional loyalty schemes and more.
Digital
Financial Services
In
today’s hyper-connected world, sustainable digital innovation has become a survival strategy for banks and financial institutions.
As technologies evolve, consumers constantly continue to raise the bar for their expectations of better service, new products, and ongoing
connectivity. Digital creativity and trust must always be reflected to customers as the competitors are using a new wealth of information
to satisfy customers and attempt to attract new ones.
Incumbent
banks' core banking systems are legacy systems built over decades using multiple hardware and software providers. These various parts
have been "patched" one on top of one another raising significant difficulties for connectivity and compatibility, intensifying the already-substantial
security challenges and operational risks. Such patches cannot foster the market-presence of an innovation-minded bank.
Our
Platform may serve as the basis for innovation programs for our potential customers, which simulates a banking core system, so as to create
a digital environment that enables collaboration between their development teams and external software providers, such as start-ups and
development-stage companies, developers, and other financial institutions, without exposing the technological manufacturing environments
of our customers to outsiders.
Since
it saves the effort and time needed to develop an innovation platform, our Platform provides cost-effective and time-saving solutions
to our customers as it enables them to integrate our digital financial services into their mobile apps. This significantly minimizes the
financial and business exposure of our customers to external security threats
Our
Platform serves as a core-banking-as-a-service solution for legacy banks to build their own banking and financial innovation programs,
to connect with developers’ communities, and to meet market and regulatory demands while saving on IT investments across hardware,
software, and support staff.
The
solution delivers three key capabilities:
| |
◾ |
API gateway for external
and internal systems including a ready-to-use set of PCI-DSS certified banking APIs for user and account management, transactions and
payments, credit cards, loans, and more, through a single integration point |
| |
◾ |
Business logic layer
for banking products |
| |
◾ |
Hosted and managed
database |
The
Platform is an exceptionally market-responsive Core-Banking-as-a-Service solution. It’s the bank's innovation mock-up platform
that revs up innovation engines with agile, customer-centric BaaS powers. The bank can have in-house developers, thought leaders, and
intrapreneurs join forces with software providers and fintech firms to innovate easily around a ready-to-use set of banking APIs. Launch
POCs with providers securely, purposefully, and effortlessly with no need to allocate valuable IT resources or risk your existing operational
systems. Platform includes APIs for user and account management, transactions and payments, credit cards, loans, and more – all
that is needed is one integration point to connect the bank with the future.
Use
Cases
The
Platform is a secure, cloud-native, and highly scalable digital innovation platform for innovation-driven legacy banks. Use cases may
include:
◾ Building
a fully-customizable white-label developer portal to invite, manage, and service developers
◾ Running
fintech programs, competitions, and hackathons
◾ Launching
secure and purposeful POCs with the fintech industry
◾ Possessing
a production environment built for the new serverless era
◾ Shortening
time-to-market: from inception to the launch of new digital products and services
◾ Migrating
existing bank products and services to the Innovatn.io micro-services-based architecture
The
market-responsive of the Platform is designed to allow banks to foster digital creativity in-house and reflect it to the outside world.
The Platform is integrable and interoperable with existing systems.
We
anticipate that our future customers may include businesses of all sizes and from various industries in Israel, such as financial institutions,
credit card companies, insurance companies, and retailers, etc. We currently do not have international customers and our sole customer
is located in Israel.
For
the years ended December 31, 2021 and December 31, 2020, we served one customer in Israel. For the year ended December 31, 2020, this
customer accounted for 96% of our revenues and approximately 4% of our revenues were derived from other non-substantial sales.
On
December 5, 2019, we entered into an Agreement for Operation and Sale of Digital Wallets, which was amended by an Addendum to Sales Agreement
on December 27, 2020, with our sole customer Galileo Tech Ltd.
We
granted Galileo an exclusive license to commercialize our technology in Israel. However, we are not bound to make any development, consultation,
management and/or other service of our technology to Galileo or its customers.
In
accordance with the terms of our agreement with Galileo, the licensing fee included an one-time establishment fee of approximately NIS800,000
(including the annual licensing fee for the first year of the agreement) and an annual licensing fee of NIS 100,000 for the second and
third years (2021 and 2022), and NIS 150,000 per additional year commencing December 5, 2020. In addition, Hold Me is also entitled to
12% of all income generated by Galileo from using or sub-licensing the Company's products licensed to Galileo.
Galileo
was also given the right to use our technology for clearing payments between various digital wallets and the businesses registers in Israel.
For such right we are to receive 10% of all gross profits generated by Galileo from their customers.
Galileo
is entitled to market and commercialize in Israel the applications developed by Hold Me and to make changes and/or additions as it deems
fit. For this right we were paid NIS100,000 and are entitled to 10% of all gross profits, of which none has been paid to date.
Pursuant
to the terms of the agreement, we are obligated to fix or repair the failures and/or inadequacies, but not those developed or changed
by Galileo.
The
agreement does not provide for a term. Each party has the right to terminate the agreement if the other party in breach fails to cure
a breach within 30 days or conducts illegal activities or violates the laws.
During
2021 Galileo paid us NIS200,000 which were recognized as licensing revenues for 2 years.
As
a result of Galileo not paying us the full 800,000 owed to us for the year ended December 31, 2020 in accordance with the terms of the
Agreement, we signed an Addendum with Galileo on December 27, 2020. According to the Addendum, Galileo undertook to pay us (1) NIS120,000
by December 31, 2020 (which was fully paid); (2) NIS150,000 by January 31, 2021 (which was fully paid) and (3) in exchange for NIS180,000
owed, Galileo issued us 128,571 shares of Galileo. In addition, the payment of the NIS100,000 annual registration fee was postponed until
June 2021, when it was fully paid.
