Georgi Kamburov

Tapinator Inc (OTCMKTS:TAPM) Wipes More Of Its Gains

by Georgi Kamburov September 2, 2015

On August 20 the stock of Tapinator Inc (OTCMKTS:TAPM, TAPM message board) 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?

Two weeks ago TAPM filed their financial report for the second quarter of the year and it contained some rather encouraging numbers:

• $1.85 million cash
• $2.12 million total current assets
• $71,348 total current liabilities
• $615 thousand revenue
• $4.9 million net loss

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 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 that was featured as a "Best New Game" on Apple's iOS platform. Furthermore Tapinator plans to announce a major game based on a hit movie franchise.

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.

In our previous articles we warned investors that there are several red flags that must be taken into account when approaching TAPM's 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.

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. 

An entity called TomorrowsBlueChips has also been receiving some sizable compensations for various awareness services regarding TAPM. 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.

Despite the progress it has made TAPM remains a risky choice for now. Do not underestimate the volatility of the ticker, do your own due diligence, and set appropriate time horizons for your trades. 

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