AppTech Payments Corp. 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Mark One)

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

For the quarterly period ended September 30, 2024

o	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: 001-39158

AppTech Payments Corp.

(Exact Name of Registrant as Specified in its Charter)

Delaware

7389

65-0847995

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

5876 Owens Avenue

Suite 100

Carlsbad, California 92008

(760) 707-5959

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	APCX	Nasdaq Capital Market
Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $4.15	APCXW	Nasdaq Capital Market

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

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

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 x No o

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	o	Accelerated filer	o

Non-accelerated filer	x	Smaller reporting company	x

		Emerging growth company	o

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. o

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

As of November 14, 2024, the registrant had 27,646,185 shares of common stock issued and outstanding.

EXPLANATORY NOTE

This amendment is being filed solely to provide clarification around the pricing of certain stock issuances that happened in the period subsequent to the quarter end. The Company had received questions from investors and determined to make the filing to assist investors in their understanding of the transactions.

AppTech Payments Corp.

Form 10-Q

Table of Contents

		Page
	Part I

	Special Note Regarding Forward-Looking Statements and Projections	3

Item 1.	Consolidated Financial Statements (unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34

Item 4.	Controls and Procedures	34

	Part II

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

	Signatures	40

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS

Various statements in this Quarterly on Form 10-Q of AppTech Payments Corp. (we, our, AppTech or the Company) 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. Meaningful factors that could cause actual results to differ include:

	·	delays and uncertainty associated with the boarding of clients onto our platform;
	·	substantial investment and costs associated with new potential revenue streams and their corresponding contractual obligations;
	·	a slowdown or reduction in our sales due to a reduction in end user demand, unanticipated competition, regulatory issues, or other unexpected circumstances;
	·	uncertainty regarding adverse macroeconomic conditions, including inflation, a recession, changes to fiscal and monetary policy, tighter credit, higher interest rates, consumer confidence and spending, and high unemployment;
	·	dependence on third-parties needed to facilitate our automated clearing house ("ACH") and merchant service capabilities;
	·	delay in or failure to obtain regulatory approval for any future products in additional countries, and;
	·	current and future laws and regulations.

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

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

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

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

APPTECH PAYMENTS CORP.

CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO UNAUDITED FINANCIAL STATEMENTS

(The financial statements have been condensed for presentation purposes)

	Pages

Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	5

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	6

Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023	7

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023	8

Notes to the Consolidated Financial Statements	9

APPTECH PAYMENTS CORP.

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023

(UNAUDITED)

(in thousands, except shares and per share data)


	September 30, 2024			December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	104		$	1,281
Accounts receivable		12			30
Prepaid expenses		196			205
Total current assets		312			1,516
Note receivable		–			26
Right of use asset		29			66
Security deposit		19			9
Intangible assets, net of accumulated amortization		3,664			4,428
Goodwill		1,161			1,161
Capitalized software development, net of accumulated amortization		1,429			1,147
TOTAL ASSETS	$	6,614		$	8,353
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	2,484		$	1,680
Accounts payable - related party		102			119
Accrued liabilities		1,691			1,958
Convertible note payable and accrued interest, net of discount of $428 and $0, respectively		687			–
Notes payable		1			1
Deferred revenue		150			244
Right of use liability		38			78
Total current liabilities		5,153			4,080
Long-term liabilities
Right of use liability, net of current portion		–			14
Notes payable, net of current portion		62			65
Total long-term liabilities		62			79
TOTAL LIABILITIES		5,215			4,159
Commitments and contingencies (Note 7)					–
Stockholders’ equity
Preferred stock: 100,000 shares authorized at September 30, 2024 and December 31, 2023, respectively; Series A preferred stock: $0.001 par value;14 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively.		–			–
Common stock, $0.001 par value; 105,263,158 shares authorized; 27,478,328 and 22,251,742 issued and outstanding at September 30, 2024 and December 31, 2023, respectively		27			22
Additional paid-in capital		169,120			163,921
Accumulated deficit		(167,748	)		(159,749	)
Total stockholders’ equity		1,399			4,194
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,614		$	8,353

See accompanying notes to the consolidated financial statements.

APPTECH PAYMENTS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 and 2023

(UNAUDITED)

(in thousands, except shares and per share data)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2024			2023			2024			2023
Revenues	$	43		$	140		$	224		$	363
Cost of revenues		24			44			49			159
Gross profit		19			96			175			204

Operating expenses:
Selling, general and administrative, including stock based compensation of $306 and $958 for the three months ended September 30, 2024 and 2023, respectively, $1,214 and $2,002 for the nine months ended September 30, 2024 and 2023, respectively		1,867			2,227			6,669			7,114
Impairment of intangible assets		–			–			–			6,131
Research and development, including stock based compensation of $6 and $327 for the three months ended September 30, 2024 and 2023, respectively, $138 and $956 for the nine months ended September 30, 2024 and 2023, respectively		2			751			1,278			2,774
Total operating expenses		1,869			2,978			7,947			16,019

Loss from operations		(1,850	)		(2,882	)		(7,772	)		(15,815	)

Other income (expenses)
Interest expense		(18	)		(4	)		(53	)		(48	)
Change in fair value of derivative liability		–			–			–			27
Debt discount amortization		(151	)		–			(151	)		–
Other income (expenses)		(6	)		(5	)		(8	)		711
Total other expenses		(175	)		(9	)		(212	)		690

Loss before provision for income taxes		(2,025	)		(2,891	)		(7,984	)		(15,125	)
Provision for income taxes		–			–			–			–
Net loss	$	(2,025	)	$	(2,891	)	$	(7,984	)	$	(15,125	)
Deemed dividend related to warrant resets		(15	)		–			(15	)		(763	)
Net loss attributable to common stockholders	$	(2,040	)	$	(2,891	)		(7,999	)		(15,888	)

Basic and diluted net loss per common share	$	(0.08	)	$	(0.15	)	$	(0.33	)	$	(0.86	)
Weighted-average number of shares used basic and diluted per share amounts		25,892,683			18,801,754			24,405,150			18,402,919

See accompanying notes to the consolidated financial statements.

