APCX 10-Q
AppTech Payments Corp. (APCX)
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 |
| OTC Venture Market | ||
| OTC Venture 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 15, 2026, 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 | 24 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 31 |
| Item 4. | Controls and Procedures | 32 |
| Part II | ||
| Item 1. | Legal Proceedings | 33 |
| Item 1A. | Risk Factors | 33 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 33 |
| Item 3. | Defaults Upon Senior Securities | 33 |
| Item 4. | Mine Safety Disclosures | 33 |
| Item 5. | Other Information | 33 |
| Item 6. | Exhibits | 33 |
| Signatures | 34 |
| 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, 2026 AND DECEMBER 31, 2025
(UNAUDITED)
(in thousands, except shares and per share data)
| March 31, 2026 | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Interest 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 | ||||||||
| Notes payable | ||||||||
| Notes payable – related party | ||||||||
| Convertible notes payable, net of discount of $ | ||||||||
| Deferred revenue | ||||||||
| Contingent consideration | ||||||||
| Right of use liability | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Notes payable – related party, 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, 2026 and December 31, 2025 | ||||||||
| Common stock, $ par value; shares authorized; and issued and outstanding at March 31, 2026 and December 31, 2025, 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, 2026 and 2025
(UNAUDITED)
(in thousands, except shares and per share data)
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| 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, 2026 and 2025, respectively | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain on debt extinguishment | ||||||||
| Loss on change in fair value of contingent consideration | ( | ) | ||||||
| Debt discount amortization | ( | ) | ||||||
| Other income (expenses) | ( | ) | ||||||
| Total other income (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, 2026 and 2025
(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, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | – | |||||||||||||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Series A Preferred | Common Stock | Additional Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | – | |||||||||||||||||||||||||||
| Balance March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
| 7 |
APPTECH PAYMENTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2026 and 2025
(UNAUDITED)
(in thousands, except shares and per share data)
| March 31, 2026 | March 31, 2025 | |||||||
| 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 | ( | ) | ( | ) | ||||
| Loss on change in fair value of contingent consideration | ||||||||
| Amortization of debt discount | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ||||||
| Interest receivable | ( | ) | ||||||
| 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 equity receivable | ||||||||
| Proceeds from notes payable – related party | ||||||||
| Repayment of convertible 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 | $ | $ | ||||||
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 are 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, unparalleled 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.
AppTech trades under the symbol “APCX” and its warrants trade under the symbol “APCXW”.
Purchase of Infinitus Pay, Inc.
On October 31, 2025 (the “Acquisition Date”), the Company acquired 100% of the outstanding equity interests of Infinitus Pay Inc. (“IP”), a provider of payment platform solutions, pursuant to a Stock Purchase and Share Exchange Agreement dated October 30, 2025. The acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations. The acquisition enhances the Company’s Banking-as-a-Service (BaaS) and digital commerce offerings by integrating IP’s technology platform and customer relationships.
Total consideration transferred was $
The purchase price was allocated to the
identifiable assets acquired and liabilities assumed based on estimated fair values at the acquisition date. Identifiable intangible
assets totaled $
Liquidity and Going Concern Considerations
The Company has experienced recurring operating losses, primarily due to limited revenues and net cash used in operations. 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. 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, 2026 and March 31, 2025. 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, 2025, filed with the SEC on March 31, 2026. The interim results for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the year ended December 31, 2026 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.
As of March 31, 2026,
For the three months ended March 31, 2026,
| 10 |
Cash and Cash Equivalents
The Company's cash consists of cash on deposit at its bank. Cash equivalents, if applicable, represents highly liquid investments with maturities of three months or less at the date of purchase. Management determines the appropriate classification.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount and presented net of an allowance for credit losses, when applicable. The Company estimates the allowance for credit losses using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical loss experience is generally the starting point for estimating expected credit losses, which is then adjusted for current conditions and reasonable and supportable forecasts of future economic conditions, as applicable. The Company regularly monitors receivables for collectability and updates its estimate of expected credit losses at each reporting date.
Historically, the Company has not experienced significant credit losses on its accounts receivable and, as a result, maintains an allowance for credit losses of $0 as of March 31, 2026 and December 31, 2025, respectively. The Company has not written off any material accounts receivable balances in the periods presented.
Loan Receivables and Interest Income
Loan receivable represents amounts due to the Company under contractual lending arrangements. Loans are recorded at their outstanding principal balance, net of any allowance for expected credit losses, when applicable. The Company evaluates loan receivables for collectability on a regular basis and considers relevant factors such as payment history, financial condition of the borrower, and current economic conditions.
