Quarterly Report (10-q)

Date : 02/19/2019 @ 7:54PM
Source : Edgar (US Regulatory)
Stock : Appyea Inc (PK) (APYP)
Quote : 0.0001  0.0 (0.00%) @ 12:22PM
Appyea (PK) share price Chart

Quarterly Report (10-q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

x

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

 

 

 

For the quarterly period ended: December 31, 2018

 

 

or

 

 

¨

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from _________________ to _________________

 

 

 

Commission File Number: 000-55403                                   

  

APPYEA, INC.

(Exact name of registrant as specified in its charter)

  

South Dakota

 

46-1496846

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

 

 

 

777 Main Street, Suite 600, Fort Worth, Texas

 

76102

(Address of principal executive offices)

 

(Zip Code)

 

(817) 887-8142

(Registrant’s telephone number, including area code)

 

____________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  YES    ¨  NO 

 

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

 

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

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

 

Emerging growth company

¨

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨  YES     x  NO 

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ¨  YES     ¨  NO 

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

2,150,441,260 common shares issued and outstanding as of February 14, 2019

 

 
 
 
 

 

FORM 10-Q

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

18

 

Item 4.

Controls and Procedures

 

18

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

20

 

Item 1A.

Risk Factors

 

20

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

20

 

Item 3.

Defaults Upon Senior Securities

 

20

 

Item 4.

Mine Safety Disclosures

 

20

 

Item 5.

Other Information

 

20

 

Item 6.

Exhibits

 

21

 

SIGNATURES

 

22

 

 

 
2
 
 

  

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

APPYEA, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

December 31,

 

 

June 30,

 

 

 

2018

 

 

2018

 

ASSETS

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$ 2,064

 

 

$ 47,196

 

Total Current Assets

 

 

2,064

 

 

 

47,196

 

 

 

 

 

 

 

 

 

 

Fixed assets, net of accumulated depreciation of $257,070 and $250,570

 

 

800

 

 

 

7,300

 

TOTAL ASSETS

 

$ 2,864

 

 

$ 54,496

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

270,221

 

 

 

275,312

 

Accrued salary

 

 

272,000

 

 

 

224,000

 

Convertible loans and accrued interest, net of unamortized discounts of $37,095 and $81,968, respectively

 

 

337,531

 

 

 

290,823

 

Convertible loans and accrued interest - related party

 

 

9,999

 

 

 

8,977

 

Due to related party

 

 

82,689

 

 

 

88,087

 

Derivative liability

 

 

566,519

 

 

 

1,016,865

 

Total Current Liabilities

 

 

1,538,959

 

 

 

1,904,064

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

1,538,959

 

 

 

1,904,064

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit:

 

 

 

 

 

 

 

 

Convertible preferred stock, $0.0001 par value, 60,000,000 shares authorized, 5,000,000 shares issued and outstanding at December 31, 2018 and June 30, 2018, respectively

 

 

500

 

 

 

500

 

Common stock, $0.0001 par value, 6,000,000,000 shares authorized, 1,623,141,260 and 1,240,477,060 shares issued and outstanding at December 31, 2018 and June 30, 2018, respectively

 

 

162,313

 

 

 

124,047

 

Additional paid-in capital

 

 

4,826,005

 

 

 

4,740,277

 

Stock payable

 

 

62,727

 

 

 

62,727

 

Accumulated deficit

 

 

(6,587,640 )

 

 

(6,777,119 )

Total Stockholders' Deficit

 

 

(1,536,095 )

 

 

(1,849,568 )

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$ 2,864

 

 

$ 54,496

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 
3
 
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APPYEA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

Six months ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$ 119

 

 

$ 110

 

 

$ 197

 

 

$ 1,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legal and professional fees

 

 

18,610

 

 

 

164,974

 

 

 

28,171

 

 

 

229,804

 

General and administrative

 

 

26,412

 

 

 

37,860

 

 

 

54,669

 

 

 

135,096

 

Depreciation

 

 

-

 

 

 

7,936

 

 

 

6,500

 

 

 

18,744

 

Total Operating Expenses

 

 

45,022

 

 

 

210,770

 

 

 

89,340

 

 

 

383,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(44,903 )

 

 

(210,660 )

 

 

(89,143 )

 

 

(382,600 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of derivative liabilities

 

 

486,086

 

 

 

(215,751 )

 

 

355,325

 

 

 

(349,988 )

Interest expense

 

 

(34,128 )

 

 

(111,100 )

 

 

(76,703 )

 

 

(211,556 )

Net Other Income (Expense)

 

 

451,958

 

 

 

(326,851 )

 

 

278,622

 

 

 

(561,544 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$ 407,055

 

 

$ (537,511 )

 

$ 189,479

 

 

$ (944,144 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) Per Common Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$ 0.00

 

 

$ (0.00 )

