PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND PROJECTIONS
Various statements in this report of AppTech Corp.
are “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve substantial risks and uncertainties. All statements, other than statements of historical
facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs,
prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties
and are based on information currently available to our management. Words such as “anticipate,” “believe,” “estimate,”
“expect,” “intend,” “may,” “plan,” “contemplates,” “predict,”
“project,” “target,” “likely,” “potential,” “continue,” “ongoing,”
“will,” “would,” “should,” “could,” or the negative of these terms and similar expressions
or words, identify forward-looking statements. The events and circumstances reflected in our forward-looking statements may not occur
and actual results could differ materially from those projected in our forward-looking statements.
You should not place undue
reliance on forward looking statements. The cautionary statements set forth in this prospectus identify important factors which you should
consider in evaluating our forward-looking statements. These risks include, but are not limited to, the following:
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uncertainty
associated with
anticipated launch of our text payment
platform and other potential advanced payment solutions we intend to launch in the future;
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substantial
investment and costs associated with new potential revenue streams and their corresponding contractual obligations;
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dependence
on third-party channel and referral partners,
who comprise a significant portion of our
sales force, for gaining new clients;
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a slowdown
or reduction in our sales in due
to a reduction in end user demand, unanticipated
competition, regulatory issues, or other unexpected
circumstances;
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uncertainty
regarding our ability to achieve profitability and positive cash flow through the commercialization of the products we offer or intend
to offer in the future;
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dependence
on third-party payment processors to facilitate our merchant services capabilities;
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delay
in or failure to obtain regulatory approval of our text payment system or any future products in additional countries;
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our
ability to operate our business while timely making payments pursuant to our loan agreements;
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our
need to raise additional financing to fund daily operations and successfully grow our Company;
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our
ability to retain and recruit appropriate employees, in particular a productive sales force;
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current
and future laws and regulations;
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general
economic uncertainty associated with the COVID-19 pandemic;
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the
adverse effects of COVID-19, and its unpredictable duration, in regions where we have customers, employees and distributors;
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the
adverse effects of COVID-19 on processing volumes resulting from (a) limitations on in-person access to our merchants’ businesses
or (b) the unwillingness of customers to visit our merchants’ businesses; and
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the
possibility that the economic impact of COVID-19 will lead to changes in how consumers make purchases that we are unable to
monetize.
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All written and oral forward-looking statements
attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained
or referred to in this section. We caution investors not to rely too heavily on the forward-looking statements we make or that are made
on our behalf. We undertake no obligation and specifically decline any obligation, to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. Please see, however, any further disclosures we make on related subjects
in any annual, quarterly or current reports that we may file with the Securities and Exchange Commission (SEC).
We encourage you to read the discussion and analysis
of our financial condition and our consolidated financial statements contained in this Annual Report on Form 10-K. There can be no assurance
that we will in fact achieve the actual results or developments we anticipate or, even if we do substantially realize them, that they
will have the expected consequences to, or effects on, us. Therefore, we can give no assurances that we will achieve the outcomes stated
in those forward-looking statements and estimates.
Unless the context otherwise requires, throughout
this Annual Report on Form 10-K, the words “AppTech” “we,” “us,” the “registrant” or the
“Company” refer to AppTech Corp.
Item 1.
Business.
Business Overview
We intend to simplify and streamline
digital financial services for corporations, small and midsized enterprises (“SMEs”) and consumers through
innovative payment processing, reconciliation and digital banking technologies that complement our core merchant services
capabilities. Our company’s merchant services provide financial processing for businesses to accept cashless and/or
contact less payments, such as credit cards, ACH, wireless payments, and more. Our patented, exclusively licensed, and
proprietary merchant services software offers, or will offer, integrated solutions for friction less digital and mobile
payment acceptance including acceptance of alternative payment methods (“APMs”); we are supplementing these
capabilities with software that solves for multi-use case, multi-channel, API-driven, account-based issuer processing for
card, digital tokens, and payment transfer transactions. Our innovative and scalable business model allows for expansive
white-labeling, SaaS, and embedded payment solutions that will drive the digital transformation of financial services and
generate diverse revenue streams for our company.
We believe the financial services industry is
going through a period of intensive change driven by the advancement of technology, the adaptation to societal changes resulting
from COVID-19, and otherwise, and the rapid rise of contactless transactions. End-users are beginning to expect ease of use and an
enhanced user experience in all of their daily financial transactions. In this rapidly evolving digital marketplace, merchants have
broad and frequently changing requirements for payment processing to meet consumer expectations and operational requirements. Our
flexible and configurable financial services platform will enable us to provide solutions that meet each merchant’s current
needs while providing scope to solve for their future development plans and opportunities allowing merchants to take advantage
of future platform development and new innovative digital financial solutions through clean APIs and our scalable global
infrastructure. By taking a holistic view of all aspects of our clients’ business, including risk, volume, user experience,
integration capabilities and technical needs, we are able to create optimal and extensible financial technology solutions. Merchants
and independent software vendors (“ISVs”) that require integrated financial technology solutions to best serve their
customers are looking beyond basic payment acceptance and “lowest price” models. These entities recognize that staying
competitive in the digital age requires a partner that provides a platform capable of delivering flexibility and growth while
streamline operations to continue increase revenue and profitability. While we offer extremely competitive pricing, we believe the
value we create for merchants, SMEs, ISVs and regional banking institutions through our technology, services and consultative
approach will create true differentiation from our competitors.
Through exclusive licensing and partnership agreements,
we believe we will become leaders in the embedded payment and digital banking sectors by supporting digital, tokenized, multi-channel,
embedded API-driven transactions. We will augment this position through the integration of our merchant services and secure text payment
solution with extensive digital account-based and multi-channel issuer payment processing capabilities. This will enable us to provide
our merchant customers an end-to-end payment acceptance and digital banking solution and will power straight-through processing and embedded
payments opportunities in the B2B space.
A key to the company’s success and market penetration
relies on the continued development of enterprise-grade, patent protected software for
SMS text payments via a mobile device. Our patented technology manages text messaging
for processing payments, notification, response, authentication, marketing, advertising,
information queries and reports. Our software
platform will extend merchants’ marketplace capabilities creating
new avenues and channels to request and receive frictionless, digital payments and engage
end-users utilizing a familiar, convenient and widely adopted technology.
Once an
account is established through a multi-currency digital wallet, internet connectivity or a specific application are not required to
process payments between merchants and end-users. These features will be particularly beneficial for the unbanked and under banked
individuals in developing and emerging markets where access to the internet on a mobile device and modern banking institutions may
not be readily available.
We believe our
technologies will greatly increase the adoption of mobile payments and alternate
banking solutions in a sector that appears to have little alternative but to adapt and migrate towards new technologies that
facilitate convenient and safe contactless payments. To survive and succeed
in this environment, businesses may need to adopt new technologies to engage,
communicate and process payments with their customers. We
believe that, by embracing technological advancement in the payment and banking industries, we are aligned in the precise
direction that our current and prospective customer base is trending towards. We intend for our current and future products
to be at the forefront in providing solutions that enable and facilitate these anticipated changes.
We are
also expanding upon our financial technology foundation into the telehealth and remote patient monitoring sectors in response to
cultural shifts and new healthcare demands of society. We have identified a need for the integration of payment acceptance
technologies into the burgeoning telehealth sector. We believe this sector’s focus to date has been on providing
health-related telecommunications but the way in which fees and payments for these services are requested and accepted is being
overlooked. We intend to fill this identified shortfall by developing technologies and payment-related services to aid companies
providing telehealth solutions. Through a strategic partnership, we plan to help bring to market personal emergency response and
remote patient monitoring services and equipment to help ensure the safety of the elderly and injured or sick patients while
providing peace of mind to family members, care givers and retirement communities. These solutions increase patients’ access
to comprehensive care options and allow medical teams to intervene in a timely manner to avoid more serious health concerns. By
providing financial and administrative services we will have the opportunity to receive substantial revenue share from recurring
revenue billed through Medicare with the potential for substantial growth and substantial profit margins.
Industry and Market Data
We use market data and industry forecasts throughout
this registration statement and, in particular, in the sections entitled “Industry Overview.” Unless otherwise indicated,
statements in this registration statement concerning our industry and the markets in which we operate, including our general expectations,
competitive position, business opportunity and market size, growth and share, are based on information obtained from industry publications,
government publications and third party forecasts. The forecasts and projections are based upon industry surveys and the preparers’
experience in the industry. There can be no assurance that any of the projections will be achieved. We believe that the surveys and market
research performed by others are reliable, but we have not independently verified this information. Accordingly, the accuracy and completeness
of the information are not guaranteed.
Industry Overview
The financial technology and payment processing
industries are an integral part of today’s worldwide financial structure. The electronic payments industry is massive, with
growth fueled by powerful long-term trends that continue to increase the acceptance and use of electronic payments compared to
paper-based payments. According to The Nilson Report, purchase volume on credit, debit and prepaid cards in the United States was
approximately $6.1 trillion in 2018 and is estimated to reach nearly $10.4 trillion by 2027, a compound annual growth rate, or CAGR,
of 6.1%.
The payment processing industry continues to
evolve rapidly, based on the application of new technology and changing customer needs. Changes in technology have allowed for new
payment methods, such as mobile and contactless payments, and merchants increasingly need new methods of interacting with their
customers, deliver a frictionless experience and to ensure loyalty and repeat business. As consumers continue to integrate mobile
devices into their lives, there will be increased demand to conduct business on these devices. According to Businesswire, the
global mobile payment market was valued at $1,449.56 billion in 2020 and is expected to reach over $5,399.6 billion in 2026 with
growth at a CAGR of 24.5% over the forecast period (2021 - 2026).
GSMA Intelligence reported in 2019 that globally,
there are more than 9.2 billion mobile connections and 5.1 billion mobile subscribers with text messaging capabilities. Statista asserted
that just over 3.9 billion of these devices have access to mobile internet.
The pandemic environment of 2020 added fuel to the
fire and accelerated these trends in a way no one could have predicted. An Accenture study found that a total of 2.7 trillion transactions
worth $48 trillion shifted from cash to other forms of payments, representing a $300 billion opportunity for payment providers. The pandemic
also narrowed the generational gap between digital payment preferences, with nearly two thirds (64%) of consumers saying they used contactless
cards during the pandemic.
Telehealth uses information and communication technology
to overcome distance barriers and improve access to healthcare. According to Fortune Business Insights, the global telehealth market size
was valued at $61.40 billion in 2019 and is projected to reach $559.52 billion by 2027, exhibiting a CAGR of 25.2% during the forecast
period. Reports and Data reported the remote patient monitoring market is forecast to reach $2.14 billion by 2027 with a CAGR of 14.1%.
Our Competitive Strengths
We believe our adaptable technology and holistic
product offering differentiate us from our competitors. Our products, many of which could be launched in a matter of months, help to
eliminate much of our sector’s reliance on legacy payment rails and financial systems. Management believes by not being
restricted by antiquated foundational technology the applicability and frictionless nature of our products will offer an immediate
impact on the digital financial services industry. Further, while technologically advanced, the products will be comfortable to
end-users allowing for a seamless adoption.
The patent protection to some of our products is uncommon
within the fintech industry. This protection prevents competitors from trying to replicate our products in order to carve away at our
anticipated market share. Therefore, backing our text payment and lead generation products with patents strengthens the viability of such
products by limiting direct competition.
Our patent protected text payment system’s anticipated
capabilities also set us apart. By creating a product that permits mobile payments without the need for a data plan, internet or an application,
we will have the unique ability to extend our customer base to target unbanked and underbanked individuals primarily in developing or
emerging markets. Integrating consumers that are not traditionally included in the payment space will allow us to have a larger potential
market than many of our competitors.
The features and capabilities of products we intend
to bring to market allow for agile transaction processing which supports API-driven, multi-channel and secure products. The ability for
such products to be embedded into other technologies while supporting multi-currency transactions set our anticipated suite of products
apart from many large, established fintech companies.
