UNITED STATES SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2020

 

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: 000-27569

 

AppTech Corp. 

(Exact name of registrant as specified in its charter)

 

Wyoming   65-0847995
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)
     
5876 Owens Ave. Suite 100
Carlsbad, California
  92008
(Address of principal executive offices)   (Zip Code)

 

(760) 707-5959

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.001 par value per share APCX OTC Pink Open Market

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

 

 

 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer
         
Non-accelerated filer   Smaller reporting company ☒ 
         
      Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

 

As of June 30, 2020, the last business day of the registrant’s last completed second quarter, the aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $17,922,032 based on the closing price of the registrant’s Common Stock, on June 30,2020, as reported by the OTC Pink Open Market. As of December 31, 2020, the last business day of the registrant’s last completed quarter, the aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $44,470,000 based on the closing price of the registrant’s Common Stock, on December 31, 2020, as reported by the OTC Pink Open Market. For the purposes of this disclosure, shares of Common Stock held by each executive officer, director and stockholder known by the registrant to be affiliated with such individuals based on public filings and other information known to the registrant have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

 

As of March 30, 2021, there were 376 holders of record of our common stock, and there were 106,915,500 shares of Common Stock issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Specified portions of the registrant’s proxy statement with respect to the registrant’s 2021 Annual Meeting of Stockholders, which is to be filed pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended December 31, 2020, are incorporated by reference into Part III of this Annual Report on Form 10-K.

 

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AppTech Corp.

 

Form 10-K

 

Table of Contents  

 

    Page
  Part I  
  Special Note Regarding Forward-Looking Statements and Projections 4
Item 1. Business 5
Item 1A. Risk Factors 17
Item 1B. Unresolved Staff Comments 17
Item 2. Properties 17
Item 3. Legal Proceedings 18
Item 4. Mine Safety Disclosures 18
     
  Part II  
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 18
Item 6. Selected Consolidated Financial Data 20
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
Item 7A. Qualitative and Quantitative Disclosures about Market Risk 24
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 24
Item 9A. Controls and Procedures 24
Item 9B. Other Information 25
     
  Part III  
Item 10. Directors, Executive Officers and Corporate Governance 25
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 26
Item 13. Certain Relationships and Related Transactions and Director Independence 26
Item 14. Principal Accountant Fees and Services 26
     
  Part IV  
Item 15. Exhibits and Financial Statements Schedules 26
Item 16. Form 10-K Summary 26
   
Index to Financial Statements 27
Exhibit Index 52
Signatures 55

 

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PART I

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS

 

Various statements in this report of AppTech Corp. are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties and are based on information currently available to our management. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “contemplates,” “predict,” “project,” “target,” “likely,” “potential,” “continue,” “ongoing,” “will,” “would,” “should,” “could,” or the negative of these terms and similar expressions or words, identify forward-looking statements. The events and circumstances reflected in our forward-looking statements may not occur and actual results could differ materially from those projected in our forward-looking statements.

 

You should not place undue reliance on forward looking statements. The cautionary statements set forth in this prospectus identify important factors which you should consider in evaluating our forward-looking statements. These risks include, but are not limited to, the following:

 

  ●        uncertainty associated with anticipated launch of our text payment platform and other potential advanced payment solutions we intend to launch in the future;
   
  ●         substantial investment and costs associated with new potential revenue streams and their corresponding contractual obligations;
   
  ●         dependence on third-party channel and referral partners, who comprise a significant portion of our sales force, for gaining new clients;
   
  ●         a slowdown or reduction in our sales in due to a reduction in end user demand, unanticipated competition, regulatory issues, or other unexpected circumstances;          
     
  ●         uncertainty regarding our ability to achieve profitability and positive cash flow through the commercialization of the products we offer or intend to offer in the future;
   
  ●         dependence on third-party payment processors to facilitate our merchant services capabilities;
   
  ●         delay in or failure to obtain regulatory approval of our text payment system or any future products in additional countries;
   
  ●         our ability to operate our business while timely making payments pursuant to our loan agreements;
   
  ●         our need to raise additional financing to fund daily operations and successfully grow our Company;
   
  ●         our ability to retain and recruit appropriate employees, in particular a productive sales force;
   
  ●         current and future laws and regulations;
   
  ●         general economic uncertainty associated with the COVID-19 pandemic;
   
  ●         the adverse effects of COVID-19, and its unpredictable duration, in regions where we have customers, employees and distributors;
   
  ●         the adverse effects of COVID-19 on processing volumes resulting from (a) limitations on in-person access to our merchants’ businesses or (b) the unwillingness of customers to visit our merchants’ businesses; and
   
  ●         the possibility that the economic impact of COVID-19 will lead to changes in how consumers make purchases that we are unable to monetize.

 

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All written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We caution investors not to rely too heavily on the forward-looking statements we make or that are made on our behalf. We undertake no obligation and specifically decline any obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please see, however, any further disclosures we make on related subjects in any annual, quarterly or current reports that we may file with the Securities and Exchange Commission (SEC).

 

We encourage you to read the discussion and analysis of our financial condition and our consolidated financial statements contained in this Annual Report on Form 10-K. There can be no assurance that we will in fact achieve the actual results or developments we anticipate or, even if we do substantially realize them, that they will have the expected consequences to, or effects on, us. Therefore, we can give no assurances that we will achieve the outcomes stated in those forward-looking statements and estimates.

 

Unless the context otherwise requires, throughout this Annual Report on Form 10-K, the words “AppTech” “we,” “us,” the “registrant” or the “Company” refer to AppTech Corp.

 

Item 1. Business.

 

Business Overview

 

We intend to simplify and streamline digital financial services for corporations, small and midsized enterprises (“SMEs”) and consumers through innovative payment processing, reconciliation and digital banking technologies that complement our core merchant services capabilities. Our company’s merchant services provide financial processing for businesses to accept cashless and/or contact less payments, such as credit cards, ACH, wireless payments, and more. Our patented, exclusively licensed, and proprietary merchant services software offers, or will offer, integrated solutions for friction less digital and mobile payment acceptance including acceptance of alternative payment methods (“APMs”); we are supplementing these capabilities with software that solves for multi-use case, multi-channel, API-driven, account-based issuer processing for card, digital tokens, and payment transfer transactions. Our innovative and scalable business model allows for expansive white-labeling, SaaS, and embedded payment solutions that will drive the digital transformation of financial services and generate diverse revenue streams for our company.

 

We believe the financial services industry is going through a period of intensive change driven by the advancement of technology, the adaptation to societal changes resulting from COVID-19, and otherwise, and the rapid rise of contactless transactions. End-users are beginning to expect ease of use and an enhanced user experience in all of their daily financial transactions. In this rapidly evolving digital marketplace, merchants have broad and frequently changing requirements for payment processing to meet consumer expectations and operational requirements. Our flexible and configurable financial services platform will enable us to provide solutions that meet each merchant’s current needs while providing scope to solve for their future development plans and opportunities allowing merchants to take advantage of future platform development and new innovative digital financial solutions through clean APIs and our scalable global infrastructure. By taking a holistic view of all aspects of our clients’ business, including risk, volume, user experience, integration capabilities and technical needs, we are able to create optimal and extensible financial technology solutions. Merchants and independent software vendors (“ISVs”) that require integrated financial technology solutions to best serve their customers are looking beyond basic payment acceptance and “lowest price” models. These entities recognize that staying competitive in the digital age requires a partner that provides a platform capable of delivering flexibility and growth while streamline operations to continue increase revenue and profitability. While we offer extremely competitive pricing, we believe the value we create for merchants, SMEs, ISVs and regional banking institutions through our technology, services and consultative approach will create true differentiation from our competitors.

 

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Through exclusive licensing and partnership agreements, we believe we will become leaders in the embedded payment and digital banking sectors by supporting digital, tokenized, multi-channel, embedded API-driven transactions. We will augment this position through the integration of our merchant services and secure text payment solution with extensive digital account-based and multi-channel issuer payment processing capabilities. This will enable us to provide our merchant customers an end-to-end payment acceptance and digital banking solution and will power straight-through processing and embedded payments opportunities in the B2B space.

 

A key to the company’s success and market penetration relies on the continued development of enterprise-grade, patent protected software for SMS text payments via a mobile device. Our patented technology manages text messaging for processing payments, notification, response, authentication, marketing, advertising, information queries and reports. Our software platform will extend merchants’ marketplace capabilities creating new avenues and channels to request and receive frictionless, digital payments and engage end-users utilizing a familiar, convenient and widely adopted technology.

 

Once an account is established through a multi-currency digital wallet, internet connectivity or a specific application are not required to process payments between merchants and end-users. These features will be particularly beneficial for the unbanked and under banked individuals in developing and emerging markets where access to the internet on a mobile device and modern banking institutions may not be readily available.

 

We believe our technologies will greatly increase the adoption of mobile payments and alternate banking solutions in a sector that appears to have little alternative but to adapt and migrate towards new technologies that facilitate convenient and safe contactless payments. To survive and succeed in this environment, businesses may need to adopt new technologies to engage, communicate and process payments with their customers. We believe that, by embracing technological advancement in the payment and banking industries, we are aligned in the precise direction that our current and prospective customer base is trending towards. We intend for our current and future products to be at the forefront in providing solutions that enable and facilitate these anticipated changes.

 

We are also expanding upon our financial technology foundation into the telehealth and remote patient monitoring sectors in response to cultural shifts and new healthcare demands of society. We have identified a need for the integration of payment acceptance technologies into the burgeoning telehealth sector. We believe this sector’s focus to date has been on providing health-related telecommunications but the way in which fees and payments for these services are requested and accepted is being overlooked. We intend to fill this identified shortfall by developing technologies and payment-related services to aid companies providing telehealth solutions. Through a strategic partnership, we plan to help bring to market personal emergency response and remote patient monitoring services and equipment to help ensure the safety of the elderly and injured or sick patients while providing peace of mind to family members, care givers and retirement communities. These solutions increase patients’ access to comprehensive care options and allow medical teams to intervene in a timely manner to avoid more serious health concerns. By providing financial and administrative services we will have the opportunity to receive substantial revenue share from recurring revenue billed through Medicare with the potential for substantial growth and substantial profit margins.

 

Industry and Market Data

 

We use market data and industry forecasts throughout this registration statement and, in particular, in the sections entitled “Industry Overview.” Unless otherwise indicated, statements in this registration statement concerning our industry and the markets in which we operate, including our general expectations, competitive position, business opportunity and market size, growth and share, are based on information obtained from industry publications, government publications and third party forecasts. The forecasts and projections are based upon industry surveys and the preparers’ experience in the industry. There can be no assurance that any of the projections will be achieved. We believe that the surveys and market research performed by others are reliable, but we have not independently verified this information. Accordingly, the accuracy and completeness of the information are not guaranteed.

 

Industry Overview

 

The financial technology and payment processing industries are an integral part of today’s worldwide financial structure. The electronic payments industry is massive, with growth fueled by powerful long-term trends that continue to increase the acceptance and use of electronic payments compared to paper-based payments. According to The Nilson Report, purchase volume on credit, debit and prepaid cards in the United States was approximately $6.1 trillion in 2018 and is estimated to reach nearly $10.4 trillion by 2027, a compound annual growth rate, or CAGR, of 6.1%.

 

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The payment processing industry continues to evolve rapidly, based on the application of new technology and changing customer needs. Changes in technology have allowed for new payment methods, such as mobile and contactless payments, and merchants increasingly need new methods of interacting with their customers, deliver a frictionless experience and to ensure loyalty and repeat business. As consumers continue to integrate mobile devices into their lives, there will be increased demand to conduct business on these devices. According to Businesswire, the global mobile payment market was valued at $1,449.56 billion in 2020 and is expected to reach over $5,399.6 billion in 2026 with growth at a CAGR of 24.5% over the forecast period (2021 - 2026).

 

GSMA Intelligence reported in 2019 that globally, there are more than 9.2 billion mobile connections and 5.1 billion mobile subscribers with text messaging capabilities. Statista asserted that just over 3.9 billion of these devices have access to mobile internet.

 

The pandemic environment of 2020 added fuel to the fire and accelerated these trends in a way no one could have predicted. An Accenture study found that a total of 2.7 trillion transactions worth $48 trillion shifted from cash to other forms of payments, representing a $300 billion opportunity for payment providers. The pandemic also narrowed the generational gap between digital payment preferences, with nearly two thirds (64%) of consumers saying they used contactless cards during the pandemic.

 

Telehealth uses information and communication technology to overcome distance barriers and improve access to healthcare. According to Fortune Business Insights, the global telehealth market size was valued at $61.40 billion in 2019 and is projected to reach $559.52 billion by 2027, exhibiting a CAGR of 25.2% during the forecast period. Reports and Data reported the remote patient monitoring market is forecast to reach $2.14 billion by 2027 with a CAGR of 14.1%.

 

Our Competitive Strengths

 

We believe our adaptable technology and holistic product offering differentiate us from our competitors. Our products, many of which could be launched in a matter of months, help to eliminate much of our sector’s reliance on legacy payment rails and financial systems. Management believes by not being restricted by antiquated foundational technology the applicability and frictionless nature of our products will offer an immediate impact on the digital financial services industry. Further, while technologically advanced, the products will be comfortable to end-users allowing for a seamless adoption.

 

The patent protection to some of our products is uncommon within the fintech industry. This protection prevents competitors from trying to replicate our products in order to carve away at our anticipated market share. Therefore, backing our text payment and lead generation products with patents strengthens the viability of such products by limiting direct competition.

 

Our patent protected text payment system’s anticipated capabilities also set us apart. By creating a product that permits mobile payments without the need for a data plan, internet or an application, we will have the unique ability to extend our customer base to target unbanked and underbanked individuals primarily in developing or emerging markets. Integrating consumers that are not traditionally included in the payment space will allow us to have a larger potential market than many of our competitors.

 

The features and capabilities of products we intend to bring to market allow for agile transaction processing which supports API-driven, multi-channel and secure products. The ability for such products to be embedded into other technologies while supporting multi-currency transactions set our anticipated suite of products apart from many large, established fintech companies.

 

Our Growth Strategy

 

We intend to grow through leveraging our existing IP, developing with strategic partner relationships that uniquely complements our core businesses and through selective acquisitions. From traditional merchant accounts to customizable inbound and outbound payment solutions, we intend to modernize and enhance the payment processing and digital banking capabilities for businesses throughout the world. Our business objective is to generate revenue based on licensing fees, synergistic product lines, processing fees, SaaS distribution and continual advancement of our IP portfolio.

