Research and Development

In accordancewith ASC 730, Research andDevelopment (“R&D”) costs areexpensed when incurred.R&Dcosts include costs ofacquiring patents andother unproven technologies, contractorfees and other costs associatedwiththe developmentof the SMSshortcodetextingplatform,contract and other outside services. TotalR&D costsfor the three monthsended March31, 2021 and 2020 were zero and2019were $12,000,and $6,820,respectively.

APPTECH CORP. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

Propertyand equipmentis recorded at cost.Expenditures for major additionsand betterments are capitalized. Maintenanceand repairs arecharged tooperations as incurred. Depreciation of propertyand equipmentiscomputedby the straight-linemethod (after taking intoaccount theirrespective estimated residual values)over the assets estimateduseful life offive (5) years. Uponsale orretirementof equipment,the related costand accumulated depreciation areremoved from the accounts and any gain orloss is reflected in the consolidatedstatements of operations.

Impairment of Long-LivedAssets

Long-lived assets are reviewedfor impairment when thereis evidencethat events or changes in circumstances indicate thatthe carrying amount of anasset orasset group may not berecoverable. Recoverability of assets to beheld and used ismeasuredbycomparing thecarrying amount of anasset orasset group to estimatedundiscounted future cash flows expected to begenerated by theasset orasset group. If the carrying amount of anasset orasset group exceeds itsestimated future cashflows,animpairment charge is recognizedfor the amountby whichthecarryingamount of the asset orasset group exceeds the estimatedfair value ofthe asset orasset group. Long-lived assets tobe disposed of bysale arereported atthe lower of theircarrying amounts or theirestimated fair values less costs to selland arenot depreciated.As of March 31, 20202021 and December 31,2019, 2020, there were no asset impairments.

Lease Commitment

The Company determinesif anarrangement is a lease atinception. This determination generally depends on whetherthe arrangement conveys tothe Company theright to control theuse of an explicitly or implicitlyidentified fixed assetfor a period oftimeinexchange for consideration. Control ofanunderlying asset isconveyed tothe Companyif the Company obtains therights to directthe use ofandto obtainsubstantially all of theeconomic benefits from usingthe underlying asset. The Companyhas lease agreements which include lease and non-leasecomponents, which the Companyhas elected to accountfor as asingle leasecomponent for all classes of underlying assets.Lease expense for variable lease components are recognizedwhen the obligation is probable.

Operating leaseright ofuse (“ROU”)assets and lease liabilities arerecognized atcommencement date based onthe present valueof lease paymentsover the leaseterm. Operating leasepayments arerecognized as lease expense on a straight-line basisover the leaseterm. The Company primarily leases buildings (real estate) which are classifiedas operating leases. ASC 842requires alessee to discount itsunpaid lease payments using the interest rate implicitinthe lease or, ifthat rate cannot be readilydetermined, itsincremental borrowing rate. As an implicit interest rate isnot readily determinable in the Company’s leases,the incremental borrowing rate isused based on the information available at commencement date in determining thepresent value of leasepayments.

The lease termfor all ofthe Company’s leasesincludes the non-cancellable period ofthe leaseplus any additional periods covered byeither a Company option toextend (ornot toterminate) the lease thatthe Company is reasonably certain to exercise, or an option toextend (ornot toterminate) the lease controlled bythe lessor.Options for leaserenewals have been excluded from the lease term(and (and leaseliability) for the majority of theCompany’s leases asthe reasonably certain threshold isnot met.

Lease payments included inthe measurement ofthe lease liability arecomprised of fixedpayments, variable paymentsthat depend onindex or rate,and amounts probable to be payableunder the exercise of the Company option topurchase theunderlying assetif reasonablycertain.

Variable leasepayments not dependent on a rate orindex associatedwiththeCompany’s leases arerecognizedwhen theevent, activity, orcircumstanceinthe leaseagreementonwhich thosepayments areassessedas probable.Variable leasepaymentsarepresented as operating expenses inthe Company’sstatement of operationsin thesame line asexpensearising fromfixed leasepayments.As of March 31, 2020,2021, management determinedthat there were no variable leasecosts.