Interest income is recognized over the term of the loan using the effective interest method, based on the principal amount outstanding. Accrual of interest is discontinued when, in management’s opinion, the collectability of principal or interest becomes uncertain. Payments received on nonaccrual loans are applied to principal unless otherwise determined by management.
Convertible Notes
Convertible notes represent debt instruments that may be converted into the Company’s equity securities upon the occurrence of certain events or at the option of the holder, in accordance with the terms of the agreement. Convertible notes are recorded at their principal amount, net of any unamortized debt discount and issuance costs.
The Company evaluates the terms of each convertible note to determine whether any embedded features, including conversion options, should be accounted for separately or as a component of the note. Debt discounts, including those arising from embedded derivative liabilities or other embedded elements, are amortized to interest expense over the term of the notes using the effective interest method.
Upon conversion, the carrying value of the convertible note, including any unamortized discount, is reclassified to equity.
| 11 |
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.
Setup Fees
The Company provides one-time customer setup services that include gathering and validating required compliance documentation for its banking partners and performing the technical integration necessary to establish an operational merchant profile on the Company’s platform. As part of the setup, customers receive stand-alone value by receiving a named bank account with our banking partner that they can use independent of us. Setup services are satisfied at a point in time when the customer or subaccount is fully configured and enabled to transact on the platform. Revenue is recognized upon completion of setup, which generally coincides with month-end billing.
Monthly Platform and Transaction-Based Fees
Monthly recurring platform access fees and transaction-based fees represent consideration for continuous platform access and payment processing services and are recognized monthly as the services are performed. Transaction-based fees, which represent variable consideration, are recognized in the period in which the underlying transactions occur. Subaccount setup fees are recognized when the subaccount is established and made available for use.
Customers are invoiced in arrears at month-end, and amounts billed but not yet collected are recorded as accounts receivable.
Merchant Processing Services
The Company provides merchant processing solutions for credit card and ACH transactions. We act as an intermediary between merchants, who initiate transactions and banks that process them. We collect either a flat fee, a fee for each transaction, and or a fee calculated as a percentage of its value, from both credit cards and ACHs. Revenue is recognized when transactions are processed by banks or at month-end based on the processing activity. Payments to channel partners are deducted from revenue.
Accrued Residuals
The Company pays commissions to independent agents who refer merchant accounts. The amounts payable to these independent agents are based upon a percentage of the amounts processed by these merchant accounts.
| 12 |
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 should 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. Goodwill represents the excess of the purchase price over the estimated fair values of the net tangible and intangible assets of acquired entities. The Company performs a goodwill impairment test annually and more frequently if an event or circumstance indicates that impairment may have occurred. Triggering events that may indicate a potential impairment include, but are not limited to, significant adverse changes in customer demand or business climate and related competitive considerations. The Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company performs a goodwill impairment test to calculate the fair value of the applicable reporting unit(s) and compares it to its carrying amount. We recognize an impairment on any amount of the carrying value over the fair value. If the Company determines that the implied fair value of a reporting unit is greater than its carrying amount, the goodwill impairment test is not required. Management performed the analysis and no impairment was deemed necessary.
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. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset or asset group to estimated
undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group
exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or
asset group exceeds the estimated fair value of the asset or asset group. Long-lived assets to be disposed of by sale are reported at
the lower of their carrying amounts or their estimated fair values less costs to sell and are not depreciated. During the first quarter
ended March 31, 2026 and March 31, 2025, there was $
| 13 |
Research and Development
Research and Development (R&D) expenses include
internal and outsourced service costs incurred to maintain the FinZeo and Infintus Pay, Inc platforms. Per ASC 730, R&D costs are
expensed as incurred. Total R&D expenses for the three months ended March 31, 2026 and 2025 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, 2026 and 2025, 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, 2026 | March 31, 2025 | |||||||
| Series A preferred stock | ||||||||
| Warrants | ||||||||
| Options | ||||||||
| Total | ||||||||
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.
Segment Reporting
In accordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business activities are managed and evaluated. ASC 280 establishes standards for companies to report financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision makers (“CODMs”) in deciding how to allocate resources and assess performance.
The CODMs have been identified as the Chief Executive Officer and Chief Financial Officer, who reviews the operating results for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that the Company only has operating and reportable segment.
