AppTech Payments Corp.: Form 10-Q for the period ended Mar 31, 2026

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

Business Overview

AppTech Payments Corp. (“AppTech”) continued executing its financial technology platform strategy during 2026, building on the operational and technology foundation established in 2025. The Company now operates as a fintech infrastructure provider delivering digital banking, embedded finance, and omnichannel payment capabilities to financial institutions, enterprises, and technology partners.

The AppTech Banking Platform, licensed and deployed in 2025, is fully operational with the Company’s partner bank and continues onboarding clients in 2026. The platform supports digital account creation, payment services, compliance workflows, and financial operations through a unified, cloud-native architecture that integrates alongside a bank’s existing core system. Operational alignment with the partner bank has strengthened, improving onboarding efficiency and supporting the Company’s ability to scale additional financial institutions over time.

AppTech also advanced the integration of InfinitusPay (“IP”), acquired in late 2025. IP’s cross-border payments engine, multi-currency capabilities, onboarding, and compliance workflows are now incorporated into the Company’s broader product suite. The IP partner portal continues to support both existing clients and AppTech’s broader channel strategy by providing reporting, analytics, and operational insights to partners.

The Company’s FinZeo Payments-as-a-Service business remains an active contributor to revenue in 2026. AppTech continues to support merchants, ISOs, and technology partners while leveraging the PaaS channel to identify opportunities aligned with its broader digital banking and embedded finance strategy.

AppTech’s 2026 priorities include scaling the Banking Platform, expanding cross-border and multi-currency capabilities, increasing transaction-based and subscription revenue, and strengthening partner and enterprise relationships. With its modernized technology stack and integrated product suite, the Company is positioned to participate in the continued shift toward digital financial services and embedded financial infrastructure.

Financial Operations Overview

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

Revenues

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

Set up Fees

The Company provides one-time customer setup services that include gathering and validating required compliance documentation for its banking partners and performing the technical integration necessary to establish an operational merchant profile on the Company’s platform. As part of the setup, customers receive stand-alone value by receiving a named bank account with our banking partner that they can use independent of us. Setup services are satisfied at a point in time when the customer or subaccount is fully configured and enabled to transact on the platform. Revenue is recognized upon completion of setup, which generally coincides with month-end billing.

Monthly Platform and Transaction-Based Fees

Monthly recurring platform access fees and transaction-based fees represent consideration for continuous platform access and payment processing services and are recognized monthly as the services are performed. Transaction-based fees, which represent variable consideration, are recognized in the period in which the underlying transactions occur. Subaccount setup fees are recognized when the subaccount is established and made available for use.

Customers are invoiced in arrears at month-end, and amounts billed but not yet collected are recorded as accounts receivable.

Merchant Processing Services

The Company provides merchant processing solutions for credit card and ACH transactions. We act as an intermediary between merchants, who initiate transactions and banks that process them. We collect either a flat fee, a fee for each transaction, and or a fee calculated as a percentage of its value, from both credit cards and ACHs. Revenue is recognized when transactions are processed by banks or at month-end based on the processing activity. Payments to channel partners are deducted from revenue.

Accrued Residuals

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

Expenses

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

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

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

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

Results of Operations

This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for the three months ended March 31, 2026 and 2025, respectively.

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

($ in thousands)

26

Revenue

Revenue was approximately $1,457 thousand for the three months ended March 31, 2026, compared to $217 thousand for the three months ended March 31, 2025, representing an increase of 571%. The increase was driven by our lending revenue vertical, the revenue generated from the IP platform, and an increase of merchant processing revenue from our independent sales organization (“ISO”).

Cost of Revenue

Cost of revenue was approximately $646 thousand for the three months ended March 31, 2026, compared to $128 thousand for the three months ended March 31, 2025, representing an increase of $518 thousand. The increase was principally driven by fees owed to our ISO partner, fees owed to our IP platform processor, and an increase to referral partner payouts related to the IP.

General and Administrative Expenses

General and administrative expenses were approximately $3,284 thousand for the three months ended March 31, 2026, compared to $1,965 thousand for the three months ended March 31, 2025, representing an increase of $1,319. The increase was driven by stock based compensation and the accelerated vesting of performance based shares.

Research and Development Expenses

Research and development expenses were approximately $375 thousand for the three months ended March 31, 2026, compared to $780 thousand for the three months ended March 31, 2025, representing a decrease of $405 thousand. The decrease was solely driven by the Company’s decision to lower its outsourced development team.

Other income (expenses)

Interest Expense

Interest expense was approximately $196 thousand and $33 thousand for the three months ended March 31, 2026 and 2025, respectively, representing an increase of $163 thousand. The increase was due to the interest expense related to the convertible notes and liability assumption from our banking partner.

Gain on debt extinguishment

The gain on debt extinguishment was approximately $29 thousand and $13 thousand for the three months ended March 31, 2026 and 2025, respectively, representing an increase of $16 thousand. The increase was due to the Company extinguishing less of its past debt.

Loss on change in fair value of contingent consideration

The loss was approximately $262 thousand and $0 for the three months ended March 31, 2026 and 2025, respectively, representing an increase of $262 thousand. The increase was due to the Company adjusting the earnout owed to the Sellers of IP.

