UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

April 27, 2020

Date of Report (Date of earliest event reported)

 

World Health Energy Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of incorporation)

 

000-30256   59-2762023
(Commission
File Number) 		  (IRS Employer
Identification No.)

 

1825 NW Corporate Blvd. Suite 110, Boca Raton, FL5243

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code: (561) 870-0440

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[  ] Pre-commencement communications pursuant to 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company [  ]

 

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

 

 

 
 

 

Item 1.01 Entry into a Material Definitive Agreement

 

The disclosures set forth in Item and 2.01 of this Current Report on Form 8-K are incorporated herein by reference

 

Item 2.01 Completion of Acquisition or Disposition of Assets

 

On April 27, 2020, World Health Energy Holdings, Inc., (the “Company” or “WHEN”), completed a reverse triangular merger pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) among the Company, R2GA, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Sub”), UCG, Inc., a Florida corporation (“Seller”), SG 77 Inc., a Delaware corporation and wholly-owned subsidiary of Seller (“SG”), and RNA Ltd., an Israeli company and a wholly owned subsidiary of SG (“RNA”). Under the terms of the Merger Agreement, R2GA merged with and into SG, with SG remaining as the surviving corporation and a wholly-owned subsidiary of the Company (the “Merger”). The Merger was effective as of April 29, 2020, upon the filing of a copy of the Merger Agreement and certificate of merger with the Secretary of State of the State of Delaware (the “Effective Time”), whereby SG became a direct and wholly owned subsidiary of the Company and RNA indirect wholly owned subsidiary of the Company. Unless the context otherwise requires, “WHEN” shall refer to the Company prior to the Effective Time and the “Company” and similar expressions refer to the Company, after the Effective Time (post-Merger).

 

As consideration for the Merger, the Company issued to Seller 3,870,000 Series B Convertible Preferred Stock, par value $0.0007 per share, of the Company (the “Series B Preferred Shares”). Each share of the Series B Preferred Shares will automatically convert into 100,000 shares of the Company’s common stock, par value $0.0007 (the “Common Stock”), for an aggregate amount of 387,000,000,000 shares of the Company’s Common Stock, upon the filing with the Secretary of State of Delaware of an amendment to the Company’s certificate of incorporation increasing the number of authorized shares of Common Stock that the Company is authorized to issue from time to time. The Company anticipates shortly obtaining the requisite shareholder consent to increase the Company’s number of authorized shares of Common Stock that may be issued from time to time. Each of Gaya Rozensweig and George Baumeohl, directors of the Company, are also the sole shareholders and directors of UCG.

 

The shares of the Series B Preferred Shares issued at the Closing were not, and the shares of Common Stock issuable upon conversion thereof will not be, not registered under the Securities Act of 1933, as amended (the “Securities Act”), and were in each case offered, sold and issued in reliance upon the exemption from registration provided by Section 4 (a) (2) of the Securities Act, as a transaction by an issuer not involving a public offering, and Rule 506 of Regulation D promulgated thereunder. Each of the certificates or instruments evidencing the shares of Series B Preferred Shares and, the Common Stock issuable upon conversion thereof, will bear a legend to the effect that the resale of such shares require registration or an applicable exemption from the registration requirements of the Securities Act.

 

RNA is primarily a research and development company that has been performing software design work for the Seller in the field of cybersecurity. SG is primarily engaged in the marketing and distribution of cybersecurity related products. In anticipation of the transaction contemplated under the Merger Agreement, SG was formed and all of the cybersecurity rights and interests held by the Seller, including the share ownership of RNA, were assigned to SG. The Company intends to continue the business of SG/RNA as the Company’s principal business enterprise.

 

The foregoing description of the Merger Agreement and the Series B Preferred Shares do not purport to be complete and are qualified in their entirety by reference to the complete text of the Merger Agreement and the Series B Preferred Designation Certificate filed as exhibits to the this Current Report on Form 8-K.

 

Item 3.02 Unregistered Sales of Equity Securities

 

The disclosures set forth above in Item 2.01 of this Current Report on Form 8-K are incorporated herein by reference.

 

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The foregoing issuances of the Series A Preferred Shares were made in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Act”), in reliance upon exemptions from the registration requirements of the Act in transactions not involving a public offering, including, but not limited to the exemption provided pursuant to Rule 506(b) of Regulation D, as promulgated by the Securities and Exchange Commission under the Act for offers and sales of restricted securities in a private, non-public transactions.

 

FORWARD-LOOKING STATEMENTS

 

Statements in this Current Report on Form 8-K may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this report, including the risks described under “Risk Factors” in this report and in other documents which we file with the SEC. In addition, such statements could be affected by risks and uncertainties related to:

 

  ● Our ability to raise funds for general corporate purposes and operations and to realize our business plan;
     
  ● The commercial feasibility and success of our online data security technology based solutions that we intend to market;
     
  ● Our ability to recruit qualified management and technical personnel; and

 

The other risk factors discussed under “Risk Factors” section and elsewhere in this Current Report on Form 8-K.

 

Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of such statements.

 

The terms the “Company,” “we,” “us,” and “our” refer to the combined enterprises of World Health Energy Holdings, Inc., SG 77 Inc., and RNA Ltd., after giving effect to the Merger and the related transactions described below, except with respect to information for periods before the consummation of the Merger which refer expressly to RNA, as specifically indicated.

 

Overview of the Business of SG/RNA

 

RNA is a software security company that designs, develops and markets data security software based solutions. RNA’s solutions are intended for parental or other legal guardian use to protect their minor children when online and for use by commercial enterprises to prevent unauthorized transfer of proprietary and confidential enterprise data.

 

SG is primarily the marketing arm of the enterprise. RNA has historically designed and developed software based solutions for the Seller.

 

In order to grow in this rapidly evolving market, the Company has developed a growth strategy. Our strategy includes the following;

 

  ● Bringing the next generation of online cyber security technologies to our target markets,
     
  ● Driving increased demand for our products in new applications and new markets,
     
  ● Increasing the adoption of our cyber security technologies,
     
  ● Continuing to expand our client base in segments beyond our core business, and
     
  ● Acquiring security technology companies that either expand our technology portfolio or our customer base.

 

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Industry Background

 

User Behavior Analytics (UBA) is the process of collecting data on the events generated by software based device users through their daily activity across different networks and leverages machine learning, algorithms, statistics and probability to organize that data into logical, useful analytics reports that highlight activity significant to an organization or an individual. This knowledge, in the case of an enterprise helps businesses scale processes, ensure compliance rules are met, and more popularly, protects the organization against insider threats and aids with the investigation process in the event of a breach in security. Additionally, this knowledge can be used by a parent to oversee a child’s internet usage to guard against unwanted or dangerous patters.

 

UBA is a type of cyber security process that takes note of the normal conduct of users. In turn, they detect any anomalous behavior or instances when there are deviations from these “normal” patterns. For example, if a particular user regularly downloads 10 MB of files every day but suddenly downloads gigabytes of files, the system would be able to detect this anomaly and alert them immediately. In the case of a child, if such child normally has 100 calls or messages per day and suddenly gets a significantly less amount on any given day, then the parent is warned of such development.

 

We have developed UBA software that the addresses the security concerns of businesses and other enterprises and also of parents overseeing their minor children’s on-line activities.

 

Parental cyber protection of minor children

 

Parental control software allows parents to limit the access or use of adult content or a specific type of content to their children. According to Market Research Future, the Global Parental Control Software Market is worth $1.52 billion and is expected to expand at a 9.54% compounded annual growth rate (CAGR) during the forecast period from 2018 to 2023. There are many benefits to providing young people (minors) with access to social media including self-education and participating in social activities. Nevertheless, minors remain vulnerable to inappropriate content such violent videos, aggressive or sexual content, images and games etc. as well as online activities of a potentially criminal nature.

 

The popularity of social media results in young people spending hours each day watching videos, viewing photos and other content posted by friends, family members, celebrities or public figures. Due to such patterns of use, parental control software solutions serve to enable parents or legal guardians the ability to view their children’s online activity and set internet filters.

 

An additional contributor to the market growth of these types of parental cyber protection systems is the increasing number of cyberbullying cases worldwide. According to Centers for Disease Control and Prevention (CDC) in the U.S., in 2017, 14.9% of high school students were cyberbullied, either though Facebook, text messaging, Instagram, or other social media platforms. Based on these projections, North America accounted for the largest market in 2017, with a share of 46.4% (a market value of $706,000,000), with an expected 8.63% CAGR increase in the upcoming years. Valued at $436,150,000 with an expected 10.23% CAGR, Europe was the second largest market in 2017.

 

There are multiple products commercially available that enable everyday consumers to place a smartphone under close surveillance. Such can include capturing SMS message data from the phone, recordings of phone conversations, internet browsing data, private videos or photos. Furthermore, some spyware enables “live access” to the smartphone’s camera and/or microphone.

 

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The Problem of Teen Suicide

 

Another significant problem in the world today is suicide. The World Health Organization (WHO) estimates that each year there are approximately one million people who commit suicide, representing a global mortality rate of 16 people per 100,000 or one death every 40 seconds, making suicide amongst the three leading causes of death for persons between 15 to 44 years of age.

 

Due to these alarming statistics, psychologists around the world have begun studying the phenomenon, seeking behavioral patterns which could enable us to detect if a person is depressed or even suicidal. Though experts and parents know how to recognize signs of depression, the increasing use of technology and social media makes recognizing depression and suicidal intents almost impossible for the unprofessional eye to see. Therefore, there is a need for a digital tool which can detect any problem needing professional attention before it is too late.

 

North America accounted for the largest market share of 46.4% in 2017 (market value $706 million) with expected 8.63% CAGR during the coming years. Europe was the second-largest market in 2017, valued at $436.15 million (CAGR 10.23%).

 

Growth in the U.S. market is driven by the increase in internet usage among children, the growing adoption of smartphones and tablets among children, increasing cases of cyberbullying activities in the country, and the emergence of harmful games, including the Blue Whale Challenge, which asked the recruited children to commit suicide in its final tasks.

 

Additionally, the increasing use social media platforms and sites in the country and rising investments from key players of the market in research and development of parental control software solutions are also contributing in boosting the market in North America.

 

We believe a unique window of opportunity exists to capture significant market share within the parental control market. Our products leverage several key factors:

 

  ● Our algorithms are designed based on information collected from cellphones of minors who have committed suicide; and
     
  ● Our system analyzes every activity on the phone, collates the information with a view to identifying changes in the patterns of the individual’s behavior. Any change in a recognized pattern is highlighted as a red flag, which in turn sends us an alert to the parent or the adult guardian.

 

We believe that our solutions’ ability to identify patterns of behavior and subsequent variations to these patterns provides a competitive advantage to other commercially available monitoring solutions.

 

Commercial Enterprise Security

 

Commercially available technologies provide management with the capability of analyzing the performance of their employees. Employee monitoring software is used to track employees’ online activities, such as software usage, Internet browsing, networking interactions, and active and idle computer time. Administrators can use software-generated reports to plan strategies to assess employee productivity and performance and improve productivity.

 

When adding a work email address to their phone, employees are likely be asked to install a Mobile Device Management (MDM) profile. MDM is set up by the company’s IT department to reach inside the phone in the background, allowing them to ensure the device is secure, know where it is, and remotely erase data if the phone is stolen. MDM’s main role is to increase security, corporate functionality, securing emails, securing corporate documents on devices, integrating and managing mobile devices including laptops and handheld devices. The implementation of MDM can either be a cloud-based software or an on-premises software.

 

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MDM profiles, paired with device management tools, allow companies to track employee phones in a single dashboard. They can mitigate security breaches or potential harm from a rogue employee. However, for employees, it is difficult to tell what these invisible profiles are collecting behind the scenes.

 

The market for employee monitoring technology is vast and provides software based options fulfilling a wide range of functions from attendance tracking, payroll integration, to detecting potential fraudulent activities by monitoring key logs. Some employee monitoring and time tracking tools are built into project management systems and, because of their core function, are often offered as add-ons for HR solutions.

 

The Mobile Device Management (MDM) market size was $2.36 billion in 2017 and is projected to reach USD 7.86 Billion by 2023 with a CAGR of 22.8% between 2018 and 20231.

 

Management believes that there is a significant opportunity to apply the technologies it has developed for the parental cyber protection sector to the enterprise market, providing management with a much deeper and broader way of analyzing and understanding employee behavioral patterns.

 

As noted above, MDM is widely used. However, MDM focuses on monitoring and eliminating threats which come from outside the organization, while significant threats arise from within the organization.

 

According to Space Market Now, in 2017, the Mobile Device Management market size was of $2.36 billion and projected to reach $7.86 billion by 2023 with a CAGR of 22.8% between 2018 and 2023.

 

We believe a unique window of opportunity exists to apply the technologies we developed for the personal sector to the enterprise market, our technology leverages several key distinctions:

 

  ● Management can analyze employee computer activities.
     
  ● Asses and improve employee productivity and protect corporate confidential information at ease.
     
  ● The software is deployed silently over the network in minutes with no use prompts.
     
  ● Smart and Small Agent in each PC & server.
     
  ● BI Style smart report generator.

 

Our solution analyzes any variations to the online behavioral patterns of employees and other services providers in order to alert management or those in supervisory roles of any suspicious behaviors or activities that can compromise an enterprise’s business and proprietary information.

 

The Company’s Solution

 

B2C

 

Our B2C product line is positioned as the “ultimate parental cyber solution”. Our solution incorporates a range of features enabling parents to view and manage their children’s phones. The key elements of our proprietary solutions include the following:

 

  ● Analyze all incoming and outgoing written data,
     
  ● access to all incoming and outgoing audio communication,
     
  ● Analyze real time location tracking,
     
  ● analyze environmental surroundings using the mobile device's sensors, and
     
  ● analyze online cyber activity.

 

 

1 https://spacemarketnow.com/427831/mobile-device-management-mdm-market-2019-global-analysis-segments-size-share-industry-growth-and-recent-trends-by-forecast-to-2023/

 

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Our B2C Analytics product developed having all the capacities of the B2C product yet tailored to variations in online behavioral patterns, whether vocally, via SMS or any other way. If there is a change in behavior patterns, the product is designed to immediately send the parent or adult guardian an alert. For example, one of the identifiable indicators before suicide is social withdrawal, something which today appears as a significant decrease in text message exchanges. The system categorizes this decrease as a red flag. Moreover, prior to suicide, there are certain words and phrases which usage are increase, should the system detect these it will put them in the red flag category.

 

While analyzing voice calls based on; tone of speech, lengths of the conversation and the frequency of calls, B2C Analytics is capable of identifying changes in behavioral patterns and flagging these. I.e. studies showed that with mental health decrease, the frequency of calls decreases and the sentences along with the length of the conversations get shorter.

 

B2B

 

Though MDM’s are widely used in the workforce, they are focused on providing protection from threats originating outside the organization. Our commercially available B2B product, provides such protection but also is designed to prevent threats to data loss or unauthorized use or transfer originating from persons within the organization.

 

Our technology was developed having all the capabilities of the B2C product which we believe go beyond the capabilities of existing MDM solutions. The key elements of our proprietary solutions include the following:

 

  ● Detection, command and control.
     
  ● Archiving. Detection system sends data to a closed Database which prevents data overwrite. These data reports may also be exported.
     
  ● Generate reports. B2B generates time reports helping analyze employee activity and improving employee efficiency.

 

Our B2B product, will be provided as business to business (B2B) under the SaaS model through distributors with existing relationships with target enterprises. Potential distributors include cyber security vendors, IT companies, anti-virus and suppliers of MDM.

 

Product Offerings

 

B2C

 

RNA/SG offer a comprehensive solution which is designed to enable parents wishing to observe their children’s online behavior to learn if they are accessing inappropriate websites and content and/or to protect them from a range of threats including cyberbullying and identity theft. The main features of the B2C product include:

 

  ● Gaining access to all incoming and outgoing written data. Offering the option to flag specific contacts and get real-time alerts if they make contact.
     
  ● Gaining access to all incoming and outgoing audio communications.
     
  ● Real Time Location Tracking: Instantly accessing a current location, even when regular GPS services are unavailable. As well as the ability to check their location history or set a virtual barrier that will alert you if your child has left their safe-zone or has entered a danger-zone.

 

B2C Analytics

 

The main features of the B2C Analytics include:

 

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  ● Analyzing Text Messages: the system analyzes every text message that is sent or received on the device.
     
  ● Media Analyzer: We analyze the media traffic in the device, measuring the volume of traffic of both photos and videos received and sent from the device and comparing it to personal habits as well as pre-collected data from all over the world.
     
  ● Voice Calls Analyzer: The system analyses different categories of information collected from voice calls on the device. It analyses the tone of speech, the lengths of the conversations as well as the frequency of the calls.
     
  ● Routine Analyzer: The system detects daily, weekly, and monthly route patterns, if any such patterns are broken, you will receive an alert.
     
  ● Real Time Location Tracking: allowing you to create virtual boundaries around specific locations like home, school or forbidden sites and to receive an alert if your child steps out of such boundaries.

 

B2B

 

The main features of our B2B solutions are similar to those of the B2C product features adapted for use by commercial enterprises. These features include:

 

  ● Detection: The ability to analyze employees’ organizational behavior, active on a mobile, tablet. desktop and server device. This enables an employer or manager to instantly identify and prevent the unauthorized behavior such as but not limited to: access, download or transfer of company documents or information.
     
  ● Routine Analyzer: Identifying non-routine employee activities such as correspondence that suggests the employee is planning to resign or a change in a behavioral pattern i.e. if the company bookkeeper prints out salary slips every month and suddenly there is a change.
     
  ● Alerts: Receive alerts when a behavioral pattern changes, i.e. unauthorized files are accessed. In the event of a data leak with external memory device, an alert that an external user has accessed the system.

 

Competitive Advantages of the Our Solutions

 

B2C and B2C Analytics

 

The key players of global parental control software market are McAfee LLC (US), Avanquest (France), Bitdefender (Romania), SaferKid (US), Symantec Corporation (US), Webroot Inc. (US), Content Watch Holdings, Inc. (US), Verizon Communications Inc. (US), Mobicip LLC (US), and Trend Micro Inc. (Japan).

 

B2C Analytics offers a product that goes beyond the capabilities of competing products as it was developed alongside the neuroscience department of Tel Aviv University. The algorithm was based on data collected from cellphones of individuals who committed suicide thus making the it a more accurate pattern analyzer. We focus on behavioral pattern changes and have developed a unique alert system, which enables us to detect the threat at an early stage and protect your loved ones. Another competitive advantage B2C Analytics offers is its user-friendly interface. Contrary to some of our competitors, our software is easy to install and operate, there is no need for third-party assistance to install or tutorial to use, thus saving both precious time and money.

 

B2B

 

Our B2B solution goes beyond the capabilities of existing MDM solutions. While MDM solutions focus on monitoring and eliminating threats arising from outside the organization, we offer cyber protection which eliminates threats arising from within the organization. B2B analyzes the patterns of which files and applications the user accessed, duration of the user access, and user activity building a behavioral pattern. The system sends you alerts in the event any change is made in the behavioral pattern such as unauthorized access to files, data leak with external memory device, system access by an external user, and alerts according to every parameter.

 

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B2B is easy and quick to install and distribute in all the organization devices, including but not limited to cellphone, computers, servers and other OP based devices. The system is a non-intervening observing system that cannot be detected. Furthermore, B2B a lightweight system and therefore does not burden on the organization’s operations, as would competitor systems.

 

Our B2B product is currently being used by certain city municipalities around the country to help detect behavioral pattern changes and send an alert warning if their system becomes compromised. There is a growing clientele for our products, B2B is currently sold and used by numerous global businesses, mainly in Latin America and Europe.

 

Market Penetration Strategy

 

Through RNA, we currently have 107 resellers and a user base of approximately 14,600 paying users. We believe that maintaining and expanding the reseller network, while focusing more strongly on direct sales (B2C model) will allow us to achieve a leading position in the market.

 

Online Marketing

 

Subject to raising the needed capital, of which no assurance can be provided, we intend to invest a minimum of $1,000,000 in marketing during the year 2020. The raised investment will serve develop a sales and support office in Switzerland which shall provide service to the European market for our enterprise users, our B2B product. Additionally, the funds will serve to finance the currently utilized online target marketing service to help increase our sales with regards to the Parental services, our B2C product.

 

B2B Product

 

Our B2B product will be provided as a B2B under the SaaS model through resellers with existing relationships with target enterprises. Potential resellers include cyber security vendors, IT companies, anti-virus providers and MDM suppliers. Subject to further research, the product will be available as a white label, enabling resellers to integrate the product into their existing range of products.

 

Our Revenue Model

 

B2C and B2C Analytics are based on a business to consumer (B2C) revenue model. The parents or lawful guardian purchase the program from resellers, who purchase it from us at a fixed amount per device per year. As our products are white label, in the future we intend to create our own resellers and thus receive the full sum per device sold. This revenue model is based on recurring revenues in which there is an annual or semi-annual, depending on the subscription choice. Following the initial cost, the margins are big seeing as there is no additional cost following the purchase of a license. We expect to generate revenues from the recurring fees as well as from the targeted online marketing.

 

Our B2B solution is sold through in a business to business (B2B) model through resellers with existing relationships with target enterprises. We are currently focusing on small to medium businesses, up to 50 devices. When the company purchases the program there is a onetime installation and a monthly fee per device. There is an installation fee and then a monthly fee per device on which the software is installed.

 

Research and Development

 

RNA’s research and development efforts historically have been, and will continue to be, concentrated on product enhancement, new technology development, and related new product introductions. We will employ a team of full-time engineers and, from time to time, also engage independent engineering firms to conduct non-strategic research and development efforts on our behalf.

 

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Competition

 

Our main competition in the global parental control software market are McAfee LLC (US), Avanquest (France), Bitdefender (Romania), SaferKid (US), Symantec Corporation (US), Webroot Inc. (US), Content Watch Holdings, Inc. (US), Verizon Communications Inc. (US), Mobicip LLC (US), and Trend Micro Inc. (Japan). These are companies may have been in the market longer than our company, or a more recognizable name, but our algorithms are formed to trace behavioral pattern changes in the user as opposed to the machine, thus providing a better understanding of the user.

 

With regards to the enterprise model (B2B model) and software available to protect businesses, we believe that B2B is truly unique. Our main known competitor is Checkpoint Systems, yet, our cyber software provides unique protection by analyzing inner company behavioral patterns as well as external, thus aiding our clients to foresee security breaches whether from an internal or external threat.