Our Growth Strategy
We intend to grow through leveraging our
existing IP, developing with strategic partner relationships that uniquely complements our core businesses and through selective
acquisitions. From traditional merchant accounts to customizable inbound and outbound payment solutions, we intend to modernize and
enhance the payment processing and digital banking capabilities for businesses throughout the world. Our business objective is to
generate revenue based on licensing fees, synergistic product lines, processing fees, SaaS distribution and continual advancement of
our IP portfolio.
Our target market is SMEs seeking to broaden
their distribution through the addition of digital payment channels and SMBs looking to create competitive advantage by reducing
integration complexity and streamlining their payment processing services. We also intend to target financial institutions looking
to maintain their ability to compete by digitizing their financial services offerings to meet market demand, enhance their
customer’s user experience through the development of innovative and user centric multi-channel, multi-currency, digital
financial products. We intend to utilize a white-label SaaS delivery model, which will allow for service fees, revenue sharing and
back-end processing fees. Further, by offering SMEs a full array of lead generation services, merchant services processing and
digital banking technologies, we will allow them to better interact with their customers and provide additional, dynamic means of
processing both inbound and outbound payments. SMEs generally lack the resources of large enterprises to invest heavily in
technology. As a result, they are more dependent on service providers, such as us, to handle critical functions including payment
acceptance and other support services and are likely to be early adopters of new services that will further increase their
efficiency and drive growth.
Businesses’ financial technology needs are increasingly
complex. As electronic and mobile commerce continues to grow, businesses have no alternative but to use technology to better reach their
customers. We believe that delivering novel, adaptive, scalable and operationally efficient products that meet their financial services
needs will result in rapid market penetration for our anticipated products launches.
While leveraging new technology is vital to our growth
plan, it is equally important that the technology is relevant and seamlessly fits into and benefits our end-user’s everyday life.
Consumers are sometimes reluctant to alter their typical routines, especially when it relates to financial services. The anticipated launch
of our text payment system and broader digital banking and payments solutions will meet both these needs. We will offer payment acceptance
technologies that do not rely on legacy payment rails while allowing the end-user to transact frictionless and secure payments with the
comfort of text messaging. Once properly developed and rolled out, we anticipate rapid adoption.
We seek to grow our business by pursuing the following
strategies:
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Increasing our customer base by offering unique and
compelling, patent protected technology solutions;
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Driving growth in our merchant services business through new and flexible technologies, including our secure text payment system, that will enable our customers to adapt to a rapidly changing marketplace;
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Rolling-out our API-driven, account-based, issuer processing solution for card, digital token, and payment transfer transactions that will enable us to target multi-currency and multi-channel digital banking and embedded B2B payment opportunities;
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Engaging end-users via lead generation and text marketing services to enable businesses to better communicate with their customers and integrate our full suite of products;
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Maintaining technological leadership by continuing to innovate and improve our scalable, extensible, cloud-based technology;
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Pursuing strategic acquisitions, investments or partnerships to complement and bolster our suite of fintech products;
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Creating cross-selling synergies through white-labeling or SaaS distribution enabling us to provide a holistic suite of products and services to merchants, banking institutions and SMEs;
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Utilizing a scalable business model to eliminate certain barriers to rapid growth; and
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Expanding into the telehealth sector by offering advanced remote patient monitoring technologies.
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Vital to our future success is the market penetration
of our current and future products. Our market penetration strategy includes four elements: (1) royalty-free licenses; (2) engaging close
industry contacts; (3) utilizing potential market share shifting IP; and (4) illustrating the need for our fintech products amongst our
target industry segments.
To gain a market share, we plan to initially offer
royalty-free licenses for our text messaging and complimentary payment solutions in exchange for processing the related payments. By incentivizing
potential clients with free access to advanced, patented technology, we will give clients the ability to bolster and enhance their fintech
capabilities, while creating revenue streams for our full suite of products.
With years of fintech experience, management believes
we can leverage our industry contacts and past clients in order to gain valuable contracts with businesses. Engaging individuals with
the ability to integrate our products may prove invaluable. Further, through our channel partnerships, we have an expansive network of
potential clients to integrate our technology into their payment processing solutions.
Management believes there are substantial opportunities
in emerging and developing markets for our anticipated products. Our mobile payment and digital banking solutions offer innovative avenues
to unbanked and underbanked communities to transact and provide remittances. Further, since internet connectivity is not required for
our text payment solution, individuals with limited internet access will still be able transact. These two factors have the ability to
open our products to markets with immense growth potential.
Companies are regularly attempting to identify ways
to stay in contact with their customers and create new payment channels. Our products do precisely this. When customers sign up for our
secure text payment system, clients will have the ability to integrate a text messaging waiver into the registration process. This allows
for clients to have fresh, opted-in contact information which can be paired with our text messaging services for notification, response,
authentication, marketing, advertising, information queries and reports. It is our intent to market these identifiable benefits to companies
in order to illustrate the advantages of partnering with us. Specific industries that could utilize our secure text payment system are
pharmacies, collection agencies, charitable and religious organizations, utility companies, property management companies and any business
that relies upon recurring business or subscription management services.
Our partnership with NEC Payments’ internationally
experienced and proven team of subject matter experts will enable our management to focus resources on delivering growth using the strategies
described above. We will do this with full confidence that the business is being powered by innovative technology IP running on robust,
secure and scalable highly-available cloud infrastructure.
Management believes our partnership with
Silver Alert Services, LLC will be the initial foothold for our expansion in the telehealth sector. Our strategic partnership
providing financial services in support of their remote patient monitoring devices has the opportunity to create substantial
revenue. However, with the emergence of new telehealth platforms and the rapid shift towards e-visits, many of which require
a private payer model, we believe our payment acceptance technology, specifically our embedded capabilities will have
widespread application in the sector.
Our Products and Services
Merchant Services
Our core historical business is merchant transaction
services. We create revenue by processing payments for credit and debit cards via POS (point of sale) equipment, e-commerce gateways,
periodic ACH (automatic clearing house) payments and gift & loyalty programs. We currently support over 100 merchants representing
dozens of market verticals in managing their financial transactions.
Each merchant has unique needs for payment
processing. As a result, we have a variety of processing partners to meet each merchant’s requirements. In addition to these
needs, we take into consideration certain aspects of each business in choosing the optimal processing partner including risk,
volume, customer service, integration capabilities, product features and profitability.
Our processing partners include Total Systems Services
(“TSYS”)/Global Payments., JetPay an NCR Payment Solutions Company, Harbortouch Payments a Shift4 Company, Cynergy Data/Priority
Payments Systems Group, Novera/WorldPay and High Risk Holdings, LLC, with each providing products and services that meet each of our merchants’
needs. Currently, our partners manage our backend payment processing needs in addition to managing risk and compliance on our behalf.
Through the implementation of our proprietary payment processing protocols as we grow our customer base, we will manage the risk and compliance
ourselves, which will increase our margins on each transaction processed.
Using our proprietary software, together with
our partnerships, we are able to offer our merchants payment integration APIs including data encryption, payment tokenization and
issuing banking authorization, and the creation of white-label, merchant-specific mobile applications. As we move forward with our
secure text payment system and other products, we intend to enter new partnership agreements to align with our plans to integrate
advanced processing capabilities, permitting the global expansion of our financial services technologies.
Text Payment System
We are developing a comprehensive and broad mobile
payment platform which, once an account is established, relies solely on SMS text messaging. By integrating our payment processing with
text messaging and a digital wallet, we intend to offer the mobile payment industry’s first and only patent protected text payment
system. The integration of direct, reliable, instant, and familiar text messaging with secure payments is how we believe we bridge the
gap between fintech and mobile wireless systems.
Anticipated features of our secure mobile payments include:
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Utilization
of standard SMS (Short Message Services) text messaging;
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A
payment platform that does not require mobile internet, a data plan or a mobile application;
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A
secure text payment protocol that can be used on all traditional and smart cellular phones on all major global carriers without any
additions or modifications to the mobile user wireless plan; and
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Simple
authentication of the end-user.
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We intend for our secure text payment system to
offer a simple, three-step SMS text process utilizing a digital wallet, necessary to verify payee and payor identification, account
numbers and fund availability for pre-registered users. Payment may be engaged by the mobile user messaging a set of keywords to an
established short code managed by us, or a merchant can contact an opted-in mobile user inquiring whether they desire to make a
payment. The registered user will authorize the amount and company in which they intend to remit payment.
Within the text payment platform there are three
distinct services that are used. These include: (1) our patented text messaging platform, (2) a digital wallet and (3) payment
processing. Depending on the needs of the merchant, we may provide all three services or only license our text messaging platform to
a business that utilizes their own/third-party digital wallet and alternate payment processors. Through licensing agreements, we
possess modern application programming interfaces (APIs) to allow licensees to develop their own, white-labeled software
applications. This flexible approach allows for an opportunity for greater market penetration.
Our text payment system will be used by
businesses seeking to maintain contact with customers and find new ways to receive payments. A utility company could contact a
customer via text message informing them their bill is due, then ask if they would like to pay their bill via text message. A church
could contact their parishioners asking to contribute their weekly tithe and companies can create simplistic ways to update, inform
and process transactions with brand loyalists.
Our text payment system is still in development. Continued
development including integration, testing and certification are still needed in order to be marketable. Management currently believes
the text payment system will be launched in third quarter of 2021.
We believe this simple payment process has widespread
application and potential for widespread adoption by mobile users because it utilizes a technology many end users are comfortable with
and use daily. The process is quick and user-friendly allowing businesses to simply expand their payment receiving capabilities. Management
believes no other product exists that provides verification of accounts and funds, authentication of user identity, and the authorization
of payment processing in the same fashion as our anticipated product.
The following is a visual depiction of the text payment system:
Digital Banking Platform, BaaS& Embedded Payments
AppTech’s white-label, digital banking
technology platform with payment capabilities will equip financial institutions (FIs), technology providers and brands with a digital
“bank-in-a-box” – also referred to as our Banking-as-a-Service (BaaS) (“Platform”). Furthermore, our Platform
will enable multi-channel, multi-currency, pure digital financial services products unlike any other providers in the world. It incorporates
a “plug-and-play” capability to enact deep integration with payment gateways and POS merchant services to form an end-to-end
payment acceptance and digital banking solution. In detail, we intend the Platform to enable innovative and disruptive digital distribution
products including:
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Neo-Banking for Consumers and SMEs;
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B2B and Consumer Virtual Payments (VCNs);
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Multi-Currency Money Management and P2P Money Transfer;
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Payroll, Expenses Management and B2C and G2C disbursements;
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Treasury Management;
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Gift, Incentive and Reward programs for retail, wholesale and employee benefits;
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Any other product that requires a prepaid or credit balance to be held and transacted upon.
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Other attributes to our Platform will include:
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Patented
Technology including a Text-to-Pay patent that enables B2B, B2C and P2P payments via
SMS. Combined with 4 mobile-to-computer messaging and lead generation patents, we can enable
FIs, technology companies and businesses to unlock innovative customer experiences.
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Personalization
is also at the core of our BaaS. Through marketing automation capabilities, our BaaS
provides an industry first online-to-offline customer attribution capability. Licensees of
our BaaS will be able to link their customer’s online behavior to their buying preferences
in real-time in order to personalize the selling and buying experience.
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Automation
is delivered as a part of our BaaS and through our APIs that unlock automated financial
transactions and customer experiences. For example, like Acorns and other automated financial
wellness apps, our BaaS can easily be leveraged to create similar money saving experiences
like round ups, i.e., rounding to the nearest dollar and depositing the difference between
the purchase price and round-up into a digital bank account.
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Integration
is central to our digital banking platform and BaaS. As such, AppTech offers developers
and enterprises an open platform with flexible Rest APIs to build new payment and financial
transaction features in SaaS and cloud apps.