Debt discount amortization

The debt discount amortization was approximately $28 thousand and $0 for the three months ended March 31, 2026 and 2025, respectively, representing an increase of $28 thousand. The change was due to the amount of convertible debt incurred in FY 2025.

Other income (expenses)

Other expense was approximately $3 thousand for the three months ended March 31, 2026 and other income of $35 thousand for the three months ended March 31, 2025, representing a decrease of $38 thousand. The change was primarily driven by an adjustment to the state and federal taxes credit.

Liquidity and Capital Resources

The Company routinely evaluates its immediate working capital needs and liquidity sources. For the three months ended March 31, 2026 and March 31, 2025, the Company maintained its liquidity sources primarily through cash and cash equivalents, convertible notes, and proceeds received from equity and equity-linked instruments to pay for services and compensation.

Cash and cash equivalents at March 31, 2026 and December 31, 2025 were $110 thousand and $244 thousand, respectively.

Management's Plan to Address Going Concern Considerations

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

Management is actively pursuing additional funding options and new revenue streams that may contribute additional cash flows over the twelve months following the issuance date of these financial statements.

Management intends to maintain adequate working capital and adhere to prudent financial forecasting. In March 2026, Management began implementing comprehensive expense reduction strategies across the Company’s operations to enhance financial stability.

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 three months ended March 31, 2026, was approximately $913 thousand, which is comprised of (i) our net loss of $3,308 thousand, adjusted for non-cash expenses totaling $2,388 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) decreased by changes in operating assets and liabilities of approximately $7 thousand.

Net cash used in operating activities during the three months ended March 31, 2025, was approximately $1,801 thousand, which is comprised of (i) our net loss of $2,641 thousand, adjusted for non-cash expenses totaling $1,202 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) decreased by changes in operating assets and liabilities of approximately $362 thousand.

Cash Flow from Investing Activities

There was no cash used by investing activities during the three months ended March 31, 2026 and 2025.

Cash Flow from Financing Activities

Net cash provided by financing activities during the year ended March 31, 2026 was approximately $779 thousand, primarily reflecting $1,000 thousand of proceeds received from the participation agreement, partially offset by $221 thousand of repayments of notes payable.

During the three months ended March 31, 2025, net cash provided by financing activities was $1,350 thousand, which consists of proceeds received on the outstanding equity receivable at year-end..

Critical Accounting Policies and Estimates

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

Critical accounting policies are those that we consider the most critical to understanding our financial condition and results of operations. The accounting policies we believe to be most critical to understanding our financial condition and results of operations are discussed below. As of March 31, 2026, there have been no significant changes to our critical accounting estimates nor to our recently issued accounting pronouncements, except as described in Note 2 to our consolidated financial statements.

Business Combination

Recognition and Measurement: Companies must recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquiree at their fair value on the acquisition date.

Goodwill: Arises when the consideration transferred in a business combination exceeds the fair value of the net identifiable assets acquired. It represents future economic benefits arising from assets that are not individually identified and separately recognized.

Intangible Assets: Identifiable intangible assets, distinguishable either by separability from the acquired entity or through contractual or other legal rights, are valued and reported independently from goodwill. These assets include, but are not limited to, trademarks, customer relationships, proprietary technology, and patents. The fair value of these intangible assets is determined at the time of acquisition and is subject to subsequent impairment tests.

The fair value of identifiable intangible assets is estimated using income, market, or cost approach methods. The income approach, often applied through the discounted cash flow (DCF) method, involves projecting future cash flows attributable to the asset and discounting them to present value using a discount rate that reflects the risk associated with those cash flows. The estimation of fair value is inherently uncertain due to the assumptions and judgments involved in projecting future cash flows, determining appropriate discount rates, and estimating the useful life of each asset.

Over the reporting period, changes in market conditions, technological advancements, or strategic shifts in the business may necessitate revisions to the assumptions used in the valuation of identifiable intangible assets. Management closely monitors these factors and will adjust the valuation of intangible assets as appropriate, reflecting the impact of any such changes in our financial statements.

Contingent Consideration: Any contingent consideration, such as earn-outs, is measured at fair value at the acquisition date and can be adjusted in subsequent periods if the fair value changes.

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

Goodwill Impairment

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

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

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

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

Impairment of Long-Lived Assets

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

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

Recent Accounting Pronouncements

As of March 31, 2026, there have been no significant changes to our recently issued accounting pronouncements, except as described in Note 2 to our consolidated financial statements.

Off-Balance Sheet Arrangements

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

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 not effective as of March 31, 2026 due to the material weaknesses in our internal control over financial reporting as described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Our management is also responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for us. Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated, as of March 31, 2026, the effectiveness of our internal control over financial reporting using the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of March 31, 2026.

The management has identified a material weakness in our internal control over financial reporting, primarily due to insufficient formal financial reporting policies and procedures resulting in material post-close adjustments.

Policies and procedures should be implemented to ensure that any significant events requiring disclosure are identified, accounted for, disclosed and reviewed by the management.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

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

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.