UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
(Mark One)
For the fiscal year ended December 31, 2021
or
For the transition period from to
Commission file number: 000-27569
AppTech Payments Corp.
(Exact Name of Registrant as Specified in its Charter)
5876 Owens Avenue
Suite 100
Carlsbad, California92008
(760)707-5959
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Luke D’Angelo
Chief Executive Officer
5876 Owens Avenue
Suite 100
Carlsbad, California 92008
(760) 707-5959
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.0095 par value per share APCX NASDAQ
1
Securities registered pursuant to Section 12(g)
of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes☒No ☐
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☒No ☐
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☒No ☐
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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 ☐
Non-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. ☐
0
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐No☒
As of March 24, 2022, the registrant had 16,348,096
shares of common stock issued and outstanding.
2
AppTech Payments Corp.
(Formerly AppTech Corp.)
Form 10-K
Table of Contents
Page
Part I
Special Note Regarding Forward-Looking Statements and Projections 4
Item 1. Business 5
Item 1A. Risk Factors 12
Item 1B. Unresolved Staff Comments 12
Item 2. Properties 12
Item 3. Legal Proceedings 13
Item 4. Mine Safety Disclosures 13
Part II
Item 6. Selected Financial Data 14
Item 7A. Qualitative and Quantitative Disclosures about Market Risk 22
Item 8. Financial Statements and Supplementary Data 22
Item 9A. Controls and Procedures 22
Item 9B. Other Information 22
Part III
Item 10. Directors, Executive Officers and Corporate Governance 23
Item 11. Executive Compensation 23
Item 14. Principal Accountant Fees and Services 24
Part IV
Item 15. Exhibits and Financial Statements Schedules 25
Index to Financial Statements 26
Exhibit Index 50
Signatures 53
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PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND PROJECTIONS
Various statements in this report of AppTech Payments
Corp. are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included
in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans
and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties and are based on
information currently available to our management. Words such as “anticipate,” “believe,” “estimate,”
“expect,” “intend,” “may,” “plan,” “contemplates,” “predict,”
“project,” “target,” “likely,” “potential,” “continue,” “ongoing,”
“will,” “would,” “should,” “could,” or the negative of these terms and similar expressions
or words, identify forward-looking statements. The events and circumstances reflected in our forward-looking statements may not occur
and actual results could differ materially from those projected in our forward-looking statements.
You should not place undue
reliance on forward looking statements. The cautionary statements set forth in this prospectus identify important factors which you should
consider in evaluating our forward-looking statements. These risks include, but are not limited to, the following:
● current and future laws and regulations;
● general economic uncertainty associated with the COVID-19 pandemic;
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All written and oral forward-looking statements attributable
to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred
to in this section. We caution investors not to rely too heavily on the forward-looking statements we make or that are made on our behalf.
We undertake no obligation and specifically decline any obligation, to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. Please see, however, any further disclosures we make on related subjects in any annual,
quarterly or current reports that we may file with the Securities and Exchange Commission (SEC).
We encourage you to read the discussion and analysis
of our financial condition and our financial statements contained both in our Form S-1 that was filed with the Securities and Exchange
Commission on January 3, 2021 and in this Annual Report on Form 10-K. There can be no assurance that we will in fact achieve the actual
results or developments we anticipate or, even if we do substantially realize them, that they will have the expected consequences to,
or effects on, us. Therefore, we can give no assurances that we will achieve the outcomes stated in those forward-looking statements and
estimates.
Unless the context otherwise requires, throughout
this Annual Report on Form 10-K, the words “AppTech Payments,” “we,”
“us,” the “registrant” or the “Company” refer to AppTech Payments Corp.
Item 1.
Business.
Business Overview
Through our scalable cloud-based
platform architecture and infrastructure coupled with our commerce experiences development and delivery model, we intend to simplify and
streamline digital financial services for corporations, small and midsized enterprises (“SMEs”) and consumers. We will accomplish
this through innovative omnichannel payment and digital banking technologies that complement our core merchant services capabilities.
We believe there is opportunity to generate significant revenue for the Company the near future by providing innovative commerce solutions
and experiences that resonate with clients, their customers, and the market as a whole. Further, our soon to be launched modular platform
will equip forward-thinking financial institutions, technology companies, and SMEs with operational efficiencies, such as automated financial
controls and reconciliation in addition to manual administration.
Today, our Company’s merchant
services solutions provide financial processing for businesses to accept cashless and/or contactless payments, such as credit cards, ACH,
wireless payments, and more. Our patented, exclusively licensed, and proprietary merchant services software will offer, new integrated
solutions for frictionless digital and mobile payment acceptance including acceptance of alternative payment methods (“APMs”).