APPTECH PAYMENTS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 and 2023

(UNAUDITED)

(in thousands, except shares and per share data)


	Series A Preferred			Common Stock				Additional Paid-		Accumulated			Stockholders’
	Shares		Amount	Shares		Amount		in Capital		Deficit			Equity
Balance December 31, 2022	14	$	–	16,697,280	$	17	$	147,881	$	(140,474	)	$	7,424
Net loss	–		–	–		–		–		(3,151	)		(3,151	)
Stock based compensation	–		–	178,750		–		1,094		–			1,094
Repricing of warrants	–		–	–		–		763		(763	)		–
Net proceeds from sale of offering shares	–		–	1,666,667		2		4,488		–			4,490
Balance March 31, 2023	14	$	–	18,542,697	$	19	$	154,226	$	(144,388	)	$	9,857
Net loss	–		–	–		–		–		(9,083	)		(9,083	)
Stock based compensation	–		–	38,750		–		813		–			813
Balance June 30, 2023	14	$	–	18,581,447	$	19	$	155,039	$	(153,471	)	$	1,587
Net loss	–		–	–		–		–		(2,891	)		(2,891	)
Stock based compensation	–		–	53,750		–		1,285		–			1,285
Issuance of stock for prepaid services	–		–	145,000		–		153		–			153
Option exercise	–		–	10,528		–		15		–			15
Net proceeds from ATM offering	–		–	229,283		–		667		–			667
Balance September 30, 2023	14	$	–	19,020,008	$	19	$	157,159	$	(156,362	)	$	816

	Series A Preferred			Common Stock				Additional Paid-			Accumulated			Stockholders’
	Shares		Amount	Shares		Amount		in Capital			Deficit			Equity

Balance December 31, 2023	14	$	–	22,251,742	$	22	$	163,921		$	(159,749	)	$	4,194
Net loss	–		–	–		–		–			(3,037	)		(3,037	)
Stock based compensation	–		–	55,000		1		486			–			487
Net proceeds from sale of common shares	–		–	2,423,180		2		2,436			–			2,438
Balance March 31, 2024	14	$	–	24,729,922	$	25	$	166,843		$	(162,786	)	$	4,082
Net loss	–		–	–		–		–			(2,922	)		(2,922	)
Stock based compensation	–		–	105,000		–		553			–			553
Shares issued with Note Payable	–		–	30,000		–		27			–			27
Balance June 30, 2024	14	$	–	24,864,922	$	25	$	167,423		$	(165,708	)	$	1,740
Net loss	–		–	–		–		–			(2,025	)		(2,025	)
Stock based compensation	–		–	325,000		–		312			–			312
Shares issued with convertible note payable	–		–	100,000		–		96			–			96
Offering costs	–		–	–		–		(68	)		–			(68	)
Warrants issued with convertible note payable	–		–	–		–		334			–			334
Warrant repricing	–		–	–		–		15			(15	)		–
Warrant exercise, net of offering costs	–		–	1,666,667		2		1,008			–			1,010
Warrant exercise - cashless	–		–	521,739		–		–			–			–
Balance September 30, 2024	14	$	–	27,478,328	$	27	$	169,120		$	(167,748	)	$	1,399

See accompanying notes to the consolidated financial statements.

APPTECH PAYMENTS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 and 2023

(UNAUDITED)

(In thousands, except shares and per share data)


	September 30, 2024			September 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(7,984	)	$	(15,125	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		1,352			2,958
Cancellation of stock repurchase liabilities		–			(430	)
Write off of note receivable		25			–
Impairment of intangible assets		–			6,131
Gain on settlement of convertible note, warrants, and derivative liabilities		–			(250	)
Amortization of debt discount		151			4
Amortization of intangible assets and software		1,039			712
Change in fair value of derivative liabilities		–			(27	)
Changes in operating assets and liabilities:
Accounts receivable		18			(202	)
Prepaid expenses		10			614
Accounts payable		785			205
Accrued liabilities		(254	)		(1,685	)
Deferred revenue		(94	)		557
Right of use asset and liability, net		(16	)		(7	)
Net cash used in operating activities		(4,968	)		(6,545	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized software development		(557	)		(50	)
Other assets		(10	)		–
Net cash used in investing activities		(567	)		(50	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable		200			–
Payments on loans payable - related parties		–			(88	)
Proceeds on convertible note payable		910			–
Proceeds from sale of common stock		2,438			5,157
Proceeds from exercise of warrants		1,010			–
Repayment of notes payable		(200	)		(1,021	)
Repayment of convertible notes payable		–			(679	)
Proceeds received from exercise of stock options		–			15
Net cash provided by financing activities		4,358			3,384
Changes in cash and cash equivalents		(1,177	)		(3,211	)
Cash and cash equivalents, beginning of period		1,281			3,462
Cash and cash equivalents, end of period	$	104		$	251
Supplemental disclosures of cash flow information:
Cash paid for interest	$	32		$	1,233
Cash paid for income taxes	$	–		$	–
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of stock for prepaid services	$	68		$	268
Common stock issued with note payable	$	27		$	–
Common stock issued with convertible note payable	$	96		$	–
Warrants issued with the convertible note payable	$	334		$	–
Cancellation of stock repurchase liabilities	$	–		$	430

See accompanying notes to the consolidated financial statements.