 

$ 0.00

 

 

$ (0.00 )

Diluted

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

$ (000 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

1,330,983,536

 

 

 

944,991,968

 

 

 

1,285,730,298

 

 

 

805,777,397

 

Diluted

 

 

7,173,042,878

 

 

 

944,991,968

 

 

 

7,148,481,669

 

 

 

805,777,397

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 
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APPYEA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Six months ended

 

 

 

December 31,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net Income (loss)

 

$ 189,479

 

 

$ (944,144 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

6,500

 

 

 

18,744

 

Common stock issued for services

 

 

-

 

 

 

99,500

 

Amortization of debt discounts

 

 

44,873

 

 

 

171,514

 

Change in fair value of derivative liabilities

 

 

(355,325 )

 

 

349,988

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

(5,091 )

 

 

95,196

 

Accrued salary

 

 

48,000

 

 

 

48,000

 

Accrued interest

 

 

31,830

 

 

 

40,043

 

Net Cash Used in Operating Activities

 

 

(39,734 )

 

 

(121,159 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Investment in equity method investee

 

 

-

 

 

 

(25,000 )

Net cash used in Investing Activities

 

 

-

 

 

 

(25,000 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Issuance of common stock for cash and common stock payable

 

 

-

 

 

 

200

 

Proceeds from convertible notes payable, net of original issue discounts

 

 

-

 

 

 

91,667

 

Proceeds from convertible notes payable - related party, net of original issue discounts

 

 

-

 

 

 

8,333

 

Proceeds from loan to related party

 

 

4,196

 

 

 

20,050

 

Repayment of loan to related party

 

 

(9,594 )

 

 

(6,571 )

Net cash provided by (used in) Financing Activities

 

 

(5,398 )

 

 

113,679

 

 

 

 

 

 

 

 

 

 

Net cash decrease for period

 

 

(45,132 )

 

 

(32,480 )

Cash at beginning of period

 

 

47,196

 

 

 

42,567

 

Cash at end of period

 

$ 2,064

 

 

$ 10,087

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

Cash paid for interest

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

NON CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Issuance of common stock for conversion of debt and accrued interest

 

$ 28,973

 

 

$ 145,039

 

Resolution of derivative liability upon conversion of debt

 

$ 95,021

 

 

$ 258,603

 

Derivative liability recognized as debt discount

 

$ -

 

 

$ 235,000

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 
5
 
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APPYEA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2018

(Unaudited)

 

1. NATURE OF OPERATIONS

 

AppYea, Inc. ("AppYea", "the Company", "we" or "us") was incorporated in the State of South Dakota on November 26, 2012 to engage in the acquisition, purchase, maintenance and creation of mobile software applications. The Company is in the development stage with no significant revenues and a limited operating history.

 

The Company incorporated a wholly-owned subsidiary, “AppYea Holdings, Inc.” in state of South Dakota on January 13, 2017 and "The Diagnostic Centers Inc." in State of South Dakota on August 2, 2017.

 

Through its wholly owned subsidiary, The Diagnostic Centers, Inc., AppYea markets comprehensive diagnostic testing services to physician offices, clinics, hospitals, long term care facilities, healthcare groups, and other healthcare providers.

 

The Company's common stock is traded on the OTC Markets (www.otcmarkets.com) under the symbol "APYP". The first day of trading on the OTC Markets was December 15, 2014.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

 

In the opinion of the company’s management, the accompanying unaudited interim financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the company as of December 31, 2018 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended December 31, 2018 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the company’s Annual Report on Form 10-K for the year ended June 30, 2018 filed with the SEC on October 15, 2018.

 

Use of Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions about the valuation and recognition of stock-based compensation expense, the valuation and recognition of derivative liability, valuation allowance for deferred tax assets and useful life of fixed assets.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of AppYea and its subsidiaries. Intercompany transactions and balances have been eliminated.

 

Fair Value of Financial Instruments

 

As defined in ASC 820” Fair  Value Measurements,”  fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

 

 
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The following table summarizes fair value measurements by level at December 31, 2018 and June 30, 2018, measured at fair value on a recurring basis:

 

December 31, 2018

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

None

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ -

 

 

$ -

 

 

$ 566,519

 

 

$ 566,519

 

 

June 30, 2018

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

None

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ -

 

 

$ -

 

 

$ 1,016,865

 

 

$ 1,016,865

 

 

3. GOING CONCERN AND LIQUIDITY

 

At December 31, 2018, the Company had cash of $2,064 and current liabilities of $1,538,959 and a working capital deficit of $1,536,895. The Company has generated net losses from operations since inception. The Company anticipates future losses in its business. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company’s ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no assurance that this series of events will be satisfactorily completed.

