UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
FOR THE QUARTERLY PERIOD ENDED:
For the transition period from ______________ to ______________
Commission File Number:
(Exact name of Registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number)
Securities registered under Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| 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. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each
of the issuer’s classes of common equity, as of the latest practicable date: As of September 30, 2025, the issuer had
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CUENTAS, INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
AS OF SEPTEMBER 30, 2024
IN U.S. DOLLARS
TABLE OF CONTENTS
| Page | |
| CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED): | |
| Unaudited Condensed Consolidated Interim Balance Sheets | 1 |
| Unaudited Condensed Consolidated Interim Statements of Comprehensive Loss | 2 |
| Unaudited Condensed Consolidated Interim Statements of Stockholders’ Deficit | 3 |
| Unaudited Condensed Consolidated Interim Statements of Cash Flows | 5 |
| Notes to Condensed Consolidated Interim Financial Statements | 6 - 16 |
i
CUENTAS, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(USD in thousands except share and per share data)
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts Receivables – related parties | ||||||||
| Accounts Receivables – others | ||||||||
| Related parties | ||||||||
| Other current assets | ||||||||
| Investment in unconsolidated entity held for sale (Note 3b) | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Investment in unconsolidated entities (Note 3b) | ||||||||
| Intangible assets | ||||||||
| Total Non-Current Assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Short term credit | $ | $ | ||||||
| Trade payable | ||||||||
| Other accounts liabilities | ||||||||
| Warrants liability, net | ||||||||
| Deferred revenue | ||||||||
| Notes and Loan payable | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Other long-term loans | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock, | ||||||||
| Additional paid-in capital | ||||||||
| Treasury Stock | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
1
CUENTAS, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
(USD in thousands except share and per share data)
| Nine months ended | Three months ended | |||||||||||||||
| September 30 | September 30 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues from related party | $ | $ | $ | $ | ||||||||||||
| Revenues from other | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues from related party | ( | ) | ( | ) | ( | ) | ||||||||||
| Other cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating expenses | ||||||||||||||||
| Amortization of Intangible assets | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on impairment of intangible asset | ( | ) | ||||||||||||||
| Selling, General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expenses | ||||||||||||||||
| Other income (loss), net | ( | ) | ( | ) | ||||||||||||
| Interest (expenses) income, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss upon default to pay principal and interest of Promissory Notes | ( | ) | ( | ) | ||||||||||||
| Gain from Change in fair value of derivative warrants liability, net | ||||||||||||||||
| Loss on impairment of held for sale investment in unconsolidated entities | ( | ) | ||||||||||||||
| Loss on sale of investment in unconsolidated entity | ( | ) | ||||||||||||||
| Loss from Change in fair value of stock-based liabilities | ||||||||||||||||
| Total other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before equity losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Equity losses in unconsolidated entities | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share (basic and diluted) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted weighted average number of shares of common stock outstanding | ||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
2
CUENTAS, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(USD in thousands, except share and per share data)
| Number of Shares (**) | Amount | Additional paid-in capital | Treasury stock | Accumulated deficit | Total stockholders’ deficit | |||||||||||||||||||
| BALANCE AT DECEMBER 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Share based Compensation | - | |||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Number of Shares (**) | Amount | Additional paid-in capital | Treasury stock | Accumulated deficit | Total stockholders’ deficit | |||||||||||||||||||
| BALANCE AT JUNE 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Share based Compensation | - | |||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
3
CUENTAS, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(USD in thousands, except share and per share data)
| Number of Shares | Amount | Additional paid-in capital | Treasury stock | Accumulated deficit | Total stockholders’ equity (deficit) | |||||||||||||||||||
| BALANCE AT DECEMBER 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Issuance of Shares of Common Stock for cash, net of issuance expenses (**) | ||||||||||||||||||||||||
| Share based Compensation | ||||||||||||||||||||||||
| Issuance of Shares of Common due to acquisition of an asset | ||||||||||||||||||||||||
| Treasury stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Reverse split | ||||||||||||||||||||||||
| Net loss for the period ended September 30, 2023 | - | ( | ) | ( | ) | |||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||
| (*) |
| (**) |
| Number of Shares | Amount | Additional paid-in capital | Treasury stock | Accumulated deficit | Total stockholders’ equity (deficit) | |||||||||||||||||||
| BALANCE AT JUNE 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||
| Share based Compensation | - | |||||||||||||||||||||||
| Issuance of Shares of Common Stock for cash, net of issuance expenses (**) | ||||||||||||||||||||||||
| Net loss for the period ended September 30, 2023 | - | ( | ) | ( | ) | |||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||
| (*) | represents amount less than $1 thousand. |
| (**) |
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
4
CUENTAS, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(USD in thousands)
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation and shares issued for services | ||||||||
| Equity losses in non-consolidated entity | ||||||||
| Amortization of discounts and accrued interest on loans | ||||||||
| Loss upon default to pay principal and interest of Promissory Notes | ||||||||
| Loss on impairment of an investment in an unconsolidated entity | ||||||||
| Loss on sale of an unconsolidated entities | ||||||||
| Loss on impairment of intangible asset | ||||||||
| Loss from change in fair value of stock-based liabilities | ||||||||
| Gain from change in fair value of derivative warrants liability | ( | ) | ||||||
| Depreciation expense | ||||||||
| Amortization of intangible assets | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Increase in accounts receivable – other | ( | ) | ( | ) | ||||
| Decrease (Increase) in other current assets | ( | ) | ||||||
| Decrease (increase) in related parties, net | ( | ) | ||||||
| Increase in accounts payable | ||||||||
| Decrease in other accounts liabilities | ( | ) | ||||||
| Decrease in deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Investment in unconsolidated entities | ( | ) | ||||||
| Proceeds from sale of an investment in an unconsolidated entity | ||||||||
| Purchase of intangible asset | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCE ACTIVITIES: | ||||||||
| Proceeds from issuance of common stock and warrants, net of issuance expense | ||||||||
| Short term loans received | ||||||||
| Short term loans repaid | ( | ) | ||||||
| Treasury stock | ( | ) | ||||||
| Net cash provided by finance activities | ||||||||
| DECREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | ||||||
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTMENT AND FINANCING ACTIVITIES: | ||||||||
| Sale of investment in an unconsolidated entity | ||||||||
| Issuance of Shares of Common due to acquisition of an asset | ||||||||
| Cash paid during the period for interest | ||||||||
| Cash paid during the period for taxes | ||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements
5
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 1 – GENERAL
Cuentas, Inc. (the “Company”)
was incorporated under the laws of the State of Florida on September 21, 2005. The Company, together with its subsidiary, Meimoun and
Mammon, LLC (
On May 22, 2025, the Company signed
an agreement for the sale of its full interests in Brooksville Development Partners, LLC (“Brooksville”) for total consideration
of $
GOING CONCERN
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As of September 30, 2024, the Company had $
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of presentation
The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements presented herein have not been audited by an independent registered public accounting firm but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations and cash flows for the for nine-months ended September 30, 2024. However, these results are not necessarily indicative of results for any other interim period or for the year ended December 31, 2024. The preparation of financial statements in conformity with GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, and expenses. Actual amounts could differ from these estimates.
Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”). The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on April 15, 2024 (the “2023 Form 10-K”). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the 2023 Form 10-K.
6
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements are prepared in accordance with GAAP. The unaudited condensed consolidated financial statements of the Company include the Company and its wholly-owned and majority-owned subsidiaries. All inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.
Fair Value Measurement
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3: Significant unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.
Long lived assets held for sale
The company accounted for its long-lived assets held for sale under ASC 360-10 (“Impairment or disposal of Long-lived Assets”).
Under management decision (see Note 3b), its investment in Brooksville Development Partners, LLC. is intended to be sold.
The Company classifies an asset group (an “asset”) as held for sale in the period during which (i) the Company has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable and transfer of the asset is expected to qualify for recognition as a completed sale within one year, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be abandoned.
7
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (continued)
The Company initially and subsequently measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in operating loss for the period in which the held for sale criteria are met.
Upon designation as an asset held for sale, the Company stops recording depreciation or amortization expense on the asset. The Company assesses the fair value of assets held for sale less any costs to sell at each reporting period until the asset is no longer classified as held for sale. Realization costs of the investment in Brooksville Development Partners, LLC. are immaterial.
Derivative Warrants Liability
The Company accounts for certain warrants to purchase Ordinary Shares in connection with certain transactions, held by investors, that include a fundamental transaction feature pursuant to which such warrants could be required to be settled in cash upon certain events, as current liability according to the provisions of ASC 815-40, “Derivatives and Hedging - Contracts in Entity’s Own Equity” (“ASC 815-40”) measured at fair value using significant unobservable inputs (in Level 3 measurements).
Recently Adopted Accounting Standards
During the nine months ended September 30, 2024, the Company was not required to adopt any recently issued accounting standards.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to provide enhanced segment disclosures. The standard will require disclosures about significant segment expenses and other segment items and identifying the Chief Operating Decision Maker and how they use the reported segment profitability measures to assess segment performance and allocate resources. These enhanced disclosures are required for all entities on an interim and annual basis, even if they have only a single reportable segment. The standard is effective for years beginning after December 15, 2023 and interim periods within annual periods beginning after December 15, 2024, and early adoption is permitted. The Company does not believe that adoption of this ASU will have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. The standard will require more detailed information in the rate reconciliation table and for income taxes paid, among other enhancements. The standard is effective for years beginning after December 15, 2024, early adoption is permitted. The Company does not believe that adoption of this ASU will have a material impact on the Company’s consolidated financial statements.
8
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 3 – EVENTS DURING THE PERIOD
| A. | On February 7, 2024, the Company entered into an agreement with 1800 Diagonal Lending LLC, an accredited investor (the “Investor”), pursuant to which the Company sold the investor an unsecured original issuance discount promissory note in the principal amount of $ |
On April 22, 2024, the Company
entered into a second agreement with the Investor, pursuant to which the Company sold the investor an unsecured original issuance discount
promissory note in the principal amount of $
As of September 2024, the Company failed
to pay the September 2024 repayment amount under the February Promissory Note resulting in default of the February Promissory Note and
April Promissory Note and calculated the balance of the notes payable at $
On May 14, 2025, the Company entered into a Settlement Agreement and Mutual Release (the “1800 Agreement”) with 1800 Diagonal Lending, LLC for the obligations under the February Promissory Note and the April Promissory Note. According to the 1800 Agreement the Company will pay , for the full release from all liabilities associated with the related judgment and promissory notes.
On May 27, 2025, full payment of was made and on September 6, 2025, the reserve of shares held at the transfer agent were retired.
9
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 3 – EVENTS DURING THE PERIOD (continued)
| B. | On March 13, 2024, the Company through its approximately |
The property was originally purchased
on April 28, 2023 for $
On May 22, 2025, the Company signed
a Membership Interest Purchase Agreement (MIPA) with Brooksville FL Partners, LLC (“Buyer”) the holder of the minority stake
in Brooksville, for the sale of its full interests in Brooksville for total consideration of $
On May 27, 2025, the MIPA closing took
place and the Escrow agent received $
As of September 30, 2024, Company’s
management determined that its investment in Brooksville is intended to be sold and accounted for its investment in Brooksville at fair
value. The Company recorded loss on impairment of an investment in an unconsolidated entity of $
10
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 3 – EVENTS DURING THE PERIOD (continued)
| C. | On May 20, 2024 the Company and OLB Group, Inc., (“OLB”) entered into a Membership Interest Purchase Agreement according to which the Company sold to OLB its |
| D. | On September 3, 2024, the Company signed a Non Binding Letter of Intent (LOI) with World Mobile Group Ltd (“World Mobile”), a UK limited company to leverage the World Mobile sharing economy to expand network coverage and provide affordable connectivity, while also offering Cuentas’ digital products to customers. |
Cuentas and World Mobile will collaborate to integrate Cuentas’ fintech, banking, payments, remittance, and other financial services into the World Mobile app and ecosystem. This integration aims to enhance the user experience and expand the range of available services.
