RPMT 10-Q Quarter ended June 30, 2025

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business

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 (the “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, 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.

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

NOTE 2 – MANAGEMENT PLANS

The accompanying condensed 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.

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 August 14, 2025, the Company has a cash position of approximately $ 1,300,000 . 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 September 2025.

NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES - RELATED PARTIES

As of June 30, 2025 and December 31, 2024, the Company owed the Chief Executive Officer, who is also a more than 5 % beneficial owner, a total of $ 3,077 and $ 4,327 in unpaid salary.

As of June 30, 2025 and December 31, 2024, the Company owed the Chief Financial Officer a total of $ 1,461 and $ 2,192 in unpaid salary.

NOTE 4 – LOANS PAYABLE

Loans payable as of June 30, 2025 and December 31, 2024 were $ 42,600 . Interest accrued on the loans at 6 % and 10 % was $ 14,170 and $ 12,701 as of June 30, 2025 and December 31, 2024. Interest expense related to these loans payable was $ 739 and $ 1,469 for the three months and six months ended June 30, 2025 and $ 739 and $ 1,477 for the three and six months ended June 30, 2024. There is no collateral associated with these loans.

NOTE 5 – 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. In June 2025, the Company issued an additional $ 2,000,000 of Notes to stockholders. The maturity dates of the Notes have been extended most recently from December 31, 2024 to April 30, 2025 , with the consent of the Note holders. An additional extension was provided by the Note holders on April 30, 2025. This extended the maturity date until May 31, 2025, with a provision stipulating that unless previously repaid in full such date shall be automatically extended on a month-to-month basis thereafter unless the Note holder submits notification in writing to the contrary.

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 Note holders and a collateral agent acting on behalf of the Note holders (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.

The Notes are recorded as a current liability as of June 30, 2025 and December 31, 2024 in the amount of $ 5,036,237 and $ 3,036,237 , respectively. Interest accrued on the Notes was $ 3,101,577 and $ 2,940,724 as of June 30, 2025 and December 31, 2024. Interest expense related to these Notes payable was $ 84,947 and $ 160,853 for the three and six months ended June 30, 2025 and $ 75,906 and $ 151,812 for the three and six months ended June 30, 2024.

NOTE 6 – NOTES PAYABLE – STOCKHOLDERS

These notes payable have no formal repayment terms and $ 370,000 of the notes bear interest at 10 % per annum and the remaining $ 225,000 of the notes bear interest at 20 % per annum.

These notes payable are recorded as a current liability as of June 30, 2025 and December 31, 2024 in the amount of $ 595,000 . Interest accrued on the notes as of June 30, 2025 and December 31, 2024 was $ 484,962 and $ 443,952 . Interest expense, including accretion of discounts, and warrants issued related to these notes payable was $ 20,618 and $ 41,010 for the three and six months ended June 30, 2025 and $ 20,618 and $ 41,237 for the three and six months ended June 30, 2024.

NOTE 7 – 4% SECURED CONVERTIBLE 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 the years 2016 through 2022.

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 April 30, 2025. An additional extension was provided by the New Secured Note holders on April 30, 2025. This extended the maturity date until May 31, 2025 , with a provision stipulating that unless previously repaid in full such date shall be automatically extended on a month-to-month basis thereafter unless the New Secured Note holder submits notification in writing to the contrary.

The New Secured Notes are recorded as a current liability in the amount of $ 14,981,250 as of June 30, 2025 and December 31, 2024. Interest accrued on the New Secured Notes was $ 3,648,574 and $ 3,348,949 , as of June 30, 2025 and December 31, 2024. Interest expense, including accretion of discounts related to these New Secured Notes was $ 149,813 and $ 299,625 for the three and six months ended June 30, 2025 and June 30, 2024.

NOTE 8 – INCOME TAXES

Income tax expense was $ 0 for the three and six months ended June 30, 2025 and 2024.

As of January 1, 2025, the Company had no unrecognized tax benefits, and accordingly, the Company did not recognize interest or penalties during 2024 related to unrecognized tax benefits. There has been no change in unrecognized tax benefits during the three and six months ended June 30, 2025, and there was no accrual for uncertain tax positions as of June 30, 2025. Tax years from 2021 through 2024 remain subject to examination by major tax jurisdictions.

There is no income tax benefit for the losses for the three and six months ended June 30, 2025 and 2024, since management has determined that the realization of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits.

NOTE 9 – CONVERTIBLE PREFERRED STOCK

Rego Payment Architectures, Inc. Series A Preferred Stock

The Series A Preferred Stock has a preference in liquidation equal to two times its original issue price, or $ 19,670,000 , 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 its 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.

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.

Rego Payment Architectures, Inc. Series B Preferred Stock

The Series B Preferred Stock is pari passu with the Series A Preferred Stock and has a preference in liquidation equal to two times its original issue price, or $ 50,610,420 as of June 30, 2025, 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 its 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 $ 7.20 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.

During the six months ended June 30, 2025 and 2024, the Company sold 0 and 41,367 shares of the Company’s Series B Preferred Stock in private placements to accredited investors and received proceeds of $0 and $ 3,723,021 .

