10-K: Cuentas 2024 Annual Report: Strategic Shifts & Financial Woes

Cuentas Inc. reports significant financial losses and strategic shifts in its 2024 annual filing, exiting real estate and prepaid card ventures while pursuing new FinTech and MVNO partnerships.

Summary

• Net loss increased to $3.309 million for the year ended December 31, 2024, compared to $2.196 million in 2023.
• Total revenues decreased significantly by 71% to $676,000 in 2024 from $2.346 million in 2023, primarily due to a $1.612 million decrease in wholesale telecommunication services.
• The company exited the prepaid debit-card vertical on August 12, 2024, receiving a $475,000 credit from InComm in full settlement of obligations.
• Cuentas exited the real estate business by selling its 63.9% equity interest in Brooksville Development Partners, LLC for $800,000 on May 27, 2025, using the proceeds to settle approximately $1.132 million in debts for an actual cost of $666,356.
• A joint venture, World Mobile LLC, was formed with World Mobile Group Ltd to operate a mobile virtual network operator (MVNO) business, with Cuentas holding a 51% membership interest.
• The company secured $385,000 in convertible notes from World Mobile Group Ltd in September and October 2025 for operational expenses and PLUM contract obligations.
• Unsecured convertible promissory notes totaling over $1 million were issued to CEO Shalom Arik Maimon ($586,087.62), Schulman ($112,900.11), and AM Law ($308,000) on October 17, 2025.
• Material weaknesses in disclosure controls and procedures and internal control over financial reporting were identified as of December 31, 2024.
• Cuentas was delisted from Nasdaq on December 20, 2023, due to failure to maintain $2.5 million in shareholders' equity, and its shares now trade on the Expert Market OTC, limiting public trading.
• The auditor's report for the 2024 consolidated financial statements contains a statement concerning substantial doubt regarding the company's ability to continue as a going concern, citing an accumulated deficit of $58.255 million and a negative working capital of $3.170 million as of December 31, 2024.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, including increasing net losses, declining revenue, a significant working capital deficit, and a 'going concern' warning from its auditor. While strategic shifts and capital raises are underway, the immediate financial health and operational challenges are highly concerning.

Positives

• Gross loss decreased from $387,000 in 2023 to $75,000 in 2024, indicating an improvement in gross profitability.
• Operating expenses decreased significantly by $4.468 million (69.7%) from $6.409 million in 2023 to $1.941 million in 2024.
• Net cash used in operating activities decreased substantially from $4.193 million in 2023 to $598,000 in 2024.
• Net cash from investing activities shifted from a net use of $2.098 million in 2023 to a net receipt of $92,000 in 2024.
• Received a $475,000 credit from InComm upon termination of the prepaid Mastercard program, settling all obligations.
• Successfully settled debts totaling approximately $1.132 million with four major creditors for an actual cost of $666,356 by selling its real estate interest.
• Formed a joint venture, World Mobile LLC, with World Mobile Group Ltd to operate an MVNO business, leveraging World Mobile's platform for potential growth.
• Secured $385,000 in convertible notes from World Mobile Group Ltd to fund operational expenses and PLUM contract obligations.
• Filed 2024-Q2 and 2024-Q3 10Q reports on July 2, 2025, as initial steps to regain compliant status and qualify for open market trading.

Negatives

• Net loss increased to $3.309 million in 2024 from $2.196 million in 2023.
• Total revenues decreased significantly by 71% from $2.346 million in 2023 to $676,000 in 2024, primarily due to a $1.612 million decrease in wholesale telecommunication services.
• Cash and cash equivalents decreased to $15,000 as of December 31, 2024, from $205,000 in 2023.
• Working capital deficit increased to $3.170 million as of December 31, 2024, from $2.929 million in 2023.
• Accumulated deficit increased to $58.255 million as of December 31, 2024.
• Auditor issued a "going concern" statement due to substantial doubt about the company's ability to continue operations.
• Delisted from Nasdaq on December 20, 2023, and now trades on the Expert Market OTC, limiting public trading.
• Identified material weaknesses in internal control over financial reporting and disclosure controls and procedures.
• Incurred an impairment loss of $700,000 on its equity investment in 4280 Lakewood Road Manager, LLC.
• Incurred a loss on impairment of held for sale investment in unconsolidated entities of $1.216 million related to Brooksville.
• Tel3 business became unprofitable and was shut down in June 2024.
• Sold 19.99% interest in Cuentas-SDI for $215,500, resulting in an impairment charge of $0.5 million.
• Company President and CEO executed a joint personal guaranty for a $453,856.68 judgment against the company (later settled for $465,856.68).
• Net cash provided by financing activities decreased significantly from $6.030 million in 2023 to $316,000 in 2024.

