EDGAR 10-K Filing

Company CIK: 1070050
Filing Year: 2021
Filename: 1070050_10-K_2021_0001575705-21-000156.json

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ITEM 1. BUSINESS
Item 1. Business.
Business Overview
We intend to simplify and streamline digital financial services for corporations, small and midsized enterprises (“SMEs”) and consumers through innovative payment processing, reconciliation and digital banking technologies that complement our core merchant services capabilities. Our company’s merchant services provide financial processing for businesses to accept cashless and/or contact less payments, such as credit cards, ACH, wireless payments, and more. Our patented, exclusively licensed, and proprietary merchant services software offers, or will offer, integrated solutions for friction less digital and mobile payment acceptance including acceptance of alternative payment methods (“APMs”); we are supplementing these capabilities with software that solves for multi-use case, multi-channel, API-driven, account-based issuer processing for card, digital tokens, and payment transfer transactions. Our innovative and scalable business model allows for expansive white-labeling, SaaS, and embedded payment solutions that will drive the digital transformation of financial services and generate diverse revenue streams for our company.
We believe the financial services industry is going through a period of intensive change driven by the advancement of technology, the adaptation to societal changes resulting from COVID-19, and otherwise, and the rapid rise of contactless transactions. End-users are beginning to expect ease of use and an enhanced user experience in all of their daily financial transactions. In this rapidly evolving digital marketplace, merchants have broad and frequently changing requirements for payment processing to meet consumer expectations and operational requirements. Our flexible and configurable financial services platform will enable us to provide solutions that meet each merchant’s current needs while providing scope to solve for their future development plans and opportunities allowing merchants to take advantage of future platform development and new innovative digital financial solutions through clean APIs and our scalable global infrastructure. By taking a holistic view of all aspects of our clients’ business, including risk, volume, user experience, integration capabilities and technical needs, we are able to create optimal and extensible financial technology solutions. Merchants and independent software vendors (“ISVs”) that require integrated financial technology solutions to best serve their customers are looking beyond basic payment acceptance and “lowest price” models. These entities recognize that staying competitive in the digital age requires a partner that provides a platform capable of delivering flexibility and growth while streamline operations to continue increase revenue and profitability. While we offer extremely competitive pricing, we believe the value we create for merchants, SMEs, ISVs and regional banking institutions through our technology, services and consultative approach will create true differentiation from our competitors.
Through exclusive licensing and partnership agreements, we believe we will become leaders in the embedded payment and digital banking sectors by supporting digital, tokenized, multi-channel, embedded API-driven transactions. We will augment this position through the integration of our merchant services and secure text payment solution with extensive digital account-based and multi-channel issuer payment processing capabilities. This will enable us to provide our merchant customers an end-to-end payment acceptance and digital banking solution and will power straight-through processing and embedded payments opportunities in the B2B space.
A key to the company’s success and market penetration relies on the continued development of enterprise-grade, patent protected software for SMS text payments via a mobile device. Our patented technology manages text messaging for processing payments, notification, response, authentication, marketing, advertising, information queries and reports. Our software platform will extend merchants’ marketplace capabilities creating new avenues and channels to request and receive frictionless, digital payments and engage end-users utilizing a familiar, convenient and widely adopted technology.
Once an account is established through a multi-currency digital wallet, internet connectivity or a specific application are not required to process payments between merchants and end-users. These features will be particularly beneficial for the unbanked and under banked individuals in developing and emerging markets where access to the internet on a mobile device and modern banking institutions may not be readily available.
We believe our technologies will greatly increase the adoption of mobile payments and alternate banking solutions in a sector that appears to have little alternative but to adapt and migrate towards new technologies that facilitate convenient and safe contactless payments. To survive and succeed in this environment, businesses may need to adopt new technologies to engage, communicate and process payments with their customers. We believe that, by embracing technological advancement in the payment and banking industries, we are aligned in the precise direction that our current and prospective customer base is trending towards. We intend for our current and future products to be at the forefront in providing solutions that enable and facilitate these anticipated changes.
We are also expanding upon our financial technology foundation into the telehealth and remote patient monitoring sectors in response to cultural shifts and new healthcare demands of society. We have identified a need for the integration of payment acceptance technologies into the burgeoning telehealth sector. We believe this sector’s focus to date has been on providing health-related telecommunications but the way in which fees and payments for these services are requested and accepted is being overlooked. We intend to fill this identified shortfall by developing technologies and payment-related services to aid companies providing telehealth solutions. Through a strategic partnership, we plan to help bring to market personal emergency response and remote patient monitoring services and equipment to help ensure the safety of the elderly and injured or sick patients while providing peace of mind to family members, care givers and retirement communities. These solutions increase patients’ access to comprehensive care options and allow medical teams to intervene in a timely manner to avoid more serious health concerns. By providing financial and administrative services we will have the opportunity to receive substantial revenue share from recurring revenue billed through Medicare with the potential for substantial growth and substantial profit margins.
Industry and Market Data
We use market data and industry forecasts throughout this registration statement and, in particular, in the sections entitled “Industry Overview.” Unless otherwise indicated, statements in this registration statement concerning our industry and the markets in which we operate, including our general expectations, competitive position, business opportunity and market size, growth and share, are based on information obtained from industry publications, government publications and third party forecasts. The forecasts and projections are based upon industry surveys and the preparers’ experience in the industry. There can be no assurance that any of the projections will be achieved. We believe that the surveys and market research performed by others are reliable, but we have not independently verified this information. Accordingly, the accuracy and completeness of the information are not guaranteed.
Industry Overview
The financial technology and payment processing industries are an integral part of today’s worldwide financial structure. The electronic payments industry is massive, with growth fueled by powerful long-term trends that continue to increase the acceptance and use of electronic payments compared to paper-based payments. According to The Nilson Report, purchase volume on credit, debit and prepaid cards in the United States was approximately $6.1 trillion in 2018 and is estimated to reach nearly $10.4 trillion by 2027, a compound annual growth rate, or CAGR, of 6.1%.
The payment processing industry continues to evolve rapidly, based on the application of new technology and changing customer needs. Changes in technology have allowed for new payment methods, such as mobile and contactless payments, and merchants increasingly need new methods of interacting with their customers, deliver a frictionless experience and to ensure loyalty and repeat business. As consumers continue to integrate mobile devices into their lives, there will be increased demand to conduct business on these devices. According to Businesswire, the global mobile payment market was valued at $1,449.56 billion in 2020 and is expected to reach over $5,399.6 billion in 2026 with growth at a CAGR of 24.5% over the forecast period (2021 - 2026).