World Mobile transferred $
On April 21, 2025, the Company and World
Mobile entered into a Contribution Agreement to form World Mobile LLC, a Delaware limited liability company (the “JV Company”),
as a joint venture to operate a mobile virtual network operator (“MVNO”) business. The Company will hold a
On April 23, 2025 and May 15, 2025, Cuentas executed related letter agreements confirming the assignment of its Reseller Master Services Agreement with UVNV, Inc. (d/b/a PLUM) to the JV Company and granting the Company management of certain Cuentas Mobile brands on the JV Company platform, with respective profit/loss sharing as noted above.
| E. | On August 8, 2024, the Company entered into a Termination
Agreement to the Processing Services Agreement with Interactive Communications International, Inc., (“InComm”) according
to which InComm agreed to waive its outstanding balance of $ |
Cuentas will
still maintain its Digital Content and Distribution Agreements with InComm as it works on the transportation, bodega and cellular markets.The
Company recorded income of $
11
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 3 – EVENTS DURING THE PERIOD (continued)
| F. | On February 3, 2023, the Company entered into a Membership Interest Purchase Agreement (MIPA) with Core Development Holdings Corporation (“Core”). Core holds approximately
The
Core claimed significant financial and other damages because the Company’s Shares were never released and delivered to Core even though Core fulfilled all of its obligations pursuant to the MIPA.
In June 2025, the Company’s management initiated negotiations of a settlement agreement with Core, pursuant to which the Company agrees to transfer and assign all rights of its membership units of 4280 Lakewood Road Manager, LLC to Core and in return, Core shall transfer and assign any and all rights of the Company’s Shares held in escrow, back to the Company.
Subsequently, the Company recognized an impairment loss in the amount of $ |
| G. | On April 12, 2024, the Company entered into a Purchase and Sale of Future Receipts Agreement (the “Purchase Agreement”) with EAdvance Services LLC. (the “Buyer”), pursuant to which the Company sold the Buyer future receipts of the Company in the principal amount of $
On May 22, 2025, the Company settled outstanding obligations with EAdvance Services LLC for $ |
12
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 4 – STOCK OPTIONS
The following table presents the Company’s stock option activity for employees and directors of the Company for the nine months ended September 30, 2024:
| Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at December 31, 2023 | $ | |||||||
| Granted | $ | |||||||
| Exercised | ||||||||
| Forfeited or expired | $ | |||||||
| Outstanding at September 30, 2024 | $ | |||||||
| Number of options exercisable at September 30, 2024 | $ | |||||||
The aggregate intrinsic value of the
awards outstanding as of September 30, 2024 is $
Costs incurred in respect of stock-options
compensation for employees and directors, for the nine months ended September 30, 2024 and 2023 were $
The stock options outstanding as of September 30, 2024, have been separated into exercise prices, as follows:
| Exercise price | Stock options outstanding | Weighted average remaining contractual life – years | Stock options exercisable | |||||||||||
| As of September 30, 2024 | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
The stock options outstanding as of September 30, 2023, have been separated into exercise prices, as follows:
| Exercise price | Stock options outstanding | Weighted average remaining contractual life – years | Stock options vested | |||||||||||
| As of September 30, 2023 | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
13
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 5 – RELATED PARTIES
| A. |
| Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Sales: | ||||||||
| Sales to SDI Cuentas LLC (formerly related party see Note 3.C) | $ | $ | ||||||
| Total sales to related parties | $ | $ | ||||||
| Cost of sales: | ||||||||
| Cost of sales from Next Communications INC (a company controlled by Arik Maimon, Company’s Chairman of the Board and CEO) (a) | $ | $ | ||||||
| Total sales to related parties | $ | $ | ||||||
| B. |
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Arik Maimon (Chairman of the Board and the CEO) | $ | $ | ||||||
| Michael De Prado (Vice Chairman of the Board and President) | ||||||||
| Current assets - Related parties | ||||||||
| Next Communications INC (a company controlled by Arik Maimon Company’s Chairman of the Board and CEO) | ||||||||
| SDI Cuentas LLC. (formerly related party see Note 3.C) | ||||||||
| Current assets – Accounts receivables | ||||||||
| Total Due from related parties | $ | $ | ||||||
| (a) |
14
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 6 – SEGMENTS OF OPERATIONS
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable operating segments. The Company manages its business primarily on a product basis. The accounting policies of the various segments are the same as those described in Note 2, “Summary of Significant Accounting Policies.” The Company evaluates the performance of its reportable operating segments based on net sales and gross profit.
| A. |
Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Telecommunications | $ | $ | ||||||
| Wholesale telecommunication services | ||||||||
| Digital products and General Purpose Reloadable Cards | ||||||||
| Total revenues | $ | $ | ||||||
| B. |
Nine
months ended | ||||||||
| 2024 | 2023 | |||||||
| Telecommunications | $ | $ | ( | ) | ||||
| Wholesale telecommunication services (*) | ||||||||
| Digital products and General Purpose Reloadable Cards | ( | ) | ( | ) | ||||
| Total Gross Loss | $ | ( | ) | $ | ( | ) | ||
| (*) |
| C. |
| September 30, | December 31, | |||||||
| 2023 | 2023 | |||||||
| Telecommunications | $ | | $ | |||||
| Wholesale telecommunication services | ||||||||
| Digital products and General Purpose Reloadable Cards | ||||||||
| $ | $ | |||||||
For the nine months ended September
30, 2024 and 2023, the Company’s sales to Cuentas SDI LLC were approximately
15
CUENTAS, INC.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)
(USD in thousands, except share and per share data)
NOTE 7 – SUBSEQUENT EVENTS
Interactive Communications International, Inc., termination agreement.
See Note 3e above.
1800 Diagonal Lending, LLC
See Note 3A above.
Disposal of Ownership Interest in Brooksville Development Partners
See Note 3B above.
Joint Venture with World Mobile Group Ltd.
See Note 3D above.
EAdvance Services LLC.
See Note 3G above.
Settlement of Legal and Other Contingencies
Crosshair Media
Placement, LLC: On May 13, 2025, Cuentas’ President and CEO provided a Joint Personal Guaranty to Crosshair Media Placement, LLC
for the full payment of amounts owed by Cuentas pursuant to a judgment totaling $
Alexandra Calicchio:
On May 22, 2025, Cuentas entered into a settlement agreement for $
The Company has evaluated all other events or transactions that occurred after September 30, 2024 through the date these condensed consolidated interim financial statements were issued and determined that no other material subsequent events required disclosure or adjustment in the financial statements.
16
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2023. Some of the information contained in this discussion and analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including statements regarding expectations, beliefs, intentions or strategies for the future. When used in this report, the terms “anticipate,” “believe,” “estimate,” “expect,” “can,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and words or phrases of similar import, as they relate to our company or our management, are intended to identify forward-looking statements. We intend that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance, and we undertake no obligation to update or revise, nor do we have a policy of updating or revising, any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as may be required under applicable law. Forward-looking statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements as a result of several factors including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in subsequent reports filed pursuant to Section 13(a) of the Exchange Act.
The Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company’s other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company’s fluctuations in sales and operating results; (b) regulatory, competitive and contractual risks; (c) development risks; (d) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (e) pending litigation.
OVERVIEW AND OUTLOOK
The Company was incorporated under the laws of the State of Florida on September 21, 2005 to act as an operational company and as a holding company for its subsidiaries. Its subsidiary is Meimoun and Mammon, LLC (100% owned) (“M&M”) which provides wholesale and retail telecommunications services, Tel3, a division of M&M, is a retail long distance calling platform which provides prepaid calling services to consumers directly and operates in a complimentary space as M&M. The Company also own 50% of CUENTASMAX LLC, which installs WiFi6 shared network (“WSN”) systems in locations in the New York metropolitan tristate area using access points and small cells to provide users with access to the WSN. WSN equipment was installed in several sites and financial viability is being studied. Results from these test sites will determine if future installations will be completed. Additionally, Cuentas is evaluating the synergy between CuentasMAX and World Mobile’s platform for potential integration and further development or enhancement of platforms.
The Company is focusing its business mainly on using proprietary technologies to integrate FinTech (Financial Technology), e-finance and e-commerce services into solutions that deliver mobile financial services, prepaid debit and digital content services to the unbanked, under-banked and underserved populations nationally in the USA. The Cuentas technology platform integrates Cuentas Mobile, the Company’s Telecommunications solution, with its core financial services offerings to help entire communities enter the modern financial marketplace. Prior to the August 12, 2024, termination discussed below, Our General Purpose Reloadable (GPR) “Debit Card” is designed to allow customers to purchase prepaid products and services, including third party digital content, gift cards, remittances, mobile phone topups and other digital services. An agreement with Interactive Communications International, Inc. (“InComm”) a leading stored-value and digital-content network, enables us to market and distribute a line of prepaid digital content and gift cards targeted towards the Latin American market. Cuentas is able to purchase InComm’s prepaid digital content and gift cards at a discount and resell these same products in real time through the Black 011 portal and the Cuentas SDI network of over 31,000 bodegas. Cuentas is able to offer these digital products to the public, many at discounted prices, while making a small profit margin which varies from product to product. The prepaid digital content and gift cards include Amazon Cash, XBox, PlayStation, Nintendo, Karma Koin, Transit System Loads & Reloads (LA TAP, NY Transit, Grand Rapids, CT GO), Burger King, Cabela’s, Bass Pro Shops, AT&T, Verizon, Mango Mobile, Black Wireless and other prepaid wireless carriers in the United States.
On August 12 2024, the Company and InComm mutually agreed to sunset the processing agreement that supported the Cuentas Prepaid Mastercard® program. In connection with the wind-down, InComm issued a $475,000 credit to Cuentas in full and final settlement of all obligations under the processing agreement. The Company recognized the credit as other income in the third quarter of 2024. No further liabilities remain outstanding, and all prepaid card accounts were deactivated on or before that date.
17
The Company continues to maintain and develop its long-standing InComm Resale Agreement, under which it supplies digital content, transit reloads, mobile top-ups, bodega access and cellular offerings to its target market. Accordingly, while the Company has exited the prepaid debit-card vertical, it remains fully engaged in the FinTech sector and leverages InComm’s nationwide distribution network for higher-margin digital-content products.
Since the first quarter of 2023, we have made equity investments in real estate projects in Florida under the name Cuentas Casa. Cuentas Casa partners with leading edge developers and construction technology companies to create sustainable, inclusive and affordable residential communities specifically designed to provide high quality housing alternatives at extremely competitive pricing. Our goal is to source land zoned and ready for development of multi-family buildings in strategic areas where rental prices are increasing dramatically, placing financial stress and pressure on working class families. Our real estate investments are intended to broaden our reach into the unbanked, underbanked and underserved communities by using a patented, low cost, sustainable technology that should allow us to provide reasonably priced rental apartments to working class residents who have been priced out of rental communities due to severe rent hikes in Florida and other areas in the United States. We believe that providing affordable apartments to the Hispanic Latino and other immigrant communities in Florida will enable us to introduce them our fintech solutions and generate revenue. Due to liquidity issues impeding the operation and development of its core mobile fintech and carrier services, on April 3, 2024, the limited liability company in which Cuentas has a 63.9% equity interest (“Brooksville Development Partners, LLC” or “BDP”), entered into an agreement to sell the vacant land located in Brooksville, Florida (the “Brooksville Property”) The Brooksville Property was originally purchased by BDP on April 28, 2023 for $5.05 million, $2 million of which was contributed by Cuentas. On May 27, 2025, Cuentas sold its 63.9% equity interest in the Brooksville Property for $800,000 to Brooksville FL Partners, LLC (the “Buyer”), an existing minority member of BDP. The funds were distributed by a mutually agreed escrow agent, and Cuentas settled debts with 4 major creditors. The remaining funds are to be used for operating expenses. With these funds, the Company was able to settle debts totaling approx. $1.132M with 4 major creditors for final actual cost of $666,356
Efforts to Upgrade our Technology Platforms and Increase Sales of our Fintech Products and Services Through Cuentas-SDI and Introduction of New Fintech Solutions
In April 2023, CIMA Telecom, which provided maintenance and support services for our fintech mobile app technology platform, shut down access to the platform as we were transitioning to a new, improved platform. The Cuentas prepaid Mastercard platform continued to be active and the associated prepaid fintech platform behind it continued to function properly until the termination of the InComm agreement in August 2024 as listed below.
In May 2023, The OLB Group (NASDAQ: OLB) (“OLB”) terminated a Software Licensing and Transaction Sharing Agreement with the Company for the purpose of upgrading the Cuentas Mobile App and digital distribution system. In September 2023, OLB acquired 80.01% of Cuentas-SDI. In July 2023, the Company and Cuentas-SDI settled certain payment issues and have re-opened the digital distribution network and systems through Cuentas-SDI’s convenience store distribution network of over 31,000 locations, including many across the New York, New Jersey and Connecticut tri-state area.
18
Cuentas has agreed with Sutton Bank to wind down its relationship during 2024. These activities were completed in August 2024 concurrent with the termination of the InComm processing agreement described above. On May 16, 2024, the Company received a Notice of Termination of Contract from Sutton Bank. Management has been evaluating other alternatives including replacing issuing bank and other enhanced FinTech enabled solutions.
