Cuentas(US:CUEN)2024-04-15 20:11PART I ITEM 1. BUSINESS Cuentas, Inc. offers FinTech, e-finance, and e-commerce services to underserved communities, focusing on mobile financial and prepaid debit. - Cuentas' core business is FinTech, e-finance, and e-commerce services, providing mobile financial services, prepaid debit, and digital content to underserved populations in the USA, focusing on the Latin American market666448 - In 2023, the company made two equity investments in Florida real estate projects to provide affordable housing and introduce fintech solutions to Hispanic Latino and immigrant communities82253 - Cuentas is transitioning to a new U.S. issuing bank for its Prepaid Financial products in 202490669 - The company completed a 1-for-13 reverse stock split on March 24, 2023, but was delisted from Nasdaq on December 20, 2023, due to non-compliance with shareholders' equity requirements115145451450 ITEM 1A. RISK FACTORS Significant risks include going concern doubt from recurring losses, operational challenges, increasing regulatory compliance costs, intense competition, and investment-related risks like stock price volatility. - The 2023 auditors' report expresses substantial doubt about going concern due to lack of liquidity, an accumulated deficit of approximately $55 million, and negative working capital of approximately $3 million148175309435 - Material weaknesses in disclosure controls and internal control over financial reporting include inadequate segregation of duties, insufficient review, and weak IT controls over revenue159184316 - The company operates in a complex regulatory environment, subject to various federal and state laws, with anticipated increases in compliance costs747597127168169170193217219220221 - The company faces intense competition from larger, well-financed entities in both e-commerce card operations and telecommunications103104133134198199225226 - The common stock is subject to 'penny stock' rules (price less than $5.00), potentially reducing trading activity206234270547 ITEM 1B. UNRESOLVED STAFF COMMENTS No unresolved staff comments were reported. - No unresolved staff comments were reported238 ITEM 1C. CYBERSECURITY Cuentas manages cybersecurity risks with a comprehensive strategy, including risk assessments and an incident response plan, with no material incidents reported to date. - The company employs a comprehensive cybersecurity risk management strategy, including risk assessments, security controls, and an incident response plan208209237260261 - No cybersecurity incidents have materially affected the company's business, operations, or financial condition to date210 ITEM 2. PROPERTIES Cuentas leases its principal office in Miami Beach, FL, deeming it adequate for current needs but anticipating future expansion. - The company leases its principal office space in Miami Beach, FL, and believes current facilities are adequate but may need to expand262 ITEM 3. LEGAL PROCEEDINGS Cuentas is involved in legal proceedings, including an arbitration with Secure IP Telecom (accrued $300,000), a settled breach of contract for $630,000, and a former employee's claim for up to $30,000. - The company is a defendant in a lawsuit by Secure IP Telecom, Inc., with a $300,000 accrual as of December 31, 2023, for a reasonably possible loss contingency240597 - A breach of contract complaint was settled for $630,000, with $145,000 paid as of December 31, 2023264599 - A former employee filed a complaint for breach of employment agreement, with an estimated maximum payment of $30,000241627 ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company. - This item is not applicable to the company242 PART II ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER Cuentas' common stock and warrants were delisted from Nasdaq, now trading on OTC Markets, with no expected dividends and subject to 'penny stock' regulations. - Cuentas' common stock and publicly-traded warrants were delisted from Nasdaq on December 20, 2023, and now trade on the Pink Current Information tier of OTC Markets244172 - As of March 31, 2024, there were approximately 130 record holders for common stock and three for publicly-traded warrants245 - The company does not expect to pay cash dividends on its common stock for the foreseeable future, intending to reinvest earnings246259 Securities Authorized for Issuance under Equity Compensation Plans (as of December 31, 2023) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) | |:--------------|:------------------------------------------------------------------------------------------|:--------------------------------------------------------------------------------|:--------------------------------------------------------------------------------------------------------------------------------------| | Approved by Security Holders | 84,999 | 36.97 | 678,847 | | Not Approved by Security Holders | - | - | - | | Total | 84,999 | 36.97 | 678,847 | - The company's common stock is classified as a 'penny stock' (market price less than $5.00), which may reduce trading activity270234547 ITEM 6. [RESERVED] This item is reserved and contains no information. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cuentas' revenue decreased in 2023, but net loss significantly reduced due to derivative warrant gains, though liquidity remains a concern with negative working capital and going concern doubt. - The company's business strategy involves financial technology, telecommunications, and real estate investments, aiming to provide affordable solutions to underserved communities[273](index=273&type