0001493152-23-028358.txt : 20230814 0001493152-23-028358.hdr.sgml : 20230814 20230814154351 ACCESSION NUMBER: 0001493152-23-028358 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 49 CONFORMED PERIOD OF REPORT: 20230630 FILED AS OF DATE: 20230814 DATE AS OF CHANGE: 20230814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPYEA, INC CENTRAL INDEX KEY: 0001568969 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 461496846 STATE OF INCORPORATION: SD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55403 FILM NUMBER: 231169281 BUSINESS ADDRESS: STREET 1: 777 MAIN STREET STREET 2: SUITE 600 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: (800) 674-3561 MAIL ADDRESS: STREET 1: 777 MAIN STREET STREET 2: SUITE 600 CITY: FORT WORTH STATE: TX ZIP: 76102 10-Q 1 form10-q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

MARK ONE

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

for the Quarterly Period ended June 30, 2023; or

 

Transition Report Pursuant to 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)

 

Nevada   46-1496846
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

16 Natan Alterman St, Gan Yavne, Israel    
(Address of principal executive offices)   Zip Code

 

(800) 674-3561

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

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. Yes ☒ No ☐

 

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 ☒ 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
    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 ☐ No

 

As of August 14, 2023, there were outstanding 240,321,157 shares of the registrant’s common stock, par value $0.0001 per share.

 

 

 

 

 

 

APPYEA, INC.

Form 10-Q

June 30 June 30, 2023

 

  Page
   
PART I — FINANCIAL INFORMATION  
   
Item 1 – Unaudited Condensed Consolidated Financial Statements  
   
Condensed Consolidated Balance Sheets – June 30, 2023 (unaudited) and December 31, 2022 3
   
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (unaudited) 4
   
Condensed Consolidated Statement of Changes in Stockholders’ Equity (deficit) for the three and six months ended June 30, 2023 and 2022 (unaudited) 5-6
   
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited) 7
   
Notes to Unaudited Condensed Consolidated Financial Statements 8-17
   
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
   
Item 3 – Quantitative and Qualitative Disclosures About Market Risk 23
   
Item 4 – Controls and Procedures 24
   
PART II — OTHER INFORMATION 24
   
Item 1 – Legal Proceedings 24
   
Item 1A – Risk Factors 24
   
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds 24
   
Item 3 – Defaults upon Senior Securities 24
   
Item 4 – Mine Safety Disclosures 25
   
Item 5 – Other Information 25
   
Item 6 – Exhibits 25
   
Exhibit Index 25
   
SIGNATURES 26

 

2

 

 

APPYEA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

 

   June 30,   December 31, 
   2023   2022 
   Unaudited   Audited 
ASSETS          
Current assets          
Cash and cash equivalents   47    60 
Other accounts receivables   43    19 
           
Total current assets   90    79 
           
Non-current assets          
Property and equipment, net   1    2 
Intangible assets, net   113    124 
Total non-current assets   114    126 
           
Total assets   204    205 
           

LIABILITIES AND DEFICIENCY

          
Current liabilities          
Trade payables   38    67 
Other accounts payable and related party payables   511    340 
Short-term loans from related party   79    80 
Convertible loans from related party   38    36 
Convertible Short-term loans at fair value   233    693 
Convertible loans at fair value   1,416    1,528 
Warrants liability   231    24 
           
Total liabilities   2,546    2,768 
           
DEFICIENCY          
AppYea Inc. Stockholders’ Deficiency:          
Convertible preferred stock, $0.0001 par value   -    - 
Common stock, $0.0001 par value   22    21 
Stock Payables   74    27 
Additional Paid in Capital   2,716    1,912 
Accumulated deficit   (5,140)   (4,509)
Total AppYea Inc. stockholders’ deficiency   (2,328)   (2,549)
Non-controlling interests   (14)   (14)
           
Total Deficiency   (2,342)   (2,563)
           
Total liabilities and deficiency   204    205 

 

3
 

 

APPYEA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands)

 

   2023   2022       2022 
   For the period of three months ended June 30,   For the period of six months ended June 30, 
   2023   2022   2023   2022 
   Unaudited   Unaudited 
                 
Research and development expenses   7    17    16    42 
Sales and marketing   2    3    2    1 1 
General and administrative expenses   440    632    867    1,079 
                     
Operating loss   (449)   (652)   (885)   (1,132)
                     
Change in fair value of convertible loans and warrant liability   95    (125)   261    1,123 
Financial income (expenses), net   12    (30)   (7)   (46)
Loss before income tax benefit   (342)   (807)   (631)   (55)
                     
Income tax benefit   -    -    -    - 
                     
Net loss   (342)   (807)   (631)   (55)
                     
Net Loss attributable to AppYea Inc.   (342)   (807)   (631)   (55)
                     
Loss per Common Share                    
                     
Basic   0    (0.003)   0    0 
Diluted   0    (0.003)   0    0 
                     

Weighted Average number of Common Shares Outstanding basic and diluted

   234,943,286    219,074,483    230,272,456    218,660,405 

 

4
 

 

APPYEA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIENCY

(U.S. dollars in thousands except share data)

 

   Number   Amount   Number   Amount   Payables   Capital   Deficit   Total   interests   Deficiency 
   Preferred Stock   Common Stock   Stock   Additional Paid in   Accumulated      Non-controlling   Total 
   Number   Amount   Number   Amount   Payables   Capital   Deficit   Total   interests   Deficiency 
                      Unaudited                 
Balance as of January 1, 2023   300,000    -    220,930,798    21    27    1,912    (4,509)   (2,549)   (14)   (2,563)
                                                   
Share issuance upon conversion of Convertible notes   -    -    19,390,359    1    -    242    -    243    -    243 
Stock payables   -    -    -    -    47    -    -    47    -    47 
Share based compensation   -    -    -    -    -    562    -    562    -    562 
Net loss   -    -    -    -    -    -    (631)   (631)   -    (631)
                                                   
Balance as of June 30, 2023   300,000    -    240,321,157    22    74    2,716    (5,140)   (2,328)   (14)   (2,342)

 

   Preferred Stock   Common Stock   Stock   Additional Paid in   Accumulated      Non-controlling   Total 
   Number   Amount   Number   Amount   Payables   Capital   Deficit   Total   interests   Deficiency 
                      Unaudited                 
Balance as of January 1, 2022   300,000    -    218,246,326    21    -     768    (3,205)   (2,416)   (14)   (2,430)
                                                   
Issuance of shares to service providers   -    -    2,484,472    -    -     80    -    80    -    80 
Stock payables   -    -    -    -    28         -    28    -    28 
Share based compensation   -    -    -    -    -     508    -    508    -    508 
Net loss   -    -    -    -    -     -    (55)   (55)   -    (55)
                                                  

 

 

Balance as of June 30, 2022   300,000    -    220,730,798    21    28    1,356    (3,260)   (1,855)   (14)   (1869)

 

5
 

 

APPYEA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIENCY

(U.S. dollars in thousands except share data)

 

   Preferred Stock   Common Stock   Stock   Additional Paid in   Accumulated      Non-controlling   Total 
   Number   Amount   Number   Amount   Payables   Capital   Deficit   Total   interests   Deficiency 
                      Unaudited                 
Balance as of April 1, 2023   300,000    -    229,565,414    22    28    2,351    (4,798)   (2,397)   (14)   (2,411)
                                                   
Share issuance upon conversion of Convertible notes   -    -    10,755,743    -    -     83    -    83    -    83 
Stock payables   -    -    -    -    46         -    46    -    46 
Share based compensation   -    -    -    -    -     282    -    282    -    282 
Net loss   -    -    -    -    -     -    (342)   (342)   -    (342)
                                                   
Balance as of June 30, 2023   300,000    -    240,321,157    22    74    2,716    (5,140)   (2,328)   (14)   (2,342)

 

   Preferred Stock   Common Stock   Stock   Additional Paid in   Accumulated      Non-controlling   Total 
   Number   Amount   Number   Amount   Payables   Capital   Deficit   Total   interests   Deficiency 
                      Unaudited                 
Balance as of April 1, 2022   300,000         218,246,326    21    -    1,020    (2,453)   (1,412)   (14)   (1,426)
                                                   
Issuance of shares to service providers   -    -    2,484,472    -    -     80    -    80    -    80 
Stock payables   -    -    -    -    28         -    28    -    28 
Share based compensation   -    -    -    -    -     256    -    256    -    256 
Net loss   -    -    -    -    -     -    (807)   (807)   -    (807)
                                                   