Cuentas Prepaid Mastercard account holders may deposit funds to their account (until the August 12 2024 wind-down) via (a) no-cost Direct Deposit, or (b) for a small charge, using InComm’s VanillaLoad network in over 200,000 locations at major retailers like Walmart, CVS, Walgreens, Dollar General, and more.
Once account holders had available funds, they can use their Cuentas Prepaid Mastercard® wherever prepaid Mastercards are accepted worldwide and at most ATMs in the U.S., and many international ATMs.
Cuentas e-commerce Distribution and Mobile Payments
The Cuentas e-commerce Distribution and Mobile Payments ecosystem will allow consumers to purchase Cuentas’s line of digital products and services through a nationwide network of retailers that specifically serve Cuentas’ target market. Cuentas’ distribution network includes certain neighborhood markets known as “Bodegas” and convenience stores as well as other retail establishments. This brings previously unavailable digital products and services to those neighborhoods affected by the e-commerce digital divide.
The Latino Market
The name “Cuentas” is a Spanish word that has multiple meanings and was chosen for strategic reasons, to develop a close relationship with the Spanish speaking population. It means “Accounts” as in “bank accounts” and it can also mean “You can count on me” as in “Cuentas conmigo”. Additionally, it can be used to “Pay or settle accounts” (saldar cuentas), “accountability” (rendición de cuentas), “to be accountable” (rendir cuentas) and other significant meanings.
The 2020 U.S. Census showed the Hispanic Latino population at over 62 million and at 18.7% of the total U.S. population. The FDIC defines the “unbanked” “as those adults without an account at a bank or other financial institution and are considered to be outside the mainstream for one reason or another. The Company believes that the Hispanic and Latino demographic generally have had more identification, credit, and former bank account issues than any other U.S. minority group leading to more difficulty in obtaining a traditional bank account.
19
RESULTS OF OPERATIONS
Comparison of the nine months ended September 30, 2024 to the nine months ended September 30, 2023
Revenue
The Company generates revenues through the sale and distribution of Digital products, General Purpose Reloadable Cards, wholesale telecommunication services and other related telecom services. Revenues during the nine months ended September 30, 2024, totaled $676,000 compared to $1,000,000 for the nine months ended September 30, 2023. The decrease in our sales is mainly related to the decrease in wholesale telecommunication services in the amount of $569,000 from our Bilateral Wholesale Carrier Agreement with others including Next Communications INC., a company controlled by Arik Maimon our Chairman of the Board and our CEO.
Revenue by product for the nine months ended September 30, 2024, and the nine months ended September 30, 2023 are as follows:
| Nine Months Ended | ||||||||
| September 30 | ||||||||
| 2024 | 2023 | |||||||
| Dollars in thousands | ||||||||
| Telecommunications | $ | 26 | $ | 57 | ||||
| Wholesale telecommunication services | 569 | 860 | ||||||
| Digital products and General Purpose Reloadable Cards | 81 | 83 | ||||||
| Total revenue | $ | 676 | $ | 1,000 | ||||
Costs of Revenue and Gross profit
Cost of revenues during the nine months ended September 30, 2024 totaled $760,000 compared to $1,247,000 for the nine months ended September 30, 2023.
Cost of revenue consists of the purchase of wholesale minutes for resale, related telecom platform costs and purchase of digital products in the amount of $565,000 during the nine months ended September 30, 2024 and $854 during the nine months ended September 30, 2023.
Cost of revenue also consists of costs related to the sale of the Company’s Digital products and GPR Card in the amount of $177,000 during the nine months ended September 30, 2024 and $169,000 during the nine months ended September 30, 2023.
Gross loss by product for the nine months ended September 30, 2024, and the nine months ended September 30, 2023 are as follows:
| Nine Months Ended | ||||||||
| September 30 | ||||||||
| 2024 | 2023 | |||||||
| Dollars in thousands | ||||||||
| Telecommunications | $ | 8 | $ | (167 | ) | |||
| Wholesale telecommunication services | 4 | 6 | ||||||
| Digital products and General Purpose Reloadable Cards | (96 | ) | (86 | ) | ||||
| Total Gross profit (loss) | $ | (84 | ) | $ | (247 | ) | ||
20
Gross profit margin for the nine months ended September 30, 2024 was negative for the digital product and general purpose reloadable cards segment but slightly positive for wholesale which by its nature has a tiny markup and the telecommunications segment. The gross loss for the sale of digital product and general-purpose reloadable cards stemmed from ceasing all activities with Cuentas SDI LLC. In addition, in April 2023, CIMA, which provided maintenance and support services for our technology platform, shut down access to the platform as we were transitioning to a new, improved platform. During the first quarter of 2023, we reduced product availability to Cuentas-SDI to allow Cuentas-SDI to catch up on its payments and during the second quarter of 2023 we curtailed all services to Cuentas-SDI and marketing initiatives with Cuentas-SDI due to its inability to reduce its debt significantly. These disruptions to our fintech solutions and technology business were a major reason for the decline in revenues during the year ended December 31, 2023. In May 2023, The OLB Group terminated a Software Licensing and Transaction Sharing Agreement with the Company for the purpose of upgrading the Cuentas Mobile App and digital distribution system. In September 2023, OLB acquired 80.01% of Cuentas-SDI. In July 2023, the Company and Cuentas-SDI settled certain payment issues and renewed discussions and cooperation to re-open the digital distribution network and systems through Cuentas-SDI’s convenience store distribution network of over 31,000 locations, including many across the New York, New Jersey and Connecticut tri state area.
Operating Expenses
Operating expenses consist of selling, general and administrative Expenses and amortization of Intangible assets as discussed below and totaled $1,561,000 during the nine months ended September 30, 2024, compared to $3,512,000 during the nine months ended September 30, 2023 representing a net decrease of $1,951,000.