The key measures of segment profit or loss reviewed by our CODMs are revenue and operating expenses. Revenue is monitored by the CODMs to understand the performance of its verticals. Operating expenses are reviewed and monitored by the CODMs to manage and forecast cash. The CODMs also reviews operating costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and internal budgets.
| 14 |
Fair Value Measurements
The Company measures certain assets and liabilities at fair value in accordance with applicable accounting guidance. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company categorizes fair value measurements within a three-level hierarchy based on the nature of the inputs used in the valuation, as follows:
| · | Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. | |
| · | Level 2 — Inputs are observable for the asset or liability, either directly or indirectly, but do not include quoted prices for identical instruments in active markets. These inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, and other observable inputs such as interest rates and yield curves. | |
| · | Level 3 — Inputs are unobservable and reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available in the circumstances. |
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of the asset or liability within the fair value hierarchy.
The Company recorded a contingent consideration of up to $1,000 thousand payable in cash upon achievement of specified performance targets. It was initially measured at fair value using a Monte Carlo simulation and is recorded as a liability, subject to remeasurement at each reporting date with changes recognized in earnings.
This contingent consideration liability is classified as a Level 3 fair value measurement; it is remeasured at each reporting date with changes in fair value recognized in earnings. The following table presents a rollforward of the liability for the period:
| $ in thousands | ||||
| Balance at December 31, 2025 | $ | |||
| Loss on change in fair value of contingent consideration | ||||
| Total contingent liability | $ | |||
| 15 |
New Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) issues Accounting Standards Updates (“ASUs”) to amend the authoritative accounting guidance in the Accounting Standards Codification (“ASC”).
On November 4, 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures. This ASU provides guidance to public companies regarding footnote disclosures of natural expense components (such as employee compensation, depreciation, and amortization) included within each relevant income statement expense caption. The guidance is effective for public companies for fiscal years beginning after December 15, 2026. The Company is currently assessing the impact of the new guidance on its financial statement disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (the “internal-use software update”). This ASU modernizes the accounting for internal-use software costs to better reflect agile development methods. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. Per the guidance, the effective date of the ASU is for annual reporting periods after December 15, 2027.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This ASU clarifies the applicability of interim reporting guidance and reorganizes certain interim disclosure requirements within ASC 270 to improve consistency and usability. The guidance also introduces a disclosure principle requiring entities to disclose material events and changes occurring after the most recent annual reporting period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. Per the guidance, the effective date of the ASU is for interim reporting periods within fiscal years beginning after December 15, 2027, with early adoption permitted.
Except as noted above, the Company believes that recent ASUs issued by the FASB either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company, or (iv) are not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.
NOTE 3 – OTHER CURRENT ASSETS
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 $
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NOTE 4 – INTANGIBLE ASSETS
Intellectual Property
As part of the Infintitus Pay, Inc transaction,
the Company acquired intangible assets valued at $
As of March 31, 2026 and December 31,
2025, the gross value of acquired technology is $
| Intellectual Property | March 31, 2026 | December 31, 2025 | ||||||
| Beginning balance | $ | $ | ||||||
| Acquisition of intangible assets | ||||||||
| 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, 2026, and December 31, 2025,
the gross value of capitalized development cost is $
| Capitalized Development Cost | March 31, 2026 | December 31, 2025 | ||||||
| Beginning balance | $ | $ | ||||||
| Additions | ||||||||
| Amortization expenses | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
Goodwill
On October 31, 2025, the Company completed the
acquisition of Infinitus Pay, Inc. The difference between the fair value of the purchase price and the net assets acquired is recorded
as goodwill. As of March 31, 2026 and December 31, 2025, the goodwill was approximately $
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NOTE 5 – ACCRUED LIABILITIES
Accrued liabilities as of March 31, 2026 and December 31, 2025 are as follows:
| March 31, 2026 | December 31, 2025 | |||||||
| Payables due to seller for acquisition | $ | $ | ||||||
| Accrued payroll | ||||||||
| Other | ||||||||
| Total accrued liabilities | $ | $ | ||||||
In connection with the original Purchase of Alliance
Partners, $
NOTE 6 – 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, 2026 and December 31,
2025, the balance of the note payable was $
Convertible Notes
In fiscal year 2025, the Company entered into multiple unsecured convertible note agreements with third-party lenders, with principal amounts ranging from approximately $300 thousand to $360 thousand, bearing stated interest rates of 10%, and original issue discounts ranging from $50 thousand to $60 thousand. The notes have terms of six to twelve months, with maturities between December 2025 and August 2026. As of March 31, 2026, one note was paid off and two others remained outstanding.
