For the transition period from ____________________ to ________________________

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “ accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~May~~November 10, 2022, the registrant had ~~16,118,264~~16,408,563 shares of common stock (par value ~~0.001)~~$0.001 per share) issued and outstanding.

Various statements in this Quarterly on Form 10-Q of AppTech Payments Corp. (we, our, AppTech or the Company) are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties and are based on information currently available to our management. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “contemplates,” “predict,” “project,” “target,” “likely,” “potential,” “continue,” “ongoing,” “will,” “would,” “should,” “could,” or the negative of these terms and similar expressions or words, identify forward-looking statements. The events and circumstances reflected in our forward-looking statements may not occur and actual results could differ materially from those projected in our forward-looking statements. Meaningful factors that could cause actual results to differ include:

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

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

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

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

APPTECH PAYMENTS CORP.

CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

(The financial statements have been condensed for presentation purposes)

	Pages

Consolidated Balance Sheets as of ~~March 31,~~September 30, 2022 and December 31, 2021 (unaudited)	56

Consolidated Statements of Operations for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021 (unaudited)	67

Consolidated Statements of Stockholders’ Equity (Deficit) for the three, six, and nine months ended ~~March 31,~~September 30, 2022 and 2021 (unaudited)	78

Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021 (unaudited)	89

Notes to the Unaudited Financial Statements	910

APPTECH PAYMENTS CORP.

CONSOLIDATED BALANCE SHEETS AS OF

~~MARCH 31,~~SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

(UNAUDITED)

(in thousands, except per share data)


	March 31, 2022			December 31, 2021			September 30, 2022			December 31, 2021
ASSETS
Current assets
Cash	$	10,290		$	8		$	5,878		$	8
Accounts receivable		43			40			100			40
Prepaid expenses		247			95			370			95
Prepaid License Fees - Current		599			479
Prepaid license fees - current								659			479
Total current assets		11,179			622			7,007			622

Prepaid offering cost		—			92			—			92
Prepaid license fees - long term		3,060			3,180			3,000			3,180
Intangible assets								407			—
Note receivable		26			26			26			26
Right of use asset		173			189			143			189
Security deposit		8			8			8			8
Capitalized software development and license		3,625			3,440			5,188			3,440
TOTAL ASSETS	$	18,071		$	7,557		$	15,779		$	7,557

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	474		$	1,255		$	383		$	1,255
Accrued liabilities		1,821			3,136			1,727			3,136
Right of use liability		64			61			64			61
Stock repurchase liability		430			430			430			430
Convertible notes payable, net of $37 and $51 thousand debt discount		680			679
Convertible notes payable, net of $1 and $51 debt discount								680			679
Notes payable		1,086			438			1,122			438
Notes payable related parties		—			685			—			685
Derivative liabilities		463			599			418			599
Total current liabilities		5,018			7,283			4,824			7,283

Long-term liabilities
Right of use liability		146			163			115			163
Notes Payable, net of current portion		67			67			67			67
Anti-dilution liability		2,121			—
Total long-term liabilities		2,334			230			182			230

TOTAL LIABILITIES		7,352			7,513			5,006			7,513

Commitments and contingencies (Note 9)

Stockholders’ Equity (Deficit)
Series A preferred stock; $0.001 par value; 10,526 shares authorized; 14 shares issued and outstanding at March 31, 2022 and December 31, 2021		—			—
Common stock, $0.001 par value; 105,263,157 shares authorized; 15,745,070 and 11,944,607 and outstanding at March 31, 2022 and December 31, 2021, respectively		16			12
Stockholders’ Equity
Series A preferred stock; $0.001 par value; 10,526 shares authorized; 14 shares issued and outstanding on September 30, 2022 and December 31, 2021								—			—
Common stock, $0.001 par value; 105,263,157 shares authorized; 16,633,563 and 11,944,600 and outstanding at September 30, 2022 and December 31, 2021, respectively								16			12
Additional paid-in capital		140,351			124,225			146,471			124,225
Accumulated deficit		(129,648	)		(124,193	)		(135,714	)		(124,193	)
Total stockholders’ equity (deficit)		10,719			44
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	18,071		$	7,557
Total stockholders’ equity								10,773			44
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY							$	15,779		$	7,557

See accompanying notes to the financial statements.

APPTECH PAYMENTS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2022 AND 2021

(UNAUDITED)

(in thousands, except per share data)


	For the Three Months Ended March 31,						For the Three Months Ended September 30,						For the Nine Months Ended September 30, 2022
	2022			2021			2022			2021			2022			2021

Revenues	$	104		$	101		$	115		$	92		$	342		$	259
Cost of revenues		51			34			54			42			167			112
Gross profit		53			67			61			50			175			147

Operating expenses:
General and administrative, including stock based compensation of $2.5 million and $1.4 million, respectively		2,779			1,780
Research and development		2,053			—
General and administrative, including stock based compensation of $188 thousand and $31 thousand, and $1,130 thousand and $2,357 thousand for the three and nine months ended September 30, 2022 and 2021, respectively								1,365			1,360			5,466			6,733
Research and development, including stock based compensation of $1,262 thousand and $0, and $4,922 thousand and $0 for the three and nine months ended September 30, 2022 and 2021, respectively								1,513			—			5,539			—
Excess fair value of equity issuance over assets received		832			63,943			—			1,091			904			66,125
Total operating expenses		5,664			65,723			2,878			2,451			11,909			72,858

Loss from operations		(5,611	)		(65,656	)		(2,817	)		(2,401	)		(11,734	)		(72,711	)

Other income (expenses)
Interest expense		(55	)		(129	)		(41	)		(478	)		(137	)		(3,038	)
Change in fair value of derivative liability		136			(508	)		8			135			181			80
Other income (expenses)		75			—			1			—			169			175
Total other income (expenses)		156			(637	)		(32	)		(343	)		213			(2,783	)

Loss before provision for income taxes		(5,455	)		(66,293	)		(2,849	)		(2,744	)		(11,521	)		(75,494	)

Provision for income taxes		—			—			—			—			—			—

Net loss	$	(5,455	)	$	(66,293	)	$	(2,849	)	$	(2,744	)	$	(11,521	)	$	(75,494	)

Basic and diluted net loss per common share	$	(0.35	)		(6.52	)	$	(0.17	)		(0.23	)	$	(0.72	)		(6.75	)
Weighted-average number of shares used basic and diluted per share amounts		15,479,613			10,165,034			16,596,333			11,779,684			16,106,528			11,184,315

See accompanying notes to the financial statements.

APPTECH PAYMENTS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE, SIX, AND NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2022 AND 2021

(UNAUDITED)

(in thousands, except per share data)


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

Balance December 31, 2020		14	$	—		9,317,017		$	9	$	36,744		$	(44,948	)	$	(8,195	)	14	$	—	9,317,017		$	9	$	36,744		$	(44,948	)	$	(8,195	)

Net loss		—		—		—			—		—			(66,293	)		(66,293	)	—		—	—			—		—			(66,293	)		(66,293	)
Imputed interest		—		—		—			—		3			—			3		—		—	—			—		3			—			3
Stock based compensation		—		—		35,737			—		429			—			429		—		—	35,737			—		429			—			429
Issuance of options for capitalized prepaid software development and license		—		—		—			—		1,891			—			1,891		—		—	—			—		1,891			—			1,891
Common stock issued for purchase of judgment		—		—		21,053			—		1,000			—			1,000		—		—	21,053			—		1,000			—			1,000
Common stock issued for capitalized prepaid software development and license		—		—		1,895,949			2		67,525			—			67,543		—		—	1,895,949			2		67,541			—			67,543
Common stock cancelled		—		—		(15,789	)		—		(10	)		—			(10	)	—		—	(15,789	)		—		(10	)		—			(10	)
Net Proceeds from sale of repurchase option		—		—		—			—		1,973			—			1,973		—		—	—			—		1,973			—			1,973
Balance Balance March 31, 2021																			14		—	11,253,967			11		109,571			(111,241	)		(1,659	)
Net loss																			—		—	—			—		—			(6,458	)		(6,458	)
Imputed interest																			—		—	—			—		3			—			3
Stock based compensation																			—		—	23,137			—		2,988			—			2,988
Issuance of options for capitalized prepaid software development and license																			—		—	—			—		1,091			—			1,091
Common stock issued for convertible notes payable, accrued interest, derivative liabilities, and accounts payable																			—		—	500,726			1		3,945			—			3,946
Net Proceeds from sale of repurchase option																			—		—	—			—		458			—			458
Balance June 30, 2021																			14	$	—	11,777,830		$	12	$	118,056		$	(117,699	)	$	369
Net loss																			—		—	—			—		—			(2,743	)		(2,743	)
Imputed interest																			—		—	—			—		3						3
Stock based compensation																			—		—	5,176			—		894						894
Issuance of options for capitalized prepaid software development and license																											1,091						1,091
Common stock issued for forbearance																			—		—	5,619			—		64						64
Common stock issued for services with warrant issuance																			—		—	12,105			—		29						29
Common stock issued for convertible notes payable, accrued interest, derivative liabilities, and accounts payable																			—		—	107,241			—		1,233						1,233
Balance September 30, 2021																			14		—	11,907,971			12		121,370			(120,442	)		940

Balance March 31, 2021		14	$	—		11,253,967		$	11	$	109,555		$	(111,241	)	$	(1,659	)

Balance December 31, 2021		14	$	—		11,944,600		$	12	$	124,225		$	(124,193	)	$	44		14	$	—	11,944,600		$	12	$	124,225		$	(124,193	)	$	44

Net loss		—		—		—			—		—			(5,455	)		(5,455	)	—		—	—			—		—			(5,070	)		(5,070	)
Common Stock Issued for Forbearance		—		—		2,104			—		3			—			3		—		—	2,104			—		3			—			3
Stock based compensation		—		—		310,480			—		2,732			—			2,732		—		—	310,223			—		2,732			—			2,732
Common stock cancelled		—		—		(126,315	)		—		—			—			—		—		—	(126,315	)		—		—			—			—
Net Proceeds from sale of Offering Shares		—		—		3,614,201			4		13,391			—			13,395		—		—	3,614,458			4		13,391			—			13,395

Balance March 31, 2022		14	$	—		15,745,070		$	16	$	140,351		$	(129,648	)	$	10,719		14		—	15,745,070			16		140,351			(129,263	)		11,104
Net loss																			—		—	—			—		—			(3,602	)		(3,602	)
Common stock issued for Stock Based Compensation																			—		—	140,681			—		2,120			—			2,120
Anti-Dilution Provision (Infinios)																			—		—	451,957					2,123						2,123
Common stock issued for HotHand Patents																			—		—	225,000			—		407			—			407
Balance June 30, 2022																			14	$	—	16,562,708		$	16	$	145,001		$	(132,865	)	$	12,152
Net loss																			—		—	—			—		—			(2,849	)	$	(2,849	)
Common stock issued for Stock Based Compensation																			—		—	28,750			—		1,449			—		$	1,449
Exercise of Options																			—		—	42,105			—		20			—		$	20
Balance September 30, 2022																			14		—	16,633,563			16		146,470			(135,714	)		10,773

See accompanying notes to the financial statements.

