UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________________ to ________________________
Commission file number:
(Exact Name of Registrant as Specified in its Charter)
| 7389 | ||||
|
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
(
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Capital Market | ||
| Capital Market |
Securities registered pursuant to Section 12(g) of the Act:
None
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.
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).
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 | ☐ | |
| ☒ | 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. ☐
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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of May 14, 2025, the registrant had shares of common stock issued and outstanding.
AppTech Payments Corp.
Form 10-Q
Table of Contents
| Page | ||
| Part I | ||
| Special Note Regarding Forward-Looking Statements and Projections | 3 | |
| Item 1. | Consolidated Financial Statements (unaudited) | 4 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 21 |
| Item 4. | Controls and Procedures | 21 |
| Part II | ||
| Item 1. | Legal Proceedings | 21 |
| Item 1A. | Risk Factors | 23 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
| Item 3. | Defaults Upon Senior Securities | 23 |
| Item 4. | Mine Safety Disclosures | 23 |
| Item 5. | Other Information | 23 |
| Item 6. | Exhibits | 24 |
| Signatures | 25 |
| 2 |
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 report identify important factors which you should consider in evaluating our forward-looking statements. These risks include, but are not limited to, the following:
| · | delays and uncertainty associated with the boarding of clients to our platform; | |
| · | substantial investment and costs associated with new potential revenue streams and their corresponding contractual obligations; | |
| · | a slowdown or reduction in our sales due to a reduction in end user demand, unanticipated competition, regulatory issues, or other unexpected circumstances; | |
| · | uncertainty regarding adverse macroeconomic conditions, including inflation, a recession, changes to fiscal and monetary policy, tighter credit, higher interest rates, consumer confidence and spending, and high unemployment; | |
| · | dependence on third-parties needed to facilitate our automated clearing house (“ACH”) and merchant service capabilities; | |
| · | delay in or failure to obtain regulatory approval for any future products in additional countries, and; | |
| · | current and future laws and regulations. |
All written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We caution investors not to rely too heavily on the forward-looking statements we make or that are made on our behalf. We undertake no obligation and specifically decline any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please see, however, any further disclosures we make on related subjects in any annual, quarterly or current reports that we may file with the Securities and Exchange Commission (SEC).
We encourage you to read the discussion and analysis of our financial condition and our financial statements contained in this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q, the words “AppTech Payments,” “we,” “us,” the “registrant” or the “Company” refer to AppTech Payments Corp.
| 3 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
APPTECH PAYMENTS CORP.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO UNAUDITED FINANCIAL STATEMENTS
(The financial statements have been condensed for presentation purposes)
| 4 |
APPTECH PAYMENTS CORP.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2025 AND DECEMBER 31, 2024
(UNAUDITED)
(in thousands, except shares and per share data)
| March 31, 2025 | December 31, 2024 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Equity receivable | ||||||||
| Total current assets | ||||||||
| Right of use asset | ||||||||
| Security deposit | ||||||||
| Intangible assets, net of accumulated amortization | ||||||||
| Goodwill | ||||||||
| Capitalized software development, net of accumulated amortization | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Right of use liability | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Right of use liability, net of current portion | ||||||||
| Notes payable, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders’ equity | ||||||||
| Series A preferred stock; $ par value; shares authorized; shares issued and outstanding at March 31, 2025 and December 31, 2024 | ||||||||
| Common stock, $ par value; shares authorized; and issued and outstanding at March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| 5 |
APPTECH PAYMENTS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 and 2024
(UNAUDITED)
(in thousands, except shares and per share data)
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling, general and administrative, including stock-based compensation of $ thousand and $ thousand, for the three months ended March 31, 2025 and 2024, respectively | ||||||||
| Research and development, including stock-based compensation of $ and $ thousand, for the three months ended March 31, 2025 and 2024, respectively | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain on debt extinguishment | ||||||||
| Other income (expenses) | ( | ) | ||||||
| Total other expenses | ( | ) | ||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per common share | $ | ) | $ | ) | ||||
| Weighted-average number of shares used basic and diluted per share amounts | ||||||||
See accompanying notes to the consolidated financial statements.