GSMA Intelligence reported in 2019 that globally, there are more than 9.2 billion mobile connections and 5.1 billion mobile subscribers with text messaging capabilities. Statista asserted that just over 3.9 billion of these devices have access to mobile internet.
The pandemic environment of 2020 added fuel to the fire and accelerated these trends in a way no one could have predicted. An Accenture study found that a total of 2.7 trillion transactions worth $48 trillion shifted from cash to other forms of payments, representing a $300 billion opportunity for payment providers. The pandemic also narrowed the generational gap between digital payment preferences, with nearly two thirds (64%) of consumers saying they used contactless cards during the pandemic.
Telehealth uses information and communication technology to overcome distance barriers and improve access to healthcare. According to Fortune Business Insights, the global telehealth market size was valued at $61.40 billion in 2019 and is projected to reach $559.52 billion by 2027, exhibiting a CAGR of 25.2% during the forecast period. Reports and Data reported the remote patient monitoring market is forecast to reach $2.14 billion by 2027 with a CAGR of 14.1%.
Our Competitive Strengths
We believe our adaptable technology and holistic product offering differentiate us from our competitors. Our products, many of which could be launched in a matter of months, help to eliminate much of our sector’s reliance on legacy payment rails and financial systems. Management believes by not being restricted by antiquated foundational technology the applicability and frictionless nature of our products will offer an immediate impact on the digital financial services industry. Further, while technologically advanced, the products will be comfortable to end-users allowing for a seamless adoption.
The patent protection to some of our products is uncommon within the fintech industry. This protection prevents competitors from trying to replicate our products in order to carve away at our anticipated market share. Therefore, backing our text payment and lead generation products with patents strengthens the viability of such products by limiting direct competition.
Our patent protected text payment system’s anticipated capabilities also set us apart. By creating a product that permits mobile payments without the need for a data plan, internet or an application, we will have the unique ability to extend our customer base to target unbanked and underbanked individuals primarily in developing or emerging markets. Integrating consumers that are not traditionally included in the payment space will allow us to have a larger potential market than many of our competitors.
The features and capabilities of products we intend to bring to market allow for agile transaction processing which supports API-driven, multi-channel and secure products. The ability for such products to be embedded into other technologies while supporting multi-currency transactions set our anticipated suite of products apart from many large, established fintech companies.
Our Growth Strategy
We intend to grow through leveraging our existing IP, developing with strategic partner relationships that uniquely complements our core businesses and through selective acquisitions. From traditional merchant accounts to customizable inbound and outbound payment solutions, we intend to modernize and enhance the payment processing and digital banking capabilities for businesses throughout the world. Our business objective is to generate revenue based on licensing fees, synergistic product lines, processing fees, SaaS distribution and continual advancement of our IP portfolio.
Our target market is SMEs seeking to broaden their distribution through the addition of digital payment channels and SMBs looking to create competitive advantage by reducing integration complexity and streamlining their payment processing services. We also intend to target financial institutions looking to maintain their ability to compete by digitizing their financial services offerings to meet market demand, enhance their customer’s user experience through the development of innovative and user centric multi-channel, multi-currency, digital financial products. We intend to utilize a white-label SaaS delivery model, which will allow for service fees, revenue sharing and back-end processing fees. Further, by offering SMEs a full array of lead generation services, merchant services processing and digital banking technologies, we will allow them to better interact with their customers and provide additional, dynamic means of processing both inbound and outbound payments. SMEs generally lack the resources of large enterprises to invest heavily in technology. As a result, they are more dependent on service providers, such as us, to handle critical functions including payment acceptance and other support services and are likely to be early adopters of new services that will further increase their efficiency and drive growth.
Businesses’ financial technology needs are increasingly complex. As electronic and mobile commerce continues to grow, businesses have no alternative but to use technology to better reach their customers. We believe that delivering novel, adaptive, scalable and operationally efficient products that meet their financial services needs will result in rapid market penetration for our anticipated products launches.
While leveraging new technology is vital to our growth plan, it is equally important that the technology is relevant and seamlessly fits into and benefits our end-user’s everyday life. Consumers are sometimes reluctant to alter their typical routines, especially when it relates to financial services. The anticipated launch of our text payment system and broader digital banking and payments solutions will meet both these needs. We will offer payment acceptance technologies that do not rely on legacy payment rails while allowing the end-user to transact frictionless and secure payments with the comfort of text messaging. Once properly developed and rolled out, we anticipate rapid adoption.
We seek to grow our business by pursuing the following strategies:
● Increasing our customer base by offering unique and compelling, patent protected technology solutions;
● Driving growth in our merchant services business through new and flexible technologies, including our secure text payment system, that will enable our customers to adapt to a rapidly changing marketplace;
● Rolling-out our API-driven, account-based, issuer processing solution for card, digital token, and payment transfer transactions that will enable us to target multi-currency and multi-channel digital banking and embedded B2B payment opportunities;
● Engaging end-users via lead generation and text marketing services to enable businesses to better communicate with their customers and integrate our full suite of products;
● Maintaining technological leadership by continuing to innovate and improve our scalable, extensible, cloud-based technology;
● Pursuing strategic acquisitions, investments or partnerships to complement and bolster our suite of fintech products;
● Creating cross-selling synergies through white-labeling or SaaS distribution enabling us to provide a holistic suite of products and services to merchants, banking institutions and SMEs;
● Utilizing a scalable business model to eliminate certain barriers to rapid growth; and
● Expanding into the telehealth sector by offering advanced remote patient monitoring technologies.
Vital to our future success is the market penetration of our current and future products. Our market penetration strategy includes four elements: (1) royalty-free licenses; (2) engaging close industry contacts; (3) utilizing potential market share shifting IP; and (4) illustrating the need for our fintech products amongst our target industry segments.
To gain a market share, we plan to initially offer royalty-free licenses for our text messaging and complimentary payment solutions in exchange for processing the related payments. By incentivizing potential clients with free access to advanced, patented technology, we will give clients the ability to bolster and enhance their fintech capabilities, while creating revenue streams for our full suite of products.
With years of fintech experience, management believes we can leverage our industry contacts and past clients in order to gain valuable contracts with businesses. Engaging individuals with the ability to integrate our products may prove invaluable. Further, through our channel partnerships, we have an expansive network of potential clients to integrate our technology into their payment processing solutions.
Management believes there are substantial opportunities in emerging and developing markets for our anticipated products. Our mobile payment and digital banking solutions offer innovative avenues to unbanked and underbanked communities to transact and provide remittances. Further, since internet connectivity is not required for our text payment solution, individuals with limited internet access will still be able transact. These two factors have the ability to open our products to markets with immense growth potential.
