10-Q 1 apptigo_10q-033116.htm 10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2016

 

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

 

For the transition period from ___________________ to ___________________

 

Commission File Number 000-55375

 

APPTIGO INTERNATIONAL, INC.

(Name of small business issuer in its charter)

 

NEVADA 99-0382426
(State of incorporation or organization) (IRS Identification No.)

 

1801 SW 3rd Avenue, Suite 402

Miami, FL 33129

(Address of principal executive offices)

 

(844) 277-8446

(Issuer’s telephone number)

 

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

Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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 o

 

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

 

Large Accelerated Filer o Accelerated Filer o
Non-Accelerated Filer o (Do not check if a smaller reporting company) Smaller Reporting Company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

 

As of May 23, 2016 there were 1,301,275,642 shares of the issuer’s common stock, $.001 par value, issued and outstanding.

 

 

 

 

APPTIGO INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q

 

TABLE OF CONTENTS

 

PART I   FINANCIAL INFORMATION (UNAUDITED) 3
   
ITEM 1.   FINANCIAL STATEMENTS 3
   
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13
   
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
   
ITEM 4.   CONTROLS AND PROCEDURES 15
   
PART II   OTHER INFORMATION 16
   
ITEM 1.   LEGAL PROCEEDINGS 16
   
ITEM 1A.   RISK FACTORS 16
   
ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 16
   
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES 16
   
ITEM 4.   MINE SAFETY DISCLOSURES 16
   
ITEM 5.   OTHER INFORMATION 16
   
ITEM 6.   EXHIBITS 16
   
SIGNATURES 17

 

 2 
 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

APPTIGO INTERNATIONAL, INC.

Consolidated Balance Sheets

(unaudited)  

 

   March 31,   December 31, 
   2016   2015 
Assets          
Cash  $3,470   $334,227 
Total current assets   3,470    334,227 
           
Furniture and Fixtures, net accumulated depreciation $12,055 and $10,046   44,192    46,201 
Deposits   5,592    5,592 
           
Total assets  $53,254   $386,020 
           
Liabilities and Stockholders' Deficit          
Accounts payable and accrued liabilities  $197,707   $162,157 
Payroll liabilities   159,094    142,743 
Convertible debenture - related party, net of discounts of $329,834 and $625,154   579,371    384,051 
Convertible debenture - current portion, net of discounts of $333,992 and $522,587   405,063    258,782 
Derivative liability   3,478,975    8,746,651 
Total current liabilities   4,820,210    9,694,384 
           
Convertible debenture - long term, net of discounts of $57,618 and $82,845   142,382    137,119 
Total liabilities   4,962,592    9,831,503 
           
Commitments and contingencies          
           
Stockholders' Deficit          
Preferred stock, $0.001 par value: 10,000,000 authorized 0 and 0 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively  
 		  
 		  
–		  
 		  
 		  
 		  
–		  
 
Common stock, $0.001 par value: 5,000,000,000 authorized; 1,239,428,192 and 129,487,298 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively  
 		  
 		  
1,239,428		  
 		  
 		  
 		  
129,487		  
 
Additional paid-in capital   499,471    1,398,491 
Accumulated deficit   (6,648,237)   (10,973,461)
Total stockholders' deficit   (4,909,338)   (9,445,483)
Total liability and stockholders' deficit  $53,254   $386,020 

 

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

 

 

 3 
 

 

APPTIGO INTERNATIONAL, INC.

Consolidated Statements of Operations

(unaudited)

                   

 

   For the   For the 
   three months   three months 
   ended   ended 
   March 31,   March 31, 
   2016   2015 
Revenue  $–   $– 
           
Operating expenses          
Selling, general and administrative expenses   242,355    248,257 
Research and development expense   –    33,779 
Depreciation expense   2,009    2,009 
Total operating expenses   244,364    284,045 
           
Loss from operations   (244,364)   (284,045)
Other income (expense)          
Interest expense - related party   (320,744)   (9,329)
Interest expense   (239,172)   (17,501)
Change in fair value of derivative liabilities   5,129,504    (641,598)
Income (Loss) before income tax   4,325,224    (952,473)
Provision for income tax   –    – 
Net Income (Loss)  $4,325,224   $(952,473)
           
Net income (loss) per share: basic  $0.01   $(0.03)
           
Net income (loss) per share: diluted  $(0.00)  $(0.03)
           
Weighted averages shares outstanding: basic   473,699,140    30,258,000 
           
Weighted averages shares outstanding: diluted   14,306,478,137    30,258,000 

 

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

 

 

 

 

 

 4 
 

 

APPTIGO INTERNATIONAL, INC.