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Embedded
Payments are delivered as a configurable SaaS for scalability and to meet ever-evolving
business goals and customer experiences.
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Lead Generation
The lead generation industry has relied on
thousands of “cold calls” that are rarely answered. According to the Mobile Marketing Association, the only wireless
technology that is opened up 98% of the time is SMS text message. As a supplement to our merchant services business, we offer a
patent protected SMS text messaging lead generation service for advertising, marketing and alerting our merchants’ customers
directly.
Using the merchant’s own opted-in mobile
number database, our lead generation service can regularly offer the merchants’ customers with the merchant’s latest in
the products and services, promotions, discounts, appointment scheduling. Additionally, it can provide payment reminders, which can
then be purchased via our text payments solution should merchants choose to utilize this service. Soliciting consumers requires
added incentive and, as a solution, we plan on integrating a reward program. Management believes this will increase our merchant
customers’ revenues and increase our customer base.
Our lead generation platform utilizes our patented
text messaging capabilities to deliver text marketing services. Further, merchants and business will able to utilize data captured through
the transaction which may be offered back to the merchant to leverage marketing trends.
By offering merchants our lead generation services,
it provides an opportunity for cross-selling our text payment system. For example, a pharmacy using our services to inform their consumer
that their prescription is filled can then send a follow-up text asking if the consumer is interested in paying for the prescription via
our text payment. Management believes this cross-selling synergy has the ability to increase revenues for all the services we offer.
Our digital text messaging for marketing, advertising,
information queries and alert notifications has extensive applications across numerous industries. Our past, present, and future clients
will have direct access to their end user customers offering them targeted information and new services. Just as important, our technology
is scalable, easily allowing us to meet the needs of our growing customer base.
The following is a visual representation of our lead
generation system:
Our Intellectual Property
Our intellectual property is an important component
to our business. Our strategy is to continue to build on our existing patent base and further develop additional patents and intellectual
property as we grow our business domestically and internationally. Our management believes developing patent-based software products,
integrating new technologies and creating intellectual property will significantly contribute to our performance. We also believe we will
be able to leverage our existing patents to cross-license with other, leading, innovative patented technology partners.
We have incorporated four USPTO patents into our operational,
enterprise-grade text messaging platform for SMS marketing, advertising and sales. By integrating our SMS technology with our MFA payment
system, we will offer secure text payments. In addition to secure text payments, our MFA allows users to authenticate and validate in
order to access private data and complete online transactions and inquiries. Our proprietary text messaging capabilities also allow users
to send and receive a text message from a short code and initiate two-way chat from a mobile to a computer using only text-messaging.
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8,369,828
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8,315,184
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8,572,166
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8,073,895
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|
|
|
Mobile-to-Mobile
Payment System and Method
|
|
Computer-to-Mobile
Two-Way Chat System and Method
|
|
System
and Method for Delivering Web Content to a Mobile Device
|
|
System
and Method for Delivering Web Content to a Mobile Device
|
SMS
chat on a computer short or long codes, chat on circuit & packet switch networks, chat on paging channels.
|
|
Receiving,
displaying, linking web content via URL from application delivered via SMS short code to at least one mobile.
|
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Receiving,
displaying, linking web content via URL from application delivered via SMS short code to at least one mobile.
|
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Embedding
of a URL in a text message from a pop- up screen.
|
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Expiration
Date:
|
|
Expiration
Date:
|
|
Expiration
Date:
|
|
Expiration
Date:
|
11-12-2029
|
|
11-14-2030
|
|
09-28-2024
|
|
02-26-2027
|
Patent Number 8,369,828 is at the core of our Secure
Text Payment System. The patent enables a mobile user to initiate a request for payment to a payee via SMS text message. Patent Number
8,315,184 utilizes short and/or long codes to send and receive text messages from an application to a mobile device. Patent Number 8,572,166
embeds a URL in a text message sent from an application to a mobile device. These patents comprise the components of our Secure Text Payment
System. Patent Number 8,073,895 provides us another capability of delivering web content to a mobile device.
We currently have one additional patent pending. We
anticipate seeking additional patents, including derivative patents, as we continue to innovate to better meet our customer’s needs.
In addition to incorporating our intellectual property into our offerings, we will license all or some of our technology to third parties
to increase our revenue and speed market acceptance of our products and services.
Regulations
Various aspects of our business are subject to U.S.
and non-U.S. federal, state and local regulation. Many domestic laws and regulations that affect companies conducting business on the
Internet and companies transmitting user information and payments via text message or other electronic means are still evolving and the
interpretation of such laws and regulations are often uncertain. Failure to comply with applicable laws and regulations may result in
the suspension or revocation of licenses or registrations, the limitation, suspension or termination of services and/or the imposition
of civil and criminal penalties and/or fines. Our services to mobile phone carriers are also further subject to certain of the rules and
policies of such carriers and ongoing contractual covenants with such carriers, the violation of which may result in penalties and/or
fines and possible termination of our services. Certain services we offer are also subject to rules set by various payment networks, such
as Visa and MasterCard.
Association and Network Rules. While not legal
or governmental regulation, we are subject to the network rules of Visa, MasterCard and other payment networks. In order to provide processing
services, we are registered with Visa and/or MasterCard as a service provider for member institutions. As a processor level member of
numerous networks, we are also subject to various network rules in connection with processing services and other services we provide.
As such, we are subject to applicable card association, networks and national scheme rules that could subject us to fines or penalties.
The payment networks routinely update and modify their requirements. Under these rules, we may potentially receive notices of non-compliance
and fines, which might be related to excessive charge backs by a merchant or data security failures. Our failure to comply with the networks’
requirements or to pay the fines they impose could cause the termination of our registration and require us to stop providing payment
services.
Dodd-Frank Act. In July 2010, the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010 was signed into law in the United States. The Dodd-Frank Act has resulted in significant
structural and other changes to the regulation of the financial services industry.
The Dodd-Frank Act provided two self-executing statutory
provisions limiting the ability of payment card networks to impose certain restrictions that became effective in July 2010. The first
provision allows merchants to set minimum dollar amounts (not to exceed $10) for the acceptance of a credit card (and allows federal governmental
entities and institutions of higher education to set maximum amounts for the acceptance of credit cards). The second provision allows
merchants to provide discounts or incentives to entice consumers to pay with cash, checks, debit cards or credit cards, as the merchant
prefers.
Separately, the so-called Durbin Amendment to the
Dodd-Frank Act provided that interchange fees that a card issuer or payment network receives or charges for debit transactions will now
be regulated by the Federal Reserve and must be “reasonable and proportional” to the cost incurred by the card issuer in authorizing,
clearing and settling the transaction. Payment network fees, such as switch fees may not be used directly or indirectly to compensate
card issuers in circumvention of the interchange transaction fee restrictions. In July 2011, the Federal Reserve published the final rules
governing debit interchange fees. Effective in October 2011, debit interchange rates for card issuing financial institutions with more
than $10 billion of assets are capped at $0.21 per transaction with an additional component of five basis points of the transaction’s
value to reflect a portion of the issuer’s fraud losses plus, for qualifying issuing financial institutions, an additional $0.01
per transaction in debit interchange for fraud prevention costs. The debit interchange fee would be $0.24 per transaction on a $38 debit
card transaction, the average transaction size for debit card transactions. In July 2013, the U.S. District Court for the District of
Columbia determined that the Federal Reserve’s regulations implementing the Durbin Amendment were invalid. The U.S. Court of Appeals
for the District of Columbia, or D.C. Circuit, reversed this decision on March 21, 2014, generally upholding the Federal Reserve’s
interpretation of the Durbin Amendment and the Federal Reserve’s rules implementing it. On August 18, 2014, the plaintiffs in this
litigation filed a petition for a writ of certiorari asking the U.S. Supreme Court to review the D.C. Circuit’s decision with respect
to the interchange fee cap. We continue to monitor developments in the litigation surrounding these rules. Regardless of the outcome of
the litigation, the cap on interchange fees is not expected to have a material direct impact on our results of operations.
In addition, the new rules contain prohibitions on
network exclusivity and merchant routing restrictions. Beginning in October 2011, (i) a card payment network may not prohibit a card issuer
from contracting with any other card payment network for the processing of electronic debit transactions involving the issuer’s
debit cards and (ii) card issuing financial institutions and card payment networks may not inhibit the ability of merchants to direct
the routing of debit card transactions over any card payment networks that can process the transactions. Since April 2012, most debit
card issuers have been required to enable at least two unaffiliated card payment networks on each debit card. We do not expect the prohibition
on network exclusivity to impact our ability to pass on network fees and other costs to our clients. These regulatory changes create both
opportunities and challenges for us. Increased regulation may add to the complexity of operating a payment processing business, creating
an opportunity for larger competitors to differentiate themselves both in product capabilities and service delivery.
Federal Trade Commission Act and Other Laws Impacting
our Customers’ Business. All persons engaged in commerce, including, but not limited to, us and our merchants are subject to
Section 5 of the Federal Trade Commission Act prohibiting unfair or deceptive acts or practices, or UDAP. In addition, there are other
laws, rules and or regulations, including the Telemarketing Sales Act, that may directly impact the activities of our merchant customers
and in some cases may subject us, as the merchant’s payment processor, to investigations, fees, fines and disgorgement of funds
in the event we are deemed to have aided and abetted or otherwise provided the means and instrumentalities to facilitate the illegal activities
of the merchant through our payment processing services. Various federal and state regulatory enforcement agencies including the Federal
Trade Commission, or FTC, and the states’ attorney general have authority to take action against nonbanks that engage in UDAP or
violate other laws, rules and regulations and to the extent we are processing payments for a merchant that may be in violation of laws,
rules and regulations, we may be subject to enforcement actions and as a result may incur losses and liabilities that may impact our business.
Anti-Money Laundering and Counter Terrorist Regulation.
We are also subject to U.S. federal anti-money laundering laws and regulations, including the Bank Secrecy Act, as amended by the USA
PATRIOT Act of 2001 (collectively, the BSA). The BSA requires, among other things, that money services businesses to develop and implement
risk-based anti-money laundering programs, report large cash transactions and suspicious activity and maintain transaction records.
We are additionally subject to economic and trade
sanctions programs administered by the Treasury Department’s Office of Foreign Assets Control, or OFAC. These programs prohibit
or restrict transactions to or from or dealings with specified countries, their governments and, in certain circumstances, their nationals,
narcotics traffickers, and terrorists or terrorist organizations. We are also subject to other countries’ laws, where applicable,
regarding anti-money laundering, counter terrorist financing and proceeds of crime.
Anti-Corruption. We are subject to applicable
anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, in the jurisdictions in which we operate. Anti-corruption laws generally
prohibit offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a government
official or private party in order to influence official action or otherwise gain an unfair business advantage.
Telephone Consumer Protection Act. We are subject
to restrictions regarding telemarketing practices. Under the Telephone Consumer Protection Act (“TCPA”), telephone solicitations
and the use of automated phone equipment is subject to strict solicitation rules. This includes the use of pre-recorded voice messages,
automatic dialing, text messaging, and fax use. Absent informed consent by the consumer, commercial telemarketers are prohibited from
making unwanted, unsolicited sales calls to mobile devices. The TCPA affects our ability to contact consumers in association with our
secure text payment system and lead generation services. Violations of the TCPA may be enforced by the FCC or by individuals through litigation,
including class actions and statutory penalties for TCPA violations ranging from $500 to $1,500 per violation, which is often interpreted
to mean per phone call. While we intend to implement processes and procedures to comply with the TCPA, any failure by us or the third
parties in which we rely on for data, to adhere to, or successfully implement, appropriate processes and procedures in response to existing
or future regulations could result in legal and monetary liability, fines and penalties, or damage to our reputation in the marketplace,
any of which could have a material adverse effect on our business, financial condition and results of operations.