APPTECH PAYMENTS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~THREE~~NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2022 AND 2021

(UNAUDITED)

(in thousands, except per share data)


	September 30, 2022			September 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(11,521	)	$	(75,494	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		6,052			5,733
Common Stock Issued for Forbearance		3			—
Stock issued for purchase of judgment		—			1,000
Stock issued for excess fair value of equity over assets received		904			64,725
Stock issued for excess fair value of equity issuance		—			2,706
Imputed interest on notes payable		—			10
Amortization of debt discount		49			280
Gain on extinguishment of accounts payable		—			(175	)
Change in fair value of derivative liabilities		(181	)		(80	)
Changes in operating assets and liabilities:
Accounts receivable		(58	)		6
Prepaid expenses		66			(87	)
Accounts payable		(872	)		421
Accrued liabilities		(190	)		128
Right of use asset and liability		1			7
Net cash used in operating activities		(5,747	)		(820	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized prepaid software development and license		(1,748	)		(1,568	)
Payments on notes receivable		—			(8	)
Net cash used in investing activities		(1,748	)		(1,576	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for prepaid offering costs		—			(25	)
Payments on loans payable - related parties		—			(34	)
Payments on notes payable		(50	)		—
Net Proceeds from offering		13,395			—
Repurchase of common stock		—			(10	)
Proceeds received from exercise of stock options		20			—
Proceeds from sale of repurchase options		—			2,431
Net cash provided by financing activities		13,365			2,362
Changes in cash and cash equivalents		5,870			(34	)
Cash and cash equivalents, beginning of period		8			57
Cash and cash equivalents, end of period	$	5,878		$	23
Supplemental disclosures of cash flow information:
Non-cash investing and financing transactions	$	—		$	5,491
Common stock issued for conversion of accounts payable		—			206
Forgiveness of debt through conversion of accounts payable		—			175
Common stock issued convertible notes, accrued interest and derivative liabilities		—			1,253
Issuance of stock for prepaid services		250			—
Issuance of stock for intangible assets		407			—
Issuance of stock for forbearance agreements recorded as a discount	$	—		$	64

March 31,
2022 March 31,
2021

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,455 ) $ (66,293 )
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of stock based compensation 2,508 1,829
Issuance of stock for prepaid services 156 —
Common Stock Issued for Forbearance 3 —
Stock issued for purchase of judgment — 1,000
Stock issued for excess fair value of equity over assets received 832 62,543
Imputed interest on notes payable — 3
Amortization of debt discount 14 40
Change in fair value of derivative liabilities (136 ) 508
Changes in operating assets and liabilities:
Accounts receivable (3 ) (26 )
Prepaid expenses 8 (61 )
Accounts payable (781 ) (24 )
Accrued liabilities (25 ) 93
Right of use asset and liability 1 3
Net cash used in operating activities (2,878 ) (385 )

CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized prepaid software development and license (185 ) (960 )
Net cash used in investing activities (185 ) (960 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on loans payable - related parties — (33 )
Payments on notes payable (50 ) —
Net Proceeds from offering 13,395 —
Repurchase of common stock — (10 )
Proceeds from sale of repurchase options — 1,948
Net cash provided by financing activities 13,345 1,905

Changes in cash and cash equivalents 10,282 560
Cash and cash equivalents, beginning of period 8 58
Cash and cash equivalents, end of period $ 10,290 $ 618

Supplemental disclosures of cash flow information:
Cash paid for interest $ — $ —
Cash paid for income taxes $ — $ —
Non-cash investing and financing transactions related to capitalized software and licensing costs $ — $ 5,491
Issuance of stock for prepaid services $ 156 $ —

See accompanying notes to the financial statements.

APPTECH PAYMENTS CORP.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

(In thousands, except per share data)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

In 2013, AppTech merged with Transcendent One, Inc., whereby Transcendent One, Inc. and its management took controlling ownership of the Company. During this time, AppTech operated as a merchant services provider, continuing the business conducted by Transcendent One, Inc.

In 2017, the Company acquired assets from GlobalTel Media, Inc. The assets included patented, enterprise-grade software for advanced text messaging. In addition to the software, four patents in text technology, and additional intellectual property for mobile payments.

In 2020, AppTech entered into a strategic partnership with Infinios (formerly “NEC Payments”), 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 legacy payment types to contactless card and real time payment transactions.

In 2021, the Company announced its intent to launch an innovative and patented mobile text payment solution in addition to a suite of digital banking and payment acceptance products designed in the Business-to-Business (“B2B”) and Business-to-Consumer (“B2C”) payment and software space.

On December 23, 2021, AppTech ~~Payments Corp. (“AppTech” or the “Company”) changed our name to AppTech Payments Corp from AppTech Corp. and~~ re-domiciled to ~~Delaware. We are headquartered in Carlsbad, CA~~Delaware and ~~our~~changed its name from “AppTech Corp.” to “AppTech Payments Corp.” AppTech stock trades under the symbol “APCX” and ~~our~~its warrants trade under the symbol ~~“APCXW”~~“APCXW,” on the Nasdaq Capital Market ("NASDAQ").

The Company successfully completed its capital raise and uplisting onto NASDAQ (herein referred to as its “Offering”) on January 7, 2022. As part of the Offering, the Company executed a 9.5 to 1 reverse split of its common stock. In addition, the Offering sold~~3,614,201~~ 3,614,458 units of our common stock (a unit ~~consisted~~consisting of one share of common stock and a warrant to purchase one share of common stock) at $4.15 per unit. In addition, 542,168 warrants were granted by EF Hutton ~~with~~and the Offering warrants of 3,614,458, all having a five-year 5 ~~five-year~~ expiration and an exercise price of $5.19. The Offering provided net proceeds of approximately $13.4million. ~~The Company’s current cash position is significant enough to support the daily operations for a period in excess of one year from the date of filing this 10-Q.~~ All shares and share prices within this 10-Q have been adjusted to reflect the stock split.

In April 2022, the Company acquired HotHand Inc. (“HotHand”), a patent-holding company. These patents are focused on the delivery, purchase, or request of any products or services within specific geolocation and time parameters, provided by a consumer’s cell phone anywhere in the United States.

AppTech Payments 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 accompanying consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of the Company’s management, the accompanying financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended ~~March 31,~~September 30, 2022 and ~~March 31,~~September 30, 2021. Although management believes that the disclosures in these unaudited financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC.

The accompanying consolidated unaudited financial statements should be read in conjunction with the Company’s financial statements and notes related thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. The interim results for the three and nine months ended ~~March 31,~~September 30, 2022 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or for any future interim periods.

Basis of Consolidation

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

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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 thousand 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 ~~six~~seven financial institutions to service their merchants for which represented 100% of accounts receivable as of ~~March 31,~~September 30, 2022. 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 ~~three~~nine months ended ~~March 31, 2022 and~~September 30, 2021, ~~the~~ one merchant (customer) represented approximately ~~8.2~~40% ~~and~~ 36% of the total ~~revenues, respectively.~~revenues. The loss of this customer would not have significant impact on the Company’s operations.

Software Development Costs

The Company capitalizes software development costs in developing internal use software when capitalizing requirements have been met. Costs prior to meeting the capitalization requirements are expensed as incurred.

Fair Value Measurements

The Company follows FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) to measure and disclose 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

~~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 financial statements for cash, accounts payable and accrued expenses approximate their fair value because of the immediate or short-term maturity of these financial instruments.

Transactions involving related parties cannot be presumed to be carried out on an arms-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 ~~March 31,~~September 30, 2022 and December 31, 2021 on recurring basis (in thousands):

Schedule of derivative liabilities
	September 30, 2022
	Level 1		Level 2		Level 3		Total Carrying Value
Derivative liabilities	$	—	$	—	$	418	$	418

Schedule of derivative liabilities
March 31, 2022
Level 1 Level 2 Level 3 Total Carrying Value
Derivative liabilities $ — $ — $ 463 $ 463

December 31, 2021
Level 1 Level 2 Level 3 Total Carrying Value
Derivative liabilities $ — $ — $ 599 $ 599

	December 31, 2021
	Level 1		Level 2		Level 3		Total Carrying Value
Derivative liabilities	$	—	$	—	$	599	$	599

See Note 6 for discussion of valuation and roll forward related to derivative liabilities.

Intangible Assets and Patents

Our intangible assets only consist of patents. We amortize the patents on a straight-line basis over 15 years, which approximates the way the economic benefits of the intangible asset will be consumed.

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 ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021 ~~were~~approximately $~~2.1~~5.5 million and $0, respectively.

Per Share Information

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year, increased by the potentially dilutive common shares that were outstanding during the year. Dilutive securities include stock options, warrants granted, convertible debt and convertible preferred stock.

The number of common stock equivalents not included in diluted income per share was ~~6,006,350~~5,999,940 and ~~1,733,159~~1,315,598 for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, respectively. The weighted average number of common stock equivalents is not included in diluted income (loss) per share, because the effects are anti-dilutive.

Schedule of anti dilutive stock	March 31, 2022		March 31, 2021
					September 30, 2022		September 30, 2021

Series A preferred stock		1,149		1,149		1,149		1,149
Convertible debt		175,632		645,432		174,060		172,549
Warrants		4,275,464		21,052		4,275,464		21,053
Options		999,132		706,000		1,039,868		765,526
Restricted stock units		554,973		359,526		509,399		355,321
Total		6,006,350		1,733,159		5,999,940		1,315,598

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.