 

Risk Factors

 

An investment in our Company involves a significant level of risk. Investors should carefully consider the risk factors described below together with the other information included in this Current Report on Form 8-K. If any of the risks described below occurs, or if other risks not identified below occur, our business, financial condition, and results of operations could be materially and adversely affected.

 

Risks Relating to Our Business and Industry

 

Our ability to continue as going concern is in doubt absent obtaining adequate new debt or equity financing and achieving sufficient sales levels.

 

We anticipate that we may continue to lose money during 2020 as we integrate new operations and acquire additional entities as part of our plan of operation. Our continued existence is dependent upon generating sufficient working capital and obtaining adequate new debt or equity financing. Because of our continuing losses, we may have to continue to reduce our expenditures, without improvements in our cash flow from operations or new financing. Working capital limitations continue to impinge on our day-to-day operations, thus contributing to continued operating losses.

 

We will need to raise significant capital in order to realize our business plan and the failure to obtain the needed funding could lead to our operational failure.

 

We will need to raise at least $1 million following the Merger in order to design and develop our second-generation online security and data protection technologies, expand our market strategy and potentially acquire complementary technologies. Without adequate funding, we also may not be able to accelerate the development and deployment of our products, respond to competitive pressures and develop new or enhanced products. At the present time, we have no commitments for any financing, and there can be no assurance that capital will be available to us on commercially acceptable terms or at all. We may have difficulty obtaining additional funds as and when needed, and we may have to accept terms that would adversely affect our stockholders. Any failure to achieve adequate funding will delay our development programs and product launches and could lead to abandonment of one or more of our development initiatives, as well as prevent us from responding to competitive pressures or take advantage of unanticipated acquisition opportunities.

 

Any additional equity financing may be dilutive to stockholders, and debt and certain types of equity financing, if available, may involve restrictive covenants or other provisions that would limit how we conduct our business or finance our operations.

 

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Even if we raise funds to address our immediate working capital requirements, we also may be required to seek additional financing in the future to respond to increased expenses or shortfalls in anticipated revenues, accelerate product development and deployment, respond to competitive pressures, develop new or enhanced products, or take advantage of unanticipated acquisition opportunities.

 

These conditions raise substantial doubt as to our ability to continue as a going concern and may make it more difficult for us to raise additional capital when needed. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of reported assets or liabilities should we be unable to continue as a going concern.

 

We have a history of losses and expect to incur losses and negative operating cash flows in the future.

 

We expect our operating losses to continue as we continue to expend resources to further develop and enhance our technology offering, to complete prototypes for proof-of-concept, obtain regulatory clearances or approvals as required, expand our business development activities and finance capabilities and conduct further research and development. We also expect to experience negative cash flow in the short-term until licensing revenues increase from our planned acquisitions.

 

We do not have a long operating history which makes it difficult for you to evaluate our business.

 

RNA commenced operations in 2015. Accordingly, there is currently no historical information regarding our revenue trends and operations upon which investors can evaluate our business. Our prospects must be considered in light of the substantial risks, expenses, uncertainties and difficulties encountered by entrants into the cyber security industry, which is characterized by increasing intense competition and the relative failure rates.

 

The nature of the technology platforms utilized by us are complex and highly integrated, and if we fail to successfully manage releases or integrate new updates, it could harm our revenues, operating income, and reputation.

 

The technology platforms developed by us accommodate integrated applications that include our own developed technology and third-party technology, thereby substantially increasing their functionality. By enabling such system interoperability, our communications platform both reduces implementation and ongoing costs, and improves overall management efficiencies.

 

Due to this complexity and the condensed development cycles under which we operate, we may experience errors in our software, corruption or loss of our data, or unexpected performance issues from time to time. For example, our solutions may face interoperability difficulties with software operating systems or programs being used by our customers, or new releases, upgrades, fixes or the integration of acquired technologies may have unanticipated consequences on the operation and performance of our other solutions. If we encounter integration challenges or discover errors in our solutions late in our development cycle, it may cause us to delay our launch dates. Any major integration or interoperability issues or launch delays could have a material adverse effect on our revenues, operating income and reputation.

 

The market opportunity for our products and services may not develop in the ways that we anticipate.

 

The demand for our products and services can change quickly and in ways that we may not anticipate because the market in which we operate is characterized by rapid, and sometimes disruptive, technological developments, evolving industry standards, frequent new product introductions and enhancements, changes in customer requirements and a limited ability to accurately forecast future customer orders. Our operating results may be adversely affected if the market opportunity for our products and services does not develop in the ways that we anticipate or if other technologies become more accepted or standard in our industry or disrupt our technology platforms.

 

11
 

 

We could be vulnerable to security breaches if certain third-parties attempt to gain access through our systems because of unknown weaknesses in our clients’ infrastructures.

 

Our products contain technology that incorporates the use of secret numbers and encryption technology. A cyber incident could disrupt our ability to provide our product to customers which can cause us to suffer significant monetary and other losses as well as significantly harm our reputation. We expect that there are likely to be hacking attempts intended to impede the performance of our products, disrupt our services and harm our reputation as a company, as the processes used by computer hackers to access or sabotage technology products, services and networks are rapidly evolving in sophistication.

 

The online security and device management industry is highly competitive, and we have a number of competitors that are larger and have greater resources.

 

We operate in an intensely competitive market which experiences rapid technological developments, changes in customer requirements and changes in industry standards. These in addition to the frequent new product introductions and improvements offered by our competitors. Our competitive position could weaken, and we could experience a drop-in revenue in we are not able to anticipate or react to competitive challenges or if new or existing competitors gain market share in any of our markets. In order to successfully compete, we must maintain a successful research and development effort to develop new product and enhance our existing products. Should we not be successful in responding to our competitors or to changing technological and customer demands, the outcome could be a negative effect on our competitive position and our financial results.

 

Another challenge is the growing competition from network equipment and computer hardware manufacturers as well as large operating system providers. These firms continuously develop and incorporate into their products data protection and storage and server management software that competes at some levels with our product offerings. Our competitive position could be adversely affected to the extent that our customers perceive the functionality incorporated into these products as replacing the need for our products.

 

Many of our competitors have deeper pockets, greater technical, sales, marketing, or other resources than we do and consequently may have the ability to influence customers to purchase their products instead of ours.

 

There is uncertainty as to market acceptance of our technology and services.

 

The demand for our products and services can change quickly and in ways that we may not anticipate because the market in which we operated is characterized by rapid, and sometimes disruptive, technological development.

 

We may not be able to complete or integrate successfully any potential future acquisitions, partnerships or joint ventures.

 

Acquisitions can involve a number of special risks and challenges, including but not limited to:

 

  ● Complexity, time and costs associated with the integration of acquired business operations, workforce, products and technologies into our existing business, sales force, employee base, product lines, and technology.
     
  ● Management distraction from our existing business and other business opportunities.
     
  ● Employee termination could occur and thus inducing costs associated with the termination of those employees.
     
  ● Assumption of debt or other liabilities of the acquired business, including litigation related to the acquired business.
     
  ● Increased expenses and working capital requirements.
     
  ● Dilution of existing stockholders’ shares.
     
  ● Increased costs and efforts in connection with compliance with Section 404 of the Sarbanes-Oxley Act.

 

12
 

 

Integrating an acquired business can be complex, time consuming, as well as an expensive process, which can impact the effectiveness of our internal control over financial reporting.

 

If such integration is unsuccessful, we may not realize the potential benefits of an acquisition or suffer from adverse effects that we currently cannot foresee.

 

Any of the foregoing, along with other factors, could harm our ability to achieve anticipated levels of profitability from such acquired businesses or to realize other anticipated benefits of such acquisitions. Due to the fact that acquiring high technology companies is inherently risky, there can be no assurance that future acquisitions will be successful and shall not adversely affect our business, financial condition or operating results.

 

If we cannot keep pace with rapid developments and changes in our industry and provide new services to our clients, the use of our services could decline, reducing our revenues.

 

Our future success depends on our ability to respond to the rapidly changing needs of our customers by developing product upgrades and introducing new products on a timely basis. Though we have and continue to incur, significant research and development expenses, the development and introduction of a new product involves significant resources and time commitment and is therefore subject to risks including:

 

  ● Managing the length of the development cycle for new product enhancements, which could be longer than originally anticipated.
     
  ● Adapting our products to the endlessly evolving industry standards and to our competitors’ technological developments.
     
  ● Entering into new markets in which we have limited experience.
     
  ● Incorporating acquired products and technologies.
     
  ● Integrating our various security and storage technologies, management solutions, and support into unified enterprise security and storage solutions.
     
  ● Developing or expanding efficient sales channels.

 

In addition, if we cannot adapt our business models to keep pace with industry trends, our revenue could be negatively impacted.

 

If we are not successful in managing these risks and challenges, or if our new products, product upgrades, and services are not technologically competitive or do not achieve market acceptance, our business and operating results could be adversely affected.

 

Our cybersecurity system might be used for fraudulent, illegal or improper purposes, which could expose us to additional liability and harm our business.

 

Reputation in the cybersecurity field is an important corporate asset. An operating incident, significant cybersecurity disruption, or other adverse event may have a negative impact on our reputation. This, in turn, could make it more difficult for us to compete successfully for new opportunities, obtain necessary regulatory approvals, or could reduce consumer demand for our branded products.

 

Furthermore, such disruptions or fraudulent use could expose us to liabilities such as lawsuits and settlements. Such liabilities could be time consuming, costly and harmful to our business and funds.

 

We may be subject to the risks of doing business internationally.

 

We have significant operations outside of the U.S., including engineering, sales, customer support and production, these will be subject to risks in addition to those faced by our domestic operations such as:

 

13
 

 

  ● Potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights that U.S. laws or may not be adequately enforced.
     
  ● Governmental control and other foreign law requirements, including labor restrictions and related laws that can impact our business operations.
     
  ● Restrictions on our ability to repatriate cash from our international subsidiaries or to exchange cash availability for use in the U.S.
     
  ● Fluctuations in currency exchange rates and economic instability such as higher interest rates in the U.S. and inflation could reduce our customers’ ability to obtain financing for software products or could make our products more expensive or could increase our costs of doing business in certain countries.
     
  ● Longer payment cycles due to sales in foreign countries.
     
  ● Difficulties related to administering a stock plan in some foreign countries.
     
  ● Delays and costs related to developing software and providing support in various languages.
     
  ● Political unrest, war, or terrorism, particularly in areas in which we have facilities.

 

Costs of compliance with laws and regulations

 

We are subject to regulatory environment changes regarding privacy and data protection and could have a material impact on our results of operations.

 

The growth and expansion of the company into a variety of new fields may potentially involve new regulatory issues/requirements such as the EU General Data Protection Regulation (GDPR) or the New York Department of Financial Services (NYDFS) Cybersecurity Regulation. The potential cost of compliance with or imposed by new/existing regulations and policies that are applicable to us may affect the use of our products and services and could have a material adverse impact on our results of operations.

 

We may not be able to successfully protect the intellectual property we license and may be subject to infringement claims.

