EVIO, INC. - Annual Report: 2016 (Form 10-K)

sgby_10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2016

o 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:000-12350

Signal Bay, Inc.

(Exact name of registrant as specified in its charter)

Colorado		47-1890509
(State of Incorporation)		(I.R.S. Employer Identification No.)

62930 O.B. Riley Rd, Suite 300 Bend, OR		97703
(Address of principal executive offices)		(Zip Code)

(541) 633-4568

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common stock, $.0001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x

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. Yes x No o

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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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 “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal quarter (March 31, 2016): $178,033

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Title of Each Class		Outstanding as of February 20, 2017
Common stock, par value $0.0001 per share		948,455,300
Class A Preferred Stock, par value $0.0001 per share		0
Class B Preferred Stock, par value $0.0001 per share		5,000,000
Class C Preferred Stock, par value $0.0001 per share		500,000
Class D Preferred Stock, par value $0.0001 per share		832,500

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

		Page
PART I

Item 1.	Business		4
Item 1A.	Risk Factors		5
Item 1B.	Unresolved Staff Comments		5
Item 2.	Properties		5
Item 3.	Legal Proceedings		5
Item 4.	Mine Safety Disclosure		5

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		6
Item 6.	Selected Financial Data		7
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		7
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		11
Item 8.	Financial Statements and Supplementary Data		12
	Balance Sheets		F-2
	Statements of Operations		F-3
	Statements of Stockholders’ Equity (Deficit)		F-4
	Statements of Cash Flows		F-5
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		13
Item 9A.	Controls and Procedures		13
Item 9B.	Other Information		14

PART III

Item 10.	Directors, Executive Officers and Corporate Governance		15
Item 11.	Executive Compensation		16
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		17
Item 13.	Certain Relationships and Related Transactions, and Director Independence		17
Item 14.	Principal Accountant Fees and Services		18

PART IV

Item 15.	Exhibits and Financial Statement Schedules		19

SIGNATURES			20

PART I

Forward-Looking Statements

This report includes forward-looking statements as the term is defined in the Private Securities Litigation Reform Act of 1995 or by the U.S. Securities and Exchange Commission in its rules, regulations and releases, regarding, among other things, all statements other than statements of historical facts contained in this report, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. In addition, our past results of operations do not necessarily indicate our future results.

Other sections of this report may include additional factors which could adversely affect our business and financial performance. New risk factors emerge from time to time and it is not possible for us to anticipate all the relevant risks to our business, and we cannot assess the impact of all such risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements. Those factors include, among others, those matters disclosed in this Annual Report on Form 10-K.

Except as otherwise required by applicable laws and regulations, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this report, whether as a result of new information, future events, changed circumstances or any other reason after the date of this report. Neither the Private Securities Litigation Reform Act of 1995 nor Section 27A of the Securities Act of 1933 provides any protection to us for statements made in this report. You should not rely upon forward-looking statements as predictions of future events or performance. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. 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.

The Company maintains an internet website at www.signalbay.com. The Company makes available, free of charge, through the Investor Information section of the web site, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Section 16 filings and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission. Any of the foregoing information is available in print to any stockholder who requests it by contacting our Investor Relations Department.

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ITEM 1. BUSINESS

Corporate Background and Our Business

Business of Registrant

Signal Bay, Inc., a Colorado corporation and its subsidiaries (“Signal Bay”, the “Company”, the "Registrant", “we”, “our”, or “us”) provide advisory, management and analytical testing services to the emerging legalized cannabis industry. Our three business units are described below:

Signal Bay, Inc. was originally incorporated in the State of New York, December 12, 1977 under the name 3171 Holding Corporation. On February 22, 1979 the name was changed to Electronomic Industries Corp. and on February 23, 1983 the name was changed to Quantech Electronics Corp. The Company was reincorporated in the State of Colorado on December 15, 2003. On August 29, 2014, the Company completed a reverse merger with Signal Bay Research, Inc., a Nevada Corporation, and took over its operations. In September 2014, the Company changed its name from Quantech Electronics Corp. to Signal Bay, Inc. The Company has selected September 30 as its fiscal year end. Signal Bay, Inc. is domiciled in the State of Colorado, and its corporate headquarters is located in Bend, Oregon.

Signal Bay Research provides industry research, business and market intelligence, market forecasts, and operational insights. We also publish industry information via online media, research reports, and publications. Our media properties include CANNAiQ.com, a business to business information portal and MarijuanaMath.com a general interest informational website for the cannabis industry.

Signal Bay Services provides advisory and consulting services to cannabis companies including license application support, regulatory compliance and operating services for current and prospect licensed cannabis businesses. Signal Bay is also the home of the Cannabis Consultant Marketplace (CCM). The CCM is an outsourcing freelancing matching platform enabling cannabis companies to post projects and hire consultants.

