0001640334-18-001064.txt : 20180521 0001640334-18-001064.hdr.sgml : 20180521 20180521172557 ACCESSION NUMBER: 0001640334-18-001064 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180521 DATE AS OF CHANGE: 20180521 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: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55403 FILM NUMBER: 18850696 BUSINESS ADDRESS: STREET 1: 777 MAIN STREET STREET 2: SUITE 600 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 817 887 8142 MAIL ADDRESS: STREET 1: 777 MAIN STREET STREET 2: SUITE 600 CITY: FORT WORTH STATE: TX ZIP: 76102 10-Q 1 apyp_10q.htm FORM 10-Q apyp_10q.htm

 

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 March 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 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

 

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

¨

 

¨

Non-accelerated filer

¨

(Do not check if a smaller reporting company)

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.

 

1,200,477,060 common shares issued and outstanding as of May 18, 2018

 

 
 
 
 

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

 

 19

 

Item 4.

Controls and Procedures

 

 19

 

 

 

 

 

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
 
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PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

APPYEA, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31,

 

 

June 30,

 

 

 

2018

 

 

2017

 

ASSETS

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$ 1,258

 

 

$ 42,567

 

Accounts receivable – related party

 

 

11,641

 

 

 

-

 

Total Current Assets

 

 

12,899

 

 

 

42,567

 

 

 

 

 

 

 

 

 

 

Fixed assets, net of accumulated depreciation of $244,070 and $218,826

 

 

13,800

 

 

 

39,044

 

Investment in equity method investee

 

 

24,524

 

 

 

-

 

TOTAL ASSETS

 

$ 51,223

 

 

$ 81,611

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

198,071

 

 

 

5,993

 

Accrued salary

 

 

200,000

 

 

 

128,000

 

Convertible loans and accrued interest, net of unamortized discounts of $57,750 and $87,240, respectively

 

 

200,233

 

 

 

174,904

 

Convertible loans and accrued interest - related party, net of unamortized discounts of $746 and $0, respectively

 

 

7,837

 

 

 

-

 

Due to related party

 

 

87,087

 

 

 

73,608

 

Derivative liability

 

 

576,984

 

 

 

114,316

 

Total Current Liabilities

 

 

1,270,212

 

 

 

496,821

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

1,270,212

 

 

 

496,821

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit:

 

 

 

 

 

 

 

 

Convertible preferred stock, $0.0001 par value, 60,000,000 shares authorized, 5,000,000 shares issued and outstanding at March 31, 2018 and June 30, 2017, respectively

 

 

500

 

 

 

500

 

Common stock, $0.0001 par value, 6,000,000,000 shares authorized, 1,168,413,424 and 519,973,313 shares issued and outstanding at March 31, 2018 and June 30, 2017, respectively

 

 

116,841

 

 

 

51,997

 

Additional paid-in capital

 

 

4,725,039

 

 

 

4,210,156

 

Stock payable

 

 

62,727

 

 

 

105,000

 

Accumulated deficit

 

 

(6,124,096 )

 

 

(4,782,863 )

Total Stockholders' Deficit

 

 

(1,218,989 )

 

 

(415,210 )

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$ 51,223

 

 

$ 81,611

 

 

See accompanying notes to the unaudited consolidated financial statements.

 
 
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APPYEA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine months ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$ 158

 

 

$ 178

 

 

$ 1,202

 

 

$ 719

 

Revenues - related party

 

 

11,641

 

 

 

-

 

 

 

11,641

 

 

 

-

 

Total Revenue

 

 

11,799

 

 

 

178

 

 

 

12,843

 

 

 

719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legal and professional fees

 

 

103,567

 

 

 

91,308

 

 

 

333,371

 

 

 

177,811

 

General and administrative

 

 

26,301

 

 

 

44,383

 

 

 

161,397

 

 

 

105,640

 

Depreciation

 

 

6,500

 

 

 

10,808

 

 

 

25,244

 

 

 

32,792

 

Total Operating Expenses

 

 

136,368

 

 

 

146,499

 

 

 

520,012

 

 

 

316,243

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(124,569 )

 

 

(146,321 )

 

 

(507,169 )

 

 

(315,524 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of derivative liabilities

 

 

(159,104 )

 

 

5,276

 

 

 

(509,092 )

 

 

4,216

 

Interest expense

 

 

(112,940 )

 

 

(10,506 )

 

 

(324,496 )

 

 

(16,495 )

Loss on Investment in equity method investee

 

 

(476 )

 

 

-

 

 

 

(476 )

 

 

-

 

Net Other Expense

 

 

(272,520 )

 

 

(5,230 )

 

 

(834,064 )

 

 

(12,279 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (397,089 )

 

$ (151,551 )

 

$ (1,341,233 )

 

$ (327,803 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share: Basic and Diluted

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

$ (0.00 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding: Basic and Diluted

 

 

1,133,230,709

 

 

 

464,667,527

 

 

 

913,338,132

 

 

 

464,667,527

 

 

See accompanying notes to the unaudited consolidated financial statements.

