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 1C.
Cybersecurity
Risk Management and Strategy
We recognize the importance of cybersecurity in protecting
our operations, customer information, and proprietary data. We are committed to implementing robust security measures to mitigate the
risk of cyber incidents that could potentially disrupt our business operations or compromise the integrity of our data.
Engage Third-parties on Risk Management
Due to the difficulties and evolving nature of cybersecurity
threats, AppTech engages with external experts, including cybersecurity consultants and auditors to evaluate and test its risk management
systems. These relationships allow us to utilize specialized knowledge and insights, ensuring our strategies and processes remain in-line
with current best practices. These third-parties provide the Company with regular audits, threat assessments, and consultations on security
enhancements. Also, during onboarding and periodically thereafter, we conduct trainings for the Company’s employees, contractors,
and temporary workers about cybersecurity risks, including sending test phishing emails for training purposes to all users of the Company’s
email system.
Our cybersecurity strategy encompasses a comprehensive
suite of measures designed to protect our systems and data from unauthorized access, use, alteration, or destruction. These measures include,
but are not limited to:
•
Implementation of advanced cybersecurity technologies, including firewalls, intrusion
detection systems, and encryption protocols, to safeguard our network and data.
•
Regular security assessments and penetration testing conducted by external experts to
identify and remediate potential vulnerabilities.
•
Establishing and maintaining incident response and recovery plans to ensure timely and
effective responses to any cybersecurity incidents.
Oversee Third-party Risk
To manage the risks associated with third-party service
providers, AppTech conducts weekly calls with its providers to monitor compliance on an ongoing basis. Issues that arise are addressed
immediately with mitigating measures added to avoid future problems.
Risks from Cybersecurity Threats
Like other companies in our industry, we face several
cybersecurity risks in connection with our business. Although such risks have not materially affected us or are reasonably likely to materially
affect us, including our business strategy, results of operations, or financial condition, to date, we have, from time to time, experienced
threats to and security incidents related to our data and systems, including denial of service and phishing attacks.
Risk Management Personnel
Primary responsibility for assessing, monitoring and
managing our cybersecurity risks rests with our third-party provider, the Company's Director of Information Technology and Director of
Software Engineering (referred to as “IT”).Their knowledge, experience and relationship with our third-party vendor are instrumental
in developing and executing our cybersecurity strategies.
Risk Management Reporting
The
IT Team provides updates to upper Management on a routine basis
or as potentially critical risks from cybersecurity threats or incidents arise. In addition, the audit committee is notified of any material
cybersecurity concerns that may impact internal controls, data storage, or the integrity of our financial reporting.
Risk Management
Despite our diligent efforts to secure our systems and data, we acknowledge
that no cybersecurity measures can completely eliminate the risk of cyber incidents. The evolving nature of cyber threats means that we
must continually adapt our cybersecurity strategies to address new and emerging risks.
In recognition of these risks, we have implemented a comprehensive risk
management framework that includes:
• Continuous monitoring of our networks and systems for signs of unauthorized
activity.
• Regular updates to our cybersecurity measures to address new vulnerabilities
and threats.
• Collaboration with industry partners and government agencies to share information
on threats and best practices for cybersecurity.
• Maintaining cyber insurance to mitigate the financial impact of potential
cybersecurity incidents.
Potential Impact of Cybersecurity Incidents
We recognize that a significant cybersecurity incident could have material
adverse effects on our business, including operational disruptions, financial losses, legal liabilities, and damage to our reputation.
Such incidents could also result in the loss of proprietary information or the exposure of sensitive customer data, leading to further
financial and reputational harm.
In conclusion, while AppTech Payment Corp is committed to employing comprehensive
cybersecurity measures to protect against cyber threats, there are inherent risks associated with cybersecurity that could impact our
business. We continue to monitor our cybersecurity landscape actively and adapt our defenses to mitigate these risks as much as possible.
Item 2. Properties
Corporate headquarters is located at 5876 Owens Avenue,
Suite 100, Carlsbad, CA 92008, consisting of approximately 3,000 square feet of leased office space. As of December 31, 2024, the Company
also leases office space in Austin, Texas. The Company does not own any real property.