| 6 |
APPTECH PAYMENTS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2025 and 2024
(UNAUDITED)
(in thousands, except shares and per share data)
| Series A Preferred | Common Stock | Additional Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock based compensation | – | |||||||||||||||||||||||||||
| Net proceeds from sale of common shares | – | |||||||||||||||||||||||||||
| Balance March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Series A Preferred | Common Stock | Additional Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock based compensation | – | |||||||||||||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
| 7 |
APPTECH PAYMENTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 and 2024
(UNAUDITED)
(in thousands, except shares and per share data)
| March 31, 2025 | March 31, 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Amortization of intangible assets and software | ||||||||
| Gain on debt extinguishment | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Right of use asset and liability, net | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Net cash used in investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from an equity receivable | ||||||||
| Repayment of notes payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Changes in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flows information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Issuance of stock for prepaid services | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| 8 |
APPTECH PAYMENTS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
AppTech Payments Corp. (“AppTech” or the “Company”), a Delaware corporation, is a Fintech Company headquartered in Carlsbad, California. AppTech utilizes innovative payment processing and digital banking technologies to complement its core merchant services capabilities. The Company’s proprietary software will provide progressive and adaptable products that will be available through a suite of synergistic offerings directly to merchants, banking institutions, and business enterprises.
AppTech has a highly secure digital payments platform that we acquired and are further developing digital banking products to power commerce experiences for clients and their customers. Based upon industry standards for payment and banking protocols, we will offer standalone products and fully integrated solutions that deliver innovative payments, banking, and financial services experiences. Our processing technologies can be taken off-the-shelf or tapped into via our RESTful APIs to build fully branded and customizable experiences while supporting tokenized, multi-channel, and multi-method transactions.
The Company successfully completed its uplisting onto the Nasdaq Capital Market (“NASDAQ”) on January 7, 2022. AppTech trades under the symbol “APCX” and its warrants trade under the symbol “APCXW”. See Note 9 - subsequent events.
In June 2023, the Company entered into licensing agreements with InstaCash and PayToMe.co. The licensing arrangement with InstaCash was terminated in December 2024.
The shares related to the 7.5% preferred share equity stake in PayToMe.co have not been issued as of the date of this filing. Additionally, PayToMe.co is a related party to AppTech. A senior member of the Company sits on PayToMe.co's board of directors and AppTech's former Chief Financial Officer is married to its founder and Chief Executive Officer.
Purchase of Alliance Partners, LLC
On October 13, 2023, the Company entered into
a purchase agreement to acquire 100% of Alliance Partners, LLC, a Nevada based software development limited liability company (“Alliance
Partners”). As consideration for the purchase, the Company agreed to pay the seller total consideration of
$
The Company closed the Purchase on October 26, 2023.
On October 31, 2023, the Company issued million shares of its common stock to an entity owned by the seller. In exchange for the shares, the seller waived, cancelled, and forgave the long-term debt of Alliance Partners.
The remaining outstanding payable related to
the original purchase price as of March 31, 2025 is $
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.
In late 2024, we reorganized senior leadership and initiated actions to reduce indebtedness to improve the current financial condition of the Company. In addition, we are actively pursuing additional funding options and are confident that our revenue streams will begin generating cash, although no assurances can be made.
Management continues to maintain adequate working capital and adhere to prudent financial forecasting.
| 9 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, the accompanying financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended March 31, 2025 and March 31, 2024. Although management believes that the disclosures in these unaudited financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in unaudited condensed consolidated financial statements that have been prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and notes related thereto and included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025. The interim results for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ended December 31, 2025 or for any future interim periods.
Basis of Consolidation
The consolidated unaudited financial statements include the accounts of AppTech, and wholly owned subsidiaries of which the Company is the primary beneficiary. All significant inter-company accounts and transactions are eliminated in consolidation.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Concentration of Credit Risk
Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits of $250,000 per institution that pays Federal Deposit Insurance Corporation (“FDIC”) insurance premiums. The Company has never experienced any losses related to these balances.
The accounts receivable from merchant services
are paid by the financial institutions on a monthly basis. As of March 31, 2025,
For the three months ended March 31,
2025,
Revenue Recognition
The Company accounts for revenue under Accounting Standards Codification (“ASC”) 606 Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.
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 recorded as cost of revenues.
| 10 |
Intangible Assets and Intellectual Property
Intellectual Property
The Company amortizes intellectual property based on the estimated period over which the economic benefits of the intangible assets are expected to be consumed. Typically, the Company amortizes its intellectual property, including patents and other identifiable intangible assets, on a straight-line basis. The amortization periods generally range from three years to fifteen years, depending on the nature of the asset and its expected useful life.
Capitalized Software Development Cost
The Company capitalizes certain costs related to the development of its digital payment and banking platform, including employee compensation and consulting fees for third-party developers, only when it is probable that the development will result in new or additional functionality. Costs incurred during the preliminary project planning phase and post-implementation phase are expensed as incurred. The capitalized software development costs are amortized on a straight-line basis over the estimated useful life of the asset.