APPTECH CORP. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

IncomeTaxes

The Company recognizes deferred taxassets andliabilities forthe expectedfuturetax consequences of eventsthat havebeenincluded in the consolidatedfinancialstatements or tax returns. Under this method, deferred tax assets and liabilities are based onthe differences betweenthe financial statement and tax bases of assetsandliabilities using enacted tax rates in effect forthe fiscal yearinwhichthe differences are expected toreverse.Deferred tax assets are reduced by avaluation allowancetotheextentmanagement concludes it ismorelikely thannot that the assetswill not be realized. Deferred tax assetsandliabilities aremeasured using enacted tax rates expected to apply to taxableincomein thefiscal yearsinwhichthosetemporary differences are expected to be recoveredorsettled. Theeffecton deferred tax assets and liabilitiesofachangein tax rates is recognized inthe consolidated statement of operations intheperiodthatincludes theenactment date.

TheCompany’s income tax returns are based on calculationsand assumptions that are subject toexaminationby the InternalRevenue Service and other taxauthorities. In addition,the calculation ofthe Company’s tax liabilitiesinvolves dealingwithuncertainties in the application of complex tax regulations.The Company recognizes liabilitiesfor uncertain tax positions based on atwo-step process. Thefirst step is toevaluate the tax positionfor recognitionby determiningifthe weight of availableevidence indicatesthat it ismore likely thannot that the positionwill besustained on audit,including resolutionof related appeals orlitigation processes, ifany. Thesecond step is tomeasure the tax benefit asthe largest amountthat ismore than 50% likely of being realized uponsettlement. Whilethe Company believes ithas appropriate supportfor the positionstakenon its taxreturns, the Company regularly assessesthe potential outcomes ofexaminationsby tax authorities in determiningthe adequacyofitsprovision for income taxes. The Company continually assesses the likelihoodand amountof potential adjustmentsand adjusts theincome tax provision,income taxes payableand deferredtaxes in the period in whichthefacts thatgive rise to arevision become known. As of March 31, 2021 and 2020,and 2019,the Company doesnot believe anyprovisionsarerequired inconnection with uncertain tax positions as there arenone.

PerShare Information

Basicnet income (loss) percommon share iscomputed by dividingnet income (loss) by theweighted average number ofshares of common stockoutstanding during the period.Diluted netincome (loss) per commonshare is computed by dividingnet income (loss) bythe weighted average number of shares of commonstock and potentiallyoutstanding 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 commonstock outstanding during the period. 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.

AsThe number of common stock equivalents not included in diluted income per share was 16,465,032 and 5,202,618 for the three months ended March 31, 2021 and 2020,and 2019,the Companyhad potentialdilutive securities related tooptions, warrants, Series A preferred respectively. The weighted average number of common stock and convertiblenotes payable. Thesedilutive securitieswereequivalents is not includedwithinthecalculationofdilutive net loss in diluted income (loss) per common share, asbecause the effectswould have been are anti-dilutive.

Convertible Debt

Convertible debt is accountedfor underthe guidelines establishedbyASC470-20 Conversionand Other Options. ASC 470-20governs the calculationof an embeddedbeneficial conversion,which is treated asan additional discount to the instrumentswhere derivativeaccountingdoesnot apply. Theamount of thevalueof additional stock andother considerationin addition tothe beneficial conversionfeature may reduce thecarrying valueofthe instrument to zero,but no further. The discounts are accretedover the term of the debtusing the straight linestraight-line method due tothe short terms of thenotes.

The Company accountsfor modifications of its embeddedbeneficial conversions, in accordancewith ASC470-50 Modificationsand Extinguishments. ASC470-50requires the modification of a convertible debtinstrument that changesthe fair value of an embeddedconversion feature and the subsequent recognition of interest expense orthe associated debtinstrument whenthe modification does notresultin a debtextinguishment.

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.

