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 September 30, 2016
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	¨	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.

  

887,154,334 common shares issued and outstanding as of October 31, 2017

     

FORM 10-Q

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION				3
Item 1.	Financial Statements			3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			16
Item 4.	Controls and Procedures			16
PART II - OTHER INFORMATION				17
Item 1.	Legal Proceedings			17
Item 1A.	Risk Factors			17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			17
Item 3.	Defaults Upon Senior Securities			17
Item 4.	Mine Safety Disclosures			17
Item 5.	Other Information			17
Item 6.	Exhibits			18
SIGNATURES				19

   

2

  

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

APPYEA, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

		September 30,				June 30,
		2017				2017
ASSETS
Current Assets:
Cash and cash equivalents		$	548			$	42,567
Total Current Assets			548				42,567
Fixed assets, net of accumulated depreciation of $229,634 and $218,826			28,236				39,044
TOTAL ASSETS		$	28,784			$	81,611
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities			99,256				5,993
Accrued salary			152,000				128,000
Convertible loans and accrued interest, net of unamortized discounts of $72,927 and $87,240, respectively			138,576				174,904
Due to related party			75,258				73,608
Derivative liability			178,883				114,316
Total Current Liabilities			643,973				496,821
Total Liabilities			643,973				496,821
Stockholders' Deficit:
Convertible preferred stock, $0.0001 par value, 5,000,000 shares authorized, 5,000,000 shares issued and outstanding at September 30, 2017 and June 30, 2017, respectively			500				500
Common stock, $0.0001 par value, 1,500,000,000 shares authorized, 725,104,637 and 519,973,313 shares issued and outstanding at September 30, 2017 and June 30, 2017, respectively			72,510				51,997
Additional paid-in capital			4,453,570				4,210,156
Stock payable			47,727				105,000
Accumulated deficit			(5,189,496				(4,782,863	)
Total Stockholders' Deficit			(615,189	)			(415,210	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	28,784			$	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 September 30,
		2017				2016
Revenues		$	934			$	402
Operating Expenses
Legal and professional fees			64,830				2,997
General and administrative			97,236				27,953
Depreciation			10,808				11,093
Total Operating Expenses			172,874				42,043
Loss from operations			(171,940	)			(41,641	)
Other Expense
Change in fair value of derivative liabilities			(134,237	)			(2,178	)
Interest expense			(100,456	)			-
Net Other Expense			(234,693	)			(2,178	)
Net Loss		$	(406,633	)		$	(43,819	)
Net Loss Per Common Share: Basic and Diluted		$	(0.00	)		$	(0.00	)
Weighted Average Number of Common Shares Outstanding: Basic and Diluted			664,499,399				464,667,527

 

See accompanying notes to the unaudited consolidated financial statements.

 

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APPYEA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Three months ended September 30,
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(406,633	)		$	(43,819	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			10,808				11,093
Amortization of debt discounts			81,813				-
Change in fair value of derivative liabilities			134,237				2,178
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities			93,263				(2,249	)
Accrued salary			24,000				24,000
Accrued interest			18,643				-
Prepaid expenses			-				(500	)
Net Cash Used in Operating Activities			(43,869	)			(9,297	)
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in Investing Activities			-				-
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash and common stock payable			200				-
Proceeds from related party			1,750				-
Repayment of loan to related party			(100	)			-
Net cash provided by Financing Activities			1,850				-
Net cash increase for period			(42,019	)			(9,297	)
Cash at beginning of period			42,567				14,637
Cash at end of period		$	548			$	5,340
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		$	69,284			$	-
Resolution of derivative liability upon conversion of debt		$	137,170			$	-
Derivative liability recognized as debt discount		$	67,500			$	-

 

See accompanying notes to the unaudited consolidated financial statements.

 

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APPYEA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 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 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 September 30, 2017 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended September 30, 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, 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.

 

3. GOING CONCERN AND LIQUIDITY

 

At September 30, 2017, the Company had cash of $548 and current liabilities of $576,473 and a working capital deficit of $575,925. 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.

 

4. FIXED ASSETS

    

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

 

		September 30,				June 30,
		2017				2017
Mobile applications		$	257,870			$	257,870
Accumulated depreciation			(229,634	)			(218,826	)
Fixed assets, net		$	28,236			$	39,044

 

Depreciation expense for the three months ended September 30, 2017 and 2016 was $10,808 and $11,093, respectively.