Controlling the Assault of Non-Solicited Pornography
and Marketing Act. We are subject to laws restricting the use of commercial messages, including text messaging. The Act generally
prohibits the use of deceptive subject lines, must accurately identify the sender, and denote the message as an advertisement. In addition,
recipients must include a clear and conspicuous explanation of how to opt-out of receiving the messages and the sender must remove the
recipient within 10 business days of the receiver opting-out.
Payment Card Industry Data Security Standard.
We are subject to the information security standard for organizations processing, storing or transmitting credit card information. The
standard was created to increase controls around cardholder data to reduce credit card fraud. As we continue to process and store credit
card information, the failure to adhere to the standards has the ability to have a material adverse effect on our business, financial
condition and results of operations. However, through partnerships with Total Systems Services, Inc. and Oracle Corporation, we are able
to utilize preventative measures when we store, process or transmit cardholder data, helping us to meet PCI level 1 compliance.
Other Laws and Regulations
Since we collect certain information from members
and users on our platform, we will be subject to current and future government regulations regarding the collection, use and safeguarding
of consumer information over the Internet and mobile communication devices. These regulations and laws may involve taxation, tariffs,
user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications,
consumer protection and electronic payment services. In many cases, it may be unclear how existing laws governing issues such as property
ownership, sales and other taxes, libel and personal privacy apply to the Internet or mobile communication services as the vast majority
of these laws were adopted prior to the advent of these technologies and do not contemplate or address the unique issues raised by the
Internet and e-commerce.
There are a number of legislative proposals that are
anticipated or pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning data protection
which could affect us. Many states, for example, have already passed laws requiring notification to subscribers when there is a security
breach of personal data. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data
practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data practices,
which could have an adverse effect on our business. In addition, some states are interpreting their own statutes differently than federal
law. This may create additional compliance burdens.
Legislation could be passed that limits our ability
to use or store information about our users. The Federal Trade Commission FTC and various states have established regulatory guidelines
issued under the Federal Trade Commission Act and various state acts, respectively, that govern the collection, use and storage of consumer
information, establishing principles relating to notice, consent, access and data integrity and security. Our practices are designed to
comply with these guidelines.
The foregoing list of laws and regulations to which
we are subject is not exhaustive, and the regulatory framework governing our operations changes continuously. Enactment of new laws and
regulations may affect our operations, and could potentially result in increased regulatory compliance costs, litigation expense, adverse
publicity, and/or loss of revenue. We believe our policies and practices comply with the FTC privacy guidelines and other applicable laws
and regulations. However, if our belief proves incorrect, or if these guidelines, laws or regulations or their interpretations change
or new legislation or regulations are enacted, we may be compelled to provide additional disclosures to our users, obtain additional consents
from our users before collecting or using their information or implement new safeguards to help our users manage our (or others’)
use of their information, among other changes.
Employees
As of the date of this annual report, we have three
full-time employees and seven consultants. In addition to our employees, we utilize various consultants and contractors for other services
on an as-needed basis.
Item 1A.
Risk Factors.
As a smaller reporting company, as defined in Rule
12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
Item 1B.
Unresolved Staff Comments
Not applicable.
Item 2.
Properties
Our headquarters is located at 5876 Owens Avenue,
Suite 100, Carlsbad, Ca 92008, consisting of approximately 3000 square feet of office space. Our lease on this facility expires in February
2025. We anticipate that following the expiration of the lease, during the term of the current lease, depending on various factors, we
will be able to lease or purchase additional or alternative space at commercially reasonable terms.
Item 3. Legal Proceedings
In November 2017, two shareholders of AppTech, filed
another lawsuit against us in the State of California. The lawsuit has been transferred to the United States District Court for the Southern
District of California. We filed an answer, affirmative defenses and counter claims. Management believes that the Plaintiff misrepresented
and mislead us during our merger with Transcendent One, Inc. The court has encouraged the parties to settle. Even though the Company believes
the lawsuit is without merit and will vigorously defend, the Company has made several offers to settle. On December 19, 2019, the Company
entered into a settlement and release agreement. The Company has recorded the liability as of December 31, 2019 for the total obligation
of $240,000 to be paid out over three years beginning February 15, 2020. On January 24, 2021, the parties entered a stipulation modifying
the repayment schedule of the settlement. We are current on the modified repayment schedule.
In September 2018, a complaint was filed in San
Diego superior court for a breach of contract arising from a written agreement for the purchase of a judgment to which AppTech was
not a party. The purchase of the judgment was part of the transaction to acquire the patents. AppTech substantially performed under
the agreement but the second agreement to extend the final payment was executed under alleged duress. On October 26, 2018, the
Company filed an answer that denied each and every purported allegation and cause of action and further denied that they caused any
damage or loss. On December 3, 2019, the Company entered into a conditional settlement providing the terms of the conditional
settlement have been completed by October 1, 2020. The conditional settlement amount of $150,000 was paid in monthly installments of
$15,000. The settlement installments paid for the year ended December 31, 2020 was $135,000. On December 30, 2020,full payment was
made in accordance with a modified settlement payment schedule.
In July of 2020, an owner and corporation having a
business opportunity filed a lawsuit in the State of California alleging a breach of contract, intentional misrepresentation, fraudulent
inducement of contract, negligent misrepresentation and unjust enrichment relating to a non-binding memorandum of understanding (“MOU”)
between the parties and its associated circumstances in 2016. Process was served on January 8, 2021. The Plaintiffs filed an amended complaint
on March 15, 2021. Management believes the agreement was non-binding, the statute of limitation has expired and the allegations have no
merit. We intend to file an answer, affirmative defenses and counter claims in the near future. We currently own a judgment against the
owner and corporation in the amount of $516,932.
ITEM 4.
Mine Safety Disclosures
Not applicable.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION
OF BUSINESS
AppTech Corp. (“AppTech”
or the “Company”) is a Wyoming Corporation incorporated on July 2, 1998.
AppTech Corp. is a FinTech company providing
electronic payment processing technologies and merchant services..These technologies allow businesses to accept cashless and/or
contactless payments, such as credit cards, ACH, wireless payments, and more. Their patented, exclusively licensed and/or proprietary
merchant services software offers or will offer integrated solutions for frictionless digital and mobile payment acceptance; AppTech
is supplementing these capabilities with software that solves for multi-use case, multi-channel, API-driven, account-based issuer
processing for card, digital tokens, and payment transfer transactions.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The Company’s consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”). Also see Note 3.
Principles of Consolidation
The Company’s accounts include
financials of the Company and its wholly owned subsidiaries, Transcendent One, Inc. and TransTech One, LLC. All significant inter-company
transactions have been eliminated in consolidation. The operations of Transcendent One, Inc. and TransTech One, LLC are insignificant,
and the Company dissolved the subsidiaries on October 8, 2019.
Use of Estimates
The preparation of the consolidated
financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates
include the estimated liabilities related to various vendors in which communications have ceased, contingent liabilities, and realization
of tax deferred tax assets. Actual results could differ from those estimates.
Concentration of Credit Risk
Cash and cash equivalents are maintained
at financial institutions and, at times, balances may exceed federally insured limits of $250,000 per institution that pays Federal
Deposit Insurance Corporation (“FDIC”) insurance premiums. The Company has never experienced any losses related to
these balances.
The accounts receivable from merchant services
are paid by the financial institutions on a monthly basis. The Company currently uses five financial institutions to service their merchants
for which represented 100% of accounts receivable as of December 31, 2020 and 2019. The loss of one of these financial institutions would
not have a significant impact on the Company’s operations as there are additional financial institutions available to the Company.
For the years ended December 31, 2020 and 2019, the one merchant (customer) represented approximately 36% and 39% of the total
revenues, respectively. The loss of this customer would have significant impact on the Company’s operations.
Cash and Cash Equivalents
The Company classifies its highly
liquid investments with maturities of three months or less at the date of purchase as cash equivalents. Management determines
the appropriate classification of its investments at the time of purchase and reevaluates the designations of each investment
as of the balance sheet date for each reporting period. The Company classifies its investments as either short-term or
long-term based on each instrument’s underlying contractual maturity date. Investments with maturities of less than 12
months are classified as short-term and those with maturities greater than 12 months are classified as long-term. The cost of
investments sold is based upon the specific identification method.
Accounts Receivable and Allowance
for Doubtful Accounts
Accounts receivable is recorded net
of an allowance for doubtful accounts, if needed. The Company considers any changes to the financial condition of its financial
institutions used and any other external market factors that could impact the collectability of its receivables in the determination
of its allowance for doubtful accounts. The Company does not expect to have write-offs or adjustments to accounts receivable which
could have a material adverse effect on its consolidated financial position, results of operations or cash flows as the portion
which is deemed uncollectible is already taken into account when the revenue is recognized.
Revenue Recognition
The Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, codified as Accounting Standards Codification
(“ASC”) 606 Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use
in accounting for revenue arising from contracts with customers. The Company adopted ASC 606 effective January 1, 2019 using modified
retrospective basis and the cumulative effect was immaterial to the consolidated financial statements.
The Company provides merchant processing
solutions for credit cards and electronic payments. In all cases, the Company acts as an agent between the merchant which generates
the credit card and electronic payments, and the bank which processes such payments. The Company’s revenue is generated on
services priced as a percentage of transaction value or a specified fee transaction, depending on the card or transaction type.
Revenue is recorded as services are performed which is typically when the bank processes the merchant’s credit card and electronic
payments.
Consideration paid to customers, such
as amounts earned under our customer equity incentive program, are recorded as a reduction to revenues.
Consideration paid to customers such
as amounts earned under our customer equity incentive program, are recorded as a reduction to revenue. There were no amounts paid
or incurred during the years ended December 31, 2020 and 2019.
Fair Value Measurements
The Company follows FASB ASC 820,
Fair Value Measurements and Disclosures (“ASC 820”) to measure and disclosure the fair value of its
financial instruments. ASC 820 establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about
fair value measurements and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820 are described
below:
Level
1
|
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
Level
2
|
|
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of
the reporting date.
|
|
|
|
Level
3
|
|
Pricing
inputs that are generally unobservable inputs and not corroborated by market data.
|
Financial assets are considered Level
3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least
one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the
categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts reported in the
Company’s consolidated financial statements for cash, accounts payable and accrued expenses approximate their fair value
because of the immediate or short-term mature of these financial instruments.
Transactions involving related parties
cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-marketing
dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party
transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations
can be substantiated.
The following table presents liabilities
that are measured and recognized at fair value as of December 31, 2020 on recurring basis:
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Total Carrying
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Value
|
Derivative liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
597,948
|
|
|
|
597,948
|
|
See Note 7 for discussion of valuation
and roll forward related to derivative liabilities.
Research and Development
In accordance with ASC 730, Research
and Development (“R&D”) costs are expensed when incurred. R&D costs include costs of acquiring patents and
other unproven technologies, contractor fees and other costs associated with the development of the SMS short code texting platform,
contract and other outside services. Total R&D costs for the years ended December 31, 2020 and 2019 were $49,250 and $82,057,
respectively.
Property and Equipment
Property and equipment is recorded at
cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred.
Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated
residual values) over the assets estimated useful life of five (5) years. Upon sale or retirement of equipment, the related cost
and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of
operations.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment
when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset or asset group may
not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset or asset
group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount
of an asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which
the carrying amount of the asset or asset group exceeds the estimated fair value of the asset or asset group. Long-lived assets
to be disposed of by sale are reported at the lower of their carrying amounts or their estimated fair values less costs to sell
and are not depreciated. As of December 31, 2020 and 2019, there were no asset impairments.
Lease Commitment
The Company determines if an arrangement
is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control
the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an
underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially
all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease
components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease
expense for variable lease components are recognized when the obligation is probable.
Operating lease right of use (“ROU”)
assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The Company primarily leases
buildings (real estate) which are classified as operating leases. ASC 842 requires a lessee to discount its unpaid lease payments
using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As
an implicit interest rate is not readily determinable in the Company’s leases, the incremental borrowing rate is used based
on the information available at commencement date in determining the present value of lease payments.