Companies are regularly attempting to identify ways to stay in contact with their customers and create new payment channels. Our products do precisely this. When customers sign up for our secure text payment system, clients will have the ability to integrate a text messaging waiver into the registration process. This allows for clients to have fresh, opted-in contact information which can be paired with our text messaging services for notification, response, authentication, marketing, advertising, information queries and reports. It is our intent to market these identifiable benefits to companies in order to illustrate the advantages of partnering with us. Specific industries that could utilize our secure text payment system are pharmacies, collection agencies, charitable and religious organizations, utility companies, property management companies and any business that relies upon recurring business or subscription management services.
Our partnership with NEC Payments’ internationally experienced and proven team of subject matter experts will enable our management to focus resources on delivering growth using the strategies described above. We will do this with full confidence that the business is being powered by innovative technology IP running on robust, secure and scalable highly-available cloud infrastructure.
Management believes our partnership with Silver Alert Services, LLC will be the initial foothold for our expansion in the telehealth sector. Our strategic partnership providing financial services in support of their remote patient monitoring devices has the opportunity to create substantial revenue. However, with the emergence of new telehealth platforms and the rapid shift towards e-visits, many of which require a private payer model, we believe our payment acceptance technology, specifically our embedded capabilities will have widespread application in the sector.
Our Products and Services
Merchant Services
Our core historical business is merchant transaction services. We create revenue by processing payments for credit and debit cards via POS (point of sale) equipment, e-commerce gateways, periodic ACH (automatic clearing house) payments and gift & loyalty programs. We currently support over 100 merchants representing dozens of market verticals in managing their financial transactions.
Each merchant has unique needs for payment processing. As a result, we have a variety of processing partners to meet each merchant’s requirements. In addition to these needs, we take into consideration certain aspects of each business in choosing the optimal processing partner including risk, volume, customer service, integration capabilities, product features and profitability.
Our processing partners include Total Systems Services (“TSYS”)/Global Payments., JetPay an NCR Payment Solutions Company, Harbortouch Payments a Shift4 Company, Cynergy Data/Priority Payments Systems Group, Novera/WorldPay and High Risk Holdings, LLC, with each providing products and services that meet each of our merchants’ needs. Currently, our partners manage our backend payment processing needs in addition to managing risk and compliance on our behalf. Through the implementation of our proprietary payment processing protocols as we grow our customer base, we will manage the risk and compliance ourselves, which will increase our margins on each transaction processed.
Using our proprietary software, together with our partnerships, we are able to offer our merchants payment integration APIs including data encryption, payment tokenization and issuing banking authorization, and the creation of white-label, merchant-specific mobile applications. As we move forward with our secure text payment system and other products, we intend to enter new partnership agreements to align with our plans to integrate advanced processing capabilities, permitting the global expansion of our financial services technologies.
Text Payment System
We are developing a comprehensive and broad mobile payment platform which, once an account is established, relies solely on SMS text messaging. By integrating our payment processing with text messaging and a digital wallet, we intend to offer the mobile payment industry’s first and only patent protected text payment system. The integration of direct, reliable, instant, and familiar text messaging with secure payments is how we believe we bridge the gap between fintech and mobile wireless systems.
Anticipated features of our secure mobile payments include:
● Utilization of standard SMS (Short Message Services) text messaging;
● A payment platform that does not require mobile internet, a data plan or a mobile application;
● A secure text payment protocol that can be used on all traditional and smart cellular phones on all major global carriers without any additions or modifications to the mobile user wireless plan; and
● Simple authentication of the end-user.
We intend for our secure text payment system to offer a simple, three-step SMS text process utilizing a digital wallet, necessary to verify payee and payor identification, account numbers and fund availability for pre-registered users. Payment may be engaged by the mobile user messaging a set of keywords to an established short code managed by us, or a merchant can contact an opted-in mobile user inquiring whether they desire to make a payment. The registered user will authorize the amount and company in which they intend to remit payment.
Within the text payment platform there are three distinct services that are used. These include: (1) our patented text messaging platform, (2) a digital wallet and (3) payment processing. Depending on the needs of the merchant, we may provide all three services or only license our text messaging platform to a business that utilizes their own/third-party digital wallet and alternate payment processors. Through licensing agreements, we possess modern application programming interfaces (APIs) to allow licensees to develop their own, white-labeled software applications. This flexible approach allows for an opportunity for greater market penetration.
Our text payment system will be used by businesses seeking to maintain contact with customers and find new ways to receive payments. A utility company could contact a customer via text message informing them their bill is due, then ask if they would like to pay their bill via text message. A church could contact their parishioners asking to contribute their weekly tithe and companies can create simplistic ways to update, inform and process transactions with brand loyalists.
Our text payment system is still in development. Continued development including integration, testing and certification are still needed in order to be marketable. Management currently believes the text payment system will be launched in third quarter of 2021.
We believe this simple payment process has widespread application and potential for widespread adoption by mobile users because it utilizes a technology many end users are comfortable with and use daily. The process is quick and user-friendly allowing businesses to simply expand their payment receiving capabilities. Management believes no other product exists that provides verification of accounts and funds, authentication of user identity, and the authorization of payment processing in the same fashion as our anticipated product.
The following is a visual depiction of the text payment system:
Digital Banking Platform, BaaS& Embedded Payments
AppTech’s white-label, digital banking technology platform with payment capabilities will equip financial institutions (FIs), technology providers and brands with a digital “bank-in-a-box” - also referred to as our Banking-as-a-Service (BaaS) (“Platform”). Furthermore, our Platform will enable multi-channel, multi-currency, pure digital financial services products unlike any other providers in the world. It incorporates a “plug-and-play” capability to enact deep integration with payment gateways and POS merchant services to form an end-to-end payment acceptance and digital banking solution. In detail, we intend the Platform to enable innovative and disruptive digital distribution products including:
● Neo-Banking for Consumers and SMEs;
● B2B and Consumer Virtual Payments (VCNs);
● Multi-Currency Money Management and P2P Money Transfer;
● Payroll, Expenses Management and B2C and G2C disbursements;
● Treasury Management;
● Gift, Incentive and Reward programs for retail, wholesale and employee benefits;
● Any other product that requires a prepaid or credit balance to be held and transacted upon.
Other attributes to our Platform will include:
● Patented Technology including a Text-to-Pay patent that enables B2B, B2C and P2P payments via SMS. Combined with 4 mobile-to-computer messaging and lead generation patents, we can enable FIs, technology companies and businesses to unlock innovative customer experiences.