 

4. FIXED ASSETS

 

As at December 31, 2018 and June 30, 2018, the balance of fixed assets represented a vehicle and mobile application software as follows:

 

 

 

December 31

 

 

June 30,

 

 

 

2018

 

 

2018

 

Mobile applications

 

$ 257,870

 

 

$ 257,870

 

Accumulated depreciation

 

 

(257,070 )

 

 

(250,570 )

Fixed assets, net

 

$ 800

 

 

$ 7,300

 

 

Depreciation expense for the six months ended December 31, 2018 and 2017 was $6,500 and $18,744, respectively.

 

 
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5. CONVERTIBLE LOANS

 

At December 31, 2018 and June 30, 2018, convertible loans consisted of the following:

 

 

 

December 31,

 

 

June 30,

 

 

 

2018

 

 

2018

 

March 2015 Note

 

$ -

 

 

$ -

 

November 2016 Note -1

 

 

150,000

 

 

 

150,000

 

Convertible notes - Issued in fiscal year 2018

 

 

188,996

 

 

 

195,614

 

Total convertible notes payable

 

 

338,996

 

 

 

345,614

 

 

 

 

 

 

 

 

 

 

Accrued interest

 

 

35,630

 

 

 

27,177

 

Less: Unamortized debt discount

 

 

(37,095 )

 

 

(81,968 )

Total convertible notes

 

 

337,531

 

 

 

290,823

 

 

 

 

 

 

 

 

 

 

Less: current portion of convertible notes

 

 

337,531

 

 

 

290,823

 

Long-term convertible notes

 

$ -

 

 

$ -

 

 

During the six months ended December 31, 2018 and 2017, the Company recognized amortization of discount, included in interest expense, of $44,873 and $169,442, respectively.

 

Conversion

 

During the six months ended December 31, 2018, the Company converted notes with principal amounts and accrued interest of $28,973 into 382,664,200 shares of common stock. The corresponding derivative liability at the date of conversion of $95,021 was settled through additional paid in capital.

 

March 2015 Note

 

As of December 31, 2018, and June 30, 2018, the outstanding principal balance of the note was $0, the note had accrued interest of $454.

 

November 2016 Note 1

 

On November 15, 2016, the Company entered into four separate agreements with Greentree Financial Group, Inc., consisting of a Financial Advisory Agreement, a Loan Agreement, a Convertible Promissory Note, and a Warrant.

 

The Loan Agreement allows for the Company to borrow up to $250,000 from Greentree, which will be evidenced by various promissory notes, which will automatically mature 12 months from the date of applicable Note, will accrue interest at a rate of 12% per annum, and will include an original issuance discount (“OID”) of 10%. In addition, the promissory notes will be convertible at a price equal to 55% of the lowest trading price during the 10 trading days immediately prior to a conversion date. The conversion price shall not be lower than $0.0001. Note may not be converted prior to 6 months from its issuance. There is a 10% prepayment penalty associated with each of the promissory notes. Each promissory note conversion shall result in $1,500 being added to the principal of each promissory note converted. An initial promissory note of $100,000 was issued on November 15, 2016.

 

The warrant issued to Greentree allows for the purchase of up to 5,000,000 shares of the Company’s common stock for a three year period, expiring on November 15, 2019, with an exercise price of $0.03 per share. The warrants also contain a cashless exercise feature, based on a cashless exercise formula.

 

The Company determined that the exercise feature of the warrants met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock. The Company will bifurcate the embedded conversion option in the note once the note becomes convertible and account for it as a derivative liability. The fair value of the warrants was recorded as a debt discount being amortized to interest expense over the term of the note.

 

On January 26, 2017 and June 30, 2017, the Company issued convertible notes of $75,000 and $75,000, respectively, according to the loan agreement on November 15, 2016.

 

 
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Promissory Notes - Issued in fiscal year 2018

 

During the year ended June 30, 2018, the Company issued a total of $180,614 of notes with the following terms:

 

 

·

Terms ranging from 6 months to 12 months.

 

·

Annual interest rates of 5% - 12%.

 

·

Convertible at the option of the holders at issuance.

 

·

Conversion prices are typically based on the discounted (35% to 45% discount) average closing prices or lowest trading prices of the Company’s shares during various periods prior to conversion. Certain notes allow for the conversion price to be a floor of $0.0002 per share.

 

·

Certain note allows the principal amount will increase by $15,000 and the discount rate of conversion price will decrease by 15% if the conversion price is less than $$0.01. As a result, the discount rate of conversion price changed from 45% to 60% and the Company recognized the penalty of $15,000 and recorded principal amount of $15,000.

 

Certain notes allow the Company to redeem the notes at rates ranging from 115% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, the note includes original issue discounts and financing costs totaling to $38,447 and the Company received cash of $142,167. Certain convertible notes of $116,666 are currently in default.