 
 
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APPYEA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine months ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$ (1,341,233 )

 

$ (327,803 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

25,244

 

 

 

32,792

 

Common stock issued for services

 

 

99,500

 

 

 

24,000

 

Convertible note issued for services

 

 

-

 

 

 

25,000

 

Amortization of debt discounts

 

 

273,744

 

 

 

9,326

 

Loss on investment in equity method investee

 

 

476

 

 

 

-

 

Change in fair value of derivative liabilities

 

 

509,092

 

 

 

(4,216 )

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(11,641 )

 

 

-

 

Prepaid expenses

 

 

-

 

 

 

(31,833 )

Accounts payable and accrued liabilities

 

 

192,078

 

 

 

(785 )

Accrued salary

 

 

72,000

 

 

 

72,000

 

Accrued interest

 

 

50,752

 

 

 

7,169

 

Net Cash Used in Operating Activities

 

 

(129,988 )

 

 

(194,350 )

 

 

 

 

 

 

 

 

 

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

 

 

 

157,500

 

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

 

 

8,333

 

 

 

-

 

Proceeds from loan to related party

 

 

20,050

 

 

 

59,617

 

Repayment of loan to related party

 

 

(6,571 )

 

 

(16,809 )

Net cash provided by Financing Activities

 

 

113,679

 

 

 

200,308

 

 

 

 

 

 

 

 

 

 

Net cash decrease for period

 

 

(41,309 )

 

 

5,958

 

Cash at beginning of period

 

 

42,567

 

 

 

14,637

 

Cash at end of period

 

$ 1,258

 

 

$ 20,595

 

 

 

 

 

 

 

 

 

 

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

 

$ 156,331

 

 

$ -

 

Resolution of derivative liability upon conversion of debt

 

$ 281,424

 

 

$ -

 

Derivative liability recognized as debt discount

 

$ 235,000

 

 

$ 11,500

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 
5
 
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APPYEA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 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, "The Diagnostic Centers Inc." in State of South Dakota on August 2, 2017.

 

On June 9, 2017, the Company entered into a Management Services Agreement (“MSA”) with The Diagnostic Group, LLC, A Delaware limited liability company (“TDG”) under the terms of which, the Company shall perform activities related to direct marketing of TDG products and services to healthcare providers. The initial term of the Agreement will be for thirty-six (36) months from the effective date. The MSA shall automatically renew for successive one (1) year terms, unless either Party gives the other Party ninety (90) days’ written notice of termination prior to the effective date of any renewal term, or unless the MSA is terminated earlier in accordance with Section 6 of the MSA. The Company will be paid for providing services to directly recruited customers at the rate of 35% of the Net Collected Revenue collected from non-federally funded payors by third party providers affiliated or contracted with TDG for ancillary services ordered by recruited customers less any lab specific costs related to any referred samples and/or services and less any refunds or chargebacks. The Company will be paid by the 15th of each month for Net Collected Revenue from the previous month.

 

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 March 31, 2018 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended March 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, 2017 filed with the SEC on October 13, 2017.

 

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.

 
 
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Principles of Consolidation

 

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

 

Equity Method Investment

 

The Company owns membership interests of 5% in Cedar Creek Labs Series Two LLC. The Company accounts for its interest in this entity using the equity method. The Company’s investment in this entity was $25,000 at March 31, 2018. Under the equity method of accounting, the Company records the investment at cost. The Company’s investment in the entity is increased by additional contributions to the entity as well as its proportionate share of earnings in the entity. Conversely, the Company’s investment is decreased by distributions made by the Company and by its proportionate share of losses. During the nine months ended March 31, 2018, the Company recognized loss on Investment in equity method investee of $476.

 

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).

 

The following table summarizes fair value measurements by level at March 31, 2018 and June 30, 2017, measured at fair value on a recurring basis:

 

March 31, 2018

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

None

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ -

 

 

$ -

 

 

$ 576,984

 

 

$ 576,984

 

 

June 30, 2017

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

None

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$ -

 

 

$ -

 

 

$ 114,316

 

 

$ 114,316

 

 

3. GOING CONCERN AND LIQUIDITY

 

At March 31, 2018, the Company had cash of $1,258 and current liabilities of $1,270,212 and a working capital deficit of $1,257,313. The Company has generated net losses 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.

 
 
7
 
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4. FIXED ASSETS

 

As at March 31, 2018 and June 30, 2017, the balance of fixed assets represented a vehicle and mobile application software as follows:

 

 

 

March 31,

 

 

June 30,

 

 

 

2018

 

 

2017

 

Mobile applications

 

$ 257,870

 

 

$ 257,870

 

Accumulated depreciation

 

 

(244,070 )

 

 

(218,826 )

Fixed assets, net

 

$ 13,800

 

 

$ 39,044

 

 

Depreciation expense for the nine months ended March 31, 2018 and 2017 was $25,244 and $32,792, respectively.

 

5. CONVERTIBLE LOANS

 

At March 31, 2018 and June 30, 2017, convertible loans consisted of the following:

 

 

 

March 31,

 

 

June 30,

 

 

 

2018

 

 

2017

 

March 2015 Note

 

$ -

 

 

$ -

 

November 2016 Note -1

 

 

132,803

 

 

 

246,833

 

November 2016 Note -2

 

 

-

 

 

 

4,044

 

Convertible notes -Issued in fiscal year 2018

 

 

101,667

 

 

 

-

 

Total convertible notes payable

 

 

234,470

 

 

 

250,877

 

 

 

 

 

 

 

 

 

 

Accrued interest

 

 

23,513

 

 

 

11,267

 

Less: Unamortized debt discount

 

 

(57,750 )

 

 

(87,240 )

Total convertible notes

 

 

200,233

 

 

 

174,904

 

 

 

 

 

 

 

 

 

 

Less: current portion of convertible notes

 

 

200,233

 

 

 

174,904

 

Long-term convertible notes

 

$ -

 

 

$ -

 

 

During the nine months ended March 31, 2018 and 2017, the Company recognized amortization of discount, included in interest expense, of $266,157 and $9,326, respectively.

 

March 2015 Note

 

On March 13, 2015, the Company issued a $10,000 convertible promissory note payable. The unsecured convertible promissory note payable is due upon demand and carries an interest rate of 12% per annum. The note payable is convertible at the option of the holder, at 50% of the lowest traded price for the 60 days preceding conversion as posted on the OTC Markets or on such US National Exchange upon which the Company may be listed. Effective March 13, 2015, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. The Company valued the conversion feature at the issue date (March 13, 2015) at $14,552 using the Black Scholes valuation model. $10,000 of the value assigned to the derivative liability was recognized as a debt discount on the convertible debenture. The debt discount was recorded as a reduction (contra-liability) to the convertible debenture and is being amortized over the life of the convertible debenture. The balance of $4,552 of the value assigned to the derivative liability was expensed on the issue date of the convertible note.

 

As of March 31, 2018, and June 30, 2017, the outstanding principal balance of the note was $0, the note had accrued interest of $454 and an unamortized debt discount of $0.

 
 
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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 according to the loan agreement on November 15, 2016.

 

During the nine months ended March 31, 2018, the Company converted notes with principal amounts and accrued interest of $150,131 into 485,258,293 shares of common stock. The corresponding derivative liability at the date of conversion of $264,514 was credited to additional paid in capital.

 

During the nine months ended March 31, 2018, a total of $19,000 note principal was assigned to two lenders under the same term and conversion price.

 

November 2016 Note 2

 

On November 15, 2016, the Company also issued note of $25,000 for a financial advisory service, which will automatically mature 6 months from the date of applicable Note, will accrue interest at a rate of 12% per annum. 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. 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.

 

During the nine months ended March 31, 2018, the Company converted notes with principal amounts and accrued interest of $6,200 into 28,181,818 shares of common stock. The corresponding derivative liability at the date of conversion of $16,909 was credited to additional paid in capital.

 

During the nine months ended March 31, 2018, a total of $4,044 note principal was assigned to a lender under the same term and conversion price.

 
 
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Promissory Notes - Issued in fiscal year 2018

 

During the nine months ended March 31, 2018, the Company issued a total of $101,667 note with the following terms:

 

 

·

Terms ranging from 6 months to 9 months.

 

·

Annual interest rates of 8 - 12%.

 

·

Convertible at the option of the holders at issuance.

 

·

Conversion prices are typically based on the discounted (45% discount) average closing prices or lowest trading prices of the Company’s shares during various periods prior to conversion.

 

Certain notes allow the Company to redeem the notes at rates ranging from 135% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, the note includes original issue discounts totaling to $10,000 and the Company received cash of $91,667.

 

The Company identified conversion features embedded within certain notes and warrants issued during the period ended March 31, 2018. The Company has determined that the conversion feature of the Notes represents an embedded derivative since the conversion price is variable and the Notes include a reset provision which could cause adjustments upon conversion. Accordingly, the Notes are not considered to be conventional debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The warrants are exercisable into 42,500,000 shares of common stock, for a period of five years from issuance, at a price of $0.0005 per share. As a result of the reset features, the warrants increased by 150,681,818 and the total warrants exercisable into 193,181,818 shares of common stock at $0.00011 per share. The reset feature of warrants associated with this convertible note was effective at the time that a separate convertible note with lower exercise price was issued. We accounted for the issuance of the Warrants as a derivative.

 

Warrants

 

A summary of activity during the nine months ended March 31, 2018 follows:

 

 

 

Warrants Outstanding

 

 

 

 

 

Weighted Average

 

 

 

Shares

 

 

Exercise Price

 

 

 

 

 

 

 

 

Outstanding, June 30, 2017

 

 

5,000,000

 

 

$ 0.03

 

Granted

 

 

42,500,000

 

 

 

0.0005

 

Reset feature

 

 

150,681,818

 

 

 

0.0001

 

Exercised

 

 

-

 

 

 

-

 

Forfeited/canceled

 

 

-

 

 

 

-

 

Outstanding, March 31, 2018

 

 

198,181,818

 

 

$ 0.0009

 

 

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

 

Warrants Outstanding

 

 

Warrants Exercisable

 

Number of

 

 

Weighted Average Remaining

 

 

Weighted Average

 

 

Number of

 

 

Weighted Average

 

Shares

 

 

Contractual life (in years)

 

 

Exercise Price

 

 

Shares

 

 

Exercise Price

 

5,000,000

 

 

 

1.63

 

 

$ 0.03

 

 

 

5,000,000

 

 

$ 0.03

 

193,181,818

 

 

 

4.54

 

 

$ 0.0001

 

 

 

193,181,818

 

 

$ 0.0001

 

198,181,818

 

 

 

2.23

 

 

$ 0.0009

 

 

 

198,181,818

 

 

$ 0.0009

 

 
 
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6. CONVERTIBLE LOANS – RELATED PARTY

 

At March 31, 2018 and June 30, 2017, convertible loan – related party consisted of the following:

 

 

 

March 31,

 

 

June 30,

 

 

 

2018

 

 

2017

 

Convertible notes - related party -Issued in fiscal year 2018

 

 

8,333

 

 

 

-

 

Total convertible notes payable

 

 

8,333

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Accrued interest -related party

 

 

250

 

 

 

-

 

Less: Unamortized debt discount - related party

 

 

(746 )

 

 

-

 

Total convertible notes

 

 

7,837

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Less: current portion of convertible notes - related party

 

 

7,837

 

 

 

-

 

Long-term convertible notes

 

$ -

 

 

$ -

 

 

During the nine months ended March 31, 2018 and 2017, the Company recognized amortization of discount, included in interest expense, of $7,587 and $0, respectively.

 

Promissory Notes - Issued in fiscal year 2018

 

During the nine months ended March 31, 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 nine months ended March 31, 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 March 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 March 31, 2018, the estimated fair values of the liabilities measured on a recurring basis are as follows:

 

 

 

Nine months ended

 

 

Year Ended

 

 

 

March 31,

2018

 

 

June 30,

2017

 

Expected term

 

0.04 - 5.00 years

 

 

0.38 - 2.38 years

 

Expected average volatility

 

173%-488%

 

 

235%-288%

 

Expected dividend yield

 

 

-

 

 

 

-

 

Risk-free interest rate

 

0.96%-2.68%

 

 

1.14%-1.38%

 

 

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

 

Fair Value Measurements Using Significant Observable Inputs (Level 3)

 

 

 

 

 

Balance - June 30, 2017

 

$ 114,316

 

 

 

 

 

 

Addition of new derivatives recognized as debt discounts

 

 

235,000

 

Addition of new derivatives recognized as loss on derivatives

 

 

407,488

 

Settled on issuance of common stock

 

 

(281,424 )

Gain on change in fair value of the derivative

 

 

101,604

 

Balance - March 31, 2018

 

$ 576,984

 

 

The aggregate gain (loss) on derivatives during the nine months ended March 31, 2018 and 2017 was $(509,092) and $4,216.

 

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 pays a monthly fee of $8,000 and expenses related to this contract. As of March 31, 2018, and June 30, 2017, the Company recorded accrued expenses of $75,250 and $7,900, 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 pays a monthly fee of $10,000 and expenses related to this contract. As of March 31, 2018, and June 30, 2017, the Company recorded accrued expenses of $51,000 and $7,150, respectively.

 

On October 2, 2017, the Company entered into an agreement with Pacific Pain & Regenerative Medicine. The Company pays $3,000 per month for a collector in exchange for a minimum of 5 PGX tests per week or 20 per month. As of March 31, 2018, the Company recorded accrued expense of $12,000.

 
 
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Legal

 

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

 

During 2017, the Company entered into discussions regarding a proposed merger with Decision Diagnostics Corporation (“DECN”) and entered into a Preliminary Agreement Leading to a Triangular Merger (“Merger Agreement”). The Company determined that the Merger Agreement was not in the best interest of its Shareholders and terminated the Merger Agreement. In order to resolve any potential disputes or claims, the Company entered into a Settlement Agreement and Release (“Settlement”).

 

DECN shall forever release and discharge, any and all claims or demands, of any type or description, whether known or unknown, that have been asserted or could have been asserted against the Company and shall further forever release and discharge the Company, from any and all claims, demands, causes of action, and liabilities of any kind whatsoever (upon any legal or equitable theory, whether contractual, common-law, statutory, federal, state, local, or otherwise) (collectively the “Claims”), arising by reason of any act, omission, transaction or occurrence which DECN ever had or now has against the Company existing on, after, or prior to the execution date of the Settlement Agreement. DECN further agrees to indemnify the Company to the fullest extent of the law with respect to any violation by DECN of the releases and discharges given hereunder.

 

According to the Settlement, the Company issued 75,000,000 shares of common stock in October 2017. During the nine months ended March 31, 2018, the Company recorded settlement expense of $67,500.

 

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 nine months ended March 31, 2018 and 2016, the Company incurred $1,863 and $1,820, respectively.

 

9. SHAREHOLDERS' EQUITY

 

Amendment to Articles of Incorporation or Bylaws

 

On February 15, 2018, the Company filed a Certificate of Amendment with the state of South Dakota, to the Company’s Articles of Incorporation, to increase in the number of authorized shares of its common stock from 1,500,000,000 to 6,000,000,000, par value $0.0001 and to increase the number of authorized Series A Preferred Stock from 5,000,000 to 60,000,000, par value $0.0001.

 

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 March 31, 2018 and June 30, 2017, 5,000,000 shares of the Company's Series A Preferred Stock were issued and outstanding.

 

Common Stock

 

During the nine months ended March 31, 2018, the Company issued common shares, as follows:

 

 

·

an aggregate of 513,440,111 common shares were issued for the conversion of debt and accrued interest of $156,330, and released derivative liabilities of $281,424 to paid-in capital

 

·

30,000,000 common shares were issued for cash of $200 and reduction in common stock payable of $57,273

 

·

75,000,000 common shares were issued with a fair value of $67,500 according to the settlement (Note8).

 

·

30,000,000 common shares were issued with a fair value of $17,000 for consulting services

 
 
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As at March 31, 2018 and June 30, 2017, 1,168,413,424 and 519,973,313 shares of the Company's common stock were issued and outstanding, respectively.

 

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 nine months ended March 31, 2018 the company issued 30,000,000 common shares for cash of $200 and reduced common stock payable by $57,273.

 

As of March 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 nine months ended March 31, 2018, the Company issued 10,000,000 shares with a fair value of $5,000. As of March 31, 2018, the Company had $15,000 in stock payable for which it is obligated to issued 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 March 31, 2018, and June 30, 2017, the Company recorded accrued salary of $200,000 and $128,000, respectively.

 

During the nine months ended March 31, 2018, the Company borrowed a total amount of $20,050 from Evergreen Venture Partners LLC (“EVP”), which the CEO is the majority owner, and repaid $6,571. This loan is a non-interest bearing and due on demand. As of March 31, 2018, and June 30, 2017, the Company owed EVP, a related party $87,087 and $73,608, respectively.

 

On November 15, 2017, the Company 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. The Company shall use best efforts to market the Products for the LLC and will receive compensation ranging from 15% to 40% of profit. The Company owns membership interests of 5% in LLC and the transactions between the Company and LLC which is an equity method investee are deemed to be between related parties. During the nine months ended March 31, 2018, the Company recorded revenue and accounts receivable of $11,641.

 

11. SUBSEQUENT EVENTS

 

On April 2, 2018, the Company issued 32,063,636 shares of common stock for conversion of debt and accrued interest.

  

 
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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.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

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”, “our” and "West Coast Ventures" mean AppYea, Inc., and our wholly owned subsidiaries, AppYea Holdings, Inc. and The Diagnostic Centers, Inc., 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, and maintenance of mobile software applications and 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. We entered into a service marketing agreement with The Diagnostic Group Inc. on June 6, 2017 to market their One Health Laboratory. Under this agreement, AppYea receives thirty five percent of the net proceeds per test delivered. Our Newly formed sales team will contact hospitals, long term care facilities, healthcare groups, employers, governmental units and correctional institutions in getting comprehensive diagnostic testing results quicker. Our goal is to work with multiple diagnostic testing facilities throughout the United States and at the same time using numerous collectors to handle the samples personally therefore expediting the process.