The lease term for all of the Company’s
leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend
(or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate)
the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for
the majority of the Company’s leases as the reasonably certain threshold is not met.
Lease payments included in the measurement
of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to
be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain.
Variable lease payments not dependent
on a rate or index associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease
agreement on which those payments are assessed as probable. Variable lease payments are presented as operating expenses in the
Company’s statement of operations in the same line as expense arising from fixed lease payments. As of December 31, 2020,
management determined that there were no variable lease costs.
Income Taxes
The Company recognizes deferred tax
assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial
statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences
are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more
likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of operations
in the period that includes the enactment date.
The Company’s income tax returns
are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities.
In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of
complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first
step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more
likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes,
if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized
upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company
regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for
income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision,
income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known. As of December
31, 2020 and 2019, the Company does not believe any provisions are required in connection with uncertain tax positions as there
are none.
Per Share Information
Basic net income (loss) per common share
is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year.
Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of
common stock outstanding during the year, increased by the potentially dilutive common shares that were outstanding during the
year. Dilutive securities include stock options, warrants granted, convertible debt and convertible preferred stock.
The number of common stock equivalents
not included in diluted income per share was 17,574,201 and 5,122,627 for the years ended December 31, 2020 and 2019, respectively.
The weighted average number of common stock equivalents is not included in diluted income (loss) per share, because the effects
are anti-dilutive.
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Series A preferred stock
|
|
|
10,920
|
|
|
|
10,920
|
|
Convertible debt
|
|
|
6,026,281
|
|
|
|
5,111,707
|
|
Warrants
|
|
|
200,000
|
|
|
|
—
|
|
Options
|
|
|
7,707,500
|
|
|
|
—
|
|
Common stock
|
|
|
3,629,500
|
|
|
|
—
|
|
|
|
|
17,574,201
|
|
|
|
5,122,627
|
|
Convertible Debt
Convertible debt is accounted for under
the guidelines established by ASC 470-20 Conversion and Other Options. ASC 470-20 governs the calculation of an embedded beneficial
conversion, which is treated as an additional discount to the instruments where derivative accounting does not apply. The amount
of the value of additional stock and other consideration in addition to the beneficial conversion feature may reduce the carrying
value of the instrument to zero, but no further. The discounts are accreted over the term of the debt using the straight line method
due to the short terms of the notes.
The Company accounts for modifications
of its embedded beneficial conversions, in accordance with ASC 470-50 Modifications and Extinguishments. ASC 470-50 requires the
modification of a convertible debt instrument that changes the fair value of an embedded conversion feature and the subsequent
recognition of interest expense or the associated debt instrument when the modification does not result in a debt extinguishment.
Derivative Liability
The Company issued debts that consist
of the issuance of convertible notes with variable conversion provisions. In addition, the Company issued warrants with variable
anti-dilution provisions. The conversion terms of the convertible notes and warrants are variable based on certain factors, such
as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future
price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note
is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and
shares to be issued were recorded as derivative liabilities on the issuance date and at each reporting period.
Stock Based Compensation
The Company recognizes as compensation
expense all share-based payment awards made to employees, directors, and consultants including grants of stock, stock options and
warrants, based on estimated fair values. Fair value is generally determined based on the closing price of the Company’s
common stock on the date of grant and is recognized over the service period. The Company has several consulting agreements that
have share based payment awards based on performance. These agreements typically require the Company to issue common stock to the
consultants on a monthly basis. The Company records the fair market value of the common stock issuable at each month end when the
performance is complete based upon the closing market price of the Company’s common stock.
New Accounting Pronouncements
The FASB issues ASUs to amend the authoritative
literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued
to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv)
are not expected to have a significant impact on the Company.
NOTE 3 – GOING CONCERN
As reflected in the accompanying consolidated
financial statements, during the years ended December 31, 2020 and 2019, the Company incurred a net loss of $4,187,317 and $1,343,210
and used cash of $591,386 and $760,544 in operating activities. In addition, the Company had a working capital deficit of $8,102,699
and an accumulated deficit of $44,947,730 at December 31, 2020. These factors raise substantial doubt regarding the Company’s
ability to continue as a going concern. We have evaluated the conditions or events that raise substantial doubt about the Company’s
ability as a going concern within one year of issuance of the consolidated financial statements.
While the Company is continuing operations
and generating revenues, the Company’s cash position is not significant enough to support the Company’s daily operations.
To fund operations and reduce the working capital deficit, the Company intends to raise additional funds through public or private debt
and/or equity offerings. During 2020, the Company raised $274,614 from eight sales of a repurchase option and $55,000 from options
exercised to fund operations. Management believes that the actions presently being taken to further implement its business plan and
generate revenues provide the opportunity for the Company to continue as a going concern, however, such are not guaranteed. While the
Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no
assurances to that effect, nor can there be assurance that such funds will be at acceptable terms. Subsequent to December 31, 2020, the
Company has raised an additional $1,972,750 through March 25, 2021. As of the date of these consolidated financial statements, the Company
has not finalized a commitment for additional capital. The ability of the Company to continue as a going concern is dependent upon our
ability to further implement its business plan and generate revenues and cash flows. The consolidated financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as a going concern.
Risks and uncertainties
On January 30, 2020, the World Health
Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10,
2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include
restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The
coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and
financial markets of many countries, including the geographical area in which the Company operates. Since the Company derives its
revenues from processing of purchases from our merchant services clients, a downturn in economic activity, such as associated with
the current coronavirus pandemic, could reduce the volume of purchases it processes, and thus its revenues. In addition, such a
downturn could cause its merchant customers to cease operations permanently decreasing our payment processing unless new customers
are found. We may also face additional difficulty in raising capital during an economic downturn. The effects of the pandemic had
significant impact on revenue at the beginning of the pandemic and the processors gave significant concessions of reduced fees to
minimize the impact of the pandemic. The revenue began to return to normal after several months as the economy began to open up
using different methods of purchasing especially online purchasing. The continuing effects of the potential impact cannot be
estimated at this time.
Additionally, it is reasonably possible
that the estimates made in the financial statements have been, or will be materially and adversely impacted in the near term as
a result of these conditions.
NOTE 4 – PATENTS
Patents
On June 22, 2017, AppTech executed an
Amendment to Asset Purchase Agreement with GlobalTel Media, Inc. In connection with the asset purchase agreement, 5,000,000 shares
of common stock were issued to GlobalTel Media, Inc. The Company valued the common stock issuance at $1,000,000 based on the closing
market price of the Company’s common stock on the date in which the performance was complete. This amendment revived the
original asset purchase agreement dated December 4, 2013 to purchase the assets of GlobalTel Media, Inc. (AppTech and GlobalTel
agree that the asset purchase agreement dated September 30, 2015 is null and void), which include, but is not limited to, all intellectual
property, United States Patent Trademark Office (“USPTO”) issued patents, enterprise-grade, patent protected software
and intellectual property for advanced messaging incorporating secure payments, databases, documentation, copyrights, trademarks,
registrations, and all current development work in process of USPTO application approval; more specifically but not limited to
USPTO 8,073,895 & 8,572,166 “System and Method for Delivering Web Content to a Mobile Device”, USPTO 8,315,184
“Computer to Mobile Two-Way Chat System and Method”, and USPTO 8,369,828 “Mobile-to-Mobile Payment System and
Method”. GlobalTel’s technology focuses on SMS text-based applications, social media and mobile payment. The USPTO
assigned the patents to AppTech on July 25, 2017. AppTech, as part of the various agreements, agreed to pay $1,600,000 which included
an assumption of certain liabilities, including costs incurred to continue development of the patents, as well as guaranteed payment
of 25% of the net proceeds on revenue created by the patents up to $26,600,000. As of December 31, 2020 and 2019, amounts included
in accounts payable related to the assumption of liabilities in connection with the patents were $280,000 and $415,000, respectively.
The Company has expensed the cost of the patents as research and development costs as the future estimated cash flow expected cannot
be reasonably estimated.
NOTE 5 – ACCRUED LIABILITIES
Accrued liabilities as of December
31, 2020 and 2019 consist of the following:
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Accrued interest – related parties
|
|
$
|
1,056,450
|
|
|
$
|
943,356
|
|
Accrued interest – third parties
|
|
|
1,378,660
|
|
|
|
1,215,699
|
|
Accrued residuals
|
|
|
62,174
|
|
|
|
39,064
|
|
Accrued merchant equity
|
|
|
91,023
|
|
|
|
91,023
|
|
Other
|
|
|
44,027
|
|
|
|
45,338
|
|
Total accrued liabilities
|
|
$
|
2,632,334
|
|
|
$
|
2,334,480
|
|
Accrued Interest
Notes payable and convertible notes
payable incur interest at rates between 10% and 15%, per annum. The accrued interest in most cases is currently in technical default
due to the notes being past their maturity date.
Accrued Residuals
The Company pays commissions to independent
agents which refer merchant accounts. The amounts payable to these independent agents is based upon a percentage of the amounts
processed on a monthly basis by these merchant accounts.
Accrued Merchant Equity Liability
The Company provided all merchants the
opportunity to earn shares of the Company’s common stock through their Merchant Equity Program (the “Program”).
Under the Program, the merchant earned 1% of their total Visa/MasterCard volume processed during the first year of their contract.
For example, if a merchant processes $1.0 million in credit card charges, the merchant will receive 10,000 shares of the Company’s
common stock. The merchant must process with the Company for a period of three years for the shares to vest. All merchants became
fully vested when the Company ended the program effective December 31, 2015.
The Company accounts for the value of
the shares under the program as a sales incentive and thus the amounts in connection with the Program are recorded as a reduction
to revenues. As of December 31, 2020, the Company has an obligation to issue approximately 776,000 shares of the Company’s
common stock issuable under the Program. During the year ended December 31, 2019, the Company issued 37,193 shares of common stock
relieving $14,877 in liability under the program.
NOTE 6 – NOTES PAYABLE AND
CONVERTIBLE NOTES PAYABLE
The Company funds operations through
cash flows generated from operations and the issuance of loans and notes payable. The following is a summary of loans and notes
payable outstanding as of December 31, 2020 and 2019. Related parties noted below are either members of management, board of directors,
significant shareholders or individuals in which have significant influence over the Company.
Loans Payable – Related
Parties
During the years ended December 31,
2020 and 2019, the Company obtained (paid) $(59,001) and $39,319 loans payable from related parties, net. As of December 31, 2020
and 2019, the balance of the loans payable was $34,400 and $93,401, respectively. The loans payable are due on demand, unsecured
and non-interest bearing as there are no formal agreements executed.
Subordinated Notes Payable
In 2016, the Company issued $350,000
in subordinated notes payable to third parties. The subordinated notes payable were due in 30 to 180 days and incurred interest
at 10% per annum. As of December 31, 2020 and 2019, accrued interest related to the subordinated notes was $153,545 and $118,545,
respectively. The Company is currently in default of the subordinated note agreements.
Convertible Notes Payable
In 2020, the Company entered into a
Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell to the investor a $300,000 convertible
note bearing interest at 12% per annum (the “Note”). The Note matures in 365 days from the date of issuance. The Note
is convertible at the option of the holder at any time into shares of the Company’s common stock at one dollar ($1.00) for
the one hundred and eighty (180) days immediately following the issue date and thereafter shall equal the lower of: 1) the lowest
closing price of the common stock during the preceding twenty five (25) trading day, ending on the last complete trading day prior
to the issue date of the Note. 2) seventy five (75) percent of the lowest trading price for the common stock during the twenty
five (25) consecutive trading days preceding the conversion date with a minimum trading volume of one thousand (1,000) shares.
In the event of a default of the Note,
the Holder in its sole discretion may elect to use a conversion price equal to the lower of: 1) the lowest trading price of the
common stock on the trading day immediately preceding the issue date or 2) seventy five (75) percent of either the lowest trading
price or the closing bid price, whichever is lower during any trading day in which the event of default has not been cured.
