Item 7. 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 together with the audited consolidated financial statements and related notes included elsewhere in this report. Certain statements contained in this report, including statements regarding the anticipated development and expansion of our business, our intent, belief or current expectations, primarily with respect to the future operating performance of our company and the products and services we expect to offer and other statements contained herein regarding matters that are not historical facts, are “forward-looking” statements. Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also forward-looking statements which involve risks, uncertainties, and assumptions. Because forward-looking statements are inherently subject to risks and uncertainties, our actual results may differ materially from the results discussed in the forward-looking statements.
Business Overview
2025 was a defining year for AppTech Payments Corp. (“AppTech”). The Company entered the year with inherited structural, operational, and technological challenges that limited its ability to scale and compete effectively in the rapidly evolving financial services landscape. The legacy FinZeo acquisition, while strategically intended to position the Company in digital payments, required significant remediation. The inherited platform architecture was fragmented, the marketplace model was not commercially viable, and the product required substantial modernization to meet industry expectations. These issues constrained growth and created operational inefficiencies that needed to be addressed before the Company could pursue new opportunities.
Recognizing these challenges, the new management team undertook a comprehensive transformation of the Company. This included stabilizing operations, preserving existing revenue streams, restructuring internal processes, modernizing the technology stack, and repositioning the Company toward scalable, high-value financial technology infrastructure. The objective was not incremental improvement, but a fundamental repositioning of AppTech into a modern fintech infrastructure provider capable of supporting digital banking, embedded finance, and omnichannel payments at scale. By year-end, AppTech had rebuilt its foundation, aligned its teams, and established a clear strategic direction for long-term growth.
This transformation occurred during a period of rapid change in the financial services industry. Businesses, financial institutions, and technology platforms increasingly require modern, flexible, and compliant financial technology capable of supporting digital-first interactions, automated onboarding, and embedded financial services. The market is shifting toward unified platforms that reduce integration complexity, support multi-channel payment experiences, and deliver scalable financial services without requiring costly or disruptive changes to existing banking systems. Smaller and mid-sized banks, in particular, face mounting pressure to modernize their digital offerings but often lack the internal resources or infrastructure to do so effectively. These institutions represent a significant and underserved segment of the market.
To address these needs, AppTech deployed the AppTech Banking Platform, a modern financial services layer licensed and implemented in 2025. While architecturally similar to Banking-as-a-Service systems, AppTech positions this platform as a core Company technology rather than a traditional BaaS product. The platform enables digital banking capabilities, account-based processing, onboarding, compliance, and financial workflows through a unified, cloud-native architecture. It is designed as a multi-tenant, multi-bank system, allowing AppTech to support multiple financial institutions simultaneously and expand its banking partnerships over time. Importantly, the platform integrates alongside a bank’s existing core system rather than replacing it, enabling AppTech to deliver modern digital capabilities without requiring banks to undertake costly or disruptive system changes.
The Company’s first partner bank is now fully online and accepting clients through the AppTech Banking Platform. This relationship provides AppTech with a compliant and scalable foundation for delivering digital banking capabilities, account creation, payment services, and financial workflows. The close operational alignment between AppTech and its partner bank enhances the Company’s ability to deliver efficient onboarding, consistent compliance processes, and a streamlined path for clients to activate financial products, while maintaining the bank’s regulatory oversight and decision-making authority.
Building on this strengthened foundation, AppTech completed the acquisition of IP in late 2025. IP brings a profitable business, a growing customer portfolio, and a robust cross-border payments and onboarding platform that integrates directly into the AppTech Banking Platform. Its technology expands AppTech’s capabilities in global payment acceptance, international payouts, multi-currency transactions, automated recipient onboarding, and compliance workflows. IP also contributes a sophisticated partner portal that provides detailed reporting, business metrics, and operational insights. This portal not only supports IP’s existing clients but also enhances AppTech’s broader sales channel by equipping partners with tools to identify opportunities, monitor client performance, and unlock client potential.