 

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Our target market is SMEs seeking to broaden their distribution through the addition of digital payment channels and SMBs looking to create competitive advantage by reducing integration complexity and streamlining their payment processing services. We also intend to target financial institutions looking to maintain their ability to compete by digitizing their financial services offerings to meet market demand, enhance their customer’s user experience through the development of innovative and user centric multi-channel, multi-currency, digital financial products. We intend to utilize a white-label SaaS delivery model, which will allow for service fees, revenue sharing and back-end processing fees. Further, by offering SMEs a full array of lead generation services, merchant services processing and digital banking technologies, we will allow them to better interact with their customers and provide additional, dynamic means of processing both inbound and outbound payments. SMEs generally lack the resources of large enterprises to invest heavily in technology. As a result, they are more dependent on service providers, such as us, to handle critical functions including payment acceptance and other support services and are likely to be early adopters of new services that will further increase their efficiency and drive growth.

 

Businesses’ financial technology needs are increasingly complex. As electronic and mobile commerce continues to grow, businesses have no alternative but to use technology to better reach their customers. We believe that delivering novel, adaptive, scalable and operationally efficient products that meet their financial services needs will result in rapid market penetration for our anticipated products launches.

 

While leveraging new technology is vital to our growth plan, it is equally important that the technology is relevant and seamlessly fits into and benefits our end-user’s everyday life. Consumers are sometimes reluctant to alter their typical routines, especially when it relates to financial services. The anticipated launch of our text payment system and broader digital banking and payments solutions will meet both these needs. We will offer payment acceptance technologies that do not rely on legacy payment rails while allowing the end-user to transact frictionless and secure payments with the comfort of text messaging. Once properly developed and rolled out, we anticipate rapid adoption.

 

We seek to grow our business by pursuing the following strategies:

 

  Increasing our customer base by offering unique and compelling, patent protected technology solutions;
     
  Driving growth in our merchant services business through new and flexible technologies, including our secure text payment system, that will enable our customers to adapt to a rapidly changing marketplace;
     
  Rolling-out our API-driven, account-based, issuer processing solution for card, digital token, and payment transfer transactions that will enable us to target multi-currency and multi-channel digital banking and embedded B2B payment opportunities;
     
  Engaging end-users via lead generation and text marketing services to enable businesses to better communicate with their customers and integrate our full suite of products;
     
  Maintaining technological leadership by continuing to innovate and improve our scalable, extensible, cloud-based technology;
     
  Pursuing strategic acquisitions, investments or partnerships to complement and bolster our suite of fintech products;
     
  Creating cross-selling synergies through white-labeling or SaaS distribution enabling us to provide a holistic suite of products and services to merchants, banking institutions and SMEs;
     
  Utilizing a scalable business model to eliminate certain barriers to rapid growth; and
     
  Expanding into the telehealth sector by offering advanced remote patient monitoring technologies.

 

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Vital to our future success is the market penetration of our current and future products. Our market penetration strategy includes four elements: (1) royalty-free licenses; (2) engaging close industry contacts; (3) utilizing potential market share shifting IP; and (4) illustrating the need for our fintech products amongst our target industry segments.

 

To gain a market share, we plan to initially offer royalty-free licenses for our text messaging and complimentary payment solutions in exchange for processing the related payments. By incentivizing potential clients with free access to advanced, patented technology, we will give clients the ability to bolster and enhance their fintech capabilities, while creating revenue streams for our full suite of products.

 

With years of fintech experience, management believes we can leverage our industry contacts and past clients in order to gain valuable contracts with businesses. Engaging individuals with the ability to integrate our products may prove invaluable. Further, through our channel partnerships, we have an expansive network of potential clients to integrate our technology into their payment processing solutions.

 

Management believes there are substantial opportunities in emerging and developing markets for our anticipated products. Our mobile payment and digital banking solutions offer innovative avenues to unbanked and underbanked communities to transact and provide remittances. Further, since internet connectivity is not required for our text payment solution, individuals with limited internet access will still be able transact. These two factors have the ability to open our products to markets with immense growth potential.

 

Companies are regularly attempting to identify ways to stay in contact with their customers and create new payment channels. Our products do precisely this. When customers sign up for our secure text payment system, clients will have the ability to integrate a text messaging waiver into the registration process. This allows for clients to have fresh, opted-in contact information which can be paired with our text messaging services for notification, response, authentication, marketing, advertising, information queries and reports. It is our intent to market these identifiable benefits to companies in order to illustrate the advantages of partnering with us. Specific industries that could utilize our secure text payment system are pharmacies, collection agencies, charitable and religious organizations, utility companies, property management companies and any business that relies upon recurring business or subscription management services.

 

Our partnership with NEC Payments’ internationally experienced and proven team of subject matter experts will enable our management to focus resources on delivering growth using the strategies described above. We will do this with full confidence that the business is being powered by innovative technology IP running on robust, secure and scalable highly-available cloud infrastructure.

 

Management believes our partnership with Silver Alert Services, LLC will be the initial foothold for our expansion in the telehealth sector. Our strategic partnership providing financial services in support of their remote patient monitoring devices has the opportunity to create substantial revenue. However, with the emergence of new telehealth platforms and the rapid shift towards e-visits, many of which require a private payer model, we believe our payment acceptance technology, specifically our embedded capabilities will have widespread application in the sector.

 

Our Products and Services

 

Merchant Services

 

Our core historical business is merchant transaction services. We create revenue by processing payments for credit and debit cards via POS (point of sale) equipment, e-commerce gateways, periodic ACH (automatic clearing house) payments and gift & loyalty programs. We currently support over 100 merchants representing dozens of market verticals in managing their financial transactions.

 

Each merchant has unique needs for payment processing. As a result, we have a variety of processing partners to meet each merchant’s requirements. In addition to these needs, we take into consideration certain aspects of each business in choosing the optimal processing partner including risk, volume, customer service, integration capabilities, product features and profitability.

 

Our processing partners include Total Systems Services (“TSYS”)/Global Payments., JetPay an NCR Payment Solutions Company, Harbortouch Payments a Shift4 Company, Cynergy Data/Priority Payments Systems Group, Novera/WorldPay and High Risk Holdings, LLC, with each providing products and services that meet each of our merchants’ needs. Currently, our partners manage our backend payment processing needs in addition to managing risk and compliance on our behalf. Through the implementation of our proprietary payment processing protocols as we grow our customer base, we will manage the risk and compliance ourselves, which will increase our margins on each transaction processed.

 

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Using our proprietary software, together with our partnerships, we are able to offer our merchants payment integration APIs including data encryption, payment tokenization and issuing banking authorization, and the creation of white-label, merchant-specific mobile applications. As we move forward with our secure text payment system and other products, we intend to enter new partnership agreements to align with our plans to integrate advanced processing capabilities, permitting the global expansion of our financial services technologies.

 

Text Payment System

 

We are developing a comprehensive and broad mobile payment platform which, once an account is established, relies solely on SMS text messaging. By integrating our payment processing with text messaging and a digital wallet, we intend to offer the mobile payment industry’s first and only patent protected text payment system. The integration of direct, reliable, instant, and familiar text messaging with secure payments is how we believe we bridge the gap between fintech and mobile wireless systems.

 

Anticipated features of our secure mobile payments include:

 

  Utilization of standard SMS (Short Message Services) text messaging;
     
  A payment platform that does not require mobile internet, a data plan or a mobile application;
     
  A secure text payment protocol that can be used on all traditional and smart cellular phones on all major global carriers without any additions or modifications to the mobile user wireless plan; and
     
  Simple authentication of the end-user.

 

We intend for our secure text payment system to offer a simple, three-step SMS text process utilizing a digital wallet, necessary to verify payee and payor identification, account numbers and fund availability for pre-registered users. Payment may be engaged by the mobile user messaging a set of keywords to an established short code managed by us, or a merchant can contact an opted-in mobile user inquiring whether they desire to make a payment. The registered user will authorize the amount and company in which they intend to remit payment.

 

Within the text payment platform there are three distinct services that are used. These include: (1) our patented text messaging platform, (2) a digital wallet and (3) payment processing. Depending on the needs of the merchant, we may provide all three services or only license our text messaging platform to a business that utilizes their own/third-party digital wallet and alternate payment processors. Through licensing agreements, we possess modern application programming interfaces (APIs) to allow licensees to develop their own, white-labeled software applications. This flexible approach allows for an opportunity for greater market penetration.

 

Our text payment system will be used by businesses seeking to maintain contact with customers and find new ways to receive payments. A utility company could contact a customer via text message informing them their bill is due, then ask if they would like to pay their bill via text message. A church could contact their parishioners asking to contribute their weekly tithe and companies can create simplistic ways to update, inform and process transactions with brand loyalists.

 

Our text payment system is still in development. Continued development including integration, testing and certification are still needed in order to be marketable. Management currently believes the text payment system will be launched in third quarter of 2021.

 

We believe this simple payment process has widespread application and potential for widespread adoption by mobile users because it utilizes a technology many end users are comfortable with and use daily. The process is quick and user-friendly allowing businesses to simply expand their payment receiving capabilities. Management believes no other product exists that provides verification of accounts and funds, authentication of user identity, and the authorization of payment processing in the same fashion as our anticipated product.

 

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The following is a visual depiction of the text payment system:

 

 

 

Digital Banking Platform, BaaS& Embedded Payments

 

AppTech’s white-label, digital banking technology platform with payment capabilities will equip financial institutions (FIs), technology providers and brands with a digital “bank-in-a-box” – also referred to as our Banking-as-a-Service (BaaS) (“Platform”). Furthermore, our Platform will enable multi-channel, multi-currency, pure digital financial services products unlike any other providers in the world. It incorporates a “plug-and-play” capability to enact deep integration with payment gateways and POS merchant services to form an end-to-end payment acceptance and digital banking solution. In detail, we intend the Platform to enable innovative and disruptive digital distribution products including:

 

  Neo-Banking for Consumers and SMEs;
  B2B and Consumer Virtual Payments (VCNs);
  Multi-Currency Money Management and P2P Money Transfer;
  Payroll, Expenses Management and B2C and G2C disbursements;
  Treasury Management;
  Gift, Incentive and Reward programs for retail, wholesale and employee benefits;
  Any other product that requires a prepaid or credit balance to be held and transacted upon.

 

Other attributes to our Platform will include:

 

Patented Technology including a Text-to-Pay patent that enables B2B, B2C and P2P payments via SMS. Combined with 4 mobile-to-computer messaging and lead generation patents, we can enable FIs, technology companies and businesses to unlock innovative customer experiences.
Personalization is also at the core of our BaaS. Through marketing automation capabilities, our BaaS provides an industry first online-to-offline customer attribution capability. Licensees of our BaaS will be able to link their customer’s online behavior to their buying preferences in real-time in order to personalize the selling and buying experience.
Automation is delivered as a part of our BaaS and through our APIs that unlock automated financial transactions and customer experiences. For example, like Acorns and other automated financial wellness apps, our BaaS can easily be leveraged to create similar money saving experiences like round ups, i.e., rounding to the nearest dollar and depositing the difference between the purchase price and round-up into a digital bank account.
Integration is central to our digital banking platform and BaaS. As such, AppTech offers developers and enterprises an open platform with flexible Rest APIs to build new payment and financial transaction features in SaaS and cloud apps.
Embedded Payments are delivered as a configurable SaaS for scalability and to meet ever-evolving business goals and customer experiences.

 

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Lead Generation

 

The lead generation industry has relied on thousands of “cold calls” that are rarely answered. According to the Mobile Marketing Association, the only wireless technology that is opened up 98% of the time is SMS text message. As a supplement to our merchant services business, we offer a patent protected SMS text messaging lead generation service for advertising, marketing and alerting our merchants’ customers directly.

 

Using the merchant’s own opted-in mobile number database, our lead generation service can regularly offer the merchants’ customers with the merchant’s latest in the products and services, promotions, discounts, appointment scheduling. Additionally, it can provide payment reminders, which can then be purchased via our text payments solution should merchants choose to utilize this service. Soliciting consumers requires added incentive and, as a solution, we plan on integrating a reward program. Management believes this will increase our merchant customers’ revenues and increase our customer base.

 

Our lead generation platform utilizes our patented text messaging capabilities to deliver text marketing services. Further, merchants and business will able to utilize data captured through the transaction which may be offered back to the merchant to leverage marketing trends.

 

By offering merchants our lead generation services, it provides an opportunity for cross-selling our text payment system. For example, a pharmacy using our services to inform their consumer that their prescription is filled can then send a follow-up text asking if the consumer is interested in paying for the prescription via our text payment. Management believes this cross-selling synergy has the ability to increase revenues for all the services we offer.

 

Our digital text messaging for marketing, advertising, information queries and alert notifications has extensive applications across numerous industries. Our past, present, and future clients will have direct access to their end user customers offering them targeted information and new services. Just as important, our technology is scalable, easily allowing us to meet the needs of our growing customer base.

 

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The following is a visual representation of our lead generation system:

 

 

 

Our Intellectual Property

 

Our intellectual property is an important component to our business. Our strategy is to continue to build on our existing patent base and further develop additional patents and intellectual property as we grow our business domestically and internationally. Our management believes developing patent-based software products, integrating new technologies and creating intellectual property will significantly contribute to our performance. We also believe we will be able to leverage our existing patents to cross-license with other, leading, innovative patented technology partners.

 

We have incorporated four USPTO patents into our operational, enterprise-grade text messaging platform for SMS marketing, advertising and sales. By integrating our SMS technology with our MFA payment system, we will offer secure text payments. In addition to secure text payments, our MFA allows users to authenticate and validate in order to access private data and complete online transactions and inquiries. Our proprietary text messaging capabilities also allow users to send and receive a text message from a short code and initiate two-way chat from a mobile to a computer using only text-messaging.

 

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8,369,828   8,315,184   8,572,166   8,073,895
             
Mobile-to-Mobile Payment System and Method   Computer-to-Mobile Two-Way Chat System and Method   System and Method for Delivering Web Content to a Mobile Device   System and Method for Delivering Web Content to a Mobile Device
SMS chat on a computer short or long codes, chat on circuit & packet switch networks, chat on paging channels.   Receiving, displaying, linking web content via URL from application delivered via SMS short code to at least one mobile.   Receiving, displaying, linking web content via URL from application delivered via SMS short code to at least one mobile.   Embedding of a URL in a text message from a pop- up screen.
             
Expiration Date:   Expiration Date:   Expiration Date:   Expiration Date:
11-12-2029   11-14-2030   09-28-2024   02-26-2027

 

Patent Number 8,369,828 is at the core of our Secure Text Payment System. The patent enables a mobile user to initiate a request for payment to a payee via SMS text message. Patent Number 8,315,184 utilizes short and/or long codes to send and receive text messages from an application to a mobile device. Patent Number 8,572,166 embeds a URL in a text message sent from an application to a mobile device. These patents comprise the components of our Secure Text Payment System. Patent Number 8,073,895 provides us another capability of delivering web content to a mobile device.

 

We currently have one additional patent pending. We anticipate seeking additional patents, including derivative patents, as we continue to innovate to better meet our customer’s needs. In addition to incorporating our intellectual property into our offerings, we will license all or some of our technology to third parties to increase our revenue and speed market acceptance of our products and services.

