AppTech Payments Corp.: Form 10-Q for the period ended Jun 30, 2025

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

Business Overview

The financial services industry is undergoing accelerated transformation driven by technological innovation and a rapidly evolving regulatory environment surrounding stablecoins and digital assets. Regulatory clarity around asset-backed stablecoins, custody solutions, and tokenized financial instruments is reshaping how digital financial services are structured, offered, and consumed. At the same time, advancements in blockchain infrastructure and real-time settlement capabilities are enabling more seamless, secure, and transparent user experiences. Consumers now expect intuitive access to compliant digital assets, while businesses must adapt to shifting oversight and operational requirements to stay competitive. In this dynamic landscape, organizations are challenged to balance innovation with compliance, delivering scalable, future-proof solutions that meet both market demands and regulatory expectations

To flourish in this environment, businesses need to adopt new technologies to engage, communicate and process payments and manage payouts with their customers from a supplier that widely supports innovation and adaptation as the industry evolves. We believe our technologies will greatly increase the adoption of omni-channel payments and digital banking solutions in sectors that must quickly adapt and migrate to new, secure digital Fintech technologies. By embracing advancements in the payment and banking industries, we are well-positioned to meet the growing needs of existing and prospective clients and intend for our current and future products to be at the forefront of solving these accelerated market needs.

AppTech’s all-in-one Fintech platform, FinZeo™, delivers financial technologies and capabilities through an ever-evolving modular cloud/edge-based architecture. The FinZeo platform houses a large array of financial products and services that can be implemented off-the-shelf or customized via modern APIs. Within its FinZeo platform, AppTech offers Payments-as-a-Service (“PaaS”), and Banking-as-a-Service (“BaaS”).

FinZeo provides PaaS via integrated solutions for frictionless digital and mobile payment acceptance. These solutions provide advanced payment processing solutions by catering to the unique needs of each merchant. FinZeo’s PaaS solutions include ACH (automatic clearing house), credit & debit cards, eCheck, mobile processing, electronic billing, and text-to-pay. PaaS will also solve for multi-use case, multi-channel, API-driven, account-based issuer processing for card, digital tokens, and payment transfer transactions.

AppTech is positioned to further accelerate digital transformation through BaaS, layered with financial management tools that empower financial institutions to provide businesses, professionals, and individuals with the ability to better manage their finances anywhere, anytime at a fraction of the cost of traditional banking and financial services. BaaS fosters an ecosystem of immersive and scalable digital financial management services, including FinZeo's groundbreaking automated underwriting portal. By digitizing the underwriting process, Automated Underwriting expedites business onboarding with its intuitive digital application and e-signature capabilities. This portal offers customizable pricing, risk models, and access to multiple processors, ensuring tailored solutions for diverse needs.

Also, Fintechs, Independent Sales Organizations (ISOs) and Independent Software Vendors (ISVs), can seamlessly integrate their businesses with the FinZeo Portal or BaaS solution, which facilitates swift technology adoption. By leveraging the FinZeo portal, ISOs/ISVs can streamline operations and foster growth, meeting the economic demands of their merchants. Through personalized portals, ISOs/ISVs have the flexibility to select and integrate FinZeo payments and banking services, thereby enhancing their offerings to clients.

FinZeo has a flexible architecture and can be fully white labeled to allow for rich, personalized payment and banking experiences. This cloud-based platform packages together elements of AppTech’s intellectual property, BaaS, and PaaS to create a one-hub connection point of multi-tenant portals giving the merchant, ISO/ISV, and each customer a well-defined user experience.

Recent Developments

The Company has successfully remedied its equity deficiency; however, it was unable to satisfy the $1.00 minimum bid price requirement for 10 consecutive business days, as mandated by Nasdaq Listing Rule 5550(a)(2). Consequently, the Company was delisted and transitioned to trading on the OTCQB market. Management remains committed to enhancing shareholder value and intends to pursue an uplisting to a national exchange before the end of the fiscal year.

Financial Operations Overview

The following discussion sets forth certain components of our statements of operations as well as factors that impact those items (in thousands, except per share data).

Revenues

Our Revenues. We derive our revenue by providing financial processing services to businesses.

Expenses

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

General and administrative. Include salaries, professional services, software costs, regulatory expenses, stock-based compensation, rent, utilities, and other operating costs.