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.

~~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. 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. The continuing effects of the potential impact cannot be estimated at this time.

NOTE 3 – ~~PATENTS~~INTANGIBLE ASSETS

~~Patents~~Software Development Cost

On ~~June 22, 2017, AppTech executed an Amendment~~The Company capitalizes certain costs related to ~~Asset Purchase Agreement with GlobalTel Media, Inc.,~~ the ~~details~~development of its elite digital banking platform. Costs incurred during the development phase are capitalized only when we believe it is probable the development will result in new or additional functionality. The types of costs capitalized during the development phase include employee compensation and consulting fees for third party developers working on these projects. Costs related to the preliminary project planning phase and post implementation phase are expensed as incurred. The elite digital banking platform is amortized on a straight line basis over the estimated useful life of the asset. The Company has capitalized approximately $5.2 million of software development costs as of September 30, 2022 and will amortize over five years beginning October 1, 2022. The Company capitalized $1.8 million during the nine months ended September 30, 2022 which included costs that were ~~previously disclosed by AppTech. The referenced agreement acquired intellectual property assets including but not limited to USPTO 8,073,895 & 8,572,166 “System~~initially recorded as research and ~~Method for Delivering Web Content to a Mobile Device”, USPTO 8,315,184 “Computer to Mobile Two-Way Chat System~~development expenses of $0.4 million and ~~Method”, and USPTO 8,369,828 “Mobile-to-Mobile Payment System and Method”. AppTech intends to~~ ~~use these assets as an integral part of future business expansion and product development. As of~~$0.5 million during the three month periods ended March 31, 2022 and ~~December 31, 2021, there were zero dollars~~June 30, 2022, respectively. The error was not material enough to require restatement and those periods will be revised prospectively.

Management evaluated the materiality of capitalizing and revising the research and development expenses in ~~accounts payable related~~the first and second quarter 10-Qs from a qualitative and quantitative perspective in accordance with the requirements of the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 99, Materiality (SAB 99) and determined the impact to the ~~assumption~~financial statements to be immaterial.

Patents

In April 2022, the Company fully executed a Definitive Agreement to acquire HotHand Inc. (“HotHand”), a patent-holding company. HotHand did not have any operations, so the transaction was an asset acquisition of ~~liabilities~~its portfolio of thirteen patents including USPTO 7,693,752; USPTO 8,554,632; USPTO 8,799,102; USPTO 9,436,956; USPTO 10,102,556; USPTO 10,127,592; USPTO 10,600,094; USPTO 10,621,639; USPTO 10,846,726; USPTO 10,846,727; USPTO 10,909,593; USPTO 11,107,140; USPTO 11,345,715. These patents are focused on the delivery, purchase, or request of any products or services within specific geolocation and time parameters, provided by a consumer’s cell phone anywhere in ~~connection with~~ the ~~patents.~~United States. Additionally, HotHand’s family of patents includes a patent that protects advertising on a store’s mobile application when the cell phone is in the store and the ads shown are being triggered by geolocation tagging.

AppTech is currently integrating the HotHand Intellectual Property (“IP”) into an elite digital platform. In addition to offering an embedded, highly secure, and patent-backed product, AppTech will offer licensing agreements for its IP.

HotHand was acquired for 225,000 shares of common stock and was allocated to the patents as an intangible asset based on the fair market value of the common stock on the date of acquisition (April 18, 2022). The Company expects to amortize the asset over fifteen years. Further, the purchase agreement outlines revenue milestones that may trigger four payments of $500 thousand payables to HotHand's former owners.

See Note 8 for more information on capitalized prepaid software development and license.

NOTE 4 – ACCRUED LIABILITIES

Accrued liabilities as of ~~March 31,~~September 30, 2022 and December 31, 2021 consist of the following (in thousands):

Schedule of Accrued Liabilities
	September 30, 2022		December 31, 2021

Accrued interest – third parties	$	1,215	$	1,420
Accrued payroll		386		294
Accrued residuals		33		98
Anti-dilution provision		72		1,290
Other		21		34
Total accrued liabilities	$	1,727	$	3,136

Schedule of Accrued Liabilities

March 31, 2022 December 31, 2021

Accrued interest – third parties $ 1,305 $ 1,420
Accrued payroll 251 294
Accrued residuals 28 98
Anti-dilution provision — 1,290
Other 237 34
Total accrued liabilities $ 1,821 $ 3,136

Accrued Interest

Notes payable and convertible notes payable incur interest at rates between 10% and ~~15%~~24%, ~~per~~per annum.

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.

Anti-dilution provision

The agreement between the Company and Infinios, formerly NEC Payments B.S.C., has an anti-dilution provision. To remain in compliance, the Company accrued 73,848 shares of its common stock at $17.46 per share for a total value of $1.3 million as of December 31, 2021. Further, in connection with the capital raise discussed in Note 1, the Company ~~accrued~~issued an additional 378,109 shares of its common stock at $2.20 per share for a value of $832 thousand or a total value of $2.1 ~~million as of March 31, 2022.~~million. The 451,957 total shares were issued in May ~~2022, were classified~~2022.

Further, in connection with the shares to be issued as part of the HotHand acquisition, and to be in compliance with its anti-dilution provision with Infiinios, the Company accrued an additional 39,706 shares of its common stock at $1.81 per share for a ~~long-term liability and treated~~total of $72 thousand. The shares have not been issued to Infinios as ~~additional consideration to Infinios.~~of November 10, 2022.

NOTE 5 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE

The Company funded 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 March 31, 2022 and 2021. Related parties noted below are either members of management, board of directors, significant shareholders or individuals in which have significant influence over the Company.

~~Subordinated Notes Payable~~

~~In 2016, the Company issued $350 thousand in subordinated notes payable to third parties that incurred interest at 10% per annum. On~~ September 30, 2021, the Company converted the notes issued for $530 thousand of principal and interest into 55,767 shares of the Company’s common stock. Since the notes were converted to equity, there will no longer be any accrued interest related to the subordinated notes.2022.

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 thousand convertible note bearing interest at 12% per annum (the “Note”). The Note matures in 365 days from the date of issuance. Upon maturity of the convertible note, interest rate will be increased to 24%. The Note is convertible at the option of the holder at any time into shares of the Company’s common stock at nine dollars and fifty cents $9.50 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 21,052 shares of common stock exercisable at ~~fourteen dollars and twenty-five cents ($14.25)~~$14.25 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 6 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. As of ~~March 31,~~September 30, 2022 and December 31, 2021, the convertible note payable balance was $280 thousand and $280 thousand, and has accrued interest of $68102 thousand and $39 thousand, respectively.

~~Total interest expense on convertible notes payable, inclusive of amortization of debt discount of $280~~ ~~thousand, amounted to $315~~ ~~thousand for the year ended December 31, 2021.~~ As of ~~March 31,~~September 30, 2022, the convertible note payable discount is $01. thousand.

See Note 6– Derivative Liabilities.

In 2015, the Company issued $50 thousand 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 $9.50 per share. The Company amended the convertible note on March 2, 2022 and an agreed offer of a $10 thousand discount on the principal and interest, resulting in a $72 thousand payment in full.

In 2014, the Company issued $400 thousand 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 $3.14 to $9.50 per share. In addition, the Company issued 42,105 shares of common stock in connection with the convertible notes payable. The Company had the obligation to repurchase the 42,105 shares of common stock at $9.50 per share within one year of the note issuance date. On March 30, 2022, the Company entered into ~~three~~ forbearance agreements ~~which granted the holders 2,105 shares of our common stock~~ in exchange for not enforcing the terms of the ~~agreement~~original agreements. In November 2022, the parties agreed to extend the terms of the forbearance agreements for ~~a period of twelve~~an additional six months. As of ~~March 31,~~September 30, 2022 and December 31, 2021, the ~~Company held~~balance of the ~~obligation to repurchase the shares for~~convertible notes was $400 thousand and $400 ~~thousand.~~ thousand, respectively. As of ~~March 31,~~September 30, 2022 and December 31, 2021, the accrued interest related to the convertible notes was $278 thousand and $268 thousand, respectively.

Notes Payable

In 2020, the Company entered into a 30-year unsecured note payable with U.S. Small Business Administration for $68 thousand 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 thirty months from the date of the note. As of ~~March 31,~~September 30, 2022 and December 31, 2021 the balance of the note payable was $6867 thousand and $68 thousand, and accrued interest was $46 thousand and $4 thousand, respectively.

~~Two~~A significant ~~shareholders~~shareholder funded the Company’s operations through notes payable primarily in ~~primarily~~ 2009 and 2010. ~~The notes payable incur interest at 10% per annum and were due on December 31, 2016.~~ On May 2, 2021, the Company entered into a debt reduction and confirmation agreement with the significant shareholder that is no longer a ~~significant shareholder.~~related party. The parties agreed to reduce the outstanding accrued interest in the amount of $275 thousand. On September 29, 2021, the Company converted notes issued for $51 thousand of principal and accrued interest into 5,329 shares of the Company’s common stock. On September 29, 2021, the Company entered into a forbearance agreement ~~which granted the holder 3,140 shares with a current fair market value of $35 thousand~~ in exchange for not enforcing the terms of the ~~agreement for a period of twelve months. On February 4,~~agreement. In November 2022, the ~~Company entered into an amended forbearance agreement. The~~ parties agreed to ~~reduce~~extend the ~~outstanding accrued interest in~~terms of the ~~amount of $~~75 ~~thousand along with a $~~50 ~~thousand payment of accrued interest.~~forbearance agreement for an additional six months. As of ~~March 31,~~September 30, 2022, and December 31, 2021, the ~~aggregate~~ balance of the notes payable was $597 ~~thousand and accrued interest was $258~~ thousand and $~~383~~597 thousand respectively, and the the accrued interest related to the notes was $133 thousand and $383 thousand, respectively.