Each note may be converted into shares of the Company’s common stock at a fixed conversion price of $2.00 per share, subject to adjustment in the event of default, at which point the conversion price may be reduced to the lower of $2.00 and 80% of the volume-weighted average price (VWAP) of the Company’s common stock for a specified period preceding conversion. Certain notes include provisions for fixed monthly payments beginning after a defined period, and others permit early conversion at the lender’s discretion.
As of March 31, 2026 and December 31, 2025, the
aggregate principal balance of these notes was approximately $
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Related Party Liabilities
On
October 21, 2025, the Company entered into a revenue participation agreement with a related party for an initial $1,500 thousand
investment, which increased to $2,000 thousand in February 2026. The holder is entitled to 1.75% of gross contract revenue (subject
to increase up to 10%) and minimum monthly payments ranging from $4 thousand to $73 thousand through December 31, 2029, based on the
greater of the revenue share or contractual minimums. The obligation is secured by a pledge of 10% of intellectual property-related
revenues and 10% of the issued and outstanding equity of Infinitus Pay, Inc. The Company is required to repay the investment over
the final 18 months of the term. The agreement includes (i) a participant put option, exercisable beginning December 31, 2027,
requiring repayment at an amount that provides a 20% internal rate of return, and (ii) a Company call option permitting early
termination subject to payment of a premium designed to provide a 28% internal rate of return. As of March 31, 2026, the balance of
the participation liability was $
On October 29, 2025, we secured a $
See Note 9 – Subsequent Events for an update on the loan.
The current CEO is owed approximately $
NOTE 7 – 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 14 months. The Company is currently paying rent on a month-to-month basis. 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 8 – 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.
Lawsuit with Former Lawyers
On March
13, 2025, Moses & Singer LLP filed a case against AppTech Payments Corp. for unpaid fees of approximately $
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Finzeo Seller Suit
On October 30, 2025, AppTech Payments Corp. filed a lawsuit in the United States District Court, Southern District of California, against the former owner of Finzeo (“Seller”) with claims for trade secret misappropriation, fraud, misrepresentation, conversion, unfair business practices, violation of California Penal Code section 502, and breach of contract. The litigation relates to AppTech’s acquisition of membership interests in a company and the company’s related product. The defendant has made claims of an offset based on alleged outstanding payments as part of the acquisition. On November 4, 2025, the Court entered an order approving the parties’ Stipulation re AppTech’s Motion for Temporary Restraining Order and Order, which enjoins Seller, and those acting in concert with him, from (1) disabling the FinZeo URL, (2) foreclosing upon a security agreement, and (3) disclosing AppTech’s proprietary and confidential information, among other relief, until the order is amended or superseded by Court order. Seller has been given leave to file a Counterclaim against AppTech, its Board of Directors, and two AppTech employees, which must be filed by June 1, 2026. Seller’s proposed Counterclaim includes claims based on alleged outstanding payments due to him as part of the acquisition, as well as other related claims.
As of May 6, 2026, Seller represents himself, in pro per. The case is currently in the discovery stage with fact discovery closing in July 2026, expert discovery closing in October 2026, and the final pretrial conference scheduled for March 18, 2027.
NOTE 9 – 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, 2026 and December 31, 2025. 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, 2026 and December 31, 2025, 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, 2026 and as of December 31, 2025. 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 to Management
On January 16, 2026, the Board approved fully vested restricted shares to certain executives with a lock up period that extends until December 31, 2027. The stock price on the date of issuance was $0.34 per share. During the three months ended March 31, 2026, the Company recorded an expense of $ thousand related to the issuance.
Stock Issued to a Consultant
On February 23, 2026, the Company issued a former
consultant shares of restricted stock related to a previous arrangement. The stock price on the date of issuance was $0.35 per
share and the Company recorded an expense of $
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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 have been authorized under the Company’s Equity Incentive Plan, for which as of March 31, 2026, a total of are available for issuance.
On January 16, 2026, the Board ratified the acceleration of previously granted stock options for certain executive officers effective. As part of the resolution, non-plan options, with a ten-year expiration term, a fair value on the grant date of $, and an exercise price of $ per share vested. The Company recorded an expense of $ thousand.
