# EDGAR Filing Document

**Accession Number:** 0001437283
**File Stem:** 0001214659-23-004597
**Filing Date:** 2023-3
**Character Count:** 301346
**Document Hash:** a2d847c1d900e6d4950daf6f1cad3fde
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001214659-23-004597.hdr.sgml**: 20230331

**ACCESSION NUMBER**: 0001214659-23-004597

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 79

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230331

**DATE AS OF CHANGE**: 20230331

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** REGO PAYMENT ARCHITECTURES, INC.
- **CENTRAL INDEX KEY:** 0001437283
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **IRS NUMBER:** 352327649
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-53944
- **FILM NUMBER:** 23787348

**BUSINESS ADDRESS:**
- **STREET 1:** 325 SENTRY PARKWAY
- **STREET 2:** SUITE 200
- **CITY:** BLUE BELL
- **STATE:** PA
- **ZIP:** 19422
- **BUSINESS PHONE:** 267-465-7530

**MAIL ADDRESS:**
- **STREET 1:** 325 SENTRY PARKWAY
- **STREET 2:** SUITE 200
- **CITY:** BLUE BELL
- **STATE:** PA
- **ZIP:** 19422

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** VIRTUAL PIGGY, INC.
- **DATE OF NAME CHANGE:** 20110829

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Moggle, Inc.
- **DATE OF NAME CHANGE:** 20080610

?xml version="1.0" encoding="ASCII"?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

**FORM 10-K**

(Mark One)

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| | |
|:---|:---|
| ☑ | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

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**For the fiscal year ended December 31, 2022**

**OR**

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> to <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>**

**Commission File Number 0-53944**

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| |
|:---|
| **REGO PAYMENT ARCHITECTURES, INC.** |
| **(Exact Name of Registrant as Specified in Its Charter)** |

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| | |
|:---|:---|
| **Delaware** | **35-2327649** |
| **(State or Other Jurisdiction of**<br> **Incorporation or Organization)** | **(I.R.S. Employer<br> Identification No.)** |
| **325 Sentry Parkway, Suite 200**<br> **Blue Bell, PA** | **19422** |
| **(Address of Principal Executive Offices)** | **(Zip Code)** |

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**(267) 465-7530**

**(Registrant's Telephone Number, Including Area Code)**

Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| **<u>Title of Each Class</u>** | **<u>Trading Symbol(s)</u>** | **<u>Name of Each Exchange on Which Registered</u>** |

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Securities registered pursuant to Section 12(g) of the Act:

**Common Stock, $0.0001 par value**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ or No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ or No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ or No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ or No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company", in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☑ Smaller reporting company ☑ <br> Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate market value of the common stock held by non-affiliates of the registrant was $101,391,214 as of June 30, 2022 based on the price at which the common stock of the registrant was last sold as reported by the OTC Bulletin Board. Shares of common stock held by each current executive officer and director and by each person who is known by the registrant to own 5% or more of the outstanding common stock have been excluded from this computation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not a conclusive determination for other purposes.

We had 124,443,105 shares of common stock outstanding as of the close of business on March 31, 2023.

**DOCUMENTS INCORPORATED BY REFERENCE**

**NONE**

**REGO PAYMENT ARCHITECTURES, INC.**

FORM 10-K ANNUAL REPORT

Year Ended December 31, 2022

---

| | | |
|:---|:---|:---|
|  |  | Page |
| PART I |  |  |
| Item 1. | [Business](#i1) | 1 |
| Item 1A. | [Risk Factors](#i1a) | 11 |
| Item 1B. | [Unresolved Staff Comments](#i1b) | 22 |
| Item 2. | [Properties](#i2) | 23 |
| Item 3. | [Legal Proceedings](#i3) | 23 |
| Item 4. | [Mine Safety Disclosures](#i4) | 23 |
| PART II |  |  |
| Item 5. | [Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#i5) | 23 |
| Item 6. | [\[Reserved\]](#i6) | 24 |
| Item 7 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#i7) | 24 |
| Item7A. | [Quantitative and Qualitative Disclosures About Market Risk](#i7a) | 30 |
| Item 8. | [Financial Statements and Supplementary Data](#i8) | 30 |
| Item 9. | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](#i9) | 30 |
| Item 9A. | [Controls and Procedures](#i9a) | 30 |
| Item 9B. | [Other Information](#i9b) | 31 |
| Item 9C. | [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](#i9c) | 31 |
| PART III |  |  |
| Item 10. | [Directors, Executive Officers and Corporate Governance](#i10) | 31 |
| Item 11. | [Executive Compensation](#i11) | 32 |
| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#i12) | 35 |
| Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#i13) | 38 |
| Item 14. | [Principal Accountant Fees and Services](#i14) | 38 |
| PART IV |  |  |
| Item 15. | [Exhibits and Financial Statement Schedules](#i15) | 40 |
| Item 16. | [Form 10-K Summary](#i16) | 43 |

---

[**Table of Contents**](#toc)

**<u>PART I</u>**

**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

This report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact included or incorporated by reference in this annual report on Form 10-K, including without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expects," "intends," "plans," "projects," "estimates," "anticipates," or "believes" or the negative thereof or any variation thereon or similar terminology or expressions. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to: our ability to raise additional capital, our limited revenues generated to date, our ability to attract and retain qualified personnel, our dependence on third party developers who we cannot control, our ability to develop and introduce a new service to the market in a timely manner, market acceptance of our services, our limited experience in a relatively new industry, the ability to successfully develop licensing programs and generate business, rapid technological change in relevant markets, unexpected network interruptions or security breaches, the ongoing COVID-19 pandemic, changes in demand for current and future intellectual property rights, legislative, regulatory and competitive developments, intense competition with larger companies, general economic conditions, and other factors set forth under "Item 1A — Risk Factors" below. Except as required by law, we assume no duty to update or revise our forward-looking statements.

**ITEM 1. <u>BUSINESS</u>.**

**General Development**

REGO Payment Architectures, Inc. (the "Company," "REGO," "we", or "us") was incorporated in Delaware on February 11, 2008 under the name Chimera International Group, Inc. On April 4, 2008, we amended our certificate of incorporation and changed our name to Moggle, Inc. On August 22, 2011, we filed a Certificate of Ownership with the Secretary of State of Delaware, pursuant to which the Company's newly formed wholly owned subsidiary, Virtual Piggy Incorporated was merged into and with the Company (the "Merger"). In connection with the Merger and in accordance with Section 253 of the Delaware General Corporation Law, the name of the Company was changed from "Moggle, Inc." to "Virtual Piggy, Inc." On February 28, 2017, we amended our certificate of incorporation and changed our name to REGO Payment Architectures, Inc. Our principal offices are located at 325 Sentry Parkway, Suite 200, Blue Bell, PA 19422 and our telephone number is (267) 465-7530.

As of the date of this report, we have not generated significant revenues. Our initial business plan was to develop an online game platform to allow game companies to create, monetize and distribute massive multiplayer online games (MMOG). The Company technology was the monetization component of this overall software platform (our "Platform"). During 2010, we analyzed the market potential for an expanded Company solution and decided to concentrate our efforts on the delivery of a full-featured Company solution that was not restricted to online gaming. The expanded Company solution was designed to provide a complete online solution for families and parents to teach their children about financial management and spending on gaming, retail, music and entertainment. In late 2013, we rebranded our Company product under the name "Oink®". In March 2016, we discontinued our prior Oink product offering.

Our focus currently is monetizing the Mazoola® Digital Wallet Platform in the Financial Technology ("FinTech") industry through white label, licensing and partnership agreements. We have successfully launched the Mazoola® App and are focused on improving and monetizing the existing Platform and App that will act as the foundation for the strategic alignment with the FinTech industry. The FinTech industry is composed primarily of startup companies that use software to provide financial services more efficiently and less costly than traditional financial service companies. With our Children's Online Privacy Protection Act ("COPPA") and GDPRkids<sup>TM</sup> Trustmark compliant technology as an added feature, we believe we may have better market success.

[**Table of Contents**](#toc)

**Overview**

REGO Payment Architectures, Inc. is a provider of consumer software that delivers a mobile payment platform - Mazoola® - a family focused mobile banking solution. Headquartered in Blue Bell, Pennsylvania, the Company maintains a portfolio of trade secrets and four US patent awards. REGO offers an all-digital financial payments platform to enable minors, particularly under 13 years old, to transact, complete chores and learn in a secure online environment guided by parental permission, oversight, and control, while remaining COPPA and GDPR compliant.

COPPA applies not only to websites and mobile apps. It can apply to a growing list of connected devices that is included in the Internet of Things. Some of these include toys and products that could collect personal information, such as voice recordings or geolocation information. Non-compliance with COPPA has meant substantial fines for many violators.

Management believes that by building on its COPPA compliance advantage, the future of REGO Payment Architectures, Inc. will be based on the foundational architecture of its software platform (the "Platform") that will allow its use across multiple financial markets where secure controlled payments are needed. The Company intends to license in each alternative field of use the ability for its partners, distributors and/or value-added resellers to private label each of the alternative markets. These partners will deploy, customize and support each implementation under their own label, but with acknowledgement of the Company's proprietary intellectual assets as the base technology. Management believes this approach will enable the Company to reduce marketing expenses while broadening its reach.

Further, California passed the California Consumer Privacy Act of 2018 ("CCPA") on June 28, 2018. CCPA gives consumers (defined as natural citizens who are California residents) four rights relative to their personal information as follows:

● the right to know, through a general privacy policy and with more specifics available upon request, what personal information a business has collected about them, where it was sourced from, what it is being used for, whether it is being disclosed or sold, and to whom it is being disclosed or sold;

● the right to "opt out" of allowing a business to sell their personal information to third parties (or, for consumers who are under 16 years old, the right not to have their personal information sold absent their, or their parent's, opt-in);

● the right to have a business delete their personal information, with some exceptions; and

● the right to receive equal service and pricing from a business, even if they exercise their privacy rights under the CCPA.

In November 2020, California went even further by passing the California Privacy Rights Act ("CPRA") of 2020. The CPRA is the strongest consumer privacy law ever enacted in the United States and achieves broad general parity with the most comprehensive laws in other jurisdictions including Europe (GDPR), Japan, Israel, New Zealand, and Canada. Protection of children is a key component of the CPRA with significant expansion to enforcement also included. CPRA empowers the Attorney General, California's 62 different district attorneys, and a brand-new California Privacy Protection Agency to enforce it, with those powers coming into force on July 1, 2023. Additional states such as Virginia, Connecticut, Colorado, and Nevada are exploring joining California in implementing similar comprehensive privacy legislation.

With respect to the evolving CCPA, the Company has designed its Platform and app to be in compliance.

Additionally, the European Parliament and Council agreed upon the General Data Protection Regulation ("GDPR") in April 2016, to replace the Data Protection Directive 95/46/EC. This is the primary law regulating how companies protect European Union ("EU") citizens' personal data. GDPR became effective on May 25, 2018. Companies that fail to achieve GDPR compliance are subject to severe fines and penalties.

[**Table of Contents**](#toc)

GDPR requirements apply to each member state of the European Union, aiming to create more consistent protection of consumer and personal data across EU nations. Some of the key privacy and data protection requirements of the GDPR include:

● Requiring the consent of subjects for data processing

● Anonymizing collected data to protect privacy

● Providing data breach notifications

● Safely handling the transfer of data across borders

● Requiring certain companies to appoint a data protection officer to oversee GDPR compliance

In short, the handling of EU citizens' data is mandated by GDPR using a baseline set of standards for companies that are designed to better safeguard the processing and movement of personal data. The Company has designed its Platform and app to be in compliance with GDPR and has received the GDPRkidsTM Trustmark from PRIVO.

Revenues generated from the Platform will come from multiple sources depending on the level of service and facilities requested. There will be levels of subscription revenue paid monthly, service fees, transaction fees and in some cases, revenue sharing and licensing with banking and distribution partners.

**Industry Background**

In 2022, it was estimated that approximately 25% of the world's population, estimated at 8 billion, or approximately 2 billion people were under age 15. This is primarily Generation Z ("Gen Z") and Generation Alpha ("Gen Alpha").

Gen Z are those born between 1997 and 2010 and are characterized by growing up in a highly sophisticated media and computer environment with greater internet savvy than any previous generation. They have been coined with the names "True Gen," the "iGeneration," "Homelanders," "Generation Connected," and "Dot Com Kids." Gen Z has an estimated spending power of $323 billion per year, while it is estimated that Gen Z influences $600 billion in family spending per year.

They use the mobile internet more than any other generation on a daily basis as a communication tool and a method to stay connected with the people and things that are important to them. Studies have shown that Gen Z spends over 8 hours per week online on average, 4.5 hours per day on their mobile phones and 3.5 hours per day on their laptops. They are online for 10 or more hours per day with the use of smartphones, tablets, laptops, desktops and TV's. Gen Z are 2 times more likely to shop online than Millennials. Additionally, 62 percent of Gen Z have reported worrying about the use of their personal information by companies.

Gen Alpha are those born since the year 2010. They are the children of the Millennials and are sometimes referred to as mini-Millennials. They will be the first generation entirely born and shaped in the 21<sup>st</sup> century. They have become known as "Digital Natives." They are the most materially endowed and technologically literate generation on Earth. While not much information has been observed as of yet, Gen Alpha has been projected to be the best-educated, the most technologically immersed, the wealthiest and the generation most likely to spend some or all of their childhood in living arrangements without both of their biological parents. Millennials tend to provide mini versions of what they have themselves to Gen Alpha. Thus, Gen Alpha is more likely to seek out the best brands and best products and have the ability to differentiate knockoff brands. This is the next generation to watch as they have already begun to spend and influence spending.

Because there is no direct financial solution for these generations, they still use either cash or their parent's funding source (credit card) and hence there is still a lack of quantification of the dollar size of the children's "spending" market, which is separate from the dollars spent on children. Marketers and regulators have taken note of the change and made a shift to a more "digital" approach to their overall strategy. Additionally, children's access to increasingly available technology has fueled concerns about security, safety and compliance with government regulations. As children march toward adulthood, parents are providing the means for children to have products (money), and technology and providing them the increasingly easy opportunity to do so.

[**Table of Contents**](#toc)

With Gen Z and Gen Alpha in mind, the Company is focusing on the FinTech industry. There are several fields affected by FinTech including banking, insurance, loans, personal finance, electronic payments, venture capital and wealth management. The brands that appear in the FinTech industry include Apple, Goldman Sachs, PWC, JP Morgan, Samsung, Amazon and Paypal to name a few.

The key metrics to the FinTech industry are as follows:

● The U.S. Fintech market has achieved a $4 trillion market size in 2022 and projects a Compound Annual Growth Rate (CAGR) of 11% over the next 5 years.

● In the U.S., the leading FinTech segment is digital payment, valued at over $1.2 trillion in 2021.

● 60% of credit unions and 49% of banks believe partnerships with FinTech companies are important.

● By 2025, the U.S. will account for more than 62% of the global FinTech transaction value.

● The worth of the global financial sector is expected to be $28.5 trillion by 2025 with a 6% CAGR.

● 75% of global consumers have used at least one fintech service to pay online or using a mobile application.

● 70% of U.S. customers say that mobile banking will represent the future.

● In 2022, the market's leading segment was digital payments, with a total transaction value of $1.8 trillion.

● In the U.S., the number digital payment users is projected to be 307 million by 2026.

FinTech companies are not restricted to the same degree by regulatory compliance nor antiquated systems with which the established financial services companies contend, although governments at all levels are increasing their interest in the industry. These companies can concentrate on single purpose solutions, which are designed to enhance the user's experience. In 2022, nearly two-thirds (65.3 percent) of the U.S. population used a digital banking services. Additionally, in 2022, 97% of millennials indicated that they use mobile banking.

The innovations taking place in FinTech can be summarized in four categories:

&nbsp;&nbsp;&nbsp;&nbsp;1. Peer-to-Peer ("P2P") value exchanges – Growth of applications has been stimulated by the popularity and use of social
networks.

&nbsp;&nbsp;&nbsp;&nbsp;2. Applications with machine intelligence – Automation becoming a necessity in the do-it-yourself environment.

&nbsp;&nbsp;&nbsp;&nbsp;3. Data-driven services – The ability to access data and data analytics is leading to more individualized products and lower pricing
of financial services.

&nbsp;&nbsp;&nbsp;&nbsp;4. Less definition between physical and virtual worlds – People are using financial services more in the virtual arena than in
visiting physical locations.

Digital-only banking is growing. These banks offer virtual global payments, P2P transfers and opportunities to buy and exchange Bitcoin and other cryptocurrencies.

Blockchain, a distributed ledger technology, is also having a substantial impact on global finance. The two fastest-growing segments of FinTech are blockchain and regulatory technology ("regtech"). It is anticipated that blockchain technology will increase the global economy by $1.76 trillion by 2030. The largest economic impact will be tracking and tracing products and services estimated at $962 billion. Payments and financial services will be impacted by an approximate $433 billion. The sectors benefiting the most will be public administration, education and healthcare. The countries that will benefit the most are anticipated to be China ($440 billion) and the US ($407 billion).

The global P2P market size was valued at $1.9 trillion in 2020 and is projected to grow to $9 trillion by 2030. In 2022, the largest P2P money transfer service has an estimated transaction volume of $1.4 trillion with 435 million users. There is evidence to support the primary uses of P2P money transfers is the exchange of money between family and friends.

[**Table of Contents**](#toc)

Artificial intelligence ("AI") is projected to reduce bank operating costs by 22% by the year 2030. This could mean savings of approximately $1 trillion. AI in the banking industry is well positioned to combat cybercrimes and financial fraud. Customer service in financial institutions is now being conducted by AI chatbots and other smart systems. Chatbot interactions are expected to save operational costs in the banking industry $7.3 billion globally by 2023. By 2025, Robo-advisors are expected to manage $16 trillion in assets. In the next 10 years, AI is anticipated to handle 95% of all customer interactions.

Mobile payments were approximately $2 trillion in 2021. The people using contactless payments in 2021 numbered 1.5 billion. In 2022, there were approximately 3.4 billion mobile wallet users with this number expected to exceed 5.2 billion in 2026. As of 2022, mobile payments are used by more than 2 billion people globally, growing by millions each year and mobile transactions comprised 89% of all banking transactions. App store spending was $167 billion worldwide in 2022.

With this as a backdrop, REGO Payment Architectures, Inc. has identified an emerging need to market a financial platform that provides this generation with an alternative solution to traditional banking and solves current limitations on their ability to safely transact using mobile payment solutions for both brick & mortar retail outlets and online shopping. Mazoola® is that platform and along with providing the solution it teaches financial responsibility.

**The Company's Relationship to the Children's Online Privacy Protection Act**

Though the Company does not target or collect the personal information of the under 13 age group, and rather targets parents and families as a whole, the products must still be compliant with COPPA. The new products will meet the requirements imposed by COPPA, including the recent amendments. The Company has gone further than dealing with the federal rules by mapping all state-by-state statutes and regulations that deviate from the federal laws and thus have a complete inter-state commerce view of the regulations that assure compliance for all participants in the system.

To be compliant the Company has renewed its COPPA certification and has received the GDPRkids<sup>TM</sup> Trustmark from PRIVO. PRIVO is an online privacy compliance company and with the certification and Trustmark the Company has joined Privo's Kids Privacy Assured Program, which helps companies navigate the online privacy landscape from COPPA and GDPR to the numerous student digital privacy laws, in addition to offering compliant technology solutions that include youth registration, age verification, parental consent and account management.

**Other Consumer Privacy Protection Legislation**

The Federal Trade Commission ("FTC") has been very active, since as far back as 2003, in penalizing companies for non-compliance with privacy promises, with COPPA at the core of the settlements. Possible penalties under COPPA provide for civil penalties of $42,350 per violation, however, the FTC considers many factors when levying penalties. Among these are the ability of the company to stay in business after the penalty is imposed. Google and YouTube paid a record $170 million in 2019 to settle civil penalties brought by the FTC. Musical.ly (TikTok) agreed to a settlement of $5.7 million in February 2019. TechCrunch's Verizon-owned parent, Oath, created from the merging of AOL and Yahoo, has agreed to pay approximately $5 million for violating COPPA in December 2018. The New York Attorney General has targeted Viacom, Mattel, JumpStart and Hasbro for investigations related to COPPA compliance issues. In July 2021, Kuuhuub, Inc. was fined $3 million for violating COPPA. Epic Games, Inc., the creator of the popular video game Fortnite, was recently fined in December 2022 $275 million for COPPA violations.

A number of foreign governments also have either adopted or are considering data privacy and security regulations. For example, the EU has adopted GDPR, as was previously discussed. The Company's initial target is the U.S. However, the Company has been performing research on compliance issues in European countries and is expanding its focus into the European market. With the GDPR Trustmark the Company is positioned to rapidly adapt to these new markets.

In 2022 there were 511 GDPR fines that totaled over €835 million. Among the top violators in 2022 were Meta/Facebook twice (totaling €670 million) and Clearview AI, Inc. several times (totaling €68 million).

[**Table of Contents**](#toc)

**The Opportunity**

Gen Z and Gen Alpha are the core target users of our mobile payment app, Mazoola®

*As consumers, Gen Z and Gen Alpha have deep pockets, but lack direct access to funds.*

Their spending power is significant and growing. Gen Z has a combined buying power of $323 billion in direct spending. Over 70% of Gen Z say they influence family decisions around furniture, household goods, food and beverages purchases. They are 2 times more likely to shop on mobile devices than Millennials.

*Social and digital learning is key to Gen Z.*

85% of Gen Z uses social media to learn about new products.

*Gen Z's financial future and global impact has yet to be written.*

While 60% of Gen Z say 'a lot of money' is a sign of success and 72% of Gen Z want to start a business one day, the details of how to make smart choices about money are not being shared. In 2022, 20 states had enacted legislation or adopted resolutions regarding financial literacy and financial education issues. Gen Z is primed for deep engagement around future-focused payments solutions, but the conversation and learning and introduction of new financial technologies for this generation must occur within an experience that complements their values, interests and goals. To this end, the financial literacy facilities built within our Platform target both the parent and the child. These built-in guidelines will prepare children for the financial responsibilities they will have in the future and prepare them for the emerging digital economy.

**Our Solution**

Our goal, moving forward is to enable both incumbent and new FinTech participants, as well as key verticals with a large base of 'family accounts,' to provide their consumers with safe and empowering youth money management and financial literacy content and tools via the mobile payment platform.

While some of the REGO Platform can be easily duplicated/commoditized, such as the app skin, APIs to retailers, APIs to financial infrastructure and cloud storage, we believe that defending our market position rests on three factors:

&nbsp;&nbsp;&nbsp;&nbsp;1. The ability to define data control settings from parent to child.

Our approach to this opportunity uses a master account to dictate purchase rules to sub-accounts via a hierarchical architecture. This approach adheres to data flow and privacy policy requirements specifically outlined for COPPA compliance. We believe other approaches based on machine learning, or other artificial intelligence methodologies are potentially viable alternatives but are likely too costly, do not meet current compliance timelines, and may defy the core of COPPA's "opt-in" parameters. There is considerable room for next-generation automation techniques to be layered on REGO's hierarchical approach. Given its current stability and scalability metrics, the REGO Platform strongly features these advances in its technical development roadmap without compromising any of its current data control performance.

&nbsp;&nbsp;&nbsp;&nbsp;2. The ability to (mis) attribute the child's transaction and personal identification.

REGO has solved this issue by masking user data and maintaining separate identity and financial data flows. As a result, REGO can verify the age of the internet user through the transaction lifecycle on its Platform. Authenticating and validating the identity of the actual user on the internet maintains one of the more difficult cybersecurity challenges. Current approaches are mainly not for commercial use; however, there is investment in commercial innovation in this area. REGO's data control features and its (mis)attribution approach is inextricably linked and a key to its scalability and extensibility.

[**Table of Contents**](#toc)

&nbsp;&nbsp;&nbsp;&nbsp;3. The ability to disseminate transactional data on minors while remaining COPPA and GDPR compliant.

The highest value data will be that which shows the most nuanced detail afforded under current regulations. Without extreme data control features, such as in the REGO Platform, any lesser data precision will be less valuable.

These three factors are all supported by REGO's patented technology.

