APPYEA, INC - Quarter Report: 2015 March (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 March 31, 2015

[   ]

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: 36,266,989 shares outstanding as of May 20, 2015.

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PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

 

APPYEA, INC.
CONDENSED BALANCE SHEETS
		March 31,				June 30,
		2015				2014
		(unaudited)				(unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	8,194			$	4,404
Accounts receivable			—				11
Prepaid expenses			1,611,313				—
Total current assets			1,619,507				4,415
Fixed assets (net of accumulated depreciation of $95,988 (unaudited) and $55,811, respectively)			92,187				72,364
Total assets		$	1,711,693			$	76,779
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	11,094			$	422
Derivative liabilities			154,095				—
Convertible loans, net of debt discounts - related parties			26,712				30,037
Total current liabilities			191,901				30,459
Total liabilities			191,901				30,459
Commitments and contingencies (note 6)
Stockholders' equity:
Convertible preferred stock, $0.0001 par value, 5,000,000 shares authorized, 5,000,000 shares issued and outstanding at March 31, 2015 (unaudited) and June 30, 2014, respectively.			500				500
Common stock, $0.0001 par value, 750,000,000 shares authorized, 36,266,989 (unaudited) and 34,512,660 shares issued and outstanding at March 31, 2015 and June 30, 2014, respectively.			3,626				3,451
Additional paid-in capital			1,943,091				162,221
Accumulated deficit			(427,425	)			(119,852	)
Total stockholders' equity			1,519,792				46,320
Total Liabilities and Stockholders' Equity		$	1,711,693			$	76,779

 

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See accompanying notes to condensed unaudited financial statements.

 

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App Yea, Inc.

(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.

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 March 31, 2015 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.

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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 $149 and $17,436 (2015) and $84 and $2,721 (2014) were incurred during the three and nine months ended March 31, 2015 and 2014, 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 were 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 March 31, 2015 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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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 of March 31, 2015 and June 30, 2014, the balance of fixed assets represented mobile application software as follows:

Depreciation expenses of $15,615 and $40,177 (2015) and $10,615 and $31,438 (2014) were incurred during the three and nine months ended March 31, 2015 and 2014, respectively.

5. CONVERTIBLE LOANS – RELATED PARTIES

On February 9, 2015, the Company issued a $15,000 convertible promissory note payable. The unsecured convertible promissory note payable is due upon demand and carried 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 February 9, 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 (February 9, 2015) at $21,817 using the Black Scholes valuation model with the following assumptions: dividend yield of zero, 12 months to maturity, risk free interest rate of 0.25% and a volatility over the 12 month period of 168%.  $15,000 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 $6,817 of the value assigned to the derivative liability was recognized as origination interest on the derivative liability and expensed on the issue date of the convertible note payable.

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 another income or expense item.

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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 another income or expense item.

 

At March 31, 2015, the Company revalued the conversion feature of the convertible debenture using the Black Scholes valuation model with the following assumptions: 11 months and 17 day risk free interest rate of 0.250% and volatility over an 11 month and 17 day period of 168% and determined that, since the issue date, the fair value of our derivative liability had decreased by $67 to $14,485.  Accordingly we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

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 another income or expense item.

 

At March 31, 2015, the Company revalued the conversion feature of the $15,000 convertible debenture issued on April 2, 2013 using the Black Scholes valuation model with the following assumptions: 8 month and 15 day risk free interest rate of 0.172% and volatility over a 8 month and 15 day period of 167% and determined that, since the last day of the previous quarter, the fair value of our derivative liability had decreased by $6,797 to $23,698.  Accordingly we recognized a corresponding gain on derivative liability in conjunction with this revaluation.

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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 March 31, 2015, and the results of operations for the three and nine months ended March 31, 2015.  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 filed on October 14, 2014 for the year ended June 30, 2014.

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.

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Net cash provided by financing activities for the nine months ended March 31, 2015 was $68,250, compared to $3,739 provided by financing activities for the nine months ended March 31, 2014. During the nine months ended March 31, 2015 we received $23,250 from the sale of shares of our common stock for cash, issued convertible notes in an amount of $47,000 and repaid $2,000 of the balance of the convertible notes.

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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: