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, 2017

 

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

 

For the transition period from __________ to __________

 

Commission File Number: 000-55403

 

APPYEA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

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

 

777 Main Street, Suite 600, Fort Worth, Texas 76102

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number including area code: (817) 887-8142

 

N/A

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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	o		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	x
			Emerging growth company	o

 

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. o

 

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 464,667,527 shares outstanding as of May 9, 2017.

 

 

APPYEA, INC.

 

Index

 

			Page
Part I – FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Balance Sheets as of March 31, 2017 and June 30, 2016 (unaudited)		3
	Statements of Operations for the three and nine months ended March 31, 2017 and 2016 (unaudited)		4
	Statements of Cash Flows for the three and nine months ended March 31, 2017 and 2016 (unaudited)		5
	Notes to Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		14
Item 4.	Controls and Procedures		14
Part II - OTHER INFORMATION
Item 1.	Legal Proceedings		15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		15
Item 3.	Defaults Upon Senior Securities		15
Item 4.	Mine Safety Disclosures		15
Item 5.	Other Information		15
Item 6.	Exhibits		16
SIGNATURES			17

 

2

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

APPYEA, INC.

BALANCE SHEETS

(Unaudited)

 

		March 31,				June 30,
		2017				2016
ASSETS
Current Assets:
Cash and cash equivalents		$	20,595			$	14,637
Prepaid expenses			36,000				4,167
Total Current Assets			56,595				18,804
Fixed assets, net of accumulated depreciation of $208,018 and $175,226			49,852				82,644
TOTAL ASSETS		$	106,447			$	101,448
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable			3,858				4,643
Accrued salary			104,000				32,000
Convertible loans and accrued interest, net of unamortized discounts of $19,674 and $0, respectively			187,949				454
Due to related party			42,808				-
Derivative liability			8,736				1,452
Total Current Liabilities			347,351				38,549
Total Liabilities			347,351				38,549
Stockholders’ Equity (Deficit):
Convertible preferred stock, $0.0001 par value, 5,000,000 shares authorized, 5,000,000 shares issued and outstanding at March 31, 2017 and June 30, 2016, respectively			500				500
Common stock, $0.0001 par value, 750,000,000 shares authorized, 464,667,527 shares issued and outstanding at March 31, 2017 and June 30, 2016, respectively			46,466				46,466
Additional paid-in capital			4,098,473				4,098,473
Stock payable, 10,000,000 common shares			24,000				-
Accumulated deficit			(4,410,343	)			(4,082,540	)
Total Stockholders’ Equity (Deficit)			(240,904	)			62,899
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	106,447			$	101,448

 

See accompanying notes to the unaudited financial statements.

 

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APPYEA, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended March 31,								Nine Months Ended March 31,
		2017				2016				2017				2016
Revenues		$	178			$	3,554			$	719			$	5,412
Operating Expenses
Sales and marketing			-				820				-				7,206
Legal and professional fees			91,308				96,653				177,811				1,823,046
General and administrative			44,383				14,955				105,640				22,618
Loss on sales of fixed assets			-				3,914				-				3,914
Depreciation			10,808				18,084				32,792				55,814
Total Operating Expenses			146,499				134,426				316,243				1,912,598
Loss from operations			(146,321	)			(130,872	)			(315,524	)			(1,907,186	)
Other Income (Expense)
Change in fair value of derivative liabilities			5,276				(1,985	)			4,216				(334,475	)
Interest expense			(10,506	)			(74,229	)			(16,495	)			(193,313	)
Total Other Income (Expense)			(5,230	)			(76,214	)			(12,279	)			(527,788	)
Net Loss		$	(151,551	)		$	(207,086	)		$	(327,803	)		$	(2,434,974	)
Net Loss Per Common Share: Basic and Diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.03	)
Weighted Average Number of Common Shares Outstanding: Basic and Diluted			464,667,527				116,445,060				464,667,527				75,757,332

 

See accompanying notes to the unaudited financial statements.