REGO addresses hard industry problems such as:

● COPPA compliant technology with a key component being its ability to verify the age of an internet user

● A master and sub-account architecture with the ability to administer user-specific controls

● An advanced rules engine to provide strict automated compliance of the parental rules for each child

● Near real-time buying behavior database on minors - anonymized geolocation, age range and purchases

Currently, we are targeting established brands with large family-focused account bases — including banks, telecommunication companies, faith-based organizations, media distributors, mobile device Original Equipment Manufacturers ("OEMs"), and merchants.

We are seeking partners that will leverage our Platform to:

**Buy vs. Build:** Partners can license or revenue share for their specific market or field of use a safe, compliant system, instead of building one on their own.

**Safety & Security**: Partners can safely engage a younger consumer segment and their families with a new family friendly peer-to-peer-payment approach. Vendors will be explicitly protected from non-compliant transactions and the underlying technology protects the privacy of the user.

**Youth Financial Literacy**: Partners can expand their brand story around empowerment and education of youth financial literacy while engaging their 'future customers' with Gen Z, a digital native population of post-millennial youth.

The REGO Mazoola® app and associated digital wallet technology is designed to enable our partners to engage families with Gen Z and Gen Alpha youths through the leading money management, transactional and financial literacy platform that enables young people to make smart decisions about the things they value in life — including their money, their time, their ideas and their connections. The Mazoola® app enables a new way for individual users to own and monetize their purchasing behavior that is currently unavailable to them.

In addition, we are analyzing specific components of our technology for individual monetization as well as exploring opportunities in the Business to Business ("B2B") realm.

Other markets for potential licensed applications are:

Government social services payments where control over how benefits allowances are used is required. This is particularly necessary in some European countries where social benefits are not being used as intended by the government or where benefits are subject to fraud.

Closed network consumer to business (C2B) and business to business (B2B). An example is school lunch programs where the consumer can make direct mobile payments to the provider's point of sale (POS) terminal without the need to traverse the traditional merchant payment system. This reduces the cost per transaction for the vendor and provides instant non-repudiated settlement. Many school lunch programs are now provided by large catering companies. This is particularly valuable as credit card fees, transaction fees and service fees can exceed 3% in overhead costs per transaction dependent on the negotiated rate. Removing this overhead can have a significant positive financial impact on profitability. It also allows the closed network to own its own behavioral use data thus obviating the need to pay a third party for the same data.

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**Our Intellectual Property**

Intellectual property is important to our business. The Company has four issued patents with the United States Patent and Trademark Office ("USPTO"), entitled "Parent Match," "System and Method for Verifying the Age of an Internet User," "System and Method for Virtual Piggy Bank Wish-List" and "System and Method for Virtual Piggy Bank." The Company has filed for one provisional U.S. patent application, as well as twelve non-provisional U.S. patent applications, one of which is pending, four of which have been allowed, and seven of which have been abandoned. Additionally, the Company has been granted two patents, entitled "Virtual Piggy Bank" and "Parent Match," in each of Germany, Canada, and Australia. The Company also has patents pending in the Republic of Korea under the Patent Cooperation Treaty ("PCT"). Costs associated with the registration and legal defense of the patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents.

The following are the names and brief descriptions of our patents:

<u>Parent Match</u>. A method of providing control preferences set by a person for a second person who is a prospective Internet user, the method comprising the steps of establishing a first account, the settings of the first account being stored in a database; establishing a second account, the settings of the second account being stored in the database; linking the first and second accounts such that control settings of the second account are determined through the first account; and viewing Internet content from the second account consistent with the control settings of the second account.

<u>System and Method for Virtual Piggy Bank</u>. A method of providing control preferences for a prospective Internet user, the method comprising the steps of establishing a first account, the settings of the first account being stored in a database; establishing a second account, the settings of the second account being stored in the database; linking the first and second accounts such that control settings of the second account are determined through the first account; and making a purchase from the second account consistent with the control settings of the second account.

<u>System and Method for Verifying the Age of an Internet User</u>. A system and method of verifying the age of a prospective internet user, the method comprising creating an age check account with a service requester; activating the age check system through the account; inputting into the age check system a user's information; checking user's information by age check system; and notifying service requester of checked user's information by the age check system.

<u>System and Method for Virtual Piggybank Wish-List</u>. A non-transitory computer-readable storage medium, storing one or more programs configured for execution, the one or more programs for monitoring, transmitting, and recording usage of a computer or mobile device connected to a network, the one or more programs including instructions for establishing a first account, the settings of the first account being stored in a database; establishing a second account, the settings of the second account being stored in the database, wherein the second account includes a wish-list; linking the first and second accounts such that control settings of the second account are determined through the first account; and making a purchase from the wish-list of the second account consistent with the control settings of the second account.

Until such time as the remaining pending patents are awarded, if ever, we intend to also rely on trade secret protection and/or confidentiality agreements with our employees, customers, business partners and others to protect our intellectual property rights.

Furthermore, we have filed trademark applications pertaining to our service with the USPTO, the European Community, and Canada and a service mark application for Mazoola® The USPTO has already granted us service mark registrations for Oink, Oink (stylized), PiggyPick, Virtual Piggy, Virtual Piggy and design (horizontal), the PIG design, Parent Match, Quickconnect, Virtual Piggy Youth Empowered Parent Approved and Design, Youth Empowered. Parent Approved, and Oink.com. The European Community has already granted us registration for Virtual Piggy, Virtual Piggy and Design, Virtual Piggy Youth Empowered Parent Approved and Design, PiggyPick, Wishlist Wednesday, the PIG design, and the PIG design (alternative). The Canadian Intellectual Property Office has already granted the registration for VP Authenticate.

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Despite certain precautions taken by us, it may be possible for third parties to obtain and use our intellectual property without authorization. This risk may be increased due to the lack of patent and/or copyright protection. If any of our proprietary rights are misappropriated or we are forced to defend our intellectual property rights, we will have to incur substantial costs. Such litigation could result in substantial costs and diversion of our resources, including diverting the time and effort of our senior management, and could disrupt our business, as well as have a material adverse effect on our business, prospects, financial condition and results of operations. Management will from time to time determine whether applying for and pursuing patent and copyright protection is appropriate for us. We have no guarantee that any applications will be granted or, if awarded, whether they will offer us any meaningful protection from other companies in our business, or that we will have the financial resources to oppose any actual or threatened infringement by any third party. Furthermore, any patent or copyrights that we may be granted may be held by a court to infringe on the intellectual property rights of others and subject us to the payment of damage awards.

In addition, we cannot be certain that our technology will not infringe upon patents, copyrights or other intellectual property rights held by third parties. While we know of no basis for any claims of this type, the existence of and ownership of intellectual property can be difficult to verify, and we have not made an exhaustive search of all patent filings. We may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternative technology or obtain other licenses. In addition, we may incur substantial expenses in defending against these third-party infringement claims and be diverted from devoting time to our business and operational issues, regardless of the merits of any such claim.

**Research and Development**

During 2022 and 2021, our research and product development expenses were approximately $2.1 million and $2.8 million, all of which were borne by us.

**Our Revenue Model**

Our ability to generate and grow revenue is affected by consumer spending patterns, merchants and consumer adoption of digital payment methods. We are relying on the growth of mobile devices and the applications that will be used by merchants and consumers on those devices, and the transition from cash and checks to digital forms of payment, including cryptocurrencies. Our strategy to drive revenue in our business includes the following:

● Utilize our COPPA compliant platform to capitalize on mobile device applications

● License or enter into revenue sharing agreements around our technology for use with compatible technologies focusing on digital forms of payment

● Utilize the blockchain component of the platform in conjunction with cryptocurrencies

As of the date of this report, we have not generated significant revenue. Our previous revenues were generated by taking a small percentage of every transaction from an online merchant. Until now this was our only revenue source. As we proceed through 2023, we expect to seek additional revenue streams as follows:

● Private labeling licenses for: FinTech companies, telecommunication vendors, distributors, and value-added resellers (VAR)

● User subscription fees based on premium services

● Transaction and processing fees for both closed and open network transactions

● Special services fees for ad hoc special requests

● Data analytics sales – using algorithms to analyze use data for sale to data brokers (meta data)

● Advertising revenue – for context-based push messaging to subscribers

● Shared transaction revenue or rebates from banking partners

On March 8, 2023, we entered into a Partner Acceleration Program Agreement with Q2 Software, Inc. ("Q2"). Pursuant to this agreement, we will integrate our certified COPPA-compliant white label Family Wallet Banking-as-a-Platform into to Q2's digital banking platform. The agreement will make our family wallet available to Q2's network of 450 financial institution customers to allow end-user customers of subscribing financial institutions to utilize our family wallet.

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**Our Plan of Operation**

We launched our Mazoola® app in 2021. In 2022, the following enhancements were made:

● Added support for complex families

● Redesigned UI from the ground up

● Moved to React Native for a unified codebase for iOS and Android

● Simplified Peer-to-Peer

● Improved Fraud Prevention

● Switched to Mastercard's Finicity for connecting bank accounts

● Added Biometric Authentication

● Migrated ChoreCheck Users to Mazoola

● Capture Device Info to Simplify Support

● Created POC of Stock Investing Feature

In addition to expanding the existing payment solution to a growing US and global customer base, management believes there is robust demand for:

&nbsp;&nbsp;&nbsp;&nbsp;1. A digital ecosystem for children embedded within a marketplace of service offerings, delivered via in-house technology and through
third party integrations ("super app"). The inherent fenced design and systems architecture of the Mazoola® digital wallet
aligns well with the overall purpose and approach of a "super app"— to offer a wide array of services within a controlled
environment on mobile operating systems, such as iOS and Android.

&nbsp;&nbsp;&nbsp;&nbsp;2. Expanded in-application service modules such as investments, charitable giving, and financial literacy, as well as, the inclusion
of new marketplaces, health centers, and logistic/inventory management systems.

&nbsp;&nbsp;&nbsp;&nbsp;3. Predictive analytic products and services based on REGO's anonymized data collection techniques.

&nbsp;&nbsp;&nbsp;&nbsp;4. A two-sided platform of the REGO offering, MazoolaPay, which is currently in later stage development. This provides a way for retailers
to offer families a compliant payment offering when engaging in e-commerce transactions.

**Sales and Marketing Strategy**

In 2023, we are working with small and large banks, credit unions and other channel providers for the adoption of our unique wallet for their family clients. Additionally, we are also focusing on onboarding established brands with large family-focused account bases that would enable us to co-brand our platform and reach the Gen Z and Gen Alpha population through the FinTech industry. The Company maintains its view that these channels are most likely to provide rapid adoption of its technology across a broader industry segment.

**Seasonality**

Our new model should not be subject to seasonality.

**Competition**

The global payments industry is highly competitive. There is a continuous introduction of new entrants into the market and the development of new technologies and product offerings in the global payments industry, which is already highly competitive. It is continuously changing, highly innovative, and increasingly subject to regulatory scrutiny and oversight. We compete against a wide range of businesses. Most of our current and potential competitors may be larger than we are, have larger customer bases, greater brand recognition, longer operating histories, a dominant or more secure position, or broader geographic scope than we do, or offer products and services that we do not offer. Although payment services such as Zelle, Venmo, PayPal, Amex Bluebird, FamZoo and Visa Buxx can be viewed as our competitors, we do not believe that these provide the type of family friendly solution that not only teaches young people about saving, spending, and giving, while being compliant with COPPA and other laws that users of all ages need to be aware of, including but not limited to privacy, data collection, and security. We will compete against many companies that are larger than we are in a wide range of businesses, including banks, credit card providers, technology and ecommerce companies and traditional retailers. We will compete against various forms of payment methods including cash and checks, credit and debit cards, automated clearing house, mobile payments and other online payment services.

To compete effectively, we will focus a majority of our 2023 resources on product distribution and licensing and technology and product development.

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**Government Regulation**

The industry which we serve is subject to regulation by the FTC, laws such as COPPA, and other laws relating to collection, use, retention, and security. Complying with these varying U.S. and international requirements, such as GDPR, could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business. In addition, we have and post on our websites our own privacy policies and practices concerning the collection, use and disclosure of user data. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any regulatory requirements or orders or other federal, state or international privacy or consumer protection-related laws and regulations could result in proceedings or actions against us by governmental entities or others, subject us to significant penalties and negative publicity and adversely affect us. In addition, we are subject to the possibility of security breaches, which themselves may result in a violation of these laws.

The Company has added preventative measures to reduce the risk of non-compliance and security breaches. However, as the Company utilizes third party infrastructure, the risk of security breaches cannot be guaranteed but the Company has performed reasonable efforts to mitigate risk.

**Human Capital Resources**

As of December 31, 2022, we had 4 employees, who were working in the areas of marketing, programming and product development, web development, finance and administration. None of our employees are represented by a union or covered by a collective bargaining agreement. We believe that our relations with our employees are good.

We outsource our marketing efforts and most of our product development costs. Our relationship with all of these vendors is good.

**Company Information**

Our website can be found on the Internet at www.regopayments.com. The website contains information about the Company and our operations, however, the contents of our website are not incorporated into this Form 10-K. We make available free of charge through a link on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and amendments to these reports, as soon as we electronically file such material with, or furnish such material to, the Securities and Exchange Commission (SEC). These reports may be accessed on our website by following the link under Investor Relations and then clicking on SEC filings.

**ITEM 1A. <u>RISK FACTORS</u>.**

*An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors in addition to other information in this Annual Report on Form 10-K before purchasing our common stock. The risks and uncertainties described below are those that we currently deem to be material and that we believe are specific to our company and our industry. In addition to these risks, our business may be subject to risks currently unknown to us. If any of these or other risks actually occurs, our business may be adversely affected, the trading price of our common stock may decline, and you may lose all or part of your investment.*

 

**<u>RISKS RELATED TO OUR BUSINESS</u>**

**We have a history of losses, have yet to begin generating significant revenue, will require additional capital, and our auditors have raised substantial doubt about our ability to continue as a going concern.**

We have experienced net losses in each fiscal year since our inception and as of December 31, 2022, have an accumulated deficit of approximately $117.2 million. We incurred net losses to common shareholders of approximately $17.6 million during the year ended December 31, 2022 and approximately $11.8 million during the year ended December 31, 2021. As of March 31, 2023 we had a cash position of approximately $5.2 million. Depending on the speed at which we begin to generate revenue, and to the degree we continue to accelerate spending to take advantage of our market opportunity, we will need additional capital to execute our business plan. As a result of these conditions, the report of our independent accountants issued in connection with the audit of our financial statements as of and for our fiscal year ended December 31, 2022 contained a qualification raising a substantial doubt about our ability to continue as a going concern.

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**In order to execute our business plan and pay expenses in connection with unforeseen events, we will need to raise additional capital, which may not be available on terms acceptable to us, if at all.**

In order to execute our current business plan, we will need to raise additional capital. The amount of funding required will be determined by many factors, some of which are beyond our control, and we may require such funds sooner than currently anticipated or to cover unforeseen expenses. We expect that any such funding will be raised through sales of our debt or equity securities. When raising additional funding, general market conditions or the then-current market price of our common stock may not support capital-raising transactions. We have not made arrangements to obtain additional financing and we can provide no assurance that additional financing will be available in an amount or on terms acceptable to us, if at all. If we cannot raise funds when they are needed or if such funds cannot be obtained on acceptable terms, we may not be able to (a) pay our costs and expenses as they are incurred, (b) execute our business plan, (c) take advantage of future opportunities, or (d) respond to competitive pressures or unanticipated requirements, which may in the extreme case, require us to liquidate the Company. This may seriously harm our business, financial condition and results of operations.

**We are essentially a start-up company with an unproven business model which makes it difficult to evaluate our current business and future prospects.**

We are essentially a start-up company introducing new services and technologies. We are completing the development and rollout of our enhanced Platform, however, we have not generated significant revenue. We expect to generate all of our future revenues from the development and marketing of our COPPA compliant payment solution Platform to financial institutions and merchants. However, we have only a very limited operating history and have not generated significant revenue upon which to base an evaluation of our current business and future prospects. Although our management team has substantial experience in developing and managing businesses, they have never developed or offered such a technology and there can be no assurance that we will be able to successfully develop and market such technology. If we are unable to fully develop and commercialize our Platform, or manage other challenges facing development stage companies, such as raising additional capital, managing existing and expanding operations, and hiring qualified personnel, we may continue to be unprofitable or, in the extreme case, be forced to cease operations. Before purchasing our common stock, you should consider an investment in our common stock in light of the risks, uncertainties and difficulties frequently encountered by early-stage companies in new and evolving markets such as ours, including those described herein. We may not be able to successfully address any or all of these risks. Failure to adequately address such risks would have a material adverse effect on our financial condition and results of operation and could cause our business to fail.

**Our management has limited experience in our relatively new industry, which may make it difficult for you to evaluate our business prospects.**

Our senior management does not have direct experience in the online payment or retail industries. There can be no assurance that our management team will be successful in working together to develop and market our Platform. In addition, the online payment industry is a relatively new industry. Although there a number of online payment solutions, relatively few are directed specifically to the "Under 18" market segment. You must consider our business prospects in light of the risks and difficulties we will encounter in the future in a new and rapidly evolving industry. We may not be able to successfully address these risks and difficulties, which could materially harm our business prospects, financial condition and results of operations.

**We are developing a service platform which is new to the market and there is substantial uncertainty regarding the level of consumer and industry acceptance, if any, of our platform.**

Our Platform is intended to provide a solution to certain financial institutions, website operators and online merchants. As we do not believe any provider is currently offering such a solution, it is very difficult for us to predict the level of demand and market acceptance of our Platform by consumers or online retailers. As regulations, consumer and industry preferences and trends evolve, there is a high degree of uncertainty about whether users will value some or all of the key features which we are incorporating into the Platform. The failure of the marketplace to deem our features desirable may discourage use of our Platform and limit our ability to generate any meaningful revenues or profits which would have a material adverse effect on our business, operating results, and financial condition.

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**Fluctuations in demand for our Platform may have a material adverse effect on our business, operating results and financial condition.**

We are subject to fluctuations in demand for our Platform due to a variety of factors, including general economic conditions, including the possibility of a prolonged period of limited economic growth or possible economic decline in the U.S.; competition; disruptions to the credit and financial markets in Europe, the U.S., and elsewhere; contractions or limited growth in consumer spending or consumer credit; and adverse economic conditions that may be specific to the Internet, ecommerce and payments industries.

We are also subject to product obsolescence, technological change, shifts in buying patterns, financial difficulties and budget constraints of current and potential customers, levels of demand for virtual goods, awareness of security threats to IT systems, and other factors. While such factors may, in some periods, increase revenues, fluctuations in demand can also negatively impact our revenues.

**If we do not remain proactive with technological development to provide new products and services, the use of our services may not be adopted.**

Technological changes impact the industries in which we operate, including developments in payment card tokenization, ecommerce through social networks, authentication and virtual currencies. We cannot predict the effects of technological changes on our business. We expect that new services and technologies applicable to the industries in which we operate will continue to emerge and may be superior to, or render obsolete, the technologies we currently use in our products and services. Developing and incorporating new technologies into our products and services may require substantial expenditures, take considerable time, and ultimately may not be successful. In addition, our ability to adopt new products and services and to develop new technologies may be inhibited by industry-wide standards, payments networks, changes to laws and regulations, resistance to change from consumers or merchants, third-party intellectual property rights, or other factors. Our success will depend on our ability to develop and incorporate new technologies and adapt to technological changes and evolving industry standards; if we are unable to do so in a timely or cost-effective manner, our business could be harmed.

**Weak consumer spending may adversely affect our business prospects, financial condition and results of operations.**

Our ability to attract new users, and encourage users to purchase items through our website, and use our payment services in times where consumer spending is weak could materially and adversely affect our business, financial condition and results of operations.

**Undetected programming errors or flaws in our Platform could harm our reputation or prevent market acceptance of the Platform which would materially and adversely affect our business prospects, reputation, financial condition and results of operations.**

The Platform may contain programming errors or flaws, which may become apparent only after sustained use in the market. In addition, the Platform was developed using programs and engines developed by and/or licensed from third party vendors, which may include programming errors or flaws over which we have no control. If our users or partners have a negative experience with the Platform, related to or caused by undetected programming errors or flaws, they may be less inclined to continue or resume use of the Platform or recommend the Platform to other potential users. Undetected programming errors in the Platform can also cause our users or partners to cease using the Platform or delay market acceptance of the Platform, either of which could materially and adversely affect our business, financial condition and results of operations.

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**Our future growth is largely dependent upon our ability to develop technologies that achieve market acceptance with acceptable margins.**

The markets for our products and services are characterized by constant technological changes, frequent introductions of new products and services and evolving industry standards. Our ability to execute our business depends upon a number of factors, including our ability to identify emerging technological and market trends in our target end-markets, develop and maintain competitive products, develop our Platform that differentiates our services from those of our competitors, and develop and bring services to market quickly and cost-effectively. In addition, we will need to effectively manage risks associated with new products and production ramp issues as well as risks that new products may have quality or other defects in the early stages of introduction. The process of developing new high technology products, services and solutions and enhancing our existing products is complex, costly and uncertain. Our ability to continually refine and successfully commercialize the Platform will require substantial technological innovation and requires the investment of significant resources. These development efforts may not lead to the ongoing evolution of the Platform on a timely basis or meet the needs of our customers as fully as competitive offerings. Any failure by us to anticipate customers' changing needs and emerging technology trends accurately could significantly harm our market share and results of operations. In addition, the markets for our services may not develop or grow as we anticipate. The failure of our products to gain market acceptance or their obsolescence due to more attractive offerings by competitors could significantly impact our revenues and adversely affect our business, operations and financial results.

**Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.**

The techniques used to attempt to obtain unauthorized or illegal access to systems and information (including customers' personal data), disable or degrade service, exploit vulnerabilities, or sabotage systems are constantly evolving, and in some circumstances may not be recognized or detected until after they have been launched against a target. Unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems or facilities through various means, including, but not limited to, hacking into our systems or facilities or those of our customers, partners, or vendors, and attempting to fraudulently induce users of our systems (including employees and customers) into disclosing user names, passwords, payment card information, or other sensitive information used to gain access to such systems or facilities. This information may in turn be used to access our customers' personal or proprietary information and payment data that are stored on or accessible through our information technology systems and those of third parties with whom we partner. Numerous and evolving cybersecurity threats, including advanced and persisting cyberattacks, cyberextortion, distributed denial-of-service attacks, ransomware, spear phishing and social engineering schemes, the introduction of computer viruses or other malware, and the physical destruction of all or portions of our information technology and infrastructure and those of third parties with whom we partner could compromise the confidentiality, availability, and integrity of the data in our systems. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations and the services we provide to customers, and damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business/operating margins, revenues and competitive position.

**Our plans are dependent upon key individuals and the ability to attract qualified personnel, as well as our relationship with outside developers.**

In order to execute our business plan, we will be dependent upon executives, as well as other key development personnel. The loss of any of the foregoing individuals could have a material adverse effect upon our business prospects. Moreover, our success continues to depend to a significant extent on our ability to identify, attract, hire, train and retain qualified professional, creative, technical and managerial personnel. Competition for such personnel is intense, and there can be no assurance that we will be successful in identifying, attracting, hiring, training and retaining such personnel in the future. The competition for software developers, and technical directors is especially intense because the software market has significantly expanded over the past several years. If we are unable to hire, assimilate and retain such qualified personnel in the future, our business, operating results, and financial condition could be materially adversely affected. We may also depend on third party contractors and other partners, to develop our Platform as well as any future enhancements thereto. There can be no assurance that we will be successful in either attracting and retaining qualified personnel or creating arrangements with such third parties. The failure to succeed in these endeavors would have a material adverse effect on our ability to consummate our business plans.

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**Our business, results of operations and financial condition may be adversely affected by public health epidemics, including the continuing effects of the novel coronavirus ("COVID-19") pandemic.**

The ultimate extent to which the COVID-19 pandemic impacts our business, financial condition, and results of operations will depend on future developments, which are highly uncertain, difficult to predict, and subject to change, including, but not limited to, the duration, scope, severity, proliferation of variants and increase in the transmissibility of the virus, its impact on the global economy, actions taken to contain or limit the impact of COVID-19, geographic variation in how countries and states are handling the pandemic, and how quickly and to what extent normal economic and operating conditions may potentially resume.

