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
Date of Report (Date of earliest event reported): January 7, 2020
(December 31, 2019)
Cuentas Inc.
(Exact name of registrant as specified in its charter)
Florida |
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000-54923 |
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20-3537265 |
(State
or other jurisdiction of |
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(Commission file number) |
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(IRS
Employer |
incorporation or organization) |
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Identification No.) |
200 S Biscayne Blvd., 55th Floor, Miami, Florida
33131
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (800)
611-3622
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligations of the registrant
under any of the following provisions:
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Written communications pursuant to
Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of 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.
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Trading Symbol |
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Name of Each Exchange on Which Registered |
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Item 1.01 |
Entry into a Material Definitive
Agreement. |
As previously reported, on May 16, 2019, Cuentas Inc. (the
“Company” or “Cuentas”) entered into a term sheet with CIMA
Telecom, Inc., a Florida corporation doing business as “CIMA Group”
(“CIMA”) (the “Term Sheet”) outlining its License for the
technology platforms (the “Platforms”) owned by two of CIMA’s
wholly owned subsidiaries, Knetik, Inc., a Delaware corporation
(“Knetik”), and Auris, LLC, a Florida limited liability company
(“Auris”), respectively. Collectively, the Platforms would provide
the back-end software for the Cuentas General Purpose Card and
compatibility via application programming interfaces, or APIs, with
third party software and the mobile apps. Under the Term Sheet,
CIMA will grant the Company a world-wide, perpetual,
non-sublicensable license (the “License”) to utilize the Platforms
and intellectual properties included in the Platforms for the
Financial Technology (“FINTECH”) worldwide vertical markets. The
License to be granted shall be exclusive for use within the FINTECH
space, which for purposes of the License shall be defined as
“connecting banking and prepaid card usage.”
On December 31, 2019, the Company entered into a series of
integrated transactions to license the Platforms from CIMA, through
CIMA’s wholly owned subsidiaries Knetik, and Auris (the
“Transaction Closing”) pursuant to that certain Platform License
Agreement, dated December 31, 2019 by and among (i) the Company,
(ii) CIMA, (iii) Knetik and (iv) Auris (the “License Agreement”)
and the various other agreements listed below.
Note and Warrant Purchase Agreement
Contemporaneously with the Transaction Closing, the Company entered
into a Note and Warrant Purchase Agreement (the “Purchase
Agreement”) by and between the Company and CIMA, pursuant to which
the Company made and sold to (i) CIMA a 3% convertible promissory
note (the “Convertible Promissory Note”) in the principal amount of
$9,000,000 and (ii) (a) CIMA a warrant (the “CIMA Warrant”) , to
purchase from the Company an aggregate of duly authorized, validly
issued, fully paid and nonassessable shares (the “Shares”)
of common stock of the Company, par value $0.001 per share (the
“Common Stock”), equal to twenty-five percent (25%) of shares of
Common Stock upon the conversion of the Series B preferred stock.
The Purchase Agreement contained customary representations,
warranties, covenants, and conditions, including indemnification.
As a condition to closing, the Company has agreed to take all
necessary steps to amend and restate its Articles of Incorporation
(the “A&R Articles”) and to amend and restate its Bylaws (the
“A&R Bylaws”) and properly file and effect such A&R
Articles and A&R Bylaws with the Secretary of State of the
State of Florida and the U.S. Securities and Exchange Commission,
each as necessary, no later than June 30, 2020.
The above description of the Purchase Agreement does not purport to
be complete and is qualified in its entirety by reference to the
Purchase Agreement, which is filed as Exhibit 10.1 hereto.
Convertible Promissory Note
Contemporaneously with the Transaction Closing, the Company made
and sold to CIMA a convertible promissory note (the “CIMA
Convertible Promissory Note”) in accordance with the Purchase
Agreement. Pursuant to the Convertible Promissory Note, at any time
on or before twelve (12) months after the date of the CIMA
Convertible Promissory Note, CIMA may elect in its sole and
absolute discretion to convert all unpaid principal and accrued and
unpaid interest under the CIMA Convertible Promissory Note into 25%
of the issued and outstanding Common Stock of the Company
calculated on a fully diluted basis as of December 31, 2019,
assuming the conversion, exercise, and exchange of all equity and
debt securities of the Company which are convertible into, or
exercisable or exchangeable for, Common Stock of the Company, but
not including the Warrants.