Selling, General and Administrative Expenses
The table below summarizes our general and administrative expenses incurred during the periods presented:
| Nine Months Ended | ||||||||
| September 30 | ||||||||
| 2024 | 2023 | |||||||
| Dollars in thousands | ||||||||
| Officers compensation | $ | 152 | $ | 699 | ||||
| Directors fees | 125 | 267 | ||||||
| Share-based compensation | 194 | 290 | ||||||
| Professional services | 556 | 737 | ||||||
| Maintenance and support services | - | 120 | ||||||
| Legal fees | 127 | 302 | ||||||
| Payments in accordance with the processing service agreement with Incomm | 100 | 200 | ||||||
| Selling and Marketing | 35 | 278 | ||||||
| Settlements | - | 299 | ||||||
| Office expenses and other | 253 | 307 | ||||||
| Total | $ | 1,542 | $ | 3,499 | ||||
Selling, general and administrative expenses totaled $1,542,000 during the nine months ended September 30, 2024, a net decrease of $1,957,000, or 56% compared to $3,499,000 during the nine months ended September 30, 2023. The decrease in our Selling, general and administrative expenses during the nine months ended September 30, 2024 compare to the nine months ended September 30, 2023, is primarily attributable to the decrease in the amount of $547,000 in officers compensation attributable to the departure of several directors during 2023 and the reduction in the number of the officers of the Company in 2023, decrease in the amount of $96,000 in Share-based compensation and shares issued for services, decrease in the amount of $120,000 in maintenance and support services that were provided by CIMA, decrease in the amount of $181,000 in professional services and a decrease in selling and marketing expenses of $241,000 since the Company reduced significantly its selling and marketing campaigns starting 2023 due to its ineffectiveness and lack of resources.
21
Amortization of Intangible Assets
Amortization of intangible assets totaled $2,000 during the nine months ended September 30, 2024 compared to $6,000 during the nine months ended September 30, 2023. The amortization expense during the nine months ended September 30, 2024, are related to the amortization of domain name purchased on March 5, 2021.
Other Income (Expenses)
Other expenses totaled $1,272,000 during the nine months ended September 30, 2024. Other income (expenses) are mainly comprised of gain of $682,000 from change in fair value of derivative warrants liability issued as part of our February 2023 and August 2023 security offering and from income resulting from our settlement with InComm in the amount of $517,000, offset by Loss on impairment of our investment in Brooksville and Lakewood amounting to a total of $1,916,000.
Other expenses totaled $511,000 during the nine months ended September 30, 2023. Other income (expenses) are mainly comprised of from impairment of our investment of $537,000 in Cuentas SDI.
Net Loss
We incurred a net loss of $2,916,000 for the nine-month period ended September 30, 2024, as compared to a net loss of $4,270,000 for the nine-month period ended September 30, 2023 due to the decrease in selling and general administrative expenses as described above.
Comparison of the three months ended September 30, 2024 to the three months ended September 30, 2023
Revenue
The Company generates revenues through the sale and distribution of Digital products, wholesale telecommunication services and other related telecom services. Revenues during the three months ended September 30, 2024, totaled $4,000 compared to $895,000 for the three months ended September 30, 2023. The decrease in our sales is mainly related to the decrease in the sales of digital products and General-Purpose Reloadable Cards partially offset by the increase in our sales of wholesale telecommunications services by our wholly owned subsidiary, M&M.
Revenue by product for the three months ended September 30, 2024, and the three months ended September 30, 2023 are as follows:
| Three Months Ended | ||||||||
| September 30 | ||||||||
| 2024 | 2023 | |||||||
| Dollars in thousands | ||||||||
| Telecommunications | $ | $ | 22 | |||||
| Wholesale telecommunication services | 860 | |||||||
| Digital products | 4 | 13 | ||||||
| Total revenue | $ | 4 | $ | 895 | ||||
Costs of Revenue and Gross profit
Cost of revenues during the three months ended September 30, 2024 totaled $11,000 compared to $971,000 for the three months ended September 30, 2023.
Gross loss by product for the three months ended September 30, 2024, and the three months ended September 30, 2023 are as follows:
| Three Months Ended | ||||||||
| September 30 | ||||||||
| 2024 | 2023 | |||||||
| Dollars in thousands | ||||||||
| Telecommunications | $ | - | $ | (40 | ) | |||
| Wholesale telecommunication services | - | 6 | ||||||
| Digital products | (7 | ) | (42 | ) | ||||
| Total Gross profit (loss) | $ | (7 | ) | $ | (76 | ) | ||
22
Gross profit margin for the three months ended September 30, 2024 was negative both for the digital product and general purpose reloadable cards segment and for telecommunications. The gross loss for the sale of digital product and general-purpose reloadable (GPR) cards stemmed from termination of the GPR program and ceasing all activities with Cuentas SDI LLC. In addition, in April 2023, CIMA, which provided maintenance and support services for our technology platform, shut down access to the platform as we were transitioning to a new, improved platform. During the first quarter of 2023, we reduced product availability to Cuentas-SDI to allow Cuentas-SDI to catch up on its payments and during the second quarter of 2023 we curtailed all services to Cuentas-SDI and marketing initiatives with Cuentas-SDI due to its inability to reduce its debt significantly. These disruptions to our fintech solutions and technology business were a major reason for the decline in revenues during the year ended December 31, 2023. In May 2023, The OLB Group terminated a Software Licensing and Transaction Sharing Agreement with the Company for the purpose of upgrading the Cuentas Mobile App and digital distribution system. In September 2023, OLB acquired 80.01% of Cuentas-SDI. In July 2023, the Company and Cuentas-SDI settled certain payment issues and renewed discussions and cooperation to re-open the digital distribution network and systems through Cuentas-SDI’s convenience store distribution network of over 31,000 locations, including many across the New York, New Jersey and Connecticut tri state area.
Operating Expenses
Operating expenses consist of selling, general and administrative Expenses and amortization of Intangible assets as discussed below and totaled $299,000 during the three months ended September 30, 2024, compared to $1,104,000 during the three months ended September 30, 2023 representing a net decrease of $805,000.
Selling, General and Administrative Expenses
The table below summarizes our general and administrative expenses incurred during the periods presented:
| Three Months Ended | ||||||||
| September 30 | ||||||||
| 2024 | 2023 | |||||||
| Dollars in thousands | ||||||||
| Officers compensation and Directors fees | $ | 41 | $ | 454 | ||||
| Share-based compensation | 32 | 3 | ||||||
| Professional services | 182 | 250 | ||||||
| Maintenance and support services | - | - | ||||||
| Legal fees | - | 142 | ||||||
| Payments in accordance with the processing service agreement with Incomm | - | 75 | ||||||
| Selling and Marketing | 2 | 49 | ||||||
| Settlements | - | - | ||||||
| Office expenses and other | 42 | 124 | ||||||
| Total | $ | 299 | $ | 1,097 | ||||
Selling, general and administrative expenses totaled $299,000 during the three months ended September 30, 2024, a net decrease of $798,000, or 73% compared to $1,097,000 during the three months ended September 30, 2023. The decrease in our Selling, general and administrative expenses during the three months ended September 30, 2024 compare to the three months ended September 30, 2023, is primarily attributable to the decrease in the amount of $291,000 in officers compensation and a decrease in the amount of $68,000 in professional services, attributable to the departure of several directors during 2023 and the reduction in the number of the officers and services providers of the Company in 2023, partially offset by increase in the amount of $29,000 in Share-based compensation and shares issued for services.
