Preheat oven to 350 degrees F (175 degrees C). Grease 9-inch square pan.
Combine flour, confectioners' sugar, baking powder, salt, cinnamon and nutmeg in a bowl.
Cream butter in separate large bowl. Beat in egg, applesauce, and vanilla extract.
Mix dry ingredients into wet ingredients. Stir to combine. Add diced apples, caramel bits and walnuts; blend in thoroughly. Pour into greased pan and distribute evenly.
Combine granulated sugar, cinnamon and sea salt for the topping. Sprinkle evenly on top of the batter.
Bake until toothpick inserted in center comes out clean, 30-35 minutes.
