UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark One)
For the fiscal year ended December 31, 2022
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 Capital Market
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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. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If securities
are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether
any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June
30, 2022, the last business day of the registrant’s last completed second quarter, the aggregate market value of the common stock
held by non-affiliates of the registrant was approximately $8,270,261, based on the closing price of the registrant’s common stock,
on June 30, 2022, as reported by the Nasdaq Capital Market. For the purposes of this disclosure, shares of common stock held by each
executive officer, director and stockholder known by the registrant to be affiliated with such individuals based on public filings and
other information known to the registrant have been excluded since such persons may be deemed affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
As of March 20,
2023, the registrant had 18,438,947shares of common stock issued and outstanding.
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AppTech Payments 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 12
Item 4. Mine Safety Disclosures 12
Part II
Item 6. Reserved 13
Item 7A. Qualitative and Quantitative Disclosures about Market Risk 20
Item 8. Financial Statements and Supplementary Data 20
Item 9A. Controls and Procedures 20
Item 9B. Other Information 21
Item 9C. Disclosure Regarding Foreign Jurisdictions that 21
Part III
Item 10. Directors, Executive Officers and Corporate Governance 22
Item 11. Executive Compensation 22
Item 14. Principal Accountant Fees and Services 23
Part IV
Item 15. Exhibits and Financial Statements Schedules 24
Index to Financial Statements 25
Exhibit Inde 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; and
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).
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We encourage you to read the discussion and analysis
of our financial condition and our consolidated financial statements contained both in our Form S-1 that was filed with the Securities
and Exchange Commission on January 3, 2022 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
The financial services industry is going through a
period of intensive change driven by the advancement of technology and the rapid rise of contactless transactions due to societal changes,
in part, as a response to COVID-19. 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 survive and succeed 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-new, innovative Fintech platform, “CommerseTM” officially launched in
October 2022. The platform delivers best-in-class
financial technologies and capabilities through an ever-evolving modular cloud/edge-based
architecture. The Commerse platform houses a large array of financial products and services
that can be implemented off-the-shelf or customized via modern APIs. Within its Commerse
platform, AppTech offers three primary products: Payments-as-a-Service (“PaaS”),
Banking-as-a-Service (“BaaS”), and Commerce-as-a-Service (“CXS”).
Commerse provides PaaS via integrated solutions for
frictionless digital and mobile payment acceptance. These solutions provide advanced payment processing solutions for credit cards, ACH,
and gift/loyalty cards by catering to the unique needs of each merchant. 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 creates an ecosystem of immersive and scalable digital financial management services backed by Mastercard &
Visa processing certifications.
Commerse has a flexible architecture to allow for
rich, personalized payment and banking experiences. This first-to-market, cloud-based CXS platform packages together elements of AppTech’s
intellectual property, BaaS, PaaS and other related technologies to create seamless interactions throughout the customer journey.
The platform also incorporates AppTech’s core,
patented text payment and geofence triggered ecommerce and/or advertising via cell phone capabilities delivering experiences that focus
on frictionless use cases and end-users desire for payment transaction simplicity, control, and comfort. The Company believes that these
features will be particularly beneficial for unbanked and under-banked in developing or emerging markets where access to the internet
on a mobile device and modern banking institutions may not be readily available. Particularly by extending merchants’ marketplace
capabilities via new 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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AppTech’s innovative Commerse platform delivers
scalable solutions for automated and embedded, customizable business and consumer experiences. These experiences propel business growth,
create value and drive operational efficiencies for businesses while providing economic convenience for end users.
Corporate
Information
AppTech Corp. reincorporated in Delaware on December
23, 2021 and changed its name to AppTech Payments Corp. The Company’s principal executive offices are located at 5876 Owens Avenue,
Suite 100, Carlsbad, California 92008. Its phone number is (760) 707-5959. Its website address is www.apptechcorp.com.
AppTech does not incorporate the information on or accessible through our website into this prospectus. AppTech has included our website
address in this prospectus solely as an inactive textual reference.
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 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, the 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 PricewaterhouseCoopers 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 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 PricewaterhouseCoopers, 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]
[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 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 skill sets
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.
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 are launching into the market 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 for 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.
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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.
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:
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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.
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.
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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.
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, Nuvei, 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 clients 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.
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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;
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 began beta testing the platform at
the end of the fourth 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 twenty-three
full-time employees. In addition to our employees, we utilize various consultants and contractors for other services on an as-needed basis.
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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.
In September 2022, the Company opened a new office
in Austin’s emerging tech hub to expand operations and foster growth. The one year lease is $11
thousand.
Item 3. Legal Proceedings
On December 19, 2019, the Company entered into a settlement
and release agreement with two shareholders. The total obligation was for $240 thousand and the final payment was made in March 2022.
The litigants are now paid in full and no further action is warranted by the Company.
In July 2020, Flowpay Corporation, a Delaware corporation
(“Flowpay”), and R. Wayne Steiger, the President of Flowpay, 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.
The claims included breach of contract, intentional misrepresentation, negligent misrepresentation, and unjust enrichment. Management
believes the non-binding MOU terminated after no definite agreement was executed between the parties, and negotiations ceased December
20, 2016. On May 19, 2022, AppTech entered into a Settlement and Release Agreement (the “Settlement Agreement”) with Flowpay
and Mr. Steiger. Under the terms of the Settlement Agreement, Flowpay and Mr. Steiger dismissed with prejudice all claims against the
Company, its Chief Executive Officer, a Director and a third party individual.