Risks

• Requires additional funding, which may be on disadvantageous terms or unavailable, leading to substantial dilution for existing stockholders.
• Substantial doubt regarding ability to continue as a going concern due to lack of financial liquidity.
• Limited operating history and no assurance of generating cash flow or profit.
• Business strategy may be unsuccessful, and risks may not be addressed cost-effectively.
• Incurred substantial losses and may never achieve profitability or sustain distributions to shareholders.
• Inability to secure sufficient capital to execute the business plan.
• Material weaknesses in disclosure controls and procedures and internal control over financial reporting.
• Involved in various litigation matters that are expensive and time-consuming, with potential for adverse judgments.
• Operating on a larger scale could substantially increase expenses without guaranteed scalability or economies of scale.
• Security breaches and disruptions could compromise information, leading to liability and reputational damage.
• Dependent on executive officers and key personnel; departure could adversely affect the company.
• Subject to extensive and evolving federal, state, and foreign laws and regulations (communications, anti-money laundering, consumer protection, money transmitter licenses, privacy).
• Failure to comply with anti-money laundering regulations could increase costs, decrease revenues, and disrupt business.
• Abuse of prepaid products for illicit financing could cause reputational harm and adverse financial effects.
• Failure to comply with consumer protection regulations could have a material adverse effect.
• Failure to maintain money transmitter licenses or obtain new ones in a timely manner could materially and adversely affect the business.
• Data security breaches could lead to liability, costly litigation, and harm to reputation and revenues.
• Subject to card association and network organization rules; non-compliance could result in fines or termination.
• Intense competition from larger, better-financed competitors in the prepaid and MVNO markets.
• MVNO operations dependent on third-party network operators.
• Inability to continuously improve offerings to compete effectively.
• Inability to attract and retain MVNO users.
• Adversely affected by fraudulent activity, including cyber-organized criminal syndicates.
• Market price of common stock and warrants may be highly volatile.
• Convertible debt could result in substantial dilution.
• Secured notes to Michael De Prado are collateralized by Fintech (non-MVNO) assets; default could lead to asset transfer.
• Governance rights granted to World Mobile Group Ltd. may constrain corporate actions.
• Shares are subject to penny stock rules, making trading more difficult.
• Failure to remain current in SEC reporting obligations could harm capital raising and stock liquidity.
• Does not expect to pay dividends for the foreseeable future.

Future Outlook

Management anticipates the business will require substantial additional investments that have not yet been secured and is actively pursuing fund-raising in private equity and capital markets. The company expects to enter into a Management & Software Licensing Agreement with World Mobile Group Ltd. and plans to implement e-SIMS for Cuentas Mobile services. Compliance costs for regulated subsidiaries are expected to increase. The company is evaluating the synergy between CuentasMAX and World Mobile's platform for potential integration and believes the alliance with World Mobile Group and the joint venture World Mobile should provide significant revenue and profitability. A proposed follow-on public offering with Maxim Group LLC is also planned.

Management Comments

• Management has been evaluating other alternatives including replacing issuing bank and other enhanced FinTech enabled solutions, however, the company has not replaced it to date.
• Management has taken important steps to reduce the financial burn rate and has curtailed some ineffective marketing programs, concentrating on those programs that have been proven to produce good results.
• Reduction of some top-level personnel has brought savings to the company as current executives took over the vacant positions at no additional cost to the Company but offset by the bonuses.
• The Company is committed to remediating its material weaknesses as promptly as possible. Implementation of the Company's remediation plans has commenced and is being overseen by the board.
• The Company is in the process of interviewing additional potential Independent Directors to fill additional board positions with goals of Gender, Age and Racial diversity as well as Cyber protection experience as indicated by the SEC to be important goals.

Industry Context

Cuentas Inc. operates in the FinTech and telecommunications sectors, specifically targeting the unbanked, under-banked, and underserved Hispanic/Latino populations in the USA. The company is shifting its focus from prepaid debit cards to higher-margin digital content and mobile virtual network operator (MVNO) services, leveraging partnerships like InComm's distribution network and World Mobile's decentralized telecom economy. This strategic pivot aligns with broader trends of digital financial inclusion and the growth of MVNOs offering specialized services. The regulatory environment for FinTech, money transmitters, and consumer protection remains complex and evolving, posing ongoing compliance challenges and costs.