 

We rely on a combination of contractual rights, copyright, trademark and trade secret laws to establish and protect our proprietary technology. We customarily require our employees and independent contractors to execute confidentiality agreements or otherwise to agree to keep our proprietary information confidential when their relationship with us begins. Typically, our employment contracts also include clauses requiring our employees to assign to us all of the inventions and intellectual property rights they develop in the course of their employment and to agree not to disclose our confidential information. Nevertheless, others, including our competitors, may independently develop similar technology to that licensed by us, duplicate our services or design around our intellectual property. Further, contractual arrangements may not prevent unauthorized disclosure of our confidential information or ensure an adequate remedy in the event of any unauthorized disclosure of our confidential information. Because of the limited protection and enforcement of intellectual property rights in many foreign markets, our intellectual property rights may not be as protected as they may be in more developed markets such as the United States. We may have to litigate to enforce or determine the scope or enforceability of our intellectual property rights (including trade secrets and know-how), which could be expensive, could cause a diversion of resources and may not prove successful. The loss of intellectual property protection could harm our business and ability to compete and could result in costly redesign efforts, discontinuance of certain service offerings or other competitive harm. Additionally, we do not hold any patents for our business model or our business processes, and we do not currently intend to obtain any such patents in Mexico, the United States or elsewhere.

 

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We may also be subject to costly litigation in the event our services or the technology that we license are claimed to infringe, misappropriate or otherwise violate any third party’s intellectual property or proprietary rights. Such claims could include patent infringement, copyright infringement, trademark infringement, trade secret misappropriation or breach of licenses. We may not be able to successfully defend against such claims, which may result in a limitation on our ability to use the intellectual property subject to these claims and also might require us to redesign affected services, enter into costly settlement or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our services. In such circumstances, if we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from another source, our revenue and earnings could be adversely impacted. Additionally, in recent years, non-practicing entities have been acquiring patents, making claims of patent infringement and attempting to extract settlements from companies in our industry. Even if we believe that such claims are without merit and successfully defend these claims, defending against such claims is time consuming and expensive and could result in the diversion of the time and attention of our management and employees.

 

If we don’t have sufficient resellers it is possible we won’t have sufficient funds for aggressive advertising campaigns thus resulting in deficits.

 

We sell our products to customers around the world through resellers. Sales through indirect channels involve a number of risks, including:

 

  ● Our resellers are not subject to minimum sales requirements or to any obligations to market our products to their customers
     
  ● Our reseller agreements are generally nonexclusive and may be terminated at any time without cause.
     
  ● It is possible that our resellers distribute competing products and may, occasionally, place a greater emphasis on the sale of these products due to pricing, promotions, and other terms offered by such competitors.

 

Currency exchange rate

 

Our exposure to exchange risk mainly involves sales negotiated with customers in U.S. dollars net of expenses and possible investment or loan repayments in this currency. The change in foreign currencies compared to the Israeli Shekel may have an impact on the profit and loss statements for the Company.

 

Fluctuations in demand for our products and services are driven by many factors, and a decrease in demand for our products could adversely affect our financial result.

 

We are subject to fluctuations in demand for our products and services due to a variety of factors, including general economic conditions, competition, technological changes, changes in buying patterns, financial difficulties and or budget cuts of our actual and potential customers or resellers, awareness of security threats to IT systems, and other factors. Though such factors can at times increase our sales, yet such fluctuations could have a negative impact on our product sales. If for any reason the demand for our products declines, our revenues and gross margin could be adversely affected.

 

Our products are complex and operate in a wide variety of computer configurations, which could result in errors or product failures.

 

Due to the complexity of our product, there is a chance that our products contain undetected errors, failures, or bugs, especially when products are first introduced or when new versions are released. Our products are installed and used in large-scale computing environments, therefore are subject to different operating systems, system management software and network configurations, all of which may cause errors or a failure in our products. Furthermore, these may expose undetected errors, failures, or bugs in our products.

 

Errors, failures, or bugs in our products could result in negative reviews and publicity, causing damage to our brand name, product returns. These in turn could result in loss of market acceptance, loss of competitive position, or claims by customers. Finally, if an actual or perceived breach of information integrity or availability occurs in one of our customer’s systems, regardless of whether the breach is attributable to our products, the market perception of the effectiveness of our products could be harmed.

 

15
 

 

Solving any of these problems could require significant expenses and other resources and could cause interruptions, delays, or cessation of our product licensing, which could cause us to lose existing or potential customers and thus affect our operating results.

 

If we are unable to attract and retain qualified employees, lose key personnel, fail to integrate replacement personnel successfully, or fail to manage our employee base effectively, we may be unable to develop new and enhanced products and services, effectively manage or expand our business, or increase our revenues.

 

Our future success depends upon our ability to recruit and retain our key management, technical, sales, marketing, finance, and other critical personnel. Our officers and other key personnel are employees-at-will, and we cannot assure you that we will be able to retain them as the competition for workers with the specific skills that we require is significant. In order to attract and retain personnel in a competitive marketplace, we believe that we must provide a competitive compensation package, including cash and equity-based compensation. The unpredictability in our stock price may from time to time unfavorably affect our ability to recruit or retain employees. In addition, we may be unable to obtain required stockholder approvals of future increases in the number of shares available for issuance under our equity compensation plans, and accounting rules require us to treat the issuance of employee stock options and other forms of equity-based compensation as compensation expense. As a result, we may decide to issue fewer equity-based incentives and may be impaired in our efforts to attract and retain necessary personnel. If we are unable to hire and retain qualified employees, or conversely, if we fail to manage employee performance or reduce staffing levels when required by market conditions, our business and operating results could be adversely affected.

 

Similarly to every work place, from time to time, key personnel in our company may leave, which may in turn have a negative impact and result in significant disruptions to our operations, including harming the timeliness product release, the successful implementation and completion of company initiatives, effectiveness of our disclosure controls and procedures and our internal control over financial reports, and the results of our operations. Furthermore, recruiting, training and successfully integrating replacement employees could be time consuming and may result in additional disruptions to our operations, which could in turn negatively impact future revenues.

 

Third parties claiming that we infringe their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products.

 

There is a possibility of future claims that we allegedly infringed the intellectual property rights of others, including claims regarding patents, copyrights, and trademarks. In addition, former employers of our former, current, or future employees may assert claims that such employees have improperly disclosed to us the confidential or proprietary information of these former employers. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations. If we do not successfully defend our company of such claims, we could be forced to stop selling, or redesign our products, pay monetary amounts as damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our customers. We cannot assure you that any royalty or licensing arrangements that we may seek in such circumstances will be available to us on commercially reasonable terms or at all.

 

We must comply with governmental regulations setting privacy standards.

 

Governmental regulations setting environmental standards influence the design, components or operation of our products. New regulations and changes to current regulations are always possible and, in some jurisdictions, regulations may be introduced with little or no time to bring related products into compliance with these regulations. Our failure to comply with these regulations may prevent us from selling our products in certain countries. In addition, these regulations may increase our cost of supplying the product by forcing us to redesign existing products or to use more expensive designs or components. This may induce unexpected costs or operational complexities to bring products into compliance. Such could have an adverse effect on our revenues, gross profit margins and results of operations and increase the volatility of our financial results.

 

16
 

 

The recent outbreak of COVID-19 or the new coronavirus may adversely affect our business.

 

On January 30, 2020, the World Health Organization (WHO) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond the point of origin. In March 20, 2020 the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

 

The full impact of the COVID-19 outbreak continues to evolve as of the date of these financial statements. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.

 

Risks Related to Our Securities

 

There is not an active liquid trading market for the Company’s common stock.

 

The Company reports under the Exchange Act and its Common Stock is eligible for quotation on the OTC Markets. However, there is no regular active trading market in the Company’s Common Stock, and we cannot give an assurance that an active trading market will develop. If an active market for the Company’s Common Stock develops, there is a significant risk that the Company’s stock price may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control:

 

  ● Variations in our quarterly operating results;
     
  ● Announcements that our revenue or income are below analysts’ expectations;
     
  ● General economic slowdowns;
     
  ● Sales of large blocks of the Company’s common stock; and
     
  ● Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments.

 

Directors, executive officers, principal stockholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our stockholders do not consider to be in their best interests.

 

As of the date of this current report on Form 8-K, our directors, executive officers, principal stockholders and affiliated entities beneficially own, in the aggregate, approximately 90% of our outstanding voting securities immediately following the Acquisition. Additionally, Ms. Gaya Rozensweig, one of our directors, holds Series A preferred Stock which allows her to vote with holders of the Common Stock on an as converted basis giving her effective control of any vote.

 

This concentration of ownership may have the effect of delaying or preventing a change in control of our company that may be favored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current market prices. This concentration of ownership and influence in management and board decision-making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of our company.

 

17
 

 

The market price of our common stock may be volatile and such volatility could cause you to lose some or all of your investment.

 

The market price of our common stock can fluctuate, and as a result you could lose the value of your investment. The market price of our common stock may be affected by a number of factors, including:

 

  ● Announcements of quarterly operating results and revenue and earnings predictions we made and failed to meet or be consistent with such earlier projections or the expectations of our investors.
     
  ● Rumors, announcements, or press articles regarding our competitors’ operations, management, organization, financial condition, or financial statements.
     
  ● Changes in revenue and earnings estimates by us or our investors.
     
  ● Announcements of planned acquisitions or dispositions by us or by our competitors.
     
  ● Announcement of a new or planned product to be released either by us, our competitors or our customers.
     
  ● Acquiring or losing a significant customer.
     
  ● Inquiries by the SEC, NASDAQ, law enforcement or other regulatory bodies.
     
  ● Acts of terrorism, the threat of war, and other crises or emergency situations.
     
  ● Economic slowdowns or the perception of an oncoming economic slowdown in any of the major markets in which we operate.

 

Because we became public by means of a reverse acquisition, we may not be able to attract the attention of brokerage firms.

 

We may be subject to additional risks because we became public through a reverse acquisition. Securities analysts of brokerage firms may not provide coverage of our company since there is little incentive for brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct secondary offerings on our behalf in the future.

 

Our Board of Directors may issue and fix the terms of shares of our Preferred Stock without stockholder approval, which could adversely affect the voting power of holders of our Common Stock or any change in control of our Company.

 

Our Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares of “blank check” preferred stock, with a $0.0007 par value per share (the “Preferred Stock”), with such designation rights and preferences as may be determined from time to time by the Board of Directors. Our Board of Directors is empowered, without shareholder approval, to issue shares of Preferred Stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our Common Stock. In the event of such issuances, the Preferred Stock could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our Company.

 

Our board of directors has significant control over us and we have yet to establish committees comprised of independent directors.

 

We only have two directors. Because of such limited number of directors, each of our board members has significant control over all corporate issues. Our directors were also the former owners of RNA.

 

We have not yet established board committees comprised of independent members. Our directors perform these functions, despite there not being independent directors. Thus, there is potential conflict in that our directors are also engaged in management and participated in decisions concerning management compensation and audit issues. While we intend to rectify this situation by expanding the board of directors and forming independent audit and compensation committees, there is no assurance that we will be able to do so.

 

18
 

 

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.

 

We must maintain effective internal controls to provide reliable financial reports and to detect and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as would be possible with an effective control system in place. We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

 

We have been assessing our internal controls to identify areas that need improvement. We are in the process of implementing changes to internal controls but have not yet completed implementing these changes. Failure to implement these changes to our internal controls or any others that it identifies as necessary to maintain an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our common stock.

 

We do not expect to pay dividends and investors should not buy our Common Stock expecting to receive dividends.

 

We do not anticipate that we will declare or pay any dividends in the foreseeable future. Consequently, you will only realize an economic gain on your investment in our Common Stock if the price appreciates. You should not purchase our Common Stock expecting to receive cash dividends. Since we do not pay dividends, and if we are not successful in establishing an orderly trading market for our shares, then you may not have any manner to liquidate or receive any payment on your investment. Therefore, failure to pay dividends may result in you not seeing any return on your investment even if our business operations are successful. In addition, because we do not pay dividends, we may have trouble raising additional funds which could affect our ability to expand our business operations.