 

On June 25, 2018, the Company entered into and closed a financing transaction with Bellridge Capital L.P. consisting of a Securities Purchase Agreement, a Secured Convertible Promissory Note, and a Warrant.

 

The Securities Purchase Agreement provides that Bellridge Capital L.P. would receive a Secured Convertible Promissory Note in an amount of $78,947 in exchange for a funding amount of $78,947, and as additional consideration would also receive a Warrant for the purchase of an additional 394,735,000 shares of common stock. The Convertible Promissory Note will accrue interest at a rate of 5% per annum, default interest at a rate of 24% per annum, and will be convertible at a price equal to the lesser of (i) $0.0002, and (ii) the variable conversion price, which is defined as 65% of the lowest daily VWAP in the twenty (20) Trading Days prior to the Conversion Date . The “market price” is defined as the lowest trading price for the common stock during the twenty-five trading day period ending on the last complete trading day prior to the conversion date. The “trading price” is defined as the lowest trade price on the OTC Pink, OTCQB or applicable trading market. Bellridge Capital L.P. shall not be able to convert the promissory notes in an amount that would result in the beneficial ownership of greater than 4.99% of the outstanding shares of the Company, with the exception that the limitation may be waived by Bellridge Capital L.P. with 61 days prior notice. If, at any time when the note is issued and outstanding, the Company sells or issues shares of common stock for no consideration or for a consideration price per share less than the conversion price in effect on the date of such issuance, the conversion price for the note would be reduced to the amount of the consideration per share received by the Company for such dilutive issuance. If the Company prepays the note on or before 90 days following the date of the note, the Company shall be required to pay 115%, multiplied by the sum of the outstanding principal of the note, plus all accrued and unpaid interest and default interest if any. If the Company prepays the note during the period beginning 91 days and ending 180 days from the issue date of the note, the Company shall be required to pay 120% multiplied by the sum of the then outstanding principal amount of the note, plus accrued and unpaid interest and default interest, if any. If the Company prepays the note during the period beginning after 180 days from the issue date of the note, the Company shall be required to pay 125% multiplied by the sum of the then outstanding principal amount of the note, plus accrued and unpaid interest and default interest, if any.

 

The warrant issued to Bellridge Capital L.P. allows for the purchase of up to 394,735,000 shares of the Company’s common stock for a three-year period with an exercise price of $0.0002 per share. The warrants also contain a cashless exercise feature, based on a cashless exercise formula. In connection with the Secured Promissory Note, the Company entered into a Security Agreement which grants the Debtor a security interest in all of the assets of the Company.

 

 
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Derivative liabilities

 

The Company determined that the exercise feature of the warrants met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock. The Company will bifurcate the embedded conversion option in the note once the note becomes convertible and account for it as a derivative liability. The fair value of the warrants was recorded as a debt discount being amortized to interest expense over the term of the note.

 

The Company valued the conversion features using the Black Scholes valuation model. The fair value of the derivative liability for all the note and warrants that became convertible for the year ended June 30, 2018 amounted to $965,401. $277,167 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $688,234 was recognized as a “day 1” derivative loss.

 

Warrants

 

A summary of activity during the six months ended December 31, 2018 follows:

 

 

 

Warrants Outstanding

 

 

 

Shares

 

 

Weighted Average

Exercise Price

 

Outstanding, June 30, 2018

 

 

592,916,818

 

 

$ 0.0004

 

Granted

 

 

-

 

 

 

-

 

Reset feature

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

Forfeited/canceled

 

 

-

 

 

 

-

 

Outstanding, December 31, 2018

 

 

592,916,818

 

 

$ 0.0004

 

 

The following table summarizes information relating to outstanding and exercisable warrants as of December 31, 2018:

 

Warrants Outstanding

 

 

Warrants Exercisable

 

Number of

Shares

 

 

Weighted Average Remaining

Contractual life (in years)

 

 

Weighted Average

Exercise Price

 

 

Number of

Shares

 

 

Weighted Average

Exercise Price

 

 

5,000,000

 

 

 

0.87

 

 

$ 0.03

 

 

 

5,000,000

 

 

$ 0.03

 

 

193,181,818

 

 

 

3.79

 

 

$ 0.0001

 

 

 

193,181,818

 

 

$ 0.0001

 

 

394,735,000

 

 

 

2.48

 

 

$ 0.0002

 

 

 

394,735,000

 

 

$ 0.0002

 

 

592,916,818

 

 

 

2.90

 

 

$ 0.0004

 

 

 

592,916,818

 

 

$ 0.0004

 

 

6. CONVERTIBLE LOANS – RELATED PARTY

 

At December 31, 2018 and June 30, 2018, convertible loan – related party consisted of the following:

 

 

 

December 31,

 

 

June 30,

 

 

 

2018

 

 

2018

 

Convertible notes - related party -Issued in fiscal year 2018

 

 

8,333

 

 

 

8,333

 

Total convertible notes payable

 

 

8,333

 

 

 

8,333

 

 

 

 

 

 

 

 

 

 

Accrued interest -related party

 

 

1,666

 

 

 

644

 

Less: Unamortized debt discount - related party

 

 

-

 

 

 

-

 

Total convertible notes

 

 

9,999

 

 

 

8,977

 

 

 

 

 

 

 

 

 

 

Less: current portion of convertible notes - related party

 

 

9,999

 

 

 

8,977

 

Long-term convertible notes

 

$ -

 

 

$ -

 

 

 
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During the six months ended December 31, 2018 and 2017, the Company recognized amortization of discount, included in interest expense, of $0 and $2,072, respectively.