 

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Regulations

 

Various aspects of our business are subject to U.S. and non-U.S. federal, state and local regulation. Many domestic laws and regulations that affect companies conducting business on the Internet and companies transmitting user information and payments via text message or other electronic means are still evolving and the interpretation of such laws and regulations are often uncertain. Failure to comply with applicable laws and regulations may result in the suspension or revocation of licenses or registrations, the limitation, suspension or termination of services and/or the imposition of civil and criminal penalties and/or fines. Our services to mobile phone carriers are also further subject to certain of the rules and policies of such carriers and ongoing contractual covenants with such carriers, the violation of which may result in penalties and/or fines and possible termination of our services. Certain services we offer are also subject to rules set by various payment networks, such as Visa and MasterCard.

 

Association and Network Rules. While not legal or governmental regulation, we are subject to the network rules of Visa, MasterCard and other payment networks. In order to provide processing services, we are registered with Visa and/or MasterCard as a service provider for member institutions. As a processor level member of numerous networks, we are also subject to various network rules in connection with processing services and other services we provide. As such, we are subject to applicable card association, networks and national scheme rules that could subject us to fines or penalties. The payment networks routinely update and modify their requirements. Under these rules, we may potentially receive notices of non-compliance and fines, which might be related to excessive charge backs by a merchant or data security failures. Our failure to comply with the networks’ requirements or to pay the fines they impose could cause the termination of our registration and require us to stop providing payment services.

 

Dodd-Frank Act. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was signed into law in the United States. The Dodd-Frank Act has resulted in significant structural and other changes to the regulation of the financial services industry.

 

The Dodd-Frank Act provided two self-executing statutory provisions limiting the ability of payment card networks to impose certain restrictions that became effective in July 2010. The first provision allows merchants to set minimum dollar amounts (not to exceed $10) for the acceptance of a credit card (and allows federal governmental entities and institutions of higher education to set maximum amounts for the acceptance of credit cards). The second provision allows merchants to provide discounts or incentives to entice consumers to pay with cash, checks, debit cards or credit cards, as the merchant prefers.

 

Separately, the so-called Durbin Amendment to the Dodd-Frank Act provided that interchange fees that a card issuer or payment network receives or charges for debit transactions will now be regulated by the Federal Reserve and must be “reasonable and proportional” to the cost incurred by the card issuer in authorizing, clearing and settling the transaction. Payment network fees, such as switch fees may not be used directly or indirectly to compensate card issuers in circumvention of the interchange transaction fee restrictions. In July 2011, the Federal Reserve published the final rules governing debit interchange fees. Effective in October 2011, debit interchange rates for card issuing financial institutions with more than $10 billion of assets are capped at $0.21 per transaction with an additional component of five basis points of the transaction’s value to reflect a portion of the issuer’s fraud losses plus, for qualifying issuing financial institutions, an additional $0.01 per transaction in debit interchange for fraud prevention costs. The debit interchange fee would be $0.24 per transaction on a $38 debit card transaction, the average transaction size for debit card transactions. In July 2013, the U.S. District Court for the District of Columbia determined that the Federal Reserve’s regulations implementing the Durbin Amendment were invalid. The U.S. Court of Appeals for the District of Columbia, or D.C. Circuit, reversed this decision on March 21, 2014, generally upholding the Federal Reserve’s interpretation of the Durbin Amendment and the Federal Reserve’s rules implementing it. On August 18, 2014, the plaintiffs in this litigation filed a petition for a writ of certiorari asking the U.S. Supreme Court to review the D.C. Circuit’s decision with respect to the interchange fee cap. We continue to monitor developments in the litigation surrounding these rules. Regardless of the outcome of the litigation, the cap on interchange fees is not expected to have a material direct impact on our results of operations.

 

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In addition, the new rules contain prohibitions on network exclusivity and merchant routing restrictions. Beginning in October 2011, (i) a card payment network may not prohibit a card issuer from contracting with any other card payment network for the processing of electronic debit transactions involving the issuer’s debit cards and (ii) card issuing financial institutions and card payment networks may not inhibit the ability of merchants to direct the routing of debit card transactions over any card payment networks that can process the transactions. Since April 2012, most debit card issuers have been required to enable at least two unaffiliated card payment networks on each debit card. We do not expect the prohibition on network exclusivity to impact our ability to pass on network fees and other costs to our clients. These regulatory changes create both opportunities and challenges for us. Increased regulation may add to the complexity of operating a payment processing business, creating an opportunity for larger competitors to differentiate themselves both in product capabilities and service delivery.

 

Federal Trade Commission Act and Other Laws Impacting our Customers’ Business. All persons engaged in commerce, including, but not limited to, us and our merchants are subject to Section 5 of the Federal Trade Commission Act prohibiting unfair or deceptive acts or practices, or UDAP. In addition, there are other laws, rules and or regulations, including the Telemarketing Sales Act, that may directly impact the activities of our merchant customers and in some cases may subject us, as the merchant’s payment processor, to investigations, fees, fines and disgorgement of funds in the event we are deemed to have aided and abetted or otherwise provided the means and instrumentalities to facilitate the illegal activities of the merchant through our payment processing services. Various federal and state regulatory enforcement agencies including the Federal Trade Commission, or FTC, and the states’ attorney general have authority to take action against nonbanks that engage in UDAP or violate other laws, rules and regulations and to the extent we are processing payments for a merchant that may be in violation of laws, rules and regulations, we may be subject to enforcement actions and as a result may incur losses and liabilities that may impact our business.

 

Anti-Money Laundering and Counter Terrorist Regulation. We are also subject to U.S. federal anti-money laundering laws and regulations, including the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 (collectively, the BSA). The BSA requires, among other things, that money services businesses to develop and implement risk-based anti-money laundering programs, report large cash transactions and suspicious activity and maintain transaction records.

 

We are additionally subject to economic and trade sanctions programs administered by the Treasury Department’s Office of Foreign Assets Control, or OFAC. These programs prohibit or restrict transactions to or from or dealings with specified countries, their governments and, in certain circumstances, their nationals, narcotics traffickers, and terrorists or terrorist organizations. We are also subject to other countries’ laws, where applicable, regarding anti-money laundering, counter terrorist financing and proceeds of crime.

 

Anti-Corruption. We are subject to applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, in the jurisdictions in which we operate. Anti-corruption laws generally prohibit offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a government official or private party in order to influence official action or otherwise gain an unfair business advantage.

 

Telephone Consumer Protection Act. We are subject to restrictions regarding telemarketing practices. Under the Telephone Consumer Protection Act (“TCPA”), telephone solicitations and the use of automated phone equipment is subject to strict solicitation rules. This includes the use of pre-recorded voice messages, automatic dialing, text messaging, and fax use. Absent informed consent by the consumer, commercial telemarketers are prohibited from making unwanted, unsolicited sales calls to mobile devices. The TCPA affects our ability to contact consumers in association with our secure text payment system and lead generation services. Violations of the TCPA may be enforced by the FCC or by individuals through litigation, including class actions and statutory penalties for TCPA violations ranging from $500 to $1,500 per violation, which is often interpreted to mean per phone call. While we intend to implement processes and procedures to comply with the TCPA, any failure by us or the third parties in which we rely on for data, to adhere to, or successfully implement, appropriate processes and procedures in response to existing or future regulations could result in legal and monetary liability, fines and penalties, or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition and results of operations.

 

Controlling the Assault of Non-Solicited Pornography and Marketing Act. We are subject to laws restricting the use of commercial messages, including text messaging. The Act generally prohibits the use of deceptive subject lines, must accurately identify the sender, and denote the message as an advertisement. In addition, recipients must include a clear and conspicuous explanation of how to opt-out of receiving the messages and the sender must remove the recipient within 10 business days of the receiver opting-out.

 

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Payment Card Industry Data Security Standard. We are subject to the information security standard for organizations processing, storing or transmitting credit card information. The standard was created to increase controls around cardholder data to reduce credit card fraud. As we continue to process and store credit card information, the failure to adhere to the standards has the ability to have a material adverse effect on our business, financial condition and results of operations. However, through partnerships with Total Systems Services, Inc. and Oracle Corporation, we are able to utilize preventative measures when we store, process or transmit cardholder data, helping us to meet PCI level 1 compliance.

 

Other Laws and Regulations

 

Since we collect certain information from members and users on our platform, we will be subject to current and future government regulations regarding the collection, use and safeguarding of consumer information over the Internet and mobile communication devices. These regulations and laws may involve taxation, tariffs, user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, consumer protection and electronic payment services. In many cases, it may be unclear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet or mobile communication services as the vast majority of these laws were adopted prior to the advent of these technologies and do not contemplate or address the unique issues raised by the Internet and e-commerce.

 

There are a number of legislative proposals that are anticipated or pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning data protection which could affect us. Many states, for example, have already passed laws requiring notification to subscribers when there is a security breach of personal data. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data practices, which could have an adverse effect on our business. In addition, some states are interpreting their own statutes differently than federal law. This may create additional compliance burdens.

 

Legislation could be passed that limits our ability to use or store information about our users. The Federal Trade Commission FTC and various states have established regulatory guidelines issued under the Federal Trade Commission Act and various state acts, respectively, that govern the collection, use and storage of consumer information, establishing principles relating to notice, consent, access and data integrity and security. Our practices are designed to comply with these guidelines.

 

The foregoing list of laws and regulations to which we are subject is not exhaustive, and the regulatory framework governing our operations changes continuously. Enactment of new laws and regulations may affect our operations, and could potentially result in increased regulatory compliance costs, litigation expense, adverse publicity, and/or loss of revenue. We believe our policies and practices comply with the FTC privacy guidelines and other applicable laws and regulations. However, if our belief proves incorrect, or if these guidelines, laws or regulations or their interpretations change or new legislation or regulations are enacted, we may be compelled to provide additional disclosures to our users, obtain additional consents from our users before collecting or using their information or implement new safeguards to help our users manage our (or others’) use of their information, among other changes.

 

Employees

 

As of the date of this annual report, we have three full-time employees and seven consultants. In addition to our employees, we utilize various consultants and contractors for other services on an as-needed basis.

 

Item 1A. Risk Factors.

 

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.

 

Item 1B. Unresolved Staff Comments

 

Not applicable.

 

Item 2. Properties

 

Our headquarters is located at 5876 Owens Avenue, Suite 100, Carlsbad, Ca 92008, consisting of approximately 3000 square feet of office space. Our lease on this facility expires in February 2025. We anticipate that following the expiration of the lease, during the term of the current lease, depending on various factors, we will be able to lease or purchase additional or alternative space at commercially reasonable terms.

 

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Item 3. Legal Proceedings

 

In November 2017, two shareholders of AppTech, filed another lawsuit against us in the State of California. The lawsuit has been transferred to the United States District Court for the Southern District of California. We filed an answer, affirmative defenses and counter claims. Management believes that the Plaintiff misrepresented and mislead us during our merger with Transcendent One, Inc. The court has encouraged the parties to settle. Even though the Company believes the lawsuit is without merit and will vigorously defend, the Company has made several offers to settle. On December 19, 2019, the Company entered into a settlement and release agreement. The Company has recorded the liability as of December 31, 2019 for the total obligation of $240,000 to be paid out over three years beginning February 15, 2020. On January 24, 2021, the parties entered a stipulation modifying the repayment schedule of the settlement. We are current on the modified repayment schedule.

 

In September 2018, a complaint was filed in San Diego superior court for a breach of contract arising from a written agreement for the purchase of a judgment to which AppTech was not a party. The purchase of the judgment was part of the transaction to acquire the patents. AppTech substantially performed under the agreement but the second agreement to extend the final payment was executed under alleged duress. On October 26, 2018, the Company filed an answer that denied each and every purported allegation and cause of action and further denied that they caused any damage or loss. On December 3, 2019, the Company entered into a conditional settlement providing the terms of the conditional settlement have been completed by October 1, 2020. The conditional settlement amount of $150,000 was paid in monthly installments of $15,000. The settlement installments paid for the year ended December 31, 2020 was $135,000. On December 30, 2020,full payment was made in accordance with a modified settlement payment schedule.

 

In July of 2020, an owner and corporation having a business opportunity filed a lawsuit in the State of California alleging a breach of contract, intentional misrepresentation, fraudulent inducement of contract, negligent misrepresentation and unjust enrichment relating to a non-binding memorandum of understanding (“MOU”) between the parties and its associated circumstances in 2016. Process was served on January 8, 2021. The Plaintiffs filed an amended complaint on March 15, 2021. Management believes the agreement was non-binding, the statute of limitation has expired and the allegations have no merit. We intend to file an answer, affirmative defenses and counter claims in the near future. We currently own a judgment against the owner and corporation in the amount of $516,932.

 

ITEM 4. Mine Safety Disclosures

 

Not applicable.

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

 

Our common stock has been registered with the SEC since 1999 and trading since 2010. It is currently listed on the OTC Pink Open Market under the symbol “APCX”.

 

Stockholder Data

 

As of March 30, 2021, there were 376 holders of record of our common stock, and there were 106,915,500 shares of our common stock issued and outstanding.

 

Dividends

 

We have not declared or paid any cash dividends on our common stock since our inception. We do not plan to pay dividends in the foreseeable future. We currently intend to retain earnings, if any, to finance our growth. Consequently, stockholders will need to sell shares of our common stock to realize a return on their investment, if any.

 

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Equity Compensation Plan

 

For information regarding securities authorized under the equity compensation plan, see Item 12. 

 

Recent Sales of Unregistered Securities

 

During 2021 year-to-date, 140,000 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $258,400 and 200,000 shares of common stock were issued in connection with the purchase of a judgment valued at $829,200. During 2021 year-to-date, we assigned our rights to stock repurchase option agreements to third parties resulting in net proceeds of $1,972,750.

 

During the year ended December 31, 2020, 4,012,000 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $2,631,899. During the year ended December 31, 2020, we assigned our rights to stock repurchase option agreements to third parties resulting in net proceeds of $274,614. During the year ended December 31, 2020, 145,832 shares of common stock options vested for the members of the Board of Directors valued at $81,958. Additionally, during the year ended December 31, 2020, 350,000 shares of common stock were issued to members of the Board of Directors valued at $196,700 for which vest quarterly over the period of approximately one year.

  

During the year ended December 31, 2019, 454,500 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $91,414; 37,193 shares of common stock were issued to several merchants under the merchant equity program valued at $14,877; 40,000 shares of common stock were issued to a landlord in lieu of the costs of improvements to our office valued at $18,400; and 275,000 shares of common stock for subscription agreements in the amount of $68,750. During the year ended December 31, 2019, we assigned our rights to stock repurchase option agreements to third parties resulting in net proceeds of $736,250. During the year ended December 31, 2019, no shares of common stock were issued to the management or members of the Board of Directors.

 

On January 24, 2019, we engaged an investment banking firm to provide general financial advisory and investment banking services. On September 23, 2019, we further engaged the same investment banking firm to assist us in raising capital. No sales took place as a result of their efforts. We terminated that engagement letter and any related offering on January 15, 2020.

