STOCKHOLDERS’ EQUITY

12 Months Ended

Dec. 31, 2023

Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 10 – STOCKHOLDERS’ EQUITY

Series A Preferred Stock

The Company is authorized to issue 10,526 shares of $0.001 par value Series A preferred stock (“Series A”). There were fourteen (14) shares of Series A preferred stock outstanding as of December 31, 2023 and 2022. The holders of Series A preferred stock are entitled to one vote per share on an “as converted” basis on all matters submitted to a vote of stockholders and are not entitled to cumulate their votes in the election of directors. The holders of Series A preferred stock are entitled to any dividends that may be declared by the Board of Directors out of funds legally available, therefore on a pro rata basis according to their holdings of shares of Series A preferred stock, on an as converted basis. In the event of liquidation or dissolution of the Company, holders of Series A preferred stock are entitled to share ratably in all assets remaining after payment of liabilities and have no liquidation preferences. Holders of Series A preferred stock have a right to convert each share of Series A into 82 shares common stock.

Common Stock

The Company is authorized to issue 105,263,158 shares of $0.001 par value as of December 31, 2023 and 2022. There were 22,251,742 and 16,697,280, respectively, shares of common stock outstanding as of December 31, 2023 and 2022. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders and are not entitled to cumulate their votes in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the board of directors out of funds legally available, therefore subject to the prior rights of holders of any outstanding shares of preferred stock and any contractual restrictions against the payment of dividends on common stock. In the event of liquidation or dissolution of the Company, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no preemptive or other subscription rights and no right to convert their common stock into any other securities.

In February 2023, the Company completed an underwritten public offering of its common stock and warrants, raising gross proceeds of approximately $5.0 million. As of November 14, 2023, approximately $66.5 million remains available under the shelf registration statement Form S-3 (File No. 333-265526) previously filed and declared effective by the Securities and Exchange Commission (SEC) on July 15, 2022. SEC regulations limit the amount of funds we can raise during any 12-month period pursuant to our effective shelf registration statement on Form S-3. We are currently limited by the Baby Shelf Rule as of the filing of this Annual Report, until such time as our public float exceeds $75 million. However, factors such as stock price, volatility, trading volume, market conditions, demand and regulatory requirements may adversely affect the Company’s ability to raise capital in an efficient manner.

On October 24, 2023, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with a certain accredited and institutional investor (the “Purchaser”) pursuant to which the Company has agreed to issue and sell to Purchaser an aggregate of: (i) 1,666,667 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and (ii) warrants (the “Purchase Warrants”) to purchase up to 1,666,667 shares of Common Stock, exercisable at $2.74 per share (the “Offering”). The offering price per Share and associated Purchase Warrants is $2.10. The October Warrants will expire five years from the date on which they become exercisable.

On October 26, 2023, the Company closed the Offering and raised $3.5 million in gross proceeds from the Offering.

In August 2023, the Company entered into a sales agreement under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $18.0 million through “at-the-market” offerings (ATM), pursuant to its shelf registration statement on Form S-3 on file with the SEC. During the year ended December 31, 2023, the Company sold 475,600 shares of common stock under the ATM, for which the Company received net proceeds of $1.3 million, after deducting commissions, fees and expenses.

During the years ended December 31, 2023 and 2022, the Company issued 345,000 and 371,846, respectively, shares of common stock to several consultants in connection with business development and professional services. The Company valued the common stock issuances at $738 thousand and $586 thousand, respectively, based upon the closing market price of the Company’s common stock on the date of the agreement.

During the years ended December 31, 2023 and 2022, the Company granted 115,000 and 133,912 shares of common stock to the board of directors valued at $168 thousand and $236 thousand, respectively. The shares vest quarterly over the period of approximately one year.

During the year ended December 31, 2023, the Company reserved 10,800 shares of common stock for HotHand's shareholders in relation to incomplete HotHand shareholder contact information and or unexecuted APCX shareholder issuance agreements. These said shares will remain in escrow until each party is identified and new issuance agreement is fully executed.

On October 26, 2023 (the “Closing Date”), the Company completed acquisition of Alliance Partners, LLC, a Nevada limited liability company (“Alliance Partners”, “FinZeo”). On October 31, 2023, the Company issued 1,000,000 shares of common stock valued at $2.44 per share to an entity owned by the Seller. In exchange for the shares, the Seller waived, cancelled, and forgave the long-term debt of FinZeo. Also, the entire FinZeo team elected to join AppTech and certain employees received non-guaranteed stock options based on performance.

See Note 1 - Purchase of Alliance Partners, LLC and Note 3 - Acquisition

On November 27, 2023, the Company issued 250,000 shares of common stock, valued approximately at $400 thousand to a previous investor to retire a Right of Participation from a previous agreement. It was recorded within selling, general and administrative expenses in the accompanying statement of operations.