 

Promissory Notes - Issued in fiscal year 2018

 

During the year ended June 30, 2018, the Company issued a total of $8,333 note with the following terms:

 

 

·

Terms of 6 months.

 

·

Annual interest rates of 8%.

 

·

Convertible at the option of the holders at issuance.

 

·

Conversion prices are typically based on the discounted (45% discount) average closing prices of the Company’s shares during 20 days prior to conversion.

 

The Company received cash of $8,333.

 

The Company determined that the conversion feature met the definition of a liability in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and therefore bifurcated the embedded conversion option once the note becomes convertible and accounted for it as a derivative liability. The fair value of the conversion feature was recorded as a debt discount and amortized to interest expense over the term of the note.

 

The Company valued the conversion feature using the Black Scholes valuation model. The fair value of the derivative liability for all the notes that became convertible, including the notes issued in prior years, during the year ended June 30, 2018 amounted to $9,371. $8,333 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $1,038 was recognized as a “day 1” derivative loss.

 

7. DERIVATIVE LIABILITIES

 

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

 

Fair Value Assumptions Used in Accounting for Derivative Liabilities.

 

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

 

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of December 31, 2018. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.

 

 
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At December 31, 2018, the estimated fair values of the liabilities measured on a recurring basis are as follows:

 

 

 

Six months

ended

December 31,

2018

 

 

Year Ended

June 30,

2018

 

Expected term

 

0.48 - 4.04 years

 

 

0.04 - 5.00 years

 

Expected average volatility

 

270%-451

 

147%-488

Expected dividend yield

 

 

-

 

 

 

-

 

Risk-free interest rate

 

2.36%-2.94

 

0.96%-2.73

 

The following table summarizes the changes in the derivative liabilities during the six months ended December 31, 2018:

 

Fair Value Measurements Using Significant Observable Inputs (Level 3)

 

 

 

 

 

Balance - June 30, 2018

 

$ 1,016,865

 

 

 

 

 

 

Settled due to conversion of debt

 

 

(95,021 )

Gain on change in fair value of the derivative

 

 

(355,325 )

Balance - December 31, 2018

 

$ 566,519

 

 

The aggregate (gain) loss on derivatives during the six months ended December 31, 2018 and 2017 was ($355,325) and $349,988, respectively.

 

8. COMMITMENTS AND CONTINGENCIES

 

Leases and Long term Contracts

 

The Company has not entered into any long-term leases, contracts or commitments.

 

Agreements

 

In December 2016, the Company entered into a contract agreement with M Endeavors, LLC for marketing the services to Doctors office, clinic and hospitals for the term of 5 years. The Agreements shall automatically renew for successive 12-month periods unless otherwise terminated in accordance with the terms of this Agreement. The Company was required to pay a monthly fee of $8,000 and expenses related to this contract. The Company mutually agreed to terminate this agreement. As of December 31, 2018 and June 30, 2018, the Company recorded accrued expenses of $75,000 and $75,000, respectively.

 

In December 2016, the Company entered into a contract agreement with Big Dreams ventures, LLC for marketing the services to Doctors office, clinic and hospitals for the term of 5 years. The Agreement shall automatically renew for successive 12-month periods unless otherwise terminated in accordance with the terms of this Agreement. The Company was required to pay a monthly fee of $10,000 and expenses related to this contract. The Company mutually agreed to terminate this agreement. As of December 31, 2018 and June 30, 2018, the Company recorded accrued expenses of $105,250 and $105,250, respectively.

 

On October 2, 2017, the Company entered into an agreement with Pacific Pain & Regenerative Medicine. The Company was required to pay $3,000 per month for a collector in exchange for a minimum of 5 PGX tests per week or 20 per month. During the year ended June 30, 2018, the Company terminated the services and stopped making the monthly payments. As of December 31, 2018 and June 30, 2018, the Company recorded accrued expense of $21,000 and $21,000, respectively.