APPTECH PAYMENTS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

AppTech Payments Corp. ("AppTech" or the "Company), a Delaware corporation, is a Fintech Company headquartered in Carlsbad, California. AppTech utilizes innovative payment processing and digital banking technologies to complement its core merchant services capabilities. The Company’s patented and proprietary software will provide progressive and adaptable products that are available through a suite of synergistic offerings directly to merchants, banking institutions, and business enterprises.

AppTech has a highly secure digital payments platform that we acquired and are further developing digital banking products to power commerce experiences for clients and their customers. Based upon industry standards for payment and banking protocols, we will offer standalone products and fully integrated solutions that deliver innovative, unparalleled payments, banking, and financial services experiences. Our processing technologies can be taken off-the-shelf or tapped into via our RESTful APIs to build fully branded and customizable experiences while supporting tokenized, multi-channel, and multi-method transactions.

AppTech stock trades under the symbol “APCX” and its warrants trade under the symbol “APCXW,” on the Nasdaq Capital Market ("NASDAQ").

In June 2023, the Company entered into licensing agreements with InstaCash and PayToMe.co. As part of the arrangement with these parties, the Company negotiated preferred stock equal to 7.5% of each party’s total fully diluted capital stock. As of the date of this filing, the shares have not been issued to AppTech. InstaCash’s CEO also provides investor relation services to the Company. Additionally, PayToMe.co is a related party to AppTech. Senior members of the Company sit on PayToMe.co’s board of directors and AppTech’s Chief Financial Officer (“CFO”) is married to its founder and Chief Executive Officer (“CEO”).

In August 2023, the Company entered into a sales agreement under which it may sell shares of its common stock having an aggregate offering price of up to $18.0 million through “at-the-market” (ATM) offerings, pursuant to its shelf registration statement on Form S-3 on file with the SEC. As of this filing, and due to the baby shelf calculation, the Company cannot currently raise capital under the ATM.

On October 13, 2023, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Alliance Partners, LLC, a Nevada-based software development company doing business as FinZeo, and Chris Leyva (the “Seller”). Under this agreement, the Company acquired 100% of the Seller’s membership interest in Alliance Partners. The primary purpose of this acquisition was to gain control of FinZeo’s intellectual property, key personnel, and software platform, which are integral to boarding the Company’s potential customers. The total consideration for the transaction was $2.0 million in cash, with the Company also assuming certain short-term and long-term liabilities of Alliance Partners. The transaction closed on October 26, 2023.

Subsequent to the closing of the transaction, the payment terms were amended various times with the last amendment executed on June 20, 2024. For details regarding the payment schedule and the equity considerations provided to the Seller, refer to Note 8. Stockholders’ Equity - Equity Issued related to Acquisition section.

The remaining outstanding payable as of September 30, 2024 is $1.20 million and is secured by substantially all the Company’s assets.

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 is actively pursuing additional funding options and is confident that it will begin generating revenue during the following twelve months from the issuance date of these financial statements, although no assurances can be made.

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, the accompanying financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended September 30, 2024 and September 30, 2023. Although management believes that the disclosures in these unaudited financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC.

The accompanying consolidated unaudited financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 1, 2024. The interim results for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future interim periods.

Basis of Consolidation

The consolidated unaudited financial statements include the accounts of AppTech Payments Corp., and wholly owned subsidiaries of which the Company is the primary beneficiary. All significant inter-company accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company makes critical estimates and assumptions in valuing: stock-based awards, intangible assets and the related goodwill impairment test. Actual results could differ from those estimates.

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. Specifically, the Company reclassified ‘Accounts Payable - Related Party’ from ‘Accounts Payable’ within the consolidated balance sheet. As a result, ‘Accounts Payable - Related Party’ is presented separately as of September 30, 2024 and December 31, 2023.

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 insurance premiums. The Company has never experienced any losses related to these balances.

The accounts receivable from merchant services are paid by the financial institutions on a monthly basis. As of September 30, 2024, 94% of the accounts receivable balance was generated from four customers represent 41%, 23%, 19%, and 11% respectively. As of December 31, 2023, 80% of the accounts receivable balance was generated from two customers.

For the nine months ended September 30, 2024, 77% of the revenue was generated from three customers, represent 42%, 21% and 14%, respectively. For the nine months ended September 30, 2023, two customers represented a significant amount of total revenue, at 61% and 20%, respectively. The loss of the customers would have a significant impact on the Company’s financials.

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 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 channel partners is recorded as a reduction in revenues.

Licensing Revenue

The Company is actively pursuing strategic partnership agreements that licenses our portfolio of patents in return for a fee. The licensing fee is deferred and recognized evenly on a monthly basis over the term of the service period or contract.

Intangible Assets and Intellectual Property

Intellectual Property

The Company amortizes intellectual property based on the estimated period over which the economic benefits of the intangible assets are expected to be consumed. Typically, the Company amortizes its intellectual property, including patents and other identifiable intangible assets, on a straight-line basis. The amortization periods generally range from three years to fifteen years, depending on the nature of the asset and its expected useful life.

Capitalized Software Development Costs

The Company capitalizes certain costs related to the development of its digital payment and banking platform, including employee compensation and consulting fees for third-party developers, only when it is probable that the development will result in new or additional functionality. Costs incurred during the preliminary project planning phase and post-implementation phase are expensed as incurred. The identifiable intangible assets, such as acquired technology, intellectual property, and non-competes, are recorded at their acquisition-date fair value using a combination of the income and cost approaches. The capitalized software development costs are amortized on a straight-line basis over the estimated useful life of the asset.

Goodwill

The Company accounts for goodwill in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives should be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.