~~In Q3 of 2021, the Company converted notes issued for $503 thousand into 52,942 shares of the Company’s common stock. Also, the~~The Company entered into aseveral notes payable with third parties. The Company entered into forbearance ~~agreement which granted the holders 2,760 shares of the Company’s common stock with a current fair market value of $120 thousand~~agreements in exchange for not enforcing the terms of the agreement. In November 2022, the parties agreed to extend the terms of the forbearance agreement for ~~a period~~an additional six months. As of ~~twelve months.~~September 30, 2022 and December 31, 2021, the balance of the notes payable was $525 thousand and $525 thousand, respectively, and the accrued interest related to the notes payable was $606 thousand and $606 thousand, respectively.

NOTE 6–DERIVATIVE LIABILITIES

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 March 31,~~for the nine months ended September 30, 2022 and December 31, 2021.

Based on the convertible notes described in Note 6,5, the derivative liability day one loss is $390 thousand and the change in fair value ~~at March 31,~~for the nine months ended September 30, 2022 and December 31, 2021 is $~~136~~181 thousand and ($$26 ~~thousand),~~thousand, respectively. The fair value of applicable derivative liabilities on ~~note,~~notes, warrants and change in fair value of derivative liability are as follows for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 (in thousands).

Schedule of fair value of derivative liabilities
	Derivative Liability Convertible Notes			Derivative Liability Warrants			Total			Derivative Liability Convertible Notes			Derivative Liability Warrants			Total
Balance as of December 31, 2021	$	274		$	325		$	599		$	274		$	325		$	599
Change in fair value		(76	)		(60	)		(136	)		(45	)		(136	)		(181	)
Balance as of March 31, 2022	$	198		$	265		$	463
Balance as of September 30, 2022										$	229		$	189		$	418

As of ~~March 31,~~September 30, 2022, the fair value of the derivative liability convertible notes is estimated using a Monte Carlo pricing model with the following assumptions:

Schedule of pricing mode with assumptions
Market value of common stock	$	0.69
Expected volatility		79.3	%
Expected term (in years)		0.25
Risk-free interest rate		3.65	%

Schedule of pricing mode with assumptions
Market value of common stock $ 1.35
Expected volatility 104.8 %
Expected term (in years) 0.25
Risk-free interest rate 1.37 %

As of ~~March 31,~~September 30, 2022, 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	$	0.69
Expected volatility		93.9	%
Expected term (in years)		3.13
Risk-free interest rate		3.72	%

Market value of common stock $ 1.35
Expected volatility 108.9 %
Expected term (in years) 3.64
Risk-free interest rate 1.67 %

NOTE 7–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 ~~March 31,~~September 30, 2022, including the total amount of related imputed interest (in thousands):

Years ~~ended~~ending December 31:

Schedule of Future Minimum Rental Payments for Operating Leases
2022	$	21
2023		88
2024		90
2025		7
Operating Lease Total		206
Less: Imputed interest		(27	)
Total	$	179

Schedule of Future Minimum Rental Payments for Operating Leases
2022 $ 64
2023 88
2024 90
2025 7
Operating Lease Total 249
Less: Imputed interest (39 )
Total $ 210

The rent expense was $1564 thousand and $46 thousand ~~and $~~15 ~~thousand~~ for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, respectively.

In September 2022, the Company opened a new office in Austin’s emerging tech hub to expand operations and foster growth. The one year lease is $11 thousand.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Litigation

Former Shareholders Lawsuit

In November 2017, two shareholders of AppTech, Laura Farris and Eric Ottens, filed a lawsuit against the Company in the State of California, claiming conversion, aiding and abetting conversion, breach of fiduciary duty, breach of contract, breach of implied covenant of good faith and fair dealing and declaratory relief. The lawsuit was removed to the United States District Court for the Southern District of California. On December 19, 2019, the Company entered into a settlement and release agreement with the ~~plaintiffs pursuant to which the Company will pay the plaintiffs an aggregate of $240~~ ~~thousand in installments over three years, commencing on February 15, 2020.~~plaintiffs. On January 24, 2021, the parties entered a stipulation modifying the repayment schedule of the settlement which altered the timing of payments over the three-year repayment period. The final payment was made in March 2022. The litigants are now paid in full and no further action is warranted by the Company.

Other Resolved Lawsuit

In July 2020, Flowpay Corporation, a Delaware corporation ("Flowpay"), and R. Wayne Steiger, the President of ~~2020, an owner and corporation~~Flowpay, having a non-binding Memorandum of Understanding (“MOU”) filed a lawsuit against AppTech Payments Corp. (formally “AppTech Corp.”) in the County of San Diego, State of California. ~~Plaintiffs amended the Complaint on March 11, 2021.~~ The claims ~~include~~included breach of contract, intentional misrepresentation, negligent misrepresentation, and unjust enrichment. ~~Service of process occurred on January 8, 2021.~~ Management believes the non-binding MOU terminated after no ~~Definite Agreement~~definite agreement was executed between the parties, and negotiations ceased December 20, 2016. ~~We filed an answer to~~On May 19, 2022, AppTech entered into a Settlement and Release Agreement (the “Settlement Agreement”) with Flowpay and Mr. Steiger. Under the ~~Amended Complaint on April 27, 2021~~terms of the Settlement Agreement, Flowpay and ~~began discovery. Management does not believe Plaintiffs’~~Mr. Steiger dismissed with prejudice all claims for damages have merit or are supported by Plaintiffs’ evidence. We filed a Summary Judgment requesting an Order from the Court to narrow the issues in the Amended Complaint. This matter is scheduled for trial on July 8, 2022. We currently own a judgment dated February 17, 2017, against the ~~owner~~Company, its Chief Executive Officer, a Director and corporation in the amount of $517 thousand plus interest. The judgment was assigned to AppTech Payments Corp. and Management plans to use the judgment to assist in the possible settlement and dismissal of this case prior to trial.a third party individual.

Convertible Note and Warrant Lawsuit

On July 14, 2021, EMA Financial LLC, a Delaware limited liability company (“EMAF”), filed a complaint in the United States District Court for the Southern District of New York against the Company. In its complaint, EMAF alleged that ~~the Company~~AppTech breached the terms of a convertible note and a related warrant agreement purchased by EMAF pursuant to a securities purchase agreement between the parties. ~~EMAF sought specific performance, payment of damages to be determined but not in excess of $2.75 million, reimbursement of costs and expenses, including reasonable legal fees, and non-interference.~~

On September 2,3, 2021, EMAF filed a motion for summary ~~judgment. On September 9, 2021,~~judgement arguing that it should be granted a total of $1.95 million in damages. AppTech filed a motion to dismiss onEMAF’s complaint in its entirety. On September 13, 2022, the ~~grounds~~court denied AppTech’s motion to dismiss, and granted EMAF’s motion for summary judgement in part and denied in part. In particular, the ~~agreements were void as~~court granted EMA’s motion for summary judgment for its claim of breach of contract but denied its request for damages of $1.95 million. On October 27, 2022, EMAF filed a ~~result~~briefing arguing that it should be granted either a total of $1.26 million or a total of $1.95 million in damages, plus its attorney fees and additional interest after October 27, 2022. AppTech and EMAF are scheduled to file supplemental briefings regarding the ~~illegal activity~~damages in November 2022. No final ruling has been made by the plaintiff. On October 15, 2021, the parties filed memorandums in opposition to the respective motion. On October 25, 2021, the parties filed memorandums of law in further support of their respective motions. Wecourt. AppTech and its Counsel still believe EMAF’s claims are ~~meritless and intend~~meritless. The Company intends to ~~vigorously~~ defend against this ~~lawsuit. The parties have engaged in settlement discussions with an expected range of potential liability between $400 thousand~~lawsuit vigorously and ~~$550 thousand, which includes principal and accrued interest of the convertible notes payable.~~counter if necessary.

Significant Contracts

Capital Raise

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. On October 27, 2021, Maxim and the Company terminated all relevant agreements and the Company issued Maxim 21,052 shares of the Company’s common stock in association with the termination.

On October 18, 2021, the Company entered into an engagement letter with EF Hutton, division of Benchmark Investments, LLC. (“EF Hutton”) to act as lead underwriter, deal manager and investment banker for the Company’s proposed firm commitment follow-on public offering and uplisting. This engaged EF Hutton through the earlier of (i) October 2022 or (ii) the closing of a follow-on offering. The Company completed its offering on January 7, 2022. The Company sold ~~3,614,201~~3,614,458 units of our common stock (a unit ~~consisted~~consisting of one share of common stock and a warrant to purchase one share of common stock) at $4.15 per unit. The offering provided net proceeds of approximately $13.4 million. See ~~note~~Note 1 for information on the capital raise completed in January 2022.

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”). The partnership would expand AppTech’s reach into new markets and provide advanced technological solutions for the telehealth and personal emergency response systems markets.

The strategic partnership was cancelled on February 17, 2022.

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

On October 1, 2020, the Company entered into a strategic partnership with Infinios Financial Services BSC (formally NEC Payments B.S.C) (“Infinios”) through a series of agreements, which included the following: (a) Subscription License and Services Agreement; (b) Digital Banking Platform Operating Agreement; (c) Subscription License Order Form; and (d) Registration Rights Agreement (collectively the “Agreements”).

On February 11, 2021, the Company entered into an amended and restated Subscription License and Services Agreement, Digital Banking Platform Operating Agreement and Subscription License Order Form with Infinios (collectively the “Restated Agreements”). The gross total fees due under the Restated Agreements are $2.2 million excluding pass-through costs associated with infrastructure hosting fees.

On February 19, 2021, the Company completed and validated its contractual obligations and paid to Infinios the $100 thousand engagement fee. On February 28, 2021, the Company paid the initial fee of $708 thousand to Infinios prior to the Funding Date. On March 25, 2021, the Company issued 1,895,948 shares of common stock to an Infinios affiliate on a fully diluted basis with piggyback rights. The Company valued the common stock issuance at $67.5 million based upon the closing market price on the effective date of the transaction based on the closing market price of the Company’s common stock. The issuance was recorded as a $3.8 million asset and $63.8 million expense in excess fair value of equity issuance over assets received. The capitalized asset was classified as capitalized prepaid software development of $2.8 million and capitalized licensing of $1.0 million. The estimated amortization is a ~~5-years~~5-year life based on the term of the licensing agreement. The amortization is set to begin once the platform begins processing transactions (in thousand).