Consolidated Statements of Cash Flows

(unaudited)

 

   For the   For the 
   three months   three months 
   ended   ended 
   March 31,   March 31, 
   2016   2015 
Cash flows from operating activities          
Net income (loss)  $4,325,224   $(952,473)
Adjustments to reconcile net income (loss) to net cash used in operating activities                
Depreciation   2,009    2,009 
Amortization of loan discounts   509,142    – 
Change in fair value of derivative liabilities   (5,129,504)   641,598 
Stock-based compensation   2,247    83,967 
Changes in operating assets and liabilities          
Accounts payable and accrued liabilities   –    (22,717)
Accrued interest expense   43,774    26,830 
Payroll liabilities   16,351    (3,049)
Due from related party   –    (7,618)
Net cash used in operating activities   (230,757)   (231,453)
           
Cash flow from financing activities          
Repayment of convertible debenture - related party   (100,000)   (10,000)
Proceeds from convertible debenture   –    234,000 
Net cash (used in) provided by financing activities   (100,000)   224,000 
           
Net change in cash and cash equivalents   (330,757)   (7,453)
Cash and cash equivalents at beginning of period   334,227    9,513 
Cash and cash equivalents at end of period  $3,470   $2,060 
Supplemental disclosure of cash flow information          
Cash paid during period for          
Cash paid for interest  $7,000   $– 
Cash paid for income taxes   –    – 
           
Noncash Investing and Financing Activities          
Conversion of convertible debenture and accrued interest into common stock  $70,502   $– 
Resolution of derivative liabilities   138,172    – 

 

 

 

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

 

 

 

 

 5 
 

 

APPTIGO INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Apptigo International, Inc. and its wholly-owned subsidiary (“collectively “Apptigo” or the “Company”) designs, develops, markets and intends to sell software applications. The Company intends to sell its products worldwide through online stores.

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the Company's Form 10-K for the fiscal year ended December 31, 2015. In the opinion of management, these unaudited consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of March 31, 2016, and the results of operations and cash flows for the three months ended March 31, 2016 and 2015. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the entire fiscal year. Certain prior period amounts have been reclassified to conform to current period presentation.

 

The Company’s fiscal year ends on December 31.

 

Nature of Business Operations

 

The Company was originally incorporated under the laws of the State of Nevada on October 23, 2012 under the name of “Balius Corp.” (“Inception”). Effective April 15, 2014, we acquired Apptigo Inc., a Nevada corporation incorporated on October 31, 2012 (“Apptigo”). Under the terms of the Agreement and Plan of Reorganization Agreement, dated April 14, 2014 by and between the Company, its principal shareholder, Apptigo, and its shareholders, Apptigo agreed to exchange all of the outstanding common and preferred shares of Apptigo for common and preferred shares of the Company. The closing of the acquisition transaction was completed effective April 15, 2014.

 

At closing of the acquisition transaction, Apptigo became the Company’s wholly-owned subsidiary and the Company became Apptigo’s parent. Thereafter, the principal shareholder of the Company cancelled 10,000,000 shares of the Company’s common stock owned by him. As a result of the closing of the acquisition transaction, the Company had 8,250,000 shares of common stock outstanding and 145,000 Series A Preferred Shares outstanding, which preferred shares are convertible into 4,550,000 common shares.

 

Following the acquisition transaction, the Company filed Amended and Restated Articles of Incorporation to change its name to “Apptigo International, Inc.,” increased the number of authorized common shares, authorized preferred shares, and approved a 3.5-for-1 forward split of the outstanding shares (the “Forward Split”), including the shares issued at the closing of the acquisition transaction. The Forward Split was effective at the opening of business on April 30, 2014. The effect of the Forward Split has been applied retroactively. Also, in connection with the acquisition transaction, the Company filed a Certificate of Designations, Preferences and Rights for its Series A Convertible Preferred Stock.

 

Going Concern

 

The accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. The Company has reported a net income of $4,325,224 and an operating loss of $244,364 for the three months ended March 31, 2016. The Company has a net negative working capital of $4,816,740 as of March 31, 2016. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company’s ability to obtain additional financing depends on the success of its growth strategy and its future performance, each of which is subject to general economic, financial, competitive, legislative, regulatory, and other factors beyond the Company's control.