The
shares we received in Galileo were assigned to Mr. Shalom, our sole officer and a member of our board of directors, in consideration for
the reduction in the debt owed to him. See “Related Party Transactions”.
Non-Bank
Lending License
On
November, 2022, we were issued a limited license from the Israeli Authority regulating Capital Markets, Insurance and Savings to operate
as a non-banking lender in Israel. This license enables us to lend up to NIS 25,000,000 as a non-bank. To date we have not utilized this
license.
Our
Suppliers
Our
only relationship with vendors are with a software company in India which assisted us in developing our software and Amazon. Amazon
provides us networking and hosting services through which additional software-as-a-service products and services are offered.
Intellectual
Property
We
do not have any intellectual property protection on our source code or any other aspect of the Platform.
Marketing
and Competition
The
Company does not currently have the resources to market its Platform, but when and if it does, it will attempt to generate customers by:
| |
• |
Direct sales to business
customers; |
| |
• |
Establishment of subsidiaries
to do sales and marketing in different geographies; |
| |
• |
Engaging with distributors
and partners to engage in distributors, reseller or other forms of marketing; and |
In
addition we may launch paid digital campaign(s) on different relevant social media networks (mainly LinkedIn) to approach relevant organizations
and decision makers in those organizations.
Leading
Competitors
There
are many companies, both large and small, which are our competitors. Companies to which we hope to offer the Platform can choose to develop
their own mobile wallet. Software development companies can be engaged by our potential customers to develop a mobile wallet. Software
or payment companies such as Stripe, Paypal and GooglePay, which launched its service in Israel on December 7, 2021, can offer services
and solutions which can easily enable customers to have their own mobile wallets.
Competitive
Challenges and Advantages
Given
the extremely fast changes that occur in the overall technology world, including in the payment and software sectors, management does
not believe that the Platform has any competitive advantage.
Development
and Expansion Strategy
The
key components of our development and expansion strategy over the next two-to-five years are as follows:
| |
• |
ongoing continues development
of the company's products. |
| |
• |
marketing and sales
efforts of the company's products to potential customers. |
| |
• |
licensing or buying
of additional technology, software or products that may increase the attractiveness or the price of the company's products. |
| |
• |
the Company will be
looking to form commercial partnerships with software distributors and integrators – to expand its market reach and sales. |
| |
• |
once substantial sales
are achieved, the company is looking to expand its product offering by developing, acquiring or licensing additional products relevant
for its customer-base. |
Government
legislation and regulation
Actions
of our users
In
many jurisdictions, including the United States and countries in Europe, laws relating to the liability of providers of online services
for activities of their users and other third parties are currently being tested by a number of claims, including actions based on defamation,
breach of data protection and privacy rights and other torts, unfair competition, copyright and trademark infringement and other theories
based on the nature and content of the materials searched, the ads posted, or the content uploaded by users. Any court ruling or other
governmental action that imposes liability on providers of online services for the activities of their users and other third parties could
harm our business. In addition, rising concern about the use of the Internet for illegal conduct, such as the unauthorized dissemination
of national security information, money laundering or supporting terrorist activities may in the future produce legislation or other governmental
action that could require changes to our products or services, restrict or impose additional costs upon the conduct of our business or
cause users to abandon material aspects of our service.
Data
protection
We
hold certain personal data of our users, including their username, email address, IP address, device identifiers, address, telephone number,
photo, transactional data, consumption habits (such as purchase history), profession and education, location, social media account log
in details and username and additional information regarding the use of our Marketplace (such as published portfolio, Gig information,
purchases, ratings and additional information the user decides to upload and share with us or other users of our marketplace), and may
hold certain personal data of the visitors to our users' websites. In addition, we hold certain personal data of our employees and contractors.
We operate in accordance with the terms of our privacy policies, which describe our practices concerning the collection, use, transmission
and disclosure of personal data. As a "database owner" pursuant to the Privacy Law, we are subject to certain obligations and restrictions,
such as the obligation to register databases containing personal data, the requirement to properly notify the data subjects regarding
the nature of the collection and use of their personal data prior to their collection, the requirement to obtain valid informed consents
from the data subjects prior to using their personal data, conditions with respect to transfer of personal data outside Israeli borders,
conditions and restrictions regarding the use of any personal data for direct mailing, obligations to meet certain data subject rights
(such as access, rectification and deletion rights) as well as data security obligations. In this respect, the new Israeli Privacy Protection
Regulations (Data Security) 2017 ("Data Security Regulations"), which entered into effect in Israel in May 2018, impose obligations with
respect to the manner personal data is processed, maintained, transferred, disclosed, accessed and secured. The Data Security Regulations
may require us to adjust our data protection and data security practices, information security measures, certain organizational procedures,
applicable positions (such as an information security manager) and other technical and organizational security measures. The Israeli Privacy
Protection Authority may initiate administrative inspection proceedings, from time to time, without any suspicion of any particular breach
of the Privacy Law, as the Authority has done in the past with respect to dozens of Israeli companies in various business sectors. In
addition, to the extent that any administrative supervision procedure is initiated by the Israeli Privacy Protection Authority that reveals
certain irregularities with respect to our compliance with the Privacy Law, in addition to our exposure to administrative fines, civil
claims (including class actions) and in certain cases criminal liability, we may also need to take certain remedial actions to rectify
such irregularities, which may increase our costs.
While
it is generally the laws of the jurisdiction in which a business is located that apply, there is a risk that data protection regulators
of other countries may seek jurisdiction over our activities in locations in which we process data or have users but do not have an operating
entity. Where the local data protection and privacy laws of a jurisdiction apply, we may be required to register our operations in that
jurisdiction or make changes to our business so that user data is only collected and processed in accordance with applicable local law.