We are extending and enhancing these capabilities with software that solves for multi-use case, multi-channel, API-driven, account-based
issuer processing for card, digital tokens, and payment transfer transactions. Our scalable business model allows for expansive white-labeling,
SaaS, and embedded solutions that will drive the digital transformation of financial services and generate diverse revenue streams for
our company.
The financial services industry
is going through a period of intensive change driven by the advancement of technology, the adaptation to societal changes resulting from
COVID-19, and the rapid rise of contactless transactions. End-users expect ease of use and an enhanced user experience in all their daily
financial interactions. In this rapidly evolving digital marketplace, our prospective clients, such as merchants and independent software
vendors (“ISVs”), have broad and frequently changing requirements to meet consumer expectations and operational efficiencies
to maintain their competitive edge.
Providing basic payment acceptance
and “lowest price” models is no longer the winning formula to support the market. These entities recognize that staying competitive
in the digital age requires a partner with a platform and services capable of delivering flexibility and growth while streamlining operations
to continually deliver increased revenue and profitability opportunities. Our pricing is extremely competitive, but we believe the value
we create for financial institutions, technology companies, and SMEs through our technology, deployment model, services and consultative
approach will create true differentiation from our competitors.
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Our global financial services platform
architecture and infrastructure is designed to be flexible and configurable to meet current and future market needs. This will empower
our clients to take advantage of future platform development and new innovative digital financial solutions by leveraging off-the-shelf
experiences and consuming our APIs. Additionally, by taking a holistic view of all aspects of our clients’ business, including risk,
volume, user experience, integration capabilities and technical needs, we will create optimal and extensible financial technology solutions
at a rapid pace.
Through exclusive licensing and
partnership agreements to complement our patented technology capabilities, we believe we will become leaders in the embedded payment and
digital banking sectors by supporting digital, tokenized, multi-channel, embedded API-driven transactions. We will accelerate this position
through the integration of our merchant services and a secure text payment solution with extensive digital account-based and multi-channel
issuer payment processing capabilities. This will enable us to provide our clients an end-to-end payment acceptance and digital banking
solution powering straight-through processing and embedded payment opportunities in the B2B space. We expect to support clients through
the development of custom and off-the-shelf experiences by delivering these solutions through public APIs and Webhooks.
A key to the Company’s success
and market penetration is the continued development of enterprise-grade, patent protected software
for SMS text payments via a mobile device. Our patented technology manages
text messaging for processing payments, notification, response, authentication,
marketing, advertising, information queries and reports. Once
an account is established through a multi-currency digital wallet, neither internet connectivity nor a specific application is required
to process payments between merchants and end-users. These features will be particularly beneficial for unbanked and under banked individuals
in developing or emerging markets where access to the internet on a mobile device and modern banking institutions may not be readily available.
In addition, our software platform will extend merchants’ marketplace capabilities
by creating new avenues and channels to request and receive
frictionless, digital payments and engaging end-users by utilizing a familiar, convenient, and widely adopted technology.
We believe our
technologies will greatly increase the adoption of mobile payments and alternate banking
solutions in sectors that must quickly adapt and migrate towards new technologies that facilitate convenient and safe contactless payments.
To survive and succeed in this environment, businesses
need to adopt new technologies to engage, communicate and process payments with
their customers from a supplier that widely supports innovation and adaptation as the industry
evolves. By embracing technological advancement in the payment and banking industries, we are well-positioned to meet the growing
needs of existing and prospective clients and intend for our current and future products
to be at the forefront of solving these accelerated market needs.
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Industry Background
The financial technology
and payment processing industries are an integral part of today’s worldwide financial structure. The electronic payments industry
is massive, with growth fueled by powerful long-term trends that continue to increase the acceptance and use of electronic payments compared
to paper-based payments. According to The Nilson Report, purchase volume on credit, debit and prepaid cards in the United States was approximately
$6.1 trillion in 2018 and is estimated to reach nearly $10.4 trillion by 2027, a compound annual growth rate, or CAGR, of 6.1%.[1]
According to American Banker,
banking and financial services incumbents are failing to compete on customer experience, which is a weakness fintechs are very successfully
exploiting.[2] In fact, based on a 2019 PwC Global Fintech Report, industry executives
believe that 25% or more of their business could be at risk of being lost to standalone fintechs within five years.[3]
Furthermore, according to Allied Market Research, The global digital banking platform market size was valued at $3.95 billion in 2019
and is projected to reach $10.87 billion by 2027, growing at a CAGR of 13.6% from 2020 to 2027.[4]
All of this research and expert opinion provides a clear picture of the opportunities ahead for fintechs that can provide innovative commerce
solutions and experiences that resonate with clients, their customers and the market as a whole.