While the Company’s long-term strategy is centered on digital banking and embedded financial services, AppTech continues to operate and generate revenue from its FinZeo Payments-as-a-Service (“PaaS”) business. FinZeo remains an active and revenue-producing component of the Company’s operations, contributing approximately 10–15% of total revenue in 2025. Although the inherited marketplace structure required modernization and the original product did not meet commercial expectations, the underlying PaaS capabilities continue to serve merchants, ISOs, and technology partners. The Company stabilized this business, preserved its revenue, and repositioned it as a strategic channel for identifying future opportunities aligned with the Company’s broader financial technology strategy.
As a result of these efforts, AppTech emerges from 2025 as a fundamentally different company—one with a modern technology foundation, a scalable business model, a strengthened leadership team, and a clear strategic direction. The Company is now positioned to participate meaningfully in the next generation of digital financial services, with a platform capable of supporting financial institutions, technology companies, and SMEs with scalable, customizable financial solutions that reduce integration complexity and accelerate time-to-market.
Financial Operations Overview
The following discussion sets forth certain components of our statements of operations as well as factors that impact those items (in thousands, except per share data).
Revenues
Our Revenues. We derive our revenue by providing financial services to businesses.
Set up Fees
The Company provides one-time customer setup services that include gathering and validating required compliance documentation for its banking partners and performing the technical integration necessary to establish an operational merchant profile on the Company’s platform. As part of the setup, customers receive stand-alone value by receiving a named bank account with our banking partner that they can use independent of us. Setup services are satisfied at a point in time when the customer or subaccount is fully configured and enabled to transact on the platform. Revenue is recognized upon completion of setup, which generally coincides with month-end billing.
Monthly Platform and Transaction-Based Fees
Monthly recurring platform access fees and transaction-based fees represent consideration for continuous platform access and payment processing services and are recognized monthly as the services are performed. Transaction-based fees, which represent variable consideration, are recognized in the period in which the underlying transactions occur. Subaccount setup fees are recognized when the subaccount is established and made available for use.
Customers are invoiced in arrears at month-end, and amounts billed but not yet collected are recorded as accounts receivable.
Merchant Processing Services
The Company provides merchant processing solutions for credit card and ACH transactions. We act as an intermediary between merchants, who initiate transactions and banks that process them. We collect either a flat fee, a fee for each transaction, and or a fee calculated as a percentage of its value, from both credit cards and ACHs. Revenue is recognized when transactions are processed by banks or at month-end based on the processing activity. Payments to channel partners are deducted from revenue.
Accrued Residuals
The Company pays commissions to independent agents who refer merchant accounts. The amounts payable to these independent agents is based upon a percentage of the amounts processed by these merchant accounts.
Expenses
Cost of Revenue. Includes costs directly attributable to processing and other services the Company provides. These also include related costs such as residual payments to our business development partners, which are based on a percentage of the net revenue generated from client referrals.
General and administrative. Include salaries, professional services, software costs, regulatory expenses, stock-based compensation, rent and utilities, and other operating costs.
Research and development. Includes the internal and outsourced services costs incurred to maintain and further develop the FinZeo and IP platforms, and the development of additional technology needed to pursue new product offerings.
Other income (expenses). Consists of interest on outstanding indebtedness and the gain/loss on debt extinguishment.
Results of Operations
This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for the years ended December 31, 2025 and 2024, respectively. We have derived this data from our annual consolidated financial statements included elsewhere in this report.
The following table presents our historical results of operations for the periods indicated:
Years ended December 31
Change
($ in thousands)
Amount
Revenue
Cost of revenue
Gross profit
Operating expenses
General and administrative
Research and development
Total operating expenses
Loss from operations
Other income (expenses)
Interest expense, net
Gain on debt extinguishment
Loss on change in fair value of contingent consideration
Debt discount amortization
Other income (expense)
Total other income (expenses)
Loss before income taxes
Provision for income taxes
Net loss
Revenue
Revenue was approximately $1,395 thousand for the year ended December 31, 2025, compared to $276 thousand for the year ended December 31, 2024, representing an increase of $1,119 thousand or 405.4%. The increase was principally driven by the launch of our lending revenue vertical and the revenue generated from the IP platform.