● Personalization is also at the core of our BaaS. Through marketing automation capabilities, our BaaS provides an industry first online-to-offline customer attribution capability. Licensees of our BaaS will be able to link their customer’s online behavior to their buying preferences in real-time in order to personalize the selling and buying experience.
● Automation is delivered as a part of our BaaS and through our APIs that unlock automated financial transactions and customer experiences. For example, like Acorns and other automated financial wellness apps, our BaaS can easily be leveraged to create similar money saving experiences like round ups, i.e., rounding to the nearest dollar and depositing the difference between the purchase price and round-up into a digital bank account.
● Integration is central to our digital banking platform and BaaS. As such, AppTech offers developers and enterprises an open platform with flexible Rest APIs to build new payment and financial transaction features in SaaS and cloud apps.
● Embedded Payments are delivered as a configurable SaaS for scalability and to meet ever-evolving business goals and customer experiences.
Lead Generation
The lead generation industry has relied on thousands of “cold calls” that are rarely answered. According to the Mobile Marketing Association, the only wireless technology that is opened up 98% of the time is SMS text message. As a supplement to our merchant services business, we offer a patent protected SMS text messaging lead generation service for advertising, marketing and alerting our merchants’ customers directly.
Using the merchant’s own opted-in mobile number database, our lead generation service can regularly offer the merchants’ customers with the merchant’s latest in the products and services, promotions, discounts, appointment scheduling. Additionally, it can provide payment reminders, which can then be purchased via our text payments solution should merchants choose to utilize this service. Soliciting consumers requires added incentive and, as a solution, we plan on integrating a reward program. Management believes this will increase our merchant customers’ revenues and increase our customer base.
Our lead generation platform utilizes our patented text messaging capabilities to deliver text marketing services. Further, merchants and business will able to utilize data captured through the transaction which may be offered back to the merchant to leverage marketing trends.
By offering merchants our lead generation services, it provides an opportunity for cross-selling our text payment system. For example, a pharmacy using our services to inform their consumer that their prescription is filled can then send a follow-up text asking if the consumer is interested in paying for the prescription via our text payment. Management believes this cross-selling synergy has the ability to increase revenues for all the services we offer.
Our digital text messaging for marketing, advertising, information queries and alert notifications has extensive applications across numerous industries. Our past, present, and future clients will have direct access to their end user customers offering them targeted information and new services. Just as important, our technology is scalable, easily allowing us to meet the needs of our growing customer base.
The following is a visual representation of our lead generation system:
Our Intellectual Property
Our intellectual property is an important component to our business. Our strategy is to continue to build on our existing patent base and further develop additional patents and intellectual property as we grow our business domestically and internationally. Our management believes developing patent-based software products, integrating new technologies and creating intellectual property will significantly contribute to our performance. We also believe we will be able to leverage our existing patents to cross-license with other, leading, innovative patented technology partners.
We have incorporated four USPTO patents into our operational, enterprise-grade text messaging platform for SMS marketing, advertising and sales. By integrating our SMS technology with our MFA payment system, we will offer secure text payments. In addition to secure text payments, our MFA allows users to authenticate and validate in order to access private data and complete online transactions and inquiries. Our proprietary text messaging capabilities also allow users to send and receive a text message from a short code and initiate two-way chat from a mobile to a computer using only text-messaging.
8,369,828
8,315,184
8,572,166
8,073,895
Mobile-to-Mobile Payment System and Method
Computer-to-Mobile Two-Way Chat System and Method
System and Method for Delivering Web Content to a Mobile Device
System and Method for Delivering Web Content to a Mobile Device
SMS chat on a computer short or long codes, chat on circuit & packet switch networks, chat on paging channels.
Receiving, displaying, linking web content via URL from application delivered via SMS short code to at least one mobile.
Receiving, displaying, linking web content via URL from application delivered via SMS short code to at least one mobile.
Embedding of a URL in a text message from a pop- up screen.
Expiration Date:
Expiration Date:
Expiration Date:
Expiration Date:
11-12-2029
11-14-2030
09-28-2024
02-26-2027
Patent Number 8,369,828 is at the core of our Secure Text Payment System. The patent enables a mobile user to initiate a request for payment to a payee via SMS text message. Patent Number 8,315,184 utilizes short and/or long codes to send and receive text messages from an application to a mobile device. Patent Number 8,572,166 embeds a URL in a text message sent from an application to a mobile device. These patents comprise the components of our Secure Text Payment System. Patent Number 8,073,895 provides us another capability of delivering web content to a mobile device.
We currently have one additional patent pending. We anticipate seeking additional patents, including derivative patents, as we continue to innovate to better meet our customer’s needs. In addition to incorporating our intellectual property into our offerings, we will license all or some of our technology to third parties to increase our revenue and speed market acceptance of our products and services.
Regulations
Various aspects of our business are subject to U.S. and non-U.S. federal, state and local regulation. Many domestic laws and regulations that affect companies conducting business on the Internet and companies transmitting user information and payments via text message or other electronic means are still evolving and the interpretation of such laws and regulations are often uncertain. Failure to comply with applicable laws and regulations may result in the suspension or revocation of licenses or registrations, the limitation, suspension or termination of services and/or the imposition of civil and criminal penalties and/or fines. Our services to mobile phone carriers are also further subject to certain of the rules and policies of such carriers and ongoing contractual covenants with such carriers, the violation of which may result in penalties and/or fines and possible termination of our services. Certain services we offer are also subject to rules set by various payment networks, such as Visa and MasterCard.
Association and Network Rules. While not legal or governmental regulation, we are subject to the network rules of Visa, MasterCard and other payment networks. In order to provide processing services, we are registered with Visa and/or MasterCard as a service provider for member institutions. As a processor level member of numerous networks, we are also subject to various network rules in connection with processing services and other services we provide. As such, we are subject to applicable card association, networks and national scheme rules that could subject us to fines or penalties. The payment networks routinely update and modify their requirements. Under these rules, we may potentially receive notices of non-compliance and fines, which might be related to excessive charge backs by a merchant or data security failures. Our failure to comply with the networks’ requirements or to pay the fines they impose could cause the termination of our registration and require us to stop providing payment services.
Dodd-Frank Act. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was signed into law in the United States. The Dodd-Frank Act has resulted in significant structural and other changes to the regulation of the financial services industry.
The Dodd-Frank Act provided two self-executing statutory provisions limiting the ability of payment card networks to impose certain restrictions that became effective in July 2010. The first provision allows merchants to set minimum dollar amounts (not to exceed $10) for the acceptance of a credit card (and allows federal governmental entities and institutions of higher education to set maximum amounts for the acceptance of credit cards). The second provision allows merchants to provide discounts or incentives to entice consumers to pay with cash, checks, debit cards or credit cards, as the merchant prefers.