Comparison to Industry Standards

• Cuentas Mobile operates as an MVNO, similar to successful brands like Cricket, Boost, Simple, Ultra, Mint, and Lyca Mobile, which create brands without owning network infrastructure.
• The company aims to leverage the largest 5G nationwide network from one of the top 3 mobile carriers, positioning itself against established prepaid competitors such as AT&T, Sprint, MetroPCS, and TracFone.

Management Changes

Corporate Governance

Legal Proceedings

• Secure IP Telecom, Inc. arbitration and complaint: Consolidated cases, Cuentas accrued $300,000 as of December 31, 2024, for potential adverse judgment.
• Spectrum Intelligence Communications Agency, LLC: Final Judgment in Garnishment against Cuentas for $513,872.80 on July 24, 2024; company believes it can settle for $300,000.
• Crosshair Media Placement, LLC: Complaint for breach of contract for $629,807.74; settled for $465,856.68, paid on May 27, 2025.
• Former employee complaint: Settled for $28,000 on May 22, 2025.
• 1800 Diagonal Lending LLC promissory notes: Defaulted on February and April 2024 notes, leading to a loss of $146,000; settled for $112,500 on May 14, 2025, and paid on May 27, 2025.
• EAdvance Services LLC: Defaulted on Purchase and Sale of Future Receipts Agreement; settled for $60,000 on May 22, 2025.

Related Party Transactions

• Wholesale telecommunication revenues of $569,000 in 2024 from Next Communications Inc., a company controlled by CEO Arik Maimon, resulting in a gross profit of approximately $9,000.
• Michael De Prado (former executive officer): Confidential Separation Agreement on September 18, 2025, including $110,000 cash payment, two secured promissory notes ($473,000 and $200,000), and a 16-month license to Fintech (non-MVNO) assets.
• Shalom Arik Maimon (CEO): Issued an unsecured convertible promissory note for $586,087.62 on October 17, 2025, convertible at $0.42 per share. Converted 50% ($293,043.81) into 697,723 shares.
• AM Law: Issued an unsecured convertible promissory note for $308,000 on October 17, 2025, convertible at $0.42 per share. Converted 50% ($154,000) into 366,666 shares.
• Schulman: Issued an unsecured convertible promissory note for $112,900.11 on October 17, 2025, convertible at $0.42 per share.

Stakeholder Impact

• Shareholders face significant dilution risk from convertible notes and potential future equity raises, limited liquidity due to Nasdaq delisting, and heightened investment risk from the 'going concern' warning. No dividends are expected.
• Employees may experience morale impacts due to management changes, financial difficulties, and restructuring efforts.
• Customers in the unbanked/under-banked communities will see continued focus on mobile financial services and digital content, but the exit from prepaid cards and real estate may alter service offerings.
• Creditors have seen several debts settled at a discount, indicating financial strain but also active management of liabilities. New convertible notes have been issued.
• Regulatory bodies will continue to oversee the company's operations, with ongoing compliance requirements and risks of penalties for non-compliance.

Next Steps

• Continue fund-raising in private equity and capital markets.
• Remediate identified material weaknesses in internal controls.
• Evaluate synergy between CuentasMAX and World Mobile's platform for potential integration.
• Reactivate distribution through grass roots retailers for Cuentas Mobile.
• Identify qualified Chief Financial Officer candidates.
• Pursue a proposed follow-on public offering with Maxim Group LLC.
• World Mobile LLC to distribute eSIM products through Hallo 015's network.

Key Dates

Recommendation

The company is in a precarious financial position, marked by substantial and increasing net losses, a sharp decline in revenue, a growing working capital deficit, and an auditor's 'going concern' warning. Its delisting from Nasdaq to the Expert Market OTC severely limits liquidity and investor access. While management is attempting strategic shifts and capital raises, these efforts are reactive to severe financial distress. The issuance of significant convertible notes, including to insiders, and the ongoing material weaknesses in internal controls further highlight the high risk. The overall financial health and operational challenges suggest a strong likelihood of continued share price depreciation and significant investment risk.

Keywords

FinTech, mobile financial services, MVNO, telecommunications, digital content, unbanked, under-banked, SEC filing, 10-K, Cuentas, World Mobile, financial technology, regulatory compliance, going concern, capital raise, stock delisting, internal controls, convertible notes, corporate governance