The COVID-19 pandemic has adversely impacted and is likely to further adversely impact the operations of our customers, suppliers, vendors and other business partners, and may adversely impact our results of operations in the future. Cross-border and domestic commerce may be adversely impacted by measures taken by government authorities and businesses globally to contain and limit the spread of COVID-19, including travel restrictions, border closures, quarantines, shelter in place and lock down orders, mask and social distancing requirements, and business limitations and shutdowns. To the extent that such mitigation measures remain in place or are reinstated for significant periods of time, they may adversely affect our business, financial condition, and results of operations. Actions that we have taken or may take in the future intended to assist customers impacted by COVID-19 may negatively impact our results of operations. In particular, we have experienced and may continue to experience adverse financial impacts from a number of operational factors, including, but not limited to: increased cybersecurity and payment fraud risk; challenges to the availability and reliability of our products and services; and supply chain disruptions impacting our business.

While our business may benefit from the shift from in-store shopping and traditional payment methods towards e-commerce and digital payments, to the extent that customer preferences revert to pre-COVID-19 behaviors as the pandemic-related restrictions lessen, our business, financial condition, and results of operations would be adversely impacted.

The significant increase in the number of our employees who are working remotely as a result of the pandemic, and an extended period of remote work arrangements and subsequent reintroduction into the workplace could introduce operational risk, increase cybersecurity risk, strain our business continuity plans, negatively impact productivity, and give rise to claims by employees or otherwise adversely affect our business. Additionally, COVID-19 could require new or modified processes, procedures, and controls to respond to changes in our business environment. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19 or will otherwise be satisfactory to government authorities.

The impacts of COVID-19, individually or collectively, could have a material adverse impact on our business, financial condition, and results of operations and have the effect of heightening or exacerbating many of the other risks described in this "Risk Factors" section.

**<u>RISKS RELATED TO INTELLECTUAL PROPERTY, TECHNOLOGY AND REGULATION</u>**

**Our lack of patent and/or copyright protection and any unauthorized use of the Platform by third parties may adversely affect our business.**

We have patents and have made patent applications with the United States Patent and Trademark Office related to our Platform, which we rely on for protection to our technology. We also rely on a combination of protections provided by contracts, including confidentiality and nondisclosure agreements, and common law rights, such as trade secrets, to protect our intellectual property. However, we cannot assure you that we will be able to adequately protect our technology or other intellectual property from misappropriation in the U.S. and abroad. This risk may be increased due to the lack of complete patent and/or copyright protection. Any patent issued to us could be challenged, invalidated or circumvented or rights granted thereunder may not provide a competitive advantage to us. Furthermore, patent applications that we file may not result in issuance of a patent or, if a patent is issued, the patent may not be issued in a form that is advantageous to us. Despite our efforts to protect our intellectual property rights, others may independently develop similar products, duplicate our products or design around our patents and other rights. In addition, it is difficult to monitor compliance with, and enforce, our intellectual property rights on a worldwide basis in a cost-effective manner. In jurisdictions where foreign laws provide less intellectual property protection than afforded in the U.S. and abroad, our technology or other intellectual property may be compromised, and our business would be materially adversely affected. If any of our proprietary rights are misappropriated or we are forced to defend our intellectual property rights, we will have to incur substantial costs. Such litigation could result in substantial costs and diversion of our resources, including diverting the time and effort of our senior management, and could disrupt our business, as well as have a material adverse effect on our business, prospects, financial condition and results of operations. We can provide no assurance that we will have the financial resources to oppose any actual or threatened infringement by any third party. Furthermore, any patents or copyrights that we may be granted may be held by a court to infringe on the intellectual property rights of others and subject us to the payment of damage awards.

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**We may be subject to claims with respect to the infringement of intellectual property rights of others, which could result in substantial costs and diversion of our financial and management resource*s.***

Third parties may claim that we are infringing on their intellectual property rights. We may violate the rights of others without our knowledge. We may expose ourselves to additional liability if we agree to indemnify our clients against third party infringement claims. While we know of no basis for any claims of this type, the existence of and ownership of intellectual property can be difficult to verify, and we have not made an exhaustive search of all patent filings. Additionally, most patent applications are kept confidential for twelve to eighteen months, or longer, and we would not be aware of potentially conflicting claims that they make. We may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternative technology or obtain other licenses. In addition, we may incur substantial expenses in defending against these third-party infringement claims and be diverted from devoting time to our business and operational issues, regardless of the merits of any such claim. In addition, in the event that we recruit employees from other technology companies, including certain potential competitors, and these employees are used in the development of portions of the Platform which are similar to the development in which they were involved at their former employers, we may become subject to claims that such employees have improperly used or disclosed trade secrets or other proprietary information. If any such claims were to arise in the future, litigation or other dispute resolution procedures might be necessary to retain our ability to offer our current and future services, which could result in substantial costs and diversion of our financial and management resources. Successful infringement or licensing claims against us may result in substantial monetary damages, which may materially disrupt the conduct of our business and have a material adverse effect on our reputation, business, financial condition and results of operations. Even if intellectual property claims brought against us are without merit, they could result in costly and time-consuming litigation, and may divert our management and key personnel from operating our business.

**The impact of laws regulating financial institutions may adversely impact our business.**

The impact of laws regulating financial institutions, including the Dodd-Frank Wall Street Reform and Consumer Protection Act may adversely impact our business as a result of our reliance on merchants to provide services for our Platform.

**Changes to payment card networks or bank fees, rules, or practices could harm our business and, if we do not comply with the rules, could result in the termination of our ability to accept credit cards**. **If we are unable to accept credit cards, our competitive position would be seriously damaged.**

We may belong to or directly access payment card networks, such as Visa, MasterCard and the National Automated Clearing House Association ("NACHA"), in order to accept or facilitate the processing of credit cards and debit cards (including some types of prepaid cards) for merchants. We also expect to rely on banks or other payment processors to process transactions and must pay fees for this service. From time to time, payment card networks have increased, and may increase in the future, the interchange fees and assessments that they charge for each transaction using one of their cards. Generally, payment card processors have the right to pass any increases in interchange fees and assessments on to payment systems like ours as well as increase their own fees for processing. Changes in interchange fees and assessments could increase our operating costs and reduce profit margins, if any. In addition, in some markets, governments have required Visa and MasterCard to reduce interchange fees or have opened investigations as to whether Visa or MasterCard's interchange fees and practices violate antitrust law. The financial reform law enacted in 2010 authorizes the Federal Reserve Board to regulate debit card interchange rates and debit card network exclusivity provisions, and the Federal Reserve Board has proposed rules that include caps on debit card interchange fees at significantly lower rates than Visa or MasterCard currently charge. We expect to be required by our processors to comply with payment card network operating rules, which generally include the obligation to reimburse processors for any fines they are assessed by payment card networks as a result of any rule violations by users of our Platform. The payment card networks set and interpret the card rules which could be more difficult or expensive to comply with. We also expect to be required to comply with payment card networks' special operating rules for Internet payment services. Some of these rules may be difficult or even impossible for us to comply with. If we are unable to comply with these rules, we may be subject to fines for any failure to comply with such rules or we may lose our ability to gain access to the credit card associations or NACHA.

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**Any capacity constraints or system disruptions, including natural disasters could have a material adverse effect on our business**.

Our business will rely significantly on Internet technologies and infrastructure. Therefore, the performance and reliability of our Internet sites and network infrastructure will be critical to our ability to attract and retain users, merchants and strategic partners. Any system error, outage or failure, or a sudden and significant increase in traffic, may result in the unavailability of sites and significantly delay response times. Individual sustained or repeated occurrences could result in a loss of potential or existing users. Our systems and operations will be vulnerable to interruption or malfunction due to certain events beyond our control, including natural disasters, international diseases, telecommunications failures and computer hacking. We will also rely on Web browsers and online service providers to provide Internet access to our sites. There can be no assurance that we will be able to expand our network infrastructure, either alone or through the use of third-party hosting systems or service providers, on a timely basis sufficient to meet demand. Our operations and services depend on the extent to which our computer equipment and the computer equipment of our third-party network providers is protected against damage from fire, earthquakes, terrorist acts, natural disasters, computer viruses, unauthorized entry, power loss, telecommunications failures, and similar events. Despite precautions taken by us and our third-party network providers, over which we have no control, a natural disaster, infectious disease, or other unanticipated problems at our headquarters or a third-party provider could cause interruptions in the services that we provide. If disruptions occur, we may have no means of replacing these network elements on a timely basis or at all. Any accident, incident, system failure, or discontinuance of operations involving our network or a third-party network that causes interruptions in our operations could have a material adverse effect on our ability to provide services to our partners and customers and, in turn, on our business, financial condition, and results of operations.

**Our business will be dependent upon broadband carriers.**

We will rely on broadband providers to provide high speed data communications capacity to our customers. We may experience disruptions or capacity constraints in these broadband services. If disruptions or capacity constraints occur, we may have no means of replacing these services, on a timely basis or at all. In addition, broadband access may be limited or unavailable in certain areas, thereby reducing our potential market.

**Use of our services for illegal purposes could be detrimental to our business.**

Our payment system is susceptible to potentially illegal use. Use of our payment system for illegal or improper purposes could subject us to claims, such as individual and class action lawsuits, and government and regulatory investigations, inquiries or requests that could result in potential liability. Increased penalties for intermediaries providing payment services for certain illegal activities have become more prevalent. Any threatened or resulting claims could result in a material adverse effect on our business.

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**We may be subject to credit card transaction fraud.**

Our business model depends upon the processing of credit cards and may include the sale of gift cards. In cases where we are the merchant of record on a gift card sale, we could be held financially responsible for the value of gift cards which are purchased using a fraudulent or stolen credit card. While we use software and safeguards to ensure that credit cards we accept are valid, there can be no assurance that credit card fraud will not occur. In addition, in the case of transactions where our merchant is in the United States and is the merchant of record, we are not generally responsible for credit card fraud. However, given that our business will be dependent on the successful processing of credit cards and payment solutions, fraudulent processing could have an adverse effect on our merchant relationships and could result in liability. Additionally, other countries have varying rules on who the responsible party would be in certain variations of credit card or other payment fraud. While we are researching such international policies and rules, as necessary, and are implementing safeguards to minimize risk, there can be no assurance that we will not incur liability relating to credit card or other payment fraud.

**If we are unable to effectively protect our intellectual property rights on a worldwide basis, we may not be successful in the planned international expansion of our Platform.**

Access to worldwide markets depends in part on the strength of our intellectual property portfolio. There can be no assurance that, as our business expands into new areas, we will be able to independently develop the technology, software or know-how necessary to conduct our business or that we can do so without infringing the intellectual property rights of others. To the extent that we have to rely on licensed technology from others, there can be no assurance that we will be able to obtain licenses at all or on terms we consider reasonable. The lack of a necessary license could expose us to claims for damages and/or injunction from third parties, as well as claims for indemnification by our customers in instances where we have a contractual or other legal obligation to indemnify them against damages resulting from infringement claims. Regarding our own intellectual property, we intend to actively enforce and protect our rights to the extent practicable. However, there can be no assurance that our efforts will be adequate to prevent the misappropriation or improper use of our protected technology in international markets.

**<u>RISKS RELATED TO OUR COMMON STOCK</u>**

**If we are unable successfully to manage growth, our operations could be adversely affected.**

Our progress is expected to require the full utilization of our management, financial and other resources, which to date has occurred with limited working capital. Our ability to manage growth effectively will depend on our ability to improve and expand operations, including our financial and management information systems, and to recruit, train and manage sales personnel. There can be no assurance that we will be able to manage growth effectively. If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our business. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our products. Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potential customers.

**As a public company, we are required to incur substantial expenses.**

We are subject to the periodic reporting requirements of the Exchange Act, which requires, among other things, review, audit, and public reporting of our financial results, business activities, and other matters. SEC regulations, including regulations enacted as a result of the Sarbanes-Oxley Act of 2002, have also substantially increased the accounting, legal, and other costs related to compliance with SEC reporting obligations. If we do not have current information about our Company available to market makers, they will not be able to trade our stock. The public company costs of preparing and filing annual and quarterly reports, and other information with the SEC will cause our expenses to be higher than they would be if we were privately held. These increased costs may be material and may include the hiring of additional employees and/or the retention of additional advisors and professionals. Our failure to comply with the federal securities laws could result in private or governmental legal action against us and/or our officers and directors, which could have a detrimental effect on our business and finances, the value of our stock, and the ability of stockholders to resell their stock.

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**We operate in a highly competitive industry and compete against many large companies.**

Many companies worldwide are dedicated to providing online payment solutions including mobile payments, electronic funds transfer networks, cross-border access to networks, prepaid cards, bill pay networks and other online and offline payment methods. The market in which we operate is characterized by numerous and larger competitors, including PayPal, credit card companies, and credit card processors that offer services to online retailers, rapid technological changes, and intense competition. We expect more companies to enter the online payment business, particularly the segment aimed at serving the "Under 18" demographic. Most if not all of these competitors have longer operating histories, significantly greater financial, technical, marketing, customer service and other resources, and greater name recognition than us. As a result, they may respond to new or emerging technologies and changes in customer requirements faster and more effectively than we can. If any current online payment solution develops a COPPA compliant service, it would be substantially more difficult for us to introduce and distribute our Platform to the market, and our business, financial condition and results of operations would be materially and adversely affected.

**Our strategic alternatives process may not result in a successful corporate transaction or liquidity event.**

Our Board of Directors is continually exploring our strategic alternatives. Any process of exploring strategic alternatives includes market risk and other uncertainties. There can be no assurance that an exploration of strategic alternatives will result in the successful consummation of a liquidity event, capital raise or other corporate transaction, on a basis that will provide any specific level of value to our common stockholders or other security holders, or at all. On September 22, 2022 the Company engaged an investment banker to explore a potential sale of the Company. We have also engaged a mergers and acquisitions law firm and remain committed to the exploration and assessment of our strategic alternatives.

**Trading in our common stock has been limited, there is no significant trading market for our common stock, and purchasers of our common stock may be unable to sell their shares.**

Our common stock is currently eligible for quotation on the OTC QB, however trading to date has been limited. If activity in the market for shares of our common stock does not increase, purchasers of our shares may find it difficult to sell their shares. We currently do not meet the initial listing criteria for any registered securities exchange, including the Nasdaq Stock Market. The OTC Bulletin Board is a less recognized market than the foregoing exchanges and is often characterized by low trading volume and significant price fluctuations. These and other factors may further impair our stockholders' ability to sell their shares when they want to and/or could depress our stock price. As a result, stockholders may find it difficult to dispose of, or obtain accurate quotations of the price of our securities because smaller quantities of shares could be bought and sold, transactions could be delayed, and security analyst and news coverage of our Company may be limited. These factors could result in lower prices and larger spreads in the bid and ask prices for our shares of common stock.

**We may not be able to qualify to have our common stock listed on a national stock exchange.**

The Company's common stock currently trades on the Over the Counter Market ("OTC QB") in the United States. Listing requirements for exchanges such as NASDAQ include financial and trading requirements that, as of December 31, 2022 the Company does not meet. The listing process can be lengthy, discretionary, and ultimately must include meeting financial and trading requirements. There can be no assurance that the Company will ever be listed on a national stock exchange. Currently, the Company does not qualify for listing based on its stock price, among other things. Therefore, certain institutional investors may not be able to purchase the Company's common stock as a result of their own ownership guidelines and liquidity in the Company's common stock would remain more limited. Further, the Company's ability to raise money through subsequent offerings of its common stock will be more limited if the Company is not able to list on a national exchange.

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**Applicable SEC rules governing the trading of "penny stocks" may limit the trading and liquidity of our common stock which may affect the trading price of our common stock.**

Our common stock is a "penny stock" as defined under Rule 3a51-1 of the Exchange Act and is accordingly subject to SEC rules and regulations that impose limitations upon the manner in which our common stock can be publicly traded. Penny stocks generally are equity securities with a per share price of less than $5.00 (other than securities registered on some national securities exchanges or quoted on NASDAQ). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these securities to persons other than established customers and "accredited investors" must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, of our common stock and reducing the liquidity of an investment in our common stock.

**We have outstanding shares of preferred stock with rights and preferences superior to those of our common stock.**

The issued and outstanding shares of Series A Cumulative Convertible Preferred Stock and Series B Cumulative Convertible Preferred Stock, and the authorized but unissued shares of Series C Cumulative Convertible Preferred Stock, grant the holders of such preferred stock anti-dilution, voting, dividend and liquidation rights (including liquidation multiples) that are superior to those held by the holders of our common stock. In addition, upon the issuance or deemed issuance of additional shares of common stock in the future for a price below the applicable preferred stock conversion price (currently $0.90 per share), the conversion price of the Series A and Series B Cumulative Convertible Preferred Stock will be lowered based on a weighted average formula, and the conversion price of the Series C Cumulative Convertible Preferred Stock will be lowered based on a full-ratchet formula for twelve months from the original authorization date and pursuant to a weighted average formula thereafter, all of which will have the effect of immediately diluting the holders of our common stock.

**Sales of a substantial number of shares of our common stock in the public market originally issued through the conversion of preferred stock, exercise of options or warrants, or additional financing transactions could adversely affect the market price of our common stock and would have a dilutive effect upon our shareholders.**

Historically, our common stock has been thinly traded. This low trading volume may have had a significant effect on the market price of our common stock, which may not be indicative of the market price in a more liquid market. As of March 31, 2023, options for the purchase of 16,500,000 shares of our common stock were outstanding and 62,100,904 shares of common stock were issuable upon conversion of our outstanding Series A and B Cumulative Convertible Preferred Stock and 10% Secured Convertible Notes Payable convertible into Series B and 4% Secured Convertible Notes Payable convertible into Series C Cumulative Convertible Preferred Stock. Sales of a substantial number of shares of our common stock in the public market originally issued through the conversion of convertible notes, preferred stock, exercise of options or warrants, or additional financing transactions could adversely affect the market price of our common stock.

**We intend to raise additional funds in the future through issuances of securities and such additional funding may be dilutive to shareholders or impose operational restrictions.**

We intend to raise additional capital in the future to help fund our operations through sales of shares of our common stock or securities convertible into shares of our common stock, as well as issuances of debt. Such additional financing may be dilutive to our shareholders, and debt financing, if available, may involve the pledge of security interests in our assets, and restrictive covenants, which may limit our operating flexibility. If additional capital is raised through the issuances of shares of our common stock or securities convertible into shares of our common stock, the percentage ownership of existing shareholders will be reduced. These shareholders may experience additional dilution in net book value per share and any additional equity securities may have rights, preferences and privileges senior to those of the holders of our common stock.

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**Because we do not expect to pay dividends in the foreseeable future, investors seeking cash dividends should not purchase shares of common stock.**

We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Accordingly, investors must rely on sales of their shares, after price appreciation, which may never occur, as the only way to realize any return on their investment. Investors seeking cash dividends should not purchase our shares.

**We are not subject to certain corporate governance provisions of the Sarbanes-Oxley Act of 2002 and without voluntary compliance with such provisions, our shareholders will not receive the benefits and protections they were enacted to provide.**

Since our common stock is not listed for trading on a national securities exchange, we are not subject to certain of the corporate governance requirements established by the national securities exchanges pursuant to the Sarbanes-Oxley Act of 2002. These include rules relating to independent directors, and independent director nomination, audit and compensation committees. Unless we voluntarily elect to comply with those obligations, investors in our shares will not have the protections offered by those corporate governance provisions.

**We will be required to remain current in our filings with the SEC or our securities will not be eligible for continued quotation on the OTC QB.**

We are required to remain current in our filings with the SEC in order for our shares of common stock to continue to be eligible for quotation on the OTC QB. In the event that we become delinquent in our required filings with the SEC, quotation of shares of our common stock will be terminated following a 30-day grace period if we do not make our required filing during that time. In such an event purchasers of our common stock may find it difficult to sell their common stock.

**If we issue shares of preferred stock with superior rights to the shares of common stock, it could result in a decrease in the value of our common stock and delay or prevent a change in control of us.**

Our board of directors is authorized to issue up to 2,000,000 shares of preferred stock with such rights, designation, and preferences as determined by our board of directors. As of the date of this report, we have 269,279 shares of preferred stock outstanding (consisting of 98,350 shares of Series A Cumulative Convertible Preferred Stock and 170,929 shares of Series B Cumulative Convertible Preferred Stock), authorized the issuance of up to 300,000 shares of Series C Cumulative Convertible Preferred Stock, and 1,730,721 preferred shares remain unissued. Our board of directors has the power to establish the dividend rates, liquidation preferences, voting rights, redemption and conversion terms and privileges with respect to any series of preferred stock without shareholder approval. Depending upon our future financial needs, our board may, in the exercise of its business discretion, determine to issue additional shares of preferred stock having rights superior to those of our common stock which may result in a decrease in the value or market price of such shares. Holders of such preferred stock may have the right to receive dividends, certain preferences in liquidation and conversion rights. The issuance of preferred stock could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control of us without further vote or action by the stockholders and may adversely affect the voting and other rights of the holders of the shares of our common stock.

**Provisions of our certificate of incorporation, bylaws and Delaware law may make a contested takeover of our Company more difficult.**

Certain provisions of our certificate of incorporation, bylaws and the General Corporation Law of the State of Delaware ("DGCL") could deter a change in our management or render more difficult an attempt to obtain control of us, even if such a proposal is favored by a majority of our stockholders. For example, we are subject to the provisions of the DGCL that prohibit a public Delaware corporation from engaging in a broad range of business combinations with a person who, together with affiliates and associates, owns 15% or more of the corporation's outstanding voting shares (an "interested stockholder") for three years after the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Our certificate of incorporation also includes undesignated preferred stock, which may enable our board of directors to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise. Finally, our bylaws include an advance notice procedure for stockholders to nominate directors or submit proposals at a stockholders' meeting. Delaware law and our charter may therefore inhibit a takeover.

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**The influx of additional shares of our common stock onto the market pursuant to SEC Rule 144 may create downward pressure on the trading price of our common stock.**

A material percentage of the currently outstanding shares of our common stock were issued as *"restricted securities"* within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted securities, these shares may be resold only pursuant to an effective registration statement, under the requirements of Rule 144, or other applicable exemptions from registration under the Act and applicable state securities laws. Generally, Rule 144 provides that a person who has held restricted securities for a prescribed period may, under certain conditions, publicly resell such shares. Under Rule 144, a non-affiliate (i.e., a stockholder who has not been an officer, director or control person for at least 90 consecutive days) may freely resell restricted securities issued by a reporting company so long as such securities have been held by the owner for a period of at least one year, or under certain circumstances six months. The availability of a large number of shares for sale to the public under Rule 144 and the sale of such shares in public markets could have an adverse effect on the market price of our common stock.

**We may require shareholders to authorize additional shares for us to properly finance our business.**

Upon the Company's formation, and through a subsequent approval, our shareholders authorized and approved 230,000,000 shares of common stock. Currently, only approximately 27.6 million of such shares remain available for issuance. To finance and continue to grow our business, we will require additional capital and have historically relied upon the issuance of common stock, or securities convertible into common stock, for such financing. Should our shareholders be unwilling to approve a sufficient increase in the number of our authorized shares of common stock, we would be required to finance our business with debt or other instruments, which may be difficult or impossible to secure on terms acceptable to us. If that were to occur, we may not be able to (a) pay our costs and expenses as they are incurred, (b) execute our business plan, (c) take advantage of future opportunities, or (d) respond to competitive pressures or unanticipated requirements, which may in the extreme case, require us to liquidate the Company.

**<u>RISKS RELATED TO OUR FINANCIAL STATEMENTS</u>**

**Management's judgment could impact the amount of non-cash compensation expense.**

To estimate the fair value of our stock option awards we currently use the Black-Scholes options pricing model. The determination of the fair value of equity-based awards on the date of grant using an options pricing model is affected by our current stock price as well as assumptions regarding a number of complex and subjective variables. Management is required to make certain judgments for these variables which include the expected stock price volatility over the term of the awards, the expected term of options based on employee exercise behaviors, and the risk-free interest rate. One of the factors used in determining such value is stock volatility. Because of the limited trading activity of our common stock, prior to January 1, 2014, we used the stock volatility of four peer companies. To the extent that we used different peer companies to measure volatility, a different stock volatility factor may have resulted which would have caused a different stock valuation and a related increase or decrease in non-cash compensation expense. Beginning January 1, 2014, volatility in all instances presented is the Company's estimate of volatility that is based on the historical volatility of the Company's stock price. If actual results are not consistent with our assumptions and judgments used in estimating key assumptions, in future periods, the stock option expense that we record for future grants may differ significantly from what we have recorded in the current period.