 

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

 

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

 

 
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Results of Operations

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Revenue

 

$ 158

 

 

$ 178

 

Revenue - related party

 

$ 11,641

 

 

$ -

 

Operating expenses

 

$ (136,368 )

 

$ (146,499 )

Other expense

 

$ (272,520 )

 

$ (5,230 )

Net loss

 

$ (397,089 )

 

$ (151,551 )

 

We generated revenues of $158 and revenues from related party of $11,641 for the three months ended March 31, 2018, compared to revenues of $178 for the same period in 2017.

 

Our operating expenses, for the three months ended March 31, 2018 were $136,368 compared to $146,499 for the same period in 2017. The decrease in operating expenses was primarily as a result of a decrease in travel expense.

 

Other net expense, for the three months ended March 31, 2018 were $272,520 compared to $5,230 for the same period in 2017. The increase in other expenses was primarily related to an increase in interest expense as well as the loss on the change in the fair value of our derivative liabilities.

 

We incurred a net loss of $397,089 and $151,551 for the three months ended March 31, 2018 and 2017, respectively.

 

Nine months ended March 31, 2018 compared to Nine months ended March 31, 2017.

 

 

 

Nine months ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Revenue

 

$ 1,202

 

 

$ 719

 

Revenue - related party

 

$ 11,641

 

 

$ -

 

Operating expenses

 

$ (520,012 )

 

$ (316,243 )

Other expense

 

$ (834,064 )

 

$ (12,279 )

Net loss

 

$ (1,341,233 )

 

$ (327,803 )

 

We generated revenues of $1,202 and revenue from related party of $11,641 for the nine months ended March 31, 2018, compared to revenues of $719 for the same period in 2017.

 

Our operating expenses, for the nine months ended March 31, 2018 were $520,012 compared to $316,243 for the same period in 2017. The increase in operating expenses was primarily as a result of an increase in subcontractors expenses and professional fees, offset by a decrease in travel expense.

 

Other net expense, for the nine months ended March 31, 2018 were $834,064 compared to $12,279 for the same period in 2017. The increase in other expenses was primarily related to an increase in interest expense as well as the loss on the change in the fair value of our derivative liabilities.

 

We incurred a net loss of $1,341,233 and $327,803 for the nine months ended March 31, 2018 and 2017, respectively.

 

Liquidity and Capital Resources

 

The following table provides selected financial data about our company as of March 31, 2018 and June 30, 2017, respectively.

 

 
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Working Capital

 

 

 

March 31,

 

 

June 30,

 

 

 

2018

 

 

2017

 

Cash

 

$ 1,258

 

 

$ 42,567

 

 

 

 

 

 

 

 

 

 

Current Assets

 

$ 12,899

 

 

$ 42,567

 

Current Liabilities

 

$ 1,270,212

 

 

$ 496,821

 

Working Capital Deficiency

 

$ (1,257,313 )

 

$ (454,254 )

 

Cash Flows

 

 

 

Nine months ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

Cash Flows Used In Operating Activities

 

$ (129,988 )

 

$ (194,350 )

Cash Flows Used In Investing Activities

 

$ (25,000 )

 

 

-

 

Cash Flows From Financing Activities

 

$ 113,679

 

 

$ 200,308

 

Net Increase (Decrease) In Cash During Period

 

$ (41,309 )

 

$ 5,958

 

 

As at March 31, 2018 our company’s cash balance was $1,258 and total assets were $51,223. As at June 30, 2017, our company’s cash balance was $42,567 and total assets were $81,611.

 

As at March 31, 2018, our company had total liabilities of $1,270,212, compared with total liabilities of $496,821 as at June 30, 2017.

 

As at March 31, 2018, our company had a working capital deficiency of $1,257,313 compared with working capital deficiency of $454,254 as at June 30, 2017. The increase in working capital deficiency was primarily attributed a decrease in cash of $41,309 and an increase in accounts payable and accrued liabilities of $192,078, accrued salary of $72,000 and derivative liabilities of $462,668.

 

Cash Flow from Operating Activities

 

During the nine months ended March 31, 2018, our company used $129,988 in cash from operating activities, compared to $194,350 cash used in operating activities during the nine months ended March 31, 2017. During the nine months ended March 31, 2018, we incurred a net loss of $1,341,233 of which $908,056 arose from non-cash expenses and we generated cash flow of $314,830 from the net increase in operating liabilities and used $11,641 from the net increase in operating assets. During the nine months ended March 31, 2017, we incurred a net loss of $327,083 of which $86,902 arose from non-cash expenses and we generated cash flow of $78,384 from the net increase in operating liabilities and used $31,833 from the net increase in operating assets.