23
Amortization of Intangible Assets
Amortization of intangible assets totaled $0 during the three months ended September 30, 2024 compared to $7,000 during the three months ended September 30, 2023. The amortization expense during the three months ended September 30, 2023, and are related to the amortization of domain name purchased on March 5, 2021.
Other Income ( Expenses )
Other expenses totaled $93,000 during the three months ended September 30, 2024.
Other expenses totaled $2,000 during the three months ended September 30, 2023.
Net Loss
We incurred a net loss of $399,000 for the three-month period ended September 30, 2024, as compared to a net loss of 1,182,000 for the three-month period ended September 30, 2023 due to the decrease in selling and general administrative expenses as described above.
Liquidity and Capital Resources
The Company was able to continue basic operations by working with executive management and a few select employees who were willing to work for the company and accept deferred and accrued compensation. This enabled the Company to continue efforts to manage legal issues, plan for the future, attempt to raise capital, renew operations and bring the company back to compliance.
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
As of September 30, 2024, the Company had total current assets of $1,197,000 including $15,000 of cash, accounts receivables of $281,000, related parties in the amount of $23,000, fair value of our investment in Brooksville in the amount of $800,000 and other assets of $78,000 and total current liabilities of $3,897,000 creating a working capital deficit of $2,700,000.
To date, we have principally financed our operations through the sale of our Common Stock. Nevertheless, management anticipates that our current cash and cash equivalents position and generating revenue from the sales of our digital products, General-Purpose Reloadable Cards and prepaid cellular phone services will provide us limited financial resources for the near future to continue implementing our business strategy of further developing our digital products, General Purpose Reloadable Card, enhance our digital products offering and increase our sales and marketing. Therefore management plans to secure additional financing sources, including but not limited to the sale of our Common Stock in future financings. This is expected to be used to further support our operations as described above and to complete the development of its new portal and financial technology capabilities. There can be no assurance, however, that the company will be successful in raising additional capital or that the company will have net income from operations to fund the business plan of the company for the near future or long term. As of September 30, 2024, the Company had approximately $15,000 in cash and cash equivalents, approximately $2,700,000 in negative working capital and an accumulated deficit of approximately $57,862,000. These conditions raise substantial doubt about the Company’s ability to continue as a going concern as of September 30, 2024.
24
Cash Flows – Operating Activities
The Company’s operating activities for the nine months ended September 30, 2024, resulted in net cash used of $592,000. Net cash used in operating activities consisted of a net loss of $2,916,000, partially offset by non-cash expenses mainly consisting of share-based compensation of $194,000 and loss on impairment of an investment in unconsolidated subsidiary of $1,916,000, Changes in operating assets and liabilities utilized cash of $417,000, resulting mainly from an increase in accounts receivable of $1,628,000 offset by increase in accounts receivable – related parties of $765,000 and decrease if other accounts liabilities of $648,000.
The Company’s operating activities for the nine months ended September 30, 2023, resulted in net cash used of $3,201,000. Net cash used in operating activities consisted of a net loss of $4,294,000, partially offset by non-cash expenses mainly consisting of share-based compensation of $290,000 and impairment loss due to decrease in cost of an investment in a non-consolidated entity in the amount of $537,000, Changes in operating assets and liabilities utilized cash of $473,000.
Cash Flows – Investing Activities
The Company’s investment activities for the nine months ended September 30, 2024 resulted in net cash provided by investment activities of $81,000 due to proceeds from sale of an investment in an unconsolidated entity.
The Company’s investment activities for the nine months ended September 30, 2023 resulted in net cash used of $2,238,000 due to the Company’s investment in Brooksville Development Partners, LLC. in the amount of $2,085,000.
Cash Flows – Financing Activities
The Company’s financing activities for the three months ended September 30, 2024, resulted in net cash received of $321,000 mainly consisting of $390,000 received from short term loan received. On February 7, 2024, the Company entered into an agreement with 1800 Diagonal Lending LLC, an accredited investor (the “Investor”), pursuant to which the Company sold the investor an unsecured original issuance discount promissory note in the principal amount of $178,250 (the “February Promissory Note”). The Company received net proceeds of $150,000 in consideration of issuance of the February Promissory Note after original issue discount of $23,250 and legal fees of $5,000. On April 22, 2024, the Company entered into a second agreement with the Investor, pursuant to which the Company sold the investor an unsecured original issuance discount promissory note in the principal amount of $96,000 (the “April Promissory Note”). The Company received net proceeds of $75,000 in consideration of issuance of the April Promissory Note after original issue discount of $16,000 and legal fees of $5,000. The Company was unable to fully pay the remaining balance and the investor was awarded a judgement against Cuentas. On May 14, 2025, the Company entered into a settlement agreement with 1800 Diagonal Lending, LLC to resolve all outstanding obligations associated with a judgment and related promissory notes. After accounting for payments made, the Company agreed to a full and final settlement payment of $112,500, inclusive of interest and legal fees. The settlement resulted in the release of all liabilities relating to the judgment and promissory notes. Payment was made on May 27, 2025
The Company’s financing activities for the three months ended September 30, 2023, resulted in net cash received of $6,030,000, mainly consisting of $6,034,000 received from the sale of our common stock.
On May 22, 2025, the Company signed a Membership Interest Purchase Agreement (MIPA) with Brooksville FL Partners, LLC (“Buyer”) the holder of the minority stake in Brooksville, for the sale of its full Interests in Brooksville for total consideration of $800. The transaction closed on May 27, 2025 and, in accordance with the terms of the MIPA, the Company directed the escrow agent to disburse a portion of the sale proceeds to satisfy four outstanding obligations owed to certain judgment and debt holders. These settlement payments were made directly by the escrow agent on behalf of the Company in connection with the closing of the transaction.