On July 14, 2021, EMA Financial LLC, a Delaware limited
liability company (“EMAF”), filed a complaint in the United States District Court for the Southern District of New York against
the Company. In its complaint, EMAF alleged that AppTech breached the terms of a convertible note and a related warrant agreement purchased
by EMAF pursuant to a securities purchase agreement between the parties.
On September 3, 2021, EMAF filed a motion for summary
judgment. AppTech filed a motion to dismiss EMAF’s complaint in its entirety. On September 13, 2022, the court denied AppTech’s
motion to dismiss, and granted EMAF’s motion for summary judgment in part and denied in part. In particular, the court granted EMA’s
motion for summary judgment for its claim of breach of contract but denied its request for damages.
On December 8, 2022, the United States District Court
for the Southern District of New York entered an order denying AppTech’s motion to dismiss and granted EMA’s motion for summary
judgment and awarded damages to EMA for $1.2 million. On December 15, 2022, AppTech appealed the judgment to the United States Court of
Appeals for the Second Circuit. In January 2023, the Company secured a cash backed bond for $1.3 million for the appeal.
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. The case is currently stayed in the Southern
District of California as the parties take jurisdictional discovery. NCR has filed a motion to dismiss, motion to transfer venue and motion
to compel arbitration.
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 20,
2023, 18,438,947 shares of our common stock were outstanding and held of record by 4,512 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
None.
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 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.
Business Overview
The financial services industry is going through a
period of intensive change driven by the advancement of technology and the rapid rise of contactless transactions due to societal changes,
in part, as a response to COVID-19. End-users expect ease of use and an enhanced user experience in all of their daily financial interactions.
In this rapidly evolving digital marketplace, businesses face broad and ever-changing requirements to meet consumer expectations and achieve
the operational efficiencies necessary to maintain a competitive edge.
To survive and succeed in this environment, businesses
must adopt new technologies in order to engage, communicate, process payments, and manage payouts with their customers. They need a supplier
who will widely support innovation and adaptation as the industry evolves. AppTech believes that its technologies will greatly increase
the adoption of omni-channel payments and digital banking solutions in sectors that must adapt and migrate to new, secure digital Fintech
technologies. By embracing advancements in the payment and banking industries, AppTech is well-positioned to meet the growing needs of
existing and prospective clients and it intends for its current and future products to be at the forefront of solving these accelerated
market needs.
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AppTech’s all-new, innovative Fintech platform,
“CommerseTM” officially launched in October 2022. The platform will deliver best-in-class financial technologies and
capabilities through an ever-evolving modular cloud/edge-based architecture. The Commerse platform houses a large array of financial products
and services that can be implemented off-the-shelf or customized via modern APIs. Within its Commerse platform, AppTech offers three primary
products: Payments-as-a-Service (“PaaS”), Banking-as-a-Service(“BaaS”), and Commerce-as-a-Service (“CXS”).
Commerse provides PaaS via integrated solutions for
frictionless digital and mobile payment acceptance. These solutions provide advanced payment processing solutions for credit cards, ACH,
and gift/loyalty cards by catering to the unique needs of each merchant. 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 creates an ecosystem of immersive and scalable digital financial management services backed by Mastercard &
Visa processing certifications.
Commerse has a flexible architecture to allow for
rich, personalized payment and banking experiences. This first-to-market, cloud-based CXS platform packages together elements of AppTech’s
intellectual property, BaaS, PaaS, and other related technologies to create seamless interactions throughout the customer journey.
The platform also incorporates AppTech’s core,
patented text payment and geolocation-triggered ecommerce and/or advertising via cell phone capabilities delivering experiences that focus
on frictionless use cases and end-users desire for payment transaction simplicity, control, and comfort. AppTech believes that these features
will be particularly beneficial to the unbanked and under-banked in developing or emerging markets—where access to the internet
on a mobile device and modern banking institutions may not be readily available—specifically by extending merchants’ marketplace
capabilities via new channels to request and receive frictionless, digital payments and engaging end-users by utilizing a familiar, convenient,
and widely adopted technology.
AppTech’s innovative Commerse platform delivers
scalable solutions for automated and embedded, customizable business and consumer commerce experiences. These experiences propel business
growth, create value and drive operational efficiencies for businesses while providing economic convenience for end users.
AppTech was reincorporated in Delaware on December
23, 2021. During this time, the business name was changed to AppTech Payments Corp. AppTech’s executive offices are located at 5876
Owens Avenue, Suite 100, Carlsbad, California 92008. The Company’s phone number is (760) 707-5959. The Company’s website address
is www.apptechcorp.com. AppTech does not incorporate the information on or accessible through our website into this prospectus. The Company
has included our website address in this prospectus solely as an inactive textual reference.
Financial Operations Overview
The following discussion sets forth certain components of our statements
of operations as well as factors that impact those items.
Revenues
Revenues. Revenue
is derived 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.
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Research and development. Research and development
costs include costs of acquiring patents and other unproven technologies, contractor fees and other costs associated with the development
of the SMS short code texting platform, contract and outside services.
Interest expense, net. Our interest expense
consists of interest on our outstanding indebtedness and amortization of debt issuance costs.
Results of Operations
This section includes a summary of our historical
results of operations, followed by detailed comparisons of our results for years ended December 31, 2022 and 2021, respectively.
We have derived this data from our annual consolidated financial statements included elsewhere in this registration statement.
Year Ended December 31, 2022
Compared to Year Ended
December 31, 2021
(in thousands, except per share
data)
The following table presents our historical results of operations for the
periods indicated:
Year ended December 31 Change
Operating expenses
Other income (expenses)
Change in fair value of Derivative Liability 166 (26 ) 192 (738 %)
Provision for income taxes — — — —
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