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 our technology platform, contract and other outside services. Total R&D costs for the nine months ended September 30, 2024 and 2023 were approximately $1.3 million and $2.8 million, respectively.

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, and convertible preferred stock.

The number of common stock equivalents not included in diluted income per share was 14,360,863 and 7,436,726 for the nine months ended September 30, 2024 and 2023, respectively. The weighted average number of common stock equivalents is not included in diluted income (loss) per share, because the effects are anti-dilutive.


	September 30, 2024		September 30, 2023

Series A preferred stock		1,148		1,148
Warrants		9,156,627		5,823,036
Options		5,203,088		1,612,542
Total		14,360,863		7,436,726

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 their estimated fair values. For stock awards, fair value is determined based on the closing price of the Company’s common stock on the grant date and is recognized over the service period required for the employees, directors, and consultants to earn the awards. For stock options and warrants, fair value is estimated using an appropriate valuation model at the grant date, considering the terms and conditions under which the awards were granted. The expense is similarly recognized over the period during which the service conditions are expected to be met. Additionally, the Company has several grant agreements that include options awarded based on contingent performance. For these performance-based option grants, the Company records the fair market value of the options at the time the performance criteria are fully met.

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 – INTANGIBLE ASSETS

Intellectual Property

The Company has two patent portfolios, which include:

Mobile Payment Technology This portfolio consists of four mobile technology patents that range from System & Method for Delivering Web Content to a Mobile Device, Computer to Mobile Two-Way Chat System & Method, and Mobile to Mobile payment.

Geolocation Technology This portfolio consists of 13 patents that are focused on the delivery, purchase, or request of any products or services within specific geolocation and time parameters, provided by a consumer’s mobile phone anywhere in the United States. This portfolio houses the patent that protects all advertising on a mobile phone, including in a store’s mobile application. We amortize the patents on a straight-line basis from three years to 15 years, which approximates the way the economic benefits of the intangible asset will be consumed.

As of September 30, 2024 and December 31, 2023, the gross value of patents is $407 thousand. As of September 30, 2024 and December 31, 2023, cumulative amortization is approximately $334 thousand and $232 thousand, respectively.

On October 26, 2023, the Company acquired FinZeo, a Nevada based LLC. The gross value of acquired intangible assets is $4.4 million. As of September 30, 2024 and December 31, 2023, cumulative amortization is approximately $809 thousand and $147 thousand, respectively. The estimated aggregate amortization of the intellectual property for each of the five succeeding fiscal years is approximately $882 thousand.

Intellectual Property as of September 30, 2024 and December 31, 2023 are as follows:


Intellectual Property	September 30, 2024			December 31, 2023
Beginning Balance	$	4,428		$	311
Acquisition of intangible assets		–			4,400
Amortization expenses		(764	)		(283	)
Ending Balance	$	3,664		$	4,428

Capitalized Software Development Costs

The Company capitalizes certain costs related to the development of its digital payment and banking platform.

During the nine months of September 30, 2024, the Company capitalized software development cost at $557 thousand.

As of September 30, 2024, the gross value of capitalized software development cost is approximately $2.1 million. As of September 30, 2024 and December 31, 2023, cumulative amortization is approximately $695 thousand and $419 thousand, respectively. The estimated aggregate amortization of the capitalized software development cost for each of the four succeeding fiscal years is approximately $480 thousand.


	September 30, 2024			December 31, 2023
Beginning Balance	$	1,147		$	4,921
Additions		557			–
Impairment		–			(3,072	)
Amortization expenses		(275	)		(702	)
Ending Balance	$	1,429		$	1,147

See Note 7 - Commitments and Contingencies for discussions of Infinios Financial Services (formerly NEC Payments B.S.C.) and the write-off of capitalized software development costs.

Goodwill

On October 26, 2023, the Company completed the acquisition of Alliance Partners, LLC, a Nevada limited liability company. The difference between the fair value of the purchase price and the net assets acquired (including the assembled workforce) is recorded as goodwill. As of September 30, 2024, the Company recorded goodwill of approximately $1.2 million.

See Note 1 - Purchase of Alliance Partners, LLC.

NOTE 4 – ACCRUED LIABILITIES

Accrued liabilities as of September 30, 2024 and December 31, 2023 are as follows:

Schedule of accrued liabilities
	September 30, 2024		December 31, 2023
Accrued payroll	$	241	$	189
Anti-dilution provision		72		72
Payables due to related party		1,200		1,500
Other		178		197
Total accrued liabilities	$	1,691	$	1,958

Related parties noted below are either members of management, board of directors, significant shareholders, or individuals that have significant influence over the Company.

Anti-dilution provision

In connection with the shares to be issued as part of the HotHand acquisition, and anti-dilution provision with Infinios, the Company accrued an additional 39,706 shares of its common stock at $1.81 per share for a total of $72 thousand. The shares will be canceled and returned to the Company treasury after the Settlement Agreement is fulfilled and have not been issued to Infinios as of September 30, 2024.

See Note 7 - Commitment and Contingencies.

Payables due to related party

The remaining outstanding payable as of September 30, 2024, is $1.20 million for the purchase of FinZeo. See Note 1. Purchase of Alliance Partners, LLC (Business Combinations).

NOTE 5 – NOTES PAYABLE

The following is a summary of notes payable outstanding as of September 30, 2024 and December 31, 2023.

Notes Payable

In 2020, the Company entered into a 30-year unsecured note payable with the U.S. Small Business Administration office for $68 thousand in proceeds and with interest at 3.75% per annum. All payments of principal and interest are deferred for thirty months from the date of the note. Payments totaling $4 thousand are due each year through the maturity date of July 1, 2050.