 

Cash Flow from Investing Activities

 

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

 

Cash Flow from Financing Activities

 

During the nine months ended March 31, 2018, our company received $113,679 from financing activities compared to $200,308 received from financing activities during the nine months ended March 31, 2017. During the nine months ended March 31, 2018, 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. During the nine months ended March 31, 2017, we received $157,500 by way of loan under a convertible note payable and $59,617 loan from a related party and repaid $16,809 to a related party.

 

 
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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.

 

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.

 

 
18
 
Table of Contents

 

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.

 

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: May 21, 2018

 

/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

 

EX-31.1 2 apyp_ex311.htm CERTIFICATION apyp_ex311.htm

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Douglas O. McKinnon, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Appyea, Inc.;

 

 

2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

 

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: May 21, 2018

 

/s/ Douglas O. McKinnon

 

Douglas O. McKinnon

 

Chief Executive Officer and Chief Financial Officer

 

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

 

 

EX-32.1 3 apyp_ex321.htm CERTIFICATION apyp_ex321.htm

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Douglas O. McKinnon, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) the Quarterly Report on Form 10-Q of Appyea, Inc. for the period ended March 31, 2018 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Appyea, Inc.

 

Dated: May 21, 2018

 

/s/ Douglas O. McKinnon

 

Douglas O. McKinnon

 

Chief Executive Officer and Chief Financial Officer

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

 

 

Appyea, Inc.