Goodwill
The Company accounts for goodwill in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. The Company performs a goodwill impairment test annually.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.
Research and Development
In accordance with ASC 730, Research and Development
(“R&D”) costs are expensed when incurred. R&D 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 other outside services.
Total R&D costs for the three months ended March 31, 2025 and 2024 were approximately $
Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year, increased by the potentially dilutive common shares that were outstanding during the year. Dilutive securities include stock options, warrants granted, and convertible preferred stock.
The number of common stock equivalents not included in diluted income per share was and for the three months ended March 31, 2025 and 2024, respectively. The weighted average number of common stock equivalents is not included in diluted income (loss) per share because the effects are anti-dilutive.
| March 31, 2025 | March 31, 2024 | |||||||
| Series A preferred stock | ||||||||
| Warrants | ||||||||
| Options | ||||||||
| Total | ||||||||
| 11 |
Stock Based Compensation
Stock options are valued using the estimated grant-date fair value method of accounting in accordance with ASC Topic 718, Compensation – Stock Compensation. Fair value is determined based on the Black-Scholes Model using inputs reflecting our estimates of expected volatility, term and future dividends. We recognize forfeitures as they occur. The Company has several consulting agreements that have share-based payment awards based on performance. These agreements typically require the Company to issue common stock to the consultants on a monthly basis. The Company records the fair market value of the common stock issuable at each month end when the performance is complete based upon the closing market price of the Company’s common stock.
New Accounting Pronouncements
The FASB issues Accounting Standards Updates (“ASUs”) to amend the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. The Company believes those ASU’s issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.
NOTE 3 – INTANGIBLE ASSETS
Intellectual Property
The Company has two patent portfolios. As of March 31,
2025 and December 31, 2024, the gross value of patents is $
As of March 31, 2025 and December 31,
2024, the gross value of acquired technology is $
| Intellectual Property | March 31, 2025 | December 31, 2024 | ||||||
| Beginning balance | $ | $ | ||||||
| Amortization expenses | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
Capitalized Development Cost
The Company capitalizes certain costs related to the development of its digital payment and banking platform.
As of March 31, 2025, and December 31, 2024,
the gross value of capitalized development cost is $
| Capitalized Development Cost | March 31, 2025 | December 31, 2024 | ||||||
| Beginning balance | $ | $ | ||||||
| Additions | ||||||||
| Amortization expenses | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
Goodwill
On October 26, 2023, the Company completed the
Purchase of Alliance Partners. The difference between the fair value of the purchase price and the net assets acquired is recorded
as goodwill. As of March 31, 2025, the Company recorded goodwill of approximately $
See Note 1 - Purchase of Alliance Partners, LLC.
| 12 |
NOTE 4 – ACCRUED LIABILITIES
Accrued liabilities as of March 31, 2025 and December 31, 2024 are as follows:
| March 31, 2025 | December 31, 2024 | |||||||
| Payables due to seller for acquisition | $ | $ | ||||||
| Accrued payroll | ||||||||
| Accrued residuals | ||||||||
| Other | ||||||||
| Total accrued liabilities | $ | $ | ||||||
In connection with the original Purchase of Alliance Partners, $1,200 thousand remained outstanding as of March 31, 2025 and December 31, 2024. The payable amount is secured by substantially all the Company's assets.
See Note 1 Purchase of Alliance Partners, LLC.
NOTE 5 – NOTES PAYABLE
The Company
has a 30-year unsecured note payable with the U.S. Small Business Administration. The note payable incurred a $
As of March 31, 2025 and December 31, 2024,
the balance of the note payable was $
NOTE 6 – RIGHT OF USE ASSET
Lease Agreement
In January 2020, the Company entered into a lease agreement commencing February 8, 2020 for its corporate office in Carlsbad, California, which was set to expire in 2025. In December 2024, the Company extended its lease for fourteen months through March 2026, with an option to extend for an additional fourteen months. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an incremental borrowing rate of 8.5% within the calculation.
The rent expense was $
NOTE 7 – COMMITMENTS AND CONTINGENCIES
The Company may be involved in various claims and legal actions arising in the ordinary course of business. The Company establishes an accrued liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable.