StockBased Compensation

The Company recognizes as compensation expense all share-basedpayment awardsmadetoemployees, directors,and consultants includinggrantsof stock, stock options andwarrants, based onestimated fair values. Fairvalue is generallydeterminedbased onthe closing price of the Company’s commonstockonthe date ofgrant and is recognizedover the service period. The Company hasseveralconsultingagreementsthathave sharebasedpaymentawards based onperformance.Theseagreements typicallyrequire theCompany toissue common stock tothe consultants on amonthly basis. The Companyrecordsthe fair market value of the common stockissuableat eachmonth end when the performance is complete based upontheclosingmarket price ofthe Company’s commonstock. The Company hasentered into board of directors agreements thathave share basedpaymentawards based onservice. Theseagreements require the Company toissue commonstocktothe directors,earned on amonthly basis,over theoneyear term of theagreement. The Company recordsthe fair market valueofthe commonstock issuable atthe end ofthe month when the director isappointed totheboard basedupon the closingmarketprice oftheCompany’s common stock

APPTECH CORP. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

New Accounting Pronouncements

TheFASB issues ASUs toamend the authoritative literature inASC. Therehave been anumber of ASUs to datethat amend the original text ofASC. The Company believesthose issuedto dateeither (i) provide supplementalguidance, (ii) are technicalcorrections, (iii) arenot applicable tothe Company or(iv) arenot expected tohave a significant impact onthe Company.

NOTE 3 –GOING CONCERN

Asreflected in the accompanying consolidatedfinancial statements,during thethree months ended March 31, 2021 and 2020,and2019,the Company incurred anet lossof $66,293,498 and $1,464,050and $238,241and used cash of $385,458 and $190,888and $190,661 in operating activities. In addition,the Companyhad aworking capitaldeficit of $7,409,180$6,863,913 and anaccumulated deficit of $42,224,463 at$111,241,228 as of March 31, 2020.2021. Thesefactors raise substantial doubt regarding the Company’s ability tocontinueas agoing concern. Wehave evaluatedthe conditions or eventsthat raisesubstantial doubt aboutthe Company’s ability as agoing concern within one year of issuance ofthe consolidatedfinancial statements.

While the Company is continuing operationsand generatingrevenues, the Company’s cash position isnot significant enough to supportthe Company’s daily operations.Tofund operations andreduce the working capitaldeficit,weintend the Company intends to raise additionalfunds through public orprivate debt and/or equityofferings. During 2020,2021, the Company raised$205,781from asalereceived $1,972,750 from seven sales of arepurchase option tofund operations. option. Management believesthat the actions presently being taken tofurther implement itsbusinessplan andgenerate revenues provide the opportunityfor the Company to continue as agoing concern, however, such arenot guaranteed.While the Company believesin the viabilityofits strategy togenerate revenues and in its ability to raise additionalfunds, therecan beno assurances to thateffect, nor canthere beassurance that such fundswill be at acceptableterms. Subsequent to March 31, 2021, the Company has received an additional $145,500 through May 13, 2021. As ofthe date oftheseconsolidatedfinancial statements, the Companyhas notfinalized acommitment for additionalcapital. The ability ofthe Company tocontinue as agoing concern is dependent uponour ability tofurther implement itsbusiness planand generate revenues and cashflows. Theconsolidated financial statements donot include any adjustments thatmight be necessaryifthe Companyis unable to continue as agoing concern.

Risks and uncertaintiesUncertainties

On January 30, 2020,the World Health Organization declaredthe coronavirus outbreak a“Public “Public Health Emergency ofInternational Concern”and on March 10, 2020,declaredit to be apandemic. Actions takenaroundtheworldtohelp mitigate the spread of the coronavirusinclude restrictions ontravel, and quarantinesin certainareas,and forced closures for certaintypes of public placesand businesses. Thecoronavirus and actions taken tomitigate ithave had and are expected tocontinuetohave anadverse impact on theeconomies and financial markets ofmany countries, including thegeographical areain which the Company operates.Sincewe deriveour the Company derives its revenues from processing of purchases fromour merchant servicesclients, a downturn in economic activity,suchas associatedwith the currentcoronavirus pandemic,could reducethevolume of purchaseswe process, it processes, and thus our its revenues. In addition, such a downturn could causeour its merchant customers to cease operationspermanently decreasingour payment processing unless new customers arefound. We may alsoface additional difficulty in raising capitalduringan economicdownturn. Theeffects ofthe 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 beestimated atthis time.