According to a Walker report, customer
experience will overtake price and product features as the key brand differentiator this year. Moreover, according to research from PwC,
an immersive and engaging customer experience drives more customer spending.[5] In fact, 86%
of buyers are willing to pay more when immersed in a great customer experience – Experience outweighs cost.
The payment processing industry
continues to evolve rapidly based on the application of new technology and changing customer needs. Changes in technology have allowed
for new payment methods, such as mobile and contactless payments which is driving demand for new innovative solutions to meet consumer
expectations. This results in businesses increasingly being required to deliver new, convenient methods of interacting with their customers
to ensure loyalty and repeat business. As consumers continue to integrate mobile devices into their lives, there will be increased demand
to conduct business on these devices. According to Global Industry Analysts, the global mobile payment market was valued at $1,449.56
billion in 2020 and is expected to reach over $5,399.6 billion in 2026 with growth at a CAGR of 24.5% over the forecast period (2021 –
2026).[6]
GSMA Intelligence reported in 2019
that globally, there are more than 9.2 billion mobile connections and 5.1 billion mobile subscribers with text messaging capabilities.[7]
Statista asserted that just over 3.9 billion of these devices have access to mobile internet.[8]
Our Competitive Strengths
We believe our adaptable technology
stack and product offerings differentiate us from our competitors. Our products and solutions help to eliminate much of our sector’s
reliance on legacy payment rails and financial systems. The design and delivery are not being restricted by antiquated foundational technology.
Management believes the applicability and frictionless nature of our products will offer an immediate impact on the digital financial
services industry. Further, the solutions we intend to deliver to our clients will be driven off user-centered design principles to providing
seamless, best-in-class experiences to the end-user.
Digital transformation is complex
for most companies sighting such concerns around shifting company culture, legacy systems, rigidity of platforms and processes, inefficiencies
in skillsets and knowledge. Additionally, even when these companies see the value in digital transformation, often these companies face
an inability to properly shift resources to new technology while maintaining customers on existing platforms. Non-discretionary spend
required to “keep the lights on” outweighs leadership’s ability to invest in future technology which results in vulnerabilities
and competitive threats.
_________________________________
[1]Nilson Report – Payment Cards in the U.S. Projected, October 2020.
[2]American Banker and Monigle, Humanizing the Bank Customer Experience, 2021.
[3]PricewaterhouseCoopers, LLP– Global Fintech Report, 2019.
[4]Allied Market Research – Digital Banking Platform Market Size to Hit $10.87
Billion by 2027, at 13.6% CAGR, October 2020.
[5]Walker Resources – Customers 2020: A Progress Report.
[6]Global Industry Analysts – Consumer Mobile Payments – Global Market
Trajectory and Analytics, October 2021.
[7]GSM Association – The State of Mobile Internet Connectivity 2019.
[8]Statista Research Department – Mobile Internet Usage Worldwide –
Statistics and Facts, July 2021.
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Our financial services platform
will empower our clients with an extensible, adaptable framework capable of dynamically solving challenges found across the financial
services industry. Further, this ability will allow us to drive deeply and expediently into specific market segments to solve problems
that we find to be a continued burden on our client’s and their customer base. Based on market, client and end-user research and
discovery, it is expected that these unique solutions produced for client’s will be highly leverageable across these segments to
deliver experiences at scale while producing rapid revenue and profitability.
As we increase our client base
and deployment of solutions to meet our client’s specifications, we’ll continue to grow these “off-the-shelf”
experiences that will ultimately lower our development costs while increasing speed to market. In addition, we are positioned to utilize
this model to grow industry partnerships and app marketplace plugins thus further leveraging our capabilities and market reach.
Founded on a modern core platform
backed by an intelligent financial technology framework, our ability to rapidly deploy solutions and experiences that are otherwise cumbersome,
expensive and often fall short of expectations will prove successful. Once launched, our position is to penetrate deep into certain segments
to build a model that will directly drive growth. Gaining robust insights in these segments while delivering best-in-class experiences
will also produce future opportunities to expand our off-the-shelf solutions to other verticals or sub-verticals that are challenged with
solving similar problems.