**ITEM 1B. <u>UNRESOLVED STAFF COMMENTS</u>.**

None.

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**ITEM 2. <u>PROPERTIES</u>.**

Our principal offices are currently located at 325 Sentry Parkway, Blue Bell, PA 19422, and are leased on a month- to-month basis at $400 per month.

**ITEM 3. <u>LEGAL PROCEEDINGS</u>.**

We are not a party to any pending legal proceedings, nor are we aware of any governmental authority contemplating any legal proceeding against us.

In September 2014, the Company received a subpoena from the Securities and Exchange Commission with respect to the preservation and production of documents relating to an investigation into trading in the Company's stock. The subpoena states that it should not be construed as an indication by the Securities and Exchange Commission that any violation of law has occurred, nor as a reflection upon any person, entity or security. The Company has been cooperating fully with the terms of the subpoena.

**ITEM 4. <u>MINE SAFETY DISCLOSURES</u>.**

Not applicable.

**<u>PART II</u>**

**ITEM 5. <u>MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES</u>.**

Our common stock is quoted on the OTC QB market under the trading symbol "RPMT.OB". There was only sporadic and intermittent trading activity of our common stock. The quoted prices on the OTC QB represent only prices between dealers on each trading day as submitted from time to time by certain of the securities dealers wishing to trade in our common stock, do not reflect retail mark-ups, mark-downs or commissions, and may not represent, or differ substantially from, prices in actual transactions.

**Common Stockholders**

As of March 31, 2023 our shares of Common Stock were held by 141 stockholders of record.

**Dividend Policy**

We have never declared or paid a cash dividend. At this time, we do not anticipate paying dividends in the foreseeable future. The declaration and payment of dividends is subject to the discretion of our board of directors and will depend upon our earnings (if any), our financial condition, and our capital requirements.

**Purchases of equity securities by the issuer and affiliated purchasers**

The Company did not repurchase any common stock in the fourth quarter of 2022.

**Sales of unregistered securities**

During the fourth quarter of 2022, the Company issued 80,338 shares of the Company's Series B Preferred Stock and received proceeds of $7,230,400 in a private placement to accredited investors under Section 4(a)(2) of the Securities Act. See Note 12 of the financial statements contained herein for a description of the terms of the Series B Preferred Stock.

**Transfer Agent**

Our Transfer Agent is Securities Transfer Corporation, and their address and phone number are 2901 N. Dallas Parkway, Suite 380, Plano, Texas 75093, (469) 633-0101.

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**ITEM 6. <u>[RESERVED]</u>**

Not required.

**ITEM 7. <u>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</u>.**

*This Management's Discussion and Analysis of Financial Condition And Results Of Operations and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this Annual Report on Form 10-K are based on information available to us on the date hereof, and except as required by law, we assume no obligation to update any such forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors in Item 1A – Risk Factors herein. The following should be read in conjunction with our annual financial statements contained elsewhere in this report.*

**Overview**

REGO Payment Architectures, Inc. is a provider of consumer software that delivers a mobile payment platform—Mazoola® - a family focused mobile banking solution. Headquartered in Blue Bell, Pennsylvania, the Company maintains a portfolio of trade secrets and four US patent awards. REGO offers an all-digital financial payments platform to enable minors, particularly under 13 years old, to transact, complete chores and learn in a secure online environment guided by parental permission, oversight, and control, while remaining COPPA and GDPR compliant.

COPPA applies not only to websites and mobile apps. It can apply to a growing list of connected devices that is included in the Internet of Things. Some of these include toys and products that could collect personal information, such as voice recordings or geolocation information. Non-compliance with COPPA

has meant substantial fines for many violators.

Management believes that by building on its COPPA compliance advantage, the future of REGO Payment Architectures, Inc. will be based on the foundational architecture of its software platform (the "Platform") that will allow its use across multiple financial markets where secure controlled payments are needed. The Company intends to license in each alternative field of use the ability for its partners, distributors and/or value-added resellers to private label each of the alternative markets. These partners will deploy, customize and support each implementation under their own label, but with acknowledgement of the Company's proprietary intellectual assets as the base technology. Management believes this approach will enable the Company to reduce marketing expenses while broadening its reach.

Further, California passed the California Consumer Privacy Act of 2018 ("CCPA") on June 28, 2018. CCPA gives consumers (defined as natural citizens who are California residents) four rights relative to their personal information as follows:

● the right to know, through a general privacy policy and with more specifics available upon request, what personal information a business has collected about them, where it was sourced from, what it is being used for, whether it is being disclosed or sold, and to whom it is being disclosed or sold;

● the right to "opt out" of allowing a business to sell their personal information to third parties (or, for consumers who are under 16 years old, the right not to have their personal information sold absent their, or their parent's, opt-in);

● the right to have a business delete their personal information, with some exceptions; and

● the right to receive equal service and pricing from a business, even if they exercise their privacy rights under the CCPA.

With respect to the evolving CCPA, the Company has designed its Platform and app to be in compliance.

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Additionally, the European Parliament and Council agreed upon the General Data Protection Regulation ("GDPR") in April 2016, to replace the Data Protection Directive 95/46/EC. This is the primary law regulating how companies protect European Union ("EU") citizens' personal data. GDPR became effective on May 25, 2018. Companies that fail to achieve GDPR compliance are subject to severe fines and penalties.

GDPR requirements apply to each member state of the European Union, aiming to create more consistent protection of consumer and personal data across EU nations. Some of the key privacy and data protection requirements of the GDPR include:

● Requiring the consent of subjects for data processing

● Anonymizing collected data to protect privacy

● Providing data breach notifications

● Safely handling the transfer of data across borders

● Requiring certain companies to appoint a data protection officer to oversee GDPR compliance

In short, the handling of EU citizens' data is mandated by GDPR using a baseline set of standards for companies that are designed to better safeguard the processing and movement of personal data. The Company has designed its Platform and app to be in compliance with GDPR, and has received the GDPRkidsTM Trustmark from PRIVO.

Revenues generated from the Platform will come from multiple sources depending on the level of service and facilities requested. There will be levels of subscription revenue paid monthly, service fees, transaction fees and in some cases, revenue sharing and licensing with banking and distribution partners.

Our goal, moving forward, is to enable both incumbent and new financial technology ("FinTech") participants, as well as key verticals with a large base of 'family accounts,' to provide their consumers with safe and empowering youth money management and financial literacy content and tools via the mobile payment platform.

While some of the REGO Platform can be easily duplicated/commoditized, such as the app skin, APIs to retailers, APIs to financial infrastructure and cloud storage, we believe that defending our market position rests on three factors:

&nbsp;&nbsp;&nbsp;&nbsp;1. The ability to define data control settings from parent to child.

Our approach to this opportunity uses a master account to dictate purchase rules to sub-accounts via a hierarchical architecture. This approach adheres to data flow and privacy policy requirements specifically outlined for COPPA compliance. We believe other approaches based on machine learning, or other artificial intelligence methodologies are potentially viable alternatives but are likely too costly, do not meet current compliance timelines, and may defy the core of COPPA's "opt-in" parameters. There is considerable room for next-generation automation techniques to be layered on REGO's hierarchical approach. Given its current stability and scalability metrics, the REGO Platform strongly features these advances in its technical development roadmap without compromising any of its current data control performance.

&nbsp;&nbsp;&nbsp;&nbsp;2. The ability to (mis)attribute the child's transaction and personal identification.

REGO has solved this issue by masking user data and maintaining separate identity and financial data flows. As a result, REGO can verify the age of the internet user through the transaction lifecycle on its Platform. Authenticating and validating the identity of the actual user on the internet remains one of the more difficult cybersecurity challenges. Current approaches are mainly not for commercial use; however, there is investment in commercial innovation in this area. REGO's data control features and its (mis)attribution approach are inextricably linked and a key to its scalability and extensibility.

&nbsp;&nbsp;&nbsp;&nbsp;3. The ability to disseminate transactional data on minors while remaining COPPA and GDPR compliant.

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The highest value data will be that which shows the most nuanced detail afforded under current regulations. Without extreme data control features, such as in the REGO Platform, any lesser data precision will be less valuable.

These three factors are all supported by REGO's patented technology.

REGO addresses hard industry problems such as:

● COPPA compliant technology with a key component being its ability to verify the age of an internet user

● A master and sub-account architecture with the ability to administer user-specific controls

● An advanced rules engine to provide strict automated compliance of the parental rules for each child

● Near real-time buying behavior database on minors - anonymized geolocation, age range and purchases

Currently, we are targeting established brands with large family-focused account bases — including banks, telecommunication companies, faith-based organizations, media distributors, mobile device Original Equipment Manufacturers ("OEMs"), and merchants.

We are seeking partners that will leverage our Platform to:

**Buy vs. Build:** Partners can license or revenue share for their specific market or field of use a safe, compliant system, instead of building one on their own.

**Safety & Security:** Partners can safely engage a younger consumer segment and their families with a new family friendly peer to peer payments approach. Vendors will be explicitly protected from non-compliant transactions and the underlying technology protects the privacy of the user.

**Youth Financial Literacy:** Partners can expand their brand story around empowerment and education of youth financial literacy while engaging their 'future customers' with Gen Z, a digital native population of post-millennial youth.

The REGO Mazoola® app and associated digital wallet technology is designed to enable our partners to engage families with Gen Z and Gen Alpha youths through a money management, transactional and financial literacy platform that enables young people to make smart decisions about the things they value in life — including their money, their time, their ideas and their connections. The Mazoola® app enables a new way for individual users to own and monetize their purchasing behavior that is currently unavailable to them.

In addition, we are analyzing specific components of our technology for individual monetization as well as exploring opportunities in the Business to Business ("B2B") realm.

Other markets for potential licensed applications are:

● Government social services payments where control over how benefits allowances are used is required. This is particularly necessary in some European countries where social benefits are not being used as intended by the government or where benefits are subject to fraud.

● Closed network consumer to business (C2B) and business to business (B2B). An example is school lunch programs where the consumer can make direct mobile payments to the provider's point of sale (POS) terminal without the need to traverse the traditional merchant payment system. This reduces the cost per transaction for the vendor and provides instant non-repudiated settlement. Many school lunch programs are now provided by large catering companies. This is particularly valuable as credit card fees, transaction fees and service fees can exceed 3% in overhead costs per transaction dependent on the negotiated rate. Removing this overhead can have significant positive financial impact on profitably. It also allows the closed network to own its own behavioral use data thus obviating the need to pay a third party for the same data.

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We believe that our near-term success will depend particularly on our ability to develop customer awareness and confidence in our service. Since we have extremely limited capital resources, we will need to closely manage our expenses and conserve our cash by continually monitoring any increase in expenses and reducing or eliminating unnecessary expenditures. Our prospects must be considered in light of the risks, expenses and difficulties encountered by companies at an early stage of development, particularly given that we operate in new and rapidly evolving markets, that we have limited financial resources, and face an uncertain economic environment. We may not be successful in addressing such risks and difficulties.

**Results of Operations**

**<u>Comparison of the Years Ended December 31, 2022 and 2021</u>**

The following discussion analyzes our results of operations for the years ended December 31, 2022 and 2021. The following information should be considered together with our financial statements for such periods and the accompanying notes thereto.

<u>Revenue/Net Loss</u>

<u>Revenue</u>

We have not generated significant revenue since our inception. For the years ended December 31, 2022 and 2021, we generated revenues of $2,073 and $2,628. Our revenue is generated from transactional sources with customers.

<u>Net Loss</u>

Our net loss attributable to common stockholders increased $5.8 million to $17.6 million for the year ended December 31, 2022 compared to $11.8 million for the year ended December 31, 2021, as a result of increased legal and professional fees associated with the 2022 enterprise/patent valuation ($0.8 million); increased Board fees ($0.5 million); increased consulting options ($1.2 million); and increased stock incentive compensation ($5.4 million) partially offset by a decrease in Board options expense ($2.1 million).

<u>Transaction Expense</u>

Transaction expense for the year ended December 31, 2022 was $0.3 million compared to $0.2 million for year ended December 31, 2021. These are transactional charges primarily for the operation of the Mazoola® app, and the Chore Check app.

<u>Sales and Marketing Expenses</u>

Sales and marketing expenses increased by $0.2 million in 2022 to $1.7 million compared to $1.5 million in 2021. In 2022 we ramped up marketing campaigns for our mobile app and hired additional consultants to develop and execute the marketing plan.

<u>Product Development</u>

Product development expenses decreased by $0.7 million in 2022 to $2.1 million compared to $2.8 million in 2021. Expenses were scaled back upon completion of the Platform in February 2022.

<u>General and Administrative Expenses</u>

General and administrative expenses increased by $5.8 million in 2022 to $11.4 million compared to $5.6 million in 2021. This was attributed to the incentive awards due to certain executives and board members resulting from the successful engagement of an investment banker and the successful completion of targeted funding via the sale of Series B Preferred Stock on September 22, 2022 and October 5, 2022, respectively.

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<u>Interest Expense</u>

Interest expense decreased $0.1 million to $1.0 million in 2022 compared to $1.1 million in 2021.

<u>Forgiveness of Debt</u>

The Company had $0.1 million of vendor debt forgiven during 2022. In 2021, $0.1 million of debt was forgiven as a result of the Paycheck Protection Plan loan that was forgiven in full by the Small Business Administration.

**Liquidity and Capital Resources**

Net cash used in operating activities increased $1.1 million to $6.2 million for the year ended 2022 compared to $5.1 million for the year ended December 31, 2021. The increase resulted primarily from the increase in common stock to be issued, offset by a decrease in the fair value of common stock issued in exchnage for services in 2022.

Net cash used in investing activities was $0.01 million and $0.1 million for the years ended December 31, 2022 and 2021. The Company maintained the current patents in 2022.

Net cash provided by financing activities increased by $6.3 million to $11.7 million for the year ended December 31, 2022 compared to $5.4 million for the year ended December 31, 2021. The increase is primarily attributed to the $11.4 million in proceeds received from the sale of Series B Preferred Stock to provide capital to continue operations.

Subsequent to December 31, 2022, the Company raised gross proceeds of $760,000 through the issuance of the Company's Series B Preferred stock.

As we have not realized significant revenues since our inception, we have financed our operations through public and private offerings of debt and equity securities.

On March 13, 2023, Company entered into an Investor Private Line of Credit agreement (the "LOC Agreement") with James Davison (the "Lender"). The Lender is an existing shareholder of the Company. Pursuant to the LOC Agreement, the Lender may extend unsecured loans to the Company in the amount of up to twenty million dollars ($20,000,000) which may be drawn upon by the Company for a period of one year in order to provide additional capital to facilitate the Company's operations. Drawings may be made by the Company as long as there has not been any material change in the operations of the Company. Loans under the LOC Agreement bear interest at the rate of 7% per annum. Drawings under the LOC Agreement must be repaid in full: (i) upon the execution and completion of a sale, merger or other transaction of the Company whereby the Company transfers its ownership and/or its assets to a third party within thirty (30) days of the completion of the transaction (a "Change of Control") or (ii) if a Change of Control does not occur within one year from the date hereof, the Company will repay any amounts outstanding within sixty (60) days.

Since our inception, we have focused on developing and implementing our business plan. We believe that our existing cash resources will not be sufficient to sustain our operations during the next twelve months. We currently need to generate sufficient revenues to support our cost structure to enable us to pay ongoing costs and expenses as they are incurred, finance enhancements to our Platform, and execute the business plan. If we cannot generate sufficient revenue to fund our business plan, we intend to seek to raise such financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing shareholders. The issuance of convertible debt may also result in dilution to existing stockholders. If we are unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to us, we will be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on our business, financial condition and results of operations.

Even if we are successful in generating sufficient revenue or in raising sufficient capital in order to commercialize the Platform, our ability to continue in business as a viable going concern can only be achieved when our revenues reach a level that sustains our business operations. We do not project that significant revenue will be developed until the second quarter of 2024. There can be no assurance that we will raise sufficient proceeds, or any proceeds, for us to implement fully our proposed business plan. Moreover, there can be no assurance that even if the Platform is fully developed and successfully commercialized, that we will generate revenues sufficient to fund our operations. In either such situation, we may not be able to continue our operations and our business might fail.

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As of March 31, 2023, the Company has a cash position of approximately $5.2 million. Based upon the current cash position and the Company's planned expense run rate, management believes the Company will be able to finance its operations through December 2023.

The foregoing forward-looking information was prepared by us in good faith based upon assumptions that we believe to be reasonable. No assurance can be given, however, regarding the attainability of the projections or the reliability of the assumptions on which they are based. The projections are subject to the uncertainties inherent in any attempt to predict the results of our operations, especially where new products and services are involved. Certain elements of the assumptions used will inevitably not materialize and unanticipated events will occur. Actual results of operations are, therefore, likely to vary from the projections and such variations may be material and adverse to us. Accordingly, no assurance can be given that such results will be achieved. Moreover, due to changes in technology, new product announcements, competitive pressures, system design and/or other specifications we may be required to change the current plans.

**Off-Balance Sheet Arrangements**

As of December 31, 2022, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

**Critical Accounting Policies**

Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 1 of the Notes to Financial Statements included elsewhere herein. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management.

<u>Stock-based Compensation</u>

We have adopted the fair value recognition provisions Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") 718. In addition, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 "*Share-Based Payment*" ("SAB 107"), which provides supplemental FASB ASC 718 application guidance based on the views of the SEC. Under FASB ASC 718, compensation cost recognized includes compensation cost for all share-based payments granted, based on the grant date fair value estimated in accordance with the provisions of FASB ASC 718.

We have used the Black-Scholes option-pricing model to estimate the option fair values. The option-pricing model requires a number of assumptions, of which the most significant are, expected stock price volatility, the expected pre-vesting forfeiture rate and the expected option term (the amount of time from the grant date until the options are exercised or expire).

All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Non-employee equity-based payments that do not vest immediately upon grant are recorded as an expense over the vesting period.

<u>Revenue Recognition</u>

In accordance with FASB ASC 606, *Revenue from Contracts with Customers*, the Company recognizes revenue when it satisfies performance obligations, by transferring promised goods or services to customers, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for fulfilling those performance obligations.

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**Recently Issued Accounting Pronouncements**

Recently issued accounting pronouncements are discussed in Note 1 of the Notes to Financial Statements contained elsewhere in this report.

**ITEM 7A. <u>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</u>.**

Not required.

**ITEM 8. <u>FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</u>.**

The financial statements required to be filed pursuant to this Item 8 are appended to this report beginning on page

F-1 located immediately after the signature page.

**ITEM 9. <u>CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</u>.**

None.

**ITEM 9A. <u>CONTROLS AND PROCEDURES</u>.**

**Disclosure Controls and Procedures**

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective to ensure (i) that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, in order to allow timely decisions regarding required disclosure.

**Management's Report on Internal Control Over Financial Reporting**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 as amended. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management conducted an evaluation of the effectiveness of our internal controls over financial reporting as of December 31, 2022 using criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our management has concluded that our internal control over financial reporting was effective as of December 31, 2022.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permits us to provide only management's report in this annual report.

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**Changes in Internal Control Over Financial Reporting**

There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) that occurred during the fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**ITEM 9B. <u>OTHER INFORMATION.</u>**

None.

**ITEM 9C. <u>DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS</u>.**

Not applicable.

**<u>PART III</u>**

**ITEM 10. <u>DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE</u>.**

The current members of our board of directors and executive officers of the Company are as follows:

---

| | | |
|:---|:---|:---|
| **<u>Name</u>** | **Age** | **Position with Company** |
| Gerald Hannahs | 71 | Chairman of the Board |
| Peter S. Pelullo | 71 | Director, Chief Executive Officer |
| Joseph R. Toczydlowski | 53 | Chief Financial Officer |

---

Our directors serve annual terms. We believe that our board of directors should be composed of individuals with sophistication and experience in many substantive areas that impact our business. We believe that experience, qualifications, or skills in the following areas are most important: software development, ecommerce, the FinTech industry, accounting and finance; strategic planning; and human resources and development practices; and board practices of other corporations. These areas are in addition to the personal qualifications described in this section. We believe that all of our current board members possess the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for each board member in the individual biographies below. The principal occupation and business experience, for at least the past five years of each current director and executive officer is as follows:

 ****

***Gerald Hannahs***

Mr. Hannahs served as an Account Executive and First Vice President for EF Hutton, Prudential and Paine Webber from 1982 to 1986. Mr. Hannahs co-founded Texarkoma Crude & Gas Company in 1983. Mr. Hannahs has over 30 years of experience in the investment business and the oil and gas industry. As a result of these and other professional experiences, Mr. Hannahs possesses particular knowledge and experience in investing, finance and accounting, SEC reporting, sales and marketing that strengthen the board's collective qualifications, skills, and experience.

***Peter S. Pelullo***

 ****

Peter S. Pelullo, has been an entrepreneur for the past 20 years. While his career has focused on the media and telecommunications industries, Mr. Pelullo has had extensive experience in both the construction and food and beverage industries. Mr. Pelullo founded Clariti Telecommunications International, LTD, a NASDAQ Small Cap listed company that developed proprietary digital wireless technology. Mr. Pelullo identified and organized through European banks, asset managers, and portfolio managers approximately $90 million in equity for such company's technology and business development. Mr. Pelullo has extensive experience in corporate finance, operating a public company, strategic planning, cash flow management and international business development. Mr. Pelullo was also the founder of Alpha International Recording Studios which he merged with the world-renowned Sigma Sound Studio which created the "Sound of Philadelphia". He also created Philly World Records (an independent record label), which he sold to MCA Records. Mr. Pelullo also has years of experience in the Real Estate sector as well as restructuring and work out services for companies that need to return to solvency and stable operations.

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***Joseph R. Toczydlowski***

Mr. Toczydlowski was appointed the Chief Financial Officer in August 2022. Mr. Toczydlowski has held various financial positions at Sculptz, Inc. since 1998, most recently as Chief Financial Officer since April 2011. His other areas of expertise include taxation, business analytics and marketing. In early 2022, Mr. Toczydlowski provided CFO consulting services to a tech startup with publicly traded shares. He previously served as a Senior Tax Accountant at United Refrigeration, Inc. and Arthur Andersen & Co. Mr. Toczydlowski is a Certified Public Accountant and has a B.S. in Accounting from LaSalle University.

**Committees of the Board of Directors**

At this time, due to the small size of the Company's Board of Directors, the Company does not have any committees of the Board of Directors and the Board of Directors does not have an "audit committee financial expert," as defined by the SEC rules.

**Code of Ethics**

Our board of directors approved a Code of Ethics and Rules of Conduct in accordance with the rules of the Securities and Exchange Commission that govern the conduct of each of our directors, officers, consultants and employees. Our Code of Ethics and Rules of Conduct is maintained on our website at www.regopayments.com. Any amendments to, or waivers of the Code of Ethics and Rules of Conduct that apply to our principal executive officer, principal financial officer, or principal accounting officer and that relates to any element of the definition of the term "code of ethics," as the term is defined by the Securities and Exchange Commission, will be posted on our website at www.regopayments.com. There are currently no such amendments or waivers.

We recognize the importance of preventing both actual conflicts of interest and the appearance of such conflicts in dealings between the Company and "related persons" (our directors, director nominees, executive officers, stockholders beneficially owning 5% or greater of our common stock, or the immediate family members of any of the foregoing). The Board of Directors will regularly review our corporate policies with respect to conflicts of interest including related party transactions and investigate instances of such conflicts.

Each matter described below under "Item 13. Certain Relationships and Related Transactions, and Director Independence" was vetted and pre-approved by a majority of the disinterested members of our Board of Directors.

**Delinquent Section 16(a) Reports**

Section 16(a) of the Exchange Act requires that our officers and directors and persons who beneficially own more than 10% of our common stock file initial reports of ownership and reports of changes in beneficial ownership of our common stock with the SEC. They are also required to furnish us with copies of all Section 16(a) forms that they file with the SEC. Based solely on our review of the copies of such forms received by us, or written representations from such persons that no reports were required for those persons, we believe that all Section 16(a) filing requirements were satisfied during our fiscal year ended December 31, 2022, except that Messrs. Hannahs and Pelullo each failed to file Form 4 on a timely basis with respect to a stock option grant and a stock award.