Additionally,itis reasonably possiblethatthe estimates made in thefinancial statementshave been,orwill be materially and adversely impacted in thenearterm as a result of theseconditions.

APPTECH CORP. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 –PATENTS

Patents

OnJune22, 2017,AppTech executedanAmendmentto AssetPurchase Agreement with GlobalTelMedia, Inc. Inconnection with the asset purchaseagreement,5,000,000shares of common stockwere issued to GlobalTelMedia, Inc. The Companyvaluedthe common stock issuance at $1,000,000 based onthe closingmarketprice ofthe Company’s common stock onthedate in which the performancewas complete. Thisamendmentrevived theoriginal asset purchase agreement datedDecember4, 2013 topurchase the assets of GlobalTel Media,Inc.(AppTech (AppTech and GlobalTelagree that the asset purchase agreement dated September 30, 2015 isnull andvoid), which include,but isnot limited to, allintellectual property,United States Patent Trademark Office (“USPTO”)issued patents, enterprise-grade, patent protectedsoftware and intellectual propertyfor advanced messagingincorporating securepayments, databases, documentation,copyrights, trademarks,registrations, and allcurrent developmentwork in process of USPTO applicationapproval; more specificallybut not limited to USPTO 8,073,895 & 8,572,166“System “System and MethodforDelivering WebContent to a Mobile Device”,USPTO8,315,184“Computer “Computer to Mobile Two-WayChatSystem and Method”,andUSPTO8,369,828“Mobile-to-Mobile “Mobile-to-Mobile Payment System and Method”. GlobalTel’s technologyfocuses on SMS text-based applications, socialmedia and mobile payment. The USPTOassigned thepatentsto AppTech on July 25, 2017. AppTech, as part ofthe various agreements,agreedto pay $1,600,000which included an assumption of certain liabilities,includingcostsincurred tocontinue developmentof the patents,aswellasguaranteedpayment of 25% ofthe net proceeds onrevenue created by the patentsup to $26,600,000. As of March 31, 20202021 and December 31,2019, 2020, amounts included inaccounts payable related tothe assumption of liabilities in connectionwith the patentswere$380,000 $280,000 and $415,000,$280,000, respectively. The Company has expensed the cost of the patents as research and development costsasthe future estimated cash flow expected cannot be reasonably estimated.estimated at the time of the expense.

See Note 9 for more information on capitalized prepaid software development and license.

NOTE 5 – ACCRUEDLIABILITIES

Accrued liabilitiesas of March 31, 20202021 and December 31, 20192020 consist of thefollowing:

Accrued Interest

Notes payable and convertiblenotes payable incur interest at rates between 10%and 15%, perannum. Theaccrued interest inmost cases is currently in technicaldefault due to thenotes being pasttheir maturity date.

Accrued Residuals

The Company payscommissions to independent agents whichrefer merchant accounts. Theamountspayable tothese independent agents is based upon apercentage ofthe amounts processed on amonthly basisby thesemerchant accounts.

Accrued Merchant Equity Liability

TheCompany provided allmerchants the opportunity toearn shares ofthe Company’scommonstock throughtheir Merchant Equity Program (the“Program” “Program”). Underthe Program, themerchant earned 1% of their total Visa/MasterCardvolume processedduring the first year of theircontract. Forexample,if amerchant processes $1.0millionin credit cardcharges, the merchant will receive 10,000shares ofthe Company’s commonstock. Themerchant must processwith the Companyfor a periodof three years for the shares tovest. All merchants becamefully vestedwhen the Company endedthe programeffective December 31,2015.

Formerchants inwhich the shares of commonstock are notknown as they arewithin the one-year period,the Companyestimates on a quarterly basis as tothe estimated amount of shares based uponthe expectedamount to be processedbythemerchant on an annualbasis. Atthe end ofthe first year, when the number of shares issuable isknown, the Companymakesanadjustment tothe valueofthe shares,if needed.