Balance as of June 30, 2022   300,000    -    220,730,798    21    28    1,356    (3,260)   (1,855)   (14)   (1869)

 

6
 

 

APPYEA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

 

   2023   2022 
   For The six Months Ended 
   June 30, 
   2023   2022 
   Unaudited 
Cash flows from operating activities:          
Net loss   (631)   (55)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   12    12 
Share based compensation   570    603 
Change in fair value of convertible loans and warrant liability and financial expenses   (261)   (1,077)
Changes in operating assets and liabilities:          
Other current assets   (24)   (9)
Accounts payable   76    124 
Accounts payables – related party   66    - 
           
Net cash used in operating activities   (192)   (402)
           
Cash flows from financing activities:          
Proceeds on account of Stock Payables   40    13 
Proceeds from convertible Note received less issuance expenses   141    368 
Issuance of warrants measured at FV   -    9 
           
Net cash provided by financing activities   181    390 
           
Effect of foreign exchange on cash and cash equivalents   2    (5)
Change in cash and cash equivalents   (9)   (17)
Cash and cash equivalents at beginning of period   60    206 
           
Cash and cash equivalents at end of period   51    189 

 

7
 

 

APPYEA INC.

NOTES TO THE FINANCIAL STATEMENTS

 

NOTE 1 - GENERAL

 

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 no operating history. On November 1, 2021 the Company was redomiciled in the State of Nevada.

 

The Company’s common stock is traded on the OTC Markets, pink tier, under the symbol “APYP”.

 

Reverse merger

 

In anticipation of the reverse merger described below, on July 2, 2021, Boris Molchadsky a majority shareholder of the Company, acquired in a private transaction from the former majority shareholder two hundred and twenty-five thousand (225,000) Shares of Series A Preferred Stock of the Company. The Series A Preferred Shares have the right to vote at 1,000 to 1 as shares of common stock and are convertible at a rate of 1,500 to 1 as shares of common stock of the Company. The acquisition of the Preferred Shares provided Boris Molchadsky control of a majority of the Company’s voting equity capital.

 

On August 2, 2021, the Company entered into a stock exchange agreement with SleepX Ltd., a company formed under the laws of the State of Israel (“SleepX”) and controlled by the majority shareholder of AppYea, Pursuant to the agreement, the outstanding equity capital consisting of 1,724 common shares of SleepX was exchanged for 174,595,634 shares of common stock of the Company, based on the agreement that determined that to SleepX shareholders will be issued common shares in the amount that will result in them holding 80% of the common shares issued of AppYea. As a result, SleepX became a wholly owned subsidiary of the Company. On December 31, 2021, the terms of the agreement were fulfilled; however, the issuance of the shares to SleepX shareholders, due to administrative matters, was completed in March 2022 after the Company completed a reverse stock split. The shares that were issued are represented in the 2021 financial statements.

 

As of the result of the transactions mentioned above, Mr. Molchadsky controls approximately 71.4% of the total voting power of AppYea as of June 30, 2023 .

 

SleepX is an Israeli research and development company that has developed a unique product for monitoring and treating sleep apnea and snoring. The technology is protected by several international patents and, subject to raising working capital, of which no assurance can be provided, the Company plans to start serial production in Q4 2023. The Company will focus on further development and commercialization of the products. Its strategy will include continued investment in research and development and new initiatives in sales and marketing.

 

SleepX has incorporated, together with an unrelated third party, a privately held company under the laws of the State of Israel named Ta-nooma Ltd. (“Ta-nooma”). Ta-nooma has developed sleeping monitoring technology for which patent applications were filed and has no revenue from operation. Since its incorporation and as of the financial statements date, SleepX holds 66.7% of the voting interest of Ta-nooma.

 

In addition to SleepX, the Company has four wholly owned subsidiaries with no active operations.

 

8
 

 

APPYEA INC.

NOTES TO THE FINANCIAL STATEMENTS

 

NOTE 1 - GENERAL (cont.)