 

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APPYEA, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Nine Months Ended March 31,
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(327,803	)		$	(2,434,974	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			32,792				55,814
Stock-based compensation			24,000				337,500
Convertible note issued for services			25,000				-
Amortization of stock issued for prepaid services			-				1,447,291
Amortization of deferred financing cost			-				13,202
Amortization of debt discounts			9,326				166,079
Loss on sale of fixed assets			-				3,914
Change in fair value of derivative liabilities			(4,216	)			334,475
Changes in operating assets and liabilities:
Accounts receivable			-				339
Prepaid expenses			(31,833	)			(2,930	)
Accounts payable			(785	)			(3,102	)
Accrued salary			72,000				-
Accrued interest			7,169				14,032
Net Cash Used in Operating Activities			(194,350	)			(68,360	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceed from sales of fixed assets			-				700
Purchase of mobile application software			-				(20,000	)
Net cash used in Investing Activities			-				(19,300	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes payable, net of original issue discounts			157,500				106,750
Payment of deferred financing costs			-				(14,852	)
Proceeds from related party			59,617				-
Repayment of loan to related party			(16,809	)			-
Net cash provided by Financing Activities			200,308				91,898
Net cash increase (decrease) for period			5,958				4,238
Cash at beginning of period			14,637				265
Cash at end of period		$	20,595			$	4,503
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes		$	-			$	-
Cash paid for interest		$	-			$	-
NON CASH INVESTING AND FINANCING ACTIVITIES
Purchase of mobile application software in exchange for a convertible loan		$	-			$	58,000
Issuance of common stock for deferred financing costs		$	-			$	3,850
Issuance of common stock for conversion of debt and accrued interest		$	-			$	170,170
Resolution of derivative liability upon conversion of debt		$	-			$	474,261
Derivative liability recognized as debt discount		$	11,500			$	164,750
Cancelation of issuance of common stock for services		$	-			$	172

 

See accompanying notes to the unaudited financial statements.

 

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APPYEA, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2017

(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’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 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, 2017 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended March 31, 2017 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, 2016 filed with the SEC on September 30, 2016.

 

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.

 

3. GOING CONCERN AND LIQUIDITY

 

At March 31, 2017, the Company had cash of $20,595 and current liabilities of $347,351 and a working capital deficit of $290,756. 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.

 

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4. FIXED ASSETS

 

As at March 31, 2017 and June 30, 2016, the balance of fixed assets represented mobile application software as follows:

 

		March 31, 2017				June 30, 2016
Mobile applications		$	257,870			$	257,870
Accumulated depreciation			(208,018	)			(175,226	)
Fixed assets, net		$	49,852			$	82,644

 

Depreciation expense for nine months ended March 31, 2017, and 2016, was $32,792 and $55,814, respectively.

 

5. CONVERTIBLE LOANS

 

At March 31, 2017 and June 30, 2016, convertible loans consisted of the following:

 

		March 31, 2017				June 30, 2016
March 2015 Note		$	-			$	-
November 2016 Note			200,000				-
Total convertible notes payable			200,000				-
Accrued interest			7,623				454
Less: Unamortized debt discount			(19,674	)			-
Total convertible notes			187,949				454
Less: current portion of convertible notes			187,949				454
Long-term convertible notes		$	-			$	-

 

During the nine months ended March 31, 2017 and 2016, the Company recognized interest expense of $7,169 and $12,713 and amortization of discount, included in interest expense, of $9,326 and $166,079, respectively.

 

November 2016 Note

 

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. 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 and the note of $25,000 for a financial advisory service were issued on November 15, 2016.

 

On January 26, 2017, the Company issued convertible note of $75,000 according to the loan agreement on November 15, 2016 and the Company received cash of $67,500 and recognized OID of $7,500.

 

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.

 

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The Company valued the warrants using the Black Scholes valuation model. The fair value of the derivative liability for the warrants on November 15, 2016 amounted to $11,500. The derivative liability was recognized as a debt discount to the notes.

