APCX.OQBApptech Payments CORP
10-Q: AppTech Payments Corp. Reports Second Quarter 2024 Results Amidst Financial Challenges
Sentiment:
Quarterly Report
AppTech Payments Corp. reported a net loss of $2.922 million for the second quarter of 2024, with a decrease in revenue and ongoing concerns about its ability to continue as a going concern.
Delay expectedThe company's note payable with Black Ice Advisors, LLC, matured on August 10, 2024, and has not been repaid, resulting in late fees of $500 per day.
Capital raiseThe company completed a private placement offering on July 10, 2024, raising $910,000 in net proceeds.The company is actively pursuing additional funding options.The company's ability to raise capital under its ATM offering is currently limited by the Baby Shelf Rule.
Worse than expectedThe company's revenue decreased by 43% for the three months ended June 30, 2024, compared to the same period in 2023.The company reported a net loss of $2.922 million for the three months ended June 30, 2024, and a net loss of $5.959 million for the six months ended June 30, 2024.The company's cash and cash equivalents were critically low at $16 thousand as of June 30, 2024.
Summary
- AppTech Payments Corp. reported a net loss of $2.922 million for the three months ended June 30, 2024, and a net loss of $5.959 million for the six months ended June 30, 2024.
- Revenue decreased by 43% to $76 thousand for the three months ended June 30, 2024, and decreased by 19% to $181 thousand for the six months ended June 30, 2024, compared to the same periods in 2023.
- The company's operating expenses were $2.953 million for the three months ended June 30, 2024, and $6.079 million for the six months ended June 30, 2024.
- The company's cash and cash equivalents were $16 thousand as of June 30, 2024, with a working capital deficit of $4.3 million and total stockholders equity of $1.740 million.
- The company has experienced recurring operating losses and has raised substantial doubt about its ability to continue as a going concern.
- Management is actively pursuing additional funding options and is confident that it will begin generating revenue during the following twelve months.
- The company completed a private placement offering on July 10, 2024, raising $910,000 in net proceeds.
Sentiment
Score: 2
Explanation: The document indicates significant financial distress, with declining revenue, substantial losses, and a going concern warning. While there are efforts to raise capital, the overall outlook is negative.
Positives
- The company completed a private placement offering on July 10, 2024, raising $910,000 in net proceeds.
- Management is actively pursuing additional funding options.
- The company has taken cost-cutting measures to lower expenses.
Negatives
- The company experienced a 43% decrease in revenue for the three months ended June 30, 2024, compared to the same period in 2023.
- The company reported a net loss of $2.922 million for the three months ended June 30, 2024, and a net loss of $5.959 million for the six months ended June 30, 2024.
- The company's cash and cash equivalents were critically low at $16 thousand as of June 30, 2024.
- There is substantial doubt about the company's ability to continue as a going concern due to recurring operating losses.
- The company has a working capital deficit of $4.3 million as of June 30, 2024.
- The company wrote off $6.1 million in capitalized assets related to Infinios in June 2023.
- The company is facing a lawsuit from three former employees regarding severance claims.
Risks
- The company's recurring operating losses and limited revenues raise substantial doubt about its ability to continue as a going concern.
- The company's low cash balance of $16 thousand as of June 30, 2024, poses a significant liquidity risk.
- The company is dependent on a small number of customers for a large portion of its revenue, with 82% of revenue generated from three customers for the six months ended June 30, 2024.
- The company is involved in ongoing legal proceedings, including an arbitration claim with Infinios and a lawsuit from former employees.
- The company is subject to the risk of not regaining compliance with Nasdaq's minimum bid price requirement by November 5, 2024.
- The company's ability to raise capital under its ATM offering is currently limited by the Baby Shelf Rule.
- The company's new note payable has an implied annual interest rate of 73% and a default provision that could significantly increase the amount owed.
Future Outlook
Management is actively pursuing additional funding options and is confident that it will begin generating revenue during the following twelve months, although no assurances can be made.
Management Comments
- Management is actively pursuing additional funding options.
- Management intends to maintain adequate working capital and adhere to prudent financial forecasting.
- Management undertook cost cutting measures to lower its expenses.
Industry Context
The financial services industry is experiencing rapid growth due to technological advancements and the rise of contactless transactions. AppTech is positioning itself to meet the growing needs of businesses by offering innovative payment and digital banking solutions. The company's platform, FinZeo, aims to provide a comprehensive suite of financial technologies and services.