 

All issuances were exempt from registration requirements of Section 5 of the Securities Act of 1933 as they did not involve a public offering under Section 4(a)2(2) and were issued as restricted securities as defined in Rule 144 of the Act.

 

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Item 6. Selected Consolidated Financial Data

 

Because we are allowed to comply with the disclosure obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, with respect to this Annual Report on Form 10-K, we are not required to provide the information required by this Item.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of our financial condition and results of operations should be read together with the audited financial statements and related notes included elsewhere in this registration statement. Certain statements contained in this registration statement, including statements regarding the anticipated development and expansion of our business, our intent, belief or current expectations, primarily with respect to the future operating performance of our company and the products and services we expect to offer and other statements contained herein regarding matters that are not historical facts, are “forward-looking” statements. Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also forward-looking statements which involve risks, uncertainties, and assumptions. Because forward-looking statements are inherently subject to risks and uncertainties, our actual results may differ materially from the results discussed in the forward-looking statements.

 

Executive Overview

 

We intend to simplify and streamline digital financial services for corporations, small and midsized enterprises (“SMEs”) and consumers through innovative payment processing and digital banking technologies that complement our core merchant services capabilities. Our company’s merchant services provide financial processing for businesses to accept cashless and/or contactless payments, such as credit cards, ACH, wireless payments, and more. Our patented, exclusively licensed and/or proprietary merchant services software offers or will offer integrated solutions for frictionless digital and mobile payment acceptance; we are supplementing these capabilities with software that solves for multi-use case, multi-channel, API-driven, account-based issuer processing for card, digital tokens, and payment transfer transactions.

 

Our Revenue and Expenses

 

Revenues

 

We derive our revenues by providing financial processing services to businesses.

 

Expenses

 

Cost of Revenue. Cost of revenue includes costs directly attributable to processing and other services the company provides. These also include related costs such as residual payments to our business development partners, which are based on a percentage of the net revenue generated from client referrals.

 

General and administrative. General and administrative expenses include professional services, rent and utilities, and other operating costs.

 

Research and development. Research and development costs include costs of acquiring patents and other unproven technologies, contractor fees and other costs associated with the development of the SMS short code texting platform, contract and outside services.

 

Interest expense, net. Our interest expense consists of interest on our outstanding indebtedness and amortization of debt issuance costs.

 

How We Assess Our Business

 

We provide electronic payment processing and merchant services. Our electronic payment processing and merchant services provide comprehensive payment solutions to businesses.

 

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Key Operating Metrics

 

We evaluate our performance through key operating metrics, including:

 

  The dollar volume of payments our clients process through us (payment volume); and
     
  Period to period merchant payment volume attrition

 

Our payment volume for the years ended December 31, 2020 and 2019 was $99,673,038 and $103,389,512, respectively. This represents a period-to-period growth rate of minus 4%. Payment volume reflects the addition of new clients and the same client payment volume from existing clients, offset by client attrition during the period.

 

Our merchant payment volume attrition for the years ended December 31, 2020 and 2019 was $1,141,661 and $1,409,757 (1.37%), respectively. This represents a period-to-period attrition decrease of 19%.

 

We measure period to period merchant payment volume attrition for all clients that were processing with us for the same period in the prior period. We exclude from our calculations the merchant payment volume from new clients added during the period. We experience attrition in payment volume as a result of several factors, including business closures and transfers of client’s accounts to our competitors.

 

We have one merchant customer, American Residential Warranty Services, that represented approximately 36% of our total revenues in the year ended December 31, 2020 and approximately 39% of our total revenues in the year ended December 31, 2019. The terms of our agreement with this entity are industry standard for ACH processing for similar merchants. We have a 5-year contract, beginning April 24, 2020, with this customer, and the loss of their business would have a material adverse effect on our business.

 

Results of Operations

 

This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for years ended December 31, 2020 and 2019, respectively. We have derived this data from our annual consolidated financial statements included elsewhere in this registration statement.

 

Year Ended December 31, 2020

 

Compared to Year Ended December 31, 2019

 

The following table presents our historical results of operations for the periods indicated:

 

    Year ended December 31   Change
(in thousands)   2020   2019   Amount   %
                 
Revenue   $ 329.5     $ 256.1     $ 73.4       29 %
                                 
Cost of revenue     140.4       101.6       38.8       38 %
Gross profit     189.1       154.5       34.6       22 %
                                 
Operating expenses                                
General and administrative     3,749.5       1,020.9       2,728.6       267 %
Research and development     49.2       82.0       (32.8 )     (40 %)
Total operating expenses     3,798.7       1,102.9       2,695.8       244 %
                                 
Income (loss) from operations     (3609.6 )     (948.4 )     (2,661.2 )     281 %
                                 
Other (income) expenses                                
Other (income) expenses     (82.5 )     106.0       (188.5 )     78 %
Interest expense, net     342.3       288.8       53.5       19 %
Day one derivative loss     389.7             389.7       100 %
Change in fair value of Derivative Liability     (71.8 )           (71.8 )     100 %
Total other expenses     577.7       394.8       182.9       46 %
                                 
Income (loss) before income taxes     (4,187.3 )     (1,343.2 )     (2,844.1 )     212 %
                                 
Provision for income taxes                        
                                 
Net income (loss)   $ (4,187.3 )   $ (1,343.2 )   $ (2,844.1 )     212 %

 

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Revenue

 

Revenue increased to $329,500 from $256,138, or 29%, for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was principally driven by significant reduction in processing fees from the processors.

 

Cost of Revenue

 

Cost of revenue increased to $140,372 from $101,638, or 38%, for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was driven primarily by a significant increase in revenue.

 

General and Administrative Expenses

 

General and administrative expenses increased to $3,749,456 from $1,020,869, or 267%, for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was primarily driven by the increase of some one-time stock compensation expense from significant consulting agreements.

 

Research and Development Expenses

 

Research and development expenses decreased to $49,250 from $82,057, or 40%, for the year ended December 31, 2020 from the year ended December 31, 2019. This decrease was primarily due to the decrease in development costs resulting from service agreements related to the development of our software platforms.

 

Interest Expense, net

 

Interest expense, net increased to $342,321 from $288,784, or 19%, for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was primarily driven by the addition of one-time interest charges for the amortization of the debt discount, day one derivative loss on a security purchase agreement.

 

Day One Derivative Loss

 

Day one derivative loss increased to $389,712 from $0 or 100% for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was primarily driven by the addition of a new convertible note agreement.

 

Change in Fair Value of Derivative Liability

 

Change in fair value of derivative liability increased to $71,764 from $0 or 100% for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was primarily driven by the addition of a new convertible note agreement.

 

Liquidity and Capital Resources

 

While the company is continuing operations and generating revenues, the company’s cash position is not significant enough to support the company’s daily operations. To the extent that additional funds are necessary to finance operations and meet our long-term liquidity needs as we continue to execute our strategy, we anticipate that they can be obtained through additional indebtedness, equity or debt issuances or both. Using currently available capital resources, management believes we can conduct planned operations for six months. Further, management believes we need to raise $1.5 million to remain in business for the next 12 months.

 

Since we derive our revenues principally from processing of purchases from our merchant services clients, a downturn in economic activity, such as that associated with the current corona virus pandemic could reduce the volume of purchases we process, and thus our revenues. In addition, such a downturn could cause our merchant customers to cease operations permanently decreasing our payment processing unless new customers were found. We may also face additional difficulty in raising capital during an economic downturn.

 

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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.

 

Year Ended December 31, 2020 and 2019

 

    Year Ended December 31,
    2020   2019
     
Net cash used in operating activities   $ (591,386 )   $ (760,544 )
Net cash provided by (used) in investing activities   $ 5,911     $ (25,000 )
Net cash provided by financing activities   $ 618,813     $ 808,319  

 

Cash Flow from Operating Activities

 

Net cash used in operating activities decreased by $169,158 for the year ended December 31, 2020 from the year ended December 31, 2019. This decrease was principally driven by the reduction of a one-time settlement fee.

 

Cash Flow from Investing Activities

 

Net cash provided by investing activities increased by $30,911 for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was principally driven by the refund of a deposit placed in escrow.

 

Cash Flow from Financing Activities

 

Net cash provided by financing activities decreased by $189,506 for the year ended December 31, 2020 from the year ended December 31, 2019. This decrease was principally driven by decreased proceeds from assigning our rights to stock repurchase option agreements to a third parties.

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates including those related to revenue recognition, goodwill and intangible assets, derivative financial instruments, and equity-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

 

Critical accounting policies are those that we consider the most critical to understanding our financial condition and results of operations. The accounting policies we believe to be most critical to understanding our financial condition and results of operations are discussed below. As of December 31, 2020, there have been no significant changes to our critical accounting estimates, except as described in Note 2 to our consolidated financial statements. Further, as of December 31, 2020, there have been no significant changes to our recently issued accounting pronouncements, except as described in Note 2 to our consolidated financial statements.

 

Smaller Reporting Company

 

As a smaller reporting company, as defined in Item(f)(1) of Regulation S-K, we may choose to prepare our disclosures relying on scaled disclosure requirements for smaller reporting companies in Regulation S-K and in Article 8 of Regulation S-X.

 

The scaled disclosure requirements for smaller reporting companies permit us (i) to include less extensive narrative disclosure than required of other reporting companies, particularly in the description of executive compensation and (ii) to provide audited financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited financial statements for three years.

 

23

 

 

We may lose our status as a smaller reporting company on the last day of the fiscal year in which (i) our public float exceeds $250 million or (ii) if we have more than $100 million in annual revenues and (a) have no public float or (b) have a public float or more than $700 million.

 

Equity-based Compensation

 

The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at the fair market value on the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair market value of stock options and other equity-based compensation issued to employees and non-employees.

 

During the year ended December 31, 2020, 4,012,000 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $2,631,899.

 

During the year ended December 31, 2020, 145,832 shares of common stock were issued to the board of director. The shares were earned over the term of the director. The Company valued the stock issuance, earned as of December 31, 2020, at $81,958.

 

During the year ended December 31, 2019, 454,500 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $91,414.

 

Related Parties

 

See Item 13 for a full discussion of related parties.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

Because we are allowed to comply with the disclosure obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, with respect to this Annual Report on Form 10-K, we are not required to provide the information required by this Item.

 

Item 8. Financial Statements and Supplementary Data

 

The consolidated financial statements and related consolidated financial statement schedules required to be filed are indexed on page 26  and are incorporated herein.

 

Item 9. Changes in and Disagreements with Accounts on Accounting and Financial Disclosure

 

None.

 

Item 9A. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, we evaluated the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2020.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

24

 

 

  pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
     
  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
     
  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Under the supervision and with the participation of management, including our principal executive and financial officers, we assessed our internal control over financial reporting as of December 31, 2020, based on criteria for effective internal control over financial reporting established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Tread way Commission (COSO).

 

Based on this assessment, our management concluded that we maintained effective internal control over financial reporting as of December 31, 2020.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2020 that has materially affected, or is 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.

 

ITEM 9B. Other Information

 

None.

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

The information required by this item regarding our executive officers will be presented under the caption “Executive Officers” in our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020 (the 2021 Proxy Statement) and is incorporated herein by reference.

 

The information required by this item regarding our compliance with Section 16 of the Exchange Act of 1934, as amended, will be presented under the caption “Security Ownership of Certain Beneficial Owners and Management - Delinquent Section 16(a) Reports” in our 2021 Proxy Statement and is incorporated herein by reference.

 

The information required by this item regarding our audit committee will be presented under the caption “Corporate Governance - Board Committee - Audit Committee” in our 2021 Proxy Statement and is incorporated herein by reference.

 

The information required by this item regarding our code of ethics will be presented under the caption “Corporate Governance - Code of Business Conduct” in our 2021 Proxy Statement and is incorporated herein by reference.

 

25

 

 

Item 11. Executive Compensation

 

The information required by this item regarding executive compensation will be presented under the caption “Executive Compensation” in our 2021 Proxy Statement and is incorporated herein by reference.

 

The information required by this item regarding director compensation will be presented under the caption “Corporate Governance - Director Compensation” in our 2021 Proxy Statement and is incorporated herein by reference.

 

The information required by this item regarding our compensation committee will be presented under the caption “Corporate Governance - Compensation Committee Interlocks and Insider Participation” in our 2021 Proxy Statement and is incorporated herein by reference.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The information required by this item regarding security ownership and certain beneficial owners and management will be presented under the caption “Security Ownership of Certain Beneficial Owners and Management” in our 2021 Proxy Statement and is incorporated herein by reference.

 

Equity Compensation Plan

 

The following table provides information, as of March 30, 2021, with respect to shares of our common stock that may be issued, subject to certain vesting requirements, under existing or future awards under our 2020 Equity Incentive Plan (“2020 Plan”). The 2020 Plan was approved by our Board of Directors and ratified by our shareholders at our 2020 Annual Shareholder Meeting on July 28, 2020.

 

    A   B   C 
Plan Category   Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights   Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights   Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))
             
Equity compensation plans approved by security holders     585,500     $ 0.37 (1)     3,351,500  
Equity compensation plans not approved by security holders                  
Total     585,500     $       3,351,500  

 

(1) The weighted-average exercise price does not take into account restricted stock units, which do not have an exercise price.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

The information required by this item regarding certain relationships and related persons transactions will be presented under the caption “Certain Relationships and Related Persons Transactions” in our 2021 Proxy Statement and is incorporated herein by reference.

 

The information required by this item regarding director independence will be presented under the caption “Corporate Governance - Independent Directors” in our 2021 Proxy Statement and is incorporated herein by reference.

 

Item 14. Principal Accountant Fees and Services

 

The information required by this item regarding aggregate fees billed to us by our independent registered public accounting firm’s fees will be presented in our 2021 Proxy Statement and is incorporated herein by reference.

 

The information required by this item regarding our audit committee’s pre-approval policies and procedures will be presented in our 2021 Proxy Statement and is incorporated herein by reference.

 

PART IV

 

Item 15. Exhibits and Financial Statements Schedules

 

(a) The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K:

 

1. Financial Statements. See Index to Financial Statements under Item 8 of this Annual Report on Form 10-K.

 

2. Financial Statement Schedules. All schedules have been omitted because the information required to be presented in them is not applicable or is shown in the financial statements or related notes.

 

3. Exhibits. We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the accompanying Exhibit Index immediately following the financial statements contained in this Annual Report on Form 10-K.

 

(b) Exhibits. See Item 15(a)(3) above.

 

(c) Financial Statement Schedules. See Item 15(a)(2) above.

 

Item 16. Form 10-K Summary

 

Not applicable.