Rego Payment Architectures, Inc. Series C Preferred Stock

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 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 June 30, 2025, none of the Series C Preferred Stock was 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. There are no outstanding Series C Preferred Shares, therefore the current per annum dividend per share is $ 0 .

As of June 30, 2025, the value of the cumulative 8 % dividends for all Rego preferred stock was $ 15,382,621 . Such dividends will be paid when and if declared payable by Rego’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 10 – STOCKHOLDERS’ EQUITY

On February 22, 2024, the Company engaged a merchant bank in a consultative capacity to advise on capital funding and strategic initiatives which include the prospective sale of the Company. The Company had agreed to pay a fee equal to 1.5 % of the transaction value upon closing. On March 18, 2025, the Company terminated this agreement due to the incapacity of the principal of the merchant bank.

On May 7, 2025, the Company engaged a new investment banker to advise on capital funding and strategic alternatives which include the prospective sale of the Company. The Company agreed to pay a fee equal to 1.75 % or 2.00 % of the transaction value upon closing, which is dependent upon the aggregate consideration received. There is a minimum fee threshold amount of $ 1,000,000 . No fees were paid to this new investment banker during the six months ended June 30, 2025.

Option Amendments and Adjustments

On February 6, 2025, the Board of Directors approved amendments extending the term of certain outstanding options to purchase in the aggregate 4,072,875 shares of common stock of the Company at exercise prices ranging from $ 0.90 to $ 1.48 per share. These options were scheduled to expire in the first and second quarter of 2025 and the expiration date of each such option was extended to December 31, 2026. The increase in fair value of this term extension was $ 1,137,256 which was expensed during the six months ended June 30, 2025. 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 63.0 %, risk free interest rate of 4.21 %, and expected option life of 1.9 years.

On May 1, 2025, the Board of Directors approved amendments extending the term of certain outstanding options to purchase in the aggregate 150,000 shares of common stock of the Company at exercise prices ranging from $ 1.30 to $ 1.40 per share. These options were scheduled to expire in May 2025 and the expiration date of each such option was extended to December 31, 2026. The increase in fair value of this term extension was $ 16,535 which was expensed during the three and six months ended June 30, 2025. 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 67.2 %, risk free interest rate of 3.70 %, and expected option life of 1.7 years.

Issuance of Restricted Shares

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. There were no RSAs granted during the three and six months ended June 30, 2025.

NOTE 11 – 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 stockholders. 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 June 30, 2025, under the 2008 Plan, options to purchase 200,000 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.

NOTE 12 – OPERATING LEASES

For the three and six months ended June 30, 2025, total rent expense under leases amounted to $ 1,316 and $ 2,656 and for the three and six months ended June 30, 2024 total rent under leases amounted to $ 1,316 and $ 2,655 . 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 June 30, 2025.

NOTE 13 – RELATED PARTY TRANSACTIONS

On February 19, 2025, the Chief Executive Officer and the Chief Financial Officer each received cash bonuses of $ 30,000 for a total of $ 60,000 in aggregate.

See Notes 3, 5, 6, and 7 which also include related party transactions.

NOTE 14 - INVESTOR PRIVATE LINE OF CREDIT

On March 13, 2023, the Company entered into an Investor Private Line of Credit agreement (the “LOC Agreement”) with an existing shareholder of the Company (the “Lender”). Pursuant to this 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 of the LOC Agreement, the Company will repay any amounts outstanding within sixty (60) days.

On March 13, 2024, the Company entered into an Amendment to Investor Private Line of Credit (the “Amendment”) with the Lender. The Amendment extended the maturity date of the existing Investor Private Line of Credit Agreement with the Lender by one year, from March 13, 2024 to March 13, 2025. On March 13, 2025, the maturity date of this LOC Agreement was extended again for one year to March 13, 2026.

As of June 30, 2025 the outstanding balance on this LOC Agreement is $0 .

NOTE 15 – SEGMENT REPORTING

The Company manages the business activities on a consolidated basis and operates in one reportable segment. The Company's reportable segment is a family financial solutions platform that safeguards children’s privacy and provides anti-fraud protection for the elderly. The segment is data management and monetization. As the Company has one reportable segment, sales, transaction expense, marketing, product development, and general and administrative expenses are equal to consolidated results.

NOTE 16 – SUBSEQUENT EVENTS

On July 2, 2025, subsequent to the end of the reporting period, U.S. Congress enacted the Taxpayer Fairness and Growth Act of 2025, which includes significant amendments to the Internal Revenue Code. Key provisions include:

The Company is currently evaluating the impact of the legislation on its consolidated financial statements, including deferred tax assets and liabilities. Because the enactment occurred after the end of the reporting period and before issuance of these financial statements, the effects have not been recognized in the accompanying consolidated financial statements as of and for the period ended June 30, 2025, consistent with ASC 740 and ASC 855.

The Company expects the corporate rate reduction to have a favorable impact on its effective tax rate beginning in fiscal 2026. However, remeasurement of deferred tax balances and the application of new limitations may result in non-cash tax charges in future periods. The Company will continue evaluating the impact and recognize any required adjustments in the period of enactment.