 

We are likely to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock.

 

We have financed our operations, and we expect to continue to finance our operations, acquisitions and develop strategic relationships, by issuing equity or convertible debt securities, which could significantly reduce the percentage ownership of our existing stockholders. Furthermore, any newly issued securities could have rights, preferences and privileges senior to those of our existing Common Stock. Moreover, any issuances of equity securities made by us may be at or below the prevailing market price of our Common Stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our Common Stock to decline.

 

We may also raise additional funds through the incurrence of debt, and the holders of any debt we may issue would have rights superior to your rights in the event we are not successful and are forced to seek the protection of the bankruptcy laws.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information concerning the number of shares of our common and preferred stock owned beneficially as of April 29, 2020 (after giving effect to the Merger) by: (i) our directors and executive officer; and (ii) each person or group of persons known by us to beneficially own more than 5% of our outstanding shares of common stock. Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares they own.

 

Name of Beneficial Owner   COMMON STOCK     % of class (Common Stock) (1)     SERIES A PREFERRED STOCK (5)     % of class (Series A Preferred)     SERIES B PREFERRED STOCK    

% of class (Series B Preferred)

 

Officers and Directors

                                               
Giora Rozensweig, Interim Chief Executive Officer
    — (2)     —       —       —       —       —  
Gaya Rozensweig, Director
    28,621,107,648 (3)     6.0 %     2,500,000       50 %     —       —  
George Baumeohl. Director     17,683,333,334 (3)     3.71 %     2,500,000       50 %     —       —  
                                                 

5% or More Shareholders

                                               
UCG, Inc. (3)
   

387,000,000,000

(4)     81.17 %                     3,870,000       100 %
Total Held by Officers and Directors of Each Class     46,304,440,982       9.71 %     5,000,000       100 %     —       —  

 

1. Based on 89,789,407,996 shares of Common Stock outstanding as of April 28, 2020.

 

2. Gaya Rozensweig is the spouse of Giora Rozensweig. While the shares of Common Stock are held as of record by Gaya Rozensweig, both persons may be deemed to control the voting and disposition of these shares.

 

3. The sole shareholders and directors of UCG, Inc. are Gaya Rozensweig and George Baumeohl and, as such, they may be deemed to beneficially own these shares The address of UCG Inc. is 1825 NW Corporate Blvd. Suite 110, Boca Raton, Florida 33431.

 

4. Represents the shares of Common Stock into which the Series B Preferred Shares, representing the consideration, are automatically convertible (without any further action) upon the increase in the authorized Common Stock of the Company.

 

5. The Series A Preferred Stock were issued in August 2019 to each of Gaya Rozensweig and George Baumeohl. The Series A Preferred Stock is authorized to vote with the Common Stock in all stockholder meetings that the Common Stock may vote and each share has voting power equal to 10,000 votes per share.

 

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Item 9.01 Financial Statements and Exhibits.

 

  a) Financial Statements of Businesses Acquired.

 

The Company intends to file the consolidated financial statements of UCG (which will include the information relating to RNA) required by Item 9.01(a) as part of an amendment to this Current Report on Form 8-K not later than 71 calendar days after the date this Current Report on Form 8-K is required to be filed.

 

  b) Pro Forma Financial Information.

 

The Company intends to file the consolidated financial statements of UCG (which will include the information relating to RNA) required by Item 9.01(b) as part of an amendment to this Current Report on Form 8-K not later than 71 calendar days after the date this Current Report on Form 8-K is required to be filed.

 

Exhibits

 

Exhibit No.   Description
     
10.1   Agreement and Plan of Merger among the Company, R2GA, Inc., a Delaware corporation and a wholly owned subsidiary of the Company, UCG, Inc., a Florida corporation, SG 77 Inc., a Delaware corporation and wholly-owned subsidiary of Seller, and RNA Ltd., an Israeli company and a wholly owned subsidiary of SG (“RNA”)
10.2   Certificate of Designation of the Series B Preferred Stock, Setting Forth the Powers, Preferences, Rights, Qualifications, Limitations and Restrictions of such Series Preferred Stock

 

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SIGNATURES

 

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

 

Date: April 30, 2020    
     
World Health Energy Holdings, Inc.    
     
By: /s/ Giora Rozensweig  
  Interim Chief Executive Officer  

 

21

 

 

Exhibit 10.1

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER is made as of the 23rd day of April 2020, by and among WORLD HEALTH ENERGY HOLDINGS, INC., a Delaware corporation (“Parent”), R2GA INC., a Delaware corporation and a wholly-owned subsidiary of Parent (“Sub”), UCG, INC, a Florida corporation (“UCG”), SG 77 Inc., a Delaware corporation and a wholly-owned subsidiary of UCG (“SG”) and RNA Ltd., an Israeli corporation and a wholly-owned subsidiary of SG (“Company”). Certain capitalized and other terms used in this Agreement are defined in Annex A hereto and are used herein with the meanings ascribed to them therein.

 

WHEREAS, the respective Boards of Directors of Parent, Sub, UCG and RNA have each approved the merger of SG and Sub with SG surviving, upon the terms and subject to the conditions set forth in this Agreement, for consideration consisting of shares of Consideration Shares (as defined in Section 1.5) and upon the other terms and conditions set forth herein, which upon consummation of such transaction, SG would become a wholly owned subsidiary of Parent (the “Merger”);

 

WHEREAS, the respective Boards of Directors of Parent, Sub UCG and RNA have each determined that the Merger and the other transactions contemplated hereby are consistent with, and in furtherance of, their respective business strategies and goals and are in the best interests of their respective stockholder;

 

WHEREAS Parent, Sub, UCG, SG and the Company desire to make certain representations, warranties, covenants, each to the other, and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

 

NOW, THEREFORE, in consideration of the foregoing and the following mutual covenants and agreements the “Parties agree as follows:

 

ARTICLE I

THE TRANSACTION

 

1.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with applicable provisions of the Delaware General Corporation Law (“DGCL”), Sub shall be merged with and into SG at the Effective Time (as defined in Section 1.2). Following the Effective Time, the separate corporate existence of Sub shall cease and SG shall be the surviving corporation of the Merger (“Surviving Corporation”) and shall succeed to and assume all of the rights and obligations of Sub in accordance with the DGCL.

 

1.2 Closing; Effective Time. The closing of the Merger and other transactions contemplated hereby (“Closing”) will take place at 10:00 a.m., Eastern Standard time, on a date to be specified by the parties (“Closing Date”) at such other location as may be agreed to by the parties hereto. At the Closing, the Parties hereto shall cause the Merger to be consummated by filing this Agreement and certificate of merger (collectively the “Merger Documents”) with the Secretary of State of the State of Delaware (the “Delaware Secretary”), in accordance with the relevant provisions of the DGCL (the time of such filings, or such later time as may be agreed in writing by the Parties and specified in the Merger Documents, being the “Effective Time”). If the Delaware Secretary requires any changes in the Merger Documents as a condition to filing or issuing a certificate to the effect that the Merger is effective, UCG, WHEN and/or Sub or SG shall execute any necessary document incorporating such changes, provided such changes are not inconsistent with and do not result in any material change in the terms of this Agreement.

 

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1.3 Effects of Merger. The effects of the Merger shall be as provided in this Agreement, the Merger Documents and the applicable provisions of DGCL.

 

1.4 Certificate of Incorporation and Bylaws.

 

(a) At the Effective Time, by virtue of the Merger and without any action on the part of WHEN, Sub or SG, the certificate of incorporation and the bylaws of SG, as in effect immediately prior to the Effective Time, shall be the Certificate and Bylaws of the Surviving Corporation until thereafter amended as provided by the DGCL.

 

(b) The directors and officers of SG prior to the Effective Time shall be the initial directors and officers of the Surviving Corporation.

 

1.5 Consideration.

 

(a) Subject to the terms of this Agreement and in reliance on the representations and warranties of each of UCG, SG and the Company herein, at the Closing, Sub shall deliver to UCG, Three Million Eight Hundred and Seventy Thousand (3,870,000) shares of the Parent Series B Convertible Preferred Shares (the “Consideration Shares”), free and clear of all liens and encumbrances.

 

(b) at the Effective Time, without any action of the holder thereof, each share of Common Stock of R2GA issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued fully paid non-assessable share of common stock of SG. Each stock certificate evidencing ownership of any shares of R2GA shall, at the Effective Time, evidence ownership of one such share of capital stock of SG.

 

(c) All shares of Consideration Shares issued in connection with the Merger shall (i) contain a restricted securities legend in compliance with the Securities Act, and (ii) be deemed to have been issued in full satisfaction of all rights pertaining to such SG Shares.

 

1.6 Tax Treatment. The exchange described herein is intended to comply with Section 368(a)(1)(B) of the Code, and all applicable regulations thereunder. In order to ensure compliance with said provisions, the Parties agree to take whatever steps may be necessary, including, but not limited to, the amendment of this Agreement.

 

1.7 Replaces Previous Agreement. The Parties acknowledge that certain Capital Stock Exchange Agreement entered into by certain of the parties and dated as of January 27, 2020 (the “Prior Agreement”), which agreement has by its own terms terminated as of February 29, 2020, is hereby replaced in its entirety by this Agreement. To the extent applicable, all provisions of the Prior Agreement are hereby superseded in their entirety and replaced herein and shall have no further force or effect.

 

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ARTICLE II

REPRESENTATIONS AND WARRANTIES OF PARENT

 

Parent represents and warrants to UCG and to SG, that the statements contained in this Article II are true and correct as of the date of this Agreement and will be true and correct as of the Closing Date.

 

2.1 Organization.

 

(a) Parent is a corporation validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority and possesses all necessary governmental approvals necessary to own, lease and operate its properties, to carry on its business as now being conducted, to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby. Parent is duly qualified to do business and is in good standing in all jurisdictions in which its ownership of property or the character of its business requires such qualification, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

 

2.2 Capitalization.

 

(a) Parent’s authorized capital stock consists of (i) One Hundred and Ten Billion (110,000,000,000) shares of common stock, par value $0.0007 per share (the “Parent Common Stock”); and (ii) Ten Million (10,000,000) shares of Preferred Stock, par value $0.0007 per share (the “Parent Preferred Stock”).

 

(b) There are 89,789,407,996 shares of Parent Common Stock issued and outstanding and 8,870,000 shares of Parent Preferred Stock, of which 5,000,000 have been designated as Series A Convertible Preferred Shares and 3,870,000, have been designated as Series B Convertible Preferred Shares. All of the issued and outstanding shares of Parent Common Stock and Parent Preferred Stock were duly and validly issued and fully paid, are non-assessable and free of pre-emptive rights, and were issued in compliance with all applicable state and federal securities laws.