During the three months ended March 31, 2026, the Company granted options to purchase common stock. The grants included:
| 1) | options were awarded to the current board of directors. The fair value of these options, which are non-plan with a five-year expiration term, total $ thousand. These options have an exercise price of $ per share and a weighted average fair value of $ per share on the issuance date. They are fully vested. |
| 2) | On January 16, 2026, the Company granted options to certain members of the management team with an exercise price of $, a five-year expiration term, and a fair value on the grant date ranging from $ to $. The Company recognized $ thousand related to this grant. Half of the options are fully vested upon the grant date and the others vest on December 31, 2027. |
The following table summarizes option activity:
| Number of shares |
Weighted Average exercise price |
Weighted Average remaining years |
||||||||||
| Outstanding December 31, 2025 | $ | |||||||||||
| Issued | – | |||||||||||
| Cancelled | – | |||||||||||
| Outstanding as of March 31, 2026 | $ | |||||||||||
| Outstanding as of March 31, 2026, vested | $ | |||||||||||
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During the three months ended March 31, 2026, the Company recorded $ thousand in option expenses.
The options vest in equal monthly installments ranging from immediately to 12 months. For the three months ended March 31, 2026, 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 |
Expected Volatility – The Company now has sufficient operating history and company-specific historical data to determine its expected volatility assumption directly from its own traded stock price. Rather than examining the historical volatilities of a group of industry peers, the Company calculates its volatility based on the fluctuations in its own share prices, which are publicly available. The Company expects to continue using this approach going forward, relying on its own historical stock price data to assess volatility.
Expected Term – The expected term of stock options represents the weighted average period the stock options are expected to be outstanding. Given the limited historical exercise data of the Company’s stock options, the Company uses the simplified method for estimating the expected term, which calculates the expected term as the average time-to-vesting and the contractual life of the options for stock options issued to participants.
Risk-Free Interest Rate – The risk-free rate assumption is based on U.S. Treasury instruments, the terms of which were consistent with the expected term of the Company’s stock options.
Expected Dividend – The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid any dividends to date and does not intend to pay dividends.
Forfeitures are recognized as they occur. Plan related forfeitures are added back to the equity incentive plan.
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Warrants
As of March 31, 2026, the Company has
|
Number of Warrants |
Weighted Average exercise price |
Weighted Average remaining years |
||||||||||
| Outstanding December 31, 2025 | $ | |||||||||||
| Cancelled | – | |||||||||||
| Issued | – | |||||||||||
| Outstanding as of March 31, 2026 | $ | |||||||||||
NOTE 10 – SUBSEQUENT EVENTS
On April 3, 2026, AppTech Payments Corp. issued an aggregate of $1,000 thousand principal amount of 18% convertible promissory notes to two lenders in a private placement. The notes were issued at a discount for aggregate proceeds of $950 thousand and mature fourteen months from issuance, with amortization payments beginning May 2026.
The notes are convertible into shares of the Company’s common stock at a fixed conversion price of $2.00 per share, subject to customary adjustments and a beneficial ownership limitation. In connection with the financing, the Company issued warrants to purchase an aggregate of 1,000,000 shares of common stock at an exercise price of $1.00 per share, with a five-year term , subject to adjustment provisions for the exercise price.
The Company’s wholly owned subsidiary, Infinitus Pay, Inc., guaranteed the obligations under the notes and pledged certain assets as collateral.
In April 2026, the Company amended its promissory note agreement with Starfish Foundation. Under the amended terms, the Company will make interest-only payments of $20 thousand per month from December 2025 through March 2026, followed by monthly payments beginning April 2026 that include $50 thousand of principal plus declining interest through November 2027, at which time the note is expected to be fully repaid.
In May 2026, the Company received notice from a commercial banking partner of their intent to discontinue providing certain services to one of the Company’s revenue streams and to enable an orderly transition. Management is evaluating the potential impact of this development and is unable to determine whether the matter is material to its operations and financial statements.
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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
AppTech Payments Corp. (“AppTech”) continued executing its financial technology platform strategy during 2026, building on the operational and technology foundation established in 2025. The Company now operates as a fintech infrastructure provider delivering digital banking, embedded finance, and omnichannel payment capabilities to financial institutions, enterprises, and technology partners.
The AppTech Banking Platform, licensed and deployed in 2025, is fully operational with the Company’s partner bank and continues onboarding clients in 2026. The platform supports digital account creation, payment services, compliance workflows, and financial operations through a unified, cloud-native architecture that integrates alongside a bank’s existing core system. Operational alignment with the partner bank has strengthened, improving onboarding efficiency and supporting the Company’s ability to scale additional financial institutions over time.