On June 10, 2024, the Company entered into a 60-day unsecured note agreement with Black Ice Advisors, LLC, a third-party lender, for proceeds of $200 thousand. The note bears interest of $24 thousand, due along with the principal amount within 60 days of receipt of funds, resulting in a total payable amount of $224 thousand. Additionally, the Company issued 30,000 shares of AppTech Common Stock to the lender on June 17, 2024. The implied annual interest rate for this note is 73.0%. The maturity date of the note is August 10, 2024. The note agreement includes a default provision where the Company’s failure to pay the total amount of $224,000 by the due date will result in an additional 140% of the outstanding principal and interest, payable in free-trading AppTech Common Stock valued at the average bid price from the past 7 trading days, or a late fee of $500 per day, at the Company’s discretion. On August 12, 2024, the note and accrued interest, totaling $230,000, were repaid. Refer to Note 8 – Stockholders’ Equity /Stock Issued for Note Payable.

As of September 30, 2024 and December 31, 2023, the balance of all note payable outstanding was $63 thousand and $66 thousand, with accrued interest of $0 and $0, respectively.

Convertible Note

On July 10, 2024, the Company closed a private placement offering (the “Private Placement Offering”) consisting of a 6% convertible debenture (the “Debenture”) with a principal amount of $1,100,000 and a warrant (the “Warrant”) to purchase up to 750,000 shares of the Company’s common stock. The Debenture was sold to the investor (the “Purchaser”) for $1,000,000, reflecting an original issue discount of 10%, pursuant to a Securities Purchase Agreement executed on the same date. The Warrant, which expires five years from its date of issuance, is exercisable at any time by the holder for up to 750,000 shares of common stock at an initial exercise price of $1.16 (the “Exercise Price”), subject to adjustments as further discussed below. The fair value of the warrants was determined to be $0.85 per share as further discussed in Note 8 - Stockholder’s Equity.

Net proceeds from the Private Placement Offering were $910,000, after accounting for a $20,000 non-accountable fee withheld pursuant to the Purchase Agreement and $70,000 paid to a registered broker-dealer, for the Company’s benefit. The offering includes dilutive issuance protection and prohibits variable rate transactions until the Debenture is fully paid. In connection with the Private Placement Offering, the Company also issued an aggregate of 100,000 shares of restricted common stock (the “Commitment Shares”) on the closing date, with a fair value of $0.96 per share.

The Debenture matures twelve months from its date of issuance and bears interest at a rate of 6% per annum, payable on the maturity date. The Debenture is convertible, at the option of the holder, into such number of shares of common stock of the Company equal to the principal amount of the Debenture plus all accrued and unpaid interest, at an initial conversion price of $1.07 (the “Conversion Price”), subject to adjustment for stock splits, stock dividends, recapitalizations, and similar events. Additionally, the Conversion Price may be reduced at the option of the holder if the Company issues or grants any option to purchase common stock or other convertible securities at an effective price lower than the then-current Conversion Price.

The Debenture includes a redemption feature allowing the Company to prepay the Debenture at 110% of the principal amount and 110% of accrued interest. Additionally, if the Company raises $1.5 million or more in aggregate funds from public offerings or private placements (excluding insider investments), 50% of the proceeds from such fundraising activities must be used for the repayment of the Debenture, unless otherwise waived by the Purchaser. Default provisions are also included, providing for specific penalties and remedies in the event of non-compliance with the terms of the Debenture.

The Warrant Shares, the Commitment Shares and the shares of our common stock issuable under the Debenture were later registered under the Securities Act pursuant to the registration statement on Form S-1 (File No. 333-281409), which was declared effective by the SEC on August 22, 2024. In connection with the Inducement Transaction between us and Armistice Capital Master Fund discussed in Note 8. The exercise price of the Warrant was reduced to $0.70 per share. The conversion price of the debenture was also reduced to $0.70 as a result of this transaction triggering the conversion price adjustment provisions within the debenture. As a result of the adjustment provision within the warrants being triggered, the Company revalued the warrants both before and after the reset event, and the change in fair value of $15 thousand was recorded to additional paid-in capital and accumulated deficit as a reset.

Effective as of August 29, 2024, the Warrant was exercised cashless pursuant to the terms of the Warrant, resulting in the issuance of 521,739 freely tradable shares of our common stock.

As of September 30, 2024, the outstanding balance on the convertible note payable was $1.1 million, with accrued interest of $15 thousand. The total discount on the Debenture related to the debt component amounted to $552 thousand, composed of the following components: (i) Original Issue Discount (OID) of $100 thousand; (ii) the relative fair market value of Warrants of $334 thousand; (iii) costs allocated to debt component of the transaction of $57 thousand, and (iv) allocation of the value of the common shares issued at $61 thousand, with the remainder of the additional costs allocated to equity.

The total allocation of costs, including a portion of the value of the common shares, to equity was $68 thousand. The remaining unamortized discount balance on the convertible note was $428 thousand, following amortization expenses of $124 thousand recorded during the period.

See Note 9 - Subsequent Event - Convertible Note Payable - Debenture Conversion.

NOTE 6 – RIGHT OF USE ASSET

Lease Agreement

In January 2020, the Company entered into a lease agreement commencing February 8, 2020 for its current Carlsbad, California 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.

In October 2023, the Company entered into a lease agreement commencing October 1, 2023 for its Austin, Texas office, which expires in March 2025. The term of the lease is for 20 months.

The rent expense was $56 thousand and $55 thousand for the nine months ended September 30, 2024 and 2023, respectively.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

NCR Lawsuit

On November 30, 2022, AppTech filed a complaint against NCR Payment Solutions, LLC in the United States District Court for the Southern District of California.