 

Net Income (Loss) per Share

 

Basic income (loss) per share is computed using the weighted average number of common shares outstanding during the year. Diluted income (loss) per share reflects the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the “if converted” method. During 2015, all common stock equivalents were excluded as they would have been anti-dilutive. For the three months ended March 31, 2016, the dilutive effect of the outstanding warrants was 789,543,296 shares and the dilutive effect of the outstanding convertible debt was 13,516,934,841 shares and a reduction to net income of $5,093,954.

 

 6 
 

 

Fair Value of Financial Instruments

 

The Company adopted the FASB standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The recorded values of long-term debt approximate their fair values, as interest approximates market rates. As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows.

  

· Level 1: Observable inputs such as quoted prices in active markets;
   
· Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
   
· Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The application of the three levels of the fair value hierarchy under Topic 820-10-35 to our assets and liabilities are described below as of March 31, 2016 and December 31, 2015:

 

    Fair Value Measurements  
    Level 1     Level 2     Level 3     Total  
March 31, 2016:                                
Derivative liabilities   $     –     $     –     $ 3,478,975       3,478,975  
Total   $ –     $ –     $ 3,478,975       3,478,975  
December 31, 2015:                                
Derivative liabilities   $ –     $ –     $ 8,746,651       8,746,651  
Total   $ –     $ –     $ 8,746,651       8,746,651  

 

Derivative liability as of March 31, 2016 is $3,478,975, compared to $8,746,651 as of December 31, 2015.

 

The table below presents the change in the fair value of the derivative liabilities during the three months ended March 31, 2016:

 

Fair value as of December 31, 2015  $8,746,651 
Additions recognized as derivative expense   – 
Additions recognized as debt discounts   – 
Resolution upon conversion of debt   (138,172)
Change in fair value   (5,129,504)
Fair value as of March 31, 2016  $3,478,975 

 

2. CONVERTIBLE DEBENTURES

 

On November 21, 2014, the Company entered into a 10% Secured Convertible Debenture. The debenture carries a term of 15 months. The debenture was issued in the amount of $225,000. The Company has received one tranche from this convertible note in the amount of $60,000, which included $5,000 in fees and an OID of $5,000. The debenture has a conversion feature at a share price of the lower of $0.25 or 70% of the average of the three lowest closing prices in a 20 day period prior to the conversion. During the year ended, December 31, 2015 the lender converted $90,288 of the convertible note and accrued interest of $4,178 in exchange for 29,002,687 shares of common stock.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $60,000   $60,000 
Additional amount due to true-up feature   56,201    56,201 
Conversion of debt to common stock   (108,476)   (90,288)
Original issue discount        (137)
Discount – warrant        (2,345)
Discount – derivative        (19,026)
Convertible debenture, net of unamortized discount  $7,725   $4,405 

 

 7 
 

 

On December 2, 2014, the Company entered into a 7% Secured Convertible Debenture. The debenture carries a three year term. The debenture was issued in the amount of $200,000. As of December 31, 2014 the Company had received $100,000, with the remaining $100,000 received on January 7, 2015. The conversion price of the outstanding balance is the lower of $0.15 or 60% of the 30 day trading average.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $200,000   $100,000 
Additional amount received        100,000 
Discount – derivative   (57,618)   (66,226)
Convertible debenture, net of unamortized discount  $142,382   $133,774 

 

On February 9, 2015, the Company executed a $59,000 Convertible Promissory Note. The note has an 8% interest rate and a term of nine months. The conversion price for the amount to be converted of 58% of the average of the three lowest trading price for the previous 10 days at date of conversion. During the year ended December 31, 2015, the lender converted $30,340 of the convertible debt for 33,949,803 shares of common stock. There was an additional interest accrued as a default on the note in the amount of $29,500.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $59,000   $59,000 
Conversion of debt to common stock   (35,920)   (30,340)
Convertible debenture, net of unamortized discount  $23,080   $28,660 

 

On March 4, 2015, the Company executed a $50,000 Convertible Promissory Note. The note has a 12% interest rate and a term of six months. Conversion of the note is based on a comparison between the lesser of two variable conversion prices. The conversion price of the outstanding balance is the lower of 55% of the lowest trading price for the previous 20 days at date of conversion or 55% of the lowest trading price for the previous 20 days before the effective date of the note. During the year ended December 31, 2015, the Company converted $8,204 of the convertible debt for 21,394,225 shares of common stock.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $50,000   $50,000 
Conversion of debt to common stock   (19,979)   (8,204)
Convertible debenture, net of unamortized discount  $30,021   $41,796 

 