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 $
Litigation with Former Law Firm
On
March 13, 2025, Moses Singer, LLP, as the claimant, opened an arbitration case with the American Arbitration Association against AppTech
for unpaid invoices totaling $
| 13 |
NOTE 8 – STOCKHOLDERS’ EQUITY
Series A Preferred Stock
The Company is authorized to issue shares
of $ par value Series A preferred stock (“Series A”). There were fourteen () shares of Series A preferred stock outstanding
as of March 31, 2025 and December 31, 2024. Series A stockholders have one vote per share on an “as converted” basis
for all matters submitted to a stockholder vote, without the right to cumulative voting in director elections. They are entitled to dividends, if declared by the Company’s
board of directors (the “Board of Directors”) from legally available funds, distributed pro rata based on their Series A holdings
on an as-converted basis. In the event of liquidation or dissolution, Series A stockholders share ratably in any remaining assets after liabilities are paid,
with no liquidation preferences.
Common Stock
As of March 31, 2025 and December 31, 2024, the Company was authorized to issue shares of common stock with a par value of $ per share. The number of shares outstanding was as of March 31, 2025 and as of December 31, 2024. Common stockholders are entitled to one vote per share on all matters submitted to a stockholder vote, without the right to cumulative voting in director elections. They are eligible for dividends, if declared by the Board of Directors from legally available funds, subject to the prior rights of any outstanding preferred stock and any contractual restrictions on dividend payments. In the event of liquidation or dissolution, common stockholders share ratably in any assets remaining after payment of liabilities and satisfaction of liquidation preferences of any outstanding preferred stock. Common stock carries no preemptive or subscription rights and is not convertible into other securities.
Stock Issued for Services
During
the three months ended March 31, 2025 and 2024, the Company issued and , respectively, shares of common stock to several
consultants in connection with business development and professional services. The Company valued the common stock issuances at $
Stock Issued related to Acquisition
On March 1, 2024, the Company issued shares of common stock to the former owner of Alliance Partners as consideration for extending the payment due date for the remaining balance of the Purchase consideration due.
See Note 1 - Purchase of Alliance Partners, LLC.
Equity Receivable
As of March 31, 2025, $
Stock Options
The Company grants stock options as part of employee compensation and recognizes these options’ expense over the vesting period. If an employee does not meet certain conditions such as sales targets or leaves the Company before the options vest, these options are forfeited as they occur.
On December 7, 2021, the Board of Directors authorized the Company’s Equity Incentive Plan in order to facilitate the grant of equity incentives to employees (including our named executive officers), directors, independent contractors, merchants, referral partners, channel partners and employees of the Company’s to enable the Company to attract, retain and motivate employees, directors, merchants, referral partners and channel partners, which is essential to its long-term success. As of the date of this report, the stockholders have not voted on approving additional shares for the Company’s Equity Incentive Plan. A total of shares of common stock were authorized under the Company’s Equity Incentive Plan, for which as of March 31, 2025, a total of are available for issuance.
| 14 |
On January 21, 2025, the Company extended the
expiration term of vested and outstanding stock options to the former CFO. The fair value was calculated both on the modification date
and prior to the modification. During the three months ended March 31, 2025, the Company recorded the option modification expense
for $
During the three months ended March 31, 2025, the Company granted options to purchase common stock. The grants included:
| 1) | options were awarded to the former and current board of directors. The fair value of these options, which are non-plan with a ten-year expiration term, total $ thousand. These options have an exercise price ranging from $ to $ per share and a weighted average fair value of $ per share on the issuance date. |
| 2) | On January 21, 2025, the Company granted options to the former CFO with an exercise price of $, a ten-year expiration term, and a fair value on the grant date of $. The Company recognized $ thousand related to this grant. The options were fully vested upon the grant date. |
| 3) | On February 21, 2025, the Company granted options to the current CFO with an exercise price of $, a ten-year expiration term, and a fair value on the grant date of $. The Company recognized $ thousand related to this grant. The options were fully vested upon the grant date. |
The following table summarizes option activity:
| Number of shares | Weighted Average exercise price | Weighted Average remaining years | ||||||||||
| Outstanding December 31, 2024 | $ | |||||||||||
| Issued | – | |||||||||||
| Exercised | – | |||||||||||
| Cancelled | ( | ) | – | |||||||||
| Outstanding as of March 31, 2025 | $ | |||||||||||
| Outstanding as of March 31, 2025, vested | $ | |||||||||||
The unvested options include a total of million options contingent upon reaching specified sales milestones.
During the three months ended March 31, 2025, the Company recorded $ thousand in option expenses, which includes the modification expense noted above of $ thousand.