 

Financial position

 

The financial statements are presented on a going concern basis. The Company has not yet generated any material revenues, has suffered recurring losses from operations and is dependent upon external sources for financing its operations. As of June 30, 2023, and December 31, 2022, the Company has a stockholders’ deficiency of $2,328,000 and $2,549,000, respectively. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The Company intends to continue to finance its operating activities by raising capital. There are no assurances that the Company will be successful in obtaining an adequate level of financing needed for its long-term research and development activities on commercially reasonable terms or at all. If the Company will not have sufficient liquidity resources, the Company may not be able to continue the development of its product candidates or may be required to implement cost reduction measures and may be required to delay part of its development programs.

 

The financial statements do not include any adjustments for the values of assets and liabilities and their classification may be necessary in the event that the Company is no longer able to continue its operations as a “going concern”.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

The interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The interim financial statements do not include a full disclosure as required in annual financial statements and should be read with the annual financial statements of the Company as of December 31, 2022. The accounting policies implemented in the interim financial statements is consistent with the accounting policies implemented in the annual financial statements as of December 31, 2022, except of the following accounting pronouncement adopted by the company.

 

Recently Issued Accounting Pronouncements

 

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), which is intended to address issues identified as a result of the complexity associated.

 

9
 

 

APPYEA INC.

NOTES TO THE FINANCIAL STATEMENTS

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stocks, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance on the basis of feedback from financial statement users. ASU 2020-06 is effective for fiscal years, and interim periods in those fiscal years, beginning after December 15, 2023 (effective January 1, 2024) for smaller reporting companies. The Company is determining the adoption of this new accounting guidance and the effect on its consolidated financial statements throughout the period until implementation.

 

Use of Estimates in Preparation of Financial Statements

 

The preparation of consolidated financial statements in conformity with U.S. GAAP accounting principles requires management to make estimates and assumptions. The Company’s management believes that the estimates, judgments, and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

NOTE 3 - RELATED PARTY BALANCES AND TRANSACTIONS

 

A. Loan from related party

 

During December 2022, Boris Molchadsky lent to the Company a total amount of NIS 80,000 ($22,734). The loan bears interest at an annual rate of 5%. The loan was fully repaid during the first and second quarters, 2023.

 

B. Short-term loans from related parties

 

During 2021, SleepX borrowed from Nexense an aggregate amount of $47,623. According to the agreement, the loan shall be repaid in the event that the Company’s profits are sufficient to repay the aggregate loan amount and upon such terms and in such installments as shall be determined by the Board. The loan shall bear interest at an annual rate equal to the minimum rate approved by applicable law in Israel (2.9% in 2023).

 

During 2020, the minority shareholder of Ta-nooma loaned Ta-nooma NIS 115,725. The loan does not carry any interest expense and the repayment terms have yet to be determined. As of June 30, 2023, the loan balance amounted to NIS 115,725 ($31,277).

 

C. Convertible loans from related party

 

On August 22, 2021 Evergreen Venture Partners LLC, owned by Douglas O. McKinnon, principle stockholder of the Company, agreed to advance to the Company up to $265,000 in tranches under the terms of an 18 month unsecured promissory note. Under the terms of the note, which bears interest at a rate of 8% per annum, the note holder can convert the note into shares of common stock at 35% discount to the highest daily trading price over the 10 days’ preceding conversion but in any event not less than $0.10 per share. The note contains standard events of default. As of June 30, 2022, the related party has advanced to the Company $25,000 funds under the Note and there are no assurances if there will be additional loans. As of June 30, 2023, the principal plus interest is estimated by the company as $29,025    .

 

10
 

 

APPYEA INC.

NOTES TO THE FINANCIAL STATEMENTS

 

NOTE 3 - RELATED PARTY BALANCES AND TRANSACTIONS (cont.)

 

D. Balances with related parties

  

June 30,

2023

   December 31, 2022 
   In U.S. dollars in thousands 
     
Liabilities:          
Employees and payroll accruals   185    268 
Related party payables   206    140 
Short term loan   79    80 
Convertible loan
   38    36 

 

E. Transactions with related parties

 

   2023   2022 
  

Six months ended

June 30,

 
   2023   2022 
   In U.S. dollars in thousands 
     
Expenses:          
Management fee to the Company’s CEO   90    35 
Salaries and related cost *)   614    593 

 

*)Including share-based compensation for the six months ended June 30, 2023 and 2022 in the amount of $526,000 and $487,000, respectively.

 

11
 

 

APPYEA INC.

