(The accompanying notes are an integral part of these condensed consolidated financial statements)
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
1.
Nature of Operations and Continuance of Business
The Company was incorporated in the State of Nevada on February 24, 2010. The Company is a development stage company as defined by FASB guidelines. On May 1, 2010, the Company entered into a share exchange agreement with Appiphany Technologies Corporation (ATC) to acquire all of the outstanding common shares of ATC in exchange for 1,500,000 common shares of the Company. As the acquisition involved companies under common control, the acquisition was accounted for in accordance with ASC 805-50, Business Combinations Related Issues, and the consolidated financial statements reflect the accounts of the Company and ATC since inception.
Going Concern
These consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at January 31, 2014, the Company has not recognized significant revenue, has a working capital deficit of $301,764, and has an accumulated deficit of $869,955. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Companys future operations. These factors raise substantial doubt regarding the Companys ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.
Summary of Significant Accounting Policies
a)
Basis of Presentation
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) and are expressed in U.S. dollars. The Companys fiscal year end is April 30.
b)
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make 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 reporting period. The Company regularly evaluates estimates and assumptions related to the fair value and estimated useful life of long-lived assets, fair value of convertible debentures, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c)
Interim Condensed Consolidated Financial Statements
These interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Companys financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
d)
Cash and cash equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As at January 31, 2014 and April 30, 2013, the Company had no items representing cash equivalents.
8
APPIPHANY TECHNOLOGIES HOLDINGS CORP.
(A Development Stage Company)
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
2.
Summary of Significant Accounting Policies
(continued)
e)
Basic and Diluted Net Loss per Share
The Company computes net loss per share in accordance with ASC 260,
Earnings per Share
. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As of January 31, 2014, the Company had 7,543,672 potentially dilutive shares outstanding.
f)
Financial Instruments
Pursuant to ASC 820,
Fair Value Measurements and Disclosures
, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Companys financial instruments consist principally of cash, accounts payable and accrued liabilities, accrued compensation, and amounts due to related parties. Pursuant to ASC 820, the fair value of our cash is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
g)
Comprehensive Loss
ASC 220,
Comprehensive Income
, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at January 31, 2014 and April 30, 2013, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
h)
Revenue Recognition
The Company recognizes revenue from online advertising. Revenue will be recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is assured. The Company is not exposed to any credit risks as amounts are prepaid prior to performance of services.
9
APPIPHANY TECHNOLOGIES HOLDINGS CORP.
(A Development Stage Company)
Notes to the Condensed Consolidated Financial Statements
(Expressed in US dollars)
2.
Summary of Significant Accounting Policies
(continued)
i)
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
j)
Reclassification
Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation.
3.
Property and Equipment
|
|
|
|
|
|
|
|
|
|
|
Cost
$
|
|
Accumulated Depreciation
$
|
|
January 31, 2014
Net Carrying
Value
$
(unaudited)
|
|
April 30, 2013
Net Carrying
Value
$
|
|
|
|
|
|
|
|
|
|
Computer hardware
|
|
1,805
|
|
1,805
|
|
|
|
258
|
|
|
1,805
|
|
1,805
|
|
|
|
258
|
4.
Related Party Transactions
a)
During the period ended January 31, 2014, the Company incurred $45,000 (2013 - $nil) of management fees to the President and Director of the Company. As at January 31, 2014, the Company owed $26,500 (April 30, 2013 - $15,000) in accrued compensation.
b)
During the period ended January 31, 2014, the Company incurred $18,000 (2013 - $nil) of management fees to the former Secretary and Treasurer of the Company. As at January 31, 2014, the Company owed $9,000 (April 30, 2013 - $9,000) in accrued compensation.
c)
On August 28, 2013, the Company entered into a debt settlement agreement with President of the Company. The Company issued 3,000,000 common shares to settle accrued compensation owing of $30,000.
d)
On August 28, 2013, the Company entered into a debt settlement agreement with the former Secretary and Treasurer of the Company. The Company issued 1,800,000 common shares to settle accrued compensation owing of $18,000.
e)
As at January 31, 2014, the Company owed $51,961 (April 30, 2013 - $60,281) to the President and Director of the Company for financing of day-to-day expenditures incurred on behalf of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand.
f)
As at January 31, 2014, the Company owed $536 (April 30, 2013 - $86) to the former Secretary and Treasurer of the Company, which is included in accounts payable.
10
5.
Common Shares
a)
On August 29, 2013, the Company issued 3,000,000 common shares with a fair value of $180,000 to the CEO of the Company to settle accrued compensation.
b)
On August 29, 2013, the Company issued 1,800,000 common shares with a fair value of $108,000 to the Secretary and Treasurer of the Company to settle accrued compensation.
c)
On December 2, 2013, the Company issued 1,450,980 common shares upon the conversion of $7,400 of convertible notes payable as described in Note 6.
d)
On January 6, 2014, the Company issued 1,459,259 common shares upon the conversion of $3,940 of convertible notes payable as described in Note 6.
6.
Convertible Debenture
a)
On May 21, 2013, the Company issued a convertible debenture, to a non-related party, for proceeds of $32,500. Under the terms of the debenture, the amount owing is unsecured, bears interest at 8% per annum, and is due on February 28, 2014. Interest on overdue principal after default accrues at an annual rate of 22%. After 180 days or November 16, 2013, the debenture is convertible into common shares of the Company at a conversion price equal to 51% of the lowest two trading prices of the Companys common shares for the past 30 trading days prior to notice of conversion.
Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 Derivatives and Hedging. The fair value of the derivative liability resulted in a full discount to the note payable of $32,500. The carrying value of the convertible note will be accreted over the term of the convertible note up to the value of $32,500. During the period ended January 31, 2014, the Company issued 2,910,239 shares of common stock for the conversion of $11,340 of the note. As at January 31, 2014, $31,726 of accretion expense had been recorded.
b)
On September 3, 2013, the Company issued a convertible debenture, to a non-related party, for proceeds of $19,000. Under the terms of the debenture, the amount is unsecured, bears interest at 8% per annum, and is due on June 5, 2014. Interest on overdue principal after default accrues at an annual rate of 22%. After 180 days or March 2, 2014, the debenture is convertible into common shares of the Company at a conversion price equal to 51% of the lowest two trading prices of the Companys common shares for the past 30 trading days prior to notice of conversion.
The Company analyzed the conversion option of the Asher notes for derivative accounting consideration under ASC 815-15 Derivatives and Hedging and determined that the embedded conversion feature should be classified as a liability. However, due to the conversion option not being effective until March 2, 2014, the Company will delay measuring the derivative liability until such date.
c)
On December 17, 2013, the Company issued a convertible debenture, to a non-related party, for proceeds of $32,500. Under the terms of the debenture, the amount is unsecured, bears interest at 8% per annum, and is due on September 19, 2014. Interest on overdue principal after default accrues at an annual rate of 22%. After 180 days or June 15, 2014, the debenture is convertible into common shares of the Company at a conversion price equal to 51% of the lowest two trading prices of the Companys common shares for the past 30 trading days prior to notice of conversion.
The Company analyzed the conversion option of the Asher notes for derivative accounting consideration under ASC 815-15 Derivatives and Hedging and determined that the embedded conversion feature should be classified as a liability. However, due to the conversion option not being effective until June 15, 2014, the Company will delay measuring the derivative liability until such date.
7.
Subsequent Events
We have evaluated subsequent events through the date of issuance of the financial statements, and did not have any material recognizable subsequent events after January 31, 2014, excepting the following:
(a)
On February 18, 2014, the Company issued 1,160,000 common shares upon the conversion of $2,320 of convertible notes payable as described in Note 6.
(b)
On February 28, 2014, the Company issued 1,460,000 common shares upon the conversion of $15,920 of convertible notes payable as described in Note 6.
11
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our 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 those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
RESULTS OF OPERATIONS
Working Capital
|
|
|
|
|
January 31, 2014
$
|
|
April 30, 2013
$
|
Current Assets
|
27,852
|
|
22,798
|
Current Liabilities
|
329,616
|
|
239,388
|
Working Capital (Deficit)
|
(301,764)
|
|
(216,590)
|
Cash Flows
|
|
|
|
|
For the nine months ended January 31,
2014
$
|
|
For the nine months ended January 31,
2013
$
|
Cash Flows used in Operating Activities
|
(54,001)
|
|
(3,314)
|
Cash Flows from (used in) Investing Activities
|
|
|
|
Cash Flows from (used in) Financing Activities
|
81,741
|
|
(5,076)
|
Net increase (decrease) in Cash During Period
|
27,740
|
|
(8,390)
|
Operating Revenues
For the nine months ended January 31, 2014, the Company earned revenues of $491 compared with $574 for the nine months ended January 31, 2013.
Operating Expenses and Net Loss
For the nine months ended January 31, 2014, the Company incurred operating expenses of $102,443 compared with $86,711 for the nine months ended January 31, 2013. The increase in operating expenses were related to management fees.
For the nine months ended January 31, 2014, the Company had a net loss of $406,769 compared with a net loss of $46,137 for the nine months ended January 31, 2013. In addition to the increase in operating expenses, the Company recorded accretion expense of $31,726, financing costs of $5,000, interest expense of $73,044, loss on settlement of debt of $240,000 and gain on the change in fair value of derivative liabilities of $44,953 for the nine months ended January 31, 2014. The Company did not incur any operating expenses during the nine months ended January 31, 2013 except for a gain on settlement of debt of $40,000.
Liquidity and Capital Resources
As at January 31, 2014, the Company had cash and total assets of $27,852 compared with cash of $112 and total assets of $23,056 as at April 30, 2013. The increase in cash and total assets were attributed to debt financing of $32,500 received by the Company, of which a large portion remained unspent as of the period end date.
12
As at January 31, 2014, the Company had total liabilities of $329,616 compared with total liabilities of $239,388 at April 30, 2013. The increase in total liabilities was attributed to new convertible debentures of $72,660, an increase in accrued compensation of $11,500, derivative liability relating to the fair value of the convertibility feature on the convertible notes of $35,950, and offset by a decrease in accounts payable of $20,702 and amounts due to related parties of $8,406.
As at January 31, 2014, the Company had a working capital deficit of $301,764 compared with a working capital deficit of $216,590 as at April 30, 2013. The increase in working capital deficit was due to an increase in total liabilities due to new convertible debentures and a decrease in total assets due to a decrease in prepaid expenses.
Cash Flow from Operating Activities
During the nine month period ended January 31, 2014, the Company used $54,001 of cash for operating activities compared to the use of $3,314 of cash for operating activities during the nine month period ended January 31, 2013. The increase in net cash used for operating activities was due to the fact that the Company received financing during the period, which was used to repay outstanding obligations from operating activities.
Cash Flow from Financing Activities
During the nine month period ended January 31, 2014, the Company received $81,741 of cash from financing activities compared to the use of $5,076 for the nine month period ended January 31, 2013. During the current period, the Company received $84,000 in proceeds from the issuance of convertible debt less $2,799 for the repayment of amounts owing to related parties.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. 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.
Future Financings
We will continue to rely on equity sales of our Common Shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Our financial statements and accompanying notes have been
prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
13