The Company accountsforthevalue ofthe shares under the program as asales incentive and thus theamountsin connectionwith the Program are recorded as a reduction to revenues. As of March 31,2020, 2021, the Company has an obligation toissue approximately 776,000sharesofthe Company’s common stockissuableunderthe Program. During the year endedDecember31, 2019,the Company issued 37,193sharesof common stock relieving $14,877 in liabilityissuable underthe program.Program.

APPTECH CORP. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE

TheCompanyfunds operationsthrough cashflows generated from operationsand the issuance ofloans and notes payable. Thefollowingis a summary of loans and notes payable outstanding asof March 31, 20202021 and2019. 2020. Related partiesnotedbelow areeither membersofmanagement,board of directors,significant shareholders or individuals inwhich have significantinfluence over the Company.

Loans Payable – RelatedParties

During thethree months ended March 31, 20202021 and 2019,2020, theCompany obtained (paid) $(28,050)$(32,500) and$69,500 $39,319 loans payable from related parties,net.As of March 31, 2021 and December 31, 2020,and December31,2019,thebalance oftheloans payablewas$65,351 $1,900 and $93,401,$34,400, 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 Companyissued $350,000 insubordinated notes payable to third parties. The subordinatednotes payablewere due in 30 to180 days andincurred interest at 10% perannum. As of March 31, 20202021 and December 31, 2019,2020, accrued interest related tothe subordinated notes was $127,295$162,295 and $118,545, $153,545, respectively. The Company is currently in default ofthe 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 $39,919, amounted to $48,919 for the three months ended March 31, 2021. As of March 31, 2021 and December 31, 2020, the convertible note payable discount is $240,225 and $280,174 and will be amortized over the life of the convertible note payable in 2021. As of March 31, 2021 and December 31, 2021, the derivative liability is as follows:

In 2017,the Company received $222,000 inconvertible notes payable from related parties. Theconvertible notes payable areunsecured, were duein 180days, incur interest at 10% per annum and areconvertible at $0.10 pershare.As of March 31, 20202021 and December 31, 2019,2020, accrued interest related tothe convertible noteswas $59,538 $81,737 and $53,988, $76,187, respectively. Onthe date ofthe agreement, Management calculated the beneficial conversionfeaturein connectionwith the convertiblenotes payableand recorded adiscount of $222,000. The Companyamortized the discountover the term of the convertiblenotes payable of 180days. On February 24, 2021, the chief executive officer assigned $200,000 in convertible notes to direct relative. On April 29, 2021, the note holders converted the principal and interest in the amount of $305,588 on their respective notes into 3,055,875 shares of the Company’s common stock. Due to the subsequent conversion, the amounts have been reflected as long-term on the accompanying balance sheet.

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 March 31, 2021 and December 31, 2020, the accrued interest related to the convertible notes was $27,084 and $25,833, respectively. The Company is currently in default on the convertiblenotes note payable.

In 2015,the Companyissued $50,000 inconvertible notes payable.Theconvertible notespayable areunsecured, were dueinnine months, incur interestat 10% perannum and areconvertible at $1.00 pershare.Asof March 31, 2020and December31, 2019,the accrued interest related tothe convertible noteswas $22,084and $20,833,respectively. The Company is currentlyindefaultonthe convertiblenote payable.

In 2014,the Company issued $400,000 inconvertible notes payable. Theconvertible notes payable areunsecured, due in periodsranging up toone year,incurring interest between 10% to 12% per annumand areconvertibleat pricesranging from $0.33 to $1.00 pershare.Inaddition, the Companyissued 400,000shares ofcommon stock inconnection with the convertiblenotes payable. TheCompany had the obligation to repurchasethe 400,000sharesofcommon stock at $1.00 pershare within one year ofthe note issuance date. As of March 31, 20202021 and December 31,2019, 2020, the Companyheld theobligation torepurchase the sharesfor$400,000. $400,000. As of March 31, 20202021 and December 31, 2019,2020, the accrued interest related tothe convertible noteswas$196,333and $186,083,respectively.The Companyis currently in default of thenote agreements.