While our core foundational platform
will continue to adapt and grow based on new innovations, we will soon launch into the market with an extremely robust and innovative
set of secure digital banking and payments features and functionality. This will allow us to quickly deliver the future of digital finance
to meet the demands of the markets we intend to serve without the deployment burdens encumbering the market today.
Additionally, the patent protection
to some of our products is uncommon within the fintech industry. This protection prevents competitors from replicating our products to
carve away at our anticipated market share. Therefore, backing our text payment and lead generation products with patents strengthens
the viability of such products by limiting direct competition and strengthening strategic partnerships. It is expected that we will also
expand our patent portfolio through new innovations and acquisitions.
Our patent protected text payment
system’s anticipated capabilities also set us apart. By creating a product that permits mobile payments without the need for a data
plan, internet or an application -after an initial account is established-, we will have the unique ability to extend our customer base
to target unbanked and underbanked individuals primarily in developing or emerging markets. Integrating consumers that are not traditionally
included in the payment space will allow us to have a larger potential market than many of our competitors.
Our Growth Strategy
We intend to grow by leveraging
our existing IP, continually developing products and solutions, establishing strategic partnerships and seeking selective acquisitions
that uniquely complement our core business to meet growing market demand. From traditional merchant accounts to customizable inbound and
outbound payment solutions, we intend to modernize and enhance the payment processing and digital banking capabilities for businesses
throughout the world. Our business objective is to generate revenue based on licensing and subscription fees, transactional processing
fees, product line growth, and continual advancement of our IP portfolio.
Our target market is forward-thinking
financial institutions, technology companies, and SMEs seeking to broaden their distribution through the addition of digital omnichannel
payments and digital banking technologies. We will serve these markets by reducing integration complexity and streamlining their integrated
financial services capabilities.
SMEs generally lack the resources
of large enterprises to invest heavily in technology. As a result, they are more dependent on service providers, like AppTech, to handle
critical functions including payment acceptance and other support services and are likely to be early adopters of new services that will
further increase their efficiency and drive growth. Additionally, we are targeting financial institutions looking to maintain their ability
to compete by digitizing their financial services offerings to meet market demand. By enhancing their customer’s user experience
through the development of innovative and user centric multi-channel, multi-currency, digital financial products, they will be able to
maintain customer loyalty.
8
We intend to support a multi-method
distribution model to achieve our vision. By providing delivery flexibility, we can rapidly engage and develop the right go-to-market
strategies. As previously mentioned, not only are off-the-shelf solutions available, but we also offer embedded experiences that can be
deployed using a growing portfolio of Open and Private APIs for developers to build unique experiences based on business cases and requirements.
Further, by offering clients a
full array of marketing technology services, omnichannel payments and digital banking technologies, we will enable them to better interact
with their customers and provide additional, dynamic means of processing both inbound and outbound financial transactions.
Businesses’ financial technology
needs are increasingly complex. As electronic and mobile commerce continues to grow, businesses have no alternative but to use technology
to better meet customer’s expectations. We believe that delivering innovative, adaptive, scalable, and operationally efficient products
that meet their financial services needs will result in rapid market penetration for our anticipated products launches.
While leveraging new technology
is vital to our growth plan, it is equally important that the technology is relevant and seamlessly fits into and benefits our end-user’s
daily lives. Consumers are sometimes reluctant to alter their typical routines, especially when it relates to financial services. The
anticipated launch of our text payment system and broader digital banking and payments solutions will meet both needs. We will offer financial
technologies that do not rely on legacy rails thus increasing the opportunity to improve the end-user’s digital experiences. Once
properly developed and rolled out, we anticipate rapid adoption.
We seek to grow our business by pursuing the following
strategies:
Our market growth strategies will
focus on the following elements: (1) new product development and delivery (2) market penetration (3) market expansion (4) IP, strategic
acquisitions, and partnerships.
It is imperative that upon entrance
into the market with the new platform, we focus on delivering an enhanced experience to our existing digital client base. As we roll this
out, we will also continue discussions with our current and continually evolving pipeline of prospects to understand these opportunities
and the value that we can bring to solve their needs. This strategy also provides growth opportunities with these clients, increases customer
satisfaction and potential referrals, and produces valuable feedback into our product prioritization and roadmap.
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Maintaining focus to deliver our
technology to selective target market segments also allows us to deliver a deeper, more targeted set of solutions and experiences. In
turn this will grow our knowledge within these select segments that will translate into further innovation and market penetration.