In March 2024, the Company and NCR reached a Settlement and Release Agreement. Both parties expressly denied any liability and no further actions are required by either party.

Infinios Financial Services (formerly NEC Payments B.S.C.)

On October 1, 2020, the Company entered into a strategic partnership with Infinios Financial Services BSC (formally NEC Payments B.S.C) (“Infinios”) 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”). 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 Infinios (collectively, the “Restated Agreements”). The gross total fees due under the Restated Agreements are $2.2 million excluding pass-through costs associated with infrastructure hosting fees. During 2021 and 2022, the Company paid Infinios $1.8 million and issued to an Infinios’ affiliate 2,347,905 shares of common stock of the Company.

On May 4, 2023, unsatisfied with Infinios’ performance of its contractual obligations, the Company notified Infinios of its intent to terminate its relationship and commenced a good-faith negotiation with Infinios regarding the termination terms. In June 2023, Infinios turned off all its services, and the Company wrote off the $6.1 million net capitalized assets included in Capitalized software development and license and Prepaid license fees, as they were deemed to be impaired. On or about October 5, 2023, Infinios filed a demand for arbitration and a Statement of Claim before the International Centre for Dispute Resolution (the “Arbitration Claim”). In the Arbitration Claim, Infinios asserts claims for breach of contract, quantum meruit, and account stated. Infinios alleged damages of $598,525, and asserted a demand for the grant and registration of shares.

On November 13, 2023, the Company filed an Answer to the Arbitration Claim, along with Counterclaims for breach of contract, fraudulent inducement, unjust enrichment, breach of fiduciary duty, and breach of the covenant of good faith and fair dealing. At a Preliminary Hearing held on February 22, 2024, hearing dates of August 12 and 13, 2024, August 19 and 20, 2024, and October 21 and 22, 2024 were scheduled.

On August 8, 2024, the Company entered into a Settlement Agreement and Mutual Release with Infinios Solutions (Bahrain) W.L.L. and Infinios Financial Services B.S.C. The terms of this Settlement Agreement are confidential.

On October 29, 2024, the Company agreed to additional compensation payments to Infinios if the Settlement Payment is not made within specified time frames. If the Settlement Payment is not fully settled by October 21, 2024, additional compensation of $25,000 will apply, with further incremental amounts added based on the timing of the settlement, potentially reaching up to $80,000. These additional payments will accrue every two weeks if the Settlement Payment and any additional accrued compensation are not fully paid by December 9, 2024. As of date of financial statements, amounts have yet to be paid.

The terms of the Settlement Agreement and Amendment do not currently result in any additional amounts payable outside what has already been accrued by the Company. Upon fulfilling the terms of the Settlement Agreement, both parties have agreed to jointly file for the dismissal and termination of the ongoing arbitration. This process is anticipated to be completed before the end of November 2024. See Note 9 Subsequent Events.

Terminated Employees

Following unsuccessful negotiations regarding severance payments, three former employees filed a lawsuit against the Company in May 2024 concerning their severance claims. After reviewing the case details, including the lawsuit, the Company has assessed that it is less likely than not that a severance obligation will be incurred. Given this assessment, the Company has determined that no accrual for severance payments is necessary as of September 30, 2024.

The case is ongoing, with key proceedings scheduled for the first half of 2025. The Company will continue to monitor the case and reassess its legal obligations as necessary.

NOTE 8 – STOCKHOLDERS’ EQUITY

Series A Preferred Stock

The Company is authorized to issue 100,000 shares of preferred stock with a par value of $0.001 per share. As of September 30, 2024 and December 31, 2023, there were fourteen (14) shares of Series A preferred stock issued and outstanding. 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 82 shares of common stock.

Common Stock

The Company is authorized to issue 105,263,158 shares of $0.001 par value as of September 30, 2024 and December 31, 2023. There were 27,478,328 and 22,251,742, respectively, shares of common stock outstanding as of September 30, 2024 and December 31, 2023. 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.

Public Offerings

In February 2023, the Company announced the closing of its previously announced $5.0 million registered direct offering (the “Registered Direct Offering”) with a single institutional investor to sell 1,666,667 shares of its common stock (the “Shares”) and warrants to purchase up to 1,666,667 shares (the “Warrants”) in a concurrent private placement (the “Private Placement”). The combined purchase price for one Share and one Warrant was $3.00. Each of the Warrants has an exercise price of $4.64 per share of common stock and are exercisable on and after August 1, 2023. The Warrants expire five years from the date on which they become exercisable. The aggregate gross proceeds from the Registered Direct Offering and the concurrent Private Placement were approximately $5.0 million before deducting placement agent fees and other estimated offering expenses. The offering that was completed in February 2023, caused a reset to the exercise price of existing warrants from the S-1 offering that had a strike price of $5.19 and a future offerings floor price of $4.15. Accordingly, the floor price was reset to $4.15 in February 2023. 4,156,626 warrants were reset and $763 thousand was recorded to additional paid-in capital and accumulated deficit as a result of the reset.

In August 2023, the Company entered into a sales agreement under which it may sell shares of its common stock having an aggregate offering price of up to $18.0 million through “at-the-market” offerings (ATM), pursuant to its shelf registration statement on Form S-3 on file with the SEC. In total, as of the end of September 30, 2024, the Company sold 898,780 shares of common stock, for which we received net proceeds of $2.1 million, after deducting commissions, fees and expenses.

In October 2023, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with a certain accredited and institutional investor (the “Purchaser”) pursuant to which the Company has agreed to issue and sell to Purchaser an aggregate of: (i) 1,666,667 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and (ii) warrants (the “Purchase Warrants”) to purchase up to 1,666,667 shares of Common Stock, exercisable at $2.74 per share (the “Offering”). The offering price per Share and associated Purchase Warrants was $2.10. The October Warrants will expire five years from the date on which they become exercisable. On October 26, 2023, the Company closed the Offering and raised $3.5 million in gross proceeds from the Offering.