Research and development. Includes the internal and outsourced services costs incurred to maintain and further develop the FinZeo platform, and the development of additional technology needed to pursue new product offerings.

Other income (expenses). Consists of interest on outstanding indebtedness, and the gain/loss on debt extinguishment.

Results of Operations

This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for the three and six months ended June 30, 2025 and 2024, respectively.

Revenue

Revenue was approximately $291 thousand for the three months ended June 30, 2025, compared to $76 thousand for the three months ended June 30, 2024, representing an increase of 283%. For the six months ended June 30, 2025 and 2024, revenue was approximately $508 thousand and $181 thousand representing an increase of 181%. The increase was principally driven by an increase of our ISO and lending revenue.

Cost of Revenue

Cost of revenue was approximately $107 thousand for the three months ended June 30, 2025, compared to $14 thousand for the three months ended June 30, 2024, representing an increase of $93. For the six months ended June 30, 2025 and 2024, cost of revenue was approximately $235 thousand and $25 thousand, representing an increase of $210 thousand. The increase was driven by the revenue share with our ISO partners.

General and Administrative Expenses

General and administrative expenses were approximately $1,155 thousand for the three months ended June 30, 2025, compared to $2,320 thousand for the three months ended June 30, 2024, representing a decrease of $1,165 thousand. The reduction was mainly driven by lower salaries and professional services.

General and administrative expenses were approximately $3,120 thousand and $4,803 thousand for the six months ended June 30, 2025 and 2024, respectively, representing a decrease of 35%. The decrease was driven by lower professional fees, salaries, and stock based compensation.

Research and Development Expenses

Research and development expenses were approximately $910 thousand for the three months ended June 30, 2025, compared to $633 thousand for the three months ended June 30, 2024, representing an increase of $277 thousand. The increase was due to higher third-party development costs related to maintaining and enhancing the FinZeo platform.

Research and development expenses were approximately $1,690 thousand and $1,276 thousand for the six months ended June 30, 2025 and 2024, respectively. The increase was driven by higher third-party costs related to maintaining and enhancing the platform.

Interest income (expense)

Interest income was approximately $26 thousand for the three months ended June 30, 2025, compared to an expense of $32 thousand for the three months ended June 30, 2024, representing an increase of $58 thousand. For the six months ended June 30, 2025 and 2024, interest expense decreased from $35 thousand to $7 thousand. The change was due to the interest related to the assigned agreement with our banking partners.

Gain on debt extinguishment

Gain on debt extinguishment was approximately $13 thousand for the three months ended June 30, 2025, compared to $0 for the three months ended June 30, 2024, representing an increase of $13 thousand. The increase was driven by reconciling journal entries and accrued expenses write-offs. The balance remained unchanged as of June 30, 2025.

Other income (expenses)

Other expense was $5 thousand for the three months ended June 30, 2025, compared to income of $1 thousand for the three months ended June 30, 2024. The decrease of $6 thousand was primarily driven by the interest expense related to the note assumption recorded in April 2025. For the six months ended June 30, 2025 compared to June 30, 2024, other expense increased from $1 thousand to other income of $30 thousand. The biggest driver was the credit balance with the state of Delaware.

Liquidity and Capital Resources

The Company routinely evaluates its immediate working capital needs and liquidity sources. For the three months ended June 30, 2025 and June 30, 2024, the Company maintained its liquidity sources primarily through cash and cash equivalents, and proceeds received from the AFIOS Partners investment.

Cash and cash equivalents at June 30, 2025 and December 31, 2024 were $138 thousand and $868 thousand, respectively.

Management's Plan to Address Going Concern Considerations

The Company has experienced recurring operating losses, primarily due to limited revenues. The Company's current financial conditions and recurring losses raise substantial doubt about its ability to continue as a going concern.

Management has restructured its operations, reduced its headcount, and is actively pursuing additional funding options. We are confident that two of its revenue streams will begin generating revenue in the following twelve months from the issuance date of these financial statements.

Management intends to maintain adequate working capital and adhere to prudent financial forecasting.

Cash Flows

The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods ($ in thousands).

Cash Flow from Operating Activities

Net cash used in operating activities during the six months ended June 30, 2025, was approximately $3,080 thousand, which is comprised of (i) our net loss of $4,501 thousand, adjusted for non-cash expenses totaling $1,590 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) decreased by changes in operating assets and liabilities of approximately $169 thousand.