In addition, because our services are accessible worldwide, certain foreign jurisdictions may claim that we are required to comply with
their privacy and data protection laws, including in jurisdictions where we have no local entity, employees, or infrastructure. In such
cases, we may require additional legal review and resources to ensure compliance with any applicable privacy or data protections laws
and regulations. In addition, in many jurisdictions there is new legislation that may affect our business and require additional legal
review.
United
States
A
number of legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning
data protection could affect us. For example, in June 2018, California passed the California Consumer Privacy Act ("CCPA"), which entered
into effect on January 1, 2020 and provides new data privacy rights for consumers and new operational requirements for companies. Additionally,
some other states have passed proactive, rather than reactive, information security legislation. These state laws require that certain
minimum protections and security measures be taken to protect personal data. The costs of compliance with these laws may increase in the
future as a result of changes in interpretation.
Europe
European
legislators adopted the GDPR, repealing the 1995 European Data Protection Directive (Directive 95/46/EC). We are defined as a "Data Controller"
with respect to the personal data of our users that we collect and are therefore subject to a number of key legal obligations under the
GDPR. In addition to reflecting existing requirements that already existed under the old data protection regime, such as, among other
things, requirements to provide users with a "fair processing notice" if we process their data, ensure that inaccurate data is corrected,
only retain data for so long as is necessary and not transfer data outside the European Economic Area to jurisdictions which do not ensure
an adequate level of protection of personal data without taking certain safeguards, the GDPR also implemented new, more stringent operational
and procedural requirements for our use of personal data. These include expanded prior information requirements in light of the transparency
principle to tell our users how we may use their personal data, increased controls on profiling users, increased rights for users to access,
control and delete their personal data and mandatory data breach notification requirements. In addition, there are significantly increased
administrative fines of the greater of €20 million and 4% of global turnover (as well as the right to compensation for financial
or non-financial damages claimed by any individuals under Article 82 of the GDPR).
The
European ePrivacy Directive (Directive 2002/58/EC as amended by Directive 2009/136/EC) obliges the EU member states to introduce certain
national laws regulating privacy or data protection in the electronic communications sector. Pursuant to the requirements of the ePrivacy
Directive, companies must, among other things, obtain consent to store information or access information already stored, on a user's terminal
equipment (e.g., computer or mobile device). These requirements predominantly regulate the use by companies of cookies and similar technologies.
Prior to providing such consent, users must receive clear and comprehensive information, both in accordance with the more stringent requirements
under the GDPR. Certain exemptions to these requirements on which we rely are available for technical storage or access for the sole purpose
of carrying out the transmission of a communication over an electronic communications network or as strictly necessary to provide a service
explicitly requested by the user.
In
recent years, U.S. and European lawmakers and regulators have expressed concern over the use of third-party cookies and similar technologies
for online behavioral advertising, and laws in this area are also under reform. In the European Union, current national laws that implement
the ePrivacy Directive will soon be replaced by an EU regulation known as the ePrivacy Regulation. In the European Union, informed consent
is required for the placement of a cookie on a user's device and for direct electronic marketing, and the GDPR also imposes additional
conditions in order to satisfy such consent, such as a prohibition on pre-checked consents and on bundled consents thereby requiring users
to affirmatively consent for a given purpose through separate tick boxes. The draft ePrivacy Regulation retains these additional consent
conditions and also imposes the strict opt-in marketing rules on direct marketing that is "presented" on a web page rather than sent by
email, alters rules on third-party cookies and similar technology and significantly increases penalties for breach of the rules. Regulation
of cookies and similar technologies may lead to broader restrictions on our marketing and personalization activities and may negatively
impact our efforts to understand users' internet usage, as well as the effectiveness of our marketing and our business generally. Such
regulations may have a negative effect on businesses, including ours, that collect and use online usage information for consumer acquisition
and marketing, it may increase the cost of operating a business that collects or uses such information and undertakes online marketing,
it may also increase regulatory scrutiny and increase potential civil liability under data protection or consumer protection laws. In
response to marketplace concerns about the usage of third-party cookies and web beacons to track user behaviors, providers of major browsers
have included features that allow users to limit the collection of certain data generally or from specified websites, and the ePrivacy
Regulation draft also advocates the development of browsers that block cookies by default. These developments could impair our ability
to collect user information, including personal data and usage information, that helps us provide more targeted advertising to our current
and prospective consumers, which could adversely affect our business, given our use of cookies and similar technologies to target our
marketing and personalize the consumer experience.
As
the text of the ePrivacy Regulation is still under development and currently in draft form, and as further guidance is issued and interpretation
of both the ePrivacy Regulation and the GDPR develop, it is difficult to assess the impact of the ePrivacy Regulation on our business
or operations, but it may require us to modify our data practices and policies and we could incur substantial costs as a result.
| |
C. |
ORGANIZATIONAL STRUCTURE |
The
Company currently has no subsidiaries and is not part of a group of companies.
| |
D. |
PROPERTY, PLANT AND
EQUIPMENT |
We
currently have an office in the house of Menachem Shalom, our sole officer and a member of our board of directors. We consider our
current office space sufficient to meet our anticipated needs for the foreseeable future and is suitable for the conduct of our business.