On December 31, 2019, CIMA exercised its option to convert the
Convertible Promissory Note into 1,757,478 shares of Common Stock
of the Company, which constitutes 25% of the issued and outstanding
shares of Common Stock of the Company calculated on a fully diluted
basis as of the same date.
As previously reported on a Current Report on Form 8-K filed by the
Company with the SEC on August 6, 2019 (the “August 8-K”), on
February 28, 2019, the Company signed a binding term sheet (the
“Binding Term Sheet”) with Optima Fixed Income LLC (“Optima”),
pursuant to which, among other things, Optima may purchase a
Convertible Note in the amount of $2,000,000 which may be funded on
a quarterly basis. The term of the Convertible Note is three years
and it may be converted with a discount of 25% on the share price
at date of conversion, but in any case, not less than $3 per share.
On May 10, 2019 the Company and Optima executed the first Amendment
of the Binding Term Sheet with Optima whereas Optima will make an
additional deposit of $550,000 to the Company and whereas that
additional deposit will be provided to the Company in the form of a
Convertible Note as discussed in the Binding Term Sheet.
On July 30, 2019 Optima assigned its rights under the Binding Term
Sheet to Dinar Zuz LLC. On the same date, the Company and Dinar Zuz
LLC executed a securities purchase agreement (the “Dinar SPA”) with
the same terms as reflected in the Binding Term Sheet and its First
Amendment. Under the Subscription Agreement Dinar Zuz LLC made an
additional deposit of $250,000 and agreed to provide an additional
amount of $1,000,000 to the Company which will be provided in a
form of a Convertible Note.
On January 3, 2020, Dinar Zuz, LLC (“Dinar”) made an additional
deposit of $300,000 in the form of a convertible promissory note
(the “Dinar Convertible Note”) pursuant to the Dinar SPA.
Additionally, on January 3, 2020, the Company issued 100,000 shares
of its Common Stock to Dinar as a result of a conversion of the
Dinar Convertible Note in the amount of $300,000.
The above descriptions of the CIMA Convertible Promissory Note and
the Dinar Convertible Note do not purport to be complete and are
qualified in their entirety by reference to the CIMA Convertible
Promissory Note, which is filed hereto as Exhibit 10.2 and the
Dinar Convertible Note, filed herein as Exhibit 10.3 and
incorporated by reference to Exhibit 9.2 to the August 8-K. .
Warrant
Contemporaneously with the Transaction Closing, the Company made
and sold a warrant to each of (a) CIMA (the “CIMA Warrant”) and (b)
Dinar (the “Dinar Warrant,” and together with the CIMA Warrant, the
“Warrants”), each in accordance with the Purchase Agreement.
Pursuant to the Warrants, upon exercise, each of CIMA and Dinar
shall be entitled to purchase from the Company, in the aggregate,
an amount of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock equal to twenty-five percent
(25%) of total outstanding shares of the Company on a fully-diluted
basis (taking into account any warrants, options, debt convertible
into shares or other rights underlying shares of the Company) as of
December 31, 2019; provided, however, that each Warrant shall
increase to include 25% of any additional shares (or warrants,
options, debt convertible into shares or other rights underlying
shares of the Company) of the Company only to the extent such
shares are issued in breach of the Voting Agreement (as defined
below). Pursuant to their terms, the Warrants are exercisable, in
whole and not in part during the term commencing on December 31,
2019 and ending on the earlier of (a) thirty (30) days following
the date on which the Company’s Amended and Restated Articles of
Incorporation is filed with and accepted by the Secretary of State
of the State of Florida or (b) upon a Change of Control, as defined
in the Warrants.
The above description of the Warrants does not purport to be
complete and is qualified in its entirety by reference to the CIMA
Warrant and Dinar Warrant, which are filed hereto as Exhibit 10.4
and 10.5, respectively.
License Agreement
Contemporaneously with the Transaction Closing, on December 31,
2019 (the “Effective Date”) the Company entered into the License
Agreement. Pursuant to the License Agreement, the Company has an
exclusive, non-transferable, non-sublicensable, royalty-free
license to access and use the Knetik and Auris technology platforms
(collectively, the “Licensed Technology”) in the form provided to
the Company via the Hosting Services (as defined in the License
Agreement) and solely within the FINTECH space for the Company’s
business purposes.
