APYP Appyea Inc (QB)

 

 

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, “AppYea Holdings, Inc.” in state of South Dakota on January 13, 2017 and “The Diagnostic Centers Inc.” in State of South Dakota on August 2, 2017.

 

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.

 

During the quarter ended March 31, 2019 the Company entered into a 2-year management and advisory agreement with Hempori, Inc. to assist the Company in identifying and managing the Company’s overall business strategy and opportunities to enter the hemp based Cannabidiol (CBD) industry. Additionally, the Company entered into an exclusive CBD infused beverage licensing agreement with the Prouty Company to market flavored and non-flavored beverages in various formulas infused with CBD to achieve the following “mood enhancing” affects: Energy, Calm, Focus, and Sleep.

 

On February 7, 2020 the Company’s Board of Directors reached and approved terms of a separation agreement with our former CEO Doug McKinnon.

 

On February 7, 2020 the Company’s Board of Directors approved the employment contract of Todd Violette as the new CEO and the appointment of Todd Violette as a new Director and elected him to the position of Chairmen of the Board of Directors.

 

The Company’s common stock is traded on the OTC Markets (www.otcmarkets.com) under the symbol “APYP”.

 

 

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 December 31, 2019 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended December 31, 2019 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, 2019 filed with the SEC on October 18, 2019.
  
On July 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (as amended by ASU 2018-01, 2018-10, 2018-11, 2018-20, and 2019-01, collectively, including ASU 2016-02, “ASC 842”), using the modified retrospective method. The Company elected the transition method which allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of electing this transition method, previously reported financial information has not been restated to reflect the application of the new standard to the comparative periods presented. The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allows the Company to carry forward certain historical conclusions reached under ASC Topic 840 regarding lease identification, classification, and the accounting treatment of initial direct costs. The Company elected not to record assets and liabilities on its consolidated balance sheet for new or existing lease arrangements with terms of 12 months or less. The Company recognizes lease expenses for such leases on a straight-line basis over the lease term. In addition, the Company elected the land easement transition practical expedient and did not reassess whether an existing or expired land easement is a lease or contains a lease if it has not historically been accounted for as a lease. The adoption of ASC 842 did not have a material impact on the consolidated financial statements. See Note 6 for further discussion.

  

 

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.

 

 

 

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

 

 

As defined in ASC 820” Fair fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

 

The following table summarizes fair value measurements by level at December 31, 2019 and June 30, 2019, measured at fair value on a recurring basis:

 

 

 

Certain amounts from prior periods have been reclassified to conform to the current period presentation.

 

 

At December 31, 2019, the Company had cash of $311 and current liabilities of $1,158,815 and a working capital deficit of $1,156,504. The Company has generated net losses from operations 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.

 

 

 

During the six months ended December 31, 2019 and 2018, the Company recognized amortization of discount, included in interest expense, of $12,603 and $44,873, respectively.

 

 

During the six months ended December 31, 2019, the Company converted notes with principal amounts and accrued interest of $24,108 into 280,205,250 shares of common stock. The corresponding derivative liability at the date of conversion of $128,021, was settled through additional paid in capital.

 

 

As of December 31, 2019, and June 30, 2019, the outstanding principal balance of the note was $0, the note had accrued interest of $454.

 

 

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. An initial promissory note of $100,000 was issued on November 15, 2016. 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. Note is currently in default.

 

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.

 

 

During the year ended June 30, 2018, the Company issued a total of $180,614 note with the following terms:

 

 

 

Certain notes allow the Company to redeem the notes at rates ranging from 115% to 150% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, the note includes original issue discounts and financing costs totaling to $38,447 and the Company received cash of $142,167. Convertible notes issued in fiscal year 2018 are currently in default.

 

 

During the year ended June 30, 2019, the Company issued a total of $105,000 of notes with the following terms:

 

 

Certain notes allow the Company to redeem the notes at rates ranging from 115% to 125% depending on the redemption date provided that no redemption is allowed after the 180th day. Likewise, the note includes original issue discounts and financing costs totaling to $5,000 and the Company received cash of $100,000. Certain convertible note was also provided with a total of 50,000,000 common shares and 800,000,000 warrants.

 

 

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.