Item 3. Legal Proceedings
NCR
Litigation
On
November 30, 2022, AppTech filed a complaint against NCR Payment Solutions, LLC in the United States District Court for the Southern District
of California alleging Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, Specific Performance and Accounting.
On March 11, 2024, both parties agreed to dismiss the lawsuit. There was no impact to the Company’s financial statements.
Infinios Financial Services
Litigation
On October 1, 2020, the Company entered into
a strategic partnership with NEC PAYMENTS B.S.C., which subsequently became Infinios Financial Services B.S.C. (“Infinios”).
On May 4, 2023, the Company notified Infinios
of its intent to terminate its relationship and commenced a good-faith negotiation with Infinios.
In October 2023, the Company and Infinios
entered arbitration.
As of December 31, 2024, the parties settled
the lawsuit under a confidential Settlement Confirmation letter whereby the terms of the Settlement Agreement and Mutual Release were
fulfilled. Under the settlement, no payments were exchanged between the parties, and both the anti-dilution liability and the payable
owed to Infinios of $72 thousand and $249 thousand, respectively, were fully extinguished. The matter is closed.
Litigation with Former Employees
On May 3, 2024, the Company was sued by three former employees over
severance payments. On February 14, 2025, the Company filed a cross complaint against the Plaintiffs for breach of fiduciary duty and
breach of contract. In March 2025, the Company settled its lawsuit for $172 thousand. The settlement amount was accrued for at December
31, 2024.
Item 4. Mine Safety Disclosures
Not applicable.
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. We successfully uplisted to NASDAQ on January 7, 2022 under the symbol “APCX”. Our warrants are listed under the
symbol “APCXW”. The Company joined the Russell Microcap® Index at the conclusion of the 2023 Russell Indexes annual reconstitution,
effective after the US market opened on June 26, 2023.
Stockholder Data
As of March 31, 2025, 33,283,329 shares of our
common stock were outstanding and held of record by 5,611 stockholders, and 14 shares of preferred stock held by 11 shareholders 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
In 2024, we did not sell any shares of stock that
were not registered under the Securities Act of 1933, as amended, other than those sales previously reported in a Current Report on Form
8-K.
Item 6. RESERVED
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 consolidated financial statements and related notes included
elsewhere in this report. Certain statements contained in this report, 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.
Business Overview
The financial services industry is going through a
period of intensive growth driven by the advancement of technology and the rapid rise of contactless transactions due to societal changes.
End-users expect ease of use and an enhanced user experience in all their daily financial interactions. In this rapidly evolving digital
marketplace, businesses have broad and frequently changing requirements to meet consumer expectations and operational efficiencies to
maintain their competitive edge.
To flourish in this environment, businesses need to
adopt new technologies to engage, communicate and process payments and manage payouts with their customers from a supplier that widely
supports innovation and adaptation as the industry evolves. We believe our technologies will greatly increase the adoption of omni-channel
payments and digital banking solutions in sectors that must quickly adapt and migrate to new, secure digital Fintech technologies. By
embracing advancements 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.
AppTech’s all-in-one Fintech platform, FinZeoTM,
delivers best-in-class financial technologies and capabilities through an ever-evolving modular cloud/edge-based architecture. The FinZeo
platform houses a large array of financial products and services that can be implemented off-the-shelf or customized via modern APIs.
Within its FinZeo platform, AppTech offers Payments-as-a-Service (“PaaS”), and Banking-as-a-Service (“BaaS”).
FinZeo provides PaaS via integrated solutions for
frictionless digital and mobile payment acceptance. These solutions provide advanced payment processing solutions by catering to the unique
needs of each merchant. FinZeo’s PaaS solutions include ACH (automatic clearing house), credit & debit cards, eCheck, mobile
processing, electronic billing, and text-to-pay. PaaS will also solve for multi-use case, multi-channel, API-driven, account-based issuer
processing for card, digital tokens, and payment transfer transactions.