As of ~~March 31,~~September 30, 2022, the following fees were paid (in thousands):

Schedule of fees paid to NECP platform
Engagement Fee (prepaid licensing cost)	$	100
License subscription fee (prepaid licensing cost)		750
Annual maintenance subscription fee (prepaid licensing cost)		113
Implementation fee (capitalized software cost)		325
Infrastructure implementation fee (capitalized software cost)		65
Training fee (50% due at Funding Date)		50
Total	$	1,403

Schedule of fees paid to NECP platform
Engagement Fee (prepaid licensing cost) $ 100
License subscription fee (prepaid licensing cost) 750
Annual maintenance subscription fee (prepaid licensing cost) 113
Implementation fee (capitalized software cost) 325
Infrastructure implementation fee (capitalized software cost) 65
Training fee (50% due at Funding Date) 50
Total $ 1,403

The annual maintenance subscription fee of $113 thousand will be due annually beginning in the month of the platform launch. In addition, the infrastructure support fee of $72 thousand will be due annually with monthly payments beginning in February 2022 and ending in 2026.

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 Infinios platform to enter the United States market.

Under the agreement, the Company granted options to purchase 42,105 shares at a price of $0.095 and 263,157 shares at $2.375 and exercisable for two years after vesting. These options vest in equal monthly installments over 24 months. These options had a grant date fair value of $1.4 million and $8.7 million using a Black Scholes pricing model. The estimated amortization is a 5-year life based on the term of the licensing agreement.

On February 18, 2021, the Company entered into an amended independent contractor services agreement for $760 thousand with IR. The final payment owed to IR of $171 thousand was paid in January 2022.

Investor Relations

On January 2, 2022, the Company entered into an agreement with an investor relations firm (“IR Firm”) that compensated IR Firm $50 thousand and 100,000 shares upon the successful uplisting onto NASDAQ. In addition, on January 31, 2022, the Company entered into a consulting agreement with IR Firm. The Company agreed to a six-month commitment with IR Firm that pays $5 thousand per month, grants IR Firm a stock purchase agreement to buy 45,000 shares of the Company stock at $0.001 per share and grants a monthly budget of approximately $100 thousand (with monthly automatic renewals unless the agreement were canceled in writing). In return, IR Firm agrees to provide investor relations outreach, public relations, advisory and consulting services to AppTech. Payment for the two agreements was made in February 2022.

On May 31st, 2022, the Company entered into a six months agreement with another investor relations firm. The firm received 100,000 shares of AppTech's common stock valued at the closing price on May 31st, 2022, in return for providing marketing and investor relation services.

NOTE 9 –STOCKHOLDERS’ DEFICIT

Common Stock

During the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, the Company issued ~~233,816~~345,742 and ~~247,000~~488,05,3, respectively, shares of common stock to several consultants in connection with business development and professional services. The Company valued the common stock issuances at $~~466~~566 thousand and $~~316~~2.5 ~~thousand,~~million, 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 statements of operations.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021, the Company granted ~~76,664~~133,912and ~~9,211~~36,842 shares of common stock to the board of directors valued at $~~103~~194 thousand and $49197 thousand, respectively. The shares vest quarterly over the period of approximately one year.

During the nine months ended September 30, 2022, the Company has reservedthe 225,000 shares of common stock to HotHand.

See Note 8 – Significant Contracts for additional common stock issuance.

Stock Options

During the ~~year~~nine months ended ~~December 31, 2021:~~

September 30, 2022:

options to purchase ~~353,368~~363,685 shares of common stock at a weighted average price of $~~16.25~~ ~~were granted as compensation to employees. The options vest in equal monthly installments over 6 and 12 months. The options were valued at $6.3~~ ~~million using a Black-Scholes options pricing model.~~

~~options to purchase~~ ~~38,421~~ ~~shares of common stock at a weighted average price of $8.55~~ ~~were granted as compensation for various services including accounting, sales, and marketing. The options were valued at $825~~ ~~thousand using a Black-Scholes options pricing model.~~ ~~13,158~~ ~~shares were exercised.~~

~~The fair value of the options for the year ended December 31, 2021 is estimated using a Black-Scholes option pricing model with the following range of assumptions:~~

~~Schedule of Black Scholes option pricing~~
~~Market value of common stock on issuance date~~			$~~5.34~~ ~~- $33.25~~
~~Expected price~~			$~~0.095~~ ~~- $19.34~~
~~Expected volatility~~			~~450% -~~ ~~608~~%
~~Expected term (in years)~~			~~0.3~~ - ~~3.0~~
~~Risk-free interest rate~~			~~0.11~~%
~~Expected dividend yields~~			0

~~During the three months ended March 31, 2022:~~

~~options to purchase~~ ~~298,685~~ ~~shares of common stock at a weighted average price of $3.00~~2.73 were granted as compensation to employees. The options vest in equal monthly installments ranging from instantly to 24 ~~months~~ months. The options were valued at $~~897~~992 thousand using a Black-Scholes options pricing model.

options to purchase ~~36,842~~63,157 shares of common stock at a weighted average price of $~~12.04~~7.29 were granted as compensation for various services including engineering, accounting, and sales. The options were valued at $~~444~~460 thousand using a Black-Scholes options pricing model.

The fair value of the options for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 is estimated using a Black-Scholes option pricing model with the following range of assumptions:

Market value of common stock on issuance date	$~~1.24~~0.64 - $12.45
~~Expected~~Exercise price	$~~1.24~~0.64 - $12.04
Expected volatility	415% - 442%
Expected term (in years)	0.0 - 5.0
Risk-free interest rate	0.11%
Expected dividend yields	0	—

The following table summarizes option activity:

Schedule of option activity
	Number of shares			Weighted Average exercise price		Weighted Average remaining years		Number of shares	Weighted Average exercise price	Weighted Average remaining years

Outstanding December 31, 2021		1,055,184		$	6.62			1,055,184	$ 6.62
Issued		335,527		$	4.00			426,842	$ 3.76
Exercised		—		$	—			(42,105)	$ 0.10
Cancelled		(391,579	)	$	2.44			(400,053)	$ 2.52
Outstanding as of March 31, 2022		999,132		$	7.38		2.37
Outstanding as of March 31, 2022, vested		667,235		$	7.75		2.37
Outstanding as of September 30, 2022								1,039,868	$ 7.29	2.01
Outstanding as of September 30, 2022, vested								858,682	$ 7.67	1.99

The remaining expense outstanding through ~~March 31,~~September 30, 2022 isis $~~2.5~~2.1 million which is expected to be expensed over the next 23 ~~months~~2 years in general and administrative expense.

~~See Note 8 – Significant Contracts for additional stock options granted.~~

On December 7, 2021, the board authorized the Company’s ~~Equity~~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 employees 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 1,052,632 shares of common stock were authorized under the Equity Incentive Plan, for which as of ~~March 31,~~September 30, 2022 a total of ~~796,547~~294,232 are available for issuance.

The Company extended its stock repurchase agreement with the Chief Financial Officer. Terms of the updated agreement state that the Company has until January 31, 2023 to buyback 263,158 shares of its common stock for $500 thousand.

In July 2022, the Company amended its option agreements with all employees, consultants and board of directors. The shareholders will vote to ratify the amendment as part of the annual shareholder meeting tentatively scheduled to take place in April 2023.

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 thousand convertible note bearing interest at 12% per annum. The Company also sold warrants to the investors to purchase up to an aggregate of 21,052 shares of common stock, with an exercise term of five (5) years, at a per share price of $14.25 which may be exercised by cashless exercise. The number of warrants adjusted in the period ending March 31, 2022 due to a reset event on January 7, 2022 changed the exercise price from $9.50 to $2.52 and increased the number of warrants from 31,578 to 119,095. The warrants were deemed a derivative liability and recorded as a debt discount at ~~its~~their date of issuance.

In total, the Company has 4,275,464 warrants outstanding. ~~3,614,201~~3,614,458 were related to the Offering, 542,168 were granted on January 7 and the reset event added an additional 119,095. See Note 1 for information on warrants issued during the Offering and note 6 for additional information on the derivative liability.

NOTE 10 – 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.

For forbearance agreements disclosure, see Note 5.

The Company fully executed a Definitive Agreement to acquire Hothand Inc. (“Hothand”), a patent-holding company which owns the intellectual property rights to a wide array mobile credit/debit transaction and mobile search, location, offer and payment fields in April 2022. The purchase price was a combination of cash and stock, but should be finalized in the second quarter of 2022. The Company is still determining the impact of this transaction on the financial statements.

The Company extended its stock repurchase agreement with the Chief Financial Officer. Terms of the updated agreement state that the Company has until October 21, 2022 to buyback 263,158 shares of its common stock for $500 thousand.

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

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

Business Overview

Through our scalable cloud-based platform architecture and infrastructure coupled with our commerce experiences development and delivery model, we intend to simplify and streamline digital financial services for corporations, small and midsized enterprises (“SMEs”) and consumers. We will accomplish this through innovative omnichannel payment and digital banking technologies that complement our core merchant services capabilities. We believe there is opportunity to generate significant revenue for the Company the near future by providing innovative commerce solutions and experiences that resonate with clients, their customers, and the market as a whole. Further, our soon to be launched modular platform will equip forward-thinking financial institutions, technology companies, and SMEs with operational efficiencies, such as automated financial controls and reconciliation in addition to manual administration.

Our Company’s merchant services solutions provide financial processing for businesses to accept cashless and/or contactless payments, such as credit cards, ACH, wireless payments, and more. Our patented, exclusively licensed, and proprietary merchant services software will offer, new integrated solutions for frictionless digital and mobile payment acceptance including acceptance of alternative payment methods (“APMs”). We are extending and enhancing 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 scalable business model allows for expansive white-labeling, SaaS, and embedded solutions that will drive the digital transformation of financial services and generate diverse revenue streams for our company.

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 the rapid rise of contactless ~~transactions.~~transactions due to societal changes, in part, as a response to COVID-19. End-users expect ease of use and an enhanced user experience in all of their daily financial interactions. In this rapidly evolving digital marketplace, ~~our prospective clients, such as merchants and independent software vendors (“ISVs”), have~~businesses face broad and ~~frequently changing~~ever-changing requirements to meet consumer expectations and achieve the operational efficiencies necessary to maintain ~~their~~a competitive edge.