The embedded conversion feature of this
Note was deemed to require bifurcation and liability classification, at fair value. Pursuant to the Securities Purchase Agreement,
the Company also sold warrants to the investors to purchase up to an aggregate of 200,000 shares of common stock exercisable at
one dollar and fifty cents ($1.50) and expire in five (5) years. The fair value of the derivative liability and warrants as of
the date of issuance was in excess of the Note (see Note 7 for valuation) resulting in full discount of the Note. The conversion
feature and warrants have various reset provisions for which lower the exercise price and share and warrants issuable.
Total interest expense on convertible
notes payable, inclusive of amortization of debt discount of $19,826, amounted to $24,067 for the year ended December 31, 2020.
As of December 31, 2020, the convertible note payable discount is $280,174 and will be amortized over the life of the convertible
note payable in 2021. As of December 31, 2020, the derivative liability is as follows:
Convertible note payable
|
|
$
|
378,134
|
|
Warrants
|
|
|
219,814
|
|
|
|
$
|
597,948
|
|
In 2017, the Company received $222,000
in convertible notes payable from related parties. The convertible notes payable are unsecured, were due in 180 days, incur interest
at 10% per annum and are convertible at $0.10 per share. As of December 31, 2020 and 2019, accrued interest related to the convertible
notes was $76,187 and $53,988, respectively. On the date of the agreement, Management calculated the beneficial conversion feature
in connection with the convertible notes payable and recorded a discount of $222,000. The Company amortized the discount over the
term of the convertible notes payable of 180 days. The Company is currently in default on the convertible notes payable. On February
24, 2021, the chief executive officer assigned $200,000 in convertible notes to direct relative.
In 2015, the Company issued $50,000
in convertible notes payable. The convertible notes payable are unsecured, were due in nine months, incur interest at 10% per annum
and are convertible at $1.00 per share. As of December 31, 2020 and 2019, the accrued interest related to the convertible notes
was $25,833 and $20,833, respectively. The Company is currently in default on the convertible note payable.
In 2014, the Company issued $400,000
in convertible notes payable. The convertible notes payable are unsecured, due in periods ranging up to one year, incurring interest
between 10% to 12% per annum and are convertible at prices ranging from $0.33 to $1.00 per share. In addition, the Company issued
400,000 shares of common stock in connection with the convertible notes payable. The Company had the obligation to repurchase the
400,000 shares of common stock at $1.00 per share within one year of the note issuance date. As of December 31, 2020 and 2019,
the Company held the obligation to repurchase the shares for $400,000. As of December 31, 2020 and 2019, the accrued interest related
to the convertible notes was $227,083 and $186,083, respectively. The Company is currently in default of the note agreements.
In 2008 and 2009, the Company issued
$320,000 in convertible notes payable, of which $150,000 was from related parties. The convertible notes payable are currently
due on demand, incur interest at 15% per annum, and convertible at $0.60 per share. As of December 31, 2020 and 2019, accrued interest
related to the convertible notes was $564,013 and $516,013 of which $265,875 and $243,375, respectively, was due to related parties.
The Company is currently in default of the notes payable agreements.
Notes Payable
In 2020, the Company entered into a
30-year unsecured note payable with U.S. Small Business Administration for $68,200 in proceeds. The notes payable incurred a $100
fee upon issuance and incurs interest at 3.75% per annum. All payments of principal and interest are deferred for twelve months
with the first $333 payment due July 1, 2021. As of December 31, 2020 the balance of the note payable was $68,300 and accrued interest
was $1,281.
In 2016, the Company issued $143,000
in notes payable to third parties. The notes payable were due in ninety days or less. During 2019, the Company paid $36,000 in
notes payable. The Company is currently in default of the note agreements.
Two significant shareholders funded the
Company’s operations through notes payable in primarily 2009 and 2010 and continue to support operations on a limited basis.
The notes payable incur interest at 10% per annum and were due on December 31, 2016. The Company is currently in default of the note
agreements. As of December 31, 2020 and 2019, the aggregate balance of the notes payable was $620,355 and accrued interest was
$638,016 and $575,480, respectively.
In 2008, the Company entered into a note payable
with a third party for $10,000 in total proceeds. The note payable is currently in default and has a flat interest amount due of $21,000.
As of December 31, 2020 and 2019, the Company was in default of the note agreement and the entire amount of $21,000 has been included
within accrued interest. Since the notes payable do not incur interest, the Company imputed interest at $1,000 and $1,000, respectively,
which represented an interest rate of 10% per annum during the years ended December 31, 2020 and 2019.
In 2008, the Company entered into notes
payable with a third party for $26,000 in total proceeds. The notes payable have a flat interest amount due of $80,000. During
2015, the Company received another $50,000 from the third party. During 2017, the Company entered into an agreement whereby they
would repay the principal and accrued interest in the amount of $145,000 by April 4, 2018 and issue the holders 800,000 shares
of common stock. The Company recorded the fair market value of the common stock issued at $336,000 based on the date of issuance
as interest expense. Other than the issuance of shares of common stock, the Company did not perform under the agreement. The Company
is currently in default of the note agreement.
In 2007 and 2008, the Company entered
into notes payable with a related party for $46,000 in proceeds. The notes payable were due on demand and incurred interest at
12% per annum. These were combined into a single note agreement in 2014. As of December 31, 2020 and 2019, the balance on the note
payable was $88,136 and accrued interest related to the note payable was $59,900 and $49,243, respectively. The Company is currently
in default of the note payable agreement.
In 2007, the Company entered into note
payable with a third party for $128,000 in proceeds. Under the terms of the agreement the holder received a flat interest amount
of $37,496. The Company is currently in default of the note payable agreement and the entire amount of $37,496 has been included
within accrued interest. Since the note payable did not incur interest, the Company imputed interest at $12,800 and $12,800, respectively,
which represented an interest rate of 10% per annum during the years ended December 31, 2020 and 2019.
In 2007, the Company entered into note
payable with a third party for $221,800 in proceeds. The note payable is currently in default and incurs interest at 10% per annum.
On December 31, 2013, the holder received an arbitration settlement for the principal and accrued interest. As of December 31,
2020 and 2019, the Company was in default of the arbitration settlement. As of December 31, 2020 and 2019, accrued interest related
to the note payable was $470,143 and $429,861, respectively.
In 2007, the Company entered into note
payable with a significant shareholder for $58,600 in proceeds. The note payable is currently due on demand and incurs interest
at 10% per annum. As of December 31, 2020 and 2019, accrued interest related to the note payable was $76,372 and $70,513, respectively.
The Company is currently in default of the note agreement.
NOTE 7–DERIVATIVE LIIABILITIES
The Company issued debts that consist
of the issuance of convertible notes with variable conversion provisions. In addition, the Company issued warrants with variable
conversion provisions. The conversion terms of the convertible notes and warrants are variable based on certain factors, such as
the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future
price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note
is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants were
recorded as derivative liabilities on the issuance date and revalued at December 31, 2020.
Based on the convertible notes described
in Note 6, the derivative liability day one loss is $389,712 and the change in fair value at December 31, 2020 is $71,464. The
fair value of applicable derivative liabilities on note, warrants and change in fair value of derivative liability are as follows
for the year ended December 31, 2020.
|
|
Derivative Liability Convertible
Notes
|
|
Derivative
Liability Warrants
|
|
Total
|
Balance as of December 31, 2019
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Additions during the period
|
|
|
430,595
|
|
|
|
239,117
|
|
|
|
669,712
|
|
Change in fair value
|
|
|
(52,461
|
)
|
|
|
(19,303
|
)
|
|
|
(71,764
|
)
|
Balance as of December 31, 2020
|
|
$
|
378,134
|
|
|
$
|
219,814
|
|
|
$
|
597,948
|
|
The
fair value of the derivative liability convertible notes is estimated using a Monte Carlo pricing model with the following
assumptions:
Market value of common stock
|
|
|
$0.90 - $1.00
|
|
Expected volatility
|
|
|
98.9% - 99.5
|
%
|
Expected term (in years)
|
|
|
0.73
|
|
Risk-free interest rate
|
|
|
0.09% - 0.11
|
%
|
The
fair value of the derivative liability – warrants is estimated
using a Monte Carlo pricing model with the following
assumptions:
Market value of common stock
|
|
|
$0.90 - $1.00
|
|
Expected volatility
|
|
|
96.4% - 100.3
|
%
|
Expected term (in years)
|
|
|
5.00
|
|
Risk-free interest rate
|
|
|
0.41% - 0.42
|
%
|
NOTE 8–RIGHT OF USE ASSET
Lease Agreement
In January 2020, the Company entered
into a lease agreement commencing February 8, 2020 for its current facility which expires in 2025. The term of the lease is for
five years. At inception of the lease, the Company recorded a right of use asset and liability. The Company used an effective borrowing
rate of 12% within the calculation. The following are the expected lease payments as of December 31, 2020, including the total
amount of imputed interest related:
Years ended December 31:
2021
|
|
|
$
|
82,561
|
|
2022
|
|
|
|
85,039
|
|
2023
|
|
|
|
87,590
|
|
2024
|
|
|
|
90,217
|
|
2025
|
|
|
|
7,536
|
|
|
|
|
$
|
352,943
|
|
Less: Imputed interest
|
|
|
|
(76,290
|
)
|
Total
|
|
|
$
|
276,653
|
|
The rent expense was $61,691 and $84,763
for the years ended December 31, 2020 and 2019, respectively.
NOTE 9 - COMMITMENTS AND CONTIGENCIES
Litigation
Shareholder Lawsuit
In March 2016, a significant shareholder
(“Plaintiff”) of the Company filed a lawsuit against the Company in the state of California alleging breach of
contract,fraud and negligent misrepresentation based on supposed oral promises in 2013 to give Plaintiff’s company shares in
exchange for stocks in another company and a 2014 consulting agreement. The Company strongly disputed all claims made in the
lawsuit. On April 20, 2017, the Company filed an answer that denied each and every purported allegation and cause of action and
further denied that they caused any damage or loss. The Company reached an agreement resulting in a voluntary dismissal of the civil
case on July 5, 2017. The Plaintiff was not able to fulfill the proper documentation within the allotted 180 days and the 3,450,000
shares of AppTech Corp stock were properly cancelled in 2019.
Former Shareholders Lawsuits
In April 2014, a shareholder of AppTech
filed a lawsuit against the Company in the State of Washington claiming breach of contract related to the sale / transfer of
unregistered shares at the time of AppTech acquisition. On August 13, 2014, the Company notified the transfer agent and placed a
’Stop Order’ on the shares. The shareholder claims that the 2.5 million shares received are unrestricted and should be
reflected as such. On August 19, 2014, the Company filed a motion to dismiss the lawsuit. The lawsuit was dismissed on October 31,
2014.
In November 2017, two shareholders of
AppTech, one who previously filed the 2014 lawsuit in the State of Washington, filed another lawsuit against the Company in the
State of California, claiming the same accusations as the previously filed lawsuit which was dismissed. The lawsuit has been
transferred to the United States District Court for the Southern District of California. The Company filed the defendants answer,
affirmative defenses and counter claims. Management believes that the Plaintiff misrepresented and misled AppTech during the merger.
The court has encouraged the parties to settle. Even though the Company believes the lawsuit is without merit and will vigorously
defend, the Company has made several offers to settle. On December 19, 2019, the Company entered into a settlement and release
agreement. The Company has recorded the liability as of December 31, 2019 for the total obligation of $240,000 to be paid out over
three years beginning February 15, 2020. The 2019 impact is recorded in general and administrative expenses. On January 24, 2021,
the parties entered a stipulation modifying the repayment schedule of the settlement. The Company is current on the following
modified repayment schedule.