 

5. CONVERTIBLE LOANS

 

At September 30, 2017 and June 30, 2017, convertible loans consisted of the following:

 

		September 30,				June 30,
		2017				2017
March 2015 Note		$	-			$	-
November 2016 Note -1			189,802				246,833
November 2016 Note -2			4,044				4,044
Total convertible notes payable			193,846				250,877
Accrued interest			17,657				11,267
Less: Unamortized debt discount			(72,927	)			(87,240	)
Total convertible notes			138,576				174,904
Less: current portion of convertible notes			138,576				174,904
Long-term convertible notes		$	-			$	-

 

During the three months ended September 30, 2017 and 2016, the Company recognized amortization of discount, included in interest expense, of $81,813 and $0, respectively.

 

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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 September 30, 2017 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.

 

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 note of $75,000 and $75,000 according to the loan agreement on November 15, 2016.

 

During the three months ended September 30, 2017, the Company converted notes with principal amounts and accrued interest of $69,284 into 175,131,324 shares of common stock. The corresponding derivative liability at the date of conversion of $137,170 was credited to additional paid in capital.

 

During the year ended September 30, 2017, a total of $19,000 note principal was assigned to two lenders under the same term and conversion price.

 

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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.

         

The Company valued the conversion feature using the Black Scholes valuation model. The fair value of the derivative liability for all the note and warrants that became convertible for the year ended June 30, 2017 amounted to $331,959. $90,000 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $241,959 was recognized as a “day 1” derivative loss.

  

Warrants

  

A summary of activity during the three months ended September 30, 2017 follows:

  

		Warrants Outstanding
						Weighted Average
		Shares				Exercise Price
Outstanding, June 30, 2017			5,000,000			$	0.03
Granted			-				-
Exercised			-				-
Forfeited/canceled			-				-
Outstanding, September 30, 2017			5,000,000			$	0.03

 

The following table summarizes information relating to outstanding and exercisable warrants as of September 30, 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

2.13

$

0.03

5,000,000

$

0.03

 

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 September 30, 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 September 30, 2017, the estimated fair values of the liabilities measured on a recurring basis are as follows:

 

		Three months ended				Year Ended
		September 30, 2017				June 30, 2017
Expected term		0.13 - 2.13 years				0.38 - 2.38 years
Expected average volatility		173%-291%				235%-288%
Expected dividend yield			-				-
Risk-free interest rate		1.03%-1.47%				1.14%-1.38%

 

At September 30, 2017, the estimated fair values of the liabilities measured on a recurring basis are as follows:

 

		September 30,				Quoted Prices in Active Markets				Significant Other Observable Inputs				Significant Unobservable Inputs
		2017				(Level 1)				(Level 2)				(Level 3)
March 2015 Note		$	1,996			$	-			$	-			$	1,996
November 2016 Note 1			163,162				-				-				163,162
November 2016 Note 2			8,987				-				-				8,987
Warrants -Issued in fiscal year 2017			4,738				-				-				4,738
Total liabilities		$	178,883			$	-			$	-			$	178,883

 

The following table summarizes the changes in the derivative liabilities during the three months ended September 30, 2017:

 

Fair Value Measurements Using Significant Observable Inputs (Level 3)
Balance - June 30, 2017		$	114,316
Addition of new derivatives recognized as debt discounts			67,500
Addition of new derivatives recognized as loss on derivatives			222,531
Settled on issuance of common stock			(137,170	)
Gain on change in fair value of the derivative			(88,294	)
Balance - September 30, 2017		$	178,883

 

The aggregate loss on derivatives during the three months ended September 30, 2017 and 2016 was $134,237 and $2,178.

 

9. 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.

 

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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”), a copy of which is included as Exhibit _____ to this Form 10-Q.

 

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 three months ended September 30, 2017, the Company recorded settlement expense of $67,500 and accrued expenses of $67,500 as of September 30, 2017.

 

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 three months ended September 30, 2017 and 2016, the Company incurred $613 and $607, respectively.

 

10. 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 September 30, 2017 and June 30, 2017, 5,000,000 shares of the Company's convertible preferred stock were issued and outstanding.

 

Common Stock

 

During the three months ended September 30, 2017, the Company issued common shares, as follows:

  

	·	an aggregate of 175,131,324 common shares were issued for the conversion of debt and accrued interest of $69,284, and released derivative liabilities of $137,170 to paid-in capital
	·	30,000,000 common shares were issued for cash of $200 and reduction in common stock payable of $57,273

   

As at September 30, 2017 and June 30, 2017, 725,104,637 and 519,973,313 shares of the Company's common stock were issued and outstanding, respectively.