AppTech is positioned to further accelerate digital
transformation through BaaS, layered with financial management tools that empower financial institutions to provide businesses, professionals,
and individuals with the ability to better manage their finances anywhere, anytime at a fraction of the cost of traditional banking and
financial services. BaaS fosters an ecosystem of immersive and scalable digital financial management services, including FinZeo's groundbreaking
automated underwriting portal. By digitizing the underwriting process, Automated Underwriting expedites business onboarding with its intuitive
digital application and e-signature capabilities. This portal offers customizable pricing, risk models, and access to multiple processors,
ensuring tailored solutions for diverse needs.
The FinZeo Portal for Independent Sales Organizations
(ISOs) and Independent Software Vendors (ISVs) to seamlessly integrate their businesses, facilitating swift technology adoption. By leveraging
the FinZeo portal, ISOs/ISVs can streamline operations and foster growth, meeting the economic demands of their merchants. Through personalized
portals, ISOs/ISVs have the flexibility to select and integrate FinZeo payments and banking services, thereby enhancing their offerings
to clients.
FinZeo has a flexible architecture and can be fully
white labeled to allow for rich, personalized payment and banking experiences. This cloud-based platform packages together elements of
AppTech’s intellectual property, BaaS, and PaaS to create a one-hub connection point of multi-tenant portals giving the merchant,
ISO/ISV, and each customer a well-defined user experience.
Financial Operations Overview
The following discussion sets forth certain components
of our statements of operations as well as factors that impact those items (in thousands, except per share data).
Revenues
Our Revenues. We derive our revenue by providing
financial services to businesses.
Licensing Revenue
The Company is actively pursuing strategic partnership
agreements that license our technology for a fee. The licensing fee is deferred and recognized over the term of the service period or
contract.
Merchant Processing Services
The Company provides merchant processing solutions
for credit card and ACH transactions. We act as an intermediary between merchants, who initiate transactions and banks that process them.
We collect either a flat fee, a fee for each transaction, and or a fee calculated as a percentage of its value, from both credit cards
and ACHs. Revenue is recognized when transactions are processed by banks or at month-end based on the processing activity. Payments to
channel partners are deducted from revenue.
Accrued Residuals
The Company pays commissions to independent agents
who refer merchant accounts. The amounts payable to these independent agents is based upon a percentage of the amounts processed by these
merchant accounts.
Expenses
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. Include salaries,
professional services, software costs, regulatory expenses, stock-based compensation, rent and utilities, and other operating costs.
Research and development. Includes the internal
and outsourced services costs incurred to maintain and further develop the FinZeo platform, and the development of additional technology
needed to pursue new product offerings.
Other income (expenses). Consists of interest
on outstanding indebtedness, the change in value of derivative liabilities, and the gain/loss on debt extinguishment.
Results of Operations
This section includes a summary of our historical
results of operations, followed by detailed comparisons of our results for the years ended December 31, 2024 and 2023, respectively.
We have derived this data from our annual consolidated financial statements included elsewhere in this report.
The following table presents our historical results
of operations for the periods indicated:
Years ended December 31 Change
Operating expenses
Impairment of Intangible assets – 6,131 (6,131 ) (100% )
Other income (expenses)
Interest expense, net (646 ) (52 ) (594 ) NM
Change in fair value of derivative liability – 27 (27 ) (100% )
Provision for income taxes – – – –
Revenue
Revenue was approximately $276 thousand for the year
ended December 31, 2024, compared to $504 thousand for the year ended December 31, 2023, representing a decrease of 45%. The
decrease was principally driven by the cancellation of a licensing arrangement and a reduction in legacy processing revenue.
Cost of Revenue
Cost of revenue was approximately $52 thousand for
the year ended December 31, 2024, compared to $187 thousand for the year ended December 31, 2023, representing a decrease of
72%. The decrease was principally driven by lower transaction volume.
General and Administrative Expenses
General
and administrative expenses decreased 21%to approximately $7,794
thousand for the year ended December 31, 2024, from $9,873 thousand in 2023. The reduction was mainly due to lower salaries following
the Company’s restructuring plan and a $1,240 thousand
decrease in stock-based compensation for 2024.
Research and Development Expenses
Research and development expenses were
approximately $1,977 thousand for the year ended December 31, 2024, compared to $3,498 thousand for the year ended December 31,
2023, representing a decrease of 43%. The decrease was primarily due to less stock-based compensation and the capitalization of
specific software development costs.