**ITEM 11. <u>EXECUTIVE COMPENSATION</u>.**

**Summary Compensation Table**

The following table sets forth the compensation earned by the Company's executive officers during the years ended December 31, 2022 and 2021:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | | | | **Stock** |  | **Option** | **All Other** |  |
|  | | **Salary** | **Bonus** | **Awards (1)** |  | **Awards (1)** | **Compensation** | **Total** |
| **<u>Name and Principal Position</u>** | **Year** | **($)** | **($)** | **($)** |  | **($)** | **($)** | **($)** |
| Peter S. Pelullo, Chief Executive Officer | 2022 | 400185 | 250000 | 3021000 |  |  |  | 3671185 |
|  | 2021 | 184046 |  | 1631000 | (3) |  |  | 1815046 |
| Scott A. McPherson, Former Chief Financial Officer (2) | 2022 | 158296 | 75000 |  |  |  |  | 233296 |
|  | 2021 | 192307 |  | 460000 |  | 42102 |  | 694409 |
| Joseph R. Toczydlowski, Chief Financial Officer (2) | 2022 | 62192 | 25000 | 203850 |  | 228266 |  | 519308 |
|  | 2021 |  |  |  |  |  |  |  |

---

(1) The value of the
stock awards is based on the closing stock price on the date that the stock awards were issued. The option awards were based
on the Black-Scholes option pricing model with assumptions for dividend yield, risk free interest rate, expected volatility and expected
life described in Note 15 to the financial statements included in this Form 10-K.

(2) Mr. McPherson resigned on August
15, 2022 and was replaced by Mr. Toczydlowski as Chief Financial Officer.

(3) Stock was issued to International
Corporate Management, Inc. a company owned by Peter S. Pelullo.

**Outstanding Equity Awards at Fiscal Year-End Table**

The following table sets forth information with respect to outstanding equity-based awards held by the named executive officers at December 31, 2022:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Option awards** | **Option awards** | **Option awards** | **Option awards** | **Option awards** | **Stock awards** | **Stock awards** | **Stock awards** | **Stock awards** |
|  |  |  |  |  |  |  |  |  | **Equity** |
|  |  |  |  |  |  |  |  |  | **incentive** |
|  |  |  |  |  |  |  |  | **Equity** | **plan awards:** |
|  |  |  | **Equity** |  |  |  |  | **incentive** | **Market or** |
|  |  |  | **incentive** |  |  |  |  | **plan awards:** | **payout** |
|  |  |  | **plan awards:** |  |  |  | **Market** | **Number of** | **value of** |
|  | **Number of** | **Number of** | **Number of** |  |  | **Number of** | **value of** | **unearned** | **unearned** |
|  | **securities** | **securities** | **securities** |  |  | **shares or** | **shares or** | **shares, units** | **shares, units** |
|  | **underlying** | **underlying** | **underlying** |  |  | **units of** | **units of** | **or other** | **or other** |
|  | **unexercised** | **unexercised** | **unexercised** | **Option** |  | **stock that** | **stock that** | **rights that** | **rights that** |
|  | **options** | **options** | **unearned** | **Exercise** | **Option** | **have not** | **have not** | **have not** | **have not** |
|  | **(#)** | **(#)** | **options** | **Price** | **Expiration** | **vested** | **vested** | **vested** | **vested** |
| **<u>Name</u>** | **exercisable** | **unexercisable** | **(#)** | **($)** | **Date** | **(#)** | **($)** | **(#)** | **($)** |
| Peter S. Pelullo | 750000 **(a)** |  |  | 0.26 | 4/12/2023 |  |  |  |  |
|  | 100000 **(a)** |  |  | 0.90 | 7/23/2023 |  |  |  |  |
|  | 500000 **(a)** |  |  | 0.25 | 8/13/2025 |  |  |  |  |
|  | 300000 **(b)** |  |  | 5.00 | 12/19/2023 |  |  |  |  |
|  |  |  |  |  |  |  |  | 1500000 | 1875000 |
|  |  |  |  |  |  |  |  | 1000000 | 1250000 |
| Scott A. McPherson **(c)** | 750000 |  |  | 0.26 | 4/12/2023 |  |  |  |  |
|  | 100000 |  |  | 0.90 | 7/23/2023 |  |  |  |  |
|  | 500000 |  |  | 0.25 | 8/18/2025 |  |  |  |  |
|  | 300000 **(b)** |  |  | 5.00 | 12/19/2023 |  |  |  |  |
|  | 50000 |  |  | 0.90 | 1/15/2026 |  |  |  |  |
| Joseph R. Toczydlowski **(c)** | 250000 |  |  | 1.21 | 8/16/2027 |  |  |  |  |
|  |  |  |  |  |  |  |  | 150000 | 187500 |
|  |  |  |  |  |  |  |  | 50000 | 62500 |

---

(a) Options were issued to International Corporate Management, Inc., a company owned by Peter S. Pelullo.

(b) Options were issued by Zoom Solutions, Inc., a majority-owned subsidiary of the Company.

(c) Scott A. McPherson resigned as CFO on August 15, 2022 and was replaced by Joseph R. Toczydlowski.

No named executive officers exercised stock options or warrants during 2022.

**Narrative Disclosure to Compensation Tables**

<u>Employment Agreements</u>

On August 11, 2020 the Company appointed Peter S. Pelullo as Chief Executive Officer. In connection with his appointment, the Company also entered into an Employment Agreement with him, pursuant to which he will be employed on an at will basis with an annual salary of $200,000 during the first year of his employment and will be reviewed for increases thereafter. He is also eligible to receive an annual bonus.

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The Employment Agreement also provided for the grant of a non-statutory stock option to acquire 500,000 shares of the common stock of the Company at an exercise price of $0.25 per share (or if greater, the fair market value of such stock on the grant date), vesting immediately. In addition, upon the sale or change in control of more than 50% of the Company, Mr. Pelullo will be granted a non-statutory stock option to acquire 500,000 shares of the common stock of the Company at the exercise price of the closing price per share on the date of sale or change of control (or if greater, the fair market value of such stock on the grant date), vesting immediately upon issuance.

The Employment Agreement also provided that Mr. Pelullo receive a grant of 250,000 shares of the common stock of the Company, vesting immediately. In addition, upon the sale of the Company or change in control of more than 50% of the Company, Mr. Pelullo will be granted 250,000 shares of the common stock of the Company, vesting immediately.

On August 15, 2022, Scott A. McPherson resigned as Chief Financial Officer of the Company.

On August 16, 2022, the Company appointed Joseph R. Toczydlowski as Chief Financial Officer. Pursuant to an employment agreement effective August 16, 2022, Mr. Toczydlowski will receive an annual salary of $165,000 for the first year of employment, which will be increased to $175,000 in the second year of employment. The employment agreement has an initial term of two years and renews for successive one-year periods unless either party gives notice of intent to not renew the agreement at least 60 days prior to the renewal date. Notwithstanding the term, Mr. Toczydlowski's employment is "at will" and is terminable at any time by either party, without further economic obligation beyond the termination date except as required by law. Mr. Toczydlowski also received an option to purchase 250,000 shares of the Company's common stock upon commencement of his employment under the agreement with an exercise price of $1.21 per share and a five-year term.

<u>Performance Stock Awards</u>

On September 22, 2022, the Company engaged an investment banker to explore a potential sale of the Company. This successful engagement of an investment banker resulted in incentive awards of 2,650,000 shares of common stock due to certain executives and members of the board of directors as follows:

---

| | | |
|:---|:---|:---|
| <u>Recipient</u> | <u># of Shares</u> | <u>Value</u> |
| Gerald Hannahs | 1000000 | $949000 |
| Peter Pelullo | 1500000 | $1423500 |
| Joseph Toczydlowski | 150000 | $142350 |
| Total | 2650000 | $2514850 |

---

The distribution of the shares underlying the incentive awards will not occur until the date the Company is sold.

On October 5, 2022 the Company completed its financing through the sale of Series B Preferred Stock. This successful completion resulted in incentive awards of 2,050,000 shares of common stock due to certain executives and members of the board of directors as follows:

---

| | | |
|:---|:---|:---|
| <u>Recipient</u> | <u># of Shares</u> | <u>Value</u> |
| Gerald Hannahs | 1000000 | $1230000 |
| Peter Pelullo | 1000000 | $1230000 |
| Joseph Toczydlowski | 50000 | $61500 |
| Total | 2050000 | $2521500 |

---

The distribution of the shares underlying the incentive awards will not occur until the date the Company is sold.

On December 5, 2022, Mr. Pelullo received a grant of 250,000 shares of the Company's common stock valued at $367,500.

Mr. Pelullo will receive 250,000 shares of the Company's common stock upon the sale of the Company or a more than 50% change in control, as well as an option to purchase 500,000 shares of the Company's common stock at an exercise price of the closing price per share on the date of sale or change in control that will vest immediately.

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Upon sale of the Company, Mr. McPherson will receive 250,000 shares of the Company's common stock, as well as an option to purchase 500,000 shares of the Company's common stock at an exercise price of the closing price per share on the date of sale or change in control that will vest immediately.

Upon the sale of the Company, Mr. Toczydlowski will receive an option to purchase 250,000 shares of the Company's common stock at an exercise price of the closing price per share on the date of sale or a change in control that will vest immediately.

<u>Option Issuances</u>

On August 16, 2022, Mr. Toczydlowski received an option to purchase 250,000 shares of the Company's common stock, with an exercise price of $1.21, vesting immediately and a term of 5 years and valued at $302,500.

**Directors Compensation Table** 

The following table shows all compensation paid or granted, during or with respect to the 2022 fiscal year, to each of our directors (other than those who are also our named executive officers) for services rendered to REGO Payment Architectures, Inc. during 2022. The $100K paid to Mr. Hannahs in 2022 was a bonus resulting from the Successful Corporate Actions Awards – Completion of the Series B Preferred financing that occurred in October 2022.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | | | | | **Nonqualified** | | |
|  | | | | **Non-equity incentive** | **deferred** | | |
|  | **Fees Earned or** | **Stock** | **Option** | **plan** | **compensation** | **All Other** | |
|  | **paid in cash** | **awards** | **awards** | **compensation** | **earnings** | **Compensation** | **Total** |
| <u>Name</u> | **($)** | **($)** | **($)** | **($)** | **($)** | **($)** | **($)** |
| Gerald Hannahs (a) |  | 2179000 |  | 100000 |  |  | 2279000 |

---

(a) On December 31, 2022, Mr. Hannahs held in the aggregate options to purchase a total of 1,250,000 shares of the Company's common stock and options to purchase 500,000 shares of Zoom Solutions, Inc.

**Narrative Disclosure to Directors Compensation Table**

Our non-employee directors are eligible to receive options, restricted stock, and other equity-linked grants under our 2013 Equity Incentive Plan. We did not pay an annual fee to any of our directors during 2022 as a result of our cost conservation efforts, although Mr. Hannahs did receive an incentive-based payment as described above. Each member of our board of directors receives reimbursement of expenses incurred in connection with his or her services as a member of our board or board committees.

Mr. Hannahs also received performance stock awards during 2022 described in "Narrative Disclosure to Compensation Tables – Performance Stock Awards" above.

**ITEM 12. <u>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS</u>**

The persons or groups known to us to be beneficial owners of more than 5% of our outstanding common stock, Series A Cumulative Convertible Preferred Stock or Series B Cumulative Convertible Preferred Stock as of March 31, 2023, are reflected in the charts below. The following information is based upon Schedules 13D and 13G filed with the Securities and Exchange Commission by the persons and entities shown as of the respective dates appearing or other information provided to the Company.

---

| | | | |
|:---|:---|:---|:---|
| **Title of**<br>**class** | **Name and address of beneficial**<br>**owner** | **Amount and nature of beneficial**<br>**ownership** | **Percent of**<br>**class** |
| Common | John Paul DeJoria Family Trust | 27528856 (b) | 20.2% |
| Series A Cumulative Convertible Preferred | 1888 Century Park East | 10000 | 10.0% |
| Series B Cumulative Convertible Preferred | Suite 1600 | 97779 | 60.2% |
|  | Century City, CA 90067 |  |  |
| Common | Peter S. Pelullo | 17803983 (c) | 14.2% |
|  | 325 Sentry Parkway, Suite 200 |  |  |
|  | Blue Bell, PA 19422 |  |  |

---

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(a) This table has been prepared based on 124,443,105 shares of our common stock, 98,350 shares of Series A Cumulative Convertible Preferred Stock and 170,929 shares of Series B Cumulative Convertible Preferred Stock outstanding on March 31, 2023.

(b) Consists of 8,310,555 shares of common stock, 100,000 shares underlying options exercisable at $0.90 per share, 10,000 shares of Series A convertible preferred stock, convertible into 1,111,111 shares of common stock and 97,779 shares of Series B convertible preferred stock, convertible into 10,864,333 shares of common stock. Also consists of 7,142,857 shares of common stock held in the name of The JP's Nevada Trust. John Paul DeJoria is the settlor of The JP's Nevada Trust and, pursuant to the terms of such trust, may be deemed to have beneficial ownership of such shares.

(c) Consists of 4,792,858 shares of common stock, 11,661,125 shares of common stock held by International Corporate Management, Inc. an affiliate of Mr. Pelullo, 750,000 shares underlying options exercisable at $0.26 per share, 100,000 shares underlying options exercisable at $0.90 per share and 500,000 shares underlying options exercisable at $0.25 per share. All of the options are held by International Corporate Management, Inc.

The following table shows beneficial ownership of the Company common stock as of March 31, 2023, by our directors and our executive officers and by all current directors and executive officers as a group:

---

| | | |
|:---|:---|:---|
| <br>**Name of beneficial owner** | **Number of shares of common stock**<br>**beneficially owned (a)** | **Percentage of**<br>**shares outstanding (a)** |
| Peter S. Pelullo | 17803983 (b) | 14.2% |
| Gerald Hannahs | 5357333 (c) | 4.2% |
| Joseph R. Toczydlowski | 250000 (d) | \* |
| All current directors and executive officers as a group (3 persons) | 23411316 | 18.0% |

---

(a) This table has been prepared based on 124,443,105 shares of our common stock outstanding on March 31, 2023. The address for each person listed above is c/o REGO Payment Architectures, Inc., 325 Sentry Parkway, Suite 200, Blue Bell, PA 19422.

(b) Consists of 4,792,858 shares of common stock, 11,661,125 shares of common stock held by International Corporate Management, Inc. an affiliate of Mr. Pelullo, 750,000 shares underlying options exercisable at $0.26 per share, 100,000 shares underlying options exercisable at $0.90 per share and 500,000 shares underlying options exercisable at $0.25 per share. All of the options are held by International Corporate Management, Inc.

(c) Consists of 774,000 shares of common stock, 500,000 shares underlying options exercisable at $0.25 per share and 750,000 shares underlying options exercisable at $0.26 and 30,000 shares of Series A Convertible Preferred A stock, convertible into 3,333,333 shares of common stock held by Hannahs Value Investors, LLC an affiliate of Mr. Hannahs.

(d) Consists of 250,000 shares underlying options exercisable at $1.21 per share.

\* Less than 1%

**Transfer Agent**

Our Transfer Agent is Securities Transfer Corporation, and their address and phone number are 2901 N. Dallas Parkway, Suite 380, Plano, Texas 75093, (469) 633-0101.

[**Table of Contents**](#toc)

**Securities Authorized for Issuance Under Equity Compensation Plans**

The following table provides certain information with respect to all of our equity compensation plans in effect as of December 31, 2022:

**EQUITY COMPENSATION PLAN INFORMATION**

---

| | | | |
|:---|:---|:---|:---|
|  | | | **Number of** |
|  | | | **securities** |
|  | **Number of** | | **remaining available** |
|  | **securities to be** |  | **for issuance under** |
|  | **issued upon** | **Weighted average** | **equity** |
|  | **exercise of** | **exercise price of** | **compensation plans** |
|  | **outstanding** | **outstanding** | **(excluding** |
|  | **options, warrants** | **options, warrants** | **securities reflected** |
|  | **and rights** | **and rights** | **in column (a))** |
| **Plan Category** | **(col.a)** | **(col. b)** | **(col c)** |
| Equity compensation plans approved by |  |  |  |
| security holders: (a) | 4737500 | $0.32 | 300000 |
| Equity compensation plans not approved |  |  |  |
| by security holders: (b) | 11324625 | 0.89 | - |
| Total | 16062125 | $0.61 | 300000 |

---

(a) Equity compensation plans approved by security holders consist of the 2008 Equity Compensation Plan and the 2013 Equity Compensation Plan.

(b) Options approved by the board but not governed by an Equity Compensation Plan.

**2008 Equity Incentive Plan**

We adopted our 2008 Equity Incentive Plan as of March 3, 2008 (the "2008 Plan"). Awards could be made under the 2008 Plan for up to 25,000,000 shares of our common stock in the form of stock options or deferred stock awards. Awards could be given to our employees, officers or directors as well as our consultants or advisors. The 2008 Plan is administered by our board of directors which has full and final authority to interpret the 2008 Plan, select the persons to whom awards may be granted, and determine the amount, vesting and all other terms of any awards.

All stock options granted under the 2008 Plan are exercisable for a period of up to ten years from the date of grant, are subject to vesting as determined by the board upon grant, and have an exercise price equal to not less than the fair market value of our common stock on the date of grant (except for incentive stock options granted to 10% stockholders, which are required to have an exercise price of not less than 110% of the fair market value of the common stock on the date the option is granted). Unless otherwise determined by the board, awards may not be transferred except by will or the laws of descent and distribution. The board has discretion to determine the effect on any award granted under the 2008 Plan of the death, disability, retirement, resignation, termination or other change in employment or other status of any participant in the 2008 Plan.

Upon the occurrence of a "Change in Control", as defined in the 2008 Plan, the board may take any number of actions. These actions include providing for all options outstanding under the 2008 Plan to be assumed by the acquiring corporation or to become immediately vested and exercisable in full. The original expiration date of March 3, 2018 was extended for one year and the 2008 Plan has now expired.

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**2013 Equity Incentive Plan**

During 2013, the board and our stockholders adopted the 2013 Equity Incentive Plan ("2013 Plan"). Under the 2013 Plan, we are authorized to grant awards of stock options, restricted stock, restricted stock units and other stock-based awards of up to an aggregate of 5,000,000 shares of common stock to any officer, employee, director or consultant. The 2013 Plan is intended to permit stock options granted to employees under the 2013 Plan to qualify as incentive stock options. All options granted under the 2013 Plan, which are not intended to qualify as incentive stock options are deemed to be non-statutory stock options.

**ITEM 13. <u>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE</u>**

**Related Party Transactions**

The Company entered into an employment agreement with Peter S. Pelullo, its Chief Executive Officer, who is a more than 5% beneficial owner. As of December 31, 2022 and December 31, 2021, the Company owed the Chief Executive Officer, who is also a more than 5% beneficial owner, a total of $1,703 and $95,185, consisting of $1,703 and $95,185 in unpaid salary.

As of December 31, 2022 and December 31, 2021, the Company owed the Chief Financial Officer $907 and $35,988 in unpaid salary.

The Company has entered into a consulting agreement with the son of Mr. Pelullo, at a cost of $10,000 per month, plus expenses. As of December 31, 2022 and 2021, the Company owed the consultant $0 and $10,349. For each of the years ended December 31, 2022 and 2021, the Company expensed $120,000 to this consultant.

The amounts owed have been included in accounts payable and accrued expenses – related parties.

**Director Independence**

Our Board of Directors consists of two persons. The Board has determined that Gerald Hannahs is an "independent director" within the meaning of the Nasdaq Listing Rules. Peter Pelullo, who is a member of the Board of Directors and also our Chief Executive Officer is not independent within the meaning of the NASDAQ Listing Rules. Our common stock is not listed on Nasdaq, however, we have chosen Nasdaq's independence rules solely for purposes of this disclosure in accordance with the applicable rules of the Securities and Exchange Commission.

**ITEM 14. <u>PRINCIPAL ACCOUNTANT FEES AND SERVICES</u>.**

**Audit Fees**

The fees billed for professional services rendered by our principal accountant, Morison Cogen, LLP, for the audit of our annual financial statements for the years ended December 31, 2022 and 2021 and the review of the financial statements included in each of our quarterly reports during the fiscal years ended December 31, 2022 and 2021 were $78,552 and $76,500, respectively.

**Audit-Related Fees**

Fees billed for the years ended December 31, 2022 and 2021 for assurance and related services rendered by Morison Cogen, LLP that are reasonably related to the performance of the audit or review of the Company's financial statements and are not reported under the category Audit Fees described above were $0.

**Tax Fees**

During the fiscal years ended December 31, 2022 and 2021, there were no fees billed for tax compliance, tax advice and/or tax planning by Morison Cogen, LLP.

[**Table of Contents**](#toc)

**All Other Fees**

During the fiscal years ended December 31, 2022 and 2021, there were no additional fees billed for products and services provided by Morison Cogen, LLP other than those set forth above.

All services provided by Morison Cogen, LLP are pre-approved by our Board of Directors.

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**<u>PART IV</u>**

**ITEM 15. <u>EXHIBITS AND FINANCIAL STATEMENT SCHEDULES</u>.**

&nbsp;&nbsp;&nbsp;&nbsp;(a) Audited financial statements set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;(b) The following exhibits are filed as part of this report.

---

| | |
|:---|:---|
| **Exhibit**<br> **Number** | **Description** |
| **3.1** | Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's registration statement on Form S-1 (Reg. # 333-152050) filed with the Commission on July 1, 2008). |
| **3.2** | Certificate of Ownership (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on August 30, 2011). |
| **3.3** | Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on December 19, 2013). |
| **3.4** | Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on August 20, 2014). |
| **3.5** | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on March 7, 2012). |
| **3.6** | Certificate of Designations of Preferences, Rights and Limitations of Series A Cumulative Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on January 29, 2014). |
| **3.7** | Certificate of Designations of Preferences, Rights and Limitations of Series B Cumulative Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on October 31, 2014). |
| **3.8** | Certificate of Amendment of Incorporation (incorporated by reference to Exhibit 3.8 to the Company's Annual Report on Form 10-K filed with the Commission on March 31, 2017. |
| **3.9** | [Amendment to Certificate of Designation of Preferences, Rights and Limitations of Series C Cumulative Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company's Current Report on form 8-K filed with the Commission on August 24, 2021).](https://www.sec.gov/Archives/edgar/data/1437283/000121465921008948/ex3_1.htm) |
| **3.10** | [Amendment to Certificate of Designation of Preferences, Rights and Limitations of Series B Cumulative Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on October 17, 2022).](https://www.sec.gov/Archives/edgar/data/1437283/000121465921008948/ex3_1.htm) |
| **4.1** | Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1/A (Reg. # 333-152050) filed with the Commission on August 13, 2008). |
| **4.2** | Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on February 13, 2012). |
| **4.3** | Form of Warrant (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on February 13, 2012). |
| **4.4** | Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on April 3, 2013). |

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**4.5** Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on May 29, 2013).