 

26

 

 

 APPTECH CORP. AND SUBSIDIARIES 

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

  Pages
   
Report of Independent Registered Public Accounting Firm 28 
   
Consolidated Balance Sheets as of December 31, 2020 and 2019 29
   
Consolidated Statements of Operations for the years ended December 31, 2020 and 2019 30
   
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2020 and 2019 31
   
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019 32
   
Notes to the Consolidated Financial Statements 33

 

27

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and
Stockholders of AppTech Corp.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of AppTech Corp. and subsidiaries (collectively the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ deficit, and cash flows, for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a negative working capital, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matter

 

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involve our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 

/s/ dbbmckennon
We have served as the Company’s auditor since 2014.
San Diego, California
March 31, 2021

 

28

 

 

APPTECH CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2020 and 2019

 

    December 31,   December 31,
    2020   2019
ASSETS                
Current assets                
Cash   $ 57,497     $ 24,159  
Accounts receivable     40,635       29,836  
Prepaid rent     6,696        
Deposit escrow           25,000  
Security deposit           5,948  
Total current assets     104,828       84,943  
                 
Note receivable     17,500        
Right of use asset     249,825        
Security deposit     7,536        
TOTAL ASSETS   $ 379,689     $ 84,943  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current liabilities                
Accounts payable   $ 1,635,384     $ 1,707,878  
Accrued liabilities     2,632,334       2,334,480  
Right of use liability     52,161        
Stock repurchase liability     430,000       430,000  
Loans payable related parties     34,400       93,401  
Convertible notes payable, net of $280,174 debt discount     639,826       620,000  
Convertible notes payable related parties     372,000       372,000  
Notes payable     1,104,981       1,104,081  
Notes payable related parties     708,493       708,493  
Derivative liabilities     597,948        
Total current liabilities     8,207,527       7,370,333  
                 
Long-term liabilities                
Accounts payable     75,000       160,000  
Right of use liability     224,492        
Notes payable     67,400        
Total long-term liabilities     366,892       160,000  
                 
TOTAL LIABILITIES     8,574,419       7,530,333  
                 
Commitments and contingencies (Note 9)                
                 
Stockholders’ deficit                
Series A preferred stock; $0.001 par value; 100,000 shares
authorized; 14 shares issued and outstanding at
December 31, 2020 and 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, $0.001 par value; 1,000,000,000 shares authorized;
88,511,657 and 84,153,825 issued and outstanding
at December 31, 2020 and 2019, respectively
 
 
 
 
 
88,512
 
 
 
 
 
 
 
84,154
 
 
Additional paid-in capital     36,664,488       33,230,869  
Accumulated deficit     (44,947,730 )     (40,760,413 )
Total stockholders’ deficit     (8,194,730 )     (7,445,390 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 379,689     $ 84,943  

 

See accompanying notes to the consolidated financial statements.

 

29

 

 

APPTECH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019

 

    December 31,   December 31,
    2020   2019
         
Revenues   $ 329,500     $ 256,138  
                 
Cost of revenues     140,372       101,638  
                 
Gross profit     189,128       154,500  
                 
Operating expenses:                
General and administrative, including stock based compensation of $2,713,857 and $91,414, respectively     3,749,456       1,020,869  
Research and development     49,250       82,057  
                 
Total operating expenses     3,798,706       1,102,926  
                 
Loss from operations     (3,609,578 )     (948,426 )
                 
Other income (expenses)                
Sale of domain     72,500        
Forgiveness of debt     9,000        
Interest expense     (342,321 )     (288,784 )
Day one derivative loss     (389,712 )      
Change in fair value of derivative liability     71,764        
Other income (expenses)     1,030       (106,000 )
                 
Total other expenses     (577,739 )     (394,784 )
                 
Loss before provision for income taxes     (4,187,317 )     (1,343,210 )
                 
Provision for income taxes            
                 
Net loss   $ (4,187,317 )   $ (1,343,210 )
                 
Basic and diluted net loss per common share   $ (0.05 )   $ (0.02 )
Weighted-average number of shares used basic and diluted per share amounts   86,520,231   84,473,862  

 

See accompanying notes to the consolidated financial statements.

 

30

 

 

APPTECH CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019

 

    Series A       Additional        
    Preferred   Common Stock   Paid-   Accumulated   Stockholders’
    Shares   Amount   Shares   Amount   in Capital   Deficit   Deficit
                             
Balance December 31, 2018     14     $       86,797,132     $ 86,797     $ 32,284,735     $ (39,417,203 )   $ (7,045,671 )
Net loss                                   (1,343,210 )     (1,343,210 )
Imputed interest                             13,800             13,800  
Common stock issued for rent                 40,000       40       18,360             18,400  
Common stock issued for subscriptions                 275,000       275       68,475             68,750  
Common stock issued for merchant equity program                 37,193       37       14,840             14,877  
Common stock issued for services                 454,500       455       90,959             91,414  
Common stock cancelled                 (3,450,000 )     (3,450 )     3,450              
Proceeds from sale of repurchase option                             736,250             736,250  
Balance December 31, 2019     14     $       84,153,825     $ 84,154     $ 33,230,869     $ (40,760,413 )   $ (7,445,390 )
                                                         
Net loss                                   (4,187,317 )     (4,187,317 )
Imputed interest                             13,800             13,800  
Issuance of stock options for board of directors                             29,265             29,265  
Issuance of stock options for services                             351,441             351,441  
Common stock issued for board of directors                 145,832       146       81,812             81,958  
Common stock issued for services                 4,012,000       4,012       2,627,887             2,631,899  
Proceeds from exercise of options                 200,000       200       54,800             55,000  
Proceeds from sale of repurchase option                             274,614             274,614  
Balance December 31, 2020     14     $       88,511,657     $ 88,512     $ 36,664,488     $ (44,947,730 )   $ (8,194,730 )

 

See accompanying notes to the consolidated financial statements.

 

31

 

 

APPTECH CORP. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019

 

    December 31,   December 31,
    2020   2019
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (4,187,317 )   $ (1,343,210 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Issuance of stock options for board of directors     29,265        
Issuance of stock options for services     53,497        
Stock issued for board of directors     81,958        
Stock issued for services     2,479,399       91,414  
Stock issued for rent           18,400  
Issuance of warrants for services     297,944        
Imputed interest on notes payable     13,800       13,800  
Day one derivative loss     389,712        
Amortization of debt discount     19,826        
Change in fair value of derivative liabilities     (71,764 )      
Depreciation and amortization           65  
Changes in operating assets and liabilities:                
Accounts receivable     (10,799 )     (6,034 )
Prepaid rent     (6,696 )      
Accounts payable     (4,893 )     310,473  
Accrued liabilities     297,854       154,548  
Right of use asset and liability     26,828        
Net cash used in operating activities     (591,386 )     (760,544 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Deposit escrow     25,000       (25,000 )
Note receivable     (17,500 )      
Security deposit     (1,589 )      
Net cash provided by (used in) investing activities     5,911       (25,000 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds on loans payable - related parties     750       39,319  
Payments on loans payable - related parties     (59,751 )      
Proceeds on convertible note payable     280,000        
Proceeds on note payable     68,200        
Payments on notes payable           (36,000 )
Proceeds from sale of repurchase option     274,614       736,250  
Proceeds from exercise of options     55,000        
Proceeds from sale of common stock           68,750  
Net cash provided by financing activities     618,813       808,319  
                 
Changes in cash and cash equivalents     33,338       22,775  
Cash and cash equivalents, beginning of year     24,159       1,384  
Cash and cash equivalents, end of year   $ 57,497     $ 24,159  
                 
Supplemental disclosures of cash flow information:                
Cash paid for interest   $     $ 5,805  
Cash paid for income taxes   $     $ 7,057  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES                
Common stock issued for conversion of accounts payable   $ 152,500     $  
Common stock issued for merchant equity liability   $     $ 14,877  

  

See accompanying notes to the consolidated financial statements.

 

32

 

 

APPTECH CORP. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

AppTech Corp. (“AppTech” or the “Company”) is a Wyoming Corporation incorporated on July 2, 1998.

 

AppTech Corp. is a FinTech company providing electronic payment processing technologies and merchant services..These technologies allow businesses to accept cashless and/or contactless payments, such as credit cards, ACH, wireless payments, and more. Their patented, exclusively licensed and/or proprietary merchant services software offers or will offer integrated solutions for frictionless digital and mobile payment acceptance; AppTech is supplementing these capabilities with software that solves for multi-use case, multi-channel, API-driven, account-based issuer processing for card, digital tokens, and payment transfer transactions.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Also see Note 3.

 

Principles of Consolidation

 

The Company’s accounts include financials of the Company and its wholly owned subsidiaries, Transcendent One, Inc. and TransTech One, LLC. All significant inter-company transactions have been eliminated in consolidation. The operations of Transcendent One, Inc. and TransTech One, LLC are insignificant, and the Company dissolved the subsidiaries on October 8, 2019.

 

Use of Estimates

 

The preparation of the consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the estimated liabilities related to various vendors in which communications have ceased, contingent liabilities, and realization of tax deferred tax assets. Actual results could differ from those estimates.

 

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. The Company currently uses five financial institutions to service their merchants for which represented 100% of accounts receivable as of December 31, 2020 and 2019. The loss of one of these financial institutions would not have a significant impact on the Company’s operations as there are additional financial institutions available to the Company. For the years ended December 31, 2020 and 2019, the one merchant (customer) represented approximately 36% and 39% of the total revenues, respectively. The loss of this customer would have significant impact on the Company’s operations.

 

Cash and Cash Equivalents

 

The Company classifies its highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the designations of each investment as of the balance sheet date for each reporting period. The Company classifies its investments as either short-term or long-term based on each instrument’s underlying contractual maturity date. Investments with maturities of less than 12 months are classified as short-term and those with maturities greater than 12 months are classified as long-term. The cost of investments sold is based upon the specific identification method.

 

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Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable is recorded net of an allowance for doubtful accounts, if needed. The Company considers any changes to the financial condition of its financial institutions used and any other external market factors that could impact the collectability of its receivables in the determination of its allowance for doubtful accounts. The Company does not expect to have write-offs or adjustments to accounts receivable which could have a material adverse effect on its consolidated financial position, results of operations or cash flows as the portion which is deemed uncollectible is already taken into account when the revenue is recognized.

 

Revenue Recognition

 

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, codified as 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. The Company adopted ASC 606 effective January 1, 2019 using modified retrospective basis and the cumulative effect was immaterial to the consolidated financial statements.

 

The Company provides merchant processing solutions for credit cards and electronic payments. In all cases, the Company acts as an agent between the merchant which generates the credit card and electronic payments, and the bank which processes such payments. The Company’s revenue is generated on services priced as a percentage of transaction value or a specified fee transaction, depending on the card or transaction type. Revenue is recorded as services are performed which is typically when the bank processes the merchant’s credit card and electronic payments.

 

Consideration paid to customers, such as amounts earned under our customer equity incentive program, are recorded as a reduction to revenues.

 

Consideration paid to customers such as amounts earned under our customer equity incentive program, are recorded as a reduction to revenue. There were no amounts paid or incurred during the years ended December 31, 2020 and 2019.

 

Fair Value Measurements

 

The Company follows FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) to measure and disclosure the fair value of its financial instruments. ASC 820 establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820 are described below:

 

Level 1   Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2   Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3   Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

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The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts reported in the Company’s consolidated financial statements for cash, accounts payable and accrued expenses approximate their fair value because of the immediate or short-term mature of these financial instruments.

 

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-marketing dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

 

The following table presents liabilities that are measured and recognized at fair value as of December 31, 2020 on recurring basis:

 

    December 31, 2020    
                Total Carrying
    Level 1   Level 2   Level 3   Value
Derivative liabilities                 597,948       597,948  

 

See Note 7 for discussion of valuation and roll forward related to derivative liabilities.

 

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 years ended December 31, 2020 and 2019 were $49,250 and $82,057, respectively.

 

Property and Equipment

 

Property and equipment is recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful life of five (5) years. Upon sale or retirement of equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.

 

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. As of December 31, 2020 and 2019, there were no asset impairments.

 

Lease Commitment

 

The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable.

 

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Operating lease right of use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The Company primarily leases buildings (real estate) which are classified as operating leases. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company’s leases, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments.

 

The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met.

 

Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain.

 

Variable lease payments not dependent on a rate or index associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed as probable. Variable lease payments are presented as operating expenses in the Company’s statement of operations in the same line as expense arising from fixed lease payments. As of December 31, 2020, management determined that there were no variable lease costs.

 

Income Taxes

 

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of operations in the period that includes the enactment date.

 

The Company’s income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known. As of December 31, 2020 and 2019, the Company does not believe any provisions are required in connection with uncertain tax positions as there are none.

 

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Per Share Information

 

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, convertible debt and convertible preferred stock.

 

The number of common stock equivalents not included in diluted income per share was 17,574,201 and 5,122,627 for the years ended December 31, 2020 and 2019, respectively. The weighted average number of common stock equivalents is not included in diluted income (loss) per share, because the effects are anti-dilutive.

 

    December 31, 2020   December 31, 2019
         
Series A preferred stock     10,920       10,920  
Convertible debt     6,026,281       5,111,707  
Warrants     200,000        
Options     7,707,500        
Common stock     3,629,500        
      17,574,201       5,122,627  

  

Convertible Debt

 

Convertible debt is accounted for under the guidelines established by ASC 470-20 Conversion and Other Options. ASC 470-20 governs the calculation of an embedded beneficial conversion, which is treated as an additional discount to the instruments where derivative accounting does not apply. The amount of the value of additional stock and other consideration in addition to the beneficial conversion feature may reduce the carrying value of the instrument to zero, but no further. The discounts are accreted over the term of the debt using the straight line method due to the short terms of the notes.

 

The Company accounts for modifications of its embedded beneficial conversions, in accordance with ASC 470-50 Modifications and Extinguishments. ASC 470-50 requires the modification of a convertible debt instrument that changes the fair value of an embedded conversion feature and the subsequent recognition of interest expense or the associated debt instrument when the modification does not result in a debt extinguishment.

 

Derivative Liability

 

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. In addition, the Company issued warrants with variable anti-dilution provisions. The conversion terms of the convertible notes and warrants are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date and at each reporting period.

 

Stock Based Compensation

 

The Company recognizes as compensation expense all share-based payment awards made to employees, directors, and consultants including grants of stock, stock options and warrants, based on estimated fair values. Fair value is generally determined based on the closing price of the Company’s common stock on the date of grant and is recognized over the service period. 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.

 

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New Accounting Pronouncements

 

The FASB issues 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 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 – GOING CONCERN

 

As reflected in the accompanying consolidated financial statements, during the years ended December 31, 2020 and 2019, the Company incurred a net loss of $4,187,317 and $1,343,210 and used cash of $591,386 and $760,544 in operating activities. In addition, the Company had a working capital deficit of $8,102,699 and an accumulated deficit of $44,947,730 at December 31, 2020. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. We have evaluated the conditions or events that raise substantial doubt about the Company’s ability as a going concern within one year of issuance of the consolidated financial statements.