ITEM
6. DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
| |
A. |
DIRECTORS AND SENIOR
MANAGEMENT |
The
following table sets forth information regarding our directors, executive officers and other key employees as of December 31, 2021:
|
Name |
Age |
Position |
|
|
|
|
|
Menachem
Shalom |
47 |
Chief
Executive Officer, Chief Financial Officer and Director |
|
Gad
Zohar |
56 |
Director |
|
Igal
Chemerinsky |
51 |
Director |
Set
forth below is a brief description of the background and business experience of our executive officers and directors:
Menachem
Shalom, Chief Executive Officer, Chief Financial Officer and Director
Menachem
Shalom has been our Chief Executive Officer, Chief Financial Officer and member of our Board of Directors since 2008. Mr. Shalom founded
and served as the chief executive officer for Wayerz Solutions Ltd. from January 2015 to August 2017. From August 2013 to April 2014,
Mr. Shalom served as vice president development, sales and marketing, of Dsnr Media Group Ltd. Mr. Shalom obtained a LLM with honors from
Columbia University School of Law in 2000, a MBA from Hebrew University in 2003 and a LLB, magna cum laude, from Hebrew University of
Jerusalem in 1998.
Gad
Zohar, Director
Gad
Zohar has been a director of the Company since July 28, 2021. Mr. Zohar manages Dag Networks Ltd., an Israeli private company that offers
information technology, telecommunications and cloud services and solutions for businesses since 2011, when he founded the company.
Igal
Chemerinsky, Director
Igal
Chemerinsky has been a director of the Company since July 28, 2021. Since 2020, Mr. Chemerinsky has been the chief revenue officer of
Parknav Ltd., a startup developing real-time on-street parking with a highly accurate and scalable solution. From 2019 to 2020, Mr. Chemerinsky
served as the EVP of Global Sales of Enably Ltd.- a SaaS platform that utilizes Artificial Intelligence, Natural Language Processing (NLP)
and advanced algorithms for Online Training, e-Learning, knowledge delivery, compliance, regulations, and content delivery. From 2017
to 2019, he served as the VP of EMEA Sales of Votiro Cybersec Ltd., a global leader in Email & File secure gateways & end-point
solutions protecting organizations against zero-day exploits and other ongoing cyber threats.
Family
Relationships
There
are no family relationships between any of our executive officers and our directors.
Set forth below is the
compensation paid during the fiscal year ended December 31, 2021 for our sole executive officer.
|
Name |
2021
Compensation |
|
|
|
|
Menachem
Shalom |
NIS
420,000 |
The
amount invoiced by Mr. Shalom was pursuant to the terms of the Management Services Agreement, described below.
Management Services Agreement
We
entered into a written management services agreement with our sole executive officer and director as of December 30, 2017 to provide us
services full time. Mr. Shalom shall be entitled to receive a monthly management fee of NIS35,000 (USD10,606) plus VAT, which shall increase
to NIS45,000 (USD13,636) plus VAT upon completion of the development of the system and the commencement of the sales stage. Upon completion
of fundraising in the sum of NIS5,000,000 (USD1,515,152) or more, Mr. Shalom shall be entitled to payment of monthly fee of NIS60,000
(USD18,181) plus VAT. Mr. Shalom is also entitled to reimbursement for travel expenses as well as all his expenses related to the execution
of the agreement. We have the right to terminate the agreement with Mr. Shalom upon 6-months’ notice.
C. BOARD
PRACTICES
Pursuant
to the Companies Law, the management of our business is vested in our board of directors. Our board of directors may exercise all powers
and may take all actions that are not specifically granted to our shareholders. Our board of directors shall from time to time appoint
one or more general managers, who are responsible for our day-to-day management and have individual responsibilities established by our
board of directors. General managers are appointed by and serve at the discretion of our board of directors, subject to any applicable
employment agreements we have entered into with the general managers. At present, our sole executive officer is Mr. Menachem Shalom.
Under
the Companies Law, we are not required to have a majority of independent directors. We are required to appoint at least two external directors.
According to our articles of association, our board of directors shall consist of up to 11 directors. Currently, our board of directors
consists of three directors, and we have not appointed external directors as of the date of this Annual Report. Pursuant to our
articles of association, other than the external directors, for whom special election requirements apply under the Companies Law, our
directors are elected at an annual general meeting of our shareholders and serve on our board of directors until the next annual general
meeting at which one or more directors are elected or until they are removed by the majority of our shareholders at an annual or special
general meeting of our shareholders or upon the occurrence of certain events, in accordance with the Companies Law and our articles of
association. In addition, our articles of association allow our board of directors to appoint directors, other than external directors,
to fill vacancies in the board of directors temporarily (provided, however, that if they number less than three directors, they may act
only in an emergency or to fill the office of director that has become vacant up to the minimum number or in order to call a general meeting
of the Company for the purpose of electing directors to fill any or all vacancies, so that there are at least three directors).
Our
directors do not have written service contracts and are not required to have them under the Israel Companies Law.
Under
the Companies Law, our board of directors must determine the minimum number of directors who are required to have financial and accounting
expertise. Under applicable regulations, a director with financial and accounting expertise is a director who, by reason of his or her
education, professional experience and skill, has a high level of proficiency in and understanding of business accounting matters and
financial statements. He or she must be able to thoroughly comprehend the financial statements of the listed company and initiate debate
regarding the manner in which financial information is presented. In determining the number of directors required to have such expertise,
a company’s board of directors must consider, among other things, the type and size of the company and the scope and complexity
of its operations. Our board of directors has determined that Mr. Shalom has such requisite financial and accounting expertise.
External
Directors
Under
the Companies Law, a public company is required to appoint at least two external directors to serve on its board of directors. External
directors must meet stringent standards of independence and must be appointed by the non-controlling shareholders of the Company.
We have not appointed external directors as of the date of this Annual Report.
