Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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

The financial services industry is undergoing accelerated transformation driven by technological innovation and a rapidly evolving regulatory environment surrounding stablecoins and digital assets. Regulatory clarity around asset-backed stablecoins, custody solutions, and tokenized financial instruments is reshaping how digital financial services are structured, offered, and consumed. At the same time, advancements in blockchain infrastructure and real-time settlement capabilities are enabling more seamless, secure, and transparent user experiences. Consumers now expect intuitive access to compliant digital assets, while businesses must adapt to shifting oversight and operational requirements to stay competitive. In this dynamic landscape, organizations are challenged to balance innovation with compliance, delivering scalable, future-proof solutions that meet both market demands and regulatory expectations

To flourish in this environment, businesses need to adopt new technologies to engage, communicate and process payments and manage payouts with their customers from a supplier that widely supports innovation and adaptation as the industry evolves. We believe our technologies will greatly increase the adoption of omni-channel payments and digital banking solutions in sectors that must quickly adapt and migrate to new, secure digital Fintech technologies. By embracing advancements 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.

AppTech's all-in-one Fintech platform, FinZeo™, delivers financial technologies and capabilities through an ever-evolving modular cloud/edge-based architecture. The FinZeo platform houses a large array of financial products and services that can be implemented off-the-shelf or customized via modern APIs. Within its FinZeo platform, AppTech offers Payments-as-a-Service ("PaaS"), and Banking-as-a-Service ("BaaS").

FinZeo provides PaaS via integrated solutions for frictionless digital and mobile payment acceptance. These solutions provide advanced payment processing solutions by catering to the unique needs of each merchant. FinZeo's PaaS solutions include ACH (automatic clearing house), credit & debit cards, eCheck, mobile processing, electronic billing, and text-to-pay. 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 financial institutions to provide businesses, professionals, and individuals with the ability to better manage their finances anywhere, anytime at a fraction of the cost of traditional banking and financial services. BaaS fosters an ecosystem of immersive and scalable digital financial management services, including FinZeo's groundbreaking automated underwriting portal. By digitizing the underwriting process, Automated Underwriting expedites business onboarding with its intuitive digital application and e-signature capabilities. This portal offers customizable pricing, risk models, and access to multiple processors, ensuring tailored solutions for diverse needs.

Also, Fintechs, Independent Sales Organizations (ISOs) and Independent Software Vendors (ISVs), can seamlessly integrate their businesses with the FinZeo Portal or BaaS solution, which facilitates swift technology adoption. By leveraging the FinZeo portal, ISOs/ISVs can streamline operations and foster growth, meeting the economic demands of their merchants. Through personalized portals, ISOs/ISVs have the flexibility to select and integrate FinZeo payments and banking services, thereby enhancing their offerings to clients.

FinZeo has a flexible architecture and can be fully white labeled to allow for rich, personalized payment and banking experiences. This cloud-based platform packages together elements of AppTech's intellectual property, BaaS, and PaaS to create a one-hub connection point of multi-tenant portals giving the merchant, ISO/ISV, and each customer a well-defined user experience.

Recent Developments

The Company has successfully remedied its equity deficiency; however, it was unable to satisfy the $1.00 minimum bid price requirement for 10 consecutive business days, as mandated by Nasdaq Listing Rule 5550(a)(2). Consequently, the Company was delisted and transitioned to trading on the OTCQB market. Management remains committed to enhancing shareholder value and intends to pursue an uplisting to a national exchange before the end of the fiscal year.

On September 3, 2025, AppTech entered into a letter of intent with Infinitus Pay ("IP") to acquire 100% of their equity in return for a total package consisting of up to $3,000 thousand, up to 5,000 thousand shares of our common stock, and up to 4,000 thousand warrants The purpose of the acquisition was to enhance AppTech's product offerings while acquiring IP's platform and book of business. The acquisition was completed on October 31, 2025. The purchase price accounting has not been completed, however, it is anticipated to be completed prior to the end of the allowable measurement period.

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 processing services to businesses.

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, utilities, and other operating costs.

Research and development. Includes the internal and outsourced services costs incurred to maintain and further develop the FinZeo platform, 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 three and nine months ended September 30, 2025 and 2024, respectively.