Pursuant to the License Agreement, the Company shall pay CIMA
annual fees for the maintenance and support services in accordance
with the following schedule: (i) for the first (1st)
calendar year from the Effective Date, $300,000 to be paid on June
30, 2020; (ii) for the second (2nd) calendar year from
the Effective Date, $500,000 to be paid on December 31, 2020; (iii)
for the third (3rd) calendar year from the Effective
Date, $700,000 to be paid on December 31, 2021; (iv) for the fourth
(4th) calendar year from the Effective Date, $1,000,000
to be paid on December 31, 2022; (v) for the fifth (5th)
calendar year from the Effective Date, $640,000 to be paid on
December 31, 2022; and (vi) for each calendar year thereafter,
$640,000 to be paid on the annual anniversary date of the Effective
Date.
The above description of the License Agreement does not purport to
be complete and is qualified in its entirety by reference to the
License Agreement, which is filed as Exhibit 10.6 hereto.
Voting Agreement
Contemporaneously with the Transaction Closing, on December 31,
2019, the Company entered into that certain voting agreement and
proxy (the “Voting Agreement”), by and among the Company, Arik
Maimon, the Company’s Chief Executive Officer, Michael De Prado,
the Company’s President, Dinar, and CIMA. Pursuant to the Voting
Agreement, each of CIMA, Dinar and Mr. De Prado shall have the
right to designate one director to the Company’s Board of Directors
(the “Board”) and Mr. Maimon will have the right to designate two
directors to the Board as promptly as practicable after the
Transaction Closing. At each meeting of the Company’s stockholders
at which the election of directors is to be considered, each of
CIMA, Dinar, Mr. Maimon and Mr. De Prado shall have the right to
designate one nominee for election at such meeting.
Additionally, the Company has granted CIMA board observer rights
whereby CIMA shall have the right to invite one representative to
attend all meetings of the Board in a non-voting observer
capacity.
The size of the Board and appointee rights are subject to change in
the event that the Company’s shares of Common Stock become listed
on the NASDAQ Capital Market (or if there is any other similar
transaction which ultimately involves the listing of the Company’s
capital stock, whether Common Stock or any other class or series of
capital stock of the Company, on any exchange affiliated with or
similar to the NASDAQ Capital Market).
Furthermore, pursuant to the Voting Agreement, each of Mr. Maimon
and Mr. De Prado appointed each of CIMA and Dinar as their proxy
and attorney-in-fact, with full power of substitution and
re-substitution, to vote or act by written consent with respect to
the shares of Voting Stock (as defined in the Voting Agreement)
representing each individual’s pro rata percentage of the CIMA
Proxy Stock and Dinar Proxy Stock (as defined in the Voting
Agreement), as may be recalculated from time to time subject to the
terms and conditions of the Voting Agreement, until the CIMA
Warrant is exercised and until the Dinar Warrant is exercised,
respectively.
The above description of the Voting Agreement does not purport to
be complete and is qualified in its entirety by reference to the
Voting Agreement, which is filed as Exhibit 10.7 hereto.
Asset Pledge Agreement
Contemporaneously with the Transaction Closing, the Company entered
into an Asset Pledge Agreement with CIMA (the “Pledge Agreement”).
Pursuant to the Pledge Agreement, the Company unconditionally and
irrevocably pledged all of its rights, title and interest in and to
the Licensed Technology and any rights and assets granted pursuant
to the License Agreement to CIMA as a guarantee for the full and
punctual fulfillment of its obligations under certain provisions of
the Voting Agreement, and the issuance of the securities under the
CIMA Convertible Promissory Note and the CIMA Warrant.
The above description of the Pledge Agreement does not purport to
be complete and is qualified in its entirety by reference to the
Pledge Agreement, which is filed as Exhibit 10.8 hereto.
Side Letter Agreement
Contemporaneously with the Transaction Closing, the Company entered
into a side letter agreement (the “Side Letter Agreement”), dated
December 31, 2019, by and among the Company, Arik Maimon, Michael
De Prado, Dinar and CIMA. Pursuant to the Side Letter Agreement,
for as long as the License Agreement is in effect, the Convertible
Promissory Note is outstanding and unpaid, or CIMA is a shareholder
of the Company and owns at least 5% of the Company’s Common Stock,
in addition to any other vote or approval required under the
Company’s Articles of Incorporation, Bylaws, or any other
agreement, each as amended from time to time, the Company has
agreed not to take certain actions without certain approval
thresholds of the directors appointed by CIMA, Dinar, Mr. Maimon
and Mr. De Prado. These negative covenants restrict, among other
things, the Company’s ability to incur additional debt, alter
certain employment agreements currently in place, enter into any
consolidation, combination, recapitalization or reorganization
transactions, and issue additional capital stock.