Comparison to Industry Standards
- AppTech's financial performance is significantly below industry standards for growth and profitability, particularly when compared to established fintech companies like PayPal, Square, and Adyen.
- While these larger companies report billions in revenue and consistent profitability, AppTech is struggling with low revenue and substantial losses.
- AppTech's cash position of $16 thousand is critically low compared to the industry average, where companies typically maintain a healthy cash reserve to fund operations and growth.
- The company's reliance on a small number of customers for the majority of its revenue is a significant risk, unlike larger companies with diversified customer bases.
- The ongoing legal issues and the going concern warning are also not typical for established companies in the fintech sector.
Legal Proceedings
- The company is involved in an ongoing arbitration claim with Infinios Financial Services.
- The company is facing a lawsuit from three former employees regarding severance claims.
- The company reached a Settlement and Release Agreement with NCR Payment Solutions, LLC in March 2024.
Related Party Transactions
- PayToMe.co is a related party to AppTech, with senior members of the company sitting on PayToMe.co's board of directors and AppTech's CFO being married to its founder and CEO.
- The company has payables due to a related party of $1.35 million as of June 30, 2024, related to the purchase of FinZeo.
Stakeholder Impact
- Shareholders are at risk due to the company's financial instability and the potential for further dilution.
- Employees face uncertainty due to the company's going concern status and potential restructuring.
- Customers may be concerned about the company's ability to provide ongoing services.
- Suppliers and creditors face increased risk of non-payment due to the company's financial difficulties.
Next Steps
- The company will continue to pursue additional funding options.
- The company will work to regain compliance with Nasdaq's minimum bid price requirement by November 5, 2024.
- The company will continue to pursue consensual means of resolving the dispute with Infinios.
- The company will continue to defend against the lawsuit from former employees.
Key Dates
| Date | Description |
|---|---|
| 2020-12-30 | Date of unsecured note payable with the U.S. Small Business Administration. |
| 2020-12-31 | Date of unsecured note payable with the U.S. Small Business Administration. |
| 2021-01-01 | Start of Infinios Financial Services agreement. |
| 2022-12-31 | Year end for financial reporting. |
| 2023-01-01 | Start of financial reporting period. |
| 2023-02-01 | Start of registered direct offering. |
| 2023-02-28 | End of registered direct offering. |
| 2023-03-31 | End of quarter for financial reporting. |
| 2023-04-01 | Start of financial reporting period. |
| 2023-05-31 | Date of Equity Incentive Plan. |
| 2023-06-01 | Start of Infinios Capitalized Software Development. |
| 2023-06-30 | End of quarter for financial reporting. |
| 2023-08-01 | Start of ATM offering. |
| 2023-08-31 | End of ATM offering. |
| 2023-10-12 | Date of Membership Interest Purchase Agreement with Alliance Partners, LLC. |
| 2023-10-13 | Date of Membership Interest Purchase Agreement with Alliance Partners, LLC. |
| 2023-10-25 | Date of Securities Purchase Agreement. |
| 2023-10-26 | Date of Securities Purchase Agreement and closing of Alliance Partners, LLC acquisition. |
| 2023-10-30 | Date of Securities Purchase Agreement. |
| 2023-10-31 | Date of Securities Purchase Agreement and lease agreement. |
| 2023-12-31 | Year end for financial reporting. |
| 2024-01-01 | Start of financial reporting period. |
| 2024-03-25 | Date of Underwriting Agreement. |
| 2024-03-26 | Date of Underwriting Agreement. |
| 2024-03-31 | End of quarter for financial reporting. |
| 2024-04-01 | Start of financial reporting period. |
| 2024-04-03 | Date of stock options grant to current employees and consultants. |
| 2024-04-04 | Date of stock options grant to current employees and consultants. |
| 2024-05-31 | Date of Equity Incentive Plan. |
| 2024-06-09 | Date of unsecured note payable with Black Ice Advisors, LLC. |
| 2024-06-10 | Date of unsecured note payable with Black Ice Advisors, LLC. |
| 2024-06-17 | Date of stock issuance to Black Ice Advisors, LLC. |
| 2024-06-20 | Date of amendment to payment terms with Alliance Partners, LLC. |
| 2024-06-30 | End of quarter for financial reporting. |
| 2024-08-10 | Maturity date of note payable with Black Ice Advisors, LLC. |
| 2024-08-14 | Date of report. |
Keywords
Fintech, Payments, Digital Banking, Merchant Services, Financial Results, Going Concern, Revenue, Net Loss, Operating Expenses, Capital Raise, Stock Options, Warrants, Legal Proceedings
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