**4.6** Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on May 29, 2013).

**4.7** Form of Note and Warrant Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on December 31, 2013).

---

| | |
|:---|:---|
| **4.8** | Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on January 29, 2014). |
| **4.9** | Form of Warrant (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on January 29, 2014). |
| **4.10** | Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on October 31, 2014). |
| **4.11** | Form of Warrant (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on October 31, 2014). |
| **10.1\*** | 2008 Equity Incentive Plan (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-1 (Reg. # 333-152050) filed with the Commission on July 1, 2008). |
| **10.2\*** | 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on March 8, 2013). |
| **10.3** | Form of Securities Purchase Agreement (March 2015 Secured Convertible Notes) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on March 12, 2015) |
| **10.4** | Form of Secured Convertible Promissory Note (March 2015 Secured Convertible Notes) (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on March 12, 2015) |
| **10.5** | Form of Security Agreement (March 2015 Secured Convertible Notes) (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the Commission on March 12, 2015) |
| **10.6** | Form of Securities Purchase Agreement (May 2015 Secured Convertible Notes) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on May 11, 2015) |
| **10.7** | Form of Secured Convertible Promissory Note (May 2015 Secured Convertible Notes) (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on May 11, 2015) |
| **10.8** | Form of Security Agreement (May 2015 Secured Convertible Notes) (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the Commission on May 11, 2015) |
| **10.9** | Form of Promissory Note Agreement (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 6, 2015) |

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| | |
|:---|:---|
| **10.10** | Form of Promissory Note Agreement (including commitment fee) (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 6, 2015) |
| **10.11** | Form of Warrant (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 6, 2015) |
| **10.12** | Form of Amendment to Promissory Note Agreement (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the Commission on February 25, 2016) |
| **10.13** | ICM Consulting Agreement (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Commission on May 13, 2016) |
| **10.14** | Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on August 29, 2016) |
| **10.15** | Form of Secured Convertible Promissory Note (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on August 29, 2016) |
| **10.16** | Form of Amended and Restated Security Agreement (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the Commission on August 29, 2016) |
| **10.17** | Form of Note Exchange Agreement (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the Commission on August 29, 2016) |
| **10.18** | License Agreement between the Company and Crowd Cart, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q filed with the Commission on May 15, 2018). |
| **10.19** | Form of Simple Agreement For Future Equity (incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q filed with the Commission on May 15, 2018). |
| **10.20** | Convertible Debenture dated as of December 15, 2019 issued by REGO Payment Architectures, Inc. in favor of Nehemiah Partners I, LP (incorporated by reference to the Company's Current Report on Form 8-K filed with the Commission on January 3, 2020). |
| **10.21** | [Purchase of Business Agreement dated as of January 1, 2021 between Chore Check, LLC and the Registrant (incoprorated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Commission on January 7, 2021).](https://www.sec.gov/Archives/edgar/data/1437283/000121465921000265/ex2_1.htm) |
| **10.22** | [Nonqualified Stock Option Agreement dated January 1, 2021 between Registrant and Chore Check, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on January 7, 2021).](https://www.sec.gov/Archives/edgar/data/1437283/000121465921000265/ex10_1.htm) |
| **10.23\*** | [Employment Agreement between the Registrant and Peter S. Pelullo (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 10-Q filed with the Commission on August 14, 2020).](https://www.sec.gov/Archives/edgar/data/1437283/000121465920007182/ex10_1.htm) |
| **10.24\*** | [Agreement dated August 11, 2020 between the Registrant and David Knight (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on August 12, 2020).](https://www.sec.gov/Archives/edgar/data/1437283/000121465920006991/ex10_1.htm) |
| **10.25\*** | [Settlement Agreement dated June 1, 2021 between Registrant and Nehemiah Partners I, L.P. (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on August 16, 2021.](https://www.sec.gov/Archives/edgar/data/1437283/000121465921008679/ex10_1.htm) |

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| | |
|:---|:---|
| **10.26\*** | [Employment Agreement between the Registrant and Scott A. McPherson](https://www.sec.gov/Archives/edgar/data/0001437283/000121465922004581/ex10_26.htm) (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K filed with the Commission on March 31, 2022). |
| **10.27\*** | [Employment Agreement dated August 16, 2022 between the Company and Joseph Toczydlowski (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 14, 2022).](https://www.sec.gov/Archives/edgar/data/1437283/000121465922013728/ex10_1.htm) |
| **10.28** | [Investor Private Line of Credit dated March 13, 2023 between Rego Payment Architectures, Inc. and James Davison (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on March 16, 2023).](https://www.sec.gov/Archives/edgar/data/1437283/000121465923003865/ex10_1.htm) |
| **21.1\*\*** | [Subsidiaries of the Registrant.](https://www.sec.gov/Archives/edgar/data/1437283/000121465921003694/ex21_1.htm) |
| **31.1\*\*** | [Certification of the principal executive officer of the Company, pursuant to Securities Exchange Act Rule 13a-14(a)](https://www.sec.gov/Archives/edgar/data/1437283/000121465921003694/ex31_1.htm) |
| **31.2\*\*** | [Certification of the principal financial officer of the Company, pursuant to Securities Exchange Act Rule 13a-14(a)](https://www.sec.gov/Archives/edgar/data/1437283/000121465921003694/ex31_2.htm) |
| **32.1\*\*** | [Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by the chief executive officer of the Company](https://www.sec.gov/Archives/edgar/data/1437283/000121465921003694/ex32_1.htm) |

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---

| | |
|:---|:---|
| **32.2\*\*** | [Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by the chief financial officer of the Company](https://www.sec.gov/Archives/edgar/data/1437283/000121465921003694/ex32_2.htm) |
| 101.INS\*\* | XBRL Instance Document The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| 101.SCH\*\* | Taxonomy Extension Schema Document |
| 101.CAL\*\* | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF\*\* | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB\*\* | XBRL Taxonomy Extension Label Linkbase |
| 101.PRE\*\* | XBRL Taxonomy Extension Presentation Linkbase Document |
| 104\*\* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |

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\* Management contract or compensatory plan or arrangement

\*\*filed herewith

**ITEM 16. <u>FORM 10-K SUMMARY</u>**

Not provided.

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**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 31st day of March, 2023.

---

| | |
|:---|:---|
| REGO Payment Architectures, Inc. | REGO Payment Architectures, Inc. |
| By: | /s/ Peter S. Pelullo |
|  | Peter S. Pelullo**,** Chief Executive <br> Officer and Principal Executive Officer |
|  | /s/ Joseph R. Toczydlowski |
|  | Chief Financial Officer and<br> Principal Accounting Officer |

---

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

---

| | | |
|:---|:---|:---|
| **Signature** | **Title** | **Date** |
| /s/ Peter S. Pelullo | Director, Chief Executive Officer and Principal Executive Officer | March 31, 2023 |
| Peter S. Pelullo |  |  |
| /s/Joseph R. Toczydlowski | Chief Financial Officer and Principal Accounting Officer | March 31, 2023 |
| Joseph R. Toczydlowski |  |  |
| /s/ Gerald Hannahs | Chairman of the Board, Director | March 31, 2023 |
| Gerald Hannahs |  |  |

---

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REGO Payment Architectures, Inc.

---

| | |
|:---|:---|
|  | PAGE |
| [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID# 536)](#Report) | F-2 |
| [CONSOLIDATED BALANCE SHEETS](#BS) | F-4 |
| [CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS](#CL) | F-5 |
| [CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT](#CSD) | F-6 |
| [CONSOLIDATED STATEMENTS OF CASH FLOWS](#CF) | F-7 |
| [NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS](#Notes) | F-8 to F-26 |

---

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Rego Payment Architectures, Inc.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Rego Payment Architectures, Inc. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of comprehensive loss, changes in stockholders' deficit, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

**Going Concern**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company's losses from development activities raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

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To the Board of Directors and

Stockholders of Rego Payment Architectures, Inc.

(Continued)

**Critical Audit Matters**

Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

/s/ Morison Cogen LLP

We have served as the Company's auditor since 2008.

Blue Bell, Pennsylvania

March 31, 2023

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REGO Payment Architectures, Inc.

Consolidated Balance Sheets

---

| | | |
|:---|:---|:---|
|  | December 31, 2022 | December 31, 2021 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ASSETS |  |  |
| CURRENT ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $6005667 | $553131 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | 17758 | 108131 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deposits | 341 | 341 |
| TOTAL CURRENT ASSETS | 6023766 | 661603 |
| OTHER ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Patents and trademarks, net of accumulated amortization of $291,255 and $253,262 | 352859 | 379401 |
|  | 352859 | 379401 |
| TOTAL ASSETS | $6376625 | $1041004 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LIABILITIES AND STOCKHOLDERS' DEFICIT |  |  |
| CURRENT LIABILITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | $6861314 | $6108019 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses - related parties | 2610 | 141522 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans payable | 42600 | 42600 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10% secured convertible notes payable - stockholders | 3316357 | 3316357 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes payable - stockholders | 595000 | 595000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4% secured convertible notes payable - stockholders | 14981250 | 14781250 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock dividend liability | 9214850 | 7928199 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock to be issued | 5350000 | - |
| TOTAL CURRENT LIABILITIES | 40363981 | 32912947 |
| CONTINGENCIES |  |  |
| STOCKHOLDERS' DEFICIT |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock, $.0001 par value; 2,000,000 preferred shares authorized; 195,500 preferred shares Series A authorized; 100,350 shares issued and outstanding at December 31, 2022 and 102,350 issued and outstanding at December 31, 2021 | 10 | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock, $.0001 par value; 2,000,000 preferred shares authorized; 347,222 preferred shares Series B authorized; 162,485 shares issued and outstanding at December 31, 2022 and 35,879 issued and outstanding at December 31, 2021 | 17 | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock, $.0001 par value; 2,000,000 preferred shares authorized; 300,000 preferred shares Series C authorized; 0 shares issued and outstanding at December 31, 2022 and December 31, 2021 | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock, $.0001 par value; 230,000,000 shares authorized; 124,160,885 shares issued and outstanding at December 31, 2022 and 123,441,102 shares issued and outstanding at December 31, 2021 | 12416 | 12344 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid in capital | 83255319 | 67740012 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (117157414) | (99546710) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noncontrolling interests | (97704) | (77603) |
| STOCKHOLDERS' DEFICIT | (33987356) | (31871943) |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $6376625 | $1041004 |

---

The accompanying notes are an integral part of these consolidated financial statements.

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REGO Payment Architectures, Inc.

Consolidated Statements of Comprehensive Loss

---

| | | |
|:---|:---|:---|
|  | For the Years Ended | For the Years Ended |
|  | December 31, | December 31, |
|  | <u>2022</u> | <u>2021</u> |
| NET REVENUE | $2073 | $2628 |
| OPERATING EXPENSES |  |  |
| &nbsp;&nbsp;&nbsp;Transaction expense | 258746 | 165018 |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 1681040 | 1454325 |
| &nbsp;&nbsp;&nbsp;Product development | 2059890 | 2837012 |
| &nbsp;&nbsp;&nbsp;General and administrative | 11425026 | 5612413 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 15424702 | 10068768 |
| NET OPERATING LOSS | (15422629) | (10066140) |
| OTHER INCOME (EXPENSE) |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 1043 | 333 |
| &nbsp;&nbsp;&nbsp;Forgiveness of debt | 92660 | 95425 |
| &nbsp;&nbsp;&nbsp;Interest expense | (1015228) | (1080391) |
|  | (921525) | (984633) |
| NET LOSS | (16344154) | (11050773) |
| LESS: Accrued preferred dividends | (1286651) | (732955) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss attributable to noncontrolling interests | 101 | 101 |
| NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $(17630704) | $(11783627) |
| BASIC AND DILUTED NET LOSS PER COMMON SHARE | $(0.14) | $(0.10) |
| BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | 123634367 | 122775473 |

---

The accompanying notes are an integral part of these consolidated financial statements.

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REGO Payment Architectures, Inc.

Consolidated Statement of Changes in Stockholders' Deficit

For the years ended December 31, 2022 and 2021

---

| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Common | Common | | | | |
|  | Stock Series A | Stock Series A | Stock Series B | Stock Series B | Stock Series C | Stock Series C | Stock | Stock | | | | |
|  | Number of<br>Shares |<br>Amount | Number of<br>Shares |<br>Amount | Number of<br>Shares |<br>Amount | Number of<br>Shares |<br>Amount |<br>Additional<br>Paid-In<br>Capital |<br>Accumulated<br>Deficit |<br>Noncontrolling<br>Interests |<br><br>Total |
| Balance, December 31, 2020, as adjusted | 107850 | $11 | 28378 | $3 |  | $- | 120096866 | $12010 | $61447232 | $(87783083) | $(57502) | $(26381329) |
| Conversion of Series A Preferred Stock into common stock | (5500) | (1) |  | - |  | - | 611111 | 61 | (60) | - | - | - |
| Sale of Series B Preferred stock |  | - | 7501 | 1 |  | - |  | - | 675019 | - | - | 675020 |
| Issuance of common stock to board members and employees |  | - |  | - |  | - | 2400000 | 240 | 2550760 | - | - | 2551000 |
| Issuance of common stock for accounts payable |  | - |  | - |  | - | 150000 | 15 | 134985 | - | - | 135000 |
| Issuance of common stock to consultants |  | - |  | - |  | - | 75000 | 7 | 67493 | - | - | 67500 |
| Exercise of options |  | - |  | - |  | - | 80000 | 8 | 19992 | - | - | 20000 |
| Exercise of options, cashless |  | - |  | - |  | - | 28125 | 3 | (3) | - | - | - |
| Fair value of options for software |  | - |  | - |  | - |  | - | 111817 | - | - | 111817 |
| Fair value of options for services |  | - |  | - |  | - |  | - | 2732777 | - | - | 2732777 |
| Accrued preferred dividends |  | - |  | - |  | - |  | - | - | (712955) | (20000) | (732955) |
| Net loss | - | - | - | - |  | - | - | - | - | (11050672) | (101) | (11050773) |
| Balance, December 31, 2021 | 102350 | $10 | 35879 | $4 |  | $- | 123441102 | $12344 | $67740012 | $(99546710) | $(77603) | $(31871943) |
| Conversion of Series A Preferred stock to common stock | (2000) | - |  | - |  | - | 222221 | 22 | (22) | - | - | (0) |
| Sale of Series B Preferred stock |  | - | 126606 | 13 |  | - |  | - | 11394638 | - | - | 11394651 |
| Issuance of commonstock to board members and employees |  | - |  | - |  | - | 250000 | 25 | 367475 | - | - | 367500 |
| Issuance of common stock to consultants |  | - |  | - |  | - | 75000 | 8 | 88492 | - | - | 88500 |
| Exercise of options |  | - |  | - |  | - | 145000 | 14 | 130486 | - | - | 130500 |
| Exercise of options, cashless |  | - |  | - |  | - | 27562 | 3 | (3) | - | - | - |
| Fair value of options for services |  | - |  | - |  | - |  | - | 3534241 | - | - | 3534241 |
| Accrued preferred dividends |  | - |  | - |  | - |  | - |  | (1266651) | (20000) | (1286651) |
| Net loss | - | - | - | - |  | - | - | - | - | (16344053) | (101) | (16344154) |
| Balance, December 31, 2022 | 100350 | $10 | 162485 | $17 |  | $- | 124160885 | $12416 | $83255319 | $(117157414) | $(97704) | $(33987356) |

---

The accompanying notes are an integral part of these consolidated financial statements.

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REGO Payment Architectures, Inc.

Consolidated Statements of Cash Flows

---

| | | |
|:---|:---|:---|
|  | For the Years Ended December 31, | For the Years Ended December 31, |
|  | 2022 | 2021 |
| CASH FLOWS FROM OPERATING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss | $(16344154) | $(11050773) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of common stock issued in exchange for services | 456000 | 2618500 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of options issued in exchange for services | 3534241 | 2732775 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment loss | - | 111817 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 37993 | 31337 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forgiveness of debt | (92660) | (95425) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease in assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | 90373 | 54709 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase (decrease) in liabilities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | 845955 | 692429 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses - related parties | (138912) | (148182) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock to be issued | 5350000 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (6261164) | (5052813) |
| CASH FLOWS FROM INVESTING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;Investment in patents | (11451) | (82252) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (11451) | (82252) |
| CASH FLOWS FROM FINANCING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;Exercise of options | 130500 | 20000 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of Series B Preferred stock | 11394651 | 675020 |
| &nbsp;&nbsp;&nbsp;Proceeds from 4% secured notes payable - stockholders | 200000 | - |
| &nbsp;&nbsp;&nbsp;Repayment of notes payable - stockholders | - | (50000) |
| &nbsp;&nbsp;&nbsp;Proceeds from convertible notes payable - stockholders | - | 4770000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 11725151 | 5415020 |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 5452536 | 279955 |
| CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | 553131 | 273176 |
| CASH AND CASH EQUIVALENTS - END OF YEAR | $6005667 | $553131 |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid during year for: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest | $- | $71606 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes | $- | $- |
| SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Accrued preferred dividends | $1286651 | $732955 |
| &nbsp;&nbsp;&nbsp;Options issued for software | $- | $111817 |
| &nbsp;&nbsp;&nbsp;Issuance of common stock for accounts payable | $- | $202000 |
| &nbsp;&nbsp;&nbsp;Conversion of Series A Preferred stock to common stock | $22 | $61 |
| &nbsp;&nbsp;&nbsp;Adoption of new accounting principle for embedded derivative liabilities affecting accumulated deficit | $- | $10987578 |
| &nbsp;&nbsp;&nbsp;Exchange of deferred revenue for 10% convertible note payable | $- | $200000 |
| &nbsp;&nbsp;&nbsp;Cashless conversion of options into common stock | $3 | $3 |
| &nbsp;&nbsp;&nbsp;Exchange of note payable-stockholder and accrued interest for 4% convertible note payable | $- | $517000 |

---

The accompanying notes are an integral part of these consolidated financial statements.

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REGO Payment Architectures, Inc.

Notes to the Consolidated Financial Statements

**NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

***<u>Nature of the Business</u>***

REGO Payment Architectures, Inc. ("REGO") was incorporated in the state of Delaware on February 11, 2008.

REGO Payment Architectures, Inc. and its subsidiaries (collectively, except where the context requires, the "Company") is a provider of consumer software that delivers a mobile payment platform solution—Mazoola®- a family focused mobile banking solution. Headquartered in Blue Bell, Pennsylvania, the Company maintains a portfolio of trade secrets and four US patent awards. REGO offers an all-digital financial payments platform to enable minors, particularly under 13 years old, to purchase goods and services, complete chores and learn in a secure online environment guided by parental permission, oversight, and control, while remaining Children's Online Privacy Protection Act ("COPPA") and General Data Protection Regulation ("GDPR") compliant.

Management believes that building on its COPPA advantage that the future of REGO Payment Architectures, Inc. will be based on the foundational architecture of the Platform that will allow its use across multiple financial markets where secure controlled payments are needed. The Company intends to license in each alternative field of use the ability for its partners, distributors and/or value-added resellers to private label each of the alternative markets. These partners would deploy, customize and support each implementation under their own label, but with acknowledgement of the Company's proprietary intellectual assets as the base technology. Management believes this approach will enable the Company to reduce expenses while broadening its reach.

Revenues generated from the Platform will come from multiple sources depending on the level of service and facilities requested by the parent. The Company's model contemplates levels of subscription revenue paid monthly, service fees, transaction fees and revenue sharing and licensing with banking and distribution partners.

***<u>ZOOM Solutions, Inc. ("ZS")</u>***

ZS (formerly Zoom Payment Solutions, Inc.) was incorporated in the state of Delaware on February 16, 2018 as a subsidiary of REGO Payment Architectures, Inc. REGO owns 100% of the common stock of ZS. ZS is the holding company for various subsidiaries that will utilize REGO's payment platform to address emerging markets.

There were minimal operations at ZS during the years 2022 and 2021.

***<u>ZOOM Payment Solutions, Inc. ("ZPS")</u>***

ZPS (formerly Zoom Payment Solutions USA, Inc.) was incorporated in the state of Nevada on December 6, 2017. ZPS is a wholly owned subsidiary of ZS with the core focus on providing mobile payments solutions.

There were minimal operations at ZPS during the years 2022 and 2021. ZPS was legally dissolved on December 28, 2022.

***<u>ZOOM Blockchain Solutions, Inc. ("ZBS")</u>***

ZBS was incorporated in the state of Delaware on April 20, 2018 as an 85% owned subsidiary of ZS. This company was focused on blockchain as a business solution for the retail and Consumer Packaged Goods ("CPG") industries.

There were minimal operations at ZBS during the years 2022 and 2021. ZBS was legally dissolved on December 28, 2022.

***<u>ZOOM Cloud Solutions, Inc. ("ZCS")</u>***

ZCS (formerly Zoom Canada Solutions, Inc.) was incorporated in the state of Delaware on April 20, 2018 as an 85% owned subsidiary of ZS. ZCS was focused on providing a highly secure cloud storage as a service.

There were minimal operations at ZCS during the years 2022 and 2021. ZCS was legally dissolved on December 28, 2022.

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***<u>ZOOM Auto Solutions, Inc. ("ZAS")</u>***

ZAS (formerly Zoom Mining Solutions) was incorporated in the State of Delaware on February 19, 2018 as a wholly owned subsidiary of ZCS. It became a wholly owned subsidiary of ZBS.

There were minimal operations at ZAS during the years 2022 and 2021. ZAS was legally dissolved on December 28, 2022.

The Company's principal office is located in Blue Bell, Pennsylvania.

***<u>Basis of Presentation</u>***

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). All significant intercompany transactions and balances have been eliminated in consolidation.

The Company's activities are subject to significant risks and uncertainties, including failing to secure additional financing to operationalize the Company's current technology before another company develops similar technology to compete with the Company.

 ****

***<u>Use of Estimates</u>***

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. Actual results could differ from these estimates.

***<u>Fair Value of Financial Instruments</u>***

The Company's financial instruments consist of accounts payable and accrued expenses and notes payable. The carrying value of accounts payable and accrued expenses approximate their fair value because of their short maturities. The Company believes the carrying amount of its notes payable approximate fair value based on rates and other terms currently available to the Company for similar debt instruments.

The Company follows FASB ASC 820, *Fair Value Measurements and Disclosures*, and applies it to all assets and liabilities that are being measured and reported on a fair value basis. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market price in active markets for identical assets or liabilities

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs that are not corroborated by market data

The level in the fair value hierarchy within which a fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

***<u>Concentration of Credit Risk Involving Cash</u>***

The Company may have deposits with a financial institution which at times exceed Federal Deposit Insurance Corporation ("FDIC") coverage. The Company has not experienced any losses from maintaining cash accounts in excess of federally insured limits.

***<u>Cash and Cash Equivalents</u>***

For purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and certificates of deposit and commercial paper with original maturities of 90 days or less to be cash or cash equivalents.

***<u>Property and Equipment</u>***

Property, equipment and leasehold improvements are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Maintenance and repairs of property are charged to operations, and major improvements are capitalized. Upon retirement, sale, or other disposition of property and equipment, the costs and accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in operations. The cost of leasehold improvements is amortized over the lesser of the length of the related leases or the estimated useful lives of the assets.

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***<u>Patents and Trademarks</u>***

The Company has four issued patents with the United States Patent and Trademark Office ("USPTO"), entitled "System and Method for Verifying the Age of an Internet User," "System and Method for Virtual Piggy Bank Wish-List," "Parent Match" and "System and Method for Virtual Piggy Bank." The Company has filed for one provisional U.S. patent application, as well as twelve non-provisional U.S. patent applications, two of which are pending, four of which have been allowed, and seven of which have been abandoned. Additionally, the Company has been granted two patents, entitled "Virtual Piggy Bank" and "Parent Match," in each of Germany, Canada, and Australia. The Company also has patents pending in the Republic of Korea under the Patent Cooperation Treaty ("PCT"). Costs associated with the registration and legal defense of the patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents.

***<u>Long-Lived Assets</u>***

The Company evaluates the recoverability of its long-lived assets in accordance with FASB ASC 360 *Property, Plant, and Equipment.* The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset, undiscounted and without interest or independent appraisals. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the assets.

***<u>Deferred Financing Costs</u>***

Costs incurred in securing long-term debt are deferred and amortized, as a charge to interest expense, over the term of the related debt. In accordance with FASB ASU No. 2015-03, *Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs*, the Company presents debt issuance costs in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. In the case of long-term debt modifications, the Company follows the guidance provided by FASB ASC 470-50, *Debt-Modification and Extinguishments.*

***<u>Revenue Recognition</u>***

In accordance with FASB ASC 606, *Revenue from Contracts with Customers*, the Company recognizes revenue when it satisfies performance obligations, by transferring promised goods or services to customers, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for fulfilling those performance obligations.

Revenue for the years ended December 31, 2022 and 2021 was $2,073 and $2,628. Revenues were derived from the operation of the Platform.

***<u>Income Taxes</u>***

The Company follows FASB ASC 740 when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Tax years from 2019 through 2022 remain subject to examination by major tax jurisdictions.

***<u>Stock-based Payments</u>***

The Company accounts for stock-based compensation under the provisions of FASB ASC 718, *Compensation—Stock Compensation,* which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company estimates the fair value of stock-based awards on the date of grant using the Black-Scholes model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. In accordance with ASU No. 2018-07, *Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting* share-based payment transactions for acquiring goods and services from nonemployees are included. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied.

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***<u>Advertising Costs</u>***

Advertising costs are expensed as incurred. Advertising costs were $0 and $1,063 for the years ended December 31, 2022 and 2021. These costs when incurred are included in sales and marketing expenses.