AppTech also advanced the integration of InfinitusPay (“IP”), acquired in late 2025. IP’s cross-border payments engine, multi-currency capabilities, onboarding, and compliance workflows are now incorporated into the Company’s broader product suite. The IP partner portal continues to support both existing clients and AppTech’s broader channel strategy by providing reporting, analytics, and operational insights to partners.
The Company’s FinZeo Payments-as-a-Service business remains an active contributor to revenue in 2026. AppTech continues to support merchants, ISOs, and technology partners while leveraging the PaaS channel to identify opportunities aligned with its broader digital banking and embedded finance strategy.
AppTech’s 2026 priorities include scaling the Banking Platform, expanding cross-border and multi-currency capabilities, increasing transaction-based and subscription revenue, and strengthening partner and enterprise relationships. With its modernized technology stack and integrated product suite, the Company is positioned to participate in the continued shift toward digital financial services and embedded financial infrastructure.
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Financial Operations Overview
The following discussion sets forth certain components of our statements of operations as well as factors that impact those items (in thousands, except per share data).
Revenues
Our Revenues. We derive our revenue by providing financial services to businesses.
Set up Fees
The Company provides one-time customer setup services that include gathering and validating required compliance documentation for its banking partners and performing the technical integration necessary to establish an operational merchant profile on the Company’s platform. As part of the setup, customers receive stand-alone value by receiving a named bank account with our banking partner that they can use independent of us. Setup services are satisfied at a point in time when the customer or subaccount is fully configured and enabled to transact on the platform. Revenue is recognized upon completion of setup, which generally coincides with month-end billing.
Monthly Platform and Transaction-Based Fees
Monthly recurring platform access fees and transaction-based fees represent consideration for continuous platform access and payment processing services and are recognized monthly as the services are performed. Transaction-based fees, which represent variable consideration, are recognized in the period in which the underlying transactions occur. Subaccount setup fees are recognized when the subaccount is established and made available for use.
Customers are invoiced in arrears at month-end, and amounts billed but not yet collected are recorded as accounts receivable.
Merchant Processing Services
The Company provides merchant processing solutions for credit card and ACH transactions. We act as an intermediary between merchants, who initiate transactions and banks that process them. We collect either a flat fee, a fee for each transaction, and or a fee calculated as a percentage of its value, from both credit cards and ACHs. Revenue is recognized when transactions are processed by banks or at month-end based on the processing activity. Payments to channel partners are deducted from revenue.
Accrued Residuals
The Company pays commissions to independent agents who refer merchant accounts. The amounts payable to these independent agents is based upon a percentage of the amounts processed by these merchant accounts.
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Expenses
Cost of Revenue. Includes costs directly attributable to processing and other services the Company provides. These also include related costs such as residual payments to our business development partners, which are based on a percentage of the net revenue generated from client referrals.
General and administrative. Include salaries, professional services, software costs, regulatory expenses, stock-based compensation, rent and utilities, and other operating costs.
Research and development. Includes the internal and outsourced services costs incurred to maintain and further develop the FinZeo and IP platforms, 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, 2026 and 2025, respectively.
The following table presents our historical results of operations for the periods indicated:
| Years ended March 31 | Change | |||||||||||||||
| ($ in thousands) | 2026 | 2025 | Amount | % | ||||||||||||
| Revenue | $ | 1,457 | $ | 217 | $ | 1,240 | 571% | |||||||||
| Cost of revenue | 646 | 128 | 518 | 405% | ||||||||||||
| Gross profit | 811 | 89 | 722 | 811% | ||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | 3,284 | 1,965 | 1,319 | 67% | ||||||||||||
| Research and development | 375 | 780 | (405 | ) | (52% | ) | ||||||||||
| Total operating expenses | 3,659 | 2,745 | 914 | 33% | ||||||||||||
| Loss from operations | (2,848 | ) | (2,656 | ) | (192 | ) | 7% | |||||||||
| Other income (expenses) | ||||||||||||||||
| Interest expense, net | (196 | ) | (33 | ) | (163 | ) | 494% | |||||||||
| Gain on debt extinguishment | 29 | 13 | 16 | 123% | ||||||||||||
| Loss on change in fair value of contingent consideration | (262 | ) | – | (262 | ) | – | ||||||||||
| Debt discount amortization | (28 | ) | – | (28 | ) | – | ||||||||||
| Other income (expense) | (3 | ) | 35 | (38 | ) | (109% | ) | |||||||||
| Total other income (expenses) | (460 | ) | 15 | (475 | ) | (3,167% | ) | |||||||||
| Loss before income taxes | (3,308 | ) | (2,641 | ) | (667 | ) | 25% | |||||||||
| Provision for income taxes | – | – | – | – | ||||||||||||
| Net loss | $ | (3,308 | ) | $ | (2,641 | ) | $ | (667 | ) | 25% | ||||||
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Revenue
Revenue was approximately $1,457 thousand for the three months ended March 31, 2026, compared to $217 thousand for the three months ended March 31, 2025, representing an increase of 571%. The increase was driven by our lending revenue vertical, the revenue generated from the IP platform, and an increase of merchant processing revenue from our independent sales organization (“ISO”).