The
provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must
be elected by a majority vote of the shares present and voting on the matter at a shareholders meeting, provided that either:
| |
|
● |
such
majority includes at least a majority of the shares held by all shareholders who are non-controlling shareholders and shareholders who
do not have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship
with a controlling shareholder) that are voted at the meeting, excluding abstentions, which we refer to as a disinterested majority; or |
| |
|
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the
total number of shares held by shareholders who are non-controlling shareholders and shareholders who do not have a personal interest
in the election of the external director (other than a personal interest not derived from a relationship with a controlling shareholder)
voted against the election of the external director does not exceed 2% of the aggregate voting rights in the company. |
Under
the Companies Law, the term “controlling shareholder” means a shareholder with the ability to direct the activities of the
company, other than by virtue of serving as an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder
holds 50% or more of the voting rights in a company or has the right to appoint more than half of the directors of the company or its
general manager. For the purpose of approving transactions with controlling shareholders, a controlling shareholder is deemed to include
any shareholder that holds 25% or more of the voting rights in a public company if no other shareholder holds more than 50% of the voting
rights in the company. For purposes of determining the holding percentage stated above, two or more shareholders who have a personal interest
in a transaction that is brought for the company’s approval are deemed as joint holders.
The
term “personal interest” is defined in the Companies Law as a person’s or entity’s personal interest in an act
or a transaction of a company, (i) including the personal interest of (a) any spouse, sibling, parent, grandparent or descendant of the
persons, any descendant, sibling or parent of a spouse of the person and the spouse of any of the foregoing; and (b) an entity in which
the person or entity or any of the foregoing relatives of the person serves as a director or the chief executive officer, owns at least
5% of its issued share capital or voting rights or has the right to appoint one or more directors or the chief executive officer, but
(ii) excluding a personal interest arising solely from the ownership of shares. In the case of a person voting by proxy, “personal
interest” includes the personal interest of the proxy holder or the shareholder granting the proxy (even if the proxy holder has
no personal interest in the matter), whether or not the proxy holder has discretion how to vote.
The
initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that
capacity for up to two additional three-year terms, provided that either:
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his
or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting
rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling,
disinterested shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company, and provided further that
the external director is not an affiliated or competing shareholder, as defined in the Companies Law, or a relative of such a shareholder
at the time of the appointment, and is not affiliated with such a shareholder at the time of appointment or within the two years preceding
the date of appointment; or |
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● |
his
or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the
same majority required for the initial election of an external director (as described above). |
External
directors may be removed only by a special general meeting of shareholders called by the board of directors after the board has determined
that circumstances allow such dismissal, at the same special majority of shareholders required for their election or by a court, and in
both cases only if the external directors cease to meet the statutory qualifications for their appointment or if they violate their duty
of loyalty to our company. In the event of a vacancy created by an external director which causes the company to have fewer than two external
directors, the board of directors is required under the Companies Law to call a shareholders meeting as soon as possible to appoint such
number of new external directors in order that the company thereafter has two external directors.
Each
committee of the board of directors that exercises the powers of the board of directors must include at least one external director, except
that the audit committee and the compensation committee must include all external directors then serving on the board of directors. Under
the Companies Law, external directors of a company are prohibited from receiving, directly or indirectly, any compensation for their services
as external directors other than pursuant to the Companies Law and the regulations promulgated thereunder. Compensation of an external
director is determined prior to his or her appointment and may not be changed during any three-year term subject to certain exceptions.
The
Companies Law provides that a person is not qualified to serve as an external director if (i) the person is a relative of a controlling
shareholder of the company, or (ii) if that person or his or her relative, partner, employer, another person to whom he or she was directly
or indirectly subordinate, or any entity under the person’s control, has or had, during the two years preceding the date of appointment
as an external director: (a) any affiliation with the company, with any person or entity controlling the company or a relative of such
person at the time of appointment, or with any entity controlled by or under common control with the company at the time of appointment
or during the two years preceding the appointment; or (b) in the case of a company with no controlling shareholder or a shareholder holding
25% or more of its voting rights, had at the date of appointment as an external director, any affiliation with a person then serving as
chairman of the board or chief executive officer, a holder of 5% or more of the issued share capital or voting power in the company or
the most senior financial officer.
The
term “relative” is defined as a spouse, sibling, parent, grandparent or descendant; spouse’s sibling, parent or descendant;
and the spouse of each of the foregoing persons.
The
term “affiliation” includes (subject to certain exceptions): an employment relationship; a business or professional relationship
even if not maintained on a regular basis (excluding insignificant relationships); control; and service as an office holder, excluding
service as a director in a private company prior to the initial public offering of its shares if such director was appointed as a director
of the private company in order to serve as an external director following the initial public offering.
In
addition, no person may serve as an external director if that person’s positions or professional or other activities create, or
may create, a conflict of interest with that person’s responsibilities as a director or otherwise interfere with that person’s
ability to serve as a director or if the person is an employee of the Israel Securities Authority or of an Israeli stock exchange. A person
may furthermore not continue to serve as an external director if he or she received direct or indirect compensation other than as permitted
by the Companies Law and the regulations promulgated thereunder.
Following
the termination of an external director’s service on a board of directors, such former external director and his or her spouse and
children and other relatives may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity
under its controlling shareholder’s control. This includes engagement as an officer or director of the company or a company controlled
by its controlling shareholder or employment by, or provision of services to, any such company for consideration, either directly or indirectly,
including through a corporation controlled by such person. This restriction extends for a period of two years with regard to the former
external director and his or her spouse or child and for one year with respect to other relatives of the former external director.
If
at the time at which an external director is appointed all members of the board of directors who are not controlling shareholders or relatives
of controlling shareholders of the company are of the same gender, the external director to be appointed must be of the other gender.
A director of one company may not be appointed as an external director of another company if a director of the other company is acting
as an external director of the first company at such time.
According
to the Companies Law and regulations promulgated under the Companies Law, a person may be appointed as an external director only if he
or she has professional qualifications or if he or she has accounting and financial expertise (each, as defined below). At least one of
the external directors must be determined by our board of directors to have accounting and financial expertise.