NOTES TO THE FINANCIAL STATEMENTS

 

NOTE 4 - CONVERTIBLE LOANS AND WARRANTS

 

The following table summarizes fair value measurements by level as of June 30, 2023 and December 31, 2022 measured at fair value on a recurring basis:

 

December 31, 2022  Level 1   Level 2   Level 3   Total 
   In U.S. dollars in thousands 
Assets                    
None   -    -    -    - 
                     
Liabilities                    
Convertible Loans   -    -    2,257    2,257 
Warrants        -    24    24 

 

June 30, 2023  Level 1   Level 2   Level 3   Total 
   In U.S. dollars in thousands 
Assets                    
None   -    -    -    - 
                     
Liabilities                    
Convertible Loans   -    -    1,687    1,687 
Warrants        -    231    231 

 

The Convertible Loans changes consist of the following as of June 30, 2023 and December 31, 2022:

 

   June 30, 2023   December 31, 2022 
   Convertible Loans at Fair Value 
   June 30, 2023   December 31, 2022 
   $000 
Opening Balance   2,257    2,492 
Additional convertible loans (a)   153    526 
Repayment of convertible loan (b)   -    (18)
Conversion of convertible loan (c)   (243)   - 
Change in fair value of convertible loans liability   (480)   (743)
Closing balance   1,687    2,257 

 

(a)During the six months ended June 30, 2023, and the year ended December 31, 2022, the Company received a principal amount of $152,750 and $526,826 respectively. The amount received during the period  is convertible at a price equal 65% of the lowest trading price during the (10) days prior to the conversion date, with 35% discount.

 

(b)During the six months ended June 30, 2023, and the year ended December 31, 2022, the Company repaid nill and $17,500, respectively.

 

(c)During the six months ended June 30, 2023, and the year ended December 31, 2022, a total amount of $242,538 and $0 respectively, were converted into 19,390,359    shares of common stock.

 

12
 

 

APPYEA INC.

NOTES TO THE FINANCIAL STATEMENTS

 

NOTE 4 - CONVERTIBLE LOANS AND WARRANTS (cont.)

 

The estimated fair values of the Convertible loans were measured according to the Monte Carlo Model using the following assumptions:

 

   As of June 30,   As of December 31, 
   2023   2022 
Expected term (in years)   1-1.5    0.5 
Expected average (Monte Carlo) volatility   171%   169%
Expected dividend yield   -    - 
Risk-free interest rate   5.2%-5.4%   4.8%
WACC   30%   30%

 

The following table summarizes information relating to outstanding and exercisable warrants as of December 31, 2022:

 

Warrants Outstanding and Exercisable     
Number of   Weighted Average Remaining Contractual life   Weighted Average   Valuation as of 
Warrants   (in years)   Exercise Price   December 31, 2022 
 300,000    2.9    0.043   $11,351 
 300,000    3.35    0.043   $11,679 
 8,334    2.9    0.6   $230 
 32,500    3.35    0.6   $992 

 

The following table summarizes information relating to outstanding and exercisable warrants as of June 30, 2023:

 

Warrants Outstanding and Exercisable     
Number of   Weighted Average Remaining Contractual life   Weighted Average   Valuation as of 
Warrants   (in years)   Exercise Price   June 30, 2023 
 300,000    2.41    0.022   $1,794 
 300,000    2.86    0.022   $1,955 
 8,334    2.41    0.6   $23 
 32,500    2.86    0.6   $116 
 7,000,000*   1.00    0.04   $227,014 

 

During the quarter the company issued a new warrant to an Additional Third Party Note holder. See Note 6-H.

 

13
 

 

APPYEA INC.

NOTES TO THE FINANCIAL STATEMENTS

 

NOTE 4 - CONVERTIBLE LOANS AND WARRANTS (cont.)