The options vest in equal monthly installments ranging from immediately to 12 months. For the three months ended March 31, 2025, the fair value of the options were valued using a Black-Scholes option pricing model with the following assumptions:
| Market value of common stock on issuance date | $ | |||
| Exercise price | $ | |||
| Expected volatility | % - % | |||
| Expected term (in years) | ||||
| Risk-free interest rate | % - % | |||
| Expected dividend yields |
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Warrants
As of March 31, 2025, the Company has
Number of Warrants | Weighted Average exercise price | Weighted Average remaining years | ||||||||||
| Outstanding December 31, 2024 | $ | |||||||||||
| Cancelled | – | |||||||||||
| Issued | – | |||||||||||
| Outstanding as of March 31, 2025 | $ | |||||||||||
NOTE 9 – SUBSEQUENT EVENTS
As of the filing of this report, the Company has not received a final notice from The Nasdaq Stock Market LLC ("Nasdaq") regarding the delisting of the Company's Common Stock (APCX) and Warrants (APCXW) from Nasdaq’s exchange for its failure to comply with Nasdaq's continued listing standards. The Company was not able to overcome the minimum $1 bid price for ten consecutive business days as required by Nasdaq Listing Rule 5550(a)(2). Preemptively, we have applied for and have been accepted onto the Over-The-Counter Venture Market (“OTCQB”). APCX and APCXW will trade on the OTCQB market under the same symbols and the Company will remain a reporting entity under the Securities Exchange Act of 1934. It is management’s intention to apply to a national exchange before the end of the fiscal year.
On April 11, 2025, the Company entered a three-party agreement with one of its banking partners and software providers. Under the terms of the arrangement, AppTech agreed to pay a $103 thousand perpetual licensing fee (payable in six equal monthly installments) to the software provider. In addition, we assumed a convertible note from the bank that entitles us to an equity stake in the software provider. The $250 thousand note earns interest at 8% annually matures in June 2026, and converts to equity automatically at maturity or if there is a financing event.
See Note 7 – Commitments and Contingencies for an update on the payments related to the former employee’s lawsuit.
See Note 8 – Stockholders’ Equity for additional subsequent event related to the $500 thousand equity receivable received.
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Item 2. 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, FinZeo™, delivers 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.
Also, Independent Sales Organizations (ISOs) and Independent Software Vendors (ISVs), can seamlessly integrate their businesses with the FinZeo Portal, which facilitates 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.
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Recent Developments
The Company has successfully remedied its equity deficiency; however, it was unable to satisfy the $1.00 minimum bid price requirement for 10 consecutive business days, as mandated by Nasdaq Listing Rule 5550(a)(2). Consequently, the Company anticipates being delisted from Nasdaq and transitioning to trading on the OTCQB market. Management remains committed to enhancing shareholder value and intends to pursue an uplisting to a national exchange before the end of the fiscal year.
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 processing services to businesses.
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, 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, 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 three months ended March 31, 2025 and 2024, respectively.
Revenue
Revenue was approximately $217 thousand for the three months ended March 31, 2025, compared to $105 thousand for the three months ended March 31, 2024, representing an increase of 107%. The increase was principally driven by an increase of our ISO and lending revenue.
Cost of Revenue
Cost of revenue was approximately $128 thousand for the three months ended March 31, 2025, compared to $11 thousand for the three months ended March 31, 2024, representing an increase of $117 thousand. The increase was principally driven by the revenue share with our ISO partners.
General and Administrative Expenses
General and administrative expenses were approximately $1,965 thousand for the three months ended March 31, 2025, compared to $2,481 thousand for the three months ended March 31, 2024, representing a decrease of $516. The reduction was mainly driven by lower salaries and professional services.
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Research and Development Expenses
Research and development expenses were approximately $780 thousand for the three months ended March 31, 2025, compared to $644 thousand for the three months ended March 31, 2024, representing an increase of $136 thousand. The increase was primarily due to higher third-party development costs related to maintaining and enhancing the FinZeo platform.
Interest Expense, net
Interest expense, net was approximately $33 thousand for the three months ended March 31, 2025, compared to $3 thousand for the three months ended March 31, 2024, representing an increase of $30 thousand. The increase was due to interest owed to one of our banking partners.
Gain on debt extinguishment
Gain on debt extinguishment was approximately $13 thousand for the three months ended March 31, 2025, compared to $0 for the three months ended March 31, 2024, representing an increase of $13 thousand. The increase was driven by reconciling journal entries and accrued expenses write-off.