~~Providing basic payment acceptance~~To survive and ~~“lowest price” models is no longer~~succeed in this environment, businesses must adopt new technologies in order to engage, communicate, process payments and manage payouts with their customers. They need a supplier who will widely support innovation and adaptation as the ~~winning formula~~industry evolves. AppTech believes that its technologies will greatly increase the adoption of omni-channel payments and digital banking solutions in sectors that must adapt and migrate to ~~support the market. These entities recognize that staying competitive~~new, secure digital Fintech technologies. By embracing advancements in the ~~digital age requires a partner with a platform~~payment and ~~services capable~~banking industries, AppTech is well-positioned to meet the growing needs of ~~delivering flexibility~~existing and ~~growth while streamlining operations to continually deliver increased revenue~~prospective clients and ~~profitability opportunities. Our pricing is extremely competitive, but we believe the value we create~~it intends for ~~financial institutions, technology companies, and SMEs through our technology, deployment model, services and consultative approach will create true differentiation from our competitors.~~

~~Our global financial services platform architecture and infrastructure is designed to be flexible and configurable to meet~~its current and future products to be at the forefront of solving these accelerated market needs. ~~This~~

AppTech’s all-new, innovative Fintech platform, “Commerse^™” officially launched on October 24, 2022. The platform will deliver best-in-class financial technologies and capabilities through an ever-evolving modular cloud/edge-based architecture. The Commerse platform houses a large array of financial products and services that can be implemented off-the-shelf or customized via modern APIs. Within its Commerse platform, AppTech offers three primary products: Payments-as-a-Service (“PaaS”), Banking-as-a-Service (“BaaS”), and Commerce-as-a-Service (“CXS”).

Commerse provides PaaS via integrated solutions for frictionless digital and mobile payment acceptance. These solutions provide advanced payment processing solutions for credit cards, ACH, and gift/loyalty cards by catering to the unique needs of each merchant. PaaS will also solve for multi-use case, multi-channel, API-driven, account-based issuer processing for card, digital tokens, and payment transfer transactions.

AppTech is positioned to further accelerate digital transformation through BaaS, layered with financial management tools that empower ~~our clients~~financial institutions to ~~take advantage~~provide businesses, professionals, and individuals with the ability to better manage their finances anywhere, anytime at a fraction of ~~future platform development~~the cost of traditional banking and ~~new innovative~~financial services. BaaS creates an ecosystem of immersive and scalable digital financial ~~solutions~~management services backed by ~~leveraging off-the-shelf experiences and consuming our APIs. Additionally, by taking~~Mastercard & Visa processing certifications.

Commerse has a holistic view of all aspects of our clients’ business, including risk, volume, user experience, integration capabilities and technical needs, we will create optimal and extensible financial technology solutions at a rapid pace.

~~Through exclusive licensing and partnership agreements~~flexible architecture to ~~complement our patented technology capabilities, we believe we will become leaders in the embedded~~allow for rich, personalized payment and ~~digital~~ banking ~~sectors by supporting digital, tokenized, multi-channel, embedded API-driven transactions. We intend~~experiences. This first-to-market, cloud-based CXS platform packages together elements of AppTech’s intellectual property, BaaS, PaaS and other related technologies to ~~accelerate this position through~~create seamless interactions throughout the ~~integration of our merchant services and a secure~~customer journey.

The platform also incorporates AppTech’s core, patented text payment ~~solution with extensive digital account-based~~ and ~~multi-channel issuer~~geofence triggered ecommerce and/or advertising via cell phone capabilities delivering experiences that focus on frictionless use cases and end-users’ desire for payment ~~processing capabilities. We believe~~transaction simplicity, control, and comfort. AppTech believes that this will enable us to provide our clients an end-to-end payment acceptance and digital banking solution powering straight-through processing and embedded payment opportunities in the B2B space. We expect to support clients through the development of custom and off-the-shelf experiences by delivering these ~~solutions through public APIs and Webhooks.~~

A key to the company’s success and market penetration is 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. Once an account is established through a multi-currency digital wallet, neither internet connectivity nor a specific application is required to process payments between merchants and end-users. These features will be particularly beneficial ~~for~~to the unbanked and under-banked ~~individuals~~ in developing or emerging ~~markets~~ markets—where access to the internet on a mobile device and modern banking institutions may not be readily ~~available. In addition, our software platform will extend~~available—specifically by extending merchants’ marketplace capabilities ~~by creating~~via new ~~avenues and~~ channels to request and receive frictionless, digital payments and engaging end-users by utilizing a familiar, convenient, and widely adopted technology.

AppTech’s innovative Commerse platform delivers scalable solutions for automated and embedded, customizable business and consumer commerce experiences. These experiences propel business growth, create value and drive operational efficiencies for businesses while providing economic convenience for end users.

We believe our technologies will greatly increase the adoption of mobile payments and alternate banking solutions in sectors that must quickly adapt and migrate towards new technologies that facilitate convenient and safe contactless payments. To survive and succeed in this environment, businesses need to adopt new technologies to engage, communicate and process payments with their customers from a supplier that widely supports innovation and adaptation as the industry evolves. By embracing technological advancement in the payment and banking industries, we are well-positioned to meet the growing needs of existing and prospective clients and intend for our current and future products to be at the forefront of solving these accelerated market needs.

We were founded in 1998 and changed our name to AppTech Corp. in 2009. In 2013, we merged with Transcendent One, Inc., whereby Transcendent One, Inc. and its management took controlling ownership of the Company. From this point forward, we have operated as a merchant services provider, continuing the business conducted by Transcendent One, Inc. In 2017, we acquired certain assets from GlobalTel Media, Inc., which included patented, enterprise-grade software for advanced text messaging. In addition to the software and associated databases, the acquisition included four patents and additional intellectual property for mobile payments. On December 23, 2021, we changed our name to AppTech Payments Corp and re-domiciled to Delaware. We are headquartered in Carlsbad, CA. and uplisted to NASDAQ in January 2022. Our stock trades under the symbol “APCX” and our warrants under the symbol “APCXW”.

Financial Operations Overview

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

Revenues

~~Revenues~~

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

Expenses

~~Expenses~~

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

General and Administrative. General and administrative expenses include professional services, rent, ~~and~~ utilities, and other operating costs.

Research and Development. Research and development 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 outside services.

Interest Expense, net. Our interest expense consists of interest on our outstanding indebtedness and amortization of debt issuance costs.

Results of Operations

This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, respectively.

Revenue

Revenue was approximately ~~$104~~$115 thousand for the three months ended ~~March 31,~~September 30, 2022, compared to ~~$101~~$92 thousand for the three months ended ~~March 31,~~September 30, 2021, representing an increase of 3%25%. The increase was principally driven by higher transaction volume and the boarding of additional merchant accounts.

Revenue was approximately $342 thousand for the nine months ended September 30, 2022, compared to $259 thousand for the nine months ended September 30, 2021, representing an increase ~~in processing~~of 32%. The increase was principally driven by higher transaction volume and ~~a decrease in processing fees charged to~~ the ~~Company.~~boarding of additional merchant accounts.

Cost of Revenue

Cost of revenue was approximately ~~$51~~$54 thousand for the three months ended ~~March 31,~~September 30, 2022, compared to ~~$34~~$42 thousand for the three months ended ~~March 31,~~September 30, 2021, representing an increase of ~~50%. The increase was~~29%, driven primarily by ~~increased~~an increase in residual payouts from ~~more~~additional processing revenue.

Cost of revenue was approximately $167 thousand for the nine months ended September 30, 2022, compared to $112 thousand for the nine months ended September 30, 2021, representing an increase of 49%, driven primarily by an increase in residual payouts from additional processing revenue.

General and Administrative Expenses

General and administrative expenses held consistent at approximately $1.4 million for the three months ended September 30, 2022, compared to $1.4 million for the three months ended September 30, 2021, representing no significant changes.

General and administrative expenses were approximately ~~$2.8~~ $5.5 million for the nine months ended September 30, 2022, compared to $6.7 million for the nine months ended September 30, 2021, representing a decrease of 18%. The decrease was primarily driven by a one time judgement purchase in fiscal year 2021 related to a settled lawsuit.

Research and Development Expenses

Research and development expenses were approximately $1.5million for the three months ended ~~March 31,~~September 30, 2022, compared to ~~$1.8~~$0 million for the three months ended ~~March 31, 2021, representing an increase of 56%.~~September 30, 2021. The increase was ~~primarily driven by an increase in both payroll and bonuses which is consistent with~~due to the ~~ramped up headcount growth needed to launch the platform.~~amortization of stock based compensation.

~~Research and Development Expenses~~

Research and development expenses were approximately ~~$2.1~~$5.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2022, compared to $1 $0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021. The increase was primarily due to the ~~onboarding~~amortization of ~~engineers and developers, and the hardware and software needed to complete the platform. Only the salaries of the product development team were capitalized in January 2022.~~stock based compensation.

Excess Fair Value of Equity Issuance Over Assets Received

Excess fair value of equity issuance over assets received expenses was ~~$832 thousand~~$0 for the three months ended ~~March 31,~~September 30, 2022, compared to ~~$63.9~~$1.1 million for the three months ended ~~March 31,~~September 30, 2021. In connection with the shares to be issued as part of the HotHand acquisition, and to be in compliance with its anti-dilution provision with Infiinios, the Company accrued an additional 39,706 shares of its common stock at $1.81 per share for a total of $72 thousand. The shares have not been issued to Infinios as of September 30, 2022.

Excess fair value of equity issuance over assets received expenses was $904 thousand for the nine months ended September 30, 2022, compared to $66.1 million for the nine months ended September 30, 2021. The excess fair value over assets occurring in 2021 was a one-time event that was due to the timing of the share issuance to Infinios. The shares were issued on a day that the fair value of our common stock closed at $3.75 per share. Approximately 18 million shares were issued, so the difference between the value of the newly issued shares and the value of the services performed was expensed as excess fair value of equity issuance over assets received. See Note 4 for additional information related to the Anti-dilution provision.