Separately, the so-called Durbin Amendment to the Dodd-Frank Act provided that interchange fees that a card issuer or payment network receives or charges for debit transactions will now be regulated by the Federal Reserve and must be “reasonable and proportional” to the cost incurred by the card issuer in authorizing, clearing and settling the transaction. Payment network fees, such as switch fees may not be used directly or indirectly to compensate card issuers in circumvention of the interchange transaction fee restrictions. In July 2011, the Federal Reserve published the final rules governing debit interchange fees. Effective in October 2011, debit interchange rates for card issuing financial institutions with more than $10 billion of assets are capped at $0.21 per transaction with an additional component of five basis points of the transaction’s value to reflect a portion of the issuer’s fraud losses plus, for qualifying issuing financial institutions, an additional $0.01 per transaction in debit interchange for fraud prevention costs. The debit interchange fee would be $0.24 per transaction on a $38 debit card transaction, the average transaction size for debit card transactions. In July 2013, the U.S. District Court for the District of Columbia determined that the Federal Reserve’s regulations implementing the Durbin Amendment were invalid. The U.S. Court of Appeals for the District of Columbia, or D.C. Circuit, reversed this decision on March 21, 2014, generally upholding the Federal Reserve’s interpretation of the Durbin Amendment and the Federal Reserve’s rules implementing it. On August 18, 2014, the plaintiffs in this litigation filed a petition for a writ of certiorari asking the U.S. Supreme Court to review the D.C. Circuit’s decision with respect to the interchange fee cap. We continue to monitor developments in the litigation surrounding these rules. Regardless of the outcome of the litigation, the cap on interchange fees is not expected to have a material direct impact on our results of operations.
In addition, the new rules contain prohibitions on network exclusivity and merchant routing restrictions. Beginning in October 2011, (i) a card payment network may not prohibit a card issuer from contracting with any other card payment network for the processing of electronic debit transactions involving the issuer’s debit cards and (ii) card issuing financial institutions and card payment networks may not inhibit the ability of merchants to direct the routing of debit card transactions over any card payment networks that can process the transactions. Since April 2012, most debit card issuers have been required to enable at least two unaffiliated card payment networks on each debit card. We do not expect the prohibition on network exclusivity to impact our ability to pass on network fees and other costs to our clients. These regulatory changes create both opportunities and challenges for us. Increased regulation may add to the complexity of operating a payment processing business, creating an opportunity for larger competitors to differentiate themselves both in product capabilities and service delivery.
Federal Trade Commission Act and Other Laws Impacting our Customers’ Business. All persons engaged in commerce, including, but not limited to, us and our merchants are subject to Section 5 of the Federal Trade Commission Act prohibiting unfair or deceptive acts or practices, or UDAP. In addition, there are other laws, rules and or regulations, including the Telemarketing Sales Act, that may directly impact the activities of our merchant customers and in some cases may subject us, as the merchant’s payment processor, to investigations, fees, fines and disgorgement of funds in the event we are deemed to have aided and abetted or otherwise provided the means and instrumentalities to facilitate the illegal activities of the merchant through our payment processing services. Various federal and state regulatory enforcement agencies including the Federal Trade Commission, or FTC, and the states’ attorney general have authority to take action against nonbanks that engage in UDAP or violate other laws, rules and regulations and to the extent we are processing payments for a merchant that may be in violation of laws, rules and regulations, we may be subject to enforcement actions and as a result may incur losses and liabilities that may impact our business.
Anti-Money Laundering and Counter Terrorist Regulation. We are also subject to U.S. federal anti-money laundering laws and regulations, including the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 (collectively, the BSA). The BSA requires, among other things, that money services businesses to develop and implement risk-based anti-money laundering programs, report large cash transactions and suspicious activity and maintain transaction records.
We are additionally subject to economic and trade sanctions programs administered by the Treasury Department’s Office of Foreign Assets Control, or OFAC. These programs prohibit or restrict transactions to or from or dealings with specified countries, their governments and, in certain circumstances, their nationals, narcotics traffickers, and terrorists or terrorist organizations. We are also subject to other countries’ laws, where applicable, regarding anti-money laundering, counter terrorist financing and proceeds of crime.
Anti-Corruption. We are subject to applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, in the jurisdictions in which we operate. Anti-corruption laws generally prohibit offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a government official or private party in order to influence official action or otherwise gain an unfair business advantage.
Telephone Consumer Protection Act. We are subject to restrictions regarding telemarketing practices. Under the Telephone Consumer Protection Act (“TCPA”), telephone solicitations and the use of automated phone equipment is subject to strict solicitation rules. This includes the use of pre-recorded voice messages, automatic dialing, text messaging, and fax use. Absent informed consent by the consumer, commercial telemarketers are prohibited from making unwanted, unsolicited sales calls to mobile devices. The TCPA affects our ability to contact consumers in association with our secure text payment system and lead generation services. Violations of the TCPA may be enforced by the FCC or by individuals through litigation, including class actions and statutory penalties for TCPA violations ranging from $500 to $1,500 per violation, which is often interpreted to mean per phone call. While we intend to implement processes and procedures to comply with the TCPA, any failure by us or the third parties in which we rely on for data, to adhere to, or successfully implement, appropriate processes and procedures in response to existing or future regulations could result in legal and monetary liability, fines and penalties, or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition and results of operations.
Controlling the Assault of Non-Solicited Pornography and Marketing Act. We are subject to laws restricting the use of commercial messages, including text messaging. The Act generally prohibits the use of deceptive subject lines, must accurately identify the sender, and denote the message as an advertisement. In addition, recipients must include a clear and conspicuous explanation of how to opt-out of receiving the messages and the sender must remove the recipient within 10 business days of the receiver opting-out.
Payment Card Industry Data Security Standard. We are subject to the information security standard for organizations processing, storing or transmitting credit card information. The standard was created to increase controls around cardholder data to reduce credit card fraud. As we continue to process and store credit card information, the failure to adhere to the standards has the ability to have a material adverse effect on our business, financial condition and results of operations. However, through partnerships with Total Systems Services, Inc. and Oracle Corporation, we are able to utilize preventative measures when we store, process or transmit cardholder data, helping us to meet PCI level 1 compliance.
Other Laws and Regulations
Since we collect certain information from members and users on our platform, we will be subject to current and future government regulations regarding the collection, use and safeguarding of consumer information over the Internet and mobile communication devices. These regulations and laws may involve taxation, tariffs, user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, consumer protection and electronic payment services. In many cases, it may be unclear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet or mobile communication services as the vast majority of these laws were adopted prior to the advent of these technologies and do not contemplate or address the unique issues raised by the Internet and e-commerce.