EVIO, Inc. d/b/a EVIO Labs is the wholly owned analytical laboratory division of Signal Bay. EVIO Labs consists of three operating companies, CR Labs, Inc. d/b/a EVIO Labs Bend, EVIO Labs Eugene, d/b/a Oregon Analytical Services and Smith Scientific Industries, Inc. d/b/a Kenevir Research all of which provide compliance testing services in accordance with the Oregon Health Authority. Tests include residual solvent analysis, pesticide screening, microbiological screening, terpene analysis, and cannabinoid potency profiling of cannabis and cannabis infused products.

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ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

The above statement notwithstanding, shareholders and prospective investors should be aware that certain risks exist with respect to the Company and its business, including those risk factors contained in our most recent Registration Statements on Form 10, as amended. These risks include, among others: limited assets, lack of significant revenues and only losses since inception, industry risks, dependence on third party manufacturers/suppliers and the need for additional capital. The Company’s management is aware of these risks and has established the minimum controls and procedures to insure adequate risk assessment and execution to reduce loss exposure.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 2. PROPERTIES

Our executive mailing address is located at 62930 O. B. Riley Rd, Suite 300, Bend, OR 97703 and our telephone number is (541) 633-4568.

Our three analytical testing labs are located at:

Bend, OR:	62930 O.B. Riley Rd, Suite 300, Bend, OR 97703
Medford, OR:	540 E. Vilas Rd, Suite F, Central Point, OR 97502
Eugene, OR:	1686 Pearl St, Eugene, OR 97401

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

The Company intends to hold an annual shareholders’ meeting in the third quarter of the fiscal year ending September 30, 2017.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASE OF EQUITY SECURITIES

Market Information

Our common stock trades over-the-counter and is quoted on the OTC Bulletin Board under the symbol “SGBY.” The table below sets forth the high and low bid prices for our common stock as reflected on the OTC Bulletin Board for the last two fiscal years. Quotations represent prices between dealers, do not include retail markups, markdowns or commissions, and do not necessarily represent prices at which actual transactions were affected.

Common Stock
Fiscal Year 2016	High		Low
First Quarter	$	0.0190	$	0.0097
Second Quarter	$	0.0161	$	0.0013
Third Quarter	$	0.0018	$	0.0006
Fourth Quarter	$	0.0280	$	0.0004

Common Stock
Fiscal Year 2015	High		Low
First Quarter	$	0.07	$	0.02
Second Quarter	$	0.05	$	0.0225
Third Quarter	$	0.0999	$	0.011
Fourth Quarter	$	0.02	$	0.0051

Holders of Common Equity

As of September 30, 2016 there were 850,064,268 common shares outstanding. During the fiscal year ending September 30, 2016, the high and low sales prices of our common stock on the OTCQB were $0.0280 and $0.0004 respectively, and there were approximately 35 holders of record of our common stock.

Penny Stock Rules

Due to the price of our common stock, as well as the fact that we are not listed on Nasdaq or another national securities exchange, our stock is characterized as a “penny stock” under applicable securities regulations. Our stock therefore is subject to rules adopted by the SEC regulating broker-dealer practices in connection with transactions in penny stocks. The broker or dealer proposing to effect a transaction in a penny stock must furnish his customer a document containing information prescribed by the SEC and obtain from the customer an executed acknowledgment of receipt of that document. The broker or dealer must also provide the customer with pricing information regarding the security prior to the transaction and with the written confirmation of the transaction. The broker or dealer must also disclose the aggregate amount of any compensation received or receivable by him in connection with such transaction prior to consummating the transaction and with the written confirmation of the trade. The broker or dealer must also send an account statement to each customer for which he has executed a transaction in a penny stock each month in which such security is held for the customer’s account. The existence of these rules may have an effect on the price of our stock, and the willingness of certain brokers to effect transactions in our stock.

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Transfer Agent

Pacific Stock Transfer is the transfer agent for our common stock with its business address at 6725 Via Austi Pkwy, Suite 300 Las Vegas, NV 89119 and its telephone number is (702) 361-3033.

Dividend Policy

Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the development and growth of our business, our Board of Directors has the discretion to declare and pay dividends in the future

ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained herein involve risks and uncertainties, including statements as to:

	·	our future operating results;
	·	our business prospects;
	·	our contractual arrangements and relationships with third parties;
	·	the dependence of our future success on the general economy;
	·	our possible financings; and
	·	the adequacy of our cash resources and working capital.

These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this report. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto, included elsewhere in this 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 those differences include those discussed below and elsewhere in this report, particularly in the “Risk Factors” section.

