NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated audited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Certain prior period amounts have been reclassified to conform to the current period’s presentation.

Basis of Consolidation

The consolidated audited financial statements include the accounts of AppTech Payments Corp. and its wholly owned subsidiaries. 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.

The Company makes critical estimates and assumptions in valuing identifiable intangible assets from the IP acquisition, and its related contingent considerations. 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 $250,000 per institution that pays Federal Deposit Insurance Corporation (“FDIC”) insurance premiums. The Company has never experienced any losses related to these balances.

As of December 31, 2025, one customer accounted for 16% of the accounts receivable balance compared to three customers accounting for 85% in 2024.

For the year ended December 31, 2025, two customers accounted for 31% and 15% of our revenues compared to 34%, 22% and 15% for the top three customers for the year ended December 31, 2024. The loss of the customers would have a significant impact on the Company's financials

Cash and Cash Equivalents

The Company's cash consists of cash on deposit at its bank. Cash equivalents, if applicable, represents highly liquid investments with maturities of three months or less at the date of purchase. Management determines the appropriate classification.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are recorded at the invoiced amount and presented net of an allowance for credit losses, when applicable. The Company estimates the allowance for credit losses using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical loss experience is generally the starting point for estimating expected credit losses, which is then adjusted for current conditions and reasonable and supportable forecasts of future economic conditions, as applicable. The Company regularly monitors receivables for collectability and updates its estimate of expected credit losses at each reporting date.

Historically, the Company has not experienced significant credit losses on its accounts receivable and, as a result, maintains an allowance for credit losses of $0 as of December 31, 2025 and December 31, 2024, respectively. The Company has not written off any material accounts receivable balances in the periods presented.

Loan Receivables and Interest Income

Loan receivable represents amounts due to the Company under contractual lending arrangements. Loans are recorded at their outstanding principal balance, net of any allowance for expected credit losses, when applicable. The Company evaluates loan receivables for collectability on a regular basis and considers relevant factors such as payment history, financial condition of the borrower, and current economic conditions.

Interest income is recognized over the term of the loan using the effective interest method, based on the principal amount outstanding. Accrual of interest is discontinued when, in management’s opinion, the collectability of principal or interest becomes uncertain. Payments received on nonaccrual loans are applied to principal unless otherwise determined by management.

Convertible Notes

Convertible notes represent debt instruments that may be converted into the Company’s equity securities upon the occurrence of certain events or at the option of the holder, in accordance with the terms of the agreement. Convertible notes are recorded at their principal amount, net of any unamortized debt discount and issuance costs.

The Company evaluates the terms of each convertible note to determine whether any embedded features, including conversion options, should be accounted for separately or as a component of the note. Debt discounts, including those arising from embedded derivative liabilities or other embedded elements, are amortized to interest expense over the term of the notes using the effective interest method.

Upon conversion, the carrying value of the convertible note, including any unamortized discount, is reclassified to equity.

Revenue Recognition

The Company accounts for revenue under 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.

Setup 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 are based upon a percentage of the amounts processed by these merchant accounts.

Business Combination

ASC 805, Business Combinations (“ASC 805”), applies the acquisition method of accounting for business combinations to all acquisitions where the acquirer gains a controlling interest, regardless of whether consideration was exchanged. ASC 805 establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Accounting for acquisitions requires the Company to recognize, separately from goodwill, the assets acquired, and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While the Company provided its best estimates and assumptions when accurately valuing assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

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 Cost

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 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. Goodwill represents the excess of the purchase price over the estimated fair values of the net tangible and intangible assets of acquired entities. The Company performs a goodwill impairment test annually and more frequently if an event or circumstance indicates that impairment may have occurred. Triggering events that may indicate a potential impairment include, but are not limited to, significant adverse changes in customer demand or business climate and related competitive considerations. The Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company performs a goodwill impairment test to calculate the fair value of the applicable reporting   unit(s) and compares it to its carrying amount. We recognize an impairment on any amount of the carrying value over the fair value. If the Company determines that the implied fair value of a reporting unit is greater than its carrying amount, the goodwill impairment test is not required. Management performed the analysis and no impairment was deemed necessary.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or asset group exceeds the estimated fair value of the asset or asset group. Long-lived assets to be disposed of by sale are reported at the lower of their carrying amounts or their estimated fair values less costs to sell and are not depreciated. During the years ended December 31, 2025 and 2024, there was $0 in asset impairments.