In 2008and 2009,the Companyissued $320,000 inconvertible notes payable, ofwhich$150,000was from related parties. Theconvertible notes payable arecurrently due on demand, incurinterest at 15% perannum, andconvertible at $0.60 pershare.As of March 31, 2020 $237,333 and December 31, 2019,accrued interest related tothe convertible noteswas$528,013and $516,013 of which $249,000and $243,375, respectively, was due to related parties.$227,083, respectively. The Company iscurrently indefault of thenotes payable agreements.

Notes Payable

In 2016,the Companyissued $143,000 innotes payable tothird parties. Thenotes payablewere duein ninety days orless. During 2019,the Company paid $36,000 innotes payable.The Company is currently in default of thenote agreements.

In 20072008 and2008, 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 March 31, 2021 and December 31, 2020, accrued interest related to the convertible notes was $576,013 and $564,013 of which $271,500 and $265,875, respectively, was due to related parties. On April 29, 2021, then note holders converted the principal and interest in the amount of $902,013 of which $423,375 was from related parties on their respective notes into 1,503,354 shares of the Company’s common stock, of which 705,625 shares were to related parties. Due to the subsequent conversion, the amounts have been reflected as long-term on the accompanying balance sheet.

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 March 31, 2021 and December 31, 2020 the balance of the note payable was $68,300, and accrued interest was $1,921 and $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 March 31, 2021 and December 31, 2020, the aggregate balance of the notes payable was $620,355 and accrued interest was $653,650 and $638,016, respectively. On May 2, 2021, the Company entered into a debt reduction and confirmation agreement with a significant shareholder. The parties will reduce the outstanding accrued interest in the amount of $275,000.

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 March 31, 2021 and 2020, 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 $250 and $250, respectively, which represented an interest rate of 10% per annum during the three months ended March 31, 2021 and 2020.

In 2008, the Company entered into notespayablewith 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 partyfor $46,000in proceeds. Thenotes payablewere due ondemand and incurred interest at 12% perannum. Thesewere combinedinto a singlenote agreementin2014. As of March 31, 20202021 and December 31, 2019, 2020, thebalance onthe note payable was $88,136and accrued interest related tothe note payable was $51,907 $62,564 and$49,243, $59,900, respectively. The Companyiscurrentlyindefaultofthenote payable agreement.

APPTECH CORP. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In 2007,theCompany enteredinto note payablewitha third partyfor $128,000 inproceeds.Underthe termsof the terms of the agreementthe holder received aflat interestamount of $37,496. The Companyiscurrentlyindefault ofthe note payable agreementand 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 $3,200 and $3,200, respectively, which represented an interest rate of 10% per annum during the three months ended March 31, 20202021 and 2019.

In 2008,the Company enteredinto anote payablewith a third partyfor $10,000 in total proceeds. Thenote payableis currently indefault and has aflat interestamount dueof $21,000.As of March 31, 2020and December 31, 2019,the Companywas indefaultofthe note agreementand the entireamountof $21,000has beenincluded within accrued interest.Since the notes payable donot incur interest, the Companyimputed interest at$250and $250,respectively, which represented an interest rate of 10% perannum during the threemonths ended March 31, 2020and 2019.

In 2008,the Company enteredinto notes payable with athird partyfor $26,000 in totalproceeds. Thenotes payable have aflatinterest amount due of $80,000. During 2015,the Companyreceived another $50,000from the thirdparty. During 2017,the Company entered into an agreement whereby theywould repay the principaland accrued interestin the amountof $145,000 byApril 4, 2018and issue the holders800,000 shares of commonstock. The Company recordedthe fair market value of the commonstock issued at $336,000 based onthe date ofissuance as interest expense.Other than theissuance of shares of commonstock, the Company didnot perform underthe agreement. The Company is currentlyin default ofthe note agreement.2020.

In 2007,theCompanyentered into note payablewitha third partyfor $221,800 inproceeds.Thenote payable is currentlyindefault and incurs interest at 10% perannum.On September 30, December 31, 2013,the holder received an arbitrationsettlement fortheprincipaland accrued interest. As of March 31, 20202021 and December 31,2019, 2020, the Companywasin default ofthearbitration settlement. As of March 31, 20202021 and December 31,2019, 2020, accrued interest related to thenotepayablewas $439,931 $480,213 and $429,861,$470,143, respectively.