 

While the Company is continuing operations and generating revenues, the Company’s cash position is not significant enough to support the Company’s daily operations. To fund operations and reduce the working capital deficit, the Company intends to raise additional funds through public or private debt and/or equity offerings. During 2020, the Company raised $274,614 from eight sales of a repurchase option and $55,000 from options exercised to fund operations. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern, however, such are not guaranteed. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect, nor can there be assurance that such funds will be at acceptable terms. Subsequent to December 31, 2020, the Company has raised an additional $1,972,750 through March 25, 2021. As of the date of these consolidated financial statements, the Company has not finalized a commitment for additional capital. The ability of the Company to continue as a going concern is dependent upon our ability to further implement its business plan and generate revenues and cash flows. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Risks and uncertainties

 

On January 30, 2020, the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. Since the Company derives its revenues from processing of purchases from our merchant services clients, a downturn in economic activity, such as associated with the current coronavirus pandemic, could reduce the volume of purchases it processes, and thus its revenues. In addition, such a downturn could cause its merchant customers to cease operations permanently decreasing our payment processing unless new customers are found. We may also face additional difficulty in raising capital during an economic downturn. The effects of the pandemic had significant impact on revenue at the beginning of the pandemic and the processors gave significant concessions of reduced fees to minimize the impact of the pandemic. The revenue began to return to normal after several months as the economy began to open up using different methods of purchasing especially online purchasing. The continuing effects of the potential impact cannot be estimated at this time.

 

Additionally, it is reasonably possible that the estimates made in the financial statements have been, or will be materially and adversely impacted in the near term as a result of these conditions.

 

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NOTE 4 – PATENTS

 

Patents

 

On June 22, 2017, AppTech executed an Amendment to Asset Purchase Agreement with GlobalTel Media, Inc. In connection with the asset purchase agreement, 5,000,000 shares of common stock were issued to GlobalTel Media, Inc. The Company valued the common stock issuance at $1,000,000 based on the closing market price of the Company’s common stock on the date in which the performance was complete. This amendment revived the original asset purchase agreement dated December 4, 2013 to purchase the assets of GlobalTel Media, Inc. (AppTech and GlobalTel agree that the asset purchase agreement dated September 30, 2015 is null and void), which include, but is not limited to, all intellectual property, United States Patent Trademark Office (“USPTO”) issued patents, enterprise-grade, patent protected software and intellectual property for advanced messaging incorporating secure payments, databases, documentation, copyrights, trademarks, registrations, and all current development work in process of USPTO application approval; more specifically but not limited to USPTO 8,073,895 & 8,572,166 “System and Method for Delivering Web Content to a Mobile Device”, USPTO 8,315,184 “Computer to Mobile Two-Way Chat System and Method”, and USPTO 8,369,828 “Mobile-to-Mobile Payment System and Method”. GlobalTel’s technology focuses on SMS text-based applications, social media and mobile payment. The USPTO assigned the patents to AppTech on July 25, 2017. AppTech, as part of the various agreements, agreed to pay $1,600,000 which included an assumption of certain liabilities, including costs incurred to continue development of the patents, as well as guaranteed payment of 25% of the net proceeds on revenue created by the patents up to $26,600,000. As of December 31, 2020 and 2019, amounts included in accounts payable related to the assumption of liabilities in connection with the patents were $280,000 and $415,000, respectively. The Company has expensed the cost of the patents as research and development costs as the future estimated cash flow expected cannot be reasonably estimated.

 

NOTE 5 – ACCRUED LIABILITIES

 

Accrued liabilities as of December 31, 2020 and 2019 consist of the following:

 

    December 31, 2020   December 31, 2019
         
Accrued interest – related parties   $ 1,056,450     $ 943,356  
Accrued interest – third parties     1,378,660       1,215,699  
Accrued residuals     62,174       39,064  
Accrued merchant equity     91,023       91,023  
Other     44,027       45,338  
Total accrued liabilities   $ 2,632,334     $ 2,334,480  

 

Accrued Interest

 

Notes payable and convertible notes payable incur interest at rates between 10% and 15%, per annum. The accrued interest in most cases is currently in technical default due to the notes being past their maturity date.

 

Accrued Residuals

 

The Company pays commissions to independent agents which refer merchant accounts. The amounts payable to these independent agents is based upon a percentage of the amounts processed on a monthly basis by these merchant accounts.

 

Accrued Merchant Equity Liability

 

The Company provided all merchants the opportunity to earn shares of the Company’s common stock through their Merchant Equity Program (the “Program”). Under the Program, the merchant earned 1% of their total Visa/MasterCard volume processed during the first year of their contract. For example, if a merchant processes $1.0 million in credit card charges, the merchant will receive 10,000 shares of the Company’s common stock. The merchant must process with the Company for a period of three years for the shares to vest. All merchants became fully vested when the Company ended the program effective December 31, 2015.

 

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The Company accounts for the value of the shares under the program as a sales incentive and thus the amounts in connection with the Program are recorded as a reduction to revenues. As of December 31, 2020, the Company has an obligation to issue approximately 776,000 shares of the Company’s common stock issuable under the Program. During the year ended December 31, 2019, the Company issued 37,193 shares of common stock relieving $14,877 in liability under the program.

 

NOTE 6 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE

 

The Company funds operations through cash flows generated from operations and the issuance of loans and notes payable. The following is a summary of loans and notes payable outstanding as of December 31, 2020 and 2019. Related parties noted below are either members of management, board of directors, significant shareholders or individuals in which have significant influence over the Company.

 

Loans Payable – Related Parties

 

During the years ended December 31, 2020 and 2019, the Company obtained (paid) $(59,001) and $39,319 loans payable from related parties, net. As of December 31, 2020 and 2019, the balance of the loans payable was $34,400 and $93,401, respectively. The loans payable are due on demand, unsecured and non-interest bearing as there are no formal agreements executed.

 

Subordinated Notes Payable

 

In 2016, the Company issued $350,000 in subordinated notes payable to third parties. The subordinated notes payable were due in 30 to 180 days and incurred interest at 10% per annum. As of December 31, 2020 and 2019, accrued interest related to the subordinated notes was $153,545 and $118,545, respectively. The Company is currently in default of the subordinated note agreements.

 

Convertible Notes Payable

 

In 2020, the Company entered into a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell to the investor a $300,000 convertible note bearing interest at 12% per annum (the “Note”). The Note matures in 365 days from the date of issuance. The Note is convertible at the option of the holder at any time into shares of the Company’s common stock at one dollar ($1.00) for the one hundred and eighty (180) days immediately following the issue date and thereafter shall equal the lower of: 1) the lowest closing price of the common stock during the preceding twenty five (25) trading day, ending on the last complete trading day prior to the issue date of the Note. 2) seventy five (75) percent of the lowest trading price for the common stock during the twenty five (25) consecutive trading days preceding the conversion date with a minimum trading volume of one thousand (1,000) shares.

 

In the event of a default of the Note, the Holder in its sole discretion may elect to use a conversion price equal to the lower of: 1) the lowest trading price of the common stock on the trading day immediately preceding the issue date or 2) seventy five (75) percent of either the lowest trading price or the closing bid price, whichever is lower during any trading day in which the event of default has not been cured.

 

The embedded conversion feature of this Note was deemed to require bifurcation and liability classification, at fair value. Pursuant to the Securities Purchase Agreement, the Company also sold warrants to the investors to purchase up to an aggregate of 200,000 shares of common stock exercisable at one dollar and fifty cents ($1.50) and expire in five (5) years. The fair value of the derivative liability and warrants as of the date of issuance was in excess of the Note (see Note 7 for valuation) resulting in full discount of the Note. The conversion feature and warrants have various reset provisions for which lower the exercise price and share and warrants issuable.

 

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Total interest expense on convertible notes payable, inclusive of amortization of debt discount of $19,826, amounted to $24,067 for the year ended December 31, 2020. As of December 31, 2020, the convertible note payable discount is $280,174 and will be amortized over the life of the convertible note payable in 2021. As of December 31, 2020, the derivative liability is as follows:

 

Convertible note payable   $ 378,134  
Warrants     219,814  
    $ 597,948  

 

In 2017, the Company received $222,000 in convertible notes payable from related parties. The convertible notes payable are unsecured, were due in 180 days, incur interest at 10% per annum and are convertible at $0.10 per share. As of December 31, 2020 and 2019, accrued interest related to the convertible notes was $76,187 and $53,988, respectively. On the date of the agreement, Management calculated the beneficial conversion feature in connection with the convertible notes payable and recorded a discount of $222,000. The Company amortized the discount over the term of the convertible notes payable of 180 days. The Company is currently in default on the convertible notes payable. On February 24, 2021, the chief executive officer assigned $200,000 in convertible notes to direct relative.

 

In 2015, the Company issued $50,000 in convertible notes payable. The convertible notes payable are unsecured, were due in nine months, incur interest at 10% per annum and are convertible at $1.00 per share. As of December 31, 2020 and 2019, the accrued interest related to the convertible notes was $25,833 and $20,833, respectively. The Company is currently in default on the convertible note payable.

 

In 2014, the Company issued $400,000 in convertible notes payable. The convertible notes payable are unsecured, due in periods ranging up to one year, incurring interest between 10% to 12% per annum and are convertible at prices ranging from $0.33 to $1.00 per share. In addition, the Company issued 400,000 shares of common stock in connection with the convertible notes payable. The Company had the obligation to repurchase the 400,000 shares of common stock at $1.00 per share within one year of the note issuance date. As of December 31, 2020 and 2019, the Company held the obligation to repurchase the shares for $400,000. As of December 31, 2020 and 2019, the accrued interest related to the convertible notes was $227,083 and $186,083, respectively. The Company is currently in default of the note agreements.

 

In 2008 and 2009, the Company issued $320,000 in convertible notes payable, of which $150,000 was from related parties. The convertible notes payable are currently due on demand, incur interest at 15% per annum, and convertible at $0.60 per share. As of December 31, 2020 and 2019, accrued interest related to the convertible notes was $564,013 and $516,013 of which $265,875 and $243,375, respectively, was due to related parties. The Company is currently in default of the notes payable agreements.

 

Notes Payable

 

In 2020, the Company entered into a 30-year unsecured note payable with U.S. Small Business Administration for $68,200 in proceeds. The notes payable incurred a $100 fee upon issuance and incurs interest at 3.75% per annum. All payments of principal and interest are deferred for twelve months with the first $333 payment due July 1, 2021. As of December 31, 2020 the balance of the note payable was $68,300 and accrued interest was $1,281.

 

In 2016, the Company issued $143,000 in notes payable to third parties. The notes payable were due in ninety days or less. During 2019, the Company paid $36,000 in notes payable. The Company is currently in default of the note agreements.

 

Two significant shareholders funded the Company’s operations through notes payable in primarily 2009 and 2010 and continue to support operations on a limited basis. The notes payable incur interest at 10% per annum and were due on December 31, 2016. The Company is currently in default of the note agreements. As of December 31, 2020 and 2019, the aggregate balance of the notes payable was $620,355 and accrued interest was $638,016 and $575,480, respectively.

 

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In 2008, the Company entered into a note payable with a third party for $10,000 in total proceeds. The note payable is currently in default and has a flat interest amount due of $21,000. As of December 31, 2020 and 2019, the Company was in default of the note agreement and the entire amount of $21,000 has been included within accrued interest. Since the notes payable do not incur interest, the Company imputed interest at $1,000 and $1,000, respectively, which represented an interest rate of 10% per annum during the years ended December 31, 2020 and 2019.

 

In 2008, the Company entered into notes payable with a third party for $26,000 in total proceeds. The notes payable have a flat interest amount due of $80,000. During 2015, the Company received another $50,000 from the third party. During 2017, the Company entered into an agreement whereby they would repay the principal and accrued interest in the amount of $145,000 by April 4, 2018 and issue the holders 800,000 shares of common stock. The Company recorded the fair market value of the common stock issued at $336,000 based on the date of issuance as interest expense. Other than the issuance of shares of common stock, the Company did not perform under the agreement. The Company is currently in default of the note agreement.

 

In 2007 and 2008, the Company entered into notes payable with a related party for $46,000 in proceeds. The notes payable were due on demand and incurred interest at 12% per annum. These were combined into a single note agreement in 2014. As of December 31, 2020 and 2019, the balance on the note payable was $88,136 and accrued interest related to the note payable was $59,900 and $49,243, respectively. The Company is currently in default of the note payable agreement.

 

In 2007, the Company entered into note payable with a third party for $128,000 in proceeds. Under the terms of the agreement the holder received a flat interest amount of $37,496. The Company is currently in default of the note payable agreement and the entire amount of $37,496 has been included within accrued interest. Since the note payable did not incur interest, the Company imputed interest at $12,800 and $12,800, respectively, which represented an interest rate of 10% per annum during the years ended December 31, 2020 and 2019.

 

In 2007, the Company entered into note payable with a third party for $221,800 in proceeds. The note payable is currently in default and incurs interest at 10% per annum. On December 31, 2013, the holder received an arbitration settlement for the principal and accrued interest. As of December 31, 2020 and 2019, the Company was in default of the arbitration settlement. As of December 31, 2020 and 2019, accrued interest related to the note payable was $470,143 and $429,861, respectively.

 

In 2007, the Company entered into note payable with a significant shareholder for $58,600 in proceeds. The note payable is currently due on demand and incurs interest at 10% per annum. As of December 31, 2020 and 2019, accrued interest related to the note payable was $76,372 and $70,513, respectively. The Company is currently in default of the note agreement.

 

NOTE 7–DERIVATIVE LIIABILITIES

 

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. In addition, the Company issued warrants with variable conversion provisions. The conversion terms of the convertible notes and warrants are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants were recorded as derivative liabilities on the issuance date and revalued at December 31, 2020.

 

Based on the convertible notes described in Note 6, the derivative liability day one loss is $389,712 and the change in fair value at December 31, 2020 is $71,464. The fair value of applicable derivative liabilities on note, warrants and change in fair value of derivative liability are as follows for the year ended December 31, 2020.

 

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    Derivative Liability Convertible Notes    Derivative
Liability Warrants
     Total
Balance as of December 31, 2019   $     $     $  
Additions during the period     430,595       239,117       669,712  
Change in fair value     (52,461 )     (19,303 )     (71,764 )
Balance as of December 31, 2020   $ 378,134     $ 219,814     $ 597,948  

 

The fair value of the derivative liability convertible notes is estimated using a Monte Carlo pricing model with the following assumptions:

 

Market value of common stock   $0.90 - $1.00  
Expected volatility     98.9% - 99.5 %
Expected term (in years)     0.73  
Risk-free interest rate     0.09% - 0.11 %

 

The fair value of the derivative liability – warrants is estimated using a Monte Carlo pricing model with the following assumptions:

 

Market value of common stock     $0.90 - $1.00  
Expected volatility     96.4% - 100.3 %
Expected term (in years)     5.00  
Risk-free interest rate     0.41% - 0.42 %

 

NOTE 8–RIGHT OF USE ASSET

 

Lease Agreement

 

In January 2020, the Company entered into a lease agreement commencing February 8, 2020 for its current facility which expires in 2025. The term of the lease is for five years. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing rate of 12% within the calculation. The following are the expected lease payments as of December 31, 2020, including the total amount of imputed interest related:

 

Years ended December 31:

 

2021     $ 82,561  
2022       85,039  
2023       87,590  
2024       90,217  
2025       7,536  
      $ 352,943  
Less: Imputed interest       (76,290 )
Total     $ 276,653  

 

The rent expense was $61,691 and $84,763 for the years ended December 31, 2020 and 2019, respectively.