Cost of Revenue
Cost of revenue was approximately $624 thousand for the year ended December 31, 2025, compared to $52 thousand for the year ended December 31, 2024, representing an increase of $572 thousand. The increase was principally driven by bank fees charged by our banking partner for our lending revenue vertical and an increase to referral partner payouts related to the IP acquisition.
General and Administrative Expenses
General and administrative expenses decreased 23.0% to approximately $6,003 thousand for the year ended December 31, 2025, from $7,794 thousand in 2024. The reduction was mainly due to lower salaries following the Company’s restructuring plan, lower professional fees, and less stock-based compensation.
Research and Development Expenses
Research and development expenses were approximately $2,347 thousand for the year ended December 31, 2025, compared to $1,977 thousand for the year ended December 31, 2024, representing an increase of 18.7%. The increase was solely driven by the Company’s decision to expand the development team to launch its lending vertical and the additional costs related to managing IP’s platform.
Other Income (Expenses)
Interest Expense
Interest expense was approximately $121 thousand and $67 thousand for the years ended December 31, 2025 and December 31, 2024, respectively, representing an increase of $54 thousand. The increase was due to the interest expense related to the convertible notes and liability assumption from our banking partner.
Gain on debt extinguishment
The gain on debt extinguishment was approximately $13 thousand for the year ended December 31, 2025 compared to $1,245 thousand for the year ended December 31, 2024. The decrease was due to the Company extinguishing less of its past debt.
Loss on change in fair value of contingent consideration
The loss was approximately $174 thousand for the year ended December 31, 2025 compared to $0 for the year ended December 31, 2024. The change was due to the Company adjusting the earnout owed to the Sellers of IP.
Debt discount amortization
The debt discount amortization was approximately $104 thousand for the year ended December 31, 2025, compared to $579 thousand for the year ended December 31, 2024. The change was due to the amount of convertible debt incurred in FY 2025 versus the prior year.
Other income (expenses)
Other expense was approximately $45 thousand for the year ended December 31, 2025, compared to other income of approximately $15 thousand for the year ended December 31, 2024, representing an increase of $30 thousand. The increase was primarily driven by interest income earned on the note receivable related to our banking parter relationship.
Liquidity and Capital Resources
The Company routinely evaluates its immediate working capital needs and liquidity sources. For the years ended December 31, 2025 and 2024, the Company maintained its liquidity sources primarily through cash and cash equivalents, convertible notes, and proceeds received from equity and equity-linked instruments to pay for services and compensation.
Cash and cash equivalents at December 31, 2025 and 2024 were $244 thousand and $868 thousand, respectively.
See Note 9 – Stockholders’ Equity.
Management's Plan to Address Going Concern Considerations
The Company has experienced recurring operating losses, primarily due to limited revenues and net cash used in operations. The Company's current financial conditions and recurring losses raise substantial doubt about its ability to continue as a going concern.
Management is actively pursuing additional funding options and is confident that its revenue streams will begin generating revenue in the following twelve months from the issuance date of these financial statements.
Management intends to maintain adequate working capital and adhere to prudent financial forecasting. In December 2025, Management began implementing comprehensive expense reduction strategies across the Company’s operations to enhance financial stability.
Cash Flows
The following table presents a summary of cash flows from operating, investing and financing activities ($ in thousands):
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Cash Flow from Operating Activities
Net cash used in operating activities during the year ended December 31, 2025 was approximately $4,889 thousand, which is comprised of (i) our net loss of $7,920 thousand , adjusted for non-cash expenses totaling $2,716 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) is decreased by changes in operating assets and liabilities of approximately $315 thousand.
Net cash used in operating activities during the year ended December 31, 2024 was approximately $7,457 thousand, which is comprised of (i) our net loss of $8,933 thousand , adjusted for non-cash expenses totaling $2,175 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) is decreased by changes in operating assets and liabilities of approximately $699 thousand.
Cash Flow from Investing Activities
Net cash used by investing activities during the year ended December 31, 2025 was approximately $1,884 thousand. This expenditure was primarily attributable to the acquisition of IP.