Going Concern

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have an established source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

In the coming year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with operations and business developments. The Company may experience a cash shortfall and be required to raise additional capital.

Historically, it has mostly relied upon internally generated funds such as shareholder loans and advances to finance its operations and growth. Management may raise additional capital by retaining net earnings or through future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon it and its shareholders.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

Critical Accounting Policies and Estimates.

Revenue Recognition:

Signal Bay recognizes revenue from the sale of services in accordance with ASC 605. Revenue will be recognized only when all of the following criteria have been met:

* Persuasive evidence of an arrangement exists;

* Delivery has occurred or services have been rendered.

* The price is fixed or determinable; and

* Collectability is reasonably assured.

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Stock Based Compensation

Pursuant to Accounting Standards Codification (“ASC”) 505, the guidelines for recording stock issued for services require the fair value of the shares granted be based on the fair value of the services received or the publicly traded share price of the Company’s registered shares on the date the shares were granted (irrespective of the fact that the shares granted were unregistered), whichever is more readily determinable. This position has been further clarified by the issuance of ASC 820. ASC 820 defines fair value as “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”. Accordingly, the Company elected the application of these guidelines. Signal Bay has determined that the fair value of all common stock issued for goods or services is more readily determinable based on the publicly traded share price on the date of grant.

Critical Accounting Policies and Estimates.

While our significant accounting policies are more fully described in notes to our consolidated financial statements appearing elsewhere in this Form 10-K, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we used in the preparation of our financial statements.

RESULTS OF OPERATIONS

Revenues

							Percentage of Revenue
	2016		2015		Change		2016			2015
Testing services	$	305,679	$	2,835	$	302,844		54	%		2	%
Consulting services		255,282		122,364		132,918		46	%		98	%
Total revenue		560,961		125,199		435,762		100	%		100	%

Cost of revenue
Testing services	$	391,753	$	19,458	$	372,295		70	%		16	%
Consulting services		110,135		72,834		37,301		20	%		58	%
Total cost of revenue		501,888		92,292		409,596		90	%		74	%

Gross Profit	$	59,073	$	32,907	$	26,166		11	%		26	%

Revenues for the year ended September 30, 2016 were $560,961 compared to $125,199 for the year ended September 30, 2015. The increase in revenues during the year ended September 30, 2016 is the result increased advisory services performed in the current year compared to the prior year as well as increased testing services resulted from acquisitions completed during the year ended September 30, 2016. Additionally, Signal Bay Research experienced year over year growth of $132,918, or 109%, in consulting services during the year ended September 30, 2016. Cost of revenues for the year ended September 30, 2016 were $501,888 compared to $92,292 for the year ended September 30, 2015. The increase in the cost of revenues during the year ended September 30, 2016 is the result of the increased direct costs associated with providing testing services, along with hiring additional consultants to support the increased advisory services. Gross profit for the year ended September 30, 2016 were $59,073 compared to $32,907 during the year ended September 30, 2015. The Company experienced an increase of $26,166, or 80%, in gross profit primarily attributable to the increased advisory services during the fiscal year.

Operating Expenses

								Percentage of Revenue
	2016		2015		Change			2016			2015
Selling, general and administrative	$	785,758	$	1,313,234	$	(527,476	)		140	%		1049	%
Depreciation and amortization		65,863		17,010		48,853			12	%		14	%
	$	851,621	$	1,330,244	$	(478,623	)		152	%		1063	%

Total operating expenses during the year ended September 30, 2016 were $851,621 compared to $1,330,244 during the year ended September 30, 2015. The Company experienced a decrease of $478,623 or 36% in selling, general and administrative expenses during the year ended September 30, 2016 compared to the year ended September 30, 2015 due to lower stock based compensation expenses associated with the employee equity incentive plan. There was an increase of $48,853 in depreciation and amortization which was driven by the amortization of intangible assets associated with the acquisitions completed during the year ended September 30, 2016.

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Other Expenses

							Percentage of Revenue
	2016		2015		Change		2016			2015
Interest expense	$	324,282	$	38,438	$	285,844		58	%		31	%
Loss on disposal of asset		720		-		720		0	%		0	%
Loss on change in fair market value of derivative liabilities		1,434,540		120,460		1,314,080		256	%		96	%
	$	1,759,542	$	158,898	$	1,600,644		314	%		127	%

Total other expenses were $1,759,542 during the year ended September 30, 2016 compared to $158,898 during the year ended September 30, 2015. The increase of $1,600,644 is from the increase in the loss on fair market value of derivatives of $1,314,080 and increases in interest expense from the recognition of debt discounts associated with convertible notes payable which totaled $236,816 and $38,438 during the years ended September 30, 2016 and 2015, respectively.