***<u>Product Development Costs</u>***

In accordance with FASB ASC 730, research and development costs are expensed when incurred. Product development costs were $2,059,890 and $2,837,012 for the years ended December 31, 2022 and 2021.

***<u>Loss Per Share</u>***

The Company follows FASB ASC 260 when reporting Earnings (Loss) Per Share resulting in the presentation of basic and diluted earnings (loss) per share. Because the Company reported a net loss for each of the years ended December 31, 2022 and 2021, common stock equivalents, including preferred stock, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same.

 ****

***<u>Segment Information</u>***

The Company is organized and operates as one operating segment. In accordance with FASB ASC 280, *Segment Reporting*, the chief operating decision-maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company subject to Board approval. Since the Company operates in one segment and provides one group of similar products, all financial segment and product line information required by FASB ASC 280 can be found in the consolidated financial statements.

***<u>Recently Adopted Accounting Pronouncements</u>***

In May 2021, the FASB issued ASU 2021-04, *Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40), Issuer's Accounting for Certain Modifications or Exchanges or Freestanding Equity – Classified Written Call Options.* The amendments in this Update clarify an issuer's accounting for modifications or exchanges of freestanding equity – classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. The Company adopted this standard effective January 1, 2022 which did not have a material impact on the Company's consolidated financial statements and related disclosure.

***<u>Recently Issued Accounting Pronouncements Not Yet Adopted</u>***

As of December 31, 2022 there are no recently issued accounting standards not yet adopted which would have a material effect on the Company's financial statements.

**NOTE 2 – GOING CONCERN**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses and experienced negative cash flow from operations since inception. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Since inception, the Company has focused on developing and implementing its business plan. The Company believes that its existing cash resources will not be sufficient to sustain operations during the next twelve months. The Company currently needs to generate revenue in order to sustain its operations. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing shareholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company would be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on the business, financial condition and results of operations.

The Company's current monetization model is to derive revenues from levels of service fees, transaction fees and in some cases, revenue sharing with banking and distribution partners. As these bases of revenues grow, the Company expects to generate additional revenue to support operations.

As of March 31, 2023, the Company has a cash position of approximately $5.2 million. Based upon the current cash position and the Company's planned expense run rate, management believes the Company has funds currently to finance its operations through December 2023.

**NOTE 3 - PATENTS AND TRADEMARKS**

Costs associated with the registration of patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents (20 years). Trademarks are also being amortized on a straight-line basis over an estimated useful life of 20 years. At December 31, 2022 and 2021, capitalized patent and trademark costs, net of accumulated amortization, were $352,859 and $379,401. Amortization expense for patents and trademarks was $37,992 and $31,337 for the years ended December 31, 2022 and 2021.

**NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES – RELATED PARTIES**

As of December 31, 2022 and 2021, the Company owed the Chief Executive Officer, who is also a more than 5% beneficial owner, a total of $1,703 and $95,185 in unpaid salary.

Additionally, as of December 31, 2022 and 2021, the Company owed the son of a more than 5% beneficial owner, Chief Executive Officer, President and Board member, $0 and $10,349, pursuant to a consulting agreement.

As of December 31, 2022 and 2021, the Company owed the Chief Financial Officer $907 and $35,988 in unpaid salary.

**NOTE 5 – PAYCHECK PROTECTION PROGRAM LOAN PAYABLE**

During April 2020, the Company received $2,000 from the Emergency Injury Disaster Loan program and $79,500 from the Paycheck Protection Program. The Company has spent all of the proceeds under these programs for payroll related expenses.

In accordance with FASB ASC 470, Debt, the Company recorded the loans as a current liability in the amount of $81,500 as of December 31, 2020. The Company recorded derecognition of the liability in accordance with FASB ASC 405-20, Liabilities-Extinguishment of Liabilities, when on January 28, 2021, the Company received notification from the lender that its Paycheck Protection Program loan had been forgiven in full by the Small Business Administration in the amount of $79,500, and that no further payments were required. The Paycheck Protection Program loan was recognized as forgiveness of debt during the year ended December 31, 2021.

Additionally, the Economic Injury Disaster Loan of $2,000 ($1,000 per employee) does not require repayment and was also recognized as forgiveness of debt.

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**NOTE 6 – LOANS PAYABLE**

The balance of the loans payable as of December 31, 2022 and 2021 was $42,600. Interest accrued on the loans at 6% and 10% was $6,768 and $3,806 as of December 31, 2022 and 2021. Interest expense related to these loans payable was $2,962 and $1,016 for the years ended December 31, 2022 and 2021.

**NOTE 7 – DEFERRED REVENUE**

The Company received $200,000 in May 2018 as a down payment to develop software for the automotive industry.

During the year ended December 31, 2021, the Company exchanged $200,000 of deferred revenue for a 10% Secured Convertible Note Payable in the amount of $200,000 (Note 8).

**NOTE 8 – 10% SECURED CONVERTIBLE NOTES PAYABLE - STOCKHOLDERS**

On March 6, 2015, the Company, pursuant to a Securities Purchase Agreement (the "Purchase Agreement"), issued $2,000,000 aggregate principal amount of its 10% Secured Convertible Promissory Notes due March 5, 2016 (the "Notes") to certain stockholders. On May 11, 2015, the Company issued an additional $940,000 of Notes to stockholders. The maturity dates of the Notes have been extended most recently from October 31, 2022 to October 31, 2023, with the consent of the Note holders.

The Notes are convertible by the holders, at any time, into shares of the Company's Series B Preferred Stock at a conversion price of $90.00 per share, subject to adjustment for stock splits, stock dividends and similar transactions with respect to the Series B Preferred Stock only. Each share of Series B Preferred Stock is currently convertible into 100 shares of the Company's common stock at a current conversion price of $0.90 per share, subject to anti-dilution adjustment as described in the Certificate of Designation of the Series B Preferred Stock. In addition, pursuant to the terms of a Security Agreement entered into on May 11, 2015 by and among the Company, the Investors and a collateral agent acting on behalf of the Investors (the "Security Agreement"), the Notes are secured by a lien against substantially all of the Company's business assets. Pursuant to the Purchase Agreement, the Company also granted piggyback registration rights to the holders of the Series B Preferred Stock upon a conversion of the Notes.

During the years ended December 31, 2022 and 2021, the Company exchanged $0 and $200,000 of deferred revenue for a 10% Secured Convertible Promissory Note Payable (Note 7).

The Notes are recorded as a current liability, in the amount of $3,316,357 as of December 31, 2022 and 2021. Interest accrued on the notes was $2,511,238 and $2,179,602 as of December 31, 2022 and 2021. Interest expense related to these notes payable was $331,636 and $324,234 for the years ended December 31, 2022 and 2021.

**NOTE 9 – NOTES PAYABLE - STOCKHOLDERS**

On December 15, 2019, the Company issued a 60 day convertible debenture in the amount of $500,000, bearing interest at 10% along with options to purchase 350,000 shares of the Company's common stock at an exercise price of $0.90 for a term of 2 years, vesting immediately. In addition to the interest, the note holder will receive a total of $550,000 as principal repayment and interest upon maturity of the promissory note. The additional $50,000 is considered additional interest and is being amortized over the term of the loan. The options were valued at $28,243 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 149.3%, risk free interest rate of 1.61% and expected option life of 2 years. The relative fair value of the option was $26,864 and was recorded as a discount to the note payable in accordance with FASB ASC 835-30-25, *Recognition,* and is being accreted over the term of the note payable for financial statement purposes. The Company has been unable to raise sufficient funds to enable repayment of this promissory note. The debenture also has the following additional provisions:

1. Holder's Option to Increase Financing. The Company grants the Holder an option to purchase up to $10,000,000 in additional debentures which grant the Holder the right to convert such debentures into special cashless warrants that pay, upon a Deemed Liquidation Event, an amount per share equal to 600% of the exercise price, which is $0.90, of the warrants. Such option will expire 24 months after this Debenture has been paid or converted.

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2. As additional consideration for this Debenture, the Company agrees to share with the Holder fifty percent (50%) of the Company's revenue received from a specified Norwegian joint-venture ("Joint-Venture Consideration") until such Joint-Venture Consideration equals $500,000 in aggregate. Holder may, at Holder's option, convert such Joint-Venture Consideration into the Series C Preferred Stock provided the Series C Preferred Stock terms have not expired.

3. As additional consideration for this Debenture, the Company agrees to grant the Holder a right to purchase for $3,000,000 fifteen percent (15%) interest in the revenues of the Scandinavian joint-venture, or related entity (the "**Scandinavian Option** "). The Scandinavian Option expired 3 years from the Original Issue Date of this Debenture.

During the year ended December 31, 2021, the Company repaid $50,000 principal of the loan referenced above and then exchanged the remaining $450,000 principal of that loan for a 4% Secured Convertible Note in the amount of $517,000, which included accrued interest of $67,000 (Note 10). The holder of this Note was given an option to purchase a total of 88,889 shares of the Company's Series B Preferred Stock, which requires all cash purchases of Series B Preferred Stock at $90.00 per share, as detailed below, to be made to the Company by the due dates in order to prevent the termination of the option as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. $200,000 on or before July 20, 2021, unless the option has previously terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. $250,000 on or before August 23, 2021, unless the option has previously terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. $300,000 on or before October 4, 2021, unless the option has previously terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. $350,000 on or before November 5, 2021, unless the option has previously terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. $400,000 on or before December 6, 2021, unless the option has previously terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. $500,000 on or before January 3, 2022, unless the option has previously terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. In order to prevent the termination of the option, unless it has previously terminated, the Holder of
the option must purchase $500,000 of the Company's Series B Preferred Stock (5,556 shares) on or before February 7, 2022
and continuing on the first Monday of every subsequent month, until a total of $8 million of the Company's Series B Preferred
Stock has been purchased.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. In addition to the other termination clauses, the option will terminate and be of no further force or
effect ten days after the occurrence of any of the following events, however nothing will prevent the holder from purchasing up to $8
million in the aggregate of the Company's Series B Preferred Stock during the ten day period:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Execution by the Company of an engagement letter with a "major bracket" investment banking firm.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Upon the Company entering into a definitive agreement with respect to a specified Norway white label transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Upon the MazoolaPay® technology becoming integrated and operational on any one of the following websites:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. Demandware

ii. Magento

iii. WooCommerce

iv. Shopify

v. BigCommerce

vi. Wix

vii. Squarespace

viii. Square
Online

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Upon the Company entering into a definitive agreement to white label the MazoolaPay® technology
with a banking institution with assets in excess of $1.5 billion, excluding Origin Bank.

The option to purchase $8 million of the Company's Series B Preferred Stock with an exercise price of $90.00, a term of 1.5 months and fully vested was valued at $0, fair value. The option was valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the option, with the following assumptions: no dividend yield, expected volatility of 0%, risk free interest rate of 0.04% and expected life of 1.5 months.

The options to purchase Series B Preferred Stock on July 20, 2021 and August 23, 2021, were exercised by the holder of the note payable and the Company issued 5,000 shares of Series B Preferred Stock (Note 12).

On September 30, 2021, the Company extended the deadline date for the exercise of the option expiring on October 4, 2021 to November 1, 2021 related to the $517,000 note payable and revalued the option accordingly. The option to purchase $8 million of the Company's Series B Preferred Stock with an exercise price of $90.00, a term of 1.0 months and fully vested was revalued at $0, fair value. The option was valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the option, with the following assumptions: no dividend yield, expected volatility of 0%, risk free interest rate of 0.07% and expected life of 1.0 months.

On October 29, 2021, the Company extended the deadline date for the exercise of the option expiring on November 5, 2021 to November 23, 2021 related to the $517,000 note payable and revalued the option accordingly. The option to purchase $8 million of the Company's Series B Preferred Stock with an exercise price of $90.00, a term of 0.7 months and fully vested was revalued at $0, fair value. The option was valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the option, with the following assumptions: no dividend yield, expected volatility of 0%, risk free interest rate of 0.05% and expected life of 0.7 months.

The option to purchase up to a total of 88,889 shares of the Company's Series B Preferred Stock ($8 million) was not exercised by November 23, 2021 and has expired as of December 31, 2022.

During the year ended December 31, 2021, the Company issued $100,000 aggregate principal amount of its notes payable - stockholders with no formal repayment terms and 10% interest. This note payable also included an option to purchase 100,000 shares of the Company's common stock with an exercise price of $1.20 and a term of two years. The option was valued at $74,518 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the option, with the following assumptions: no dividend yield, expected volatility of 124.3%, risk free interest rate of 0.11% and expected life of 2 years. The relative fair value of the option of $42,699 was recorded as a discount to the loan payable in accordance with FASB ASC 835-30-25, *Recognition,* and was accreted over the term of the note payable for financial statement purposes. The note payable was repaid in full, plus interest, on March 2, 2021 and the full amount of the discount was accreted to interest expense.

During the year ended December 31, 2020, the Company exchanged $107,000 of its notes payable – stockholders for $107,000 of the Company's 4.0% Secured Convertible Promissory Notes (Note 10).

The notes payable are recorded as a current liability as of December 31, 2022 and 2021 in the amount of $595,000. Interest accrued on the notes as of December 31, 2022 and 2021 was $278,326 and $195,626. Interest expense, including accretion of discounts, and warrants issues related to these notes payable was $82,700 and $146,166 for the years ended December 31, 2022 and 2021.

**NOTE 10 – 4.0% SECURED CONVERTIBLE PROMISSORY NOTES PAYABLE – STOCKHOLDERS**

On August 26, 2016, the Company, pursuant to a Securities Purchase Agreement, issued $600,000 aggregate principal amount of its 4.0% Secured Convertible Promissory Notes due June 30, 2019 (the "New Secured Notes") to certain accredited investors ("investors"). The Company issued additional New Secured Notes during 2016, 2017, 2018, 2019, 2020, 2021 and 2022.

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The New Secured Notes are convertible by the holders, at any time, into shares of the Company's authorized Series C Cumulative Convertible Preferred Stock ("Series C Preferred Stock") at a conversion price of $90.00 per share, subject to adjustment for stock splits, stock dividends and similar transactions with respect to the Series C Preferred Stock only. Each share of Series C Preferred Stock is currently convertible into 100 shares of the Company's common stock at a current conversion price of $0.90 per share, subject to full ratchet anti-dilution adjustment for one year and weighted average anti-dilution adjustment thereafter, as described in the Certificate of Designation of the Series C Preferred Stock. Upon a liquidation event, the Company shall first pay to the holders of the Series C Preferred Stock, on a pari passu basis with the holders of the Company's outstanding Series A Preferred Stock and Series B Preferred Stock, an amount per share equal to 700% of the conversion price (i.e., $630.00 per share of Series C Preferred Stock), plus all accrued and unpaid dividends on each share of Series C Preferred Stock (the "Series C Preference Amount"). The Series C Preference Amount shall be paid prior and in preference to payment of any amounts to the Common Stock. After the payment of all preferential amounts required to be paid to the holders of shares of Series C Preferred Stock, Series A Preferred Stock, Series B Preferred Stock and any additional senior preferred stock, the Series C Preferred Stock participates in further distributions subject to an aggregate cap of seven and one-half times (7.5x) the original issue price thereof, plus all accrued and unpaid dividends.

The maturity dates of the New Secured Notes were extended by the investors most recently to October 31, 2023.

During the year ended December 31, 2022 and 2021, the Company issued $200,000 and $4,770,000 aggregate principal amount of its New Secured Notes to certain investors.

In addition, during the year ended December 31, 2021, the Company exchanged the remaining $450,000 principal of a Note Payable and accrued interest of $67,000 for a 4% Secured Convertible Note in the amount of $517,000 (Note 9).

The New Secured Notes are recorded as a current liability in the amount of $14,981,250 and $14,781,250 as of December 31, 2022 and 2021. Interest accrued on the New Secured Notes was $2,150,449 and $1,552,519 as of December 31, 2022 and 2021. Interest expense, including accretion of discounts related to these notes payable was $597,929 and $533,339 for the years ended December 31, 2022 and 2021.

**NOTE 11 - INCOME TAXES**

The Company follows FASB ASC 740-10-10 whereby an entity recognizes deferred tax assets and liabilities for future tax consequences or events that have been previously recognized in the Company's financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on provisions of enacted tax law. The effects of future changes in tax laws or rates are not anticipated.

At December 31, 2022, the Company has a net operating loss ("NOL") that approximates $92 million. Consequently, the Company may have NOL carryforwards available for federal income tax purposes, which would begin to expire in 2028. Deferred tax assets would arise from the recognition of anticipated utilization of these net operating losses to offset future taxable income.

The income tax (benefit) provision consists of the following:

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
|  | 2022 | 2021 |
| Current | $- | $- |
| Deferred | (4722000) | (4080000) |
| Change in valuation allowance | 4722000 | 4080000 |
|  | $- | $- |

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The reconciliation of the statutory federal rate to the Company's effective income tax rate is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 |
|  | Amount | % | Amount | % |
| &nbsp;&nbsp;&nbsp;U.S federal income tax benefit at<br> Federal statutory rate | $(3432000) | (21) | $(2321000) | (21) |
| State tax, net of federal tax effect | (1290000) | (8) | (1169000) | (11) |
| Non-deductible share-based compensation | - | - | (13000) | - |
| Change in valuation allowance | 4722000 | 29 | 3503000 | 32 |
| Net | $- | - | $- | - |

---

The primary components of the Company's December 31, 2022 and 2021 deferred tax assets and related valuation allowances are as follows:

---

| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
|  | 2022 | 2021 |
| Deferred tax asset for NOL carryforwards | $(26685000) | $(24530000) |
| Deferred tax asset for stock based compensation | (6261000) | (3694000) |
| Valuation allowance | 32946000 | 28224000 |
| Net | $- | $- |

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In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment. The value of the deferred tax assets was offset by a valuation allowance, due to the current uncertainty of the future realization of the deferred tax assets.

The timing and manner in which the Company can utilize operating loss carryforwards in any year may be limited by provisions of the Internal Revenue Code regarding changes in ownership of corporations. Such limitation may have an impact on the ultimate realization of its carryforwards and future tax deductions.

The Company follows FASB ASC 740.10, which provides guidance for the recognition and measurement of certain tax positions in an enterprise's financial statements. Recognition involves a determination of whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information.

The Company's policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2022, the Company had no unrecognized tax benefits and no charge during 2022, and accordingly, the Company did not recognize any interest or penalties during 2022 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2022.

The Company files U.S. income tax returns and a state income tax return. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 2019 and thereafter are subject to examination by the relevant taxing authorities.

**NOTE 12 – CONVERTIBLE PREFERRED STOCK**

***<u>REGO Payment Architectures, Inc. Series A Preferred Stock</u>***

The Series A Preferred Stock has a preference in liquidation equal to two times the Original Issue Price, or $20,070,000, to be paid out of assets available for distribution prior to holders of common stock and thereafter participates with the holders of common stock in any remaining proceeds subject to an aggregate cap of 2.5 times the Original Issue Price. The Series A Preferred Stockholders may cast the number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred Stock can be converted. The Series A Preferred Stock also contains customary approval rights with respect to certain matters. The Series A Preferred Stock accrues dividends at the rate of 8% per annum, or $8.00 per Series A Preferred share.

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The conversion price of Series A Preferred Stock is currently $0.90 per share. The Series A Preferred Stock is subject to mandatory conversion if certain registration or related requirements are satisfied and the average closing price of the Rego's common stock exceeds 2.5 times the conversion price over a period of twenty consecutive trading days.

The conversion feature of the Series A Preferred Stock issued in January 2014 is an embedded derivative, which is classified as a liability in accordance with FASB ASC 815 and was valued in accordance with FASB ASC 470 as a beneficial conversion feature at a fair market value of $1,648,825 at January 27, 2014, and $3,481,050 at December 31, 2020. This was classified as an embedded derivative liability and a discount to Series A Preferred Stock. Since the Series A Preferred Stock can be converted at any time, the full amount of the discount was accreted and reflected as a deemed distribution.

The conversion feature of the Series A Preferred Stock issued in April 2014 is an embedded derivative, which is classified as a liability in accordance with FASB ASC 815 and was valued in accordance with FASB ASC 470 as a beneficial conversion feature at a fair market value of $3,489,000 at April 30, 2014, and $5,349,800 at December 31, 2020. This was classified as an embedded derivative liability and a discount to Series A Preferred Stock. Since the Series A Preferred Stock can be converted at any time, the full amount of the discount was accreted and reflected as a deemed distribution.

The Warrants associated with the Series A Preferred Stock were classified as equity, in accordance with FASB ASC 480-10-25. Therefore, it was not necessary to bifurcate these Warrants from the Series A Preferred Stock.

On January 1, 2021, upon adoption of FASB ASU No. 2020-06, *Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity's Own Equity*, the Company reclassified the embedded derivative value of the beneficial conversion feature of the Series A Preferred Stock issued in January 2014 valued at $3,481,050 as of December 31, 2020, to accumulated deficit. The Company also reclassified the embedded derivative value of the beneficial conversion feature of the Series A Preferred Stock issued in April 2014 valued at $5,349,800 as of December 31, 2020, to accumulated deficit.

During the years ended December 31, 2022 and 2021, certain holders of the Series A Preferred Stock converted 2,000 and 5,500 shares of the Series A Preferred Stock into 222,221 and 611,111 shares of the Company's common stock. The Company reversed the cumulative accrued dividends associated with the shares upon conversion in the amount of $131,266 and $342,167, respectively.

***<u>REGO Payment Architectures, Inc. Series B Preferred Stock</u>***

The Series B Preferred Stock is pari passu with the Series A Preferred Stock and has a preference in liquidation equal to two times the Original Issue Price, or $29,247,340 as of December 31, 2022, to be paid out of assets available for distribution prior to holders of common stock and thereafter participates with the holders of common stock in any remaining proceeds subject to an aggregate cap of 2.5 times the Original Issue Price. The Series B Preferred Stockholders may cast the number of votes equal to the number of whole shares of common stock into which the shares of Series B Preferred Stock can be converted. The Series B Preferred Stock also contains customary approval rights with respect to certain matters. The Series B Preferred Stock accrues dividends at the rate of 8% per annum, or $8.00 per Series B Preferred share.

The conversion price of the Series B Preferred Stock is currently $0.90 per share. The Series B Preferred Stock is subject to mandatory conversion if certain registration or related requirements are satisfied and the average closing price of the Company's common stock exceeds 2.5 times the conversion price over a period of twenty consecutive trading days.

The conversion feature of the Series B Preferred Stock is an embedded derivative, which is classified as a liability in accordance with FASB ASC 815 and was valued in accordance with FASB ASC 470 as a beneficial conversion feature at a fair market value of $375,841 at October 30, 2014, and $2,156,728 at December 31, 2020. This was classified as an embedded derivative liability and a discount to Series B Preferred Stock. Since the Series B Preferred Stock can be converted at any time, the full amount of the discount was accreted and reflected as a deemed distribution.

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The Warrants associated with the Series B Preferred Stock were classified as equity, in accordance with FASB ASC 480-10-25. Therefore, it was not necessary to bifurcate these Warrants from the Series B Preferred Stock.

On January 1, 2021, upon adoption of FASB ASU No. 2020-06, *Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity's Own Equity*, the Company reclassified the embedded derivative liability relative to the beneficial conversion feature of the Series B Preferred Stock issued in October 2014 valued at $2,156,728 as of December 31, 2020, to accumulated deficit.

During the years ended December 31, 2022 and 2021, the Company sold 126,607 and 7,501 shares of the Company's Series B Preferred Stock in private placements to accredited investors and received proceeds of $11,394,600 and $675,020 of which $0 and $450,000 was from the exercise of options issued with notes payable – stockholders (Note 9).