Years ended December 31:
2021
|
|
|
$
|
100,000
|
|
2022
|
|
|
|
75,000
|
|
Total
|
|
|
$
|
175,000
|
|
Former Landlord Lawsuit
In September 2018, the landlord for
our former office space lease filed a limited civil lawsuit against the Company in the State of California. The Company reached
an agreement that resulted in a stipulation for judgment on October 28, 2018. The stipulated judgment was for $42,432 including
attorney fees and court costs plus interest for which the Company recorded as a liability as of December 31, 2018. The stipulated
judgment was paid in full on August 16, 2019.
Patent Acquisition Lawsuit
In September 2018, a complaint was filed in
San Diego superior court for a breach of contract arising from a written agreement for the purchase of a judgment to which AppTech was
not a party. The purchase of the judgment was part of the transaction to acquire the patents. AppTech substantially performed under the
agreement but the second agreement to extend the final payment was executed under alleged duress. On October 26, 2018, the Company filed
an answer that denied each and every purported allegation and cause of action and further denied that they caused any damage or loss.
On December 3, 2019, the Company entered into a conditional settlement providing the terms of the conditional settlement have been completed
by October 1, 2020. The conditional settlement amount of $150,000 was paid in monthly installments of $15,000. The settlement installments
paid for the year ended December 31, 2020 was $135,000. On December 30, 2020,full payment was made in accordance with a modified settlement
payment schedule.
Other Lawsuit
In July of 2020, an owner and corporation
having a non-binding memorandum of understanding filed a lawsuit in the State of California alleging a breach of contract, intentional
misrepresentation, fraudulent inducement of contract, negligent misrepresentation and unjust enrichment. Service of process did
not occur until January 8, 2021. The Plaintiffs filed an amended complaint on March 15, 2021. Management believes the agreement
was non-binding, the statute of limitation has expired and the allegations have no merit. We intend to file an answer, affirmative
defenses and counter claims in the near future. We currently own a judgment against the owner and corporation in the amount of
$516,932, See Note 11.
Significant Contracts
Capital Raise
In January 2019, the Company entered
into an agreement with a broker dealer to provide capital raising activities. Under the terms of the agreement the broker dealer
is to make a minimum of $90,000 in advisory fees. In addition, there are various other provisions within the agreement which include
a 10% placement fee, warrants to purchase common stock, a 4% transaction fee, etc.
In February 2021, the Company entered
into an engagement letter with Maxim Group LLC (“Maxim”) as the lead management underwriter for a follow-on offering
which is non-binding. This engages Maxim through September 30, 2021 as exclusive financial advisor, lead managing underwriter and
sole book running manager and investment banker in connection with the offering. The offering shall consist of approximately fifteen
million worth of securities subject to the due diligence examination of the Company. The actual size of the offering, the precise
number of securities to be offered by the Company and Maxim will depend upon the capitalization of the Company among other various
factors. Maxim shall be granted an option to acquire an additional 15% of the total number of securities as an over-allotment,
an underwriting discount of 7% and an expense allowance equal to 1%.
Silver Alert Services, LLC
In August 2020, the Company entered into a
strategic partnership with Silver Alert Services, LLC. doing business as Lifelight Systems (“Lifelight”), expanding into
the telehealth sphere. The partnership will expand AppTech’s reach into new markets and provide advanced technological solutions
for the telehealth and personal emergency response systems markets. The strategic partnership provides a promissory note to Lifelight
for up to $1.0 million dollars with an interest rate of three percent per annum upon successful completion of
Lifelight’s Personal Emergency Response System (“PERS”) pilot program. Also, Lifelight is granted an option for
the right to purchase 4,500,000 shares of AppTech Corp. for which 1 million are exercisable at $0.01 and 3,500,000 are
exercisable at $0.25 for which vest upon the successful completion of the PERS pilot program and are exercisable for 24 months. These
options were valued at $1,549,999 and $5,424,987, respectively using a Black-Scholes options pricing model.
On December 30, 2020, the Company amended
its strategic partnership agreement and purchase option agreement with Silver Alert dated August 21, 2020. The amendment altered and/or
added certain definitions and the loan disbursements in the strategic partnership agreement. Further, the purchase option agreement was
amended to incorporate a vesting schedule related to the gross revenue generated from the partnership. The options are now vested based
on reaching various gross revenue benchmarks for which expire two years after each tranche vests. These options were valued
at $900,000 and $3,149,994, respectively using a Black-Scholes options pricing model. No stock based compensation was recorded during
the year ended December 31, 2020 as vesting was determined not to be probable.
The Company’s ability to deliver on
the $1,000,000 loan and fulfill its 50% obligation in 2020 was greatly impacted by the ongoing Covid 19 pandemic. Nursing homes and other
senior living facilities were in lock down which did not allow the Silver Alert team into facilities for set-up and equipment training.
As of March 2021, the team still does have access to these facilities and thus revenue could not be generated. AppTech made the strategic
decision to fund other investments while committing to provide the $1,000,000 loan to Silver Alert during the second quarter of 2021,
as state restrictions continue to be loosened. Both parties agreed the delay was in the best interest of the long-term growth of the
partnership. The Company will assess the probability of vesting at the end of each reporting period.
On March 29, 2021, the Company amended
its strategic partnership agreement and purchase option agreement dated December 30, 2020. The amendment altered the agreement
reducing the options to purchase to one million shares at a price of $0.01 and two million five thousand shares of stock at $0.25.
The effect of this transaction has not been determined at this time.
NEC Payments
On October 1, 2020, the Company entered into a
strategic partnership with NEC Payments B.S.C (“NECP”) through a series of agreements, which included the following: (a)
Subscription License and Services Agreement; (b) Digital Banking Platform Operating Agreement; (c) Subscription License Order Form; and
(d) Registration Rights Agreement (collectively the “Agreements”).
The intent of the Agreements was for the Company
to deploy NECP’s technologies, allowing the Company to extend its product offering to include flexible, scalable and secure payment
acceptance and issuer payment processing that supports the digitization of business and consumer financial services and the migration
of cash and other legally payment types to distanced and contactless card and real time payment transactions. NECP will assist the Company
to complete the development of its text payment solution and provide “best in class” software that complements the Company’s
intellectual property. The Agreements, among other things:
|
(a)
|
provide
the Company a license to access and use NECP’s digital banking and payment technology solutions, as identified in the Subscription
License Order Form;
|
|
|
|
|
(b)
|
grant
the Company conditional exclusivity in the United States for all of NECP’s payment acceptance processing technologies contingent
upon the Company reaching transaction volume target goals;
|
|
|
|
|
(c)
|
grant
NECP a license to develop software without the possibility of infringing upon the Company’s intellectual property;
|
|
|
|
|
(d)
|
creates
the parameters in which NECP shall assist the Company in completing the development of its text payment system related to the Company’s
patents;
|
|
|
|
|
(e)
|
award
NECP a fifteen percent (15%) equity stake in the Company, on a fully diluted basis;
|
|
|
|
|
(f)
|
set
revenue sharing splits between AppTech and NECP for all revenues generated from digital banking technologies licensed to AppTech.
|
Under the Agreements, either party had the right
to terminate the agreement should the Company fail to secure a funding in the amount of $3,000,000 within 45 days from the effective
date of the Agreements.
On November 19, 2020, the Company entered into
Amendment No. 1 to the Subscription License and Services Agreement whereby the funding date was amended to amended to no later than December
18, 2020. All other terms of the original Agreements remained in full force and effect.
On February 11, 2021, the Company entered
into an amended and restated Subscription License and Services Agreement, Digital Banking Platform Operating Agreement and Subscription
License Order Form with NECP (collectively the “Restated Agreements”). The Restated Agreement created an engagement fee of
$100,000 due within three business days from the effective date, reduced the funding amount triggering the enforceability of the Restated
Agreements to $707,500 (“Funding”), altered the date in which initial fees are payable to no later than March 5, 2021 (the
“Funding Date”) and provided terms to prevent dilution for NECP’s equity compensation for future funding secured by
the Company. The fees in the Restated Agreements are payable within three business days from the effective date, at or before the Funding
Date, at the Subscription Service Ready Date annually and monthly. The gross total fees due under the Restated Agreements are $2,212,500,
excluding pass-through costs associated with infrastructure hosting fees.
On February 19, 2021, the
Company completed and validated its contractual obligations and paid to NECP the $100,000 engagement fee. On February 29, 2021, the Company
paid the initial fee of $707,500 to NECP prior to the Funding Date. On March 25, 2021, the Company issued 18,011,515 shares of common
stock to NEC on a fully diluted basis with piggyback rights.
The initial fees paid within
three business days from the effective date and at or before the Funding Date included the following costs:
Engagement Fee
|
|
$
|
100,000
|
|
License subscription fee (50% due at Funding Date)
|
|
|
375,000
|
|
Annual maintenance subscription fee (first year)
|
|
|
112,500
|
|
Implementation fee (50% due at Funding Date)
|
|
|
162,500
|
|
Infrastructure implementation fee (50% due at Funding Date)
|
|
|
32,500
|
|
Training fee (50% due at Funding Date)
|
|
|
25,000
|
|
Total
|
|
$
|
807,500
|
|
The following payments are
due in the intervals noted over the five-year life of the Restated Agreements:
License subscription fee (second 50% due at Subscription
Ready Date)
|
|
$
|
375,000
|
|
Annual maintenance subscription fees ($112,500 annually)
|
|
|
450,000
|
|
Implementation fees (50% due at Subscription Ready Date)
|
|
|
162,500
|
|
Infrastructure implementation fees (50% due at Subscription Ready
Date)
|
|
|
32,500
|
|
Training fees (50% due at Subscription Ready Date)
|
|
|
25,000
|
|
Infrastructure support fees ($6,000 monthly after Subscription Ready
Date)
|
|
|
360,000
|
|
Total
|
|
$
|
1,405,000
|
*
|
*Infrastructure Hosting Fees, which are pass
through hosting fees from a hosting partner are excluded from this calculation.
Innovations Realized LLC
On October 2, 2020, the Company entered
into an independent contractor services agreement with Innovations Realized, LLC (“IR”) to develop a strategic operating
plan focused on the design, execution and go to market implementation of the NECP platform to enter the United States market.
On February 18, 2021, the Company entered
into an amended independent contractor services agreement with IR. On February 19, 2021, the initial payment of $76,000 was made
and on February 24, 2021 the second payment of $76,000 was made. The following payments are due over the life of the contract:
April 5,2021
|
|
|
$
|
152,000
|
|
May 5, 2021
|
|
|
|
114,000
|
|
June 5, 2021
|
|
|
|
114,000
|
|
July 5, 2021
|
|
|
|
114,000
|
|
August 5, 2021
|
|
|
|
114,000
|
|
Total
|
|
|
$
|
608,000
|
|
Under the October 2020 agreement, the Company
granted options to purchase four hundred thousand shares at a price of $0.01 and two million five hundred thousand shares at $0.25 and
exercisable for two years after vesting. These options vest in equal monthly installments over 24 months, which commences upon
the Company successfully raising $3.0 million in qualified financing. As of December 31, 2020, the Company determined that
the vesting provision were not probable due to lack of funding commitments, and other reasons disclosed above. In addition, the
options early vesting based on the completion date of the statement of work or the IR principle becoming an employee of AppTech Corp.
These options were valued at $639,993 and $3,999,754 using a Black Scholes pricing model.
On December 21, 2020, the Company sold
the domain “bubblepay.com” for $72,500 to a third party.
Employee versus Contractor Classification
The Company compensates various individuals
as consultants. Annually, these consultants are issued Form 1099s for amounts paid to them. In addition, these consultants do not
have arrangements in which specify compensation payable to them. The Company risks potential tax and legal actions if these consultants
are deemed to be employees by governmental agencies.