 

2.3 Authorization. Parent has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby have been duly and validly authorized by the board of directors of Parent and no other corporate proceedings on the part of Parent are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent. This Agreement and all other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which Parent is a party constitute the valid and legally binding obligations of Parent enforceable against Parent in accordance with their terms, except as may be limited by principles of equity or applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or other similar laws relating to or affecting the rights and remedies of creditors generally. The execution, delivery and performance by Parent of this Agreement and the agreements provided for herein, and the consummation by Parent of the transactions contemplated hereby, will not, with or without the giving of notice or the passage of time or both, violate the provisions of the Parent certificate of or incorporation, as amended, or Parent bylaws, or (i) violate any judgment, decree, order or award of any court, governmental body or arbitrator; (ii) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of Parent pursuant to, any indenture, mortgage, deed of trust or other instrument or agreement to Parent is a party or by which Parent or any of their respective properties is or may be bound; or (iii) to Parent’s Knowledge, violate the provisions of any law, rule or regulation applicable to Parent, except where such violation would not reasonably be expected to have an Material Adverse Effect.

 

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2.4 No Conflict. The execution and delivery of this Agreement by Parent does not require any consent or approval under, result in any breach of, result in any loss of any benefit under or constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of any lien or encumbrance on any property or asset of Parent pursuant to any material agreement of Parent, or other instrument or obligation of Parent.

 

2.5 Valid Issuance of the Parent Stock. The Series B Convertible Preferred Shares to be issued to UCG as the Consideration Shares, and the Parent Common Stock issuable upon conversion thereof, will, when issued, be duly authorized, validly issued, fully paid and non-assessable, free and clear from all taxes and liens, claims and encumbrances (except the applicable securities Laws), and will not be subject to any pre-emptive rights or similar rights.

 

2.6 SEC and State Securities Law Filings.

 

(a) Parent has filed all forms, reports and documents, as otherwise would be required by SEC and any state securities administrators during the preceding 12 months. At the time filed, except as permitted and noted by the SEC Staff in various comment letters, all such filings (A) complied in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and (B) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such filings or necessary in order to make the statements in such filings, in the light of the circumstances under which they were made, not misleading.

 

(b) Each of the financial statements, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly presented the financial position of Parent as of the dates and the results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. Parent maintains a standard system of accounting established and administered in accordance with GAAP.

 

(c) There are no outstanding or unresolved comments in comment letters from the SEC staff with respect to any of the SEC filings. To Parent’s knowledge, none of the SEC reports is the subject of ongoing review or outstanding SEC investigation.

 

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(d) On closing, Parent will prepare and timely file a Current Report on Form 8-K setting forth the required information concerning this business combination transaction. This report may include Form 10 type disclosures on Form 8-K.

 

2.7 Undisclosed Liabilities. Except as set forth on Parent’s balance sheet dated December 31, 2019, as set forth in Parent’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC, Parent has no liability or obligation, secured or unsecured, whether accrued, absolute, contingent, unasserted or otherwise, that exceeds an aggregate of $100,000. Since December 31, 2019, Parent has not incurred any liabilities of any nature, whether or not accrued, contingent or otherwise, which could reasonably be expected to have, and there have been no events, changes or effects with respect to Parent having or which reasonably could be expected to have a Material Adverse Effect on Parent. Since December 31, 2019, there has not been (i) any change by Parent in its accounting methods, principles or practices (other than as required after the date hereof by concurrent changes in generally accepted accounting principles), (ii) any revaluation by Parent of any of its assets, including, without limitation, any write-down of the value of any assets or (iii) any other action or event that would have required the consent of any other party hereto pursuant to of this Agreement had such action or event occurred after the date of this Agreement.

 

2.8 Litigation. There is not in existence on the date hereof any order, judgment or decree of any court, tribunal or agency to Parent ‘s Knowledge enjoining or requiring Parent to take any action of any kind with respect to its business, assets or properties.

 

2.9 Exemption from Registration.

 

(a) Subject to the accuracy of the representations made by UCG and SG and the ultimate shareholders thereof, Consideration Shares to be issued to UCG will be exempt from registration under the Securities Act and applicable state securities laws.

 

(b) On Closing, Parent will prepare and file a Form D with the SEC, with copies of the Form D and filing fees, if any, to any relevant state securities authorities. It is the intent of the Parent and Sub that the share exchange transaction will be exempt from Section 5 of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) and Regulation D, Rule 506(b), by virtue of the private nature of the exchange offering.

 

2.10 Title to Assets.

 

(a) Parent has valid interests in, all real property and personal property and other assets, other than properties and assets sold or otherwise disposed of in the ordinary course of business consistent with past practice. All such properties and assets (including leasehold interests) are free and clear of liens except for the following encumbrances:

 

(i) liens for Taxes not yet due and payable or being contested in good faith by appropriate procedures and for which there are adequate accruals or reserves on the Parent’s balance sheets;

 

(ii) mechanics, carriers,’ workmen’s, repairmen’s or other statutory liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the business of Parent;

 

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(iii) easements, rights of way, zoning ordinances and other similar encumbrances affecting real property which are not, individually or in the aggregate, material to the business of Parent; or

 

(iv) liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the business of Parent.

 

2.11 Insurance. To Parent ‘s Knowledge, all current insurance policies are in full force and effect, are in amounts of a nature that are adequate and customary for Parent’s business, and to Parent’s Knowledge are sufficient for compliance with all legal requirements and agreements to which it is a party or by which it is bound. All premiums due on current policies or renewals have been paid, and there is no material default under any of the policies.

 

2.12 Tax Matters. Parent has timely filed all federal, state and local tax returns and all tax returns for other governing bodies having jurisdiction to levy taxes upon it which are required to be filed. Parent has paid all taxes, interest, penalties, assessments, and deficiencies which have become due, including without limitation income, franchise, real estate, and sales and withholding taxes. No examinations of the federal, state or local tax returns of Parent are currently in progress nor threatened and no deficiencies have been asserted or, to Parent’s Knowledge, assessed against Parent as a result of any audit by the Internal Revenue Service or any state or local taxing authority and no such deficiency has been proposed or threatened. All Taxes required to be withheld on or prior to the date hereof from employees for income taxes, social security taxes, unemployment Taxes and other similar withholding taxes have been properly withheld and, if required on or prior to the date hereof, have been deposited with the appropriate governmental agency.

 

2.13 Books and Records. The general ledger and account books of Parent, all minute books of Parent, all federal, state and local income, franchise, property and other tax returns filed by Parent, all reports and filings with the SEC by Parent, as required to be maintained under the laws of the State of Delaware or otherwise, all of which have been made available to Sub, are in all material respects complete and correct, unless otherwise disclosed and have been maintained in accordance with good business practice and in accordance with all applicable procedures.

 

2.14 Compliance with Laws. Parent has all requisite licenses, permits and certificates from federal, state and local authorities necessary to conduct its business as currently conducted and own and operate its assets, except where the failure to have such permits would not reasonably be expected to have a Material Adverse Effect. To Parent’s knowledge, Parent is not in violation of any federal, state or local law, regulation or ordinance (including, without limitation, laws, regulations or ordinances relating to building, zoning, environmental, disposal of hazardous waste, land use or similar matters) relating to its business or its properties.

 

2.15 Regulatory Approvals. All consents, approvals, authorizations or other requirements prescribed by any law, rule or regulation that must be obtained or satisfied by Parent and that are necessary for the execution and delivery by Parent of this Agreement or any documents to be executed and delivered by Parent in connection therewith have been obtained and satisfied.

 

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2.16 No Brokers. No broker or finder has acted for Parent in connection with this Agreement or the transactions contemplated hereby, and no broker or finder is entitled to any brokerage or finder’s fee or other commissions in respect of such transactions based upon agreements, arrangements or understandings made by or on behalf of Parent.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF UCG, SG AND THE COMPANY

 

UCG, SG and Company, jointly and severally, represent and warrant to Parent and Sub, that the statements contained in this Article III are true and correct as of the date of this Agreement and will be true and correct as of the Closing Date.

 

3.1 Organization. Each of UCG and SG is a corporation validly existing and in good standing under the laws of State of Delaware. The Company is a corporation validly existing and in good standing under the laws of the State of Israel. Each of UCG, SG and the Company has all requisite power and authority and possesses all necessary governmental approvals necessary to own, lease and operate its properties, to carry on its business as now being conducted, to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby.

 

3.2 Capitalization

 

(a) The authorized capital stock of each of UCG and SG consists of 10,000 shares of common stock par value $0.001 per share, all of which are issued and outstanding. All of the issued and outstanding shares of each of UCG and SG were duly and validly issued and fully paid, are non-assessable and free of pre-emptive rights, and were issued in compliance with all applicable foreign securities laws

 

(b) Company’s authorized capital stock consists of 100 shares of Ordinary Shares, par value NIS 1.00, all of which are issued and outstanding. All of the issued and outstanding shares of SG were duly and validly issued and fully paid, are non-assessable and free of pre-emptive rights, and were issued in compliance with all applicable foreign securities laws

 

3.3 Authorization. Each of UCG, SG and Company has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by UCG, SG and Company and the consummation by UCG, SG and the Company of the transactions contemplated hereby have been duly and validly authorized by the board of directors of UCG, SG and Company, and no other corporate proceedings on the part of UCG, SG or Company is necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by UCG, SG and Company. This Agreement and all other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which UCG, SG and Company are a party constitute the valid and legally binding obligations of UCG, SG and Company, enforceable against each in accordance with their respective terms, except as may be limited by principles of equity or applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or other similar laws relating to or affecting the rights and remedies of creditors generally. The execution, delivery and performance by UCG, SG and Company of this Agreement and the agreements provided for herein, and the consummation by UCG, SG and Company of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (i) violate any judgment, decree, order or award of any court, governmental body or arbitrator; (ii) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of SG and/or Company pursuant to, any indenture, mortgage, deed of trust or other instrument or agreement to which SG or Company is a party or by which SG or Company or any of their respective properties is or may be bound; or (iii) to UCG Knowledge, violate the provisions of any law, rule or regulation applicable to UCG, SG or Company, except where such violation would not reasonably be expected to have a Material Adverse Effect.

 

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3.4 No Conflict. The execution and delivery of this Agreement by UCG, SG and Company does not require any consent or approval under, result in any breach of, result in any loss of any benefit under, or constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under; give to others any right of termination, vesting, amendment, acceleration or cancellation of; or result in the creation of any lien or encumbrance on any property or asset of Company pursuant to any material agreement of Company or other instrument or obligation of Company.

 

3.5 Litigation. There is not in existence on the date hereof any order, judgment or decree of any court, tribunal or agency to UCG’s knowledge enjoining or requiring UCG, SG or Company to take any action of any kind with respect to its business, assets or properties.

 

3.6 Audited Financial Statements.

 

(a) Within 75 days of the Closing, Company will present to Parent and Sub the Audited Financial Statements set forth in subparagraph (b) below:

 

(b) Company will provide audited financial statements which are true, correct, and complete copies of its audited balance sheets, statement of operations, cash flows, changes in shareholder equity and footnotes dated as of December 31, 2019 and 2018 (the “Company Accounting Audit Date”), together with requisite and related statements of operations, balance sheets, cash flows, and changes in shareholder’s equity and footnotes for the fiscal quarters preceding the Closing, (collectively, the “Company Audited Financial Statements”).

 

3.7 Title to Assets.

 

(a) Each of UCG, SG and Company has valid interests in, all real property and tangible and intangible personal property and other assets, other than properties and assets sold or otherwise disposed of in the ordinary course of business consistent with past practice. All such properties and assets (including leasehold interests) are free and clear of liens except for the following encumbrances:

 

(i) liens for Taxes not yet due and payable or being contested in good faith by appropriate procedures and for which there are adequate accruals or reserves on the SG or Company’s balance sheets;

 

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(ii) mechanics, carriers,’ workmen’s, repairmen’s or other statutory liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the business of SG or Company;

 

(iii) easements, rights of way, zoning ordinances and other similar encumbrances affecting real property which are not, individually or in the aggregate, material to the business of SG or Company; or

 

(iv) liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the business of SG or Company.