 

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NOTE 9 - COMMITMENTS AND CONTIGENCIES

 

Litigation

 

Shareholder Lawsuit

 

In March 2016, a significant shareholder (“Plaintiff”) of the Company filed a lawsuit against the Company in the state of California alleging breach of contract,fraud and negligent misrepresentation based on supposed oral promises in 2013 to give Plaintiff’s company shares in exchange for stocks in another company and a 2014 consulting agreement. The Company strongly disputed all claims made in the lawsuit. On April 20, 2017, the Company filed an answer that denied each and every purported allegation and cause of action and further denied that they caused any damage or loss. The Company reached an agreement resulting in a voluntary dismissal of the civil case on July 5, 2017. The Plaintiff was not able to fulfill the proper documentation within the allotted 180 days and the 3,450,000 shares of AppTech Corp stock were properly cancelled in 2019.

 

Former Shareholders Lawsuits

 

In April 2014, a shareholder of AppTech filed a lawsuit against the Company in the State of Washington claiming breach of contract related to the sale / transfer of unregistered shares at the time of AppTech acquisition. On August 13, 2014, the Company notified the transfer agent and placed a ’Stop Order’ on the shares. The shareholder claims that the 2.5 million shares received are unrestricted and should be reflected as such. On August 19, 2014, the Company filed a motion to dismiss the lawsuit. The lawsuit was dismissed on October 31, 2014.

 

In November 2017, two shareholders of AppTech, one who previously filed the 2014 lawsuit in the State of Washington, filed another lawsuit against the Company in the State of California, claiming the same accusations as the previously filed lawsuit which was dismissed. The lawsuit has been transferred to the United States District Court for the Southern District of California. The Company filed the defendants answer, affirmative defenses and counter claims. Management believes that the Plaintiff misrepresented and misled AppTech during the merger. The court has encouraged the parties to settle. Even though the Company believes the lawsuit is without merit and will vigorously defend, the Company has made several offers to settle. On December 19, 2019, the Company entered into a settlement and release agreement. The Company has recorded the liability as of December 31, 2019 for the total obligation of $240,000 to be paid out over three years beginning February 15, 2020. The 2019 impact is recorded in general and administrative expenses. On January 24, 2021, the parties entered a stipulation modifying the repayment schedule of the settlement. The Company is current on the following modified repayment schedule.

 

Years ended December 31:

 

2021     $ 100,000  
2022       75,000  
Total     $ 175,000  

 

Former Landlord Lawsuit

 

In September 2018, the landlord for our former office space lease filed a limited civil lawsuit against the Company in the State of California. The Company reached an agreement that resulted in a stipulation for judgment on October 28, 2018. The stipulated judgment was for $42,432 including attorney fees and court costs plus interest for which the Company recorded as a liability as of December 31, 2018. The stipulated judgment was paid in full on August 16, 2019.

 

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Patent Acquisition Lawsuit

 

In September 2018, a complaint was filed in San Diego superior court for a breach of contract arising from a written agreement for the purchase of a judgment to which AppTech was not a party. The purchase of the judgment was part of the transaction to acquire the patents. AppTech substantially performed under the agreement but the second agreement to extend the final payment was executed under alleged duress. On October 26, 2018, the Company filed an answer that denied each and every purported allegation and cause of action and further denied that they caused any damage or loss. On December 3, 2019, the Company entered into a conditional settlement providing the terms of the conditional settlement have been completed by October 1, 2020. The conditional settlement amount of $150,000 was paid in monthly installments of $15,000. The settlement installments paid for the year ended December 31, 2020 was $135,000. On December 30, 2020,full payment was made in accordance with a modified settlement payment schedule.

 

Other Lawsuit

 

In July of 2020, an owner and corporation having a non-binding memorandum of understanding filed a lawsuit in the State of California alleging a breach of contract, intentional misrepresentation, fraudulent inducement of contract, negligent misrepresentation and unjust enrichment. Service of process did not occur until January 8, 2021. The Plaintiffs filed an amended complaint on March 15, 2021. Management believes the agreement was non-binding, the statute of limitation has expired and the allegations have no merit. We intend to file an answer, affirmative defenses and counter claims in the near future. We currently own a judgment against the owner and corporation in the amount of $516,932, See Note 11.

 

Significant Contracts

 

Capital Raise

 

In January 2019, the Company entered into an agreement with a broker dealer to provide capital raising activities. Under the terms of the agreement the broker dealer is to make a minimum of $90,000 in advisory fees. In addition, there are various other provisions within the agreement which include a 10% placement fee, warrants to purchase common stock, a 4% transaction fee, etc.

 

In February 2021, the Company entered into an engagement letter with Maxim Group LLC (“Maxim”) as the lead management underwriter for a follow-on offering which is non-binding. This engages Maxim through September 30, 2021 as exclusive financial advisor, lead managing underwriter and sole book running manager and investment banker in connection with the offering. The offering shall consist of approximately fifteen million worth of securities subject to the due diligence examination of the Company. The actual size of the offering, the precise number of securities to be offered by the Company and Maxim will depend upon the capitalization of the Company among other various factors. Maxim shall be granted an option to acquire an additional 15% of the total number of securities as an over-allotment, an underwriting discount of 7% and an expense allowance equal to 1%.

 

Silver Alert Services, LLC

 

In August 2020, the Company entered into a strategic partnership with Silver Alert Services, LLC. doing business as Lifelight Systems (“Lifelight”), expanding into the telehealth sphere. The partnership will expand AppTech’s reach into new markets and provide advanced technological solutions for the telehealth and personal emergency response systems markets. The strategic partnership provides a promissory note to Lifelight for up to $1.0 million dollars with an interest rate of three percent per annum upon successful completion of Lifelight’s Personal Emergency Response System (“PERS”) pilot program. Also, Lifelight is granted an option for the right to purchase 4,500,000 shares of AppTech Corp. for which 1 million are exercisable at $0.01 and 3,500,000 are exercisable at $0.25 for which vest upon the successful completion of the PERS pilot program and are exercisable for 24 months. These options were valued at $1,549,999 and $5,424,987, respectively using a Black-Scholes options pricing model.

 

On December 30, 2020, the Company amended its strategic partnership agreement and purchase option agreement with Silver Alert dated August 21, 2020. The amendment altered and/or added certain definitions and the loan disbursements in the strategic partnership agreement. Further, the purchase option agreement was amended to incorporate a vesting schedule related to the gross revenue generated from the partnership. The options are now vested based on reaching various gross revenue benchmarks for which expire two years after each tranche vests. These options were valued at $900,000 and $3,149,994, respectively using a Black-Scholes options pricing model. No stock based compensation was recorded during the year ended December 31, 2020 as vesting was determined not to be probable.

 

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The Company’s ability to deliver on the $1,000,000 loan and fulfill its 50% obligation in 2020 was greatly impacted by the ongoing Covid 19 pandemic. Nursing homes and other senior living facilities were in lock down which did not allow the Silver Alert team into facilities for set-up and equipment training. As of March 2021, the team still does have access to these facilities and thus revenue could not be generated. AppTech made the strategic decision to fund other investments while committing to provide the $1,000,000 loan to Silver Alert during the second quarter of 2021, as state restrictions continue to be loosened. Both parties agreed the delay was in the best interest of the long-term growth of the partnership. The Company will assess the probability of vesting at the end of each reporting period.

 

On March 29, 2021, the Company amended its strategic partnership agreement and purchase option agreement dated December 30, 2020. The amendment altered the agreement reducing the options to purchase to one million shares at a price of $0.01 and two million five thousand shares of stock at $0.25. The effect of this transaction has not been determined at this time.

 

NEC Payments

 

On October 1, 2020, the Company entered into a strategic partnership with NEC Payments B.S.C (“NECP”) through a series of agreements, which included the following: (a) Subscription License and Services Agreement; (b) Digital Banking Platform Operating Agreement; (c) Subscription License Order Form; and (d) Registration Rights Agreement (collectively the “Agreements”).

 

The intent of the Agreements was for the Company to deploy NECP’s technologies, allowing the Company to extend its product offering to include flexible, scalable and secure payment acceptance and issuer payment processing that supports the digitization of business and consumer financial services and the migration of cash and other legally payment types to distanced and contactless card and real time payment transactions. NECP will assist the Company to complete the development of its text payment solution and provide “best in class” software that complements the Company’s intellectual property. The Agreements, among other things:

 

  (a) provide the Company a license to access and use NECP’s digital banking and payment technology solutions, as identified in the Subscription License Order Form;
     
  (b) grant the Company conditional exclusivity in the United States for all of NECP’s payment acceptance processing technologies contingent upon the Company reaching transaction volume target goals;
     
  (c) grant NECP a license to develop software without the possibility of infringing upon the Company’s intellectual property;
     
  (d) creates the parameters in which NECP shall assist the Company in completing the development of its text payment system related to the Company’s patents;
     
  (e) award NECP a fifteen percent (15%) equity stake in the Company, on a fully diluted basis;
     
  (f) set revenue sharing splits between AppTech and NECP for all revenues generated from digital banking technologies licensed to AppTech.

 

Under the Agreements, either party had the right to terminate the agreement should the Company fail to secure a funding in the amount of $3,000,000 within 45 days from the effective date of the Agreements.

 

On November 19, 2020, the Company entered into Amendment No. 1 to the Subscription License and Services Agreement whereby the funding date was amended to amended to no later than December 18, 2020. All other terms of the original Agreements remained in full force and effect.

 

On February 11, 2021, the Company entered into an amended and restated Subscription License and Services Agreement, Digital Banking Platform Operating Agreement and Subscription License Order Form with NECP (collectively the “Restated Agreements”). The Restated Agreement created an engagement fee of $100,000 due within three business days from the effective date, reduced the funding amount triggering the enforceability of the Restated Agreements to $707,500 (“Funding”), altered the date in which initial fees are payable to no later than March 5, 2021 (the “Funding Date”) and provided terms to prevent dilution for NECP’s equity compensation for future funding secured by the Company. The fees in the Restated Agreements are payable within three business days from the effective date, at or before the Funding Date, at the Subscription Service Ready Date annually and monthly. The gross total fees due under the Restated Agreements are $2,212,500, excluding pass-through costs associated with infrastructure hosting fees.

 

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On February 19, 2021, the Company completed and validated its contractual obligations and paid to NECP the $100,000 engagement fee. On February 29, 2021, the Company paid the initial fee of $707,500 to NECP prior to the Funding Date. On March 25, 2021, the Company issued 18,011,515 shares of common stock to NEC on a fully diluted basis with piggyback rights.

 

The initial fees paid within three business days from the effective date and at or before the Funding Date included the following costs:

 

Engagement Fee   $ 100,000  
License subscription fee (50% due at Funding Date)     375,000  
Annual maintenance subscription fee (first year)     112,500  
Implementation fee (50% due at Funding Date)     162,500  
Infrastructure implementation fee (50% due at Funding Date)     32,500  
Training fee (50% due at Funding Date)     25,000  
Total   $ 807,500  

 

The following payments are due in the intervals noted over the five-year life of the Restated Agreements:

 

License subscription fee (second 50% due at Subscription Ready Date)   $ 375,000  
Annual maintenance subscription fees ($112,500 annually)     450,000  
Implementation fees (50% due at Subscription Ready Date)     162,500  
Infrastructure implementation fees (50% due at Subscription Ready Date)     32,500  
Training fees (50% due at Subscription Ready Date)     25,000  
Infrastructure support fees ($6,000 monthly after Subscription Ready Date)     360,000  
Total   $ 1,405,000 *

 

*Infrastructure Hosting Fees, which are pass through hosting fees from a hosting partner are excluded from this calculation.

 

Innovations Realized LLC

 

On October 2, 2020, the Company entered into an independent contractor services agreement with Innovations Realized, LLC (“IR”) to develop a strategic operating plan focused on the design, execution and go to market implementation of the NECP platform to enter the United States market.

 

On February 18, 2021, the Company entered into an amended independent contractor services agreement with IR. On February 19, 2021, the initial payment of $76,000 was made and on February 24, 2021 the second payment of $76,000 was made. The following payments are due over the life of the contract:

 

April 5,2021     $ 152,000  
May 5, 2021       114,000  
June 5, 2021       114,000  
July 5, 2021       114,000  
August 5, 2021       114,000  
Total     $ 608,000  

 

Under the October 2020 agreement, the Company granted options to purchase four hundred thousand shares at a price of $0.01 and two million five hundred thousand shares at $0.25 and exercisable for two years after vesting. These options vest in equal monthly installments over 24 months, which commences upon the Company successfully raising $3.0 million in qualified financing. As of December 31, 2020, the Company determined that the vesting provision were not probable due to lack of funding commitments, and other reasons disclosed above. In addition, the options early vesting based on the completion date of the statement of work or the IR principle becoming an employee of AppTech Corp. These options were valued at $639,993 and $3,999,754 using a Black Scholes pricing model.

 

On December 21, 2020, the Company sold the domain “bubblepay.com” for $72,500 to a third party.

 

Employee versus Contractor Classification

 

The Company compensates various individuals as consultants. Annually, these consultants are issued Form 1099s for amounts paid to them. In addition, these consultants do not have arrangements in which specify compensation payable to them. The Company risks potential tax and legal actions if these consultants are deemed to be employees by governmental agencies.

 

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NOTE 10 – STOCKHOLDERS’ DEFICIT

 

Series A Preferred Stock

 

The Company is authorized to issue 100,000 shares of $0.001 par value Series A preferred stock (“Series A”). There were fourteen (14) shares of Series A preferred stock outstanding as of December 31, 2020 and 2019. The holders of Series A preferred stock are entitled to one vote per share on an “as converted” basis on all matters submitted to a vote of stockholders and are not entitled to cumulate their votes in the election of directors. The holders of Series A preferred stock are entitled to any dividends that may be declared by the Board of Directors out of funds legally available, therefore on a pro rata basis according to their holdings of shares of Series A preferred stock, on an as converted basis. In the event of liquidation or dissolution of the Company, holders of Series A preferred stock are entitled to share ratably in all assets remaining after payment of liabilities and have no liquidation preferences. Holders of Series A preferred stock have a right to convert each share of Series A into 780 shares common stock.