Additionally, pursuant to the Side Letter Agreement, upon
conversion of the Convertible Promissory Note by CIMA, Cuentas
shall have the primary right of first refusal, and each of Dinar,
Mr. De Prado and Mr. Maimon have a secondary right of first
refusal, to purchase any shares of Common Stock which CIMA intends
to sell to the bona fide third party purchaser on the same terms
and conditions as CIMA would have sold such shares of the Company’s
Common Stock to any third party purchaser. Further, CIMA has a
co-sale right to participate in a sale of shares of the Company’s
Common Stock, in the event that Mr. De Prado, Mr. Maimon or any
other director or officer of the Company holding greater than 1% of
the Company’s Common Stock (on a fully diluted basis) proposes to
sell any of his, her or its shares of Common Stock.
In addition, CIMA and/or Dinar have been granted certain
information rights, subject to their continued ownership of the
CIMA Convertible Promissory Note or of 5% or more shares of the
Company’s issued and outstanding Common Stock.
Furthermore, pursuant to the Side Letter Agreement, upon a
successful up-listing of the Company’s shares on the NASDAQ Capital
Market and once the market capitalization of the Company is greater
than $50 million for a period of 10 consecutive trading days, Mr.
Maimon and Mr. De Prado will have a right to earn a special bonus
in the amount of $500,000 each.
The above description of the Side Letter Agreement does not purport
to be complete and is qualified in its entirety by reference to the
Side Letter Agreement, which is filed as Exhibit 10.9 hereto.
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Item 2.03 |
Creation of a
Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant. |
The information set forth under Item 1.01 of this Current Report on
Form 8-K is incorporated herein by reference to this Item 2.03.
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Item 3.02 |
Unregistered Sales of Equity
Securities. |
The information set forth under Item 1.01 of this Current Report on
Form 8-K is incorporated herein by reference to this Item 3.02.
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Item 5.02 |
Departure of
Directors or Certain Officers; Election of Directors; Appointment
of Certain Officers; Compensatory Arrangements of Certain
Officers. |
Contemporaneously with the Transaction Closing, Natali Dadon
resigned from her position on the Board of Directors of the
Company. On the same date, the Board of Directors of the
Company appointed Yochanon Bruk to the Board of Directors
of the Company in accordance with the Voting Agreement.
The information set forth under Item 1.01 of this Current Report on
Form 8-K is incorporated herein by reference to this Item 5.02.
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Item 9.01. |
Financial Statements and
Exhibits |
10.1 |
Note and Warrant Purchase Agreement, dated as of
December 31, 2019, by and between Cuentas Inc. and CIMA Telecom,
Inc. |
10.2 |
Convertible Promissory Note issued to CIMA
Telecom, Inc., dated December 31, 2019 |
10.3 |
Convertible Note issued to Dinar Zuz, LLC, dated
July 20, 2019, incorporated by reference herein to exhibit 9.2 of
that certain Current Report on Form 8-K/A filed by Cuentas, Inc.,
on August 6, 2019. |
10.4 |
Warrant granted to CIMA Telecom, Inc., dated
December 31, 2019 |
10.5 |
Warrant granted to Dinar Zuz, LLC, dated December
31, 2019 |
10.6 |
Platform License Agreement, dated December 31,
2019, by and among Cuentas Inc., CIMA Telecom, Inc., Knetik, Inc.
and Auris, LLC |
10.7 |
Voting Agreement, dated December 31, 2019, by and
among Cuentas Inc., Arik Maimon, Michael De Prado, Dinar Zuz, LLC,
and CIMA Telecom, Inc. |
10.8 |
Asset Pledge Agreement, dated December 31, 2019,
by and among Cuentas Inc. and CIMA Telecom, Inc. |
10.9 |
Letter Agreement, dated December 31, 2019, by and
among Cuentas Inc., Arik Maimon, Michael De Prado, Dinar Zuz, LLC,
and CIMA Telecom, Inc. |
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 hereunto duly authorized.
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CUENTAS
INC. |
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Dated: January
7, 2020 |
By: |
/s/ Arik
Maimon |
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Arik Maimon |
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Chief Executive
Officer |
6
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