This continual development process
will contribute to our overall strategy of delivering new, innovative technologies and solutions. It is expected that bringing these to
market will expand opportunities in complimentary and new market segments. Given the Platform’s flexibility and a la carte capabilities,
adapting these solutions and delivering new experiences is a core tenant to growth.
In addition, core to our values
and strategy is the opportunity for growth through intellectual property. This is inclusive of the existing patent portfolio while also
coupled with future innovation. It is also important to continually evaluate new technologies, market entrants and complimentary solutions
to ensure continued growth. We expect that this will include strategic acquisitions of complimentary offerings and portfolio customers,
while also focusing on strategic partnerships where we find synergy in our vision.
With years of fintech experience
and a deep understanding of the industry, management believes we can leverage this expertise, industry contacts and past clients to accelerate
market penetration. Engaging individuals with the ability to integrate our products may prove invaluable. Further, through our channel
partnerships, we have an expansive network of potential clients that continue to show interest in our strategy and opportunity to embed
our financial technologies into their solutions.
Management believes there are
substantial opportunities in emerging and developing markets for our anticipated products. Our mobile payment and digital banking
solutions offer innovative avenues to unbanked and underbanked communities to transact and provide remittances. Further, since
internet connectivity is not required for our text payment solution, individuals with limited internet access will still be able to
transact. These two factors could open our products to markets with immense growth potential.
With our in-house expertise and
our internationally experienced and proven team of subject matter experts via our partnership with Infinios Financial Services BSC’s
(formally NEC Payments B.S.C.), we are focused on resources on delivering growth using
the strategies described above. Both teams operate together in full confidence that the business is being powered by innovative technology
IP running on robust, secure and scalable cloud infrastructure. We expect to continue the innovative development of the core platform
while also developing alongside targeted market segments and clients to deliver productized, secure and scalable solutions and experiences.
Our Products and Services
We are developing and preparing
to deploy a digital-first fintech platform that empowers financial institutions and enterprise brands to deliver “best-of-breed”
B2B and B2C experiences through our revolutionary platform and deployment model. Our modular platform will seamlessly integrate with legacy
and cloud platforms to power a multitude of commerce experiences, including digital payments, financial wellness and more.
Merchant Services
Our core historical business is
merchant transaction services. We create revenue by processing payments for credit and debit cards via POS (point of sale) equipment,
e-commerce gateways, periodic ACH (automatic clearing house) payments and gift & loyalty programs. We currently support over 100 merchants
representing dozens of market verticals in managing their financial transactions.
Each merchant has unique needs
for payment processing. As a result, we have a variety of processing partners to meet each merchant’s requirements. In addition
to these needs, we take into consideration certain aspects of each business in choosing the optimal processing partner including risk,
volume, customer service, integration capabilities, product features and profitability.
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Our processing partners include
Total Systems Services (“TSYS”)/Global Payments., JetPay an NCR Payment Solutions Company, Harbortouch Payments a Shift4
Company, Cynergy Data/Priority Payments Systems Group, FIS and Cardconnect/Fiserv Inc., with
each providing products and services that meet each of our merchants’ needs. Currently, our partners manage our backend payment
processing needs in addition to managing risk and compliance on our behalf. Through the implementation of our proprietary payment processing
protocols as we grow our customer base and technology, we expect to manage the risk and compliance ourselves, which will increase our
margins on each transaction processed.
Digital Financial Technology Platform consisting
of Omnichannel Payments and Digital Banking
To power commerce experiences,
our digital financial technology platform (the “Platform”) is being, in part, licensed
from Infinios and incorporates two distinct product pillars: (1) omnichannel payments featuring patented SMS text payment technology
and (2) digital banking capabilities including multi-currency solutions, hyper-segmented savings accounts, buy now, pay later (“BNPL”)
and next generation card issuance. The omnichannel payments pillar will consist of several stand-alone solutions, including hosted ecommerce
checkout, a flexible payment gateway, patented text payment technology, digital wallets, alternative payment methods (APMs), as well
as mobile and contactless payments. The Platform’s digital banking pillar will supply financial institutions with technology to
give their customers – businesses, professionals, and individuals the ability to better manage their finances anywhere, anytime
and at a fraction of the cost of traditional banking and financial services.
Developing and deploying embedded
commerce experiences runs atop the Platform stack. This will include 1) open and private payment and digital banking APIs, 2) select third-party
APIs centered on personalization and automation, 3) UI/UX blueprints and design assets 4) online collaboration and development tools,
and 5) optional professional services engagement and support.