There are a number of legislative proposals that are anticipated or pending before the U.S. Congress, various state legislative bodies, and foreign governments concerning data protection which could affect us. Many states, for example, have already passed laws requiring notification to subscribers when there is a security breach of personal data. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data practices, which could have an adverse effect on our business. In addition, some states are interpreting their own statutes differently than federal law. This may create additional compliance burdens.
Legislation could be passed that limits our ability to use or store information about our users. The Federal Trade Commission FTC and various states have established regulatory guidelines issued under the Federal Trade Commission Act and various state acts, respectively, that govern the collection, use and storage of consumer information, establishing principles relating to notice, consent, access and data integrity and security. Our practices are designed to comply with these guidelines.
The foregoing list of laws and regulations to which we are subject is not exhaustive, and the regulatory framework governing our operations changes continuously. Enactment of new laws and regulations may affect our operations, and could potentially result in increased regulatory compliance costs, litigation expense, adverse publicity, and/or loss of revenue. We believe our policies and practices comply with the FTC privacy guidelines and other applicable laws and regulations. However, if our belief proves incorrect, or if these guidelines, laws or regulations or their interpretations change or new legislation or regulations are enacted, we may be compelled to provide additional disclosures to our users, obtain additional consents from our users before collecting or using their information or implement new safeguards to help our users manage our (or others’) use of their information, among other changes.
Employees
As of the date of this annual report, we have three full-time employees and seven consultants. In addition to our employees, we utilize various consultants and contractors for other services on an as-needed basis.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties
Our headquarters is located at 5876 Owens Avenue, Suite 100, Carlsbad, Ca 92008, consisting of approximately 3000 square feet of office space. Our lease on this facility expires in February 2025. We anticipate that following the expiration of the lease, during the term of the current lease, depending on various factors, we will be able to lease or purchase additional or alternative space at commercially reasonable terms.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
In November 2017, two shareholders of AppTech, filed another lawsuit against us in the State of California. The lawsuit has been transferred to the United States District Court for the Southern District of California. We filed an answer, affirmative defenses and counter claims. Management believes that the Plaintiff misrepresented and mislead us during our merger with Transcendent One, Inc. The court has encouraged the parties to settle. Even though the Company believes the lawsuit is without merit and will vigorously defend, the Company has made several offers to settle. On December 19, 2019, the Company entered into a settlement and release agreement. The Company has recorded the liability as of December 31, 2019 for the total obligation of $240,000 to be paid out over three years beginning February 15, 2020. On January 24, 2021, the parties entered a stipulation modifying the repayment schedule of the settlement. We are current on the modified repayment schedule.
In September 2018, a complaint was filed in San Diego superior court for a breach of contract arising from a written agreement for the purchase of a judgment to which AppTech was not a party. The purchase of the judgment was part of the transaction to acquire the patents. AppTech substantially performed under the agreement but the second agreement to extend the final payment was executed under alleged duress. On October 26, 2018, the Company filed an answer that denied each and every purported allegation and cause of action and further denied that they caused any damage or loss. On December 3, 2019, the Company entered into a conditional settlement providing the terms of the conditional settlement have been completed by October 1, 2020. The conditional settlement amount of $150,000 was paid in monthly installments of $15,000. The settlement installments paid for the year ended December 31, 2020 was $135,000. On December 30, 2020,full payment was made in accordance with a modified settlement payment schedule.
In July of 2020, an owner and corporation having a business opportunity filed a lawsuit in the State of California alleging a breach of contract, intentional misrepresentation, fraudulent inducement of contract, negligent misrepresentation and unjust enrichment relating to a non-binding memorandum of understanding (“MOU”) between the parties and its associated circumstances in 2016. Process was served on January 8, 2021. The Plaintiffs filed an amended complaint on March 15, 2021. Management believes the agreement was non-binding, the statute of limitation has expired and the allegations have no merit. We intend to file an answer, affirmative defenses and counter claims in the near future. We currently own a judgment against the owner and corporation in the amount of $516,932.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our common stock has been registered with the SEC since 1999 and trading since 2010. It is currently listed on the OTC Pink Open Market under the symbol “APCX”.
Stockholder Data
As of March 30, 2021, there were 376 holders of record of our common stock, and there were 106,915,500 shares of our common stock issued and outstanding.
Dividends
We have not declared or paid any cash dividends on our common stock since our inception. We do not plan to pay dividends in the foreseeable future. We currently intend to retain earnings, if any, to finance our growth. Consequently, stockholders will need to sell shares of our common stock to realize a return on their investment, if any.
Equity Compensation Plan
For information regarding securities authorized under the equity compensation plan, see Item 12.
Recent Sales of Unregistered Securities
During 2021 year-to-date, 140,000 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $258,400 and 200,000 shares of common stock were issued in connection with the purchase of a judgment valued at $829,200. During 2021 year-to-date, we assigned our rights to stock repurchase option agreements to third parties resulting in net proceeds of $1,972,750.
During the year ended December 31, 2020, 4,012,000 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $2,631,899. During the year ended December 31, 2020, we assigned our rights to stock repurchase option agreements to third parties resulting in net proceeds of $274,614. During the year ended December 31, 2020, 145,832 shares of common stock options vested for the members of the Board of Directors valued at $81,958. Additionally, during the year ended December 31, 2020, 350,000 shares of common stock were issued to members of the Board of Directors valued at $196,700 for which vest quarterly over the period of approximately one year.
During the year ended December 31, 2019, 454,500 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $91,414; 37,193 shares of common stock were issued to several merchants under the merchant equity program valued at $14,877; 40,000 shares of common stock were issued to a landlord in lieu of the costs of improvements to our office valued at $18,400; and 275,000 shares of common stock for subscription agreements in the amount of $68,750. During the year ended December 31, 2019, we assigned our rights to stock repurchase option agreements to third parties resulting in net proceeds of $736,250. During the year ended December 31, 2019, no shares of common stock were issued to the management or members of the Board of Directors.
On January 24, 2019, we engaged an investment banking firm to provide general financial advisory and investment banking services. On September 23, 2019, we further engaged the same investment banking firm to assist us in raising capital. No sales took place as a result of their efforts. We terminated that engagement letter and any related offering on January 15, 2020.