On March 25, 2015, the Company executed and sold a $250,000 Convertible Promissory Note. The note has a one-time 12% interest rate and a term of one year. The Company received $25,000 along with an original issue discount of $2,778 upon closing of the transaction. The conversion price of the outstanding balance is the lower of $0.087 or 60% of the lowest trading price for the previous 25 days prior to conversion. During the year ended December 31, 2015, the Company converted $7,814 of the convertible debt for 12,021,000 share of common stock.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $27,778   $27,778 
Conversion of debt to common stock   (27,054)   (7,814)
Original issue discount   (36)   (1,229)
Discount – derivative   (445)   (15,390)
Convertible debenture, net of unamortized discount  $243   $3,345 

 

On May 20, 2015, the Company executed a $31,500 Convertible Promissory Note. The note has an 8% interest rate and a term of one year. The Company received $30,000 upon closing of the transaction with $1,500 paid to the lender for legal fees. The conversion price of the outstanding balance is the 55% of the lowest trading price for the previous 18 days at date of conversion.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $31,500   $31,500 
Conversion of debt to common stock   (4,725)   – 
Discount   (174)   (578)
Discount – derivative   (3,483)   (11,557)
Convertible debenture, net of unamortized discount  $23,118   $19,365 

 

 8 
 

 

On May 21, 2015, the Company executed a $55,000 Convertible Promissory Note. The note has a 10% interest rate and a term of nine months. The Company received $49,250 upon closing of the transaction with $5,750 paid to the lender for legal and service fees. The conversion price of the outstanding balance is 50% of the average of the two lowest trading price for the previous 25 days at date of conversion.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $55,000   $55,000 
Conversions   (1,707)   – 
Discount   –    (1,083)
Conversion of debt to common stock   –    (9,279)
Convertible debenture, net of unamortized discount  $53,293   $44,638 

 

On May 22, 2015, the Company executed a $55,000 Convertible Promissory Note. The note has an 8% interest rate and a term of one year. The note includes an original issue discount of $5,000 and the Company paid $5,000 in legal fees to the lender upon execution of this loan. The conversion price of the outstanding balance is 50% of the average of the three lowest trading price for the previous 20 days at date of conversion.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $55,000   $55,000 
Conversions   (1,063)   – 
Original issue discount   (1,393)   (1,954)
Discount   –    (1,953)
Conversion of debt to common stock   (6,270)   (17,582)
Convertible debenture, net of unamortized discount  $46,274   $33,511 

 

On June 3, 2015, the Company executed a $43,500 Convertible Promissory Note. The note has an 8% interest rate and a term of nine months. As consideration for entering into this transaction, the Company granted 543,750 warrants to the lender. See Note 5. The conversion price of the outstanding balance is 51% of the average of the three lowest trading price for the previous 15 days at date of conversion.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $43,500   $43,500 
Discount – warrants   –    (9,072)
Discount - derivative   –    (1,172)
Convertible debenture, net of unamortized discount  $43,500   $33,256 

 

On August 10, 2015, the Company executed a $809,235 Convertible Debenture with a related party in exchange for 145,000 shares of Preferred Stock held by the related party lender. The note has a 10% interest rate and a term of one year. The conversion price of the outstanding balance is 45% of the lowest trading price for the previous 10 days at date of conversion.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $809,205   $809,205 
Discount - derivative   (278,802)   (485,070)
Convertible debenture, net of unamortized discount  $530,403   $324,135 

 

On August 10, 2015, the Company entered into a $50,000 Convertible Debenture with a related party. The note has a 10% interest rate and a term of one year. Additionally, the Company entered into three additional notes, each for principal of $50,000, consisting of two notes in September and one in October, with the same party and under the same terms as the note on August 10, 2015. The conversion price of the outstanding balance is 40% of the lowest trading price for the previous 10 days at date of conversion. A portion of the proceeds were used to repay in full the note dated December 18, 2014.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $200,000   $200,000 
Repayments   (100,000)   – 
Discount - derivative   (51,032)   (140,084)
Convertible debenture, net of unamortized discount  $48,968   $59,916 

 

 9 
 

 

On November 18, 2015, the Company entered into a 10% Secured Convertible Debenture. The debenture carries a one year term. The debenture was issued in the amount of $200,000. The conversion price of the outstanding balance is 50% of the lowest closing price in a 10 day period prior to conversion.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $200,000   $200,000 
Discount - derivative   (126,575)   (176,438)
Convertible debenture, net of unamortized discount  $73,425   $23,562 

 

On November 25, 2015, the Company executed a $300,000 Convertible Debenture. The note has a 10% interest rate and a term of one year. The conversion price of the outstanding balance is 50% of the lowest trading price for the previous 10 days at date of conversion.