 

Common Stock

 

The Company is authorized to issue 1,000,000,000 shares of $0.001 par value common stock. There were 88,511,657 and 84,153,825, respectively, shares of common stock outstanding as of December 31, 2020 and 2019. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders and are not entitled to cumulate their votes in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the board of directors out of funds legally available, therefore subject to the prior rights of holders of any outstanding shares of preferred stock and any contractual restrictions against the payment of dividends on common stock. In the event of liquidation or dissolution of the Company, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no preemptive or other subscription rights and no right to convert their common stock into any other securities.

 

During the years ended December 31, 2020 and 2019, the Company issued 4,012,000 and 454,500, respectively, shares of common stock to several consultants in connection with business development, accounts payable conversion and professional services. The Company valued the common stock issuances at $2,631,899 and $91,414, respectively, based upon the closing market price of the Company’s common stock on the date in which the performance was complete or issued based upon the vesting schedule and the closing market price of the Company’s common stock on the date of the agreement. The amounts were expensed to general and administrative expenses on the accompanying consolidated statements of operations. The accounts payable conversion was $152,500 during 2020.

 

During the year ended December 31, 2020, the Company granted 350,000 shares of common stock to the board of directors valued at $196,700 or $0.562 per share. The shares vest quarterly over the period of approximately one year. The Company valued the stock issuances, earned as of December 31, 2020, at $81,958 based on the closing market price of the Company’s common stock on the date of the agreement. The amount was expensed to general and administrative expenses on the accompanying consolidated statement of operations. The Company will issue 204,168 shares of common stock during 2021 valued at $114,742 based on the closing market price of the Company’s common stock on the date of the agreement, over the remaining term of the directors.

 

During the year ended December 31, 2019, the Company issued 40,000 shares of common stock to the landlord in lieu of rent. The Company valued the issuance at $18,400 based on the closing market price of the Company’s stock on the date in which the performance was completed. The amount was expensed to general and administrative expenses on the accompanying consolidated statements of operations.

 

Stock Options

 

On July 28, 2020, the Company entered into an agreement for board of director services. As compensation the Company granted options to purchase 125,000 shares at a price of $0.562 and are exercisable for two years. The options vest in equal monthly installments over 24 months. These options were valued at $70,235 using a Black-Scholes options pricing model.

 

On August 25, 2020, the Company entered into an agreement for accounting services in general and administrative expenses. As compensation the Company granted options to purchase 100,000 shares of common stock at a price of $0.25 and are exercisable for six months. These options were valued at $140,945 using a Black-Scholes options pricing model. The options were exercised on August 26, 2020.

 

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On September 21, 2020, the Company entered into an agreement for sales and marketing services in general and administrative expenses. As compensation the Company granted options to purchase 10,000 shares at a price of $0.01 and to purchase 120,000 shares at a price of $0.25 and are exercisable for two years. These options vest upon execution of the contract and in equal quarterly installments of 24 months. These options were valued at $13,498 and $161,999, respectively using a Black-Scholes options pricing model.

 

On September 22, 2020, the Company entered into an agreement for IT services in general and administrative expenses. As compensation the Company granted options to purchase 52,000 shares at a price of $0.25 and are exercisable for two years. The options vest in equal quarterly installments of 24 months. These options were valued at $77,995 using a Black-Scholes options pricing model.

 

On October 29, 2020, the Company entered into an agreement for sales and marketing in general and administrative expenses. As compensation the Company granted options to purchase 100,000 shares of common stock at a price of $0.30 and are exercisable for two years. These options were valued at $156,999 using a Black-Scholes options pricing model. The options were exercised on October 29, 2020.

 

The fair value of the options is estimated using a Black-Scholes option pricing model with the following range of assumptions:

 

Market value of common stock on issuance date     $0.562 - $1.57  
Expected price     $0.01 - $0.562  
Expected volatility     427% - 608 %
Expected term (in years)     0.5 - 3.0  
Risk-free interest rate     0.11 %
Expected dividend yields      

 

The following table summarizes option activity:

 

        Weighted   Weighted
    Number of   Average   Average
    shares   exercise price   remaining years
             
Granted       7,907,000     $ 0.21          
Exercised       (200,000 )   $ 0.28          
Outstanding as of December 31, 2020       7,707,000     $ 0.21       2.22  
Outstanding as of December 31, 2020, vested       90,752     $ 0.40       2.10  

 

The remaining expense outstanding through December 31, 2020 is $240,965 for which is expected to be expensed over the next 20 months in general and administrative expense.

 

On July 28, 2020, the board authorized the Company’s AppTech 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 consultants of our company to enable our company to attract, retain and motivate employees, directors, merchants, referral partners and channel partners, which is essential to our long-term success. A total of 5,000,000 shares of common stock were authorized under the AppTech Equity Incentive Plan, for which as of December 31, 2020 a total of 3,351,500 are available for issuance.

 

Warrants

 

In 2020, the Company entered into a security purchase agreement with an investor pursuant to which the Company agreed to sell the investor a $300,000 convertible note bearing interest at 12% per annum. The Company also sold warrants to the investors to purchase up to an aggregate of 200,000 shares of common stock, with an exercise term of five (5) years, at a per share price of one dollar and fifty cents ($1.50) which may be exercised by cashless exercise. The warrants were deemed a derivative liability and were recorded as a debt discount at date of issuance. See Note 7.

 

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Common Stock Repurchase Option

 

On January 23, 2020, the Company entered into a common stock repurchase option agreement to purchase or assign 300,000 shares of common stock from a third party at $0.05 per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase options were exercised on January 26, 2020 for which the Company received $98,750 in proceeds which was recorded as additional paid-in capital.

 

On February 26, 2020, the Company entered into a common stock repurchase option agreement to purchase or assign 266,115 shares of common stock from a third party at $0.05 per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option was exercised on February 27, 2020 for which the Company received $25,281 in proceeds which was recorded as additional paid-in capital.

 

On March 18, 2020, the Company entered into a common stock repurchase option agreement to purchase or assign 250,000 shares of common stock from a third party at $0.05 per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option was exercised on March 19, 2020 for which the Company received $62,500 in proceeds which was recorded as additional paid-in capital.

 

On April 24, 2020, the Company entered into a common stock repurchase option agreement to purchase or assign 55,000 shares of common stock from a third party at $0.05 per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option was exercised on April 27, 2020 for which the Company received $19,250 in proceeds which was recorded as additional paid-in capital.

 

On August 26, 2020, the Company entered into a common stock repurchase option agreement to purchase or assign 250,000 shares of common stock from a third party at $0.07 per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option was exercised on August 26, 2020 for which the Company received $45,000 in proceeds which was recorded as additional paid-in capital.

 

On October 14, 2020, the Company entered into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000 shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option was exercised on October 14, 2020 for which the Company received $7,333 in proceeds which was recorded as additional paid-in capital.

 

On October 14, 2020, the Company entered into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000 shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option was exercised on October 15, 2020 for which the Company received $5,500 in proceeds which was recorded as additional paid-in capital.

 

On October 14, 2020, the Company entered into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000 shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option was exercised on October 29, 2020 for which the Company received $11,000 in proceeds which was recorded as additional paid-in capital.

 

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NOTE 11 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 and has determined that no material subsequent events exist other than those disclosed below.

 

On February 3, 2021, the Company entered into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000 shares of common stock from a third party at $0.20 per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option for 50,000 shares was exercised on February 11, 2021 for which the Company received $33,750 in proceeds which was recorded as additional paid-in capital.

 

On February 3, 2021, the Company entered into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000 shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option for 350,000 shares was exercised on February 17, 2021 for which the Company received $222,250 in proceeds which was recorded as additional paid-in capital.

 

On February 3, 2021, the Company entered into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000 shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option for 850,000 shares was exercised on February 19, 2021 for which the Company received $539,750 in proceeds which was recorded as additional paid-in capital.

 

On February 3, 2021, the Company entered into a common stock repurchase option agreement to purchase or assign 1,000,000 shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option for 750,000 shares was exercised on February 22, 2021 for which the Company received $881,250 in proceeds which was recorded as additional paid-in capital.

 

On February 23, 2021, the Company entered into a common stock repurchase option agreement to purchase or assign 500,000 shares of common stock from a third party at $0.225 per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option for 250,000 shares was exercised on March 1, 2021 for which the Company received $193,750 in proceeds which was recorded as additional paid-in capital.

 

On February 23, 2021, the Company entered into a common stock repurchase option agreement to purchase or assign 500,000 shares of common stock from a third party at $0.225 per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The common stock repurchase option for 150,000 shares was exercised on March 5, 2021 for which the Company received $102,000 in proceeds which was recorded as additional paid-in capital.

 

On March 4, 2021, the Company enteredinto a common stock repurchase option agreement to purchase or assign 2,000,000 shares of common stock from a related party at $0.20 per share.The common stock repurchase option for 50,000 of the 2,000,000 shares was exercised on March 10, 2021. On March 10, 2021, the Company cancelled the 50,000 shares exercised.

 

On March 5, 2021, the Company entered into a judgment purchase agreement from a third party. The judgment is for damages in the amount of $516,932 against FlowPay Corporation and R. Wayne Steiger. The Company issued 200,000 shares of common stock as consideration for the assignment of the judgment.

 

See Note 8 and 9 for additional subsequent events.

  

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EXHIBIT INDEX

 

Exhibit Number     Exhibit Title
3.1   AppTech Corp. Articles of Conversion filed October 25, 2006 (filed as Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.2   AppTech Corp. Articles of Incorporation filed October 25, 2006(filed as Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.3   AppTech Corp. Certificate of Designation filed May 09, 2007(filed as Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.4   AppTech Corp. Certificate of Correction filed June 04, 2007(filed as Exhibit 3.4 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.5   AppTech Corp. Certificate of Designation filed June 06, 2007(filed as Exhibit 3.5 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.6   AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed November 17, 2008(filed as Exhibit 3.6 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.7   AppTech Corp. Certificate of Amendment filed October 26, 2009(filed as Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.8   AppTech Corp. Certificate of Amendment filed October 27, 2009(filed as Exhibit 3.8 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.9   AppTech Corp. Certificate of Designation filed April 21, 2010(filed as Exhibit 3.9 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.10   AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed April 27, 2010(filed as Exhibit 3.10 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.11   AppTech Corp. Certificate of Change filed July 22, 2010(filed as Exhibit 3.11 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.12   AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed October 26, 2010(filed as Exhibit 3.12 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.13   AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed October 26, 2010(filed as Exhibit 3.13 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.14   AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed October 28, 2010(filed as Exhibit 3.14 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.15   AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed April 08, 2011(filed as Exhibit 3.15 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)

 

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3.16   AppTech Corp. Certificate of Amendment filed June 06, 2011 (filed as Exhibit 3.16 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.17   AppTech Corp. Articles of Domestication filed July 18, 2011(filed as Exhibit 3.17 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.18   AppTech Corp. Bylaws dated May 07, 2013(filed as Exhibit 3.18 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.19   AppTech Corp. Certificate of Domestication filed July 09, 2013(filed as Exhibit 3.19 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.20   AppTech Corp. Articles of Amendment filed October 31, 2013(filed as Exhibit 3.20 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.21   AppTech Corp. Certificate of Incorporation filed July 29, 2015 (filed as Exhibit 3.21 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
3.22   AppTech Corp. Bylaws (Amended and Restated) dated March 27, 2020 (filed as Exhibit 3.22 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
4.1   AppTech Code of Business Conduct(filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
4.2   AppTech Corp. Audit Committee Charter (filed as Exhibit 4.3 to the Registrant’s Quarterly Report on Form 10-Q, as filed on November 16, 2020, and incorporated herein by reference)
     
4.3   AppTech Corp. Compensation Committee Charter (filed as Exhibit 4.4 to the Registrant’s Quarterly Report on Form 10-Q, as filed on November 16, 2020, and incorporated herein by reference)
     
4.4   AppTech Corp. Corporate Governance and Nominating Committee Charter
     
4.5   AppTech Equity Incentive Plan ratified by shareholders at the Annual Meeting of the Shareholders on July 28, 2020
     
4.6   AppTech Corp. Employee Bonus Program
     
10.1   Amendment to Asset Purchase Agreement dated June 22, 2017(filed as Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
10.2   Lease & Purchase Option Agreement dated January 22, 2020(filed as Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K, as filed on March 30, 2020, and incorporated herein by reference)
     
10.3   Strategic Partnership Agreement dated as of August 21, 2020, by and among AppTech Corp. and Silver Alert Services LLC, doing business as LifeLight Systems. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on August 26, 2020, and incorporated herein by reference)

 

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10.4   Subscription License and Service Agreement dated as of October 02, 2020, by and among AppTech Corp. and NEC Payments B.S.C. (c).(filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on October 07, 2020, and incorporated herein by reference)
     
10.5   Digital Banking Platform Operating Agreement dated as of October 02, 2020, by and among AppTech Corp. and NEC Payments B.S.C. (c).(filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed on October 07, 2020, and incorporated herein by reference)
     
10.6   Subscription License Order Form dated as of October 02, 2020, by and among AppTech Corp. and NEC Payments B.S.C. (c). PURSUANT TO REG S-K ITEM 601, CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED. (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, as filed on October 07, 2020, and incorporated herein by reference)
     
10.7   Registration Rights Agreement dated as of October 02, 2020, by and among AppTech Corp. and NEC Payments B.S.C. (c). (filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, as filed on October 07, 2020, and incorporated herein by reference)
     
31.1   Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 dated March 30, 2020
     
31.2   Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 dated March 30, 2020
     
32.1   Certification of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 dated March 30, 2020
     
32.2   Certification of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 dated March 30, 2020
     
101.INS   XBRL INSTANCE DOCUMENT
     
101.SCH   XBRL TAXONOMY EXTENSION SCHEMA
     
101.CAL   XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
     
101.DEF   XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
     
101.LAB   XBRL TAXONOMY EXTENSION LABEL LINKBASE
     
101.PRE   XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

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Signatures

 

Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in Carlsbad, California, on March 31, 2020.

 

  AppTech Corp.
     
  By: /s/ Luke D’Angelo
  Name: Luke D’Angelo
  Title: Chief Executive Officer

 

Pursuant to the requirements of the Securities Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ Luke D’Angelo   Interim Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)   March 31, 2021
Luke D’Angelo        
         
/s/ Gary Wachs   Chief Financial Officer and Director (Principal Financial and Accounting Officer)   March 31, 2021
Gary Wachs        
         
/s/ Michael Gross   Director   March 31, 2021
Michael Gross        
         
/s/ William Huff   Director   March 31, 2021
William Huff        
         
/s/ Mengyin H. Liang “Roz Huang”   Director   March 31, 2021
Mengyin H. Liang “Roz Huang”        
         
/s/ Michael O’Neal   Director   March 31, 2021
Michael O’Neal        
         
/s/ Christopher Williams   Director   March 31, 2021
Christopher Williams        

 

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