Other income (expenses)
Other income was $35 thousand for the three months ended March 31, 2025, compared to an expense of $3 thousand for the three months ended March 31, 2024. The increase of $38 thousand was primarily driven by a credit balance with the state of Delaware.
Liquidity and Capital Resources
The Company routinely evaluates its immediate working capital needs and liquidity sources. For the three months ended March 31, 2025 and March 31, 2024, the Company maintained its liquidity sources primarily through cash and cash equivalents, and proceeds received from the AFIOS Partners investment.
Cash and cash equivalents at March 31, 2025 and December 31, 2024 were $417 thousand and $868 thousand, respectively.
Management's Plan to Address Going Concern Considerations
The Company has experienced recurring operating losses, primarily due to limited revenues. The Company's current financial conditions and recurring losses raise substantial doubt about its ability to continue as a going concern.
Management has restructured its operations, reduced its headcount, and is actively pursuing additional funding options. We are confident that two of its revenue streams will begin generating revenue in the following twelve months from the issuance date of these financial statements.
Management intends to maintain adequate working capital and adhere to prudent financial forecasting.
Cash Flows
The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods ($ in thousands).
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (1,801 | ) | $ | (2,164 | ) | ||
| Net cash provided by investing activities | $ | – | $ | – | ||||
| Net cash provided by financing activities | $ | 1,350 | $ | 2,436 | ||||
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Cash Flow from Operating Activities
Net cash used in operating activities during the three months ended March 31, 2025, was approximately $1,801 thousand, which is comprised of (i) our net loss of $2,641 thousand, adjusted for non-cash expenses totaling $1,202 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) decreased by changes in operating assets and liabilities of approximately $362 thousand.
Net cash used in operating activities during the three months ended March 31, 2024 was approximately $2,164 thousand, which is comprised of (i) our net loss of $3,037 thousand, adjusted for non-cash expenses totaling $834 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) increased by changes in operating assets and liabilities of approximately $39 thousand.
Cash Flow from Investing Activities
There was no cash used by investing activities during the three months ended March 31, 2025 and 2024.
Cash Flow from Financing Activities
During the three months ended March 31, 2025, net cash provided by financing activities was $1,350 thousand, which consists of proceeds received on the outstanding equity receivable at year-end.
Net cash provided by financing activities during the year ended March 31, 2024 was approximately $2,436 thousand, which principally consists of net proceeds through the issuance of common shares and warrants in our public offering.
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, and equity-based compensation. 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 March 31, 2025, 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.
Equity-Based Compensation: We estimate the fair value of stock options granted using the Black-Scholes option pricing model, which requires input of subjective assumptions. The model inputs include expected stock price volatility, expected term, risk-free interest rate, and dividend yield. The assumptions about future stock price volatility and the option’s expected term involve significant judgments based on historical data and future expectations. The reported equity-based compensation expense is sensitive to changes in the volatility assumption. An increase in expected volatility could materially impact the amount of compensation expense recognized.
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.
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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.
Recent Accounting Pronouncements
As of March 31, 2025, there have been no significant changes to our recently issued accounting pronouncements, except as described in Note 2 to our consolidated financial statements.
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.
Item 3. 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 Form 10-Q, we are not required to provide the information required by this item.
Item 4. 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 effective as of March 31, 2025.
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Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of 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.
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PART II - Other Information
Item 1. Legal Proceedings.
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 first payment of $86 thousand was made in March 2025 and the second in May 2025.
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 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
During the quarter ended March 31, 2025, no director
or officer
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Item 6. Exhibits
EXHIBIT INDEX
| Exhibit Number | Exhibit Title | |
| 31.1 | Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 dated May 14, 2024 | |
| 31.2 | Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 dated May 14, 2024 | |
| 32.1 | Certification of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 dated May 14, 2024 | |
| 32.2 | Certification of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 dated May 14, 2024 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Schema Document | |
| 101.CAL | Inline XBRL Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Definition Linkbase Document | |
| 101.LAB | Inline XBRL Label Linkbase Document | |
| 101.PRE | Inline XBRL Presentation Linkbase Document | |
| 104.0 | Cover Page Interactive Data File (Embedded within the Inline XBRL document) |
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Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AppTech Payments Corp. | ||
| Date: May 14, 2025 | By: | /s/ Thomas DeRosa |
| Name: | Thomas DeRosa | |
| Title: | Interim Chief Executive Officer | |
| Date: May 14, 2025 | By: | /s/ Felipe A. Corrado IV |
| Felipe A. Corrado IV | ||
| Chief Financial Officer and Treasurer | ||
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