Other Income (Expenses)
Interest Expense, net
Interest
expense, net was approximately $646 thousand and $52 thousand for the years ended December 31, 2024 and December 31, 2023, respectively,
representing an increase of $594 thousand. The increase was primarily due to the amortization of the debt discount.
Change in Fair Value of Derivative Liability
Change in fair value of derivative liability was approximately
$0 for the year ended December 31, 2024, compared to $27 thousand for the year ended December 31, 2023, representing a decrease
of 100%. The decrease was primarily due to the Company's settlement of the notes and warrants that contained the embedded derivative liabilities
in April 2023.
Other income (expenses)
Other income was approximately $1,260 thousand for
the year ended December 31, 2024, compared to approximately $698 thousand for the year ended December 31, 2023, representing
an increase of $562 thousand or 81%. The increase was primarily driven by a $1,245 thousand gain from extinguishment of debt related to
2024, less the $430 thousand gain from the cancellation of stock repurchase liabilities and gain of $250 thousand from extinguishment
of debt related to 2023.
Liquidity and Capital Resources
The Company routinely evaluates its immediate working
capital needs and liquidity sources. For the years ended December 31, 2024 and 2023, the Company maintained its liquidity sources primarily
through cash and cash equivalents, and proceeds received from various registered offerings such as public registered offerings and “at-the-market”
offerings (ATM). Additionally, we used equity and equity-linked instruments to pay for services and compensation.
Cash and cash equivalents at December 31, 2024 and
2023 were $868 thousand and $1,281 thousand, respectively.
During the year ended December 31, 2024, we met
our immediate cash requirements through existing cash balances, public offerings, “at-the-market” offerings (ATM), a debt
financing, and a $2,500 thousand direct investment.
See Note 9 – Stockholders’ Equity.
Management's Plan to Address Going Concern Considerations
The Company has experienced recurring operating losses,
primarily due to limited revenues. The Company's current financial conditions and recurring losses raise substantial doubt about its ability
to continue as a going concern.
Management is actively pursuing additional funding
options and is confident that its revenue streams will begin generating revenue in the following twelve months from the issuance date
of these financial statements.
Management intends to maintain adequate working
capital and adhere to prudent financial forecasting. In December 2024, Management began implementing comprehensive expense reduction strategies
across the Company’s operations to enhance financial stability.
Cash Flows
The following table presents a summary of cash flows
from operating, investing and financing activities ($ in thousands):
Net cash used in operating activities $ (7,457 ) $ (8,859 )
Net cash used in investing activities $ (1,159 ) $ (500 )
Net cash provided by financing activities $ 8,203 $ 7,178
Cash Flow from Operating Activities
Net cash used in operating activities during the
year ended December 31, 2024 was approximately $7,457 thousand, which is comprised of (i) our net loss of $8,933
thousand, adjusted for non-cash expenses totaling $2,175 thousand (which includes
adjustments for equity-based compensation, depreciation and amortization), and (ii) is decreased by changes in operating assets and liabilities
of approximately $699 thousand.
Net cash used in operating activities during the year
ended December 31, 2023, was approximately $8,859 thousand, which is comprised of (i) our net loss of $18,512
thousand, adjusted for non-cash expenses totaling $10,306 thousand (which includes
adjustments for equity-based compensation, depreciation and amortization), and (ii) is decreased by changes in operating assets and liabilities
of approximately $653 thousand.
Cash Flow from Investing Activities
Net cash used by investing activities during the
year ended December 31, 2024 was approximately $1,159 thousand. This expenditure was primarily attributable to capitalized software
costs.
Net cash used by investing activities during the year
ended December 31, 2023 was approximately $500 thousand. This expenditure was primarily attributable to an initial payment of $500
thousand related to the acquisition of FinZeo.
Cash Flow from Financing Activities
Net cash provided by financing activities during
the year ended December 31, 2024 was approximately $8,203 thousand, driven by net proceeds received of $6,288 thousand
through the issuance of common shares and warrants in our public offerings, $1,010 thousand proceeds received from exercise of warrants,
and $910 thousand net proceeds received from convertible notes payable.