 

   March 31, 2016   December 31, 2015 
Convertible debenture  $300,000   $300,000 
Discount - derivative   (195,616)   (270,411)
Convertible debenture, net of unamortized discount  $104,384   $29,589 

 

3. DERIVATIVE LIABILITIES

   

Due to the variable conversion prices in the convertible notes described above, the Company treats the convertible debenture and outstanding warrants as derivative liabilities in accordance with the provisions of ASC 815 “Derivatives and Hedging” (ASC 815). ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that potentially settle in an entity’s own common stock.

 

The Company assesses the fair value of the convertible debentures and warrants using the Black Scholes pricing model and records a derivative liability for the value. The Company then assesses the fair value quarterly based on the Black Scholes Model and increases or decreases the liability to the new value, and records a corresponding gain or loss. The Company uses expected volatility based primarily on historical volatility using weekly pricing observations for recent periods that correspond to the expected life of the instruments. The risk-free interest rate is based on U.S. Treasury securities rates.

 

The following table describes the significant assumptions used in the Black Scholes pricing model:

 

    March 31, 2016     December 31, 2015  
Risk-free interest rate at grant date     .21 - .87 %       .08 - .65%  
Expected stock price volatility     307 - 527%       218 - 465%  
Expected dividend payout     –       –  
Expected option in life-years     .1 - 3.7       .1 - .65  

 

The table below presents the change in the fair value of the derivative liabilities during the three months ended March 31, 2016:

 

Fair value as of December 31, 2015  $8,746,651 
Additions recognized as derivative expense     
Additions recognized as debt discounts     
Resolution upon conversion of debt   (138,172)
Change in fair value   (5,129,504)
Fair value as of March 31, 2016  $3,478,975 

  

4. WARRANTS AND OPTIONS

 

As of March 31, 2016, these warrants include the following:

 

Warrants granted on November 21, 2014 in connection with the 12% convertible debenture, the right to purchase up to 282,575 shares of the Company’s common stock with an original exercise price of $0.0005. The warrants carry a provision for the adjustment based on the terms of the contract, wherein the number of warrants is adjusted to equal $30,000. As a result of this provision, the lender has the right to purchase up to 428,571,429 shares of the Company’s common stock as of March 31, 2016. A derivative liability on the fair value of the warrants as of March 31, 2016 amounted to $42,847. Fair value was determined using the following variables:

 

   Grant Date   March 31, 2016 
Risk-free interest rate at grant date   1.63%    0.73% 
Expected stock price volatility   139%    377% 
Expected dividend payout   –    – 
Expected option in life-years   5    2.21 

 

 10 
 

 

The following table summarizes the warrant activity during the three months ended March 31, 2016:

 

   Number of
Warrants		   Weighted-Average
Price Per Share		 
Outstanding at December 31, 2015   129,115,179   $.0001 
Granted   –      
Adjusted for variable conversion   300,000,000    – 
Canceled or expired   –    – 
Outstanding at March 31, 2016   429,115,179   $.0006 

 

On June 17, 2014, the Company granted 550,000 options to six employees for services. As of March 31, 2015, an additional 20,000 options have been vested for a total of 410,000 options vested. No options have been exercised and 140,000 options have been canceled due to termination of service contracts. Stock based compensation for the three months ended March 31, 2016 and 2015, amounted to $2,247 and $0, respectively.

 

The following table summarizes the option activity through March 31, 2016:

 

   Number of
Options		  

Option Price

Per Share

 
Outstanding at December 31, 2015   410,000   $1.00 
Granted        – 
Canceled or expired          
Outstanding at March 31, 2016   410,000   $1.00 

 

5. EQUITY

 

Common Stock

 

The Company was formed in the state of Nevada on October 31, 2012. The Company had authorized capital of 75,000 shares of common stock with a par value of $0.01. On April 17, 2014, the Company filed Amended and Restated Articles of Incorporation with the state of Nevada, increasing its authorized shares from 75,000,000 to 100,000,000 shares of common stock.

 

On April 14, 2014, the Company, entered into an a reverse acquisition transaction with Apptigo Inc., a Nevada corporation incorporated on October 31, 2012, and its shareholders, pursuant to an Agreement and Plan of Reorganization Agreement, dated April 14, 2014 between the Company, its principal shareholder, and Apptigo and its shareholders. Under the terms of the Agreement the shareholders of Apptigo agreed to exchange all of the outstanding common and preferred shares of Apptigo for common and preferred shares of the Company. The closing of the Transaction was completed effective April 15, 2014 (the “Closing Date”).