NOTE 10 – STOCKHOLDERS’
DEFICIT
Series A Preferred Stock
The Company is authorized to issue 100,000
shares of $0.001 par value Series A preferred stock (“Series A”). There were fourteen (14) shares of Series A preferred
stock outstanding as of December 31, 2020 and 2019. The holders of Series A preferred stock are entitled to one vote per share
on an “as converted” basis on all matters submitted to a vote of stockholders and are not entitled to cumulate their
votes in the election of directors. The holders of Series A preferred stock are entitled to any dividends that may be declared
by the Board of Directors out of funds legally available, therefore on a pro rata basis according to their holdings of shares of
Series A preferred stock, on an as converted basis. In the event of liquidation or dissolution of the Company, holders of Series
A preferred stock are entitled to share ratably in all assets remaining after payment of liabilities and have no liquidation preferences.
Holders of Series A preferred stock have a right to convert each share of Series A into 780 shares common stock.
Common Stock
The Company is authorized to issue 1,000,000,000
shares of $0.001 par value common stock. There were 88,511,657 and 84,153,825, respectively, shares of common stock outstanding
as of December 31, 2020 and 2019. The holders of common stock are entitled to one vote per share on all matters submitted to a
vote of stockholders and are not entitled to cumulate their votes in the election of directors. The holders of common stock are
entitled to any dividends that may be declared by the board of directors out of funds legally available, therefore subject to the
prior rights of holders of any outstanding shares of preferred stock and any contractual restrictions against the payment of dividends
on common stock. In the event of liquidation or dissolution of the Company, holders of common stock are entitled to share ratably
in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock.
Holders of common stock have no preemptive or other subscription rights and no right to convert their common stock into any other
securities.
During the years ended December 31,
2020 and 2019, the Company issued 4,012,000 and 454,500, respectively, shares of common stock to several consultants in connection
with business development, accounts payable conversion and professional services. The Company valued the common stock issuances
at $2,631,899 and $91,414, respectively, based upon the closing market price of the Company’s common stock on the date in
which the performance was complete or issued based upon the vesting schedule and the closing market price of the Company’s
common stock on the date of the agreement. The amounts were expensed to general and administrative expenses on the accompanying
consolidated statements of operations. The accounts payable conversion was $152,500 during 2020.
During the year ended December 31, 2020, the
Company granted 350,000 shares of common stock to the board of directors valued at $196,700 or $0.562 per share. The shares
vest quarterly over the period of approximately one year. The Company valued the stock issuances, earned as of December 31, 2020,
at $81,958 based on the closing market price of the Company’s common stock on the date of the agreement. The amount was expensed
to general and administrative expenses on the accompanying consolidated statement of operations. The Company will issue 204,168 shares
of common stock during 2021 valued at $114,742 based on the closing market price of the Company’s common stock on the date of the
agreement, over the remaining term of the directors.
During the year ended December 31, 2019,
the Company issued 40,000 shares of common stock to the landlord in lieu of rent. The Company valued the issuance at $18,400 based
on the closing market price of the Company’s stock on the date in which the performance was completed. The amount was expensed
to general and administrative expenses on the accompanying consolidated statements of operations.
Stock Options
On July 28, 2020, the Company entered
into an agreement for board of director services. As compensation the Company granted options to purchase 125,000 shares at a price
of $0.562 and are exercisable for two years. The options vest in equal monthly installments over 24 months. These options were
valued at $70,235 using a Black-Scholes options pricing model.
On August 25, 2020, the Company entered
into an agreement for accounting services in general and administrative expenses. As compensation the Company granted options to
purchase 100,000 shares of common stock at a price of $0.25 and are exercisable for six months. These options were valued at $140,945
using a Black-Scholes options pricing model. The options were exercised on August 26, 2020.
On September 21, 2020, the Company entered
into an agreement for sales and marketing services in general and administrative expenses. As compensation the Company granted
options to purchase 10,000 shares at a price of $0.01 and to purchase 120,000 shares at a price of $0.25 and are exercisable for
two years. These options vest upon execution of the contract and in equal quarterly installments of 24 months. These options were
valued at $13,498 and $161,999, respectively using a Black-Scholes options pricing model.
On September 22, 2020, the Company entered
into an agreement for IT services in general and administrative expenses. As compensation the Company granted options to purchase
52,000 shares at a price of $0.25 and are exercisable for two years. The options vest in equal quarterly installments of 24 months.
These options were valued at $77,995 using a Black-Scholes options pricing model.
On October 29, 2020, the Company entered
into an agreement for sales and marketing in general and administrative expenses. As compensation the Company granted options to
purchase 100,000 shares of common stock at a price of $0.30 and are exercisable for two years. These options were valued at $156,999
using a Black-Scholes options pricing model. The options were exercised on October 29, 2020.
The fair value of the options is estimated
using a Black-Scholes option pricing model with the following range of assumptions:
Market value of common stock on issuance date
|
|
|
$0.562 - $1.57
|
|
Expected price
|
|
|
$0.01 - $0.562
|
|
Expected volatility
|
|
|
427%
- 608
|
%
|
Expected term (in years)
|
|
|
0.5
- 3.0
|
|
Risk-free interest rate
|
|
|
0.11
|
%
|
Expected dividend yields
|
|
|
—
|
|
The following table summarizes option
activity:
|
|
|
|
Weighted
|
|
Weighted
|
|
|
Number of
|
|
Average
|
|
Average
|
|
|
shares
|
|
exercise price
|
|
remaining years
|
|
|
|
|
|
|
|
Granted
|
|
|
|
7,907,000
|
|
|
$
|
0.21
|
|
|
|
|
|
Exercised
|
|
|
|
(200,000
|
)
|
|
$
|
0.28
|
|
|
|
|
|
Outstanding as of December 31, 2020
|
|
|
|
7,707,000
|
|
|
$
|
0.21
|
|
|
|
2.22
|
|
Outstanding as of December 31, 2020, vested
|
|
|
|
90,752
|
|
|
$
|
0.40
|
|
|
|
2.10
|
|
The remaining expense outstanding through
December 31, 2020 is $240,965 for which is expected to be expensed over the next 20 months in general and administrative expense.
On July 28, 2020, the board authorized
the Company’s AppTech Equity Incentive Plan in order to facilitate the grant of equity incentives to employees (including
our named executive officers), directors, independent contractors, merchants, referral partners, channel partners and consultants
of our company to enable our company to attract, retain and motivate employees, directors, merchants, referral partners and channel
partners, which is essential to our long-term success. A total of 5,000,000 shares of common stock were authorized under the AppTech
Equity Incentive Plan, for which as of December 31, 2020 a total of 3,351,500 are available for issuance.
Warrants
In 2020, the Company entered into a
security purchase agreement with an investor pursuant to which the Company agreed to sell the investor a $300,000 convertible note
bearing interest at 12% per annum. The Company also sold warrants to the investors to purchase up to an aggregate of 200,000 shares
of common stock, with an exercise term of five (5) years, at a per share price of one dollar and fifty cents ($1.50) which may
be exercised by cashless exercise. The warrants were deemed a derivative liability and were recorded as a debt discount at date
of issuance. See Note 7.
Common Stock Repurchase Option
On January 23, 2020, the Company entered
into a common stock repurchase option agreement to purchase or assign 300,000 shares of common stock from a third party at $0.05
per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The
common stock repurchase options were exercised on January 26, 2020 for which the Company received $98,750 in proceeds which was
recorded as additional paid-in capital.
On February 26, 2020, the Company entered
into a common stock repurchase option agreement to purchase or assign 266,115 shares of common stock from a third party at $0.05
per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The
common stock repurchase option was exercised on February 27, 2020 for which the Company received $25,281 in proceeds which was
recorded as additional paid-in capital.
On March 18, 2020, the Company entered
into a common stock repurchase option agreement to purchase or assign 250,000 shares of common stock from a third party at $0.05
per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The
common stock repurchase option was exercised on March 19, 2020 for which the Company received $62,500 in proceeds which was recorded
as additional paid-in capital.
On April 24, 2020, the Company entered
into a common stock repurchase option agreement to purchase or assign 55,000 shares of common stock from a third party at $0.05
per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The
common stock repurchase option was exercised on April 27, 2020 for which the Company received $19,250 in proceeds which was recorded
as additional paid-in capital.
On August 26, 2020, the Company entered
into a common stock repurchase option agreement to purchase or assign 250,000 shares of common stock from a third party at $0.07
per share. The Company assigned its rights to the repurchase option agreement to a third party in exchange for compensation. The
common stock repurchase option was exercised on August 26, 2020 for which the Company received $45,000 in proceeds which was recorded
as additional paid-in capital.
On October 14, 2020, the Company entered
into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000
shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement
to a third party in exchange for compensation. The common stock repurchase option was exercised on October 14, 2020 for which the
Company received $7,333 in proceeds which was recorded as additional paid-in capital.
On October 14, 2020, the Company entered
into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000
shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement
to a third party in exchange for compensation. The common stock repurchase option was exercised on October 15, 2020 for which the
Company received $5,500 in proceeds which was recorded as additional paid-in capital.
On October 14, 2020, the Company entered
into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000
shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement
to a third party in exchange for compensation. The common stock repurchase option was exercised on October 29, 2020 for which the
Company received $11,000 in proceeds which was recorded as additional paid-in capital.
NOTE 11 – SUBSEQUENT EVENTS
Management has evaluated subsequent
events pursuant to the requirements of ASC Topic 855 and has determined that no material subsequent events exist other than those
disclosed below.
On February 3, 2021, the Company entered
into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000
shares of common stock from a third party at $0.20 per share. The Company assigned its rights to the repurchase option agreement
to a third party in exchange for compensation. The common stock repurchase option for 50,000 shares was exercised on February 11,
2021 for which the Company received $33,750 in proceeds which was recorded as additional paid-in capital.
On February 3, 2021, the Company entered
into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000
shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement
to a third party in exchange for compensation. The common stock repurchase option for 350,000 shares was exercised on February 17,
2021 for which the Company received $222,250 in proceeds which was recorded as additional paid-in capital.
On February 3, 2021, the Company entered
into a common stock repurchase option agreement with a former officer and significant shareholder to purchase or assign 2,000,000
shares of common stock from a third party at $0.20 per share. The Company assigned a portion of the repurchase option agreement
to a third party in exchange for compensation. The common stock repurchase option for 850,000 shares was exercised on February 19,
2021 for which the Company received $539,750 in proceeds which was recorded as additional paid-in capital.
On February 3, 2021, the Company entered
into a common stock repurchase option agreement to purchase or assign 1,000,000 shares of common stock from a third party at $0.20
per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The
common stock repurchase option for 750,000 shares was exercised on February 22, 2021 for which the Company received $881,250 in
proceeds which was recorded as additional paid-in capital.
On February 23, 2021, the Company entered
into a common stock repurchase option agreement to purchase or assign 500,000 shares of common stock from a third party at $0.225
per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The
common stock repurchase option for 250,000 shares was exercised on March 1, 2021 for which the Company received $193,750 in proceeds
which was recorded as additional paid-in capital.
On February 23, 2021, the Company entered
into a common stock repurchase option agreement to purchase or assign 500,000 shares of common stock from a third party at $0.225
per share. The Company assigned a portion of the repurchase option agreement to a third party in exchange for compensation. The
common stock repurchase option for 150,000 shares was exercised on March 5, 2021 for which the Company received $102,000 in proceeds
which was recorded as additional paid-in capital.
On March 4, 2021, the Company enteredinto
a common stock repurchase option agreement to purchase or assign 2,000,000 shares of common stock from a related party at $0.20 per share.The
common stock repurchase option for 50,000 of the 2,000,000 shares was exercised on March 10, 2021. On March 10, 2021, the Company cancelled
the 50,000 shares exercised.
On March 5, 2021, the Company entered
into a judgment purchase agreement from a third party. The judgment is for damages in the amount of $516,932 against FlowPay Corporation
and R. Wayne Steiger. The Company issued 200,000 shares of common stock as consideration for the assignment of the judgment.
See Note 8 and 9 for additional subsequent
events.