On March 26, 2024, AppTech Payments Corp. entered into an underwriting agreement with EF Hutton LLC, as representative of the several underwriters, relating to the public offering of 2,000,000 shares of common stock, par value $0.001 per share, at a purchase price per share to the public of $1.00. Pursuant to the Underwriting Agreement, the Company granted the Underwriters a 45-day option to purchase up to an additional 300,000 shares of Common Stock at the Offering Price, less any underwriting discounts and commissions.

As of September 30, 2024, approximately $60.7 million remains available under the shelf registration statement Form S-3 (File No. 333-265526) previously filed and declared effective by the Securities and Exchange Commission (SEC) on July 15, 2022. SEC regulations limit the amount of funds we can raise during any 12-month period pursuant to our effective shelf registration statement on Form S-3. We are currently limited by the Baby Shelf Rule as of the filing of this Report, until such time as our public float exceeds $75 million.

Stock Issued for Services

During the nine months ended September 30, 2024 and 2023, the Company granted 485,000 and 330,000 shares of common stock, respectively, to several consultants in connection with business development and professional services. The Company valued the common stock issuances at $467 thousand and $711 thousand, respectively, based upon the closing market price of the Company’s common stock on the date of the agreement.

Stock Issued with Note Payable

During the nine months ended September 30, 2024, the Company issued 30,000 shares of common stock in connection with a note payable. The 2024 issuance was valued at $27 thousand, based on the closing market price of the Company’s common stock on the agreement date. The issuance of the shares was part of the consideration for the note payable. The value of the shares issued was recorded as a debt discount and was amortized over the note’s life. The interest expense related to this amortization is $27 thousand and is included in the Company’s financial statements for the period. On August 12, 2024, the note and accrued interest, totaling $230,000, were repaid. Refer to Note 5 - Note Payables.

Stock Issued for Convertible Note

See Note 5 - Note Payable - Convertible Note.

Equity Issued related to Acquisition

On October 26, 2023, the Company completed the acquisition of FinZeo. The Seller received cash and stock as part of the purchase price. See Note 1 - Purchase of Alliance Partners, LLC.

As of September 30, 2024, the payment terms under the Purchase Agreement with Alliance Partners, LLC, were amended as follows: 1) $150,000 due on or before July 11, 2024; 2) Remaining payments are deferred until either February 1, 2025, or until the Company generates $400,000 in monthly revenue from the FinZeo products (after cost of sales, excluding operating expenses). Once either condition is met, the payment schedule will resume with payments every 30 days, in amounts ranging from $75,000 to $375,000.

In consideration for modifying the payment schedule, Chris Leyva received a total of 15,000 shares of AppTech Payments Corp. and 55,000 options to purchase shares of the Company’s stock.

Stock Options

The Company grants stock options as part of employee compensation and recognizes these options’ expense over the vesting period. If an employee does not meet certain conditions such as sales targets or leaves the Company before the options vest, these options are forfeited as they occur.

On December 7, 2021, the board authorized the Company’s Equity Incentive Plan to facilitate the grant of equity incentives to employees (including our named executive officers), directors, independent contractors, merchants, referral partners, channel partners, and employees of our company. This plan is essential for attracting, retaining, and motivating these key personnel, which is critical to our long-term success. In May 2023, shareholders approved an additional 700,000 shares for the Company’s Equity Incentive Plan, bringing the total authorized shares to 1,752,632. In May 2024, shareholders approved an additional 950,000 shares under a newly adopted 2024 Equity Incentive Plan (the "2024 Plan"), which replaced the previous plan in its entirety. As a result, a total of 2,702,632 shares of common stock were authorized under the 2024 Plan, with 451,864 shares available for issuance as of September 30, 2024.

In June 2024, the Company canceled 1 million contingent options related to the termination of a former employee.

On March 20, 2024, the Company extended the expiration term of vested and outstanding stock options to 10 years from the original grant date for current employees and consultants. The fair value was calculated both on the modification date and prior to the modification. During the nine months ended September 30, 2024, the Company recorded the option modification expense of $325 thousand.

During the nine months ended September 30, 2024, the Company granted 3,509,750 options to purchase of common stock. These grants included:

	1.	1,000,000 options to a consultant, with vesting contingent upon reaching specified sales milestones. The fair value of these options, which are non-plan with a one-year life, will be recognized as an expense when vesting appears probable. These options have an exercise price of $1.58 per share and a fair value of $0.64 per share on the issuance date. The Company did not record any stock based compensation expense during the nine months ended September 30, 2024 as these were not determined to be probable of vesting.

	2.	On April 4, 2024, the Company granted 406,000 options to current employees and consultants with an exercise price of $0.95, a ten-year expiration term, and a fair value on the grant date of $0.86. The Company recognized $349 thousand related to this grant. The options were fully vested upon on the grant date.

	3.	During the nine months ended September 30, 2024, the Company granted 141,250 options to the board of directors and consultants. These options have a ten-year expiration period, with exercise prices ranging from $1.70 to $2.165 per share. The fair value of these options, as determined on the grant date, ranged from $0.76 to $1.53 per share.

	4.	On July 3, 2024, the Company granted 510,000 options under the equity plan and approximately 1.5 million options outside of the plan to employees and consultants. These options, which expire ten years from the grant date, have an exercise price of $0.97 per share and a fair value of $0.87 per share on the issuance date. The vesting of these options is contingent upon reaching specified company milestones. The fair value of these options will be recognized as an expense when the vesting becomes probable.