***<u>REGO Payment Architectures, Inc. Series C Preferred Stock</u>***

In August 2016, REGO authorized 150,000 shares of REGO's Series C Cumulative Convertible Preferred Stock ("Series C Preferred Stock"). On August 23, 2021, REGO filed with the Delaware Secretary of State an Amendment to the Certificate of Designation of Preferences, Rights and Limitations of Series C Cumulative Convertible Preferred Stock, pursuant to which the amount of authorized Series C Preferred Stock was increased from 150,000 shares to 300,000 shares. As of December 31, 2022, none of the Series C Preferred Stock shares were issued or outstanding. After the date of issuance of Series C Preferred Stock, dividends at the rate of $7.20 per share will begin accruing and will be cumulative. The Series C Preferred Stock is pari passu with the Series A Preferred Stock and Series B Preferred Stock and has a preference in liquidation equal to seven times its original issue price to be paid out of assets available for distribution prior to holders of common stock and thereafter participates with the holders of common stock in any remaining proceeds subject to an aggregate cap of 7.5 times its original issue price. The Series C Preferred Stockholders may cast the number of votes equal to the number of whole shares of common stock into which the shares of Series C Preferred Stock can be converted. The Series C Preferred Stock also contains customary approval rights with respect to certain matters.

As of December 31, 2022, the value of the cumulative 8% dividends for all REGO preferred stock was $9,131,516. Such dividends will be paid when and if declared payable by the Company's board of directors or upon the occurrence of certain liquidation events. In accordance with FASB ASC 260-10-45-11, the Company has recorded these accrued dividends as a current liability.

***<u>ZS Series A Preferred Stock</u>***

In November 2018, ZS pursuant to a Securities Purchase Agreement (the "ZS Series A Purchase Agreement"), issued in a private placement to an accredited investor, 83,334 units at an original issue price of $3 per unit (the "ZS Original Series A Issue Price"), which includes one share of ZS' Series A Cumulative Convertible Preferred Stock (the "ZS Series A Preferred Stock") and one warrant to purchase one share of ZS' common stock with an exercise price of $3.00 per share expiring in three years (the "Series A Warrants"). ZS raised $250,000 with respect to this transaction. The Series A Warrants have all expired as of December 31, 2022. Dividends on the ZS Series A Preferred Stock accrue at a rate of 8% per annum and are cumulative. The ZS Series A Preferred Stock has a preference in liquidation equal to two times the ZS Original Series A Issue Price to be paid out of assets available for distribution prior to holders of ZS common stock and thereafter participates with the holders of ZS common stock in any remaining proceeds subject to an aggregate cap of 2.5 times the ZS Original Series A Issue Price. The ZS Series A Preferred Stockholders may cast the number of votes equal to the number of whole shares of ZS common stock into which the shares of ZS Series A Preferred Stock can be converted.

The conversion feature of the ZS Series A Preferred Stock is an embedded derivative, which is classified as equity in accordance with FASB ASC 815 and was valued in accordance with FASB ASC 470 as a beneficial conversion feature at a fair market value of $193,377 at the date of issuance. However, in accordance with FASB ASC 470, the value of the beneficial conversion feature is limited to the value of the ZS Series A Preferred Stock of $139,959 at the date of issuance. This was classified as an embedded derivative and a discount to the ZS Series A Preferred Stock. Since the ZS Series A Preferred Stock can be converted at any time, the full amount of the discount was accreted and reflected as a deemed distribution.

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The warrants associated with the ZS Series A Preferred Stock were also classified as equity, in accordance with FASB ASC 480-10-25. Therefore, it is not necessary to bifurcate the warrants from the ZS Series A Preferred Stock.

As of December 31, 2022, the value of the cumulative 8% dividends for all ZS preferred stock was $83,334. Such dividends will be paid when and if declared payable by the ZS's board of directors or upon the occurrence of certain liquidation events. In accordance with FASB ASC 260-10-45-11, the Company has recorded these accrued dividends as a current liability.

**NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS**

***<u>Derivative Liabilities</u>***

For purposes of determining whether certain instruments are derivatives for accounting treatment, the Company follows the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity's own stock. The standard applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity's own common stock.

The following table details the approximate fair value measurements within the fair value hierarchy of the Company's derivative liabilities using Level 2 inputs:

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| | |
|:---|:---|
|  | Total |
| Balance at December 31, 2020 | $10987578 |
| Change in fair value of derivative liability | $(10987578) |
| Balance at December 31, 2021 | $- |
| Change in fair value of derivative liability | $- |
| Balance at December 31, 2022 | $- |

---

**NOTE 14 – STOCKHOLDERS' EQUITY**

***<u>Option Amendments and Adjustments</u>***

On April 28, 2022, the Board of Directors approved amendments extending the term of certain outstanding options to purchase in the aggregate 250,000 shares of common stock of the Company at exercise prices of $0.90 per share. These options were scheduled to expire on June 15, 2022 and were each extended to June 15, 2023. The increase in fair value of this term extension was $109,155 which was expensed during the year ended December 31, 2022. The Company used the Black-Scholes option pricing model to calculate the increase in fair value, with the following assumptions for the extended options: no dividend yield, expected volatility of 85.9%, risk free interest rate of 2.16%, and expected option life of 1.08 years.

***<u>Issuance of Restricted Shares</u>***

A restricted stock award ("RSA") is an award of common shares that is subject to certain restrictions during a specified period. Restricted stock awards are independent of option grants and are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot transfer the shares before the restricted shares vest. Shares of nonvested restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon and are considered to be currently issued and outstanding. The Company's restricted stock awards generally vest over a period of one year. The Company expenses the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, straight-line over the period during which the restrictions lapse. For these purposes, the fair market value of the restricted stock is determined based on the closing price of the Company's common stock on the grant date.

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During the three months ended March 31, 2021, the Company issued a Board Member and the Chief Financial Officer 400,000 shares of the Company's common stock each, with an aggregate fair value of $920,000 upon the launch of the Mazoola® app. The Chief Executive Officer, who is also a Board Member, received 500,000 shares of the Company's common stock, with an aggregate fair value of $575,000. The aggregate fair value of the shares was expensed immediately.

During the three months ended March 31, 2021, the Company issued the Chief Executive Officer, who is also a Board Member, 500,000 shares of the Company's common stock with an aggregate fair value of $435,000, upon the Company raising $2,000,000. The aggregate fair value of the shares was expensed immediately.

During the three months ended June 30, 2021, the Company issued the Chief Executive Officer, who is also a Board Member, 600,000 shares of the Company's common stock with an aggregate fair value of $621,000, upon the Company raising funds above the previous $2 million requirement. The aggregate fair value of the shares was expensed immediately.

On May 20, 2022 the Company issued 75,000 shares of common stock to a consultant in payment for marketing services with a fair market value of $88,500. The fair value of the shares was expensed immediately.

On December 5, 2022, the Company granted the Chief Executive Officer, who is also a Board Member, 250,000 shares of the Company's common stock with an aggregate fair value of $367,500 as a performance-based bonus pursuant to his two-year work anniversary. The aggregate fair value of the shares was expensed immediately.

During the three months ended December 31, 2022, investors exercised options to purchase 145,000 shares of the Company's common stock at $0.90 per share or $130,500. There was no contingency associated with these options or their exercise. The fair value of these shares was expensed immediately.

During the three months ended December 31, 2022, an employee exercised an option to purchase 62,500 shares of the Company's common stock at $0.90 per share on a cashless basis. This netted the employee 27,562 shares of the Company's common stock.

On September 22, 2022 the Company engaged an investment banking firm to explore a prospective sale of the Company. The Company will pay a fee equal to 1.5% of the transaction value upon closing. This contingency has not yet been met.

**NOTE 15 - STOCK OPTIONS AND WARRANTS**

During 2008, the Board of Directors ("Board") of the Company adopted the 2008 Equity Incentive Plan ("2008 Plan") that was approved by the shareholders. Under the 2008 Plan, the Company was authorized to grant options to purchase up to 25,000,000 shares of common stock to any officer, other employee or director of, or any consultant or other independent contractor who provides services to the Company. The 2008 Plan was intended to permit stock options granted to employees under the 2008 Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended ("Incentive Stock Options"). All options granted under the 2008 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options ("Non-Statutory Stock Options"). As of December 31, 2022, under the 2008 Plan, options to purchase 1,250,000 shares of common stock have been issued and are unexercised, and no shares were available for grants under the 2008 Plan. The 2008 Plan expired on March 3, 2019.

During 2013, the Board adopted the 2013 Equity Incentive Plan ("2013 Plan"), which was approved by stockholders at the 2013 annual meeting of stockholders. Under the 2013 Plan, the Company is authorized to grant awards of stock options, restricted stock, restricted stock units and other stock-based awards of up to an aggregate of 5,000,000 shares of common stock to any officer, employee, director or consultant. The 2013 Plan is intended to permit stock options granted to employees under the 2013 Plan to qualify as Incentive Stock Options. All options granted under the 2013 Plan, which are not intended to qualify as Incentive Stock Options, are deemed to be Non-Statutory Stock Options. As of December 31, 2022, under the 2013 Plan grants of restricted stock and options to purchase 3,487,500 shares are unvested or unexercised, and 300,000 shares of common stock remained available for grants under the 2013 Plan.

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The 2013 Plan is administered by the Board or its compensation committee, which determines the persons to whom awards will be granted, the number of awards to be granted, and the specific terms of each grant, including the vesting thereof.

In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company).

Prior to January 1, 2014, volatility in all instances presented is REGO's estimate of volatility that is based on the volatility of other public companies that are in closely related industries to REGO. Beginning January 1, 2014, volatility in all instances presented is REGO's estimate of volatility that is based on the historical volatility of REGO's stock.

The following table presents the weighted-average assumptions used to estimate the fair values of the stock options granted by REGO during the years ended December 31, 2022 and 2021:

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| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
| Risk Free Interest Rate | 2.2% | 0.3% |
| Expected Volatility | 107.0% | 133.8% |
| Expected Life (in years) | 2.7 | 2.9 |
| Dividend Yield | 0% | 0% |
| Weighted average estimated fair value of options during the period | $0.62 | $0.69 |

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The following table summarizes the activities for REGO stock options for the years ended December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Options Outstanding** | **Options Outstanding** | **Options Outstanding** | **Options Outstanding** |
|  | <br>**Number of**<br>**Shares** | <br>**Weighted-**<br>**Average** <br>**Exercise Price** | **Weighted -**<br>**Average** <br>**Remaining**<br>**Contractual**<br>**Term**<br>**(in years)** | <br>**Aggregate**<br>**Intrinsic**<br>**Value**<br>**(in 000's) (1)** |
| Balance, December 31, 2020 | 10012500 | $0.50 | 2.5 | $8782 |
| Granted | 3547500 | $0.93 | 2.3 | - |
| Exercised | (117500) | $0.25 |  | - |
| Expired/Cancelled | (2125000) | $0.80 | - | - |
| Balance, December 31, 2021 | 11317500 | $0.57 | 2.1 | $2145 |
| Granted | 5802125 | 1.02 | 2 | 1490 |
| Exercised | (207500) | 0.90 |  | - |
| Expired/Cancelled | (850000) | 0.90 | - | - |
| Balance, December 31, 2022 | 16062125 | $0.71 | 1.5 | $8803 |
| Exercisable at December 31, 2022 | 16062125 | $0.71 | 1.5 | $8803 |
| Exercisable at December 31, 2022 and expected to vest thereafter | 16062125 | $0.71 | 1.5 | $8803 |

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(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $1.25 and $0.62 for Company's common stock on December 31, 2022 and 2021.

During the years ended December 31, 2022 and 2021, the weighted average fair value of stock options granted during the year was $0.62 and $0.69. The fair value of stock options for employees is expensed over the vesting term in accordance with the terms of the related stock option agreements and for consultants is expensed over the vesting term, if that is shorter than the term of the consulting agreement, otherwise over the term of the consulting agreement.

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For the years ended December 31, 2022 and 2021, the Company expensed $3,534,242 and $2,732,778 relative to the fair value of stock options granted.

As of December 31, 2022, there was $158,776 of unrecognized compensation cost related to outstanding stock options. The difference, if any, between the stock options exercisable at December 31, 2022 and the stock options exercisable and expected to vest relates to management's estimate of options expected to vest in the future.

The following table summarizes the activities for REGO's unvested options for the years ended December 31, 2022 and 2021:

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| | | |
|:---|:---|:---|
|  | **Unvested Options** | **Unvested Options** |
|  | <br>**Number of**<br>**Shares** | **Weighted -**<br>**Average** <br>**Grant**<br>**Date Fair**<br>**Value** |
| Balance December 31, 2020 | - | $- |
| Granted | 3547500 | 0.93 |
| Vested | (3547500) | 0.93 |
| Balance, December 31, 2021 | - | $- |
| Granted | 5802125 | 1.02 |
| Vested | (5802125) | (1.02) |
| Balance, December 31, 2022 | - | $- |

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The following table summarizes the activities for the REGO's warrants for the years ended December 31, 2022 and 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
|  |<br><br>**Number of**<br>**Shares** |<br><br>**Weighted-**<br>**Average**<br>**Exercise Price** | **Weighted-**<br>**Average**<br>**Remaining**<br>**Contractual**<br>**Term**<br>**(in years)** |<br>**Aggregate**<br>**Intrinsic**<br>**Value**<br>**(in 000's) (1)** |
| Balance, December 31, 2020 | 3375000 | $0.90 | 1.1 | $1620 |
| Expired | (1875000) | $0.90 | - | $- |
| Balance, December 31, 2021 | 1500000 | $0.90 | 0.5 | $- |
| Expired | (1500000) | 0.90 | - | - |
| Balance, December 31, 2022 | - | $- | - | $- |
| Exercisable at December 31, 2022 | - | $- | - | $- |
| Exercisable at December 31, 2022 and expected to vest thereafter | - | $- | - | $- |

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(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $1.25 and $0.62 for REGO's common stock on December 31, 2022 and 2021.

All warrants were vested on the date of grant.

All restricted stock grants vested on the date of the grant.

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The following table summarizes the activities for ZS's stock options for the years ended December 31, 2022 and 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Options Outstanding** | **Options Outstanding** | **Options Outstanding** | **Options Outstanding** |
|  | <br>**Number of**<br>**Shares** | <br>**Weighted-**<br>**Average**<br>**Exercise Price** | **Weighted -**<br>**Average**<br>**Remaining**<br>**Contractual**<br>**Term**<br>**(in years)** | <br>**Aggregate**<br>**Intrinsic**<br>**Value**<br>**(in 000's) (1)** |
| Balance, December 31, 2020 | 1600000 | $5.00 | 2 | $&nbsp;&nbsp;&nbsp;&nbsp; - |
| Balance, December 31, 2021 | 1600000 | $5.00 | 1 | $- |
| Balance, December 31, 2022 | 1600000 | $5.00 | 1 | $- |
| Exercisable at December 31, 2022 | 1600000 | $5.00 | 1 | $- |
| Exercisable at December 31, 2022 and expected to vest thereafter | 1600000 | $5.00 | 1 | $- |

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(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the value of $4.00 for ZS's common stock on December 31, 2022 and 2021.

For the years ended December 31, 2022 and 2021, ZS expensed $0 relative to the fair value of stock options granted.

As of December 31, 2022, there was $0 of unrecognized compensation cost related to outstanding ZS stock options.

The following table summarizes the activities for ZCS's stock options for the years ended December 31, 2022 and 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Options Outstanding** | **Options Outstanding** | **Options Outstanding** | **Options Outstanding** |
|  | <br>**Number of**<br>**Shares** | <br>**Weighted-**<br>**Average**<br>**Exercise Price** | **Weighted -**<br>**Average**<br>**Remaining**<br>**Contractual**<br>**Term**<br>**(in years)** | <br>**Aggregate**<br>**Intrinsic**<br>**Value**<br>**(in 000's) (1)** |
| Balance, December 31, 2020 | 1600000 | $5.00 | 2 | $&nbsp;&nbsp;&nbsp;&nbsp; - |
| Balance, December 31, 2021 | 1600000 | $5.00 | 1 | $- |
| Cancelled (2) | (1600000) | $5.00 | 1 | $- |
| Balance, December 31, 2022 | - | $- | - | $- |
| Exercisable at December 31, 2022 | - | $- | - | $- |
| Exercisable at December 31, 2022 and expected to vest thereafter | - | $- | - | $- |

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(1) The aggregate intrinsic
value is calculated as the difference between the exercise price of the underlying options and the value of $0.01 for ZCS's
common stock on December 31, 2021.

(2) Zoom Cloud Solutions, Inc.
was dissolved on December 28, 2022.

For the years ended December 31, 2022 and 2021, ZCS expensed $0 with respect to options.

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**NOTE 16 – NONCONTROLLING INTERESTS**

Losses incurred by the noncontrolling interests for the years ended December 31, 2022 and 2021 were $101 and $101.

**NOTE 17 - OPERATING LEASES**

For the years ended December 31, 2022 and 2021, total rent expense under leases amounted to $4,844 and $4,688. The Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases. The Company has no long-term lease obligations as of December 31, 2022.

**NOTE 18 – RELATED PARTY TRANSACTIONS**

In August 2020, the Company entered into an employment agreement with the Chief Executive Officer who is a more than 5% beneficial owner. The Company had also previously entered into a consulting agreement with a Company owned by the Chief Executive Officer at a cost of $15,000 per month. The consulting agreement was terminated upon the execution of the Chief Executive Officer's employment agreement. As of December 31, 2022 and 2021, the Company owed the Chief Executive Officer $1,703 and $95,185 relative to the employment agreement. As of December 31, 2022 and 2021, the Company owed the consulting company $0.

The Company entered into an agreement in 2021 for the preparation of all of the corporate income taxes with a company owned by the former Chief Financial Officer and expensed $10,000 for the year ended December 31, 2021, in accordance with the agreement.

The Company entered into a consulting agreement with the son of the Chief Executive Officer, at a cost of $5,000 per month, plus expenses, which was increased to $10,000 per month on January 1, 2021. As of December 31, 2022 and 2021, the Company owed the consultant $0 and $10,349. For the years ended December 31, 2022 and 2021, the Company has expensed $120,000 and $120,000 to this consultant.

On January 20, 2022, the Board Members received cash bonuses of $50,000 each, or a total of $100,000.

On January 26, 2022, the Board of Directors approved a salary increase raising the Chief Executive Officer's salary to $310,000 per year.

On February 22, 2022, a Board member and his son each purchased a 4% Secured Note Payable for $100,000.

On April 1, 2022, the Chief Executive Officer was paid a bonus of $50,000.

On April 7, 2022, the Chief Financial Officer was paid a bonus of $75,000.

On September 1, 2022 the Board passed a Resolution for Successful Corporate Actions Awards equity bonus program whereby the completion of any one of the following actions result in the awarding of common stock to certain executives and members of the board of directors: commercial distribution agreement for Rego's Digital Wallet and/or Mazoola Pay Kid Button; a branding event with Mastercard or Visa; or the adoption of the Company's COPPA compliant wallet by a bank with assets greater than $4 billion. The prospective awarding of shares would be as follows: Chairman: 1,000,000 shares; Chief Executive Officer: 1,000,000 shares; Chief Technology Officer: 200,000 shares; and Chief Financial Officer: 50,000 shares. The distribution of the shares will not occur until the date the Company is sold. As of December 31, 2022 none of the aforementioned actions were completed and thus no common stock awards were granted.

On September 22, 2022 the following bonus issuances of common shares were earned pursuant to the Successful Corporate Actions Awards equity bonus program (Engagement of an Investment Banker or the sale of the Company): Chairman: 1,000,000 shares; Chief Executive Officer: 1,500,000 shares; Chief Technology Officer: 200,000 shares; and Chief Financial Officer: 150,000 shares. The distribution of the shares will not occur until the date the Company is sold.

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**NOTE 19 – COMMON STOCK TO BE ISSUED**

On September 22, 2022 the Company engaged an investment banker for advisory services to explore a prospective sale of the Company. The successful engagement of this investment banker resulted in an incentive award of 2,850,000 shares of common stock due to certain executives and board of director members. The Company accrued compensation expense of $2,705,000, the fair value of the common stock to be issued, for the year ended December 31, 2022.

On October 5, 2022 the Company secured additional investment in its Series B Preferred Stock to satisfy completion of the $20MM Preferred B Raise – Successful Corporate Action Award. This resulted in an incentive award of 2,150,000 shares of common stock due to certain executives and board of director members. The Company accrued compensation expense of $2,645,000 the fair value of the common stock to be issued, for the year ended December 31, 2022.

**NOTE 20 – IMPAIRMENT OF LONG-LIVED ASSETS**

On January 1, 2021, REGO entered into a Purchase of Business Agreement ("Agreement") with Chore Check, LLC pursuant to which it purchased the assets of Chore Check, LLC, consisting primarily of a software application, valued at $111,817, fair value. The consideration for the acquisition consisted of the issuance of an option to purchase 100,000 shares of the Company's common stock, with an exercise price of $0.90, vesting immediately and with a term of three years.

Long-lived assets are tested for impairment by performing a qualitative assessment to determine whether it is more likely than not that the fair value is less than the carrying value. Long-lived assets are considered impaired if the carrying value exceeds its fair value. The Company determined that the carrying value of the asset acquired from Chore Check, LLC exceeded its fair value and have recorded an impairment loss in the amount of $111,817 as of September 30, 2021, which is included in general and administrative expenses.

**NOTE 21 – SUBSEQUENT EVENTS**

Between January 1, 2023 and March 31, 2023, the Company sold 8,444 shares of the Company's Series B Preferred Stock in private placements to accredited investors and received proceeds of $760,000.

On March 13, 2023, the Company entered into an Investor Private Line of Credit agreement (the "LOC Agreement") with James Davison (the "Lender"). The Lender is an existing shareholder of the Company. Pursuant to the LOC Agreement, the Lender may extend unsecured loans to the Company in the amount of up to twenty million dollars ($20,000,000) which may be drawn upon by the Company for a period of one year in order to provide additional capital to facilitate the Company's operations. Drawings may be made by the Company as long as there has not been any material change in the operations of the Company. Loans under the LOC Agreement bear interest at the rate of 7% per annum. Drawings under the LOC Agreement must be repaid in full: (i) upon the execution and completion of a sale, merger or other transaction of the Company whereby the Company transfers its ownership and/or its assets to a third party within thirty (30) days of the completion of the transaction (a "Change of Control") or (ii) if a Change of Control does not occur within one year from the date hereof, the Company will repay any amounts outstanding within sixty (60) days.

0.10 0.14 122775473 123634367 The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $1.25 and $0.62 for Company's common stock on December 31, 2022 and 2021. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the value of $4.00 for ZS's common stock on December 31, 2022 and 2021. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the value of $0.01 for ZCS's common stock on December 31, 2021. Zoom Cloud Solutions, Inc. was dissolved on December 28, 2022. 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## Exhibit 21.1

**Exhibit 21.1**

**SUBSIDIARIES OF REGISTRANT**

<u>Name</u> <u>Jurisdiction</u> <br> 1. Zoom Solutions, Inc. Delaware <br> 2. REGO Data Solutions, Inc. Delaware

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION**

I, Peter S. Pelullo, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this annual report on Form 10-K for the year ended
December 31, 2022, of Rego Payment Architectures, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: March 31, 2023 | By: | /s/ Peter S. Pelullo |
|  |  | Peter S. Pelullo |
|  |  | Chief Executive Officer |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION**

I, Joseph R. Toczydlowski, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this annual report on Form 10-K for the year ended
December 31, 2022, of Rego Payment Architectures, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Date: March 31, 2023 | By: | /s/ Joseph R. Toczydlowski |
|  |  | Joseph R. Toczydlowski |
|  |  | Chief Financial Officer |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION OF**

**CHIEF EXECUTIVE OFFICER**

**OF REGO PAYMENT ARCHITECTURES, INC.**

**PURSUANT TO 18 U.S.C. SECTION 1350**

In connection with the Annual Report on Form 10-K of Rego Payment Architectures, Inc. (the "Company") for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the "Report"), I, Peter S. Pelullo, Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, that to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | | |
|:---|:---|:---|
| Date: March 31, 2023 | By: | /s/ Peter S. Pelullo |
|  |  | Peter S. Pelullo |
|  |  | Chief Executive Officer |

---

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION OF**

**CHIEF FINANCIAL OFFICER**

**OF REGO PAYMENT ARCHITECTURES, INC.**

**PURSUANT TO 18 U.S.C. SECTION 1350**

In connection with the Annual Report on Form 10-K of Rego Payment Architectures, Inc. (the "Company") for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the "Report"), I, Joseph R. Toczydlowski, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, that to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | | |
|:---|:---|:---|
| Date: March 31, 2023 | By: | /s/ Joseph R. Toczydlowski |
|  |  | Joseph R. Toczydlowski |
|  |  | Chief Financial Officer |

---