Similar to experience-focused offerings,
our Platform powers immersive content, conversion, marketing automation, payment, and value transfer capabilities for nearly every online
and offline shopping, banking, and financial services scenario. Additionally, our Platform experiences can be taken off-the-shelf or tapped
into via modern APIs to build and embed fully branded and customizable experiences.
In many cases, our products and
services are both available off-the-shelf or through embedded commerce experiences. For example, our patented text payment capabilities
can be licensed off-the-shelf so our client can take advantage of quick market entry while doing this without any lifting or technical
requirements. Alternatively, text payment capabilities and feature sets are available via our open APIs so businesses can embed and customize
the experience, i.e. alter the onboarding experience and subscription triggers.
We believe text payment’s
simple payment process has widespread application and potential for widespread adoption by mobile users because it utilizes a technology
many end users are comfortable with and use daily. The process is quick and user-friendly allowing businesses to simply expand their payment
receiving capabilities. The integration of direct, reliable, instant, and familiar text messaging with secure payments is a vital step
in how we believe we bridge the gap between fintech and mobile wireless systems.
Our white-label, digital
banking technology platform with payment capabilities will equip financial institutions (Fis), technology providers and brands with a
digital “bank-in-a-box” – also referred to as our Banking-as-a-Service (BaaS) product.
Furthermore, our Platform will enable multi-channel, multi-currency, pure digital financial services products unlike many other providers
in the world. It incorporates a “plug-and-play” capability to facilitate deep integration with payment gateways, POS merchant
services, alternative payment mechanisms, open-banking, ERP (“Enterprise Resource Planning”), CRM and web and mobile user
interfaces to form an end-to-end, embedded, payment acceptance and digital banking solution that drives innovative and disruptive digital
distribution products. Anticipated products include:
● Neo-Banking for consumers and SMEs;
● Embedded B2B and consumer virtual payments (VCNs);
● Multi-currency money management and P2P money transfer;
● Payroll, expenses, management and B2C and G2C disbursements;
● Treasury management;
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Other attributes to our Platform will include:
Our Platform continues to be developed including integration,
testing and proper technical certifications before market readiness and client delivery. Management believes the Platform will be rolled
out in stages beginning in the first quarter of 2022. We expect that our Platform will continue to evolve as discussed to continually
provide ongoing improvements, new features and functions and improved opportunities to deliver best in class experiences to the markets
we serve.
Employees
As of the date of this annual report, we have eighteen
full-time employees. In addition to our employees, we utilize various consultants and contractors for other services on an as-needed basis.
Item 1A.
Risk Factors.
As a smaller reporting company, as defined in Rule
12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
Item 1B.
Unresolved Staff Comments
Not applicable.
Item 2.
Properties
Our headquarters is located at 5876 Owens Avenue,
Suite 100, Carlsbad, Ca 92008, consisting of approximately 3,000 square feet of office space. Our lease on this facility expires in February
2025. We anticipate that following the expiration of the lease, during the term of the current lease, depending on various factors, we
will be able to lease or purchase additional or alternative space at commercially reasonable terms.
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Item 3. Legal Proceedings
In September 2018, a complaint was filed in San Diego
superior court for a breach of contract arising from a written agreement for the purchase of a judgment to which AppTech Payments was
not a party. AppTech Payments substantially performed under the agreement but the second agreement to extend the final payment was executed
under alleged duress. The settlement amount of $150,000 was paid in monthly installments of $15,000. On December 30, 2020, full payment
was made in accordance with a modified settlement payment schedule.
On December 19, 2019, the Company entered into a settlement
and release agreement with two shareholders. The total obligation was for $240,000 and is to be paid out over three years beginning February
15, 2020. We are current on the modified repayment schedule with the final payment scheduled to be made on November 15, 2022.
In July of 2020, an owner and corporation having a
non-binding Memorandum of Understanding (“MOU”) filed a lawsuit against AppTech Payments Corp. (formally “AppTech Corp.”).
in the County of San Diego, State of California. Plaintiffs amended the Complaint on March 11, 2021. The claims include breach of contract,
intentional misrepresentation, negligent misrepresentation, and unjust enrichment. Service of process occurred on January 8, 2021. Management
believes the non-binding MOU terminated after no Definite Agreement was executed between the parties, and negotiations ceased December
20, 2016. We filed an answer to the Amended Complaint on April 27, 2021 and began discovery. Management does not believe Plaintiffs’
claims for damages have merit or are supported by Plaintiffs’ evidence. We are filing a Summary Judgment to request an Order from
the Court to narrow the issues in the Amended Complaint. This matter is scheduled for trial on July 8, 2022. We currently own a judgment
dated February 17, 2017, against the owner and corporation in the amount of $516,932 plus interest. We are in the process of having the
judgment assigned to AppTech Payments Corp. and renewed. Management plans to use the judgment to assist in the possible settlement and
dismissal of this case prior to trial.