 

The fair value of the derivative liability for all the notes that became convertible for the year ended June 30, 2019 amounted to $387,038. $85,000 of the value assigned to the derivative liability was recognized as a debt discount to the notes while the balance of $302,038 was recognized as a “day 1” derivative loss.

 

 

 

The following table summarizes information relating to outstanding and exercisable warrants as of December 31, 2019:

 

 

 

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 December 31, 2019. 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.

 

At December 31, 2019, the estimated fair values of the liabilities measured on a recurring basis are as follows:

 

 

The following table summarizes the changes in the derivative liabilities during the six months ended December 31, 2019:

 

 

The aggregate gain (loss) on derivatives during the six months ended December 31, 2019 and 2018 was ($171,144) and $355,325, respectively.

 

 

 

 

On October 2, 2017, the Company entered into an agreement with Pacific Pain & Regenerative Medicine. The Company was required to pay $3,000 per month for a collector in exchange for a minimum of 5 PGX tests per week or 20 per month. During the year ended June 30, 2018, the Company terminated the services and stopped making the monthly payments. As of December 31, 2019 and June 30, 2019, the Company has accrued expense of $21,000 and $21,000, respectively.

 

On October 17, 2017, the Company entered into an agreement of the acquisition financing of up to $30,000,000 (“the “Placement’) with Wellington Shields & Co. The Company shall pay (i) a success fee equal to 8% of the gross proceeds of the Placement, (ii) 3% of the total Company’s shares outstanding at the time of closing the placement, and (iii) was required to pay $15,000 at the time of signing and $10,000 per month. This engagement agreement was terminated at the close of business April 30, 2018. During the year ended June 30, 2019, the Company recognized gain on settlement of debt of $50,000. As of December 31, 2019 and June 30, 2019, the Company has accrued expense of $10,000 and $10,000, respectively.

 

 

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 six months ended December 31, 2019 and 2018, the Company incurred $1,259 and $1,246, respectively.

 

 

The Company is authorized to issue 60,000,000 shares of Series A Preferred Stock at a par value of $0.0001.

 

Each Series A preferred share is convertible into 1,500 shares of common stock and has the voting rights of 1,000 shares of common stock.

 

As of December 31, 2019 and June 30, 2019, 9,750,000 shares of the Company's Series A Preferred Stock were issued and outstanding.

 

 

During the six months ended December 31, 2019, the Company issued 280,205,250 shares of common stock for conversion of debt and accrued interest of $24,108.

 

As at December 31, 2019 and June 30, 2019, 5,376,140,774 and 5,095,935,524 shares of the Company's common stock were issued and outstanding.

 

As of December 31, 2019, 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.

 

 

 

In March 2016, the Company appointed the former CEO and approved a base compensation package of $8,000 per month. During the six months ended December 31, 2019 and 2018, the Company recorded management fees of $48,000 and $48,000, respectively. As of December 31, 2019, and June 30, 2019, the Company recorded accrued salary of $45,506 and $3,506, respectively.

 

During the six months ended December 31, 2019 and 2018, the Company borrowed a total amount of $25 and $377 from Evergreen Venture Partners LLC (“EVP”), which the former CEO is the majority owner, and repaid $0 and $300, respectively. This loan was a non-interest bearing and due on demand. On February 7, 2020, a separation agreement was entered into between the Company and the former CEO, pursuant to which, the Company shall amend the loan from interest free to 6% per annum and to recognize all prior unaccrued interest at 6% per annum. In addition, this loan became convertible upon execution of this separation agreement, at a 45% discount to market. For the six months ended December 31, 2019, the Company recorded an interest expense of $16,000, representing the cumulative interest for the period this loan has been outstanding, as a result of signing the agreement. As of December 31, 2019, and June 30, 2019, the Company owed EVP $104,249 and $88,224, respectively.

 

 

On February 7, 2020, the Company’s Board of Directors approved the employment contract of Todd Violette as the new CEO and the appointment of Todd Violette as a new Director and elected him to the position of Chairmen of the Board of Directors. Mr. Violette’s base salary shall be $240,000 per annum and he received 50,250,000 shares of Class A Preferred stock. In addition, Mr. Violette was granted an option to purchase up to10% of the common stock outstanding at prevailing market price, within twenty-four months.

 

On February 7, 2020, the former CEO agreed to reduce the salary payable to him to $26,750.