Net cash provided by financing activities during
the year ended December 31, 2023 was approximately $7,178 thousand, driven by net proceeds received of $8,933 thousand through the
issuance of common shares and warrants in our public offerings, $33 thousand proceeds received from exercise of stock options
partially offset by repayment of loan and note payables of $1,788 thousand.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition
and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The
preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. Significant estimates include those related to the valuation of goodwill impairment and intangible
assets. These estimates are based on historical experience and assumptions believed to be reasonable under current conditions. It's important
to note that actual results could differ from these estimates.
Critical accounting policies are those that we consider
the most critical to understanding our financial condition and results of operations. The accounting policies we believe to be most critical
to understanding our financial condition and results of operations are discussed below. As of December 31, 2024, there have been
no significant changes to our critical accounting estimates nor to our recently issued accounting pronouncements, except as described
in Note 2 to our consolidated financial statements.
Business Combination
Recognition and Measurement: Companies must
recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquiree at their fair value on the acquisition
date.
Goodwill: Arises when the consideration transferred
in a business combination exceeds the fair value of the net identifiable assets acquired. It represents future economic benefits arising
from assets that are not individually identified and separately recognized.
Intangible Assets: Identifiable intangible
assets, distinguishable either by separability from the acquired entity or through contractual or other legal rights, are valued and reported
independently from goodwill. These assets include, but are not limited to, trademarks, customer relationships, proprietary technology,
and patents. The fair value of these intangible assets is determined at the time of acquisition and is subject to subsequent impairment
tests.
The fair value of identifiable intangible assets is
estimated using income, market, or cost approach methods. The income approach, often applied through the discounted cash flow (DCF) method,
involves projecting future cash flows attributable to the asset and discounting them to present value using a discount rate that reflects
the risk associated with those cash flows. The estimation of fair value is inherently uncertain due to the assumptions and judgments involved
in projecting future cash flows, determining appropriate discount rates, and estimating the useful life of each asset.
Over the reporting period, changes in market conditions,
technological advancements, or strategic shifts in the business may necessitate revisions to the assumptions used in the valuation of
identifiable intangible assets. Management closely monitors these factors and will adjust the valuation of intangible assets as appropriate,
reflecting the impact of any such changes in our financial statements.
Contingent Consideration: Any contingent consideration,
such as earn-outs, is measured at fair value at the acquisition date and can be adjusted in subsequent periods if the fair value changes.
Goodwill Impairment
Goodwill Impairment Testing: The process requires
an annual test for impairment of goodwill, and more frequent testing if certain indicators suggest that the goodwill might be impaired.
This assessment involves comparing the carrying amount of a reporting unit, including goodwill, to its fair value. Key estimates in determining
fair value include: a) Cash Flow Projections: Utilizing the DCF method, management estimates future cash flows based on current performance,
business plans, and expected market growth, introducing judgment due to forecasting uncertainties. b) Discount Rate: The discount rate,
reflecting the WACC and adjusted for unit-specific risks, is crucial for present value calculations, with changes significantly affecting
fair value estimations; c) Long-term Growth Rates: Assumptions on sustainable growth rates impact the terminal value in the DCF model,
thus influencing the overall fair value of the reporting unit.
Impairment Loss Calculation: The impairment
loss, representing the excess of the carrying amount of goodwill over its implied fair value, is highly sensitive to the estimates and
assumptions used in the fair value calculation. Small changes in cash flow projections, discount rates, or long-term growth rates can
result in significant adjustments to the impairment loss recognized in the income statement. Given the dynamic nature of business conditions,
technological advancements, and market competition, estimates used in goodwill impairment testing may change from one period to another.
Management is tasked with regularly reviewing and updating these estimates to reflect the latest available information and market conditions.
Once an impairment loss is recognized, it is not reversible
in subsequent periods. This finality places additional importance on the accuracy and reasonableness of the underlying estimates and assumptions.
Management concluded that the fair value of the goodwill
recorded as part of the FinZeo acquisition significantly exceeds its carrying amount, and there is no significant risk of goodwill impairment
based on current assumptions and market conditions.