Net cash used by investing activities during the year ended December 31, 2024 was approximately $1,159 thousand. This expenditure was primarily attributable to capitalized software costs.
Cash Flow from Financing Activities
Net cash provided by financing activities during the year ended December 31, 2025 was approximately $6,149 thousand, driven by net proceeds received of $3,550 thousand through the issuance of common shares and warrants, and $2,599 thousand proceeds received from notes payables, net of repayments.
Net cash provided by financing activities during the year ended December 31, 2024 was approximately $8,203 thousand, driven by net proceeds received of $6,288 thousand through the issuance of common shares and warrants in our public offerings, $1,010 thousand proceeds received from exercise of warrants, and $910 thousand net proceeds received from convertible notes payable.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Significant estimates include those related to the valuation of intangible assets acquired as part of the business combination and related contingent consideration. These estimates are based on historical experience and assumptions believed to be reasonable under current conditions. It's important to note that actual results could differ from these estimates.
Critical accounting policies are those that we consider the most critical to understanding our financial condition and results of operations. The accounting policies we believe to be most critical to understanding our financial condition and results of operations are discussed below. As of December 31, 2025, there have been no significant changes to our critical accounting estimates nor to our recently issued accounting pronouncements, except as described in Note 2 to our consolidated financial statements.
Business Combination
Recognition and Measurement: Companies must recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquiree at their fair value on the acquisition date.
Goodwill: Arises when the consideration transferred in a business combination exceeds the fair value of the net identifiable assets acquired. It represents future economic benefits arising from assets that are not individually identified and separately recognized.
Intangible Assets: Identifiable intangible assets, distinguishable either by separability from the acquired entity or through contractual or other legal rights, are valued and reported independently from goodwill. These assets include, but are not limited to, trademarks, customer relationships, proprietary technology, and patents. The fair value of these intangible assets is determined at the time of acquisition and is subject to subsequent impairment tests.
The fair value of identifiable intangible assets is estimated using income, market, or cost approach methods. The income approach, often applied through the discounted cash flow (DCF) method, involves projecting future cash flows attributable to the asset and discounting them to present value using a discount rate that reflects the risk associated with those cash flows. The estimation of fair value is inherently uncertain due to the assumptions and judgments involved in projecting future cash flows, determining appropriate discount rates, and estimating the useful life of each asset.
Over the reporting period, changes in market conditions, technological advancements, or strategic shifts in the business may necessitate revisions to the assumptions used in the valuation of identifiable intangible assets. Management closely monitors these factors and will adjust the valuation of intangible assets as appropriate, reflecting the impact of any such changes in our financial statements.
Contingent Consideration: Any contingent consideration, such as earn-outs, is measured at fair value at the acquisition date and can be adjusted in subsequent periods if the fair value changes.
Smaller Reporting Company
As a smaller reporting company, as defined in Item(f)(1) of Regulation S-K, we may choose to prepare our disclosures relying on scaled disclosure requirements for smaller reporting companies in Regulation S-K and in Article 8 of Regulation S-X.
The scaled disclosure requirements for smaller reporting companies permit us (i) to include less extensive narrative disclosure than required of other reporting companies, particularly in the description of executive compensation and (ii) to provide audited consolidated financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited consolidated financial statements for three years.
We may lose our status as a smaller reporting company on the last day of the fiscal year in which (i) our public float exceeds $250 million or (ii) if we have more than $100 million in annual revenues and (a) have no public float or (b) have a public float or more than $700 million.
Recent Accounting Pronouncements
As of December 31, 2025, there was no significant changes to our recently issued accounting pronouncements, except as described in Note 2 to our consolidated financial statements.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established to facilitate off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee of our own performance.
Equity-based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at the fair market value on the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair market value of stock options and other equity-based compensation issued to employees and non-employees.
During the years ended December 31, 2025, and 2024, 10,000 shares and 260,000 shares of common stock were issued to consultants and employees in connection with business development, professional, and employment services with a value of $5 thousand and $267 thousand, respectively.
Related Parties
See Item 13 for a full discussion of related parties.