All issuances were exempt from registration requirements of Section 5 of the Securities Act of 1933 as they did not involve a public offering under Section 4(a)2(2) and were issued as restricted securities as defined in Rule 144 of the Act.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Consolidated Financial Data
Because we are allowed to comply with the disclosure obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, with respect to this Annual Report on Form 10-K, we are not required to provide the information required by this Item.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the audited financial statements and related notes included elsewhere in this registration statement. Certain statements contained in this registration statement, including statements regarding the anticipated development and expansion of our business, our intent, belief or current expectations, primarily with respect to the future operating performance of our company and the products and services we expect to offer and other statements contained herein regarding matters that are not historical facts, are “forward-looking” statements. Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also forward-looking statements which involve risks, uncertainties, and assumptions. Because forward-looking statements are inherently subject to risks and uncertainties, our actual results may differ materially from the results discussed in the forward-looking statements.
Executive Overview
We intend to simplify and streamline digital financial services for corporations, small and midsized enterprises (“SMEs”) and consumers through innovative payment processing and digital banking technologies that complement our core merchant services capabilities. Our company’s merchant services provide financial processing for businesses to accept cashless and/or contactless payments, such as credit cards, ACH, wireless payments, and more. Our patented, exclusively licensed and/or proprietary merchant services software offers or will offer integrated solutions for frictionless digital and mobile payment acceptance; we are supplementing these capabilities with software that solves for multi-use case, multi-channel, API-driven, account-based issuer processing for card, digital tokens, and payment transfer transactions.
Our Revenue and Expenses
Revenues
We derive our revenues by providing financial processing services to businesses.
Expenses
Cost of Revenue. Cost of revenue includes costs directly attributable to processing and other services the company provides. These also include related costs such as residual payments to our business development partners, which are based on a percentage of the net revenue generated from client referrals.
General and administrative. General and administrative expenses include professional services, rent and utilities, and other operating costs.
Research and development. Research and development costs include costs of acquiring patents and other unproven technologies, contractor fees and other costs associated with the development of the SMS short code texting platform, contract and outside services.
Interest expense, net. Our interest expense consists of interest on our outstanding indebtedness and amortization of debt issuance costs.
How We Assess Our Business
We provide electronic payment processing and merchant services. Our electronic payment processing and merchant services provide comprehensive payment solutions to businesses.
Key Operating Metrics
We evaluate our performance through key operating metrics, including:
● The dollar volume of payments our clients process through us (payment volume); and
● Period to period merchant payment volume attrition
Our payment volume for the years ended December 31, 2020 and 2019 was $99,673,038 and $103,389,512, respectively. This represents a period-to-period growth rate of minus 4%. Payment volume reflects the addition of new clients and the same client payment volume from existing clients, offset by client attrition during the period.
Our merchant payment volume attrition for the years ended December 31, 2020 and 2019 was $1,141,661 and $1,409,757 (1.37%), respectively. This represents a period-to-period attrition decrease of 19%.
We measure period to period merchant payment volume attrition for all clients that were processing with us for the same period in the prior period. We exclude from our calculations the merchant payment volume from new clients added during the period. We experience attrition in payment volume as a result of several factors, including business closures and transfers of client’s accounts to our competitors.
We have one merchant customer, American Residential Warranty Services, that represented approximately 36% of our total revenues in the year ended December 31, 2020 and approximately 39% of our total revenues in the year ended December 31, 2019. The terms of our agreement with this entity are industry standard for ACH processing for similar merchants. We have a 5-year contract, beginning April 24, 2020, with this customer, and the loss of their business would have a material adverse effect on our business.
Results of Operations
This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for years ended December 31, 2020 and 2019, respectively. We have derived this data from our annual consolidated financial statements included elsewhere in this registration statement.
Year Ended December 31, 2020
Compared to Year Ended December 31, 2019
The following table presents our historical results of operations for the periods indicated:
Year ended December 31 Change
(in thousands) Amount %
Revenue $ 329.5 $ 256.1 $ 73.4 29 %
Cost of revenue 140.4 101.6 38.8 38 %
Gross profit 189.1 154.5 34.6 22 %
Operating expenses
General and administrative 3,749.5 1,020.9 2,728.6 267 %
Research and development 49.2 82.0 (32.8 ) (40 %)
Total operating expenses 3,798.7 1,102.9 2,695.8 244 %
Income (loss) from operations (3609.6 ) (948.4 ) (2,661.2 ) 281 %
Other (income) expenses
Other (income) expenses (82.5 ) 106.0 (188.5 ) 78 %
Interest expense, net 342.3 288.8 53.5 19 %
Day one derivative loss 389.7 - 389.7 100 %
Change in fair value of Derivative Liability (71.8 ) - (71.8 ) 100 %
Total other expenses 577.7 394.8 182.9 46 %
Income (loss) before income taxes (4,187.3 ) (1,343.2 ) (2,844.1 ) 212 %
Provision for income taxes - - - -
Net income (loss) $ (4,187.3 ) $ (1,343.2 ) $ (2,844.1 ) 212 %
Revenue
Revenue increased to $329,500 from $256,138, or 29%, for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was principally driven by significant reduction in processing fees from the processors.
Cost of Revenue
Cost of revenue increased to $140,372 from $101,638, or 38%, for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was driven primarily by a significant increase in revenue.
General and Administrative Expenses
General and administrative expenses increased to $3,749,456 from $1,020,869, or 267%, for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was primarily driven by the increase of some one-time stock compensation expense from significant consulting agreements.
Research and Development Expenses
Research and development expenses decreased to $49,250 from $82,057, or 40%, for the year ended December 31, 2020 from the year ended December 31, 2019. This decrease was primarily due to the decrease in development costs resulting from service agreements related to the development of our software platforms.
Interest Expense, net
Interest expense, net increased to $342,321 from $288,784, or 19%, for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was primarily driven by the addition of one-time interest charges for the amortization of the debt discount, day one derivative loss on a security purchase agreement.
Day One Derivative Loss
Day one derivative loss increased to $389,712 from $0 or 100% for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was primarily driven by the addition of a new convertible note agreement.
Change in Fair Value of Derivative Liability
Change in fair value of derivative liability increased to $71,764 from $0 or 100% for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was primarily driven by the addition of a new convertible note agreement.
Liquidity and Capital Resources
While the company is continuing operations and generating revenues, the company’s cash position is not significant enough to support the company’s daily operations. To the extent that additional funds are necessary to finance operations and meet our long-term liquidity needs as we continue to execute our strategy, we anticipate that they can be obtained through additional indebtedness, equity or debt issuances or both. Using currently available capital resources, management believes we can conduct planned operations for six months. Further, management believes we need to raise $1.5 million to remain in business for the next 12 months.
Since we derive our revenues principally from processing of purchases from our merchant services clients, a downturn in economic activity, such as that associated with the current corona virus pandemic could reduce the volume of purchases we process, and thus our revenues. In addition, such a downturn could cause our merchant customers to cease operations permanently decreasing our payment processing unless new customers were found. We may also face additional difficulty in raising capital during an economic downturn.