Impairment of Long-Lived Assets
Our company evaluates long-lived assets, including
capitalized software, for impairment when there are indicators that the carrying amount may not be recoverable. This process involves
comparing the carrying amount to the expected future undiscounted cash flows from the asset. If the carrying amount exceeds the expected
cash flows, an impairment charge is recognized to reduce the asset's carrying amount to its fair value.
Indicators of impairment include significant underperformance
against projections, market or economic downturns, and technological obsolescence. The fair value is determined using market data or discounted
cash flow models. An impairment loss is recorded as an expense immediately.
Smaller Reporting Company
As a smaller reporting company, as defined in Item(f)(1)
of Regulation S-K, we may choose to prepare our disclosures relying on scaled disclosure requirements for smaller reporting companies
in Regulation S-K and in Article 8 of Regulation S-X.
The scaled disclosure requirements for smaller reporting
companies permit us (i) to include less extensive narrative disclosure than required of other reporting companies, particularly in the
description of executive compensation and (ii) to provide audited consolidated financial statements for two fiscal years, in contrast
to other reporting companies, which must provide audited consolidated financial statements for three years.
We may lose our status as a smaller reporting company
on the last day of the fiscal year in which (i) our public float exceeds $250 million or (ii) if we have more than $100 million in annual
revenues and (a) have no public float or (b) have a public float or more than $700 million.
Recent Accounting Pronouncements
As of December 31, 2024, there was no significant
changes to our recently issued accounting pronouncements.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have
been established to facilitate off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other
contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise
if we had engaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee
of our own performance.
Equity-based Compensation
The Company records stock-based compensation in accordance
with FASB ASC Topic 718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for
stock-based employee compensation at the fair market value on the grant date and recognize the expense over the employee’s requisite
service period. The Company recognizes in the statement of operations the grant-date fair market value of stock options and other equity-based
compensation issued to employees and non-employees.
During the years ended December 31, 2024,
and 2023, 260,000 shares and 460,000 shares of common stock were issued to several consultants and employees in connection with business
development, professional, and employment services with a value of $267 thousand and $906 thousand, respectively.
Related Parties
See Item 13 for a full discussion of related parties.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
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 8. Financial Statements and Supplementary
Data
The
consolidated financial statements and related financial statement schedules required to be filed are indexed on page 24 and are incorporated
herein.
Item 9. Changes in and Disagreements with Accounts
on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of
our management, including the Chief Executive Officer and the Chief Financial Officer, we evaluated the effectiveness of the design and
operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act) as of the end
of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded
that our disclosure controls and procedures were not effective as of December 31, 2024 due to the material weaknesses in our internal
control over financial reporting as described below.
A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Our
management is also responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for us. Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated,
as of December 31, 2024, the effectiveness of our internal control over financial reporting using the framework in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation,
our management concluded that our internal control over financial reporting was not effective as of December 31, 2024.
The management has identified a material weakness
in our internal control over financial reporting, primarily due to insufficient formal financial reporting policies and procedures resulting
in material post-close adjustments.
Policies and procedures should be implemented to ensure that any significant
events requiring disclosure are identified, accounted for, disclosed and reviewed by the management.
Changes in Internal Control over Financial Reporting
There have been no material changes in our internal
controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2024
that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Limitations on the Effectiveness of Controls
Due to the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because
of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information
For the quarter ended December 31, 2024, there was
no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.
During
the quarter ended December 31, 2024, no director or officer adopted or terminated any “Rule 10b5-1 trading arrangement”
or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate
Governance
The information required by this item regarding our
executive officers will be presented under the caption “Executive Officers” in our Proxy Statement for the 2025 Annual Meeting
of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2024
(the 2025 Proxy Statement) and is incorporated herein by reference.
The information required by this item regarding our
compliance with Section 16 of the Exchange Act of 1934, as amended, will be presented under the caption “Security Ownership of Certain
Beneficial Owners and Management - Delinquent Section 16(a) Reports” in our 2025 Proxy Statement and is incorporated herein by reference.