 

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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 three months ended September 30, 2017 the company issued 30,000,000 common shares for cash of $200 and reduced common stock payable by $57,273.

 

As of September 30, 2017, 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.

 

11. 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 September 30, 2017, and June 30, 2017, the Company recorded accrued salary of $152,000 and $128,000, respectively.

 

During the three months ended September 30, 2017, the Company borrowed a total amount of $1,750 from Evergreen Venture Partners LLC (“EVP”), which the CEO is the majority owner, and repaid $100. This loan is a non-interest bearing and due on demand. As of September 30, 2017, and June 30, 2017, the Company owed EVP, a related party $75,258 and $73,608, respectively.

 

12. SUBSEQUENT EVENTS

  

Subsequent to June 30, 2017, the Company issued common shares as follow;

  

	·	87,049,697 shares of common stock for conversion of debt and accrued interest of $35,212.
	·	75,000,000 shares of common stock according to the settlement agreement (Note9).

 

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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 September 30, 2017 compared to three months ended September 30, 2016.

 

		Three months ended
		September 30,
		2017				2016
Revenue		$	934			$	402
Operating expenses		$	(172,874	)		$	(42,043	)
Other expense		$	(234,693	)		$	(2,178	)
Net loss		$	(406,633	)		$	(43,819	)

 

We generated revenues of $934 for the three months ended September 30, 2017, compared to revenues of $402 for the same period in 2016. During our limited history, we have generated nominal revenue.

 

Our operating expenses, for the three months ended September 30, 2017 were $172,874 compared to $42,043 for the same period in 2016. The increase in operating expenses was primarily as a result of an increase in consulting expenses and settlement expense.

 

Other expense, for the three months ended September 30, 2017 were $234,693 compared to $2,178 for the same period in 2016. 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 $406,633 and $43,819 for the three months ended September 30, 2017 and September 30, 2016, respectively.

 

Liquidity and Capital Resources

 

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

 

Working Capital

  

		September 30,				June 30,
		2017				2017
Current Assets		$	548			$	42,567
Current Liabilities		$	643,973			$	496,821
Working Capital (Deficiency)		$	(643,425	)		$	(454,254	)

 

Cash Flows

		September 30,
		2017				2016
Cash Flows From (Used In) Operating Activities		$	(43,869	)		$	(9,297	)
Cash Flows Used In Investing Activities		$	-				-
Cash Flows From Financing Activities		$	1,850			$	-
Net (Decrease In Cash During Period		$	(42,019	)		$	(9,297	)

          

As at September 30, 2017 our company’s cash balance was $548 and total assets were $28,784. As at June 30, 2017, our company’s cash balance was $42,567 and total assets were $81,611.

 

As at September 30, 2017, our company had total liabilities of $643,973, compared with total liabilities of $496,821 as at June 30, 2017.

 

As at September 30, 2017, our company had working capital deficiency of $643,425 compared with working capital deficiency of $454,254 as at June 30, 2017. The increase in working capital deficiency was primarily attributed to a decrease in cash of $42,019 and an increase in accounts payable and accrued liabilities of $93,263 and derivative liabilities of $64,567.

 

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Cash Flow from Operating Activities

 

During the three months ended September 30, 2017, our company used $43,869 in cash from operating activities, compared to $9,297 cash used in operating activities during the three months ended September 30, 2016. During the three months ended September 30, 2017 we incurred a net loss of $406,633 of which $226,858 arose from non-cash expenses and we generated cash flow of $135,906 from the net increase in current liabilities. During the three months ended September 30, 2016 we incurred a net loss of $43,819 of which $13,271 arose from non-cash expenses and we generated cash flow of $21,751 from the net increase in current liabilities.

 

Cash Flow from Investing Activities

 

During the three months ended September 30, 2017 and 2016, our company did not have any investing activities.

 

Cash Flow from Financing Activities

 

During the three months ended September 30, 2017 our company received $1,850 from financing activities compared to $0 received from financing activities during the three months ended September 30, 2016. During the three months ended September 30, 2017, we received $200 from the issuance of our common shares, $1,750 loan from a related party and repaid $100 to a related party.

 

The report of our auditors on our audited financial statements for the fiscal year ended June 30, 2017, contains a going concern qualification as we have suffered losses since our inception. We have not attained profitable operations and are dependent upon obtaining financing to pursue our business operations. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

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.

 

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

 

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

 

Derivative Financial Instruments

 

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

  

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

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

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

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

 

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

 

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.

 

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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.

 

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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: November 14, 2017		/s/ Douglas O. McKinnon
		Douglas O. McKinnon
		Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

 

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