A
director with accounting and financial expertise is a director who, due to his or her education, experience and skills, possesses an expertise
in, and an understanding of, financial and accounting matters and financial statements, such that he or she is able to understand the
financial statements of the company and initiate a discussion about the presentation of financial data. A director is deemed to have professional
qualifications if he or she has any of (i) an academic degree in economics, business management, accounting, law or public administration,
(ii) an academic degree or has completed another form of higher education in the primary field of business of the company or in a field
which is relevant to his/her position in the company, or (iii) at least five years of experience serving in one of the following capacities,
or at least five years of cumulative experience serving in two or more of the following capacities: (a) a senior business management position
in a company with a significant volume of business; (b) a senior position in the company’s primary field of business; or (c) a senior
position in public administration or service. The board of directors is charged with determining whether a director possesses financial
and accounting expertise or professional qualifications.
Audit
Committee
Israeli
Companies Law Requirements
Under
the Companies Law, a public company is required to appoint an audit committee. The audit committee must be comprised of at least three
directors, including all of the external directors, one of whom must serve as chairman of the committee. The audit committee may not include
the chairman of the board, a controlling shareholder of the company or a relative of a controlling shareholder, a director employed by
or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder
or a director who derives most of his or her income from a controlling shareholder.
In
addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors,
within the meaning of the Companies Law. In general, an “unaffiliated director” under the Companies Law is defined as either
an external director or a director who meets the following criteria:
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● |
the
audit committee has determined that he or she meets the qualifications for being appointed as an external director, except for (i) the
requirement that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered
outside of Israel or are listed outside of Israel); and (ii) the requirement for accounting and financial expertise or professional qualifications;
and |
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he
or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of less than
two years in the service shall not be deemed to interrupt the continuation of the service. |
Audit
Committee Role
Under
the Companies Law, a company’s audit committee is responsible for:
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determining
whether there are deficiencies in the business management practices of our company, including in consultation with our internal auditor
or the independent auditor, and making recommendations to the board of directors to improve such practices; |
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determining
whether to approve certain related party transactions (including transactions in which an office holder has a personal interest) and whether
such transaction is extraordinary or material under Companies Law (see “- Approval of Related Party Transactions under Israeli Law”); |
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determining
whether a competitive process must be implemented for the approval of certain transactions with controlling shareholders or its relative
or in which a controlling shareholder has a personal interest (whether or not the transaction is an extraordinary transaction), under
the supervision of the audit committee or other party determined by the audit committee and in accordance with standards determined by
the audit committee, or whether a different process determined by the audit committee should be implemented for the approval of such transactions; |
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determining
the process for the approval of certain transactions with controlling shareholders or in which a controlling shareholder has a personal
interest that the audit committee has determined are not extraordinary transactions but are not immaterial transactions; |
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where
the board approves the working plan of the internal auditor, to examine such working plan before its submission to the board and proposing
amendments thereto; |
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examining
our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools
to dispose of its responsibilities; |
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examining
the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors
or shareholders, depending on which of them is considering the compensation of our auditor; and |
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establishing
procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to such
employees. |
We
have not yet established an audit committee. In lieu of an audit committee, our board of directors is responsible for reviewing
and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual
audit of the Company’s financial statements and other services provided by the Company’s independent public accountants. The
board of directors reviews the Company’s internal accounting controls, practices and policies.
Financial
Statement Examination Committee
Under
the Companies Law, the board of directors of a public company must appoint a financial statement examination committee, which consists
of members with accounting and financial expertise or the ability to read and understand financial statements. Our audit committee holds
the responsibilities and duties of a financial statement examination committee, as permitted under the relevant regulations promulgated
under the Companies Law. From time to time, as necessary and required in order to approve our financial statements, the audit committee
will hold separate meetings prior to the scheduled meetings of the board in respect of the financial statements. The function of a financial
statement examination committee is to discuss and provide recommendations to the board of directors (including reporting any deficiencies
found) with respect to the following issues: (a) estimations and assessments made in connection with the preparation of financial statements;
(b) internal controls related to the financial statements; (c) completeness and appropriateness of the disclosure in the financial statements;
(d) the accounting policies adopted and the accounting treatment implemented in material matters of the Company; and (e) value evaluation,
including the assumptions and assessments on which evaluations are based and the supporting data in the financial statements.
Compensation
Committee and Compensation Policy
A
public company in Israel is required to have a compensation committee as required by the Companies Law. The compensation committee must
be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of the
compensation committee. Each compensation committee member that is not an external director must be a director whose compensation does
not exceed an amount that may be paid to an external director under regulations promulgated under the Companies Law. The compensation
committee is subject to the same Companies Law restrictions as the audit committee as to who may not be a member of the committee. See
“- Audit Committee - Israeli Companies Law Requirements.”
Compensation
Committee Role
Our
board of directors has not yet adopted a compensation committee charter. One adopted, the audit committee charter will set forth
the responsibilities of the audit committee consistent with the regulations of the SEC, as well as the requirements for compensation committees
under the Companies Law, including the following:
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recommending
to the board of directors for its approval (i) a compensation policy; (ii) whether a compensation policy should continue in effect, if
the then-current policy has a term of greater than three years (approval of either a new compensation policy or the continuation of an
existing compensation policy must in any case occur every three years); and (iii) periodic updates to the compensation policy. See “-
Compensation Policy.” In addition, the compensation committee is required to periodically examine the implementation of the compensation
policy; |
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the
approval of the terms of employment and service of office holders (including determining whether the compensation terms of a candidate
for chief executive officer of the company need not be brought to approval of the shareholders); and |
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reviewing
and approving grants of options and other incentive awards to persons other than office holders to the extent such authority is delegated
by our Board of Directors, subject to the limitations on such delegation as provided in the Companies Law. |
We
have not yet established a compensation committee.