 

On October 17, 2017, the Company entered into an agreement of the acquisition financing of up to $30,000,000 (“the “Placement’) with Wellington Shields $ Co. The Company shall pay (i) a success fee equal to 8% of the gross proceeds of the Placement, (ii) 3% of the total Company’s shares outstanding at the time of closing the placement, and (iii) was required to pay $15,000 at the time of signing and $10,000 per month. This engagement agreement terminated at the close of business April 30, 2018. As of December 31, 2018 and June 30, 2018, the Company recorded accrued expense of $60,000 and $60,000, respectively.

 

Rent

 

As of January 30, 2013, the Company leases office space at $200 per month with three-month terms, which shall be automatically extended for successive three-month periods unless there is the notice to cancel. The lease can be cancelled at any time by either party with 30 days’ notice prior to expiration of an applicable term. For the six months ended December 31, 2018 and 2017, the Company incurred $1,246 and $1,238, respectively.

 

 
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9. SHAREHOLDERS' EQUITY

 

Series A Preferred Stock

 

The Company is authorized to issue 60,000,000 shares of Series A Preferred Stock at a par value of $0.0001.

 

Each Series A preferred share is convertible into 1,500 shares of common stock and has the voting rights of 1,000 shares of common stock.

 

As at December 31, 2018 and June 30, 2018, 5,000,000 shares of the Company's Series A Preferred Stock were issued and outstanding.

 

Common Stock

 

During the six months ended December 31, 2018, the Company issued 382,664,200 shares of common stock for conversion of debt and accrued interest of $28,973.

 

As at December 31, 2018 and June 30, 2018, 1,623,141,260 and 1,240,477,060 shares of the Company's common stock were issued and outstanding.

 

Stock payable

 

The Company had insufficient authorized shares as of June 30, 2017 and as a result, the Company had $105,000 in stock payable for which it is obligated to issue 55,000,000 shares of common stock for consulting services. During the year ended June 30, 2018 the company issued 30,000,000 common shares for cash of $200 and reduced common stock payable by $57,273.

 

As of December 31, 2018, the Company had $47,727 in stock payable for which it is obligated to issue 25,000,000 shares of common stock for consulting services.

 

On November 13, 2017, the Company entered into a consulting agreement with a third party for the term of 5 years with a consideration of an issuance of 40,000,000 shares of common stock valued at $20,000. The share shall be issued in two tranches with first tranche of 10,000,000 shares being due at signing of this agreement and an additional 30,000,000 shares are due on the 3 months anniversary of this agreement. During the year ended June 30, 2018, the Company issued 10,000,000 shares with a fair value of $5,000. As of December 31, 2018, the Company had $15,000 in stock payable for which it is obligated to issue 30,000,000 shares of common stock for consulting services.

 

10. RELATED PARTY TRANSACTIONS

 

In March 2016, the Company appointed current CEO and approved a base compensation package of $8,000 per month for CEO. As of December 31, 2018, and June 30, 2018, the Company recorded accrued salary of $272,000 and $224,000, respectively.

 

During the six months ended December 31, 2018 and 2017, the Company borrowed a total amount of $4,196 and $20,050 from Evergreen Venture Partners LLC (“EVP”), which the CEO is the majority owner, and repaid $9,594 and $6,571, respectively. This loan is a non-interest bearing and due on demand. As of December 31, 2018, and June 30, 2018, the Company owed EVP, a related party $82,689 and $88,087, respectively.

 

 
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11. EARNING (LOSS) PER SHARE

   

The following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share ("EPS") calculations.

 

 

 

Three Months Ended

 

 

Six months ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$ 407,055

 

 

$ (537,511 )

 

$ 189,479

 

 

$ (944,144 )

Earnings allocated to participating securities

 

 

(451,958 )

 

 

-

 

 

 

(278,622 )

 

 

-

 

Income (loss) available to common stockholders

 

$ (44,903 )

 

$ (537,511 )

 

$ (89,143 )

 

$ (944,144 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of common stock

 

 

1,330,983,536

 

 

 

944,991,968

 

 

 

1,285,730,298

 

 

 

805,777,397

 

Dilutive effect of convertible instruments

 

 

5,614,029,126

 

 

 

-

 

 

 

5,614,029,126

 

 

 

-

 

Dilutive effect of outstanding warrants

 

 

228,030,216

 

 

 

-

 

 

 

248,722,245

 

 

 

-

 

Diluted weighted-average of common stock

 

 

7,173,042,878

 

 

 

944,991,968

 

 

 

7,148,481,669

 

 

 

805,777,397

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

$ 0.00

 

 

$ (0.00 )

 

$ 0.00

 

 

$ (0.00 )

Diluted:

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

For the periods ended December 31, 2017, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.

 

For the periods ended December 31, 2018, diluted earnings per share is calculated using net income available to common stockholders divided by the diluted weighted average number of common shares outstanding during each period determined using the treasury stock method and the if-converted method.