 

The estimated fair values of the Warrants were measured according to the data as follows:

 

   As of June 30,   As of December 31, 
   2023   2022 
Expected term   2.41-2.86    2.9-3.35 
Expected average volatility   172.17%-174%   179%
Expected dividend yield   -    - 
Risk-free interest rate   4.54%-4.74%   4.09%-4.15%
Common Stock Market Value  $0.009   $0.043 

 

NOTE 5 - STOCK BASED COMPENSATION

 

  A. The table below depicts the number of options granted to consultants and employees:

 

           
   Six months ended June 30, 2023 
  

Number of

options

   Weighted average exercise price in USD 
         
Options outstanding at January 1, 2023   10,846,284   $0.0001 
Options granted during the period   3,532,290   $0.0001 
Options outstanding at the end of period   14,378,574   $0.0001 
Options exercisable at the end of period   11,550,240   $0.0001 

 

B.The estimated fair values of the options granted to directors and employees were measured using Black and Scholes Model based on the following assumptions:

 

Grant date  July 1, 2021   January 2022   Q1-Q2’2023 
Vesting period   2 years    2 years    0.25-3 years 
Expected average volatility   187.7%   187.7%   178%-187.7% 
Expected dividend yield   -    -    - 
Common Stock Value  $0.76   $0.01-$0.08   $0.01-$0.02 
Risk-free interest rate   0.3%   1.81%   3.39%-3.98 %

 

For the six months ended June 30, 2023 and 2022 the company recognized expenses, to such options, in the amount of $562,000 and $507,000, respectively. The expense is non-cash stock-based compensation expense resulting from options awards to our Chief Financial Officer and advisors. The expense represents the aggregate grant date fair value for the option awards granted and vested during the fiscal years presented, determined in accordance with FASB ASC Topic 718.

 

14
 

 

APPYEA INC.

NOTES TO THE FINANCIAL STATEMENTS

 

NOTE 6 - SIGNIFICANT EVENTS DURING THE PERIOD 

 

A-On January 1, 2023, the company engaged Ron Mekler as a board member. For his services he was granted stock option to purchase 500,000 of the Company’s common stock, valued at $21,498. Upon grant, the Options vest as follows: (i) 50% following 12 months on the first anniversary of the appointment and (ii) the balance of shares of Common Stock, in four (4) consecutive fiscal quarters, beginning with the quarter ending March 31, 2024. The Option shall be exercisable at a per share exercise price of $0.0001 and shall otherwise be subject to the other terms and conditions specified in an Option Grant Agreement to be entered into between Mr. Mekler and the Company.

 

B-On February 1, 2023, the company engaged with Adi Shemer as a board advisor. For his services he was granted stock option to purchase 1,000,000 of the Company’s common stock, valued at $20,498. Upon grant, the Options vest as follows: (i) 33% following 12 months on the first anniversary of the appointment and (ii) the balance of shares of Common Stock, in eight (8) consecutive fiscal quarters, beginning with the quarter ending April 31, 2024. The Option shall be exercisable at a per share exercise price of $0.0001 and shall otherwise be subject to the other terms and conditions specified in an Option Grant Agreement to be entered into between Mr. Shemer and the Company.

 

C-During the first quarter, the company signed an amendment with a Principal $437,190 CLA lender the following understandings: (i) the note shall be amended so that the Fixed Conversion Price is $0.022, (ii) the Note shall be increased by $7,500, (iii) if any portion of the balance due under the Note remains outstanding on April 30, 2023, an extension fee equal to 15% of such outstanding balance shall be added to it. (iv) The Maturity Date with respect to all Tranches advanced under the Note shall be amended to be July 31, 2023. (v) several sale limitations on trading during the period beginning on the Effective Date and ending on the Amended Maturity Date. The warrant exercise price was adjusted accordingly. Since this amendment was known already in December 2022 its results were included in the fair value as of 31.12.2022.

 

D-On May 1, 2023, the company engaged a consultant for management of CRM system and marketing campaigns. In consideration, the consultant was granted stock options to purchase 500,000 of the Company’s common stock, valued at $7,489. Upon grant, the Options vest as follows: (i) 33% following 12 months anniversary of the appointment and (ii) the balance of shares of Common Stock, in eight (8) consecutive quarters, beginning with the quarter ending April 30, 2024. The Option shall be exercisable, for a period of 2 years after reaching full vesting, at a per share exercise price of $0.0001 and shall otherwise be subject to the other terms and conditions specified in an Option Grant Agreement to be entered into between the consultant and the Company.

 

E-On June 1, 2023, the company engaged a consultant for its digital marketing effort. For his services the consultant was granted stock options to purchase 500,000 of the Company’s common stock, valued at $5,414. Upon grant, the Options vest on a monthly basis over a period of 3 months from grant. The Option shall be exercisable for a period of two years following vesting, at a per share exercise price of $0.0001 and shall otherwise be subject to the other terms and conditions specified in an Option Grant Agreement to be entered into between the consultant and the Company.