Revenue

Revenue was approximately $227 thousand for the three months ended September 30, 2025, compared to $43 thousand for the three months ended September 30, 2024, representing an increase of 428%. For the nine months ended September 30, 2025 and 2024, revenue was approximately $735 thousand and $224 thousand representing an increase of 228%. The increase was principally driven by an increase of our ISO and lending revenue.

Cost of Revenue

Cost of revenue was approximately $100 thousand for the three months ended September 30, 2025, compared to $24 thousand for the three months ended September 30, 2024, representing an increase of $76. For the nine months ended September 30, 2025 and 2024, cost of revenue was approximately $335 thousand and $49 thousand, representing an increase of $286 thousand. The increase was driven by the revenue share with our ISO partners.

General and Administrative Expenses

General and administrative expenses were approximately $1,373 thousand for the three months ended September 30, 2025, compared to $1,867 thousand for the three months ended September 30, 2024, representing a decrease of $494 thousand. The reduction was mainly driven by lower salaries and professional services.

General and administrative expenses were approximately $4,493 thousand and $6,669 thousand for the nine months ended September 30, 2025 and 2024, respectively, representing a decrease of 33%. The decrease was driven by lower professional fees, salaries, and stock-based compensation.

Research and Development Expenses

Research and development expenses were approximately $325 thousand for the three months ended September 30, 2025, compared to $2 thousand for the three months ended September 30, 2024, representing an increase of $323 thousand. The increase was due to higher third-party development costs related to maintaining and enhancing the FinZeo platform.

Research and development expenses were approximately $2,015 thousand and $1,278 thousand for the nine months ended September 30, 2025 and 2024, respectively. The increase was driven by higher third-party costs related to maintaining and enhancing the platform.

Interest Income (Expense)

Interest expense was approximately $17 thousand for the three months ended September 30, 2025, compared to an expense of $18 thousand for the three months ended September 30, 2024, representing an increase of $1 thousand. For the nine months ended September 30, 2025 and 2024, interest expense decreased to $24 thousand from $53 thousand. The change was due to the interest related to the assigned agreement with our banking partners.

Gain on Debt Extinguishment

Gain on debt extinguishment was approximately $13 thousand for the nine months ended September 30, 2025, compared to $0 for the nine months ended September 30, 2024, representing an increase of $13 thousand. The increase was driven by various accrued expenses written off.

Debt Discount Amortization

The amortization on debt discounts was $50 thousand for the three and nine months ended September 30, 2025, compared to $151 thousand for the three and nine months ended September 30, 2024. The changes were due to the amortization periods of each convertible note and the discounted amount.

Other Income (Expenses)

Other expense was $93 thousand for the three months ended September 30, 2025, compared to an expense of $6 thousand for the three months ended September 30, 2024. The increase of $87 thousand was primarily driven by the expensing of a security deposit related to a proposed financing event.

For the nine months ended September 30, 2025 compared to September 30, 2024, other expense decreased from $63 thousand to $8 thousand. The biggest driver was security deposit write off.

Liquidity and Capital Resources

The Company routinely evaluates its immediate working capital needs and liquidity sources. For the three months ended September 30, 2025 and September 30, 2024, the Company maintained its liquidity sources primarily through cash and cash equivalents, and proceeds received from the AFIOS Partners investment.

Cash and cash equivalents at September 30, 2025 and December 31, 2024 were $439 thousand and $868 thousand, respectively.

Management's Plan to Address Going Concern Considerations

The Company has experienced recurring operating losses, primarily due to limited revenues. The Company's current financial conditions and recurring losses raise substantial doubt about its ability to continue as a going concern.

Management has restructured its operations, reduced its headcount, and is actively pursuing additional funding options. We are confident that two of 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.

Cash Flows

The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods ($ in thousands).