 

A 3.5-for-1 forward stock split of the Company’s outstanding common shares became effective at the open of business on April 30, 2014. As a result of the forward stock split, the number of outstanding shares of common stock was increased from 8,250,000 to 29,225,000, and the 145,000 outstanding shares of Series A Convertible Preferred Stock will be convertible into 15,925,000 rather than 4,550,000 in the event of conversion.

 

On October 6, 2015, the Company filed with the Secretary of State of the State of Nevada an Amendment to Articles of Incorporation to increase the authorized shares of Common Stock of the Company. The Amendment authorizes the Company to issue 2,000,000,000 shares of Common Stock, par value $0.001 per share, and 10,000,000 shares of Preferred Stock. The Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title, prior to the issuance of any shares thereof.

 

On January 6, 2016, the Company filed with the Secretary of State of the State of Nevada an Amendment to Articles of Incorporation to increase the authorized shares of Common Stock of the Company. The Amendment authorizes the Company to issue 5,000,000,000 shares of Common Stock, par value $0.001 per share, and 10,000,000 shares of Preferred Stock. The Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title, prior to the issuance of any shares thereof.

 

2016

 

During the three months ended March 31, 2016, the Company issued 1,109,940,894 shares of common stock for the conversion of debt in the amount of $70,502, consisting of principal of $62,278 and accrued interest of $8,224.

 

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6. RELATED PARTY TRANSACTIONS

  

Between August and October 2015, the Company entered into four separate 10% Secured Convertible Debentures with a related party. During the three months ended March 31, 2016, the Company repaid two of these notes in full (see Note 2).

 

The Company entered into an Exchange Agreement on August 10, 2015. Under the terms of the Exchange Agreement the Holder, who was the owner of a 145,000 shares of the Company’s Series A Convertible Preferred stock, exchanged the Preferred Shares for a 10% Convertible Debenture in the amount of $809,205. See Note 2.

 

The remaining balance on these notes, net of unamortized discount, is $579,371 as of March 31, 2016.

 

7. SUBSEQUENT EVENTS

 

During April 2016, the Company entered into a 10% Secured Convertible Debenture in the amount of $30,000 with a related party. The term of the note is 6 months. The conversion price of the outstanding balance is 40% of the lowest trading price for the previous 10 days at date of conversion.

 

On May 18, 2016, the Company entered into a 10% Secured Convertible Debenture in the amount of $2,500 with a related party. The term of the note is 6 months. The conversion price of the outstanding balance is 20% of the lowest trading price for the previous 10 days at date of conversion

 

On May 16, 2016, the Company issued 61,847,450 shares of common stock for the conversion of debt in the amount of $1,237 consisting of accrued interest in the amount of $1,237.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Certain statements in this Management's Discussion and Analysis (“MD&A”), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “would” “expect” "intend,” “could,” “estimate,” “should,” “anticipate,” or “believe,” and similar expressions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.  

 

The following MD&A is intended to help readers understand the results of our operation and financial condition, and is provided as a supplement to, and should be read in conjunction with, our Interim Unaudited Financial Statements and the accompanying Notes to Interim Unaudited Financial Statements under Part 1, Item 1 of this Quarterly Report on Form 10-Q.

 

Growth and percentage comparisons made herein generally refer to the three months ended March 31, 2016 compared with the three months ended March 31, 2015 unless otherwise noted. Unless otherwise indicated or unless the context otherwise requires, all references in this document to “we,” “us,” “our” the “Company,” and similar expressions refer to Apptigo International, Inc., and depending on the context, its wholly-owned subsidiary.

 

Overview

 

Apptigo International, Inc.

 

We were initially incorporated in the State of Nevada on October 23, 2012 as Balius Corp. On April 14, 2014, Balius Corp. entered into a reverse acquisition transaction (the “Transaction”) with Apptigo, Inc., a Nevada corporation, and its shareholders, pursuant to an agreement and plan of reorganization agreement dated April 14, 2014 by between the Company, its principal shareholders, Apptigo and its shareholders. Under the terms of the Agreement the shareholders of Apptigo agreed to exchange all the outstanding common and preferred shares of Apptigo for common and preferred shares of the Company.

 

In connection with the closing of the Transaction, we ceased our principal business operations, terminated our sole lease, and liquidated our assets associated with these former business operations. As a result of the Transaction, we acquired Apptigo (which is now our wholly-owned subsidiary) and we became a media company focused on designing, developing and bringing to market mobile applications.