Compensation
Policy
Under
the Companies Law, the duties of the compensation committee include the recommendation to the company’s board of directors of a
policy regarding the terms of engagement of office holders, as such term is defined in the Companies Law, to which we refer to as a compensation
policy, and any extensions and updates thereto. The compensation policy must be adopted by the company’s board of directors, after
considering the recommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders,
which approval requires a Special Approval for Compensation (as defined below under “- Approval of Related Party Transactions under
Israeli Law - Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions”).
The
compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders,
including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement.
The compensation policy must relate to certain factors, including advancement of the company’s objectives, the company’s business
plan and its long-term strategy, and creation of appropriate incentives for office holders, and must consider (among other things) the
company’s risk management, size and the nature of its operations. The compensation policy must also consider the following additional
factors:
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the
knowledge, skills, expertise and accomplishments of the relevant office holder; |
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the
office holder’s roles and responsibilities and prior compensation agreements with him or her; |
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the
relationship between the terms offered and the average compensation of the other employees of the company (including any employees employed
through manpower companies); |
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the
impact of disparities in salary upon work relationships in the company; |
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the
possibility of reducing variable compensation at the discretion of the board of directors, and the possibility of setting a limit on the
exercise value of non-cash variable equity-based compensation; and |
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as
to severance compensation, the period of employment or service of the office holder, the terms of his or her compensation during such
period, the company’s performance during such period, the person’s contribution towards the company’s achievement of
its goals and the maximization of its profits, and the circumstances under which the person is leaving the company. |
The
compensation policy must also include the following principles:
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the
link between variable compensation and long-term performance and measurable criteria; |
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the
relationship between variable and fixed compensation, and the ceiling for the value of variable compensation; |
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the
conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data
upon which such compensation was based was inaccurate and was required to be restated in the company’s financial statements; |
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the
minimum holding or vesting period for variable, equity-based compensation; and |
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maximum
limits for severance compensation. |
Internal
Auditor
Under
the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee.
An internal auditor may not be:
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a
person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights; |
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a
person (or a relative of a person) who has the power to appoint a director or the general manager of the company; |
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an
office holder, within the meaning of the Companies Law (including a director and the general manager) of the company (or a relative thereof);
or |
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a
member of the company’s independent accounting firm, or anyone on his or her behalf. |
The
role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. The
audit committee is required to oversee the activities and to assess the performance of the internal auditor as well as to review the internal
auditor’s work plan.
As
of the date hereof, we have no internal auditor.
Approval
of related party transactions under Israeli law
Fiduciary
duties of directors and officers
The
Companies Law codifies the fiduciary duties that office holders owe to a company. An office holder is defined in the Companies Law as
a general manager, chief business manager, deputy general manager, vice general manager, executive Vice President, vice President, any
other person assuming the responsibilities of any of these positions regardless of such person's title, a director and any other manager
directly subordinate to the general manager. Each person listed in the table under "Management—Executive officers and directors"
is an office holder under the Companies Law.
An
office holder's fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with
the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of
loyalty requires that an office holder act in good faith and in the best interests of the company.
Disclosure
of personal interests of an office holder and approval of certain transactions
The
Companies Law requires that an office holder promptly disclose no later than the first Board Meeting in which such transaction is discussed,
to the board of directors any personal interest that he or she may have and all related material information known to him or her concerning
any existing or proposed transaction with the company. A personal interest includes an interest of any person in an act or transaction
of a company, including a personal interest of one's relative or of a corporate body in which such person or a relative of such person
is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the
general manager, but excluding a personal interest stemming solely from one's ownership of shares in the company. A personal interest
includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder
with respect to his or her vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest
in the matter.
If
it is determined that an office holder has a personal interest in a non-extraordinary transaction, meaning any transaction that is in
the ordinary course of business, on market terms or that is not likely to have a material impact on the company's profitability, assets
or liabilities, approval by the board of directors is required for the transaction, unless the company's articles of association provide
for a different method of approval. Any such transaction that is not for the benefit of the company may not be approved by the board of
directors.
In
addition to any approval required by the articles of association, approval first by the company's audit committee and subsequently by
the board of directors, and, under specified circumstances, by a meeting of the shareholders, as well, is required for an extraordinary
transaction (meaning, any transaction that is not in the ordinary course of business, not on market terms or that is likely to have a
material impact on the company's profitability, assets or liabilities) in which an office holder has a personal interest.
A
director and any other office holder who has a personal interest in a transaction which is considered at a meeting of the board of directors
or the audit committee may generally (unless it is with respect to a transaction which is not an extraordinary transaction) not be present
at such a meeting or vote on that matter however, with respect to an office holder, he/she may be present at the meeting discussions if
the chairman determines that the presence of the office holder is necessary in order to present the matter. However, if a majority of
the members of the audit committee or the board of directors has a personal interest in the approval of such a transaction then all of
the directors may participate in the meeting with respect to such transaction and vote on the approval thereof and, in such case, shareholder
approval is also required.
Certain
disclosure and approval requirements apply under Israeli law to certain transactions with controlling shareholders, certain transactions
in which a controlling shareholder has a personal interest and certain arrangements regarding the terms of service or employment of a
controlling shareholder.
For
a description of the approvals required under Israeli law for compensation arrangements of officers and directors, see above under "—Compensation
of directors and executive officers."
Shareholder
duties
Pursuant
to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders
and to refrain from abusing his or her power with respect to the company, including, among other things, in voting at a general meeting
and at shareholder class meetings with respect to the following matters:
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an amendment to the company's articles of association; |
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• |
an increase of the company's authorized share
capital; |
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interested party transactions that require shareholder
approval. |
In
addition, a shareholder has a general duty to refrain from discriminating against other shareholders.
