APPYEA, INC - Quarter Report: 2014 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUAN T TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

[   ]

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: 333-190999

(Exact Name of Registrant as Specified in its Charter)

(Address of Principal Executive Offices)  (Zip Code)

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

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 [  ]

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, or a smaller reporting company.  See definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]     No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 34,535,660 shares outstanding as of November 18, 2014.

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APPYEA, INC.

Index

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APPYEA, INC.

CONDENSED BALANCE SHEETS

See accompanying notes to condensed unaudited financial statements.

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APPYEA, INC.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

 

See accompanying notes to condensed unaudited financial statements.

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APPYEA, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

See accompanying notes to condensed unaudited financial statements.

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AppYea, Inc.

NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2014 AND 2013

(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 has no significant revenues and a limited operating history.

The Company's common stock was approved for quotation on the OTC Markets (www.otcmarkets.com) on September 18, 2014, under the symbol "APYP". 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The Company's fiscal year end is June 30. The accompanying unaudited interim condensed financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting and are presented in US dollars. Accordingly, these unaudited interim condensed financial statements do not include all information and footnote disclosures required for an annual set of financial statements prepared under United States generally accepted accounting principles. In the opinion of our management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial position, results of operations and cash flows as of September 30, 2014 and for the interim periods presented herein have been reflected in these unaudited interim condensed financial statements and the notes thereto. Interim results included herein are not necessarily indicative of the results to be expected for the fiscal year as a whole. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and accompanying notes for the fiscal year ended June 30, 2014, included in its Annual Report on Form 10-K filed on October 14, 2014.

 

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.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents.

Fixed Assets

 

The Company's fixed assets represent mobile applications that is has purchased and upgrades that it has made to these applications. These mobile applications and any upgrades are being amortized over their useful lives of 3 years.

Deferred Costs

Offering costs with respect to issue of common stock, warrants or options by the Company are initially deferred and ultimately offset against the proceeds from these equity transactions if successful or expensed if the proposed equity transaction is unsuccessful.

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Financial Instruments 

 

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability.  ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

FASB ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

 

 Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.

 

 Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

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

 

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

Revenue Recognition

The Company generates it revenue from the sale of its mobile software applications through online mobile applications stores. Revenue is recognized in accordance with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition", when the following criteria are met: persuasive evidence of an arrangement exists, delivery of the product has occurred, the fee is fixed or determinable, and collectability is probable. The Company has no remaining obligation to customers after the date on which its customers purchase its mobile software applications.

Research and Development Costs

Costs incurred in research and development activities are expensed as incurred.

Advertising cost

 

Advertising costs were expensed as incurred. Advertising costs of $2,483 and $75 were incurred during the quarters ended September 30, 2014 and 2013, respectively.

Comprehensive Income (Loss)

 

Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From the Company's Inception there have been no differences between its comprehensive loss and net loss.

Income Taxes

 

The Company accounts for income taxes in accordance with FASB ASC 740 "Income Taxes". Under FASB ASC 740, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. FASB ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. At September 30, 2014 and June 30, 2014, a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded.

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Basic and Diluted Net Income (Loss) per Share

 

The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share" which 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 income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, 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 common shares if their effect is anti-dilutive. During the quarter ended September 30, 2014 and 2013, there were shares of convertible preferred stock outstanding and conversion privileges attached to convertible promissory notes payable.  The common share equivalents of these securities have not been included in the calculations of loss per share because such inclusions would have an anti-dilutive effect as the Company has incurred losses during the three month periods ended September 30, 2014 and 2013.

 

Business Segments

 

The Company believes that its activities for the periods presented herein comprised a single segment. 

Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as "Development Stage Entities" (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and shareholder equity. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915.  The Company has elected to early adopt these provisions and consequently these additional disclosures are not included in these financial statements.

Management has considered all recent accounting pronouncements issued since the last audit of its financial statements. The Company's management believes that these recent pronouncements except No. 2014-10, will not have a material effect on the Company's financial statements.

3. GOING CONCERN AND LIQUIDITY

 

At September 30, 2014, the Company had cash of $4,787 and current liabilities of $29,654 and has incurred losses of $146,507 since Inception (November 26, 2012).

 

The Company anticipates future losses in its business.

 

In our financial statements for the period Inception (November 26, 2012) to June 30, 2014, the Report of the Independent Registered Public Accounting Firm included an explanatory paragraph that describes substantial doubt about our 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 September 30, 2014 and June 30, 2014, the balance of fixed assets represented mobile application software as follows:

Depreciation expense for the period ended September 30, 2014 and 2013 was $10,615 and $10,292, respectively.

5. CONVERTIBLE LOANS – RELATED PARTIES

During the three months ended September 30, 2014, the Company repaid $2,000 to the related parties in cash and accrued interest of $641 on the outstanding balance of convertible loans. As at September 30, 2014 and June 30, 2014, the Company had convertible loans outstanding of $24,000 and $26,000, respectively.