Net Loss

										Percentage of Revenue
	2016			2015			Change			2016			2015
Net loss	$	(2,552,090	)	$	(1,456,235	)	$	(1,095,855	)		-455	%		-1163	%

Net loss during the year ended September 30, 2016 was $2,552,090 compared to $1,456,235 during the year ended September 30, 2015. The increase in net loss is directed from the increase in other expenses partially offset by an increase in revenues as described above.

Liquidity and Capital Resources

The Company had cash on hand of $57,486 as of September 30, 2016, current assets of $131,969 and current liabilities of $1,716,246 creating a working capital deficit of $1,584,277. Current assets consisted of cash totaling $57,486, accounts receivable of $9,483 other current assets of $40,000 and note receivable of $25,000. Current liabilities consisted of accounts payable and accrued liabilities of $245,816, convertible notes payable net of discounts of $257,605, interest payable of $27,197, derivative liabilities of $775,246, current portions of notes payable of $77,375 and current portions of related party payables of $333,007.

The Company used $276,953 of cash in operating activities which consisted of a net loss of $2,552,090, non-cash losses of 2,005,554 and changes in working capital of $269,583.

Net cash used in investing activities total $29,396 during the year ended September 30, 2016. The Company acquired net cash of $9,055 in acquisitions, paid $13,451 for the purchase of equipment and issued a note receivable for $25,000.

During the year ended September 30, 2016, the Company generated cash of $337,869 from financing activities. The Company received $48,000 of cash from the sale of series D preferred stock, $349,640 in cash from convertible notes payable, net advances from loans payable of $1,725 and made net repayments on related party notes payable of $61,496.

Dividends

During the twelve months ended September 30, 2016, the Company declared $0 in dividends.

Employees

As of September 30, 2016 Signal Bay had 16 full time employees of which 14 are employed by EVIO Labs.

Need for Additional Financing

The Company is uncertain of its ability to generate sufficient liquidity from its operations so the need for additional funding may be necessary. The Company may sell stock and/or issue additional debt to raise capital to accelerate our growth.

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Going Concern Uncertainties

In management’s opinion, the Company’s cash position is insufficient to maintain its operations at the current level for the next 12 months. Any expansion may cause the Company to require additional capital until such expansion began generating revenue. It is anticipated that the raise of additional funds will principally be through the sales of our securities. As of the date of this report, additional funding has not been secured and no assurance may be given that we will be able to raise additional funds.

Emerging Growth Company Status

We are an “emerging growth company” as defined under the Jumpstart Our Business Startups Act, commonly referred to as the JOBS Act. We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

As an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:

	·	not being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act (we also will not be subject to the auditor attestation requirements of Section 404(b) as long as we are a “smaller reporting company,” which includes issuers that had a public float of less than $ 75 million as of the last business day of their most recently completed second fiscal quarter);

	·	reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

	·	exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Under this provision, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. In other words, an “emerging growth company” can delay the adoption of such accounting standards until those standards would otherwise apply to private companies until the first to occur of the date the subject company (i) is no longer an “emerging growth company” or (ii) affirmatively and irrevocably opts out of the extended transition period provided in Securities Act Section 7(a) (2) (B). The Company has elected to take advantage of this extended transition period and, as a result, our financial statements may not be comparable to the financial statements of other public companies. Accordingly, until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a) (2) (B), upon the issuance of a new or revised accounting standard that applies to your financial statements and has a different effective date for public and private companies, clarify that we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.

Accounting and Audit Plan

In the next twelve months, we anticipate spending approximately $75,000 to $100,000 to pay for our accounting and audit requirements.

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 is material to stockholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company, as a smaller reporting company, as defined by Rule 229.10(f)(1) , is not required to provide the information required by this Item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SIGNAL BAY, INC.

FORM 10-K

September 30, 2016

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets		F-2
Consolidated Statements of Operations		F-3
Consolidated Statements of Stockholders' (Deficit) Equity		F-4
Consolidated Statements of Cash Flows		F-5
Notes to the Consolidated Financial Statements		F-6

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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of

Signal Bay, Inc and Subsidiaries

Las Vegas, Nevada

We have audited the accompanying consolidated balance sheets of Signal Bay, Inc. and Subsidiaries (collectively, the “Company”) as of September 30, 2016 and 2015, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Signal Bay, Inc. and Subsidiaries as of September 30, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the consolidated financial statements, the Company has negative working capital, recurring losses from operations and likely needs financing in order to meet its financial obligations. These conditions raise significant doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 4. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty

MALONEBAILEY, LLP

www.malonebailey.com

Houston, Texas

February 23, 