On May 20, 2024, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) dated as of May 20, 2024 with OLB Group, Inc. (“Buyer”) whereby it acquired 19.99% of the membership interests of Cuentas SDI, LLC, a Florida limited liability company (the “LLC”) for a purchase price of $215,500. OLB made payments totaling $108,000 and a final settlement was executed on May 23, 2025 where OLB paid $25k.
Inflation and Seasonality
In management’s opinion, our results of operations have not been materially affected by inflation or seasonality, and management does not expect that inflation risk or seasonality would cause material impact on our operations in the future.
Off-Balance Sheet Arrangements
As of September 30, 2024, we had no off-balance sheet arrangements of any nature.
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Critical Accounting Policies
The preparation of financial statements in conformity with GAAP in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. Note 2 to our consolidated audited financial statements filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, describes the significant accounting policies and methods used in the preparation of our financial statements.
Recently Issued Accounting Standards
New pronouncements issued but not effective as of September 30, 2024, are not expected to have a material impact on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
The Company’s Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, and as discussed in greater detail below, the Chief Financial Officer has concluded that, as of the end of the period covered by this report, disclosure controls and procedures are not effective:
| ● | to give reasonable assurance that the information required to be disclosed in reports that are file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and |
| ● | to ensure that information required to be disclosed in the reports that are file or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our CEO and our Treasurer, to allow timely decisions regarding required disclosure. |
Changes in Internal Control over Financial Reporting
On June 30, 2025 our former Chief Financial Officer Mr. Zakai resigned from his position as Company’s CFO. On July 1, 2025, our Board of directors approved the nomination of Mr. Michael De Prado as Company’s Interim CFO.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On May 1, 2019, the Company received a notice of demand for arbitration from Secure IP Telecom, Inc. (“Secure IP), who allegedly had a Reciprocal Carrier Services Agreement (“RCS”) exclusively with Limecom and not with the Company. The arbitration demand originated from another demand for arbitration that Secure IP received from VoIP Capital International (“VoIP”) in March 2019, demanding $1,053 in damages allegedly caused by unpaid receivables that Limecom assigned to VoIP based on the RCS. On or about October 5, 2020, the trial court appointed a receiver over Limecom, Inc. (“Limecom”) in the matter of Spectrum Intelligence Communications Agency, LLC. v. Limecom, Inc., case no. 2018-027150-CA-01 pending in the 11th Circuit for Miami-Dade County, Florida. On September 5, 2020, Secure IP Telecom, Inc. (“Secure IP”) filed a complaint against Limecom, Heritage Ventures Limited (“Heritage”), an unrelated third party and owner of Limecom, and the Company, case no. 20-11972-CA-01. Secure IP alleges that the Company received certain transfers from Limecom during the period that the Company wholly owned Limecom that may be an avoidable under Florida Statute § 725.105. On July 13, 2021, the two cases were consolidated, and are now pending before the same trial court under the former case number. The Company has answered and denied any liability with respect to both complaints. To the extent the Company has exposure for any transfers from Limecom, Heritage has indemnified the Company for any such liability and the Company has a pending cross-claim against Heritage for purposes of enforcing the indemnification obligation. A review of the books and records of the Company reflect aggregate transfers from Limecom to the Company or its affiliates of less than $600,000. The Company’s books and records reflect that the Company fully reimbursed Limecom through direct payment of expenses of Limecom and through issuance of shares by the Company to employees or other vendors on behalf of Limecom for settlement and release of claims the employees or vendors may have asserted against Limecom. The books and records of the Company therefore do not reflect an identifiable avoidable transfer, but this analysis may change as the discovery process continues. At this time, based upon an analysis of the Company’s books and records, the loss contingency is not capable of reasonable estimation under the above circumstances, and the likelihood of an adverse judgment is not probable at this time. An adverse judgment in this matter is reasonably possible and based upon an analysis of litigation costs and likelihood of a settlement. As of September 30, 2024, the company accrued $300,000 due to this matter. Was this settled ?
On October 4, 2022, Crosshair Media Placement, LLC, a Kentucky based marketing company, filed and served a complaint on Cuentas for breach of contract alleging breach of contract damages of $629,807.74, which case remains pending in the United States District Court for the Western District of Kentucky, case no. 3:22-CV-512-CHB. On May 9, 2023, the Company and the plaintiff attended a court settlement conference before the federal magistrate judge presiding over the matter. On May 13, 2025, the Company’s President and Chief Executive Officer executed a joint personal guaranty in favor of Crosshair Media Placement, LLC, securing the full payment of amounts owed by the Company pursuant to a judgment in the amount of $453,856.68, plus accrued interest and attorney’s fees. Pursuant to an agreement with Crosshair Media Placement, LLC’s legal counsel, the parties agreed to a full and final settlement in the amount of $465,856.68, inclusive of interest and legal fees. Payment was remitted on May 27, 2025, by the escrow agent in connection with the closing of the Membership Interest Purchase Agreement.
On February 8, 2023, a former employee of the Company, filed a complaint for breach of employment agreement alleging the Company failed to pay her certain compensation she alleges she was entitled to upon her resignation. On May 22, 2025, the Company entered into a settlement agreement to resolve a previously adjudicated legal matter with a full and final payment of $28,000, inclusive of interest and legal fees. The settlement included mutual releases of claims by both parties. Although the payment was initially attempted on May 27, 2025, by the escrow agent handling the Membership Interest Purchase Agreement, it was completed on May 28, 2025, due to incorrect account information provided by the payee.
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ITEM 1A. RISK FACTORS
Reference is made to the risks and uncertainties disclosed in Item 1A (“Risk Factors”) of our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). Prospective investors are encouraged to consider the risks described in our 2023 Form 10-K, our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Report and other information publicly disclosed or contained in reports and other documents we file with the Securities and Exchange Commission before purchasing our securities.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Except as previously reported in the Company’s reports filed pursuant to Section 13(a) of the Exchange Act, there were no sales of unregistered securities during the period covered by this report.
ITEM 3. DEFAULTS UPON SENIOR DEBT
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
| Incorporated by reference | ||||||||||||
| Exhibit Number | Exhibit Description | Filed herewith | Form | Period ending | Exhibit | Filing date | ||||||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||||||
| 101.INS | Inline XBRL Instance Document. | X | ||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | X | ||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | X | ||||||||||
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Cuentas, Inc. | ||
| (Registrant) | ||
| Date: July 2, 2025 | By: | /s/ Shalom Arik Maimon |
| Chief Executive Officer | ||
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