		Nine Months Ended September 30,
		2025				2024
Net cash used in operating activities		$	(3,829	)		$	(4,968	)
Net cash used in investing activities		$	-			$	(567	)
Net cash provided by financing activities		$	3,400			$	4,358

Cash Flow from Operating Activities

Net cash used in operating activities during the nine months ended September 30, 2025, was approximately $3,829 thousand, which is comprised of (i) our net loss of $6,232 thousand, adjusted for non-cash expenses totaling $2,095 thousand(which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) decreased by changes in operating assets and liabilities of approximately $308 thousand.

Net cash used in operating activities during the nine months ended September 30, 2024, was approximately $4,968 thousand, which is comprised of (i) our net loss of $7,984 thousand, adjusted for non-cash expenses totaling $2,567 thousand (which includes adjustments for equity-based compensation, depreciation and amortization), and (ii) changes in operating assets and liabilities of approximately $449 thousand.

Cash Flow from Investing Activities

There was no cash used by investing activities during the nine months ended September 30, 2025. There was $567 thousand used in investing activities during the nine months ended September 30, 2024.

Cash Flow from Financing Activities

During the nine months ended September 30, 2025, net cash provided by financing activities was $3,400 thousand, which consists of proceeds received on the outstanding equity receivable at year-end, additional funds related to the AFIOS investment, and three convertible notes.

During the nine months ended September 30, 2024, net cash provided by financing activities was approximately $4,358 thousand. This amount primarily consists of $2,438 thousand in net proceeds from the issuance of common shares, $910 thousand from a convertible note, and $1,010 from a warrant exercise.

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 goodwill impairment and intangible assets, and equity-based compensation. 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 September 30, 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.

Equity-Based Compensation: We estimate the fair value of stock options granted using the Black-Scholes option pricing model, which requires input of subjective assumptions. The model inputs include expected stock price volatility, expected term, risk-free interest rate, and dividend yield. The assumptions about future stock price volatility and the option's expected term involve significant judgments based on historical data and future expectations. The reported equity-based compensation expense is sensitive to changes in the volatility assumption. An increase in expected volatility could materially impact the amount of compensation expense recognized.

Goodwill Impairment

Goodwill Impairment Testing:The process requires an annual test for impairment of goodwill, and more frequent testing if certain indicators suggest that the goodwill might be impaired. This assessment involves comparing the carrying amount of a reporting unit, including goodwill, to its fair value. Key estimates in determining fair value include: a) Cash Flow Projections: Utilizing the DCF method, management estimates future cash flows based on current performance, business plans, and expected market growth, introducing judgment due to forecasting uncertainties. b) Discount Rate: The discount rate, reflecting the WACC and adjusted for unit-specific risks, is crucial for present value calculations, with changes significantly affecting fair value estimations; c) Long-term Growth Rates: Assumptions on sustainable growth rates impact the terminal value in the DCF model, thus influencing the overall fair value of the reporting unit.

Impairment Loss Calculation:The impairment loss, representing the excess of the carrying amount of goodwill over its implied fair value, is highly sensitive to the estimates and assumptions used in the fair value calculation. Small changes in cash flow projections, discount rates, or long-term growth rates can result in significant adjustments to the impairment loss recognized in the income statement. Given the dynamic nature of business conditions, technological advancements, and market competition, estimates used in goodwill impairment testing may change from one period to another. Management is tasked with regularly reviewing and updating these estimates to reflect the latest available information and market conditions.

Once an impairment loss is recognized, it is not reversible in subsequent periods. This finality places additional importance on the accuracy and reasonableness of the underlying estimates and assumptions.

Management concluded that the fair value of the goodwill recorded as part of the FinZeo acquisition significantly exceeds its carrying amount, and there is no significant risk of goodwill impairment based on current assumptions and market conditions.

Impairment of Long-Lived Assets

Our company evaluates long-lived assets, including capitalized software, for impairment when there are indicators that the carrying amount may not be recoverable. This process involves comparing the carrying amount to the expected future undiscounted cash flows from the asset. If the carrying amount exceeds the expected cash flows, an impairment charge is recognized to reduce the asset's carrying amount to its fair value.

Indicators of impairment include significant underperformance against projections, market or economic downturns, and technological obsolescence. The fair value is determined using market data or discounted cash flow models. An impairment loss is recorded as an expense immediately.

Recent Accounting Pronouncements

As of September 30, 2025, there have been 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.