Net cash used in operating activities during the six months ended June 30, 2024, was approximately $3,901 thousand, which is comprised of (i) our net loss of $5,959 thousand, adjusted for non-cash expenses totaling $1,750 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) changes in operating assets and liabilities of approximately $308 thousand.

Cash Flow from Investing Activities

There was no cash used by investing activities during the three months ended June 30, 2025 and 2024.

Cash Flow from Financing Activities

During the six months ended June 30, 2025, net cash provided by financing activities was $2,350 thousand, which consists of proceeds received on the outstanding equity receivable at year-end, additional funds related to the Afios investment, and a convertible note executed in June 2025.

During the six months ended June 30, 2024, net cash provided by financing activities was approximately $2,636 thousand. This amount primarily consists of $1,800 thousand in net proceeds from the issuance of common shares in our public offering, $700 thousand from the At-The-Market (ATM) offering, and a $200 thousand loan in June 2024.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Significant estimates include those related to the valuation of goodwill impairment and intangible assets, and equity-based compensation. These estimates are based on historical experience and assumptions believed to be reasonable under current conditions. It’s important to note that actual results could differ from these estimates.

Critical accounting policies are those that we consider the most critical to understanding our financial condition and results of operations. The accounting policies we believe to be most critical to understanding our financial condition and results of operations are discussed below. As of June 30, 2025, there have been no significant changes to our critical accounting estimates nor to our recently issued accounting pronouncements, except as described in Note 2 to our consolidated financial statements.

Equity-Based Compensation: We estimate the fair value of stock options granted using the Black-Scholes option pricing model, which requires input of subjective assumptions. The model inputs include expected stock price volatility, expected term, risk-free interest rate, and dividend yield. The assumptions about future stock price volatility and the option’s expected term involve significant judgments based on historical data and future expectations. The reported equity-based compensation expense is sensitive to changes in the volatility assumption. An increase in expected volatility could materially impact the amount of compensation expense recognized.

Goodwill Impairment

Goodwill Impairment Testing: The process requires an annual test for impairment of goodwill, and more frequent testing if certain indicators suggest that the goodwill might be impaired. This assessment involves comparing the carrying amount of a reporting unit, including goodwill, to its fair value. Key estimates in determining fair value include: a) Cash Flow Projections: Utilizing the DCF method, management estimates future cash flows based on current performance, business plans, and expected market growth, introducing judgment due to forecasting uncertainties. b) Discount Rate: The discount rate, reflecting the WACC and adjusted for unit-specific risks, is crucial for present value calculations, with changes significantly affecting fair value estimations; c) Long-term Growth Rates: Assumptions on sustainable growth rates impact the terminal value in the DCF model, thus influencing the overall fair value of the reporting unit.

Impairment Loss Calculation: The impairment loss, representing the excess of the carrying amount of goodwill over its implied fair value, is highly sensitive to the estimates and assumptions used in the fair value calculation. Small changes in cash flow projections, discount rates, or long-term growth rates can result in significant adjustments to the impairment loss recognized in the income statement. Given the dynamic nature of business conditions, technological advancements, and market competition, estimates used in goodwill impairment testing may change from one period to another. Management is tasked with regularly reviewing and updating these estimates to reflect the latest available information and market conditions.

Once an impairment loss is recognized, it is not reversible in subsequent periods. This finality places additional importance on the accuracy and reasonableness of the underlying estimates and assumptions.

Management concluded that the fair value of the goodwill recorded as part of the FinZeo acquisition significantly exceeds its carrying amount, and there is no significant risk of goodwill impairment based on current assumptions and market conditions.

Impairment of Long-Lived Assets

Our company evaluates long-lived assets, including capitalized software, for impairment when there are indicators that the carrying amount may not be recoverable. This process involves comparing the carrying amount to the expected future undiscounted cash flows from the asset. If the carrying amount exceeds the expected cash flows, an impairment charge is recognized to reduce the asset’s carrying amount to its fair value.

Indicators of impairment include significant underperformance against projections, market or economic downturns, and technological obsolescence. The fair value is determined using market data or discounted cash flow models. An impairment loss is recorded as an expense immediately.

Recent Accounting Pronouncements

As of June 30, 2025, there have been no significant changes to our recently issued accounting pronouncements, except as described in Note 2 to our consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established to facilitate off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee of our own performance.

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

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 June 30, 2025.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the three months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.

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.