Stock Options

The options vest in equal monthly installments ranging from instantly to 12 months. The fair value of the options were valued using a Black-Scholes options pricing model with the following range of assumptions:

Market value of common stock on issuance date	$1.77 - $3.12
Exercise price	$1.77 - $3.12
Expected volatility	152% - 172%
Expected term (in years)	2.0 - 5.0
Risk-free interest rate	4.15% - 4.96%
Expected dividend yields	–

During the year ended December 31, 2023, options to purchase 2,263,726 shares of common stock at a weighted average exercise price of $2.11 were granted as compensation to employees and consultants.

In connection with the acquisition of FinZeo, the former management team was granted 1.5 million shares of AppTech's common stock, contingent upon the Company reaching specified sales milestones. Should they exit the Company before fulfilling these sales objectives, the options will be forfeited. The fair value of these options will be recognized as an expense at the point when vesting appears likely. These non-plan options carry a five-year life from the grant period. The options have an exercise price set at $2.26 per share, with their fair value on the issuance date being $2.08 per share.

The Company grants stock options as part of employee compensation and recognizes these options' expense over the vesting period. If an employee does not meet certain conditions such as sales targets or leaves the Company before the options vest, these options are forfeited as they occur.

During the year ended December 31, 2023, the weighted average grant date fair value of of the options issued during the year, excluding the 1.5 million options to the previous management team of FinZeo, is approximately $1.50 per share.

The following table summarizes option activity: 

	Number of shares			Weighted Average exercise price		Weighted Average remaining years
Outstanding December 31, 2022		1,089,868		$	7.00		1.91
Issued		2,263,726		$	2.11
Exercised		(35,528	)	$	0.93
Cancelled		(592,502	)	$	3.63
Outstanding as of December 31, 2023		2,725,564		$	1.84		4.07
Outstanding as of December 31, 2023, vested		1,174,004		$	1.30		3.17

The Company recorded $2.6 million option expenses for the year ended December 31, 2023, including expenses from repricing of the options at $711 thousand. The remaining expense outstanding through December 31, 2023 is $101 thousand which is expected to be expensed over approximately one year.

On December 7, 2021, the board authorized the Company’s 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. The shareholders approved an additional 700,000 shares for the Company's Equity Incentive plan in May 2023. A total of 1,752,632 shares of common stock were authorized under the Equity Incentive Plan, for which as of December 31, 2023, a total of 407,114 are available for issuance.

In May 2023, the shareholders approved the Company's proposed resolution to re-price its options. In total, 615,264 employee options were repriced to $0.715, and 250,658 options for board of directors and consultants' options were repriced to $1.430. The Company recorded the modification expense of $711 thousand during the year ended December 31, 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 their date of issuance. As of December 31, 2023, the derivative liabilities are zero as the Company settled the convertible note and also extinguished its warrants related to its derivative liability as a result of the settlement.See Note 9 - Commitment and Contingencies.

On February 2, 2023, the Company announced the closing of its previously announced $5.0 million registered direct offering (the “Registered Direct Offering”) with a single institutional investor to sell 1,666,667 shares of its common stock (the “Shares”) and warrants to purchase up to 1,666,667 shares (the “Warrants”) in a concurrent private placement (the “Private Placement”). The combined purchase price for one Share and one Warrant was $3.00. Each of the Warrants has an exercise price of $4.64 per share of common stock and are exercisable on and after August 1, 2023. The Warrants expire five years from the date on which they become exercisable. The aggregate gross proceeds from the Registered Direct Offering and the concurrent Private Placement were approximately $5.0 million before deducting placement agent fees and other estimated offering expenses. The offering that was completed in February 2023, caused a reset to the exercise price of existing warrants from the S-1 offering that had a strike price of $5.19 and a future offerings floor price of $4.15. Accordingly, the floor price was reset to $4.15 in February 2023. 4,156,626 warrants were reset and $763 thousand was recorded to additional paid-in capital and accumulated deficit as a result of the reset.

On October 26, 2023, the Company announced the closing of a $3.5 million registered direct offering. This offering involved the sale of 1,666,667 shares of common stock and an equal number of warrants (the “October Warrants”) with a combined purchase price of $2.10 for one share and one warrant. Each of the Warrants has an exercise price of $2.74 and are exercisable on and after October 26, 2023. The Warrants expire five years from the date on which they become exercisable. As a condition to the raise, the Company and the holder of the February warrant agreed to modify the exercise price of the February warrants from $4.64 to $2.74. As this was considered a cost of the offering, the Company recorded $97 thousand to additional paid-in capital and offering cost within equity, resulting in no net effect.

See additional warrants granted discussed in the Common Stock section above.

In total, the Company has 7,489,960 warrants outstanding as of December 31, 2023.

The following table summarizes warrant activity:

	Number of shares			Weighted Average exercise price		Weighted Average remaining years
Outstanding December 31, 2022		4,275,721		$	5.16		3.14
Cancelled		(119,095	)	$	4.15
Issued		3,333,334		$	2.74
Outstanding as of December 31, 2023		7,489,960		$	3.52		3.83

See Note 1 for information on warrants issued during the Offering.