Cash Flows	
The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods.
Year Ended December 31, 2020 and 2019
Year Ended December 31,
Net cash used in operating activities	 $ (591,386 ) $ (760,544 )
Net cash provided by (used) in investing activities	 $ 5,911 $ (25,000 )
Net cash provided by financing activities	 $ 618,813 $ 808,319
Cash Flow from Operating Activities
Net cash used in operating activities decreased by $169,158 for the year ended December 31, 2020 from the year ended December 31, 2019. This decrease was principally driven by the reduction of a one-time settlement fee.
Cash Flow from Investing Activities
Net cash provided by investing activities increased by $30,911 for the year ended December 31, 2020 from the year ended December 31, 2019. This increase was principally driven by the refund of a deposit placed in escrow.
Cash Flow from Financing Activities
Net cash provided by financing activities decreased by $189,506 for the year ended December 31, 2020 from the year ended December 31, 2019. This decrease was principally driven by decreased proceeds from assigning our rights to stock repurchase option agreements to a third parties.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates including those related to revenue recognition, goodwill and intangible assets, derivative financial instruments, and equity-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies are those that we consider the most critical to understanding our financial condition and results of operations. The accounting policies we believe to be most critical to understanding our financial condition and results of operations are discussed below. As of December 31, 2020, there have been no significant changes to our critical accounting estimates, except as described in Note 2 to our consolidated financial statements. Further, as of December 31, 2020, there have been no significant changes to our recently issued accounting pronouncements, except as described in Note 2 to our consolidated financial statements.
Smaller Reporting Company
As a smaller reporting company, as defined in Item(f)(1) of Regulation S-K, we may choose to prepare our disclosures relying on scaled disclosure requirements for smaller reporting companies in Regulation S-K and in Article 8 of Regulation S-X.
The scaled disclosure requirements for smaller reporting companies permit us (i) to include less extensive narrative disclosure than required of other reporting companies, particularly in the description of executive compensation and (ii) to provide audited financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited financial statements for three years.
We may lose our status as a smaller reporting company on the last day of the fiscal year in which (i) our public float exceeds $250 million or (ii) if we have more than $100 million in annual revenues and (a) have no public float or (b) have a public float or more than $700 million.
Equity-based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation - Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at the fair market value on the grant date and recognize the expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date fair market value of stock options and other equity-based compensation issued to employees and non-employees.
During the year ended December 31, 2020, 4,012,000 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $2,631,899.
During the year ended December 31, 2020, 145,832 shares of common stock were issued to the board of director. The shares were earned over the term of the director. The Company valued the stock issuance, earned as of December 31, 2020, at $81,958.
During the year ended December 31, 2019, 454,500 shares of common stock were issued to several consultants in connection with business development and professional services rendered valued at $91,414.
Related Parties
See Item 13 for a full discussion of related parties.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Because we are allowed to comply with the disclosure obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, with respect to this Annual Report on Form 10-K, we are not required to provide the information required by this Item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and related consolidated financial statement schedules required to be filed are indexed on page 26 and are incorporated herein.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accounts on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, we evaluated the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2020.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our board of directors, management and other personnel, 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 and includes those policies and procedures that:
● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Under the supervision and with the participation of management, including our principal executive and financial officers, we assessed our internal control over financial reporting as of December 31, 2020, based on criteria for effective internal control over financial reporting established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Tread way Commission (COSO).
Based on this assessment, our management concluded that we maintained effective internal control over financial reporting as of December 31, 2020.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. Other Information
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item regarding our executive officers will be presented under the caption “Executive Officers” in our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020 (the 2021 Proxy Statement) and is incorporated herein by reference.
The information required by this item regarding our compliance with Section 16 of the Exchange Act of 1934, as amended, will be presented under the caption “Security Ownership of Certain Beneficial Owners and Management - Delinquent Section 16(a) Reports” in our 2021 Proxy Statement and is incorporated herein by reference.
The information required by this item regarding our audit committee will be presented under the caption “Corporate Governance - Board Committee - Audit Committee” in our 2021 Proxy Statement and is incorporated herein by reference.
The information required by this item regarding our code of ethics will be presented under the caption “Corporate Governance - Code of Business Conduct” in our 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by this item regarding executive compensation will be presented under the caption “Executive Compensation” in our 2021 Proxy Statement and is incorporated herein by reference.
The information required by this item regarding director compensation will be presented under the caption “Corporate Governance - Director Compensation” in our 2021 Proxy Statement and is incorporated herein by reference.
The information required by this item regarding our compensation committee will be presented under the caption “Corporate Governance - Compensation Committee Interlocks and Insider Participation” in our 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item regarding security ownership and certain beneficial owners and management will be presented under the caption “Security Ownership of Certain Beneficial Owners and Management” in our 2021 Proxy Statement and is incorporated herein by reference.
Equity Compensation Plan
The following table provides information, as of March 30, 2021, with respect to shares of our common stock that may be issued, subject to certain vesting requirements, under existing or future awards under our 2020 Equity Incentive Plan (“2020 Plan”). The 2020 Plan was approved by our Board of Directors and ratified by our shareholders at our 2020 Annual Shareholder Meeting on July 28, 2020.
A B C
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))
Equity compensation plans approved by security holders 585,500 $ 0.37 (1) 3,351,500
Equity compensation plans not approved by security holders - - -
Total 585,500 $ - 3,351,500
(1) The weighted-average exercise price does not take into account restricted stock units, which do not have an exercise price.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item regarding certain relationships and related persons transactions will be presented under the caption “Certain Relationships and Related Persons Transactions” in our 2021 Proxy Statement and is incorporated herein by reference.
The information required by this item regarding director independence will be presented under the caption “Corporate Governance - Independent Directors” in our 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The information required by this item regarding aggregate fees billed to us by our independent registered public accounting firm’s fees will be presented in our 2021 Proxy Statement and is incorporated herein by reference.
The information required by this item regarding our audit committee’s pre-approval policies and procedures will be presented in our 2021 Proxy Statement and is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statements Schedules
(a) The following documents are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K:
1. Financial Statements. See Index to Financial Statements under Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules. All schedules have been omitted because the information required to be presented in them is not applicable or is shown in the financial statements or related notes.
3. Exhibits. We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the accompanying Exhibit Index immediately following the financial statements contained in this Annual Report on Form 10-K.
(b) Exhibits. See Item 15(a)(3) above.
(c) Financial Statement Schedules. See Item 15(a)(2) above.