The information required by this item regarding our
audit committee will be presented under the caption “Corporate Governance - Board Committee - Audit Committee” in our 2025
Proxy Statement and is incorporated herein by reference.
The information required by this item regarding our
code of ethics will be presented under the caption “Corporate Governance - Code of Business Conduct” in our 2025 Proxy Statement
and is incorporated herein by reference. There is no material change.
The information required by this item regarding our
insider trading policy will be presented under the caption “Insider Trading Policy” in our 2025 Proxy Statement and is incorporated
herein by reference.
Item 11. Executive Compensation
The information required by this item regarding executive
compensation will be presented under the caption “Executive Compensation” in our 2025 Proxy Statement and is incorporated
herein by reference.
The information required by this item regarding director
compensation will be presented under the caption “Corporate Governance - Director Compensation” in our 2025 Proxy Statement
and is incorporated herein by reference.
The information required by this item regarding our
compensation committee will be presented under the caption “Corporate Governance - Compensation Committee Interlocks and Insider
Participation” in our 2025 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
The information required by this item regarding security
ownership and certain beneficial owners and management will be presented under the caption “Security Ownership of Certain Beneficial
Owners and Management” in our 2025 Proxy Statement and is incorporated herein by reference.
Equity Compensation Plan
The following table provides information, as of
December 31, 2024, with respect to shares of our common stock that may be issued, subject to certain vesting requirements, under
existing or future awards under our 2024 Equity Incentive Plan (“2024 Plan”). The 2024 Plan was approved by our Board of
Directors and ratified by our shareholders at our 2024 Annual Shareholder Meeting.
A B C
Equity compensation plans not approved by security holders – – –
Item 13. Certain Relationships and Related Transactions,
and Director Independence
The information required by this item regarding certain
relationships and related persons transactions will be presented under the caption “Certain Relationships and Related Persons Transactions”
in our 2025 Proxy Statement and is incorporated herein by reference.
The information required by this item regarding director
independence will be presented under the caption “Corporate Governance - Independent Directors” in our 2025 Proxy Statement
and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item regarding aggregate
fees billed to us by our independent registered public accounting firm’s fees will be presented in our 2025 Proxy Statement and
is incorporated herein by reference.
The information required by this item regarding our
audit committee’s pre-approval policies and procedures will be presented in our 2025 Proxy Statement and is incorporated herein
by reference.
7 The weighted-average exercise price does not take into account
restricted stock units, which do not have an exercise price.
PART IV
Item 15. Exhibits and Financial Statements Schedules
(a) The following
documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K:
(b) Exhibits. See
Item 15(a)(3) above.
(c) Financial Statement
Schedules. See Item 15(a)(2) above.
Item 16. Form 10-K Summary
Not applicable.
APPTECH PAYMENTS CORP. CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
Report of Independent Registered Public Accounting Firm (PCAOB ID 3501) 25
Consolidated Balance Sheets 26
Consolidated Statements of Operations 27
Consolidated Statements of Stockholders’ Equity 28
Consolidated Statements of Cash Flows 29
Notes to the Consolidated Financial Statements 30
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of AppTech Payments Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance
sheets of AppTech Payments Corp. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of
operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of their operations and their cash flows
for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements,
the Company has limited revenues and has suffered recurring losses from operations. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note
1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from
the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. We determined there were no critical audit matters.
/s/ dbbmckennon
We have served as the Company’s auditor since 2014
San Diego, California
APPTECH
PAYMENTS CORP.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share data)
ASSETS
Current assets
Cash and cash equivalents $ 868 $ 1,281
Accounts receivable 43 30
Other current assets 1,350 –
Note receivable – 26
Right of use asset 86 66
Security deposit 86 9
Intangible assets, net of accumulated amortization 3,410 4,428
Capitalized software development, net of accumulated amortization 1,823 1,147
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Notes payable – 1
Deferred revenue – 244
Right of use liability 68 78
Long-term liabilities
Right of use liability, net of current portion 18 14
Notes payable, net of current portion 61 65
Total long-term liabilities 79 79
Commitments and contingencies (Note 8) – –
Stockholders’ equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 8,986 $ 8,353
See accompanying notes to the consolidated financial
statements