On July 14, 2021, EMA Financial LLC, a Delaware limited
liability company (“EMAF”), filed a complaint in the Southern District of New York against the Company. In its complaint,
EMAF alleged that the Company breached the terms of a convertible note and a related warrant agreement purchased by EMAF pursuant to a
securities purchase agreement between the parties. EMAF sought specific performance, payment of damages to be determined but not in excess
of $2,750,000, reimbursement of costs and expenses, including reasonable legal fees, and non-interference. On September 2, 2021, EMAF
filed a motion for summary judgment. On September 9, 2021, AppTech filed a motion to dismiss on the grounds the agreements were void as
a result of the illegal activity by the plaintiff. On October 15, 2021, the parties filed memorandums in opposition to the respective
motion. On October 25, 2021, the parties filed memorandums of law in further support of their respective motions. We believe the EMAF’s
claims are meritless and intend to vigorously defend against this lawsuit. The parties have engaged in settlement discussions with
an expected range of potential liability between $400,000 and $550,000, which includes principal and accrued interest of the convertible
notes payable.
ITEM 4.
Mine Safety Disclosures
Not applicable.
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PART II
Item 5.
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our common
stock has been registered with the SEC since 1999 and trading on the OTC Pink Open Market since 2010. We successfully uplisted
to NASDAQ on January 7, 2022 under the symbol “APCX”. Our warrants are listed under the symbol “APCXW”.
Stockholder Data
As of March 24, 2022, 16,348,096 shares of our common
stock were outstanding and held of record by 280 stockholders, and 14 shares of preferred stock were outstanding.
Dividends
We have not declared or paid any cash dividends on
our common stock since our inception.
Equity Compensation Plan
For information regarding securities authorized under the equity compensation
plan, see Item 12.
Recent Sales of Unregistered Securities
During year-to-date 2022:
During the year ended December 31, 2021:
During the year ended December 31, 2020:
All issuances were exempt from registration requirements
of Section 5 of the Securities Act of 1933 as they did not involve a public offering under Section 4(a)2(2) and were issued as restricted
securities as defined in Rule 144 of the Act.
Item 6.
Selected Financial Data
Because we are allowed to comply with the disclosure
obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, with respect to this
Annual Report on Form 10-K, we are not required to provide the information required by this Item.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial
condition and results of operations should be read together with the audited financial statements and related notes included elsewhere
in this registration statement. Certain statements contained in this registration statement, including statements regarding the anticipated
development and expansion of our business, our intent, belief or current expectations, primarily with respect to the future operating
performance of our company and the products and services we expect to offer and other statements contained herein regarding matters that
are not historical facts, are “forward-looking” statements. Our Management’s Discussion and Analysis contains not only
statements that are historical facts, but also forward-looking statements which involve risks, uncertainties, and assumptions. Because
forward-looking statements are inherently subject to risks and uncertainties, our actual results may differ materially from the results
discussed in the forward-looking statements.
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Business Overview
Through our scalable cloud-based platform architecture
and infrastructure coupled with our commerce experiences development and delivery model, we intend to simplify and streamline digital
financial services for corporations, small and midsized enterprises (“SMEs”) and consumers. We will accomplish this through
innovative omnichannel payment and digital banking technologies that complement our core merchant services capabilities. We believe there
is opportunity to generate significant revenue for the Company the near future by providing innovative commerce solutions and experiences
that resonate with clients, their customers, and the market as a whole. Further, our soon to be launched modular platform will equip forward-thinking
financial institutions, technology companies, and SMEs with operational efficiencies, such as automated financial controls and reconciliation
in addition to manual administration.
Our Company’s merchant services solutions provide
financial processing for businesses to accept cashless and/or contactless payments, such as credit cards, ACH, wireless payments, and
more. Our patented, exclusively licensed, and proprietary merchant services software will offer, new integrated solutions for frictionless
digital and mobile payment acceptance including acceptance of alternative payment methods (“APMs”). We are extending and enhancing
these capabilities with software that solves for multi-use case, multi-channel, API-driven, account-based issuer processing for card,
digital tokens, and payment transfer transactions. Our scalable business model allows for expansive white-labeling, SaaS, and embedded
solutions that will drive the digital transformation of financial services and generate diverse revenue streams for our company.