Interest Expense, net

Interest expenses, net was approximately ~~$55~~$41 thousand for the three months ended ~~March 31,~~September 30, 2022, compared to ~~$129~~$478 thousand for the three months ended ~~March 31,~~September 30, 2021, representing ana decrease of ~~57%~~95%. The decrease was primarily due to the ~~Company entering into~~Company's forbearance agreements with outstanding debt holders in ~~return~~2021.

Interest expenses, net was approximately $137 thousand for the ~~interest being capped. In addition,~~nine months ended September 30, 2022, compared to $3,038 thousand for the ~~Company converted certain~~Nine months ended September 30, 2021, representing a decrease of 95%. The decrease was primarily due to the Company's forbearance agreements with outstanding debt ~~into equity, so the interest expense was written off.~~holders in 2021.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability was approximately ~~$136~~$8 thousand for the three months ended ~~March 31,~~September 30, 2022, compared to ~~$508~~$135 thousand for the three months ended ~~March 31,~~September 30, 2021. The decrease was primarily due to standard market volatility coupled with the resetting terms of the derivative.

Change in fair value of derivative liability was approximately $181 thousand for the nine months ended September 30, 2022, compared to a derivative asset of $80 thousand for the nine months ended September 30, 2021. The increase was primarily due to standard market volatility coupled with the resetting terms of the derivative.

Liquidity and Capital Resources

The Company successfully completed its capital raise and uplisting onto NASDAQ (herein referred to as its “Offering”) on January 7, 2022. As part of the Offering, the Company executed a 9.5 to 1 reverse split of its common stock. In addition, the Offering sold 3,614,458 units of our common stock (a unit consisting of one share of common stock and a warrant to purchase one share of common stock) at $4.15 per unit. In addition, 542,168 warrants were granted by EF Hutton and the Offering warrants of 3,614,458, all having a five-year expiration and an exercise price of $5.19. The Offering provided net proceeds of approximately $13.4 million. As noted earlier, the Company successfully completed its Offering on January 7, 2022. For further discussion, see Note 1.

As of ~~March 31,~~September 30, 2022, we had cash and cash equivalents of approximately ~~$10.3~~$5.9 million, working capital of approximately ~~$6.2~~$2.2 million, and stockholders’ equity of approximately ~~$10.7~~$10.8 million.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, we met our immediate cash requirements through existing cash balances. Additionally, we used equity and equity-linked instruments to pay for services and compensation.

Net cash used in or provided by, operating, investing and financing activities were as follows (in thousands):

	Nine Months Ended September 30,
	2022			2021

Net cash used in operating activities	$	(5,747	)	$	(820	)
Net cash used in investing activities		(1,748	)		(1,576	)
Net cash provided by financing activities		13,365			2,362

Three Months Ended March 31,
2022 2021

Net cash used in operating activities $ (2,878 ) $ (385 )
Net cash provided by (used in) investing activities (185 ) (960 )
Net cash provided by financing activities 13,345 1,905

Operating Activities

Net cash used in operating activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2022 was approximately ~~$2.9~~$5.7 million, which is comprised of (i) our net loss of ~~$5.5~~$11.5 million, adjusted for non-cash expenses totaling ~~$3.4~~$6.8 million (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) increased by changes in operating assets and liabilities of approximately $1.1 million.

Net cash used in operating activities during the nine months ended September 30, 2021 was approximately $0.8 million, which is comprised of (i) our net loss of $75.5 million, adjusted for non-cash expenses totaling $74.2 million (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) changes in operating assets and liabilities using approximately $~~0.8 million.~~475 thousand.

Net cash used in operating activities during the three months ended March 31, 2021 was approximately $0.4 million, which is comprised of (i) our net loss of $66.3 million, adjusted for non-cash expenses totaling $65.9 million (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) changes in operating assets and liabilities using approximately ~~$15 thousand.~~

Investing Activities

Net cash used by investing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2022 was approximately ~~$185 thousand~~$1.7 million and was primarily due to the internal capitalized software costs.

Net cash used by investing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 was approximately ~~$960 thousand~~$1.6 million and was primarily due to the ~~purchase of~~internal capitalized software costs.

Financing Activities

Net cash provided by financing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2022 was approximately ~~$13.3~~$13.4 million, which principally consists of net proceeds of $13.4 million through the issuance of common shares and warrants in our public offering.

Net cash provided by financing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 was approximately ~~$1.9~~$2.4 million, which principally consists of net proceeds of ~~$1.9~~$2.4 million through the sale of repurchase options.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates including those related to revenue recognition, goodwill and intangible assets, derivative financial instruments, and equity-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are those that we consider the most critical to understanding our financial condition and results of operations. The accounting policies we believe to be most critical to understanding our financial condition and results of operations are discussed below. As of ~~March 31,~~September 30, 2022, there have been no significant changes to our critical accounting estimates, except as described in Note 2 to our financial statements.

Software Development Costs

Recent Accounting Pronouncements

As of ~~March 31,~~September 30, 2022, there have been no significant changes to our recently issued accounting pronouncements, except as described in Note 2 to our financial statements.

Off-Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Control and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, we evaluated the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2022.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting during the ~~three-month period~~nine months ended ~~March 31,~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

On December 19, 2019, the Company entered into a settlement and release agreement with two shareholders. The total obligation was for $240 thousand and the final payment was made in March 2022. The litigants are now paid in full and no further action is warranted by the Company.

On July 14, 2021, EMA Financial LLC, a Delaware limited liability company (“EMAF”), filed a complaint in the United States District Court for the Southern District of New York against the Company. In its complaint, EMAF alleged that ~~the Company~~AppTech breached the terms of a convertible note and a related warrant agreement purchased by EMAF pursuant to a securities purchase agreement between the parties. EMAF sought specific performance, payment of damages to be determined but not in excess of $2.75 million, reimbursement of costs and expenses, including reasonable legal fees, and non-interference.

On September 2,3, 2021, EMAF filed a motion for summary ~~judgment. On September 9, 2021,~~judgement arguing that it should be granted a total of $1.95 million in damages. AppTech filed a motion to dismiss onEMAF’s complaint in its entirety. On September 13, 2022, the ~~grounds~~court denied AppTech’s motion to dismiss, and granted EMAF’s motion for summary judgement in part and denied in part. In particular, the ~~agreements were void as a result~~court granted EMA’s motion for summary judgment for its claim of breach of contract but denied its request for damages of $1.95 million. AppTech and EMAF are scheduled to file supplemental briefings regarding the ~~illegal activity~~damages in November 2022. No final ruling has been made by the plaintiff. On October 15, 2021, the parties filed memorandums in opposition to the respective motion. On October 25, 2021, the parties filed memorandums of law in further support of their respective motions. We believe thecourt. AppTech believes EMAF’s claims are meritless, ~~and intend~~intends to ~~vigorously~~ defend against this ~~lawsuit. The parties have engaged in settlement discussions with an expected range of potential liability between $400 thousand~~lawsuit vigorously and ~~$550 thousand, which includes principal and accrued interest of the convertible notes payable.~~counter if necessary.

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

None.

~~During the three months ended March 31, 2022:~~

~~233,816 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $466 thousand.~~

~~76,664 shares of common stock were issued to members of the Board of Directors valued at $103 thousand, which vest quarterly over the period of approximately one year.~~

Item 3. Defaults Upon Senior Securities.

Not applicable.

~~Only the EMA Financial, LLC payable is in default since it is currently involved in litigation.~~

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

~~None.~~

Item 6. Exhibits.

EXHIBIT INDEX

~~Exhibit~~Exhibit		Description

~~3.1~~		~~AppTech Corp. Articles of Conversion filed October 25, 2006 (incorporated by reference to Exhibit 3.1 to Form 10-12G/A filed February 14, 2020)~~

~~3.2~~		~~AppTech Corp. Articles of Incorporation filed October 25, 2006 (incorporated by reference to Exhibit 3.2 to Form 10-12G/A filed February 14, 2020)~~

~~3.3~~		~~AppTech Corp. Certificate of Designation filed May 09, 2007 (incorporated by reference to Exhibit 3.3 to Form 10-12G/A filed February 14, 2020)~~

~~3.4~~		~~AppTech Corp. Certificate of Correction filed September 04, 2007 (incorporated by reference to Exhibit 3.4 to Form 10-12G/A filed February 14, 2020)~~

~~3.5~~		~~AppTech Corp. Certificate of Designation filed September 06, 2007 (incorporated by reference to Exhibit 3.5 to Form 10-12G/A filed February 14, 2020)~~

~~3.6~~		~~AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed November 17, 2008 (incorporated by reference to Exhibit 3.6 to Form 10-12G/A filed February 14, 2020)~~

~~3.7~~		~~AppTech Corp. Certificate of Amendment filed October 26, 2009 (incorporated by reference to Exhibit 3.7 to Form 10-12G/A filed February 14, 2020)~~

~~3.8~~		~~AppTech Corp. Certificate of Amendment filed October 27, 2009 (incorporated by reference to Exhibit 3.8 to Form 10-12G/A filed February 14, 2020)~~

~~3.9~~		~~AppTech Corp. Certificate of Designation filed April 21, 2010 (incorporated by reference to Exhibit 3.9 to Form 10-12G/A filed February 14, 2020)~~

~~3.10~~		~~AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed April 27, 2010 (incorporated by reference to Exhibit 3.10 to Form 10-12G/A filed February 14, 2020)~~

~~3.11~~		~~AppTech Corp. Certificate of Change filed July 22, 2010 (incorporated by reference to Exhibit 3.11 to Form 10-12G/A filed February 14, 2020)~~

~~3.12~~		~~AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed October 26, 2010 (incorporated by reference to Exhibit 3.12 to Form 10-12G/A filed February 14, 2020)~~

~~3.13~~		~~AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed October 26, 2010 (incorporated by reference to Exhibit 3.13 to Form 10-12G/A filed February 14, 2020)~~

~~3.14~~		~~AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed October 28, 2010 (incorporated by reference to Exhibit 3.14 to Form 10-12G/A filed February 14, 2020)~~

~~3.15~~		~~AppTech Corp. Amendment to Certificate of Designation After Issuance of Class or Series filed April 08, 2011 (incorporated by reference to Exhibit 3.15 to Form 10-12G/A filed February 14, 2020)~~