 

3.8 Intellectual Property.

 

(a) Except as disclosed herein (i) Company owns or possesses sufficient rights to use all patents, patent rights, trademarks, copyrights, licenses, inventions, manufacturing processes, design process, logos, trade names, hardware designs, programming processes, software, trade secrets, trade names and know-how (collectively, “Intellectual Property”) that are necessary for the conduct of its business as now conducted or as proposed to be conducted except where the failure to currently own or possess would not have a Material Adverse Effect, (ii) Company, to its knowledge is not infringing and has not received any notice of, or has any knowledge of, any asserted infringement by the Company of any rights of a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect, and (iii) Company has not received any notice of, or has any knowledge of, infringement by a third party with respect to any Intellectual Property rights of the Company that, individually or in the aggregate, would have a Material Adverse Effect.

 

(b) Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect

 

3.9 Insurance. To UCG and the Company’s Knowledge, all current insurance policies are in full force and effect, and to Company’s Knowledge are sufficient for compliance with all legal requirements and agreements to which it is a party or by which it is bound. All premiums due on current policies or renewals have been paid, and there is no material default under any of the policies.

 

3.10 Compliance with Laws. To the Best of Company’s knowledge, it is not in violation of any Israeli law, regulation or ordinance (including, without limitation, laws, regulations or ordinances relating to building, zoning, environmental, disposal of hazardous waste, land use or similar matters) relating to its business or its properties.

 

3.11 No Brokers. No broker or finder has acted for UCG, SG or the Company in connection with this Agreement or the transactions contemplated hereby, and no broker or finder is entitled to any brokerage or finder’s fee or other commissions in respect of such transactions based upon agreements, arrangements, or understandings made by or on behalf of Company.

 

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3.12 RESERVED

 

3.13 Disclosure. The information concerning Company set forth in this Agreement, the exhibits and schedules hereto, and any document, statement or certificate furnished or to be furnished in connection herewith (as applicable) does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated herein or therein or necessary to make the statements and facts contained herein or therein, in light of the circumstances in which they are made, not false or misleading.

 

3.14 Contracts.

 

(a) Each such Contract (each, a “Material Contract”) is in full force and effect and constitutes the legal, valid and binding obligation of the Company and is enforceable in accordance with its terms, in each case subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally. As of the date hereof, neither Company, nor to Company’s Knowledge, any other party to any Material Contract, is in breach of, or in default under such Material Contract. To the Knowledge of Company, as of the date hereof, no party has given any written notice of termination or cancellation of any Material Contract or that it intends to assert a breach of, or seek to terminate or cancel, any Material Contract as a result of the transactions contemplated hereby. Company has made available to Parent a true and complete copy of each Material Contract, as in effect on the date hereof.

 

(b) No Person is currently renegotiating any material amount paid or payable to the Company under any Material Contract or any other material term or provision of any Material Contract.

 

3.15 Absence of Certain Changes or Events. Except as set forth in this Agreement or the Schedules, since September 30, 2019, there has been no material change in the business and assets of Company and to the Company’s knowledge, Company has not become subject to any law or regulation which materially and adversely affects, the business, operations, properties, assets, or condition of Sub.

 

ARTICLE IV

CONDITIONS TO CLOSING

 

4.1 Conditions to Obligation of UCG, SG and Company. The obligation of each of UCG, SG and Company to effect the Transaction shall be subject to the fulfillment at or prior to the Closing of the following conditions, unless Sub shall waive such fulfillment:

 

4.1.1 This Agreement and the transactions contemplated hereby shall have received all approvals, consents, authorizations, and waivers from governmental and other regulatory agencies and other third parties (including lenders, holders of debt securities, and lessors) required to consummate the Transaction;

 

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4.1.2 Parent shall have performed in all material respects each of its agreements and obligations contained in this Agreement and required to be performed on or prior to the Closing and shall have complied with all material requirements, rules, and regulations of all regulatory authorities having jurisdiction relating to the Transaction;

 

4.1.3 The representations and warranties of Parent set forth in this Agreement shall be true in all material respects as of the date of this Agreement and, except in such respects as, in the reasonable judgment of Sub, do not materially and adversely affect the business or condition (financial or otherwise) of Parent, as of the Closing as if made as of such time; and

 

4.1.4 UCG and Company shall have received, on and as of the Closing Date, such closing documents and instruments Company shall reasonably request.

 

4.2 Conditions to Obligation of Parent and Sub. The obligation of Parent and Sub to effect the Transaction shall be subject to the fulfillment at or prior to the Closing of the following conditions, unless Parent and Sub shall waive such fulfillment:

 

4.2.1 This Agreement and the Transaction shall have received all approvals, consents, authorizations, and waivers from governmental and other regulatory agencies and other third parties (including lenders, holders of debt securities, lessors, and stockholders) required by law to consummate the Transaction;

 

4.2.2 There shall not be in effect a preliminary or permanent injunction or other order by any federal or state authority which prohibits the consummation of the Transaction.

 

4.2.3 Each of UCG and Company shall have performed in all material respects their agreements and obligations contained in this Agreement required to be performed on or prior to the Closing;

 

4.2.4 No material adverse change shall, in the reasonable judgment of Parent, have taken place in the business or condition (financial or otherwise) of Sub, other than those that result from the changes permitted by, and transactions contemplated by, this Agreement;

 

4.2.5 The representations and warranties of each of UCG, SG and Company set forth in this Agreement shall be true in all material respects as of the date of this Agreement and, except in such respects as, in the reasonable judgment of Parent, do not materially and adversely affect the business or condition (financial or otherwise) of the Company, as of the Closing Date as if made as of such time.

 

4.2.6 Parent shall have received, on and as of the Closing Date, such closing documents and instruments Parent shall reasonably request.

 

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ARTICLE V

ADDITIONAL COVENANTS

 

5.1 Access

 

Between the date of this Agreement and the Closing Date, UCG, SG and the Company, on the one hand, and Parent and Sub, on the other hand, will, and will cause each of their respective representatives to:

 

(a) afford the other and its representatives full and free access to its personnel, properties, assets, contracts, books and records, and other documents and data;

 

(b) furnish the other and its representatives with copies of all such contracts, books and records, and other existing documents and data as required by this Agreement and as the other may otherwise reasonably request; and

 

(c) furnish the other and its representatives with such additional financial, operating, and other data and information as the other may reasonably request.

 

All of such access, investigation and communication by a party and its representatives will be conducted during normal business hours and in a manner designed not to interfere unduly with the normal business operations of the other party. Each party will instruct its auditors to cooperate with the other party and its representatives in connection with such investigations.

 

5.2 Operation of Business. From the date of this Agreement to the Closing Date, and except to the extent that Parent otherwise consents in writing, the Company will operate its business substantially as presently operated and only in the ordinary course and in compliance with all applicable laws, and use its best efforts to preserve intact its good reputation and present business organization and to preserve its relationships with persons having business dealings with it.

 

ARTICLE VI

GENERAL PROVISIONS

 

6.1 Arbitration.

 

(a) If any dispute between the Parties arising under or relating to this Agreement cannot reasonably be resolved by the Parties through mutual negotiation, the Parties agree that the claim or dispute will be resolved by arbitration as set forth in this section.

 

(b) If the dispute or claim cannot be resolved through mutual negotiation, the Parties agree that the matter will then be submitted to and decided by arbitration to be conducted in Boca Raton, Florida. The arbitration shall be conducted by the American Arbitration Association (“AAA”) in accordance with the then-existing Commercial Arbitration Rules and Mediation Procedures (“Commercial Rules). Either Party may contact the AAA to seek arbitration. The AAA shall select a single arbitrator. Each Party shall bear its own expenses and attorneys’ fee incurred in connection with these dispute resolution procedures and will share equally the fees and expenses of the arbitrator, regardless of the outcome of the mediation or arbitration. The arbitration shall be conducted with 30 days after the first of either party contacts the AAA to request arbitration. The arbitrator’s decision shall be made within 14 days after the arbitration. There is no appeal for the arbitrator’s decision or award. If the arbitrator determines a party has acted in bad faith, he/she shall be authorized to award costs and fees.

 

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(c) Should a Party not participate in arbitration, the non-participating Party shall have a default award for the amount in dispute entered against it, plus costs of the participating Party’s fees and expenses for the arbitration proceeding. This agreement to arbitrate waives any right to trial by jury. There shall be no appeal.

 

(d) In all instances of arbitration, the party requesting that activity shall provide immediate notice via email and one-day courier (e.g., FedEx) to the addresses listed below.

 

6.2 Limitation. Notwithstanding any provision to the contrary herein, no Party will be entitled to recover, and no party shall be liable for, any incidental, consequential, exemplary, special, punitive or treble damages.

 

6.3 Notices. All notices required or permitted under this Agreement will be in writing, and shall be deemed given when delivered (i) in person; (ii) by overnight courier, upon written confirmation of receipt; (iii) by certified or registered mail, with proof of delivery; (iv) by facsimile transmission with confirmation of receipt; or (v) by email (and shall be deemed delivered when leaving the network of the sending party provided that no out of office or other delivery failure message is received):

 

If to Parent or Sub:

 

World Health Energy Holdings, Inc.

1825 NW Corporate Blvd. Suite 110

Boca Raton, FL 33431

(561)870=0440

Attn: Giora Rozensweig, Interim Chief Executive Director

email: Giora@whengroup.com

 

With a copy to:

 

David Aboudi

Attorney at Law

745 Fifth Ave., Suite 500

New York, NY 10151

Tel. (972)52-398-3707 (direct)

email: david@aboudilegal.com

 

If to UCG or Company:

 

RNA Ltd.

Jabotinsky 7, floor 27

Ramat Gan, Israel

Attn: Gaya Rozensweig

Email: gaya.rozen@gmail.com

 

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6.4 Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

6.5 Miscellaneous. This Agreement:

 

6.5.1 constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, between the Parties, with respect to the subject matter hereof, except as specifically provided otherwise or referred to herein, so that no such external or separate agreements relating to the subject matter of this Agreement shall have any effect or be binding, unless the same is referred to specifically in this Agreement or is executed by the Parties after the date hereof;

 

6.5.2 is not intended to confer upon any other person, other than to the Parties hereto and their respective heirs, successors and permitted assigns, any rights or remedies hereunder;

 

6.5.3 shall not be assigned by operation of law or otherwise;

 

6.5.4 shall be governed in all respects, including validity, interpretation and effect, by the internal laws of the State of Delaware, without regard to the principles of conflict of laws; and

 

6.5.5 shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors, assigns, heirs and legal representatives;

 

6.6 Counterparts. This Agreement may be executed in two or more counterparts, including by facsimile, which together shall constitute a single agreement.

 

6.7 Severability. If any provision, including any phrase, sentence, clause, section or subsection, of this Agreement is invalid, inoperative or unenforceable for any reason, such provision shall be valid and enforceable to the fullest extent permitted by law and such circumstances shall not have the effect of rendering such provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision herein contained invalid, inoperative or unenforceable to any extent whatsoever.