The financial services industry is going through a
period of intensive change driven by the advancement of technology, the adaptation to societal changes resulting from COVID-19, and the
rapid rise of contactless transactions. End-users expect ease of use and an enhanced user experience in all their daily financial interactions.
In this rapidly evolving digital marketplace, our prospective clients, such as merchants and independent software vendors (“ISVs”),
have broad and frequently changing requirements to meet consumer expectations and operational efficiencies to maintain their competitive
edge.
Providing basic payment acceptance and “lowest
price” models is no longer the winning formula to support the market. These entities recognize that staying competitive in the digital
age requires a partner with a platform and services capable of delivering flexibility and growth while streamlining operations to continually
deliver increased revenue and profitability opportunities. Our pricing is extremely competitive, but we believe the value we create for
financial institutions, technology companies, and SMEs through our technology, deployment model, services and consultative approach will
create true differentiation from our competitors.
Our global financial services platform architecture
and infrastructure is designed to be flexible and configurable to meet current and future market needs. This will empower our clients
to take advantage of future platform development and new innovative digital financial solutions by leveraging off-the-shelf
experiences and consuming our APIs. Additionally, by taking a holistic view of all aspects of our clients’ business, including risk,
volume, user experience, integration capabilities and technical needs, we will create optimal and extensible financial technology solutions
at a rapid pace.
Through exclusive licensing and partnership agreements
to complement our patented technology capabilities, we believe we will become leaders in the embedded payment and digital banking sectors
by supporting digital, tokenized, multi-channel, embedded API-driven transactions. We intend to accelerate this position through the integration
of our merchant services and a secure text payment solution with extensive digital account-based and multi-channel issuer payment processing
capabilities. We believe that this will enable us to provide our clients an end-to-end payment acceptance and digital banking solution
powering straight-through processing and embedded payment opportunities in the B2B space. We expect to support clients through the development
of custom and off-the-shelf experiences by delivering these solutions through public APIs and Webhooks.
A key to the company’s success and market penetration
is the continued development of enterprise-grade, patent protected software for SMS text payments via a mobile device. Our patented technology
manages text messaging for processing payments, notification, response, authentication, marketing, advertising, information queries and
reports. Once an account is established through a multi-currency digital wallet, neither internet connectivity nor a specific application
is required to process payments between merchants and end-users. These features will be particularly beneficial for unbanked and under
banked individuals in developing or emerging markets where access to the internet on a mobile device and modern banking institutions
may not be readily available. In addition, our software platform will extend merchants’ marketplace capabilities by creating new
avenues and channels to request and receive frictionless, digital payments and engaging end-users by utilizing a familiar, convenient,
and widely adopted technology.
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We believe our technologies will greatly increase
the adoption of mobile payments and alternate banking solutions in sectors that must quickly adapt and migrate towards new technologies
that facilitate convenient and safe contactless payments. To survive and succeed in this environment, businesses need to adopt new technologies
to engage, communicate and process payments with their customers from a supplier that widely supports innovation and adaptation as the
industry evolves. By embracing technological advancement in the payment and banking industries, we are well-positioned to meet the growing
needs of existing and prospective clients and intend for our current and future products to be at the forefront of solving these accelerated
market needs.
We werefounded in 1998 and changed our name to AppTech Corp. in 2009. In 2013, we
merged with Transcendent One, Inc., whereby
Transcendent One, Inc. and its managementtook controlling ownership of the Company.
From this point forward,we
have operated as a merchant services
provider, continuing the business conducted byTranscendent One, Inc. In 2017, we acquired
certain assets from GlobalTel Media, Inc., which included patented,
enterprise-grade software for advanced text messaging. In addition to the
software and associated databases, the acquisition included four patents and
additional intellectual property for mobile
payments. On December 23, 2021, we changed our name to AppTech Payment Corp and re-domiciled
to Delaware. We are headquartered in Carlsbad, CA. and uplisted to NASDAQ in January 2022. Our stock
trades under the symbol “APCX” and our warrants under the symbol “APCXW”.
Financial Operations Overview
The following discussion sets
forth certain components of our statements of operations aswellasfactors
that impact those items.
Revenues
Our Revenues.
We derive our revenue by providing financial processing services to businesses.
Expenses
Cost of Revenue. Cost of revenue includes costs
directly attributable to processing and other services the company provides. These also include related costs such as residual payments
to our business development partners, which are based on a percentage of the net revenue generated from client referrals.
General and administrative. General and administrative
expenses include professional services, rent and utilities, and other operating costs.