Cost of Revenue
Cost of revenue was approximately $646 thousand for the three months ended March 31, 2026, compared to $128 thousand for the three months ended March 31, 2025, representing an increase of $518 thousand. The increase was principally driven by fees owed to our ISO partner, fees owed to our IP platform processor, and an increase to referral partner payouts related to the IP.
General and Administrative Expenses
General and administrative expenses were approximately $3,284 thousand for the three months ended March 31, 2026, compared to $1,965 thousand for the three months ended March 31, 2025, representing an increase of $1,319. The increase was driven by stock based compensation and the accelerated vesting of performance based shares.
Research and Development Expenses
Research and development expenses were approximately $375 thousand for the three months ended March 31, 2026, compared to $780 thousand for the three months ended March 31, 2025, representing a decrease of $405 thousand. The decrease was solely driven by the Company’s decision to lower its outsourced development team.
Other income (expenses)
Interest Expense
Interest expense was approximately $196 thousand and $33 thousand for the three months ended March 31, 2026 and 2025, respectively, representing an increase of $163 thousand. The increase was due to the interest expense related to the convertible notes and liability assumption from our banking partner.
Gain on debt extinguishment
The gain on debt extinguishment was approximately $29 thousand and $13 thousand for the three months ended March 31, 2026 and 2025, respectively, representing an increase of $16 thousand. The increase was due to the Company extinguishing less of its past debt.
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Loss on change in fair value of contingent consideration
The loss was approximately $262 thousand and $0 for the three months ended March 31, 2026 and 2025, respectively, representing an increase of $262 thousand. The increase was due to the Company adjusting the earnout owed to the Sellers of IP.
Debt discount amortization
The debt discount amortization was approximately $28 thousand and $0 for the three months ended March 31, 2026 and 2025, respectively, representing an increase of $28 thousand. The change was due to the amount of convertible debt incurred in FY 2025.
Other income (expenses)
Other expense was approximately $3 thousand for the three months ended March 31, 2026 and other income of $35 thousand for the three months ended March 31, 2025, representing a decrease of $38 thousand. The change was primarily driven by an adjustment to the state and federal taxes credit.
Liquidity and Capital Resources
The Company routinely evaluates its immediate working capital needs and liquidity sources. For the three months ended March 31, 2026 and March 31, 2025, the Company maintained its liquidity sources primarily through cash and cash equivalents, convertible notes, and proceeds received from equity and equity-linked instruments to pay for services and compensation.
Cash and cash equivalents at March 31, 2026 and December 31, 2025 were $110 thousand and $244 thousand, respectively.
Management's Plan to Address Going Concern Considerations
The Company has experienced recurring operating losses, primarily due to limited revenues and net cash used in operations. The Company's current financial conditions and recurring losses raise substantial doubt about its ability to continue as a going concern.
Management is actively pursuing additional funding options and new revenue streams that may contribute additional cash flows over the twelve months following the issuance date of these financial statements.
Management intends to maintain adequate working capital and adhere to prudent financial forecasting. In March 2026, Management began implementing comprehensive expense reduction strategies across the Company’s operations to enhance financial stability.
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Cash Flows
The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods ($ in thousands).
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities | $ | (913 | ) | $ | (1,801 | ) | ||
| Net cash provided by investing activities | $ | – | $ | – | ||||
| Net cash provided by financing activities | $ | 779 | $ | 1,350 | ||||
Cash Flow from Operating Activities
Net cash used in operating activities during the three months ended March 31, 2026, was approximately $913 thousand, which is comprised of (i) our net loss of $3,308 thousand, adjusted for non-cash expenses totaling $2,388 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) decreased by changes in operating assets and liabilities of approximately $7 thousand.
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.
Cash Flow from Investing Activities
There was no cash used by investing activities during the three months ended March 31, 2026 and 2025.