The following table summarizes option activity:

Schedule of option activity
	Number of shares			Weighted Average exercise price		Weighted Average remaining years
Outstanding December 31, 2023		2,725,564		$	1.84		4.07
Issued		3,509,750			1.15
Exercised		–			–
Cancelled		(1,032,226	)		2.25
Outstanding as of September 30, 2024		5,203,088		$	1.30		7.25
Outstanding as of September 30, 2024, vested		1,740,591		$	1.23		7.87

The unvested options includes a total of 3.5 million options contingent upon reaching specified sales milestones. The remaining expense to be recognized, exclusive of the contingent performance-based options, is $0 thousand as of September 30, 2024.

During the nine months ended September 30, 2024, the Company recorded $885 thousand in option expenses, which includes the modification expense of $325 thousand and the company-wide grant of 406,000 options valued at $349 thousand.

The options vest in equal monthly installments ranging from instantly to 12 months. For the nine months ended September 30, 2024, the fair value of the options were valued using a Black-Scholes option pricing model with the following range of assumptions:

Schedule of fair value assumptions
Market value of common stock on issuance date			$0.72 - $3.12
Exercise price			$0.70 - $3.12
Expected volatility			102% - 144%
Expected term (in years)			1.0 - 10.0
Risk-free interest rate			3.58% - 5.00%
Expected dividend yields			–

Warrants

As of September 30, 2024, the Company has 9,156,627 warrants outstanding. The following table summarizes warrant activity:

Schedule of warrant activity
	Number of shares			Weighted Average exercise price			Weighted Average remaining years
Outstanding December 31, 2023		7,489,960		$	3.52			3.83
Cancelled		–			–
Exercised		(2,416,667	)	$	(0.70	)
Issued		4,083,334		$	0.78
Outstanding as of September 30, 2024		9,156,627		$	2.67			3.68

See Note 5 for warrants issued with convertible note.

Issuance of New Warrants (Inducement Transaction)

On August 30, 2024, AppTech Payments Corp. ("the Company") entered into a Warrant Inducement Agreement with Armistice Capital Master Fund Ltd. (the "Selling Stockholder") to induce the immediate exercise of warrants previously issued in October 2023. On August 30, 2024, Armistice Capital exercised 1,666,667 warrants to purchase shares of AppTech Payments Corp. (the "Company") common stock on a cash basis at a reduced exercise price of $0.70 per share. This exercise generated gross proceeds of $1,166,667 for the Company. After deducting fees and expenses, including a 7% cash fee and other associated legal expenses, the Company received net proceeds of approximately $1,010,000.

As part of the inducement transaction, the Company issued new warrants ("New Warrants") to the Selling Stockholder for the purchase of an additional 3,333,334 shares of the Company’s common stock at an exercise price of $0.70 per share. The New Warrants are exercisable beginning six months from the date of issuance and expire five and a half years from the date of issuance. The fair value of the New Warrants was determined to be $0.67 per warrant, using the Black-Scholes option-pricing model. The inputs used were similar to those used for the options as disclosed above. The total fair value of the 3,333,334 new Warrants, approximately $2.2 million, was recognized as an addition to Additional Paid-in Capital (APIC), with an offsetting entry to APIC, as this represents an equity transaction under ASC 815-40 and ASC 505-50.

Concurrent with the issuance of the New Warrants, the Company entered into a modification agreement for the February 2023 Warrants, which originally allowed the Selling Stockholder to purchase up to 1,666,667 shares of the Company’s common stock at an exercise price of $4.64 per share. In October 2023, the Company reduced the exercise price of these warrants from $4.64 to $2.74, and subsequently to $0.70 per share as part of this inducement.

This change in the exercise price increased the fair value per warrant, as calculated using the Black-Scholes model with inputs consistent with those disclosed for similar options. The fair value of the February and October 2023 Warrants increased by $350 thousand which was recognized as an addition to Additional Paid-in Capital (APIC), with an offsetting entry to APIC, as this represents an equity transaction under ASC 815-40 and ASC 505-50.

Cashless Exercise of Peak One Warrants

Refer to Note 5 - Note Payables.

Resale S-1

On September 27, 2024, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”), which relates to the resale by Armistice Capital Master Fund Ltd. (the “Selling Stockholder”) of up to 5,000,001 shares of common stock, par value $0.001 per share (the “Common Stock”), of AppTech Payments Corp. (the “Company”). The shares consist of (i) up to 1,666,667 shares issuable upon exercise of warrants at an exercise price of $0.70 per share, issued on February 2, 2023 (the “February 2023 Warrants”), and (ii) up to 3,333,334 shares issuable upon exercise of warrants at an exercise price of $0.70 per share, issued on August 30, 2024 (the “New Warrants”).

The resale of the shares under the S-1 is at the discretion of the Selling Stockholder, with pricing determined based on prevailing market conditions or negotiated transactions. The Company will not receive proceeds from the sale of shares by the Selling Stockholder. However, the Company will receive the proceeds from the exercise of the warrants if they are exercised for cash.

See Note 9 - Subsequent Events for additional subsequent events.

NOTE 9 – SUBSEQUENT EVENTS

Issuance of Common Stock Purchase Warrants

In October 2024, the Company issued two separate common stock purchase warrants. One warrant was issued to a consultant for the purchase of up to 355,000 shares of common stock, with an exercise price of $0.90 per share, and a five-year term expiring on October 25, 2029. Additionally, a warrant was issued to another consultant, entitling the holder to purchase up to 300,000 shares of common stock, also at an exercise pri

Amendment: SEC Form 10-Q/A filed by AppTech Payments Corp.