 

Warrants

 

A summary of activity during the period ended March 31, 2017 follows:

 

		Warrant Outstanding
		Shares				Weighted Average Exercise Price
Outstanding, June 30, 2016			-			$	-
Granted			5,000,000				0.03
Exercised			-				-
Forfeited/canceled			-				-
Outstanding, March 31, 2017			5,000,000			$	0.03

 

The following table summarizes information relating to outstanding and exercisable warrants as of March 31, 2017:

 

Warrants Outstanding

Warrants Exercisable

Number of

Weighted Average Remaining Contractual life

Weighted Average

Number of

Weighted Average

Shares

(in years)

Exercise Price

Shares

Exercise Price

5,000,000

2.63

$

0.03

5,000,000

$

0.03

 

6. 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, 2017. 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, 2017, the estimated fair values of the liabilities measured on a recurring basis are as follows:

 

		Nine Months Ended				Year Ended
		March 31, 2017				June 30, 2016
Expected term		2.63 - 3.00 years				0.00 - 1.00 years
Expected average volatility		528%-567		%		25%-1,390		%
Expected dividend yield			-				-
Risk-free interest rate		1.28%-1.50		%		0.00%-0.57		%

 

At March 31, 2017, the estimated fair values of the liabilities measured on a recurring basis are as follows:

 

Fair Value Measurements at March 31, 2017
						Quoted Prices in				Significant Other				Significant
		March 31,				Active Markets				Observable Inputs				Unobservable Inputs
		2017				(Level 1)				(Level 2)				(Level 3)
March 2015 Note		$	1,237			$	-			$	-			$	1,237
Warrants -Issued in fiscal year 2017			7,499				-				-				7,499
Total liabilities		$	8,736			$	-			$	-			$	8,736

 

The following table summarizes the changes in the derivative liabilities during the nine months ended March 31, 2017:

 

Balance - June 30, 2016		$	1,452
Addition of new derivatives recognized as debt discounts			11,500
Gain on change in fair value of the derivative			(4,216	)
Balance - March 31, 2017		$	8,736

 

The aggregate gain on derivatives during the nine months ended March 31, 2017 was $4,216.

 

7. COMMITMENTS AND CONTINGENCIES

 

Leases and Long term Contracts

 

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

 

Legal

 

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

 

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, 2017 and 2015, the Company incurred $1,820 and $1,882, respectively.

 

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8. SHAREHOLDERS’ EQUITY

 

Convertible Preferred Stock

 

The Company is authorized to issue 5,000,000 shares of convertible preferred stock at a par value of $0.0001.

 

Each convertible 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, 2017, and June 30, 2016, 5,000,000 shares of the Company’s convertible preferred stock were issued and outstanding.

 

Common Stock

 

The Company is authorized to issue 750,000,000 shares of common stock at a par value of $0.0001.

 

As at March 31, 2017, and June 30, 2016, 464,667,527 shares of the Company’s common stock were issued and outstanding, respectively.

 

Stock payable

 

The Company had insufficient authorized shares as of March 31, 2017 and as a result, the Company had $24,000 in stock payable for which it is obligated to issue 10,000,000 shares of common stock for consulting services.

 

9. 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, 2017, and June 30, 2016, the Company recorded accrued salary of $104,000 and $32,000, respectively.

 

During the period ended March 31, 2017, the Company borrowed a total amount of $56,617 from Evergreen Venture Partners LLC (“EVP”), which the CEO is the majority owner, and repaid $16,809. This loan is a non-interest bearing and due on demand. As of March 31, 2017, and June 30, 2016, the Company owed EVP, a related party $42,808 and $0, respectively.

 

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

 

Introduction

 

The following discussion and analysis was prepared to supplement information contained in the accompanying financial statements and is intended to provide certain details regarding the Company’s financial condition as of March 31, 2017, and the results of operations for the three and nine months ended March 31, 2017. It should be read in conjunction with the unaudited financial statements and notes thereto contained in this report as well as the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016.