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Appyea, Inc. and will be retained by Appyea, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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("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.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company incorporated a wholly-owned subsidiary, "The Diagnostic Centers Inc." in State of South Dakota on August 2, 2017.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On June 9, 2017, the Company entered into a Management Services Agreement (&#8220;MSA&#8221;) with The Diagnostic Group, LLC, A Delaware limited liability company (&#8220;TDG&#8221;) under the terms of which, the Company shall perform activities related to direct marketing of TDG products and services to healthcare providers. 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The first day of trading on the OTC Markets was December 15, 2014.</p> <div> <div align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>2. 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text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">During the nine months ended March 31, 2018, the Company issued a total of $101,667 note with the following terms:</p> <p style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <table style="text-align: justify; width: 100%; font: 10pt 'times new roman'; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr> <td width="4%"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#160;</p> </td> <td valign="top" width="4%"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#183;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">Terms ranging from 6 months to 9 months.</p> </td> </tr> <tr> <td> <p align="justify" style="margin: 0px 0px 0px 0in;">&#160;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#183;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">Annual interest rates of 8 - 12%.</p> </td> </tr> <tr> <td> <p align="justify" style="margin: 0px 0px 0px 0in;">&#160;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#183;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">Convertible at the option of the holders at issuance.</p> </td> </tr> <tr> <td> <p align="justify" style="margin: 0px 0px 0px 0in;">&#160;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#183;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">Conversion prices are typically based on the discounted (45% discount) average closing prices or lowest trading prices of the Company&#8217;s shares during various periods prior to conversion.</p> </td> </tr> </table> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">Certain notes allow the Company to redeem the notes at rates ranging from 135% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day. 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The Company has determined that the conversion feature of the Notes represents an embedded derivative since the conversion price is variable and the Notes include a reset provision which could cause adjustments upon conversion. Accordingly, the Notes are not considered to be conventional debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The warrants are exercisable into 42,500,000 shares of common stock, for a period of five years from issuance, at a price of $0.0005 per share. As a result of the reset features, the warrants increased by 150,681,818 and the total warrants exercisable into 193,181,818 shares of common stock at $0.00011 per share. The reset feature of warrants associated with this convertible note was effective at the time that a separate convertible note with lower exercise price was issued. 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width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td align="right" valign="bottom" width="9%">0.0005</td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> <p style="margin: 0px 0px 0px 0in;">Reset feature</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td align="right" valign="bottom" width="9%">150,681,818</td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td align="right" valign="bottom" width="9%">0.0001</td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> </tr> <tr bgcolor="#ffffff"> <td valign="top"> <p style="margin: 0px 0px 0px 0in;">Exercised</p> </td> <td valign="bottom" width="1%"> <p style="margin: 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The Company determined that the Merger Agreement was not in the best interest of its Shareholders and terminated the Merger Agreement. In order to resolve any potential disputes or claims, the Company entered into a Settlement Agreement and Release (&#8220;Settlement&#8221;).</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">DECN shall forever release and discharge, any and all claims or demands, of any type or description, whether known or unknown, that have been asserted or could have been asserted against the Company and shall further forever release and discharge the Company, from any and all claims, demands, causes of action, and liabilities of any kind whatsoever (upon any legal or equitable theory, whether contractual, common-law, statutory, federal, state, local, or otherwise) (collectively the &#8220;Claims&#8221;), arising by reason of any act, omission, transaction or occurrence which DECN ever had or now has against the Company existing on, after, or prior to the execution date of the Settlement Agreement. 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During the nine months ended March 31, 2018, the Company recorded settlement expense of $67,500.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Rent</i></p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <div align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">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&#8217; notice prior to expiration of an applicable term. For the nine months ended March 31, 2018 and 2016, the Company incurred $1,863 and $1,820, respectively.</div> </div> <div> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>9. SHAREHOLDERS' EQUITY</b></p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Amendment to Articles of Incorporation or Bylaws</i></p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">On February 15, 2018, the Company filed a Certificate of Amendment with the state of South Dakota, to the Company&#8217;s Articles of Incorporation, to increase in the number of authorized shares of its common stock from 1,500,000,000 to 6,000,000,000, par value $0.0001 and to increase the number of authorized Series A Preferred Stock from 5,000,000 to 60,000,000, par value $0.0001.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Series A Preferred Stock</i></p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">The Company is authorized to issue 60,000,000 shares of Series A Preferred Stock at a par value of $0.0001.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">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.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">As at March 31, 2018 and June 30, 2017, 5,000,000 shares of the Company's Series A Preferred Stock were issued and outstanding.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Common Stock</i></p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">During the nine months ended March 31, 2018, the Company issued common shares, as follows:</p> <p style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <table style="text-align: justify; width: 100%; font: 10pt 'times new roman'; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr> <td width="4%"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#160;</p> </td> <td valign="top" width="4%"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#183;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">an aggregate of 513,440,111 common shares were issued for the conversion of debt and accrued interest of $156,330, and released derivative liabilities of $281,424 to paid-in capital</p> </td> </tr> <tr> <td> <p align="justify" style="margin: 0px 0px 0px 0in;">&#160;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#183;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">30,000,000 common shares were issued for cash of $200 and reduction in common stock payable of $57,273</p> </td> </tr> <tr> <td> <p align="justify" style="margin: 0px 0px 0px 0in;">&#160;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#183;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">75,000,000 common shares were issued with a fair value of $67,500 according to the settlement (Note8).</p> </td> </tr> <tr> <td> <p align="justify" style="margin: 0px 0px 0px 0in;">&#160;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">&#183;</p> </td> <td valign="top"> <p align="justify" style="margin: 0px 0px 0px 0in;">30,000,000 common shares were issued with a fair value of $17,000 for consulting services</p> </td> </tr> </table> <div align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;&#160;</div> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">As at March 31, 2018 and June 30, 2017, 1,168,413,424 and 519,973,313 shares of the Company's common stock were issued and outstanding, respectively.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><i>Stock payable</i></p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">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 nine months ended March 31, 2018 the company issued 30,000,000 common shares for cash of $200 and reduced common stock payable by $57,273.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">As of March 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.</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <div align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">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 nine months ended March 31, 2018, the Company issued 10,000,000 shares with a fair value of $5,000. As of March 31, 2018, the Company had $15,000 in stock payable for which it is obligated to issued 30,000,000 shares of common stock for consulting services.</div> </div> <div> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;"><b>10. RELATED PARTY TRANSACTIONS</b></p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">&#160;</p> <p align="justify" style="text-align: justify; widows: 2; text-transform: none; font-style: normal; text-indent: 0px; margin: 0px 0px 0px 0in; font-family: 'times new roman'; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; font-size: 13px; font-weight: 400; word-spacing: 0px; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial;">In March 2016, the Company appointed current CEO and approved a base compensation package of $8,000 per month for CEO. 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This loan is a non-interest bearing and due on demand. 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The agreement shall be automatically extended for successive 1 year unless there is the notice to terminate. The Company shall use best efforts to market the Products for the LLC and will receive compensation ranging from 15% to 40% of profit. The Company owns membership interests of 5% in LLC and the transactions between the Company and LLC which is an equity method investee are deemed to be between related parties. 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Actual results could differ from those estimates. 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valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td align="right" valign="bottom" width="9%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td align="right" valign="bottom" width="9%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td align="right" valign="bottom" width="9%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> </tr> <tr 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style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> <p style="margin: 0px 0px 0px 0in;"><b>Liabilities</b></p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td align="right" valign="bottom" width="9%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td align="right" valign="bottom" width="9%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td valign="bottom" width="1%"> <p style="margin: 0px;">&#160;</p> </td> <td align="right" 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