Leases

The Company recognizes right-of-use assets and lease liabilities at the commencement date of the lease based on the present value of remaining fixed and determinable lease payments over the lease term. The Company calculates the present value of future payments by using an estimated incremental borrowing rate, which approximates the rate at which the Company would borrow on a secured basis and over a similar term, and recognizes lease expense for operating leases on a straight-line basis over the lease term. Right-of-use assets represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company uses the incremental borrowing rate on the commencement date in determining the present value of the lease payments.

The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable.

The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met.

Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain. Variable lease payments are presented as operating expenses in the Company’s statement of operations in the same line as expense arising from fixed lease payments. As of December 31, 2025 and 2024, management determined that there were no variable lease costs.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date.

The Company’s income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known. As of December 31, 2025 and 2024, the Company does not believe any provisions are required in connection with uncertain tax positions.

Research and Development

Research and Development (R&D) expenses include internal and outsourced service costs incurred to maintain the FinZeo and Infintus Pay, Inc platforms. Per ASC 730, R&D costs are expensed as incurred. Total R&D expenses for the years ended December 31, 2025 and December 31, 2024, were approximately $2,347 thousand and $1,977 thousand, 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 for the years ended December 31, 2025 and 2024, respectively are presented below. The weighted average number of common stock equivalents is not included in diluted income (loss) per share, because the effects are anti-dilutive.

Stock-based compensation

Stock options are valued using the estimated grant-date fair value method of accounting in accordance with ASC Topic 718, Compensation – Stock Compensation. Fair value is determined based on the Black-Scholes Model using inputs reflecting our estimates of expected volatility, term and future dividends. We recognize forfeitures as they occur. The Company has several consulting agreements that have share-based payment awards based on performance. These agreements typically require the Company to issue common stock to the consultants on a monthly basis. The Company records the fair market value of the common stock issuable at each month end when the performance is complete based upon the closing market price of the Company’s common stock.

Segment Reporting

In accordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business activities are managed and evaluated. ASC 280 establishes standards for companies to report financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision makers (“CODMs”) in deciding how to allocate resources and assess performance.

The CODMs have been identified as the Chief Executive Officer and Chief Financial Officer, who reviews the operating results for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that the Company only has one operating and reportable segment.

The key measures of segment profit or loss reviewed by our CODMs are revenue and operating expenses. Revenue is monitored by the CODMs to understand the performance of its verticals. Operating expenses are reviewed and monitored by the CODMs to manage and forecast cash. The CODMs also reviews operating costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and internal budgets.

Fair Value Measurements

The Company measures certain assets and liabilities at fair value in accordance with applicable accounting guidance. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company categorizes fair value measurements within a three-level hierarchy based on the nature of the inputs used in the valuation, as follows:

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of the asset or liability within the fair value hierarchy.

New Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issues Accounting Standards Updates (“ASUs”) to amend the authoritative accounting guidance in the Accounting Standards Codification (“ASC”).

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision-usefulness of income tax disclosures. The standard requires, among other items, enhanced rate reconciliation disclosures (including disaggregation of significant reconciling items by nature and jurisdiction) and expanded disclosures of income taxes paid, net of refunds, by jurisdiction. The Company adopted ASU 2023-09 effective January 1, 2025. The adoption did not impact the Company’s consolidated financial position, results of operations, or cash flows, as the guidance is disclosure-only in nature.

On November 4, 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures. This ASU provides guidance to public companies regarding footnote disclosures of natural expense components (such as employee compensation, depreciation, and amortization) included within each relevant income statement expense caption. The guidance is effective for public companies for fiscal years beginning after December 15, 2026. The Company is currently assessing the impact of the new guidance on its financial statement disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (the “internal-use software update”). This ASU modernizes the accounting for internal-use software costs to better reflect agile development methods. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. Per the guidance, the effective date of the ASU is for annual reporting periods after December 15, 2027.

Except as noted above, the Company believes that recent ASUs issued by the FASB either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company, or (iv) are not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.