Certain
shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder
who knows that it has the power pursuant to the provisions of a company's articles of association, to determine the outcome of a shareholder
vote and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company. The Companies
Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a breach of contract
adjusted according to the circumstances, and taking into account the status within the company of such shareholder, will also apply in
the event of a breach of the duty of fairness.
Exculpation,
insurance and indemnification of office holders
We
entered into an indemnification agreement with Menachem Shalom as of April 22, 2021 to indemnify Mr. Shalom to the fullest extent permitted
under Israeli law. We are not contractually obligated to indemnify Mr. Shalom for, among others, (i) a breach of duty of loyalty, unless
such breach was done in good faith and having reasonable cause to assume that such act would not prejudice the interests of the Company
and (ii) a willful or reckless breach of his duty of care, unless such breach was done solely in negligence.
Under
the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company
may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result
of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles
of association include such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend
or distribution to shareholders.
An
Israeli company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed as an
office holder, either in advance of an event or following an event, provided a provision authorizing such indemnification is contained
in its articles of association:
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• |
financial
liability imposed on him or her in favor of another person pursuant to a judgment, settlement or arbitrator's award approved by a court.
However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking
must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company's activities when the
undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under
the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria; |
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• |
reasonable litigation
expenses, including attorneys' fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against
him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against
such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty,
was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial
liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent and (2) in connection
with a monetary sanction; |
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• |
reasonable litigation
expenses, including attorneys' fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her
by the company, on its behalf or by a third-party or in connection with criminal proceedings in which the office holder was acquitted
or as a result of a conviction for an offense that does not require proof of criminal intent; and |
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• |
expenses, including
reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against
such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding,
pursuant to certain provisions of the Israeli Securities Law, 1968 (the "Israeli Securities Law"). |
An
Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to
the extent provided in the company's articles of association:
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• |
a breach of the duty
of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act
would not prejudice the company; |
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• |
a breach of the duty
of care to the company or to a third-party, including a breach arising out of the negligent conduct of the office holder; |
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• |
a financial liability
imposed on the office holder in favor of a third-party; |
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• |
a financial liability
imposed on the office holder in favor of a third-party harmed by a breach in an administrative proceeding; and |
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• |
expenses, including
reasonable litigation expenses and legal fees, incurred by the office holder as a result of an administrative proceeding instituted against
him or her pursuant to certain provisions of the Israeli Securities Law. |
An
Israeli company may not indemnify or insure an office holder against any of the following:
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• |
a breach of the duty
of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not
prejudice the company; |
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• |
a breach of the duty
of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; |
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• |
an act or omission
committed with intent to derive illegal personal benefit; or |
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• |
a fine, monetary sanction
or forfeit levied against the office holder. |
Under
the Companies Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee and the
board of directors (and, with respect to directors and the Chief Executive Officer, by shareholders).
Our
articles of association allow us to indemnify and insure our office holders for any liability imposed on them as a consequence of an act
(including any omission) which was performed by virtue of being an office holder.
In
the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is
against public policy and therefore unenforceable.
Remuneration
of Directors
Under
the Companies Law, remuneration of directors is subject to the approval of the compensation committee (until recently of the audit committee),
thereafter by the board of directors and thereafter by the general meeting of the shareholders. In case the remuneration of the directors
is in accordance with regulation applicable to remuneration of the external directors then such remuneration shall be exempt from the
approval of the general meeting.
D. EMPLOYEES
Other
than Mr. Shalom, our sole officer and a member of our board of directors, we have no employees.
E. SHARE
OWNERSHIP
The
following table sets forth, as of the date of this annual report, the beneficial ownership of our ordinary shares by each executive officer
and director, by each person known by us to beneficially own more than 5% of our ordinary shares and by the executive officers and directors
as a group. As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting
of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition
of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have “beneficial ownership”
of any security that such person has the right to acquire within 60 days after such date.
The
persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the SEC, a person (or
group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares the
power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly,
more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of
any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our ordinary shares.
The
percentage of shares beneficially owned has been computed on the basis of 2,282,124 ordinary shares outstanding as of April 24, 2022.
All
of our shareholders, including the shareholders listed below, have the same voting rights attached to their ordinary shares. See “Description
of share capital and articles of association”. None of our principal shareholders or our directors and executive officers have different
or special voting rights with respect to their ordinary shares. Unless otherwise noted below, each shareholder’s address is 30 Golomb
Street, Nes Ziyona, Israel.
|
Title
of class |
|
Name
of beneficial owner |
|
Amount
of
beneficial
ownership |
|
Percent
of
class(2) |
|
Ordinary
Shares |
|
Menachem
Shalom |
|
2,000,000(1) |
(2) |
|
87.64 |
% |
|
|
|
Gad
Zohar* |
|
- |
|
|
- |
% |
| |
|
Igal
Chemerinsky* |
|
- |
|
|
- |
% |
| |
|
|
|
|
|
|
|
|
|
Total
of All Current
Officers
and Directors
(3
persons): |
|
|
|
2,000,000(1) |
|
|
87.64 |
% |
| |
(1) |
Includes
2,000,000 ordinary shares owned by Mr. Shalom. The amount reflected does not include the 10,000,000 preferred shares which are also owned
by Mr. Shalom. Each preferred share is convertible at any time by the holder thereof to 100 ordinary shares. |
|
| |
(2) |
The
amount and percentage indicated refers only to the ordinary shares and does not include the amount and percentage of class of the preferred
shares, which are 100% owned by Mr. Shalom. |
*
Beneficially owns less than one percent of the class
Share
Incentive Plan
We
currently do not have any stock incentive plans.