 

Overview

 

AppYea, Inc. (“AppYea,” “we,” “our,” “us,” or the “Company”) was incorporated in the State of South Dakota on November 26, 2012. We are engaged in the acquisition, purchase, maintenance and creation of mobile software applications (or “apps”). The Company’s current business plans include the marketing of its mobile applications, as well the expansion of its mobile application portfolio through the acquisition of third party developed mobile applications and/or mobile applications development companies. The Company has derived revenue by way of the sale of its developed and acquired mobile applications as well as through advertisement integration. The Company currently uses advertising integration in the free versions of our mobile applications that are downloaded by consumers. The Company plans to continue using advertisement integration in the free versions of its mobile apps. However, at the time of the initial download, or at any time after the initial download of our application, the consumer can choose to pay for the full, “ad-free,” version of the application, at which time the advertisements are removed. We currently have 13 fully developed gaming applications, as well as a group of 14 applications that provide wait times at various amusement parks, and 23 additional source code applications that operate in the following categories: Business, Education, Entertainment, Finance, Lifestyle, Medical, Music, Navigation, News, Travel, Utilities and Wellness. We also have acquired an automobile application and a social media application.

 

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 accrue interest at a rate of 12% per annum, and will include an original issuance discount 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. Greentree shall not be able to convert the promissory notes in an amount that would result in the beneficial ownership of greater than 4.9% of the outstanding shares of the Company, with the exception that the limitation may be waived by Greentree with 61 days prior notice. 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 entered into 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 is currently focused on the sale of its fully developed applications to mobile phone users, and finalizing the development of its source code applications.

 

The Company is currently actively seeking acquisitions of developed mobile applications and/or mobile applications development companies, however, we currently do not have any proposals or arrangements to enter into any acquisition or other business combinations.

 

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Results of Operations

 

For the Three Months Ended March 31, 2017 and 2016

 

We generated revenue of $178 and $3,554 for the three months ended March 31, 2017 and 2016, respectively. During our limited history, we have generated nominal revenue and have very little operating history upon which to evaluate our business.

 

Operating expenses, which consisted of sales and marketing costs, legal and professional fees, general and administrative expenses and depreciation expense, were $146,499 and $134,426, for the three months ended March 31, 2017 and 2016, respectively. Operating expense increased during the three months ended March 31, 2017 were primarily the result of an increase in travel expenses.

 

Other expenses totaled $5,230 for the three months ended March 31, 2017 compared to $76,214 for the three months ended March 31, 2016. The decrease in other expenses was primarily the result of a decrease in interest expense.

 

As a result of the foregoing, we incurred losses of $151,551 and $207,086 during the three months ended March 31, 2017 and 2016, respectively.

 

For the Nine Months Ended March 31, 2017 and 2016

 

We generated revenue of $719 and $5,412 for the nine months ended March 31, 2017 and 2016, respectively. During our limited history, we have generated nominal revenue and have very little operating history upon which to evaluate our business.

 

Operating expenses, which consisted of sales and marketing costs, legal and professional fees, general and administrative expenses and depreciation expense, were $316,243 and $1,912,598, for the nine months ended March 31, 2017 and 2016, respectively. Operating expense decreases during the nine months ended March 31, 2017 were primarily the result of a decrease in professional fees.

 

Other expenses totaled $12,279 for the nine months ended March 31, 2017 compared to $527,788 for the nine months ended March 31, 2016. The decrease in other expenses was primarily the result of a decrease in change in fair value of derivative liabilities and interest expense.

 

As a result of the foregoing, we incurred losses of $327,803 and $2,434,974 during the nine months ended March 31, 2017 and 2016, respectively.

 

Liquidity and Capital Resources

 

As of March 31, 2017, we had cash or cash equivalents of $20,595.

 

Net cash used in operating activities was $194,350 for the nine months ended March 31, 2017 and net cash used in operating activities was $68,360 for the nine months ended March 31, 2016. During the nine months ended March 31, 2017 we incurred a net loss of $327,803, which was primarily the cause of the increase in our net cash used in operating activities. At March 31, 2017, our operating activities and available capital resources were not sufficient to fund our operations going forward. We believe that we are going to need to obtain additional funding for our activities during the next twelve months to: 1) further fund the development of our source code applications, 2) to fund any potential acquisitions of developed mobile applications and/or mobile applications development companies, and 3) to fund any operating deficits.