6. 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.

7. 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.

 

A convertible preferred share is convertible into 100 shares of common stock and has the voting rights of 1,000 share of common stock.

 

As at September 30, 2014 and June 30, 2014, 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.

During the quarter ended September 2014, the Company issued 20,000 shares of common stock, at $0.75 per share, to an investor for cash consideration of $15,000; and 3,000 shares of common stock, at $0.75 per share, to a second investor for cash consideration of $2,250.

As at September 30, 2014 and June 30, 2014, 34,535,660 and 34,512,660 shares of the Company's common stock were issued and outstanding, respectively.

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8. RELATED PARTY TRANSACTIONS

The President of the Company provides management and office premises to the Company for no compensation.

9. INCOME TAXES

The Company follows ASC 740. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.

The provision for refundable federal income tax at 34% consists of the following for the periods ending:

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows: 

At September 30, 2014 the Company had an unused net operating loss carry-forward approximating $146,507 that is available to offset future taxable income; the loss carry-forward will start to expire in 2033.

10. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of the issuance of these interim condensed financial statements and the Company did not have any material recognizable subsequent events.

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

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 September 30, 2014, and the results of operations for the three months ended September 30, 2014.  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 years ended June 30, 2014 and June 30, 2013.

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.

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.

We generated revenue of $1,329 and $2,762 for the three months ended September 30, 2014 and 2013, respectively. For the three months ended September 30, 2014, we had a smaller mobile apps offering than in the corresponding period during the prior year. 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 $27,343 and $18,617, for the three months ended September 30, 2014 and 2013, respectively. Operating expense increases during the three months ended September 30, 2014 were primarily the result of increased sales and marketing fees as well as the costs associated with managing and maintain our public financial reporting requirements.

As a result of the foregoing, we incurred losses of $26,655 and $17,041 during the three months ended September 30, 2014 and 2013, respectively.

Our activities have been entirely directed at the development of our internal apps, the acquisition of third party apps, and the sourcing of capital to fund these activities.

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As of September 30, 2014, we had cash or cash equivalents of $4,787.

Net cash used in operating activities was $14,867 for the three months ended September 30, 2014 and $10,038 for the three months ended September 30, 2013. The increase in the cash used in operating activities in the three months ended September 30, 2014 as opposed to the three months ended September 30, 2013 was due to the increase in our operating losses we incurred between the two periods. At September 30, 2014 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 three months ended September 30, 2014 and $4,000 for the three months ended September 30,2 013.During the three months ended September 30, 2013 we incurred $4,000 in the purchase of mobile application software. Due to lack of funding, we made no similar purchase during the three months ending September 30, 2014. The Company is currently seeking acquisition targets and subject to our executing any purchase agreements, we may have significant cash outlays for investing activities. Should we close on any acquisitions, we will most likely need to sell additional securities and/or borrow additional funds in order to fund such acquisitions and to meet our business objectives during the next twelve months.

Net cash provided by financing activities for the three months ended September 30, 2014 was $15,250, compared to net cash used in financing activities of $2,898 for the three months ended September 30, 2013.During the three months ended September 30, 2014 we sold 23,000 shares of our commons stock for proceeds of $17,250 and used $2,000 to repay part of our outstanding convertible notes payable. During the three months ended September 30, 2013 we used $1,398 in deferred financing costs and $1,500 to repay part of our outstanding convertible notes payable.

As of September 30, 2014, our total assets were $66,569 and our total liabilities were $29,654. Included in our assets of as of September 30, 2014 was $4,787 of cash, $33 of accounts receivable and net fixed assets of $61,749.  As of June 30, 2014 our total assets were $76,779 and our total liabilities were $30,459.

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.

We have now completed the FINRA process of obtaining our initial stock symbol, which is "APYP", however, there is currently no market for the trading of our common stock. Once our common stock is publicly traded, we believe that opportunities to either raise additional capital though the issuance of our common stock and/or use shares of our common stock for acquisitions will significantly improve. We anticipate our common stock being publicly traded during our second fiscal quarter (quarter ending December 31) of 2014. We are currently exploring various options for selling additional shares of our common stock.

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.

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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 cap ital 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;

·

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.

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.

·

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.

PART II. OTHER INFORMATION

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

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

In September of 2014, we accepted a common stock purchase agreement from an investor for the purchase of 20,000 shares of our common stock for $15,000, and we accepted a second common stock purchase agreement from an investor for the purchase of 3,000 shares of common stock for $2,250. We plan to use the proceeds from the sale of common stock to fund working capital needs and for general corporate purposes.

None.

Not applicable to our Company.

None.

31

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Jackie Williams.

32

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Jackie Williams.

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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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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:  November 18, 2014

Jackie Williams, President, Principal Financial Officer, Principal Accounting Officer, and Director