  

12. SUBSEQUENT EVENTS

 

Subsequent to December 31, 2018, the Company issued 527,300,000 shares of common stock for conversion of debt and accrued interest of $25,448.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

 

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

 

As used in this quarterly report and unless otherwise indicated, the terms “we”, “us”, and “our” mean AppYea, Inc., and our wholly owned subsidiaries, AppYea Holdings, Inc., a South Dakota corporation and The Diagnostic Centers, Inc., a South Dakota corporation unless otherwise indicated.

 

General Overview

 

We were incorporated in the State of South Dakota on November 26, 2012. We are engaged in the acquisition, purchase, maintenance and creation of mobile software applications.

 

We are an early stage company that was initially only engaged in the acquisition, purchase, and maintenance of mobile software applications (“apps”). Although we are still active in the mobile applications industry, we began investigating healthcare markets to augment the apps business in early 2017 and subsequently formed a wholly owned subsidiary The Diagnostic Centers, Inc. to focus on marketing certain products and services to healthcare providers.

 

On November 15, 2017, we entered into a distribution agreement with Cedar Creek Labs Series Two LLC (“LLC”) for the term of 1 year. The agreement shall be automatically extended for successive 1 year unless there is the notice to terminate. Our Company shall use best efforts to market the Products for the LLC and will receive compensation ranging from 15% to 40% of profit. Our company owns membership interests of 5% in LLC and the transactions between our company and LLC which is an equity method investee are deemed to be between related parties. The Company reviewed Cedar Creek Labs Series Two LLC financial condition at June 30, 2018 and concluded that there is a 100% impairment loss related to the Company’s investment, and recorded an impairment loss of $24,524, for the year ended June 30, 2018.

 

Our administrative office is located at 777 Main Street, Suite 600, Fort Worth, TX 76102, Telephone: (817) 887-8142. Our corporate website is www.appyea.com.

 

Our fiscal year end is June 30th. We have not been subject to any bankruptcy, receivership or similar proceeding.

 

We have two wholly owned subsidiaries, AppYea Holdings, Inc., a South Dakota corporation and The Diagnostic Centers, Inc., a South Dakota corporation.

 

 
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Results of Operations

 

Three months ended December 31, 2018 compared to three months ended December 31, 2017.

 

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2018

 

 

2017

 

Revenue

 

$ 119

 

 

$ 110

 

Operating expenses

 

$ (45,022 )

 

$ (210,770 )

Other income (expense)

 

$ 451,958

 

 

$ (326,851 )

Net income (loss)

 

$ 407,055

 

 

$ (537,511 )

 

We generated revenues of $119 for the three months ended December 31, 2018, compared to revenues of $110 for the same period in 2017.

 

Our operating expenses, for the three months ended December 31, 2018 were $45,022 compared to $210,770 for the same period in 2017. The decrease in operating expenses was primarily as a result of decrease in consulting expense.

 

Other net income, for the three months ended December 31, 2018 was $451,958 compared to other expense of $326,851 for the same period in 2017. The increase in other income was primarily related to change in fair value of derivative liabilities.

 

We incurred a net income (loss) of $407,055 and ($537,511) for the three months ended December 31, 2018 and 2017, respectively.

 

Six months ended December 31, 2018 compared to six months ended December 31, 2017.

 

 

 

Six months ended

 

 

 

December 31,

 

 

 

2018

 

 

2017

 

Revenue

 

$ 197

 

 

$ 1,044

 

Operating expenses

 

$ (89,340 )

 

$ (383,644 )

Other income (expense)

 

$ 278,622

 

 

$ (561,544 )

Net income (loss)

 

$ 189,479

 

 

$ (944,144 )

 

We generated revenues of $197 for the six months ended December 31, 2018, compared to revenues of $1,044 for the same period in 2017.

 

Our operating expenses, for the six months ended December 31, 2018 were $89,340 compared to $383,644 for the same period in 2017. The decrease in operating expenses, for 2018, was primarily as a result of decrease in consulting expenses and settlement expense that occurred in 2017.

 

Other net income, for the six months ended December 31, 2018 was $278,622 compared to other expense of $561,544 for the same period in 2017. The increase in other expenses was primarily related to change in fair value of derivative liabilities.

 

We incurred a net income of $189,479 and net loss of $944,144 for the six months ended December 31, 2018 and 2017, respectively.

 

 
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Liquidity and Capital Resources

 

The following table provides selected financial data about our company as of December 31, 2018 and June 30, 2018, respectively.