 

Net cash used in investing activities was $0 for the nine months ended March 31, 2017 compared to net cash used in investing activities of $19,300 for the nine months ended March 31, 2016.

 

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Net cash provided by financing activities for the nine months ended March 31, 2017 was $200,308, compared to net cash provided by financing activities of $91,898 for the nine months ended March 31, 2016. 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. During the nine months ended March 31, 2016, we received $106,750 by way of loan under a convertible note payable.

 

As of March 31, 2017, our total assets were $106,447 and our total liabilities were $347,351. Included in our assets of as of March 31, 2017 was $20,595 of cash, $36,000 in prepaid expenses, and net fixed assets of $49,852. As of June 30, 2016, our total assets were $101,448 and our total liabilities were $38,549.

 

Plan of Operation and Funding

 

During the next twelve months, we anticipate that our principal sources of liquidity will consist of any, or all, of the following: 1) proceeds from sales of our common stock, 2) revenue generated from our operations, and 3) additional debt borrowings. While we are presently generating revenue and we anticipate our revenue will continue to increase, we are currently operating at a loss.

 

On a long-term basis, our ability to ultimately achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully continue to develop our products and our ability to generate revenues.

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

 

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management and information currently available to management. The use of words such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “should”, “likely” or similar expressions, indicates a forward-looking statement.

 

The identification in this report of factors that may affect our future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

 

Factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to:

 

	·	Trends affecting the Company’s financial condition, results of operations or future prospects;
	·	The Company’s business and growth strategies;
	·	The Company’s financing plans and forecasts;
	·	The factors that we expect to contribute to our success and the Company’s ability to be successful in the future;
	·	The Company’s business model and strategy for realizing positive results as sales increase;
	·	Competition, including the Company’s ability to respond to such competition and its expectations regarding continued competition in the market in which the Company competes;
	·	Expenses;
	·	The Company’s expectations with respect to continued disruptions in the global capital markets and reduced levels of consumer spending and the impact of these trends on its financial results;
	·	The Company’s ability to meet its projected operating expenditures and the costs associated with development of new projects;
	·	The Company’s ability to pay dividends or to pay any specific rate of dividends, if declared;
	·	The impact of new accounting pronouncements on its financial statements;
	·	That the Company’s cash flows from operating activities will be sufficient to meet its projected operating expenditures for the next twelve months;
	·	The Company’s market risk exposure and efforts to minimize risk;
	·	Development opportunities and its ability to successfully take advantage of such opportunities;
	·	Regulations, including anticipated taxes, tax credits or tax refunds expected;

 

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	·	The outcome of various tax audits and assessments, including appeals thereof, timing of resolution of such audits, the Company’s estimates as to the amount of taxes that will ultimately be owed and the impact of these audits on the Company’s financial statements;
	·	The Company’s overall outlook including all statements under Management’s Discussion and Analysis or Plan of Operation;
	·	That estimates and assumptions made in the preparation of financial statements in conformity with US GAAP may differ from actual results; and
	·	Expectations, plans, beliefs, hopes or intentions regarding the future.

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk

 

Smaller reporting companies 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.

 

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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.

 

We are not required to provide this information as we are a Smaller Reporting Company.

 

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

 

None

 

Item 3. Default Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable to our Company.

 

Item 5. Other Information.

 

None.

 

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Item 6. Exhibits

 

31		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Douglas O. McKinnon.
32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Douglas O. McKinnon.
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Schema
101.CAL*		XBRL Taxonomy Calculation Linkbase
101.DEF*		XBRL Taxonomy Definition Linkbase
101.LAB*		XBRL Taxonomy Label Linkbase
101.PRE*		XBRL Taxonomy Presentation Linkbase

__________________

*

Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

Pursuant to the requirements 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.
Date: May 19, 2017	By:	/s/ Douglas O. McKinnon
		Douglas O. McKinnon, Chief Financial Officer, Principal Accounting Officer, Chief Executive Officer

 

 

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