 

F-On June 14, 2023, SleepX Ltd, the Company’s subsidiary, was granted a patent (US20150119741A1) by the United States Patent and Trademark Office, titled: “Apparatus and Method for Diagnosing Sleep Quality.” The patent extends through February 2036, and provides broad coverage in the field of sleep monitoring.

 

G-On June 18 2023, the holders of the majority (the “Majority Holders”) of the Company outstanding convertible Preferred Series A Shares par value $0.0001 per share (the “Preferred Shares”) agreed to provide that each Preferred Share shall have voting rights equal to 3,000 shares of the Company’s Common Stock which may be vote at any meeting or any action of the Company shareholders at which the holders of the Common Stock are entitled to participate.

 

15
 

 

APPYEA INC.

NOTES TO THE FINANCIAL STATEMENTS

 

NOTE 6 - SIGNIFICANT EVENTS DURING THE PERIOD (Cont.)

 

  H- In connection with Note 7-C, the holder of the Additional Third Party Note agreed to extend the maturity date of such note to June 30, 2024 and to not convert such note during such period. In consideration thereof, the Company agreed with the holder that in the event that on June 30, 2024 the preceding 90 day VWAP is less than $0.04 (the “90 day VWAP”), then the Company will issue to the holder additional shares of the Company’s common stock where the number of shares is determined by quotient of (i) the spread below $0.04 times seven million shares divided by the 90 day VWAP. Solely for the purposes of illustration, if the 90-day VWAP is $0.03 the holder of the Additional Third Party Note would be issued an additional 2,333,333 shares [$0.01 X 7,000,000 / $0.03].

 

NOTE 7 - SUBSEQUENT EVENTS

 

A-On July 1, 2023, Asaf Porat, our CFO, was granted stock options to purchase 10,237,740 of the Company’s common stock, valued at $92,102. Upon grant, the Options vest over a period of 24 months, on a monthly basis. The Option is exercisable at a per share exercise price of $0.0001 and shall otherwise be subject to the other terms and conditions specified in an Option Grant Agreement between Mr. Porat and the Company. In addition, subject to the investment in the Company, Mr. Porat shall be entitled to an additional 14,500,000 common shares on December 31, 2023.

 

B-On July 7, 2023, the Board of Directors appointed Adi Shemer as Chief Executive Officer (“CEO”) of the Company, effective immediately. Mr. Shemer has been working with the Company since February 2023 as a consultant. In connection with his appointment as CEO, Mr. Shemer and the Company’s subsidiary SleepX, Ltd. entered into an Employment Agreement (the “Agreement”) setting forth the terms of his employment and compensation. Under the Agreement, Mr. Shemer is entitled to monthly salary of 40,000 NIS (equivalent to $10,810 as of the date of this report), of which the payment of 20,000 NIS is deferred until such time as the Company raises at least $1 million in aggregate proceeds from the private placement of its securities. Under the Agreement, Mr. Shemer is also entitled to the following: (i) Manager’s Insurance under Israeli law to which SleepX contributes amounts equal to (a) 8-1/3 percent for severance payments, and 6.5%, or up to 7.5% (including disability insurance) designated for premium payment (and Mr. Shemer contributes an additional 6%) of each monthly salary payment, and (b) 7.5% of his salary (with Mr. Shemer contributing an additional 2.5%) to an education fund, a form of deferred compensation program established under Israeli law. Either Mr. Shemer or SleepX is entitled to terminate the employment at any time upon 30 days prior notice.
   
  Under the Agreement, Mr. Shemer was awarded options under the Company’s employee stock option plan for 11,500,000 shares of the Company’s common stock at a per share exercise price of $0.0001, vesting over a period of 30 months, on a quarterly basis, beginning with the quarter ending September 30, 2023, provided that Mr. Shemer continues in the employ of SleepX and continues to provide CEO services to the Company. At the end of the 30-month period, Mr. Shemer is entitled to options for an additional 11,500,000 shares at the same exercise price provided he has been in the continuous employ of SleepX. The options are exercisable through July 2033. In connection with the consulting services rendered prior to his appointment as CEO, he was awarded options for 1,000,000 shares of the Company’s common stock, exercisable through July 2033 at a per share exercise price of $0.0001 per share, all of which have vested.