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On August 20 the stock of Tapinator Inc (OTCMKTS:TAPM<\/a>) opened the trading day at less than 20 cents per share. Just four sessions later it closed at nearly $0.54. The surge up the chart was more than impressive and so was the support shown by investors but what caused the sudden change in sentiment?<\/p>\n Two weeks ago TAPM<\/a> <\/strong>filed their financial report for the second quarter of the year and it contained some rather encouraging numbers:<\/p>\n • $1.85 million cash The revenues generated by the company have continued to grow surpassing the results for the same period last year by 172% while quarter-over-quarter they are up by 49%. Although the reported net loss is staggering it should be noted that $4.69 million of it was due to loss on change in derivative liabilities. During the quarter TAPM<\/a> <\/strong>launched 19 new games bringing their portfolio to 112 games. At the end of August the company launched a new role-playing game called Dice Quest<\/em> that was featured as a “Best New Game” on Apple’s iOS platform. Furthermore Tapinator <\/strong>plans to announce a major game based on a hit movie franchise.<\/p>\n If everything is going so smoothly what could explain the performance of the stock during the last four sessions? After hitting an intraday high of $0.645 on August 27 the stock has been going nowhere but down. Yesterday it crashed by 16.6% sitting at $0.321when the closing bell rang.<\/p>\n In our previous articles we warned investors that there are several red flags that must be taken into account when approaching TAPM<\/a>‘s <\/strong>stock. The sizable cash reserves from the report were achieved through a $2.24 million 8% senior secured convertible debenture. The note has an initial conversion price of $0.205. This price can be adjust but it cannot go lower than $0.10. As part of the deal warrants for the purchase of 10.9 million shares with an exercise price of $0.30 were also issued. Another 10.9 million shares can be issued through callable warrants with the same exercise price but only in the case of a payment default.<\/p>\n With the recently increased authorized amount of shares – from 75 million to 150 million, the potential dilution is massive. Not to mention that during the quarter quite a lot of shares were already issued as a conversion of debt at prices ranging from $0.20 to $0.25. At least for now the shares are restricted and cannot be sold on th open market. <\/p>\n An entity called TomorrowsBlueChips<\/em> has also been receiving some sizable compensations for various awareness services regarding TAPM<\/a><\/strong>. They were paid 5,000 cash per month from September 8, 2014, to March 8, 2015, while also receiving an option for the purchase of 50,000 shares at a cost of $2,500 cash for the period February 8 – March 31. More recently they received 300,000 restricted shares and a monthly compensation of $8000 for the 12 months ending August 8, 2016.<\/p>\n
• $2.12 million total current assets
• $71,348 total current liabilities
• $615 thousand revenue
• $4.9 million net loss<\/p>\n