 

Working Capital

 

 

 

December 31,

 

 

June 30,

 

 

 

2018

 

 

2018

 

Cash

 

$ 2,064

 

 

$ 47,196

 

 

 

 

 

 

 

 

 

 

Current Assets

 

$ 2,064

 

 

$ 47,196

 

Current Liabilities

 

$ 1,538,959

 

 

$ 1,904,064

 

Working Capital (Deficiency)

 

$ (1,536,895 )

 

$ (1,856,868 )

 

Cash Flows

 

 

 

Six months ended

 

 

 

December 31,

 

 

 

2018

 

 

2017

 

Cash Flows Used In Operating Activities

 

$ (39,734 )

 

$ (121,159 )

Cash Flows Used In Investing Activities

 

$ -

 

 

$ (25,000 )

Cash Flows From (Used in) Financing Activities

 

$ (5,398 )

 

$ 113,679

 

Net Change In Cash During Period

 

$ (45,132 )

 

$ (32,480 )

 

As at December 31, 2018 our company’s cash balance was $2,064 and total assets were $2,864. As at June 30, 2018, our company’s cash balance was $47,196 and total assets were $54,496.

 

As at December 31, 2018, our company had total liabilities of $1,538,959, compared with total liabilities of $1,904,064 as at June 30, 2018.

 

As at December 31, 2018, our company had a working capital deficiency of $1,536,895 compared with working capital deficiency of $1,856,868 as at June 30, 2018. The decrease in working capital deficiency was primarily attributed to a decrease in derivative liabilities.

 

Cash Flow from Operating Activities

 

During the six months ended December 31, 2018, our company used $39,734 in cash from operating activities, compared to $121,159 cash used in operating activities during the six months ended December 31, 2017. During the six months ended December 31, 2018, we incurred a net income of $189,479 of which $355,325 arose from non-cash income from change in derivative valuations and $51,373 arose from non-cash expenses and we generated cash flows of $74,739 from the net increase in operating liabilities. During the six months ended December 31, 2017 we incurred a net loss of $944,144 of which $639,746 arose from non-cash expenses and we generated cash flows of $183,239 from the net increase in current liabilities.

 

Cash Flow from Investing Activities

 

During the six months ended December 31, 2018 and 2017, our company used $0 for investment in equity method investee and $25,000, respectively

 

Cash Flow from Financing Activities

 

During the six months ended December 31, 2018, our company used $5,398 in financing activities compared to $113,679 received from financing activities during the six months ended December 31, 2017. During the six months ended December 31, 2018, we received $4,196 loan from a related party and repaid $9,594 to a related party. During the six months ended December 31, 2017, we received $91,667 by way of loan under a convertible note payable, $8,333 by way of loan under a convertible note payable – related party, $200 from the issuance of our common shares, $20,050 loan from a related party and repaid $6,571 to a related party.

 

Off-Balance Sheet Arrangements

  

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, and capital expenditures or capital resources that are material to stockholders.

 

 
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Critical Accounting Policies

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with generally accepted accounting principles requires that management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

 

Financial Instruments 

 

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. FASB ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

 

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.

 

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.

 

The carrying values of cash, accounts receivable, prepaid expenses, accounts payable, and accruals approximate their fair value due to the short-term maturities of these instruments.

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

The Company’s management conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the 1934 Act) pursuant to Rule 13a-15 under the 1934 Act. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports it files or submits under the 1934 Act is recorded, processed, summarized and reported on a timely basis and that such information is communicated to management and the Company’s board of directors to allow timely decisions regarding required disclosure.

 

 
18
 
Table of Contents

  

Based on this evaluation, it has been concluded that the design and operation of our disclosure controls and procedures are not effective since the following material weaknesses exist:

 

·

Since inception our chief executive officer also functions as our chief financial officer. As a result, our officers may not be able to identify errors and irregularities in the financial statements and reports.

 

·

We were unable to maintain full segregation of duties within our financial operations due to our reliance on limited personnel in the finance function. While this control deficiency did not result in any material adjustments to our financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties.

 

·

Documentation of all proper accounting procedures is not yet complete.

 

To the extent reasonably possible given our limited resources, as financial resources become available we intend to take measures to cure the aforementioned weaknesses, including, but not limited to, the following:

 

·

Increasing the capacity of our qualified financial personnel to ensure that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
19
 
Table of Contents

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

To the best of the Company’s knowledge and belief, no legal proceedings are currently pending or threatened.

 

Item 1A. Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

 
20
 
Table of Contents

  

Item 6. Exhibits

 

Exhibit Number

 

Description

(31)

 

Rule 13a-14 (d)/15d-14d) Certifications

31.1*

 

Section 302 Certification by the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

(32)

 

Section 1350 Certifications

32.1**

 

Section 906 Certification by the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

101 *

 

Interactive Data File

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

__________ 

* Filed herewith.

** Furnished herewith.

 

 
21
 
Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

APPYEA, INC.

 

 

(Registrant)

 

 

 

Dated: February 19, 2019

 

/s/ Douglas O. McKinnon

 

 

Douglas O. McKinnon

 

 

Chief Executive Officer and Chief Financial Officer

 

 

(Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer)

 

 

 

 
22

 

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