Cash Flow from Financing Activities
Net cash provided by financing activities during the year ended March 31, 2026 was approximately $779 thousand, primarily reflecting $1,000 thousand of proceeds received from the participation agreement, partially offset by $221 thousand of repayments of notes payable.
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..
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 intangible assets acquired as part of the business combination and related contingent consideration. 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, 2026, 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.
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Business Combination
Recognition and Measurement: Companies must recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquiree at their fair value on the acquisition date.
Goodwill: Arises when the consideration transferred in a business combination exceeds the fair value of the net identifiable assets acquired. It represents future economic benefits arising from assets that are not individually identified and separately recognized.
Intangible Assets: Identifiable intangible assets, distinguishable either by separability from the acquired entity or through contractual or other legal rights, are valued and reported independently from goodwill. These assets include, but are not limited to, trademarks, customer relationships, proprietary technology, and patents. The fair value of these intangible assets is determined at the time of acquisition and is subject to subsequent impairment tests.
The fair value of identifiable intangible assets is estimated using income, market, or cost approach methods. The income approach, often applied through the discounted cash flow (DCF) method, involves projecting future cash flows attributable to the asset and discounting them to present value using a discount rate that reflects the risk associated with those cash flows. The estimation of fair value is inherently uncertain due to the assumptions and judgments involved in projecting future cash flows, determining appropriate discount rates, and estimating the useful life of each asset.
Over the reporting period, changes in market conditions, technological advancements, or strategic shifts in the business may necessitate revisions to the assumptions used in the valuation of identifiable intangible assets. Management closely monitors these factors and will adjust the valuation of intangible assets as appropriate, reflecting the impact of any such changes in our financial statements.
Contingent Consideration: Any contingent consideration, such as earn-outs, is measured at fair value at the acquisition date and can be adjusted in subsequent periods if the fair value changes.
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 Infinitus Pay, Inc and FinZeo acquisitions 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, 2026, 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.
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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 not effective as of March 31, 2026 due to the material weaknesses in our internal control over financial reporting as described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for us. Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of March 31, 2026, the effectiveness of our internal control over financial reporting using the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of March 31, 2026.
The management has identified a material weakness in our internal control over financial reporting, primarily due to insufficient formal financial reporting policies and procedures resulting in material post-close adjustments.
Policies and procedures should be implemented to ensure that any significant events requiring disclosure are identified, accounted for, disclosed and reviewed by the management.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting during the three months ended March 31, 2026 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.
Lawsuit with Former Lawyers
On March 13, 2025, Moses & Singer LLP filed a case against AppTech Payments Corp. for unpaid fees of approximately $445 thousand with the American Arbitration Association. AppTech has brought a counterclaim of legal malpractice for $800 thousand. Arbitration is confidential and ongoing and a resolution is expected by June 2026. Invoices for fees and costs to date are reflected in accounts payable.
Finzeo Seller Suit
On October 30, 2025, AppTech Payments Corp. filed a lawsuit in the United States District Court, Southern District of California, against Seller with claims for trade secret misappropriation, fraud, misrepresentation, conversion, unfair business practices, violation of California Penal Code section 502, and breach of contract. The litigation relates to AppTech’s acquisition of membership interests in a company and the company’s related product. The defendant has made claims of an offset based on alleged outstanding payments as part of the acquisition. On November 4, 2025, the Court entered an order approving the parties’ Stipulation re AppTech’s Motion for Temporary Restraining Order and Order, which enjoins Seller, and those acting in concert with him, from (1) disabling the FinZeo URL, (2) foreclosing upon a security agreement, and (3) disclosing AppTech’s proprietary and confidential information, among other relief, until the order is amended or superseded by Court order. Seller has been given leave to file a Counterclaim against AppTech, its Board of Directors, and two AppTech employees, which must be filed by June 1, 2026. Seller’s proposed Counterclaim includes claims based on alleged outstanding payments due to him as part of the acquisition, as well as other related claims.
As of May 6, 2026, Seller represents himself, in pro per. The case is currently in the discovery stage with fact discovery closing in July 2026, expert discovery closing in October 2026, and the final pretrial conference scheduled for March 18, 2027.
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, 2026, no director
or officer
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Item 6. Exhibits.
EXHIBIT INDEX
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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 15, 2026 | By: | /s/ Thomas DeRosa |
| Name: | Thomas DeRosa | |
| Title: | Chief Executive Officer | |
| Date: May 15, 2026 | By: | /s/ Felipe A. Corrado IV |
| Felipe A. Corrado IV | ||
| Chief Financial Officer and Treasurer | ||
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