~~3.16~~		~~AppTech Corp. Certificate of Amendment filed September 06, 2011 (incorporated by reference to Exhibit 3.16 to Form 10-12G/A filed February 14, 2020)~~

~~3.17~~		~~AppTech Corp. Articles of Domestication filed July 18, 2011 (incorporated by reference to Exhibit 3.17 to Form 10-12G/A filed February 14, 2020)~~

~~3.18~~		~~AppTech Corp. Bylaws dated May 07, 2013 (incorporated by reference to Exhibit 3.18 to Form 10-12G/A filed February 14, 2020)~~

~~3.19~~		~~AppTech Corp. Certificate of Domestication filed July 09, 2013 (incorporated by reference to Exhibit 3.19 to Form 10-12G/A filed February 14, 2020)~~

~~3.20~~		~~AppTech Corp. Articles of Amendment filed October 31, 2013 (incorporated by reference to Exhibit 3.20 to Form 10-12G/A filed February 14, 2020)~~

~~3.21~~		~~AppTech Corp. Certificate of Incorporation filed July 29, 2015(incorporated by reference to Exhibit 3.21 to Form 10-12G/A filed February 14, 2020)~~

~~4.1~~		~~Specimen Stock Certificate of AppTech Corp.’s Common Stock (incorporated by reference to Exhibit 4.1 to Form 10-12G/A filed February 14, 2020)~~

~~10.1~~		~~Asset Purchase Agreement dated December 04, 2013 (incorporated by reference to Exhibit 10.1 to Form 10-12G/A filed February 14, 2020)~~

~~10.2~~		~~Amendment to Asset Purchase Agreement dated September 22, 2017 (incorporated by reference to Exhibit 10.2 to Form 10-12G/A filed February 14, 2020)~~

~~10.3~~		~~Lease Agreement dated November 15, 2018 (incorporated by reference to Exhibit 10.3 to Form 10-12G/A filed February 14, 2020)~~

~~10.4~~		~~Engagement Letter dated September 23, 2019 (incorporated by reference to Exhibit 10.4 to Form 10-12G/A filed February 14, 2020)~~

~~10.5~~		~~Lease & Purchase Option Agreement dated January 22, 2020 (incorporated by reference to Exhibit 10.5 to Form 10-K filed March 30, 2020)~~

~~10.6~~		Subscription License and Service Agreement dated as of October 02, 2020, by and among AppTech Corp. and NEC Payments B.S.C. (c) (incorporated by reference to Exhibit 10.1 to Form 8-K filed October 7, 2020)

~~10.7~~		Digital Banking Platform Operating Agreement dated as of October 02, 2020, by and among AppTech Corp. and NEC Payments B.S.C. (c) (incorporated by reference to Exhibit 10.2 to Form 8-K filed October 7, 2020)

~~10.8~~		~~Subscription License Order Form dated as of October 02, 2020, by and among AppTech Corp. and NEC Payments B.S.C. (c) (incorporated by reference to Exhibit 10.3 to Form 8-K filed October 7, 2020)~~

~~10.9~~		~~Registration Rights Agreement dated as of October 02, 2020, by and among AppTech Corp. and NEC Payments B.S.C. (c) (incorporated by reference to Exhibit 10.4 to Form 8-K filed October 7, 2020)~~

~~10.10~~		Strategic Partnership Agreement dated as of August 21, 2020, by and among AppTech Corp. and Silver Alert Services LLC, doing business as LifeLight Systems (incorporated by reference to Exhibit 10.1 to Form 8-K filed August 26, 2020)

~~10.11~~		Amendment No. 1 to the Strategic Partnership Agreement dated as of August 21, 2020, by and among AppTech Corp. and Silver Alert Services LLC, doing business as LifeLight Systems (incorporated by reference to Exhibit 10.11 to Form S-1 filed February 16, 2021)

~~10.12~~		~~Amended and Restated Subscription License and Service Agreement dated as of February 11, 2021, by and among AppTech Corp. and NEC Payments B.S.C. (c).~~~~PURSUANT TO REG S-K ITEM 601, CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED~~ ~~(incorporated by reference to Exhibit 10.1 to the Form 8-K filed February 18, 2021)~~

~~10.13~~		~~Amended and Restated Digital Banking Platform Operating Agreement dated as of February 11, 2021, by and among AppTech Corp. and NEC Payments B.S.C. (c).~~ ~~PURSUANT TO REG S-K ITEM 601, CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED~~ ~~(incorporated by reference to Exhibit 10.2 to the Form 8-K filed February 18, 2021)~~

~~10.14~~		~~Amended and Restated Subscription License Order Form dated as of February 11, 2021, by and among AppTech Corp. and NEC Payments B.S.C. (c).~~ ~~PURSUANT TO REG S-K ITEM 601, CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED~~ ~~(incorporated by reference to Exhibit 10.3 to the Form 8-K filed February 18, 2021)~~

~~10.15~~		~~Independent Contractor Agreement, dated as of February 23, 2021 by and among AppTech Corp. and Innovations Realized, LLC.~~ ~~PURSUANT TO REG S-K ITEM 601, CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED~~ ~~(incorporated by reference to Exhibit 10.1 to the Form 8-K filed March 01, 2021)~~

~~10.16~~		Amended and Restated Strategic Partnership Agreement dated as of April 27, 2021, by and among AppTech Corp. And Silver Alert Services LLC, doing business as LifeLight Systems (incorporated by reference to Exhibit 10.1 to the Form 8-K filed May 03, 2021)

14		~~AppTech Code of Business Conduct (incorporated by reference to Exhibit 4.2 to Form 10-K filed March 30, 2020)~~

31.1		Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 dated ~~May 10,~~November 3, 2022

31.2		Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 dated ~~May 10,~~November 3, 2022

32.1		Certification of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 dated ~~May 10,~~November 3, 2022

32.2		Certification of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 dated ~~May 10,~~November 3, 2022

~~99.1~~		~~Audit Committee Charter (incorporated by reference to Exhibit 4.3 to Form 10-Q filed November 16, 2020)~~

~~99.2~~101.INS		~~Compensation Committee Charter (incorporated by reference to Exhibit 4.3 to Form 10-Q filed November 16, 2020)~~Inline XBRL Instance Document

~~99.3~~		~~Corporate Governance and Nominating Committee Charter (incorporated by reference to Exhibit 99.3 to Form S-1 filed February 16, 2021)~~
101.SCH		Inline XBRL Schema Document

101.CAL		Inline XBRL Calculation Linkbase Document

101.DEF		Inline XBRL Definition Linkbase Document

101.LAB		Inline XBRL Label Linkbase Document

101.PRE		Inline XBRL Presentation Linkbase Document

104.0		Cover Page Interactive Data File (Embedded within the Inline XBRL document)

~~Signatures~~

Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AppTech Payments Corp.

Date: ~~May~~November 10, 2022	By:	/s/ Luke D’Angelo
		Luke D’Angelo
		Chief Executive Officer, Chairman and Director

Date: ~~May~~November 10, 2022	By:	/s/ Gary Wachs
		Gary Wachs
		Chief Financial Officer, Treasurer and Director

Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, $0.001 par value per share	APCX	Nasdaq Capital Market
Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $5.19	APCXW	Nasdaq Capital Market

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated Filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

		Page
	Part I
	Special Note Regarding Forward-Looking Statements and Projections	34
Item 1.	Consolidated Financial Statements (unaudited)	45
	~~Condensed~~Consolidated Balance Sheets as of ~~March 31,~~September 30, 2022 and December 31, 2021	56
	~~Condensed~~Consolidated Statements of Operations for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021	67
	~~Condensed~~Consolidated Statements of Stockholder’s Equity (Deficit) for the three, six, and nine months ended ~~March 31,~~September 30, 2022 and 2021	78
	~~Condensed~~Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 and 2021	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2022
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2426
Item 4.	Controls and Procedures	2426
	Part II
Item 1.	Legal Proceedings	2527
~~Item 1A.~~Item1A.	Risk Factors	2527
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2527
Item 3.	Defaults Upon Senior Securities	2527
Item 4.	Mine Safety Disclosures	2527
Item 5.	Other Information	2527
Item 6.	Exhibits	2628
	Signatures	29


	March 31, 2022			March 31, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(5,455	)	$	(66,293	)
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of stock based compensation		2,508			1,829
Issuance of stock for prepaid services		156			—
Common Stock Issued for Forbearance		3			—
Stock issued for purchase of judgment		—			1,000
Stock issued for excess fair value of equity over assets received		832			62,543
Imputed interest on notes payable		—			3
Amortization of debt discount		14			40
Change in fair value of derivative liabilities		(136	)		508
Changes in operating assets and liabilities:
Accounts receivable		(3	)		(26	)
Prepaid expenses		8			(61	)
Accounts payable		(781	)		(24	)
Accrued liabilities		(25	)		93
Right of use asset and liability		1			3
Net cash used in operating activities		(2,878	)		(385	)

CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized prepaid software development and license		(185	)		(960	)
Net cash used in investing activities		(185	)		(960	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on loans payable - related parties		—			(33	)
Payments on notes payable		(50	)		—
Net Proceeds from offering		13,395			—
Repurchase of common stock		—			(10	)
Proceeds from sale of repurchase options		—			1,948
Net cash provided by financing activities		13,345			1,905

Changes in cash and cash equivalents		10,282			560
Cash and cash equivalents, beginning of period		8			58
Cash and cash equivalents, end of period	$	10,290		$	618

Supplemental disclosures of cash flow information:
Cash paid for interest	$	—		$	—
Cash paid for income taxes	$	—		$	—
Non-cash investing and financing transactions related to capitalized software and licensing costs	$	—		$	5,491
Issuance of stock for prepaid services	$	156		$	—

Schedule of pricing mode with assumptions
Market value of common stock	$	1.35
Expected volatility		104.8	%
Expected term (in years)		0.25
Risk-free interest rate		1.37	%

	Three Months Ended March 31,
	2022			2021

Net cash used in operating activities	$	(2,878	)	$	(385	)
Net cash provided by (used in) investing activities		(185	)		(960	)
Net cash provided by financing activities		13,345			1,905