SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2024

Accounting Policies [Abstract]

Basis of Presentation

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 June 30, 2024 and June 30, 2023. 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, 2023, filed with the SEC on April 1, 2024. The interim results for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ended December 31, 2024 or for any future interim periods.

Basis of Consolidation

Basis of Consolidation

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

Use of Estimates

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.

The Company makes critical estimates and assumptions in valuing: stock-based awards, intangible assets and the related goodwill impairment test. Actual results could differ from those estimates.

Prior Period Reclassifications

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. Specifically, the Company reclassified ‘Accounts Payable - Related Party’ from ‘Accounts Payable’ within the consolidated balance sheet. As a result, ‘Accounts Payable - Related Party’ is presented separately as of June 30, 2024 and December 31, 2023.

Concentration of Credit Risk

Concentration of Credit Risk

Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits of $250,000 per institution that pays Federal Deposit Insurance Corporation 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. As of June 30, 2024, 81% of the accounts receivable balance was generated from three customers. As of December 31, 2023, the same three customers accounted for 96% of total accounts receivable.

For the six months ended June 30, 2024, 82% of the revenue was generated from three customers. For the six months ended June 30, 2023, the same three customers represented 86% of total revenues. The loss of the customer would have a significant impact on the Company’s financials.

Revenue Recognition

Revenue Recognition

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, codified as Accounting Standards Codification (“ASC”) 606 Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.

The Company provides merchant processing solutions for credit cards and electronic payments. In all cases, the Company acts as an agent between the merchant, which generates the credit card and electronic payments, and the bank, which processes such payments.

The Company’s revenue is generated on services priced as a percentage of transaction value or a specified fee transaction, depending on the card or transaction type. Revenue is recorded as services are performed, which is typically when the bank processes the merchant’s credit card and electronic payments. Consideration paid to channel partners is recorded as a reduction in revenues.

Licensing Revenue

Licensing Revenue

The Company is actively pursuing strategic partnership agreements that licenses our portfolio of patents in return for a fee. The licensing fee is deferred and recognized evenly on a monthly basis over the term of the service period or contract.

Intangible Assets and Intellectual Property

Intangible Assets and Intellectual Property

Intellectual Property

The Company amortizes intellectual property based on the estimated period over which the economic benefits of the intangible assets are expected to be consumed. Typically, the Company amortizes its intellectual property, including patents and other identifiable intangible assets, on a straight-line basis. The amortization periods generally range from three years to fifteen years, depending on the nature of the asset and its expected useful life.

Capitalized Software Development Costs

The Company capitalizes certain costs related to the development of its digital payment and banking platform, including employee compensation and consulting fees for third-party developers, only when it is probable that the development will result in new or additional functionality. Costs incurred during the preliminary project planning phase and post-implementation phase are expensed as incurred. The identifiable intangible assets, such as acquired technology, intellectual property, and non-competes, are recorded at their acquisition-date fair value using a combination of the income and cost approaches. The capitalized software development costs are amortized on a straight-line basis over the estimated useful life of the asset.

Goodwill

The Company accounts for goodwill in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”). ASC 350 requires that goodwill and other intangibles with indefinite lives should be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value.

Research and Development

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 our technology platform, contract and other outside services. Total R&D costs for the six months ended June 30, 2024 and 2023 were approximately $1.3 million and $2.0 million, respectively.

Per Share Information

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, and convertible preferred stock.

The number of common stock equivalents not included in diluted income per share was 10,702,946 and 6,705,196 for the six months ended June 30, 2024 and 2023, respectively. The weighted average number of common stock equivalents is not included in diluted income (loss) per share, because the effects are anti-dilutive.

	June 30, 2024		June 30, 2023
Series A preferred stock		1,148		1,148
Warrants		7,489,960		5,823,036
Options		3,211,838		881,012
Total		10,702,946		6,705,196

Stock Based Compensation

Stock Based Compensation

The Company recognizes as compensation expense all share-based payment awards made to employees, directors, and consultants, including grants of stock, stock options, and warrants, based on their estimated fair values. For stock awards, fair value is determined based on the closing price of the Company’s common stock on the grant date and is recognized over the service period required for the employees, directors, and consultants to earn the awards. For stock options and warrants, fair value is estimated using an appropriate valuation model at the grant date, considering the terms and conditions under which the awards were granted. The expense is similarly recognized over the period during which the service conditions are expected to be met. Additionally, the Company has several grant agreements that include options awarded based on contingent performance. For these performance-based option grants, the Company records the fair market value of the options at the time the performance criteria are fully met.

New Accounting Pronouncements

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.