 

Apptigo, Inc.

 

Apptigo was incorporated in the State of Nevada on October 31, 2012, and commenced its operations in 2012. In connection with the closing of the Transaction, the Company filed Amended and Restated Articles of Incorporation and changed the name of the Company from Balius Corp. to Apptigo International, Inc. All references to business of the Company after the Closing of the Transaction shall refer to Apptigo International, Inc. and Apptigo Inc., collectively.

 

General

 

We are a media company focused on designing, developing and bringing to market mobile applications. The first application developed by Apptigo was SCORE, which management introduced to market in October 2014. SCORE is an interactive dating game that allows people to determine their compatibility through answering online questions. Users of the application can choose to invite anyone to play by:

 

· Entering a queue that shows other active players and sending invitations through the queue;
· Using the interactive map that shows pins of all the people who are available to play in a specific geographic region; and
· Inviting friends through email, phone number or social media contact lists.

 

SCORE has over 800 questions in 20 different categories. From “True or False” to “Have You Ever...,” the categories are intended to span all areas of interest. Once a play is fully completed, users can generate a percentage-based score derived from how many questions they answered the same way. Moments after receiving this score, users have access to a five second viewing of the other’s profile picture, which then fades to a screen giving them options to chat, play SCORE again, save the SCORE or quit. SCORE has been designed exclusively for use on smart mobile devices and utilized in both the Apple iOS platform And Google Play Store for Android.

 

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We believe that SCORE’s approach to matchmaking is not only novel and capable of creating a social-fueled movement, but will also prove to be fun and effective for users. Generally, there are three primary paths to monetizing applications: premium model, freemium model, and ad network model. They are defined as follows:

 

·

Premium Model - Using an upfront download fee, this is the most straightforward and obvious way to monetize a mobile application.

   
·

Freemium Model - The application is a free download and contains content for purchase inside the application (aka in-app purchases) or an upgrade option to a premium version.

   
· Ad Networks - The application and all its content can be completely free and still generate revenue through advertising.

 

We have decided to market SCORE via a freemium model, providing for the SCORE application to be downloadable by users at no charge through application stores, including Google Play, the Apple App Store, and iTunes, among others. We intend initially to generate revenues by offering our users in-app purchases of special features and package upgrades. Thereafter, assuming we have succeeded in building notable brand equity and a significant user base, we will then seek corporate event sponsors and/or national advertisers to further enhance our revenue and earnings growth.

 

Currently, in-app purchases built into the SCORE platform include:

 

· Categories of Score questions for purchase.
· The ability to purchase the entire app for one flat fee.
· The ability to buy categories in bulk rather than individually.
· The ability in the future to enable a multi-player function. 
· The ability in the future to purchase emoticons and gifts to send to others.

 

Features of the app include:

 

· Map view of available players
· Chat
· Anonymous play
· Score queue list view of available players

 

Results of Operations - Three Month Period Ended March 31, 2016 Compared to Three month Period Ended March 31, 2015

 

Selling, General and Administrative Expenses

 

During the three months ended March 31, 2016, we incurred $242,355 in general and administrative expenses compared to $248,257 in general and administrative expenses incurred during the three months ended March 31, 2015. General and administrative and professional fee expenses incurred were generally related to corporate overhead, financial and administrative contracted services, such as legal and accounting, developmental costs, and marketing expenses.  

 

Research and Development Costs

 

Research and development costs for the three months ended March 31, 2016 was $0 compared to $33,779 for the three months ended March 31, 2015. The company expenses costs associated with the planning and development of application programs.

 

Depreciation

 

Depreciation expense for the three months ended March 31, 2016 and 2015 totaled $2,009 and $2,009, respectively.

 

Change in fair value of derivative liabilities

 

Change in the fair value of derivative liabilities for the three months ended March 31, 2016 and 2015 totaled s gain of $5,129,504 and a loss of $641,598, respectively. The derivate liability is in relation to convertible debentures, see Note 3.

 

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Interest Expense

 

Interest expense for the three months ended March 31, 2016 and 2015, was $239,172 and $17,501, respectively. The interest expense was related to convertible debentures.

 

Interest expense related party for the three months ended March 31, 2016 and 2015, was $320,744 and $9,329 respectively. The interest expense was related to note payables from a significant shareholder.