 

6.8 Survival. All representations and warranties of each of the parties shall survive the transactions contemplated herein and shall remain operative and in full force and effect, regardless of any investigations at any time made by or on behalf of any party hereto, for a period of one (1) year after the Closing Date.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be signed on the date first written above by their respective officers thereunto duly authorized.

 

/s/ Giora Rozensweig   /s/ Gaya Rozensweig
World Health Energy Holdings Inc.   UCG Inc.
     
By: Giora Rozensweig   By: Gaya Rozensweig
Date:

4.27.2020

  Date: 4.27.2020

 

/s/ Giora Rozensweig   /s/ Gaya Rozensweig
R2GA Inc.   RNA Ltd.
     
By: Giora Rozensweig   By: Gaya Rozensweig
Date: 4.27.2020   Date: 4.27.2020

 

    /s/ Giora Rozensweig 
    SG 77 Inc.
       
    By: Giora Rozensweig
    Date: 4.27.2020

 

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Annex A

 

“1933 Act” means the Securities Act of 1933, as amended, as of the Closing Date.

 

“Affiliate” of a Person means a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the first Person.

 

“Charter Increase” shall mean the filing with the Secretary of State of the state of Delaware of an amendment to the Company’s certificate of incorporation increasing the number of authorized shares of the Common Stock par value $0.0007 per share that the Company is authorized to issue from time to time beyond the currently authorized One Hundred and Ten Billion (110,000,000,000) shares of Common Stock.

 

“Control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise. For purposes of this Agreement, each of the shareholders of the Parties and each member of each shareholder’s immediate family shall be deemed to be an Affiliate of Sub.

 

“Closing” is defined in Section 1.2.

 

“Code” means the Internal Revenue Code of 1986, as amended, and related rules and regulations thereunder.

 

“Contract” means any written or oral contract, agreement, intellectual property license, license, sublicense, lease, sublease, sales order, purchase order, credit agreement, indenture, mortgage, note, bond or warrant (including all amendments, supplements and modifications thereto).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“GAAP” means United States generally accepted accounting principles.

 

“IRS” means the Internal Revenue Service.

 

“Knowledge” (or words of similar import), means that, after having conducted a reasonable due diligence review, the Party believes the statement to be true, accurate, and complete in all material respects.

 

“Liabilities” means obligations, whether known or unknown, contingent or absolute, recorded on its books or not, arising or resulting in any way from facts, events, agreements, obligations or occurrences that existed or transpired at a prior point in time, or resulted from the passage of time.

 

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“Material Adverse Effect” or “Material Adverse Change” means with respect to any Person, any event, change, circumstance or effect that is or is reasonably likely to be materially adverse to (a) the business, financial condition or results of operations of such Person and its Subsidiaries taken as a whole; or (b) the ability of such entity to consummate the Transaction contemplated by this Agreement.

 

“Parent Series B Convertible Preferred Shares” shall mean the Series B Convertible Preferred Shares, par value $0.0007 with the rights and privileges as set forth in the Certificate of Designations attached hereto as Exhibit A, which shares will automatically convert into a total of Three Hundred Eighty-Seven Billion (387,000,000,000) shares of the Company Common Stock, par value $0.0007, immediately upon the effectiveness of the amendment to the Company’s certificate of incorporation providing for the Charter Increase.

 

“Person” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization, other entity or group.

 

“SEC” means the Securities and Exchange Commission.

 

“Tax” or “Taxes” means federal, state, county, local, foreign or other income, gross receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, communications, real or personal property, capital stock, license, payroll, wage or other withholding, employment, social security, severance, stamp, estimated and other taxes of any kind whatsoever (including, without limitation, deficiencies, penalties, additions to tax and interest attributable thereto) whether disputed or not.

 

“Tax Return” means any return, information report or filing with respect to Taxes, including any schedules attached thereto and including any amendment thereof.

 

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Exhibit 10.2

 

WORLD HEALTH ENERGY HOLDINGS, INC.

 

CERTIFICATE OF DESIGNATION OF SERIES B PREFERRED STOCK, SETTING FORTH THE POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK

 

Pursuant to Section 151 of the Delaware General Corporation Law, World Health Energy Holdings, Inc., a Delaware corporation (the “Corporation”), DOES HEREBY CERTIFY:

 

The Amended and Restated Certificate of Incorporation of the Corporation (the “Charter”) confers upon the Board of Directors of the Corporation (the “Board of Directors”) the authority to provide for the issuance of shares of preferred stock in series and to establish the number of shares to be included in each such series and to fix the powers, designations, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof.

 

On April 24, 2020 the following resolution was duly adopted by the board of directors of the Corporation (the “Board”):

 

RESOLVED, that, pursuant to the authority granted to and vested in the Board by the provisions of the certificate of incorporation of the Corporation (the “Certificate of Incorporation”), there hereby is created, out of the Ten Million (10,000,000) shares of preferred stock, par value $0.0001 per share, of the Corporation authorized by the Corporation’s Certificate of Incorporation (“Preferred Stock”), Series B Preferred Stock, consisting of THREE MILLION EIGHT HUNDRED SEVENTY THOUSAND (3,870,000) shares, which series shall have the following powers, designations, preferences and relative participating, optional and other special rights, and the following qualifications, limitations and restrictions:

 

The specific powers, preferences, rights and limitations of the Series B Preferred Stock are as follows:

 

1. Dividend Provisions. Subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the holders of shares of Series B Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, upon any payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of the Corporation) on the Common Stock of the Corporation, as and if declared by the Board of Directors, as if the Series B Preferred Stock had been converted into Common Stock.

 

2. Liquidation Preference.

 

(a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, subject to the rights of any existing series of Preferred Stock or to the rights of any series of Preferred Stock which may from time to time hereafter come into existence, the entire assets and funds of the Corporation shall be distributed to all holders of Common Stock and to each series of Preferred Stock, pro rata based on the number of shares of Common Stock held by each (assuming conversion of all such Preferred Stock into Common Stock)

 

(b) For purposes of this Section 2, a liquidation, dissolution or winding up of the Corporation shall be deemed to be occasioned by, or to include, (i) the acquisition of the Corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation, but excluding any merger effected exclusively for the purpose of changing the domicile of the Corporation); or (ii) a sale of all or substantially all of the assets of the Corporation, unless the Corporation’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Corporation’s acquisition or sale or otherwise) hold at least fifty percent (50%) of the voting power of the surviving or acquiring entity in approximately the same relative percentages after such acquisition or sale as before such acquisition or sale.

 

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(c) In any of the events specified in (b) above, if the consideration received by the corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:

 

(i) Securities not subject to investment letter or other similar restrictions on free marketability:

 

(A) If traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing;

 

(B) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and

 

(C) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors.

 

(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i)(A), (B) or (C) to reflect the approximate fair market value thereof, as mutually determined by the Corporation and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock.

 

(iii) In the event the requirements of Section 2(c) are not complied with, the Corporation shall forthwith either:

 

(A) cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; of

 

(B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series B Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Section 2(c)(iv) hereof.

 

(d) The Corporation shall give each holder of record of Series A Preferred Stock written notice of such impending transaction not later than twenty (20) days prior to the stockholders’ meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days after the corporation has given the first notice provided for herein or sooner than ten (10) days after the corporation has given notice of any material changes provided for herein; provided, however, that time periods set forth in this paragraph may be shortened upon the written consent of the holders of Series A Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least a majority of the voting power of all then outstanding shares of such Series A Preferred Stock.

 

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3. Redemption. The Series B Preferred Stock shares are non- redeemable other than upon the mutual agreement of the Company and the holder of shares to be redeemed, and even in such case only to the extent permitted by this Certificate of Designation, the Corporation’s Certificate of Incorporation and applicable law.

 

4. Conversion. The holders of the Series B Preferred Stock, shall have conversion rights as follows (the “Conversion Rights”):

 

(a) Automatic Conversion. Each share of Series B Preferred Stock shall automatically be converted into 100,000 shares of Common Stock immediately upon the effectiveness of the next increase in the authorized Common Stock of the Corporation.

 

(b) Mechanics of Conversion. Before any holder pf Series B Preferred Stock shall be entitled to convert the same into shares of Common Stock as herein provided, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series B Preferred Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act of 1933, the conversion may, at the option of any holder tendering Series B Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive Common Stock upon conversion of such Series B Preferred Stock shall not be deemed to have converted such Series B Preferred Stock until immediately prior to the closing of such sale of securities.

 

(c) Conversion Price Adjustments of Preferred Stock for Certain Splits and Combinations. The Series A Conversion Price shall be subject to adjustment from time to time as follows:

 

(i) In the event the corporation should at any time or from time to time after the purchase date with respect to any share of Series B Preferred Stock fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as “Common Stock Equivalents”) without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Series B Conversion Price, as the case may be, shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to time as provided in Section 4(d)(iii) below.

 

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(ii) If the number of shares of Common Stock outstanding at any time after the purchase date of any shares of Series A Preferred Stock is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Series A Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares.

 

(iii) The following provisions shaft apply for purposes of this Section 4(d);

 

(A) The aggregate maximum number of shares of Common Stock deliverable upon conversion or exercise of Common Stock Equivalents (assuming the satisfaction of any conditions to convertibility or exercisability, including, without limitation, the passage of time, but without taking into account potential antidilution adjustments) shall be deemed to have been issued at the time such Common Stock Equivalents were issued.

 

(B) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to the Corporation upon conversion or exercise of such Common Stock Equivalents including, but not limited to, a change resulting from the antidilution provisions thereof, the Series A Conversion Price, to the extent in any way affected by or computed using such Common Stock Equivalents, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities.

 

(C) Upon the termination or expiration of the convertibility or exercisability of any such Common Stock Equivalents, the Series A Conversion Price, to the extent in any way affected by or computed using such Common Stock Equivalents, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and Common Stock Equivalents which remain convertible or exercisable) actually issued upon the conversion or exercise of such Common Stock Equivalents.

 

(d) Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in Section 4(c), then, in each such case for the purpose of this Section 4(e), the holders of Series B Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the corporation into which their shares of Series A Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the corporation entitled to receive such distribution.

 

(e) Recapitalizations. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 4 or Section 2) provision shall be made so that the holders of the Series B Preferred Stock shall thereafter be entitled to receive upon conversion of the Series B Preferred Stock the number of shares of stock or other securities or property of the Company or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Series AB Preferred Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Series A Preferred Stock) shall be applicable after that event and be as nearly equivalent as practicable.

 

(f) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation s but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series A Preferred Stock against impairment.

 

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(g) No Fractional Shares and Certificate as to adjustments.

 

(i) No fractional shares shall be issued upon the conversion of any share or shares of the Series B Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series B Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

 

(ii) Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 4, the Corporation, at its expense, shall promptly compete such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series B Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A Preferred Stock furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price for such series of Preferred Stock at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion for share of such series of Preferred Stock.

 

(h) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holden thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series A Preferred Stock, at least 20 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

 

(i) Notices. Any notice required by the provisions of this Section 4 to be given to the holders of shares of Series B Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of the Corporation.

 

5. Voting Rights. The holder of each share of Series B Preferred Stock shall not have any voting rights.

 

6. Status of Converted Stock. Upon the conversion of the shares of Series B Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so converted shall be canceled and shall be re-issuable by the corporation.

 

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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be duly executed by its authorized officer the 24th day of April 2020.

 

  WORLD HEALTH ENERGY HOLDINGS, INC.
     
  By: /s/ Giora Rozensweig
  Name: Giora Rozensweig
  Title: Interim Chief Executive Officer

 

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