 

Net Income (Loss)

 

For the reasons stated above, our net income for the three months ended March 31, 2016 was $4,325,224 or $0.01 per share compared to a net loss of $952,473 or ($0.03) per share, during the three months ended March 31, 2015.  Operating loss for the three months ended March 31, 2016 and 2015 amounted to $244,364 and $284,048, respectively. The significant change is directly related to the change in fair value of derivative liability.

 

Liquidity and Capital Resources

 

As of March 31, 2015, we had cash of $3,470 and net negative working capital of $4,816,740. The accompanying financial statements have been prepared contemplating a continuation of the Company as a going concern. We anticipate that over the next 12 months we will require a minimum of $1-2 million to meet our cash flow requirements and accomplish our current business plan, including the re-launching and advertising of one or more of the Facebook games acquired in August 2014 and launching and advertising new games we are currently creating.

 

We intend to seek this additional funding from the sale of equity interests but have not determined the specific terms of any such offering. We currently have no agreements or arrangements in place for such financing. If we are unable to secure additional funding, we may be required to reduce our advertising plans or reduce the number of applications we develop or launch.

 

The accompanying financial statements have been prepared contemplating our continuation as a going concern. We reported a net income for the three months ended March 31, 2016 was $4,325,224 compared to a net loss of $952,473, during the three months ended March 31, 2015.  Operating loss for the three months ended March 31, 2016 and 2015 amounted to $244,364 and $284,048, respectively for the three months ended March 31, 2015 and had an accumulated deficit of $6,648,237.

 

We have not generated positive cash flows from operating activities. The primary source of capital has been from the sale of equity securities. During the three months ended March 31, 2016, our primary use of capital was for the development and testing of the SCORE mobile application, professional fees, and general and administrative costs. Our working capital requirements are expected to increase in line with the growth of our business.

 

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, capital expenditures or capital resources.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item. 

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of disclosure controls and procedures

 

Our management, with the participation of our Chief Executive Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and principal financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in internal control over financial reporting

 

There has been no change in our internal control over financial reporting, as defined in Rules 15d-15(f) of the Exchange Act, during our most recent fiscal quarter ended March 31, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

ITEM 1.  LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  We are not currently aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.

 

ITEM 1A.  RISK FACTORS

 

As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item. 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

  

On April 14, 2016, the Company entered into a 10% Secured Convertible Debenture in the amount of $30,000 with a related party. The term of the note is 6 months. The conversion price of the outstanding balance is 40% of the lowest trading price for the previous 10 days at date of conversion. This issuance was completed in accordance with Section 4(2) of the Securities Act of 1933, as amendment (the “Securities Act”) in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend. The foregoing description of this 10% Secured Convertible Debenture does not purport to be complete, and is qualified in its entirety by reference to the full text of the 10% Secured Convertible Debenture, which is filed as Exhibit 10.1 to this Form 10-Q and is incorporated herein by reference.

 

On May 18, 2016, the Company entered into a 10% Secured Convertible Debenture in the amount of $2,500 with a related party. The term of the note is 6 months. The conversion price of the outstanding balance is 20% of the lowest trading price for the previous 10 days at date of conversion. This issuance was completed in accordance with Section 4(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend. The foregoing description of this 10% Secured Convertible Debenture does not purport to be complete, and is qualified in its entirety by reference to the full text of the 10% Secured Convertible Debenture, which is filed as Exhibit 10.2 to this Form 10-Q and is incorporated herein by reference.

 

On May 16, 2016, the Company issued 61,847,450 shares of common stock for the conversion of debt in the amount of $1,237 consisting of accrued interest in the amount of $1,237. This issuance was completed in accordance with Section 3(a)(9) of the Securities Act, in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend.

 

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.  MINE SAFETY DISCLSOURES

 

Not Applicable.

 

ITEM 5.  OTHER INFORMATION

 

None.

 

ITEM 6.  EXHIBITS

 

Exhibit No.   Description
10.1*   Form of 10% Secured Convertible Debenture issued to The Vantage Group, Ltd., dated April 14, 2016.
10.2*   Form of 10% Secured Convertible Debenture issued to The Vantage Group, Ltd., dated May 18, 2016.
31.1   Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)
31.2   Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)
32.1   Certification of Principal Executive and Financial Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  APPTIGO INTERNATIONAL, INC.
     
     
Date: May 23, 2016 By /s/ Casey Cordes
    Casey Cordes, Chief Executive Officer
    (Principal Executive Officer)
     
Date: May 23, 2016 By /s/ David Steinberg
    David Steinberg, Treasurer
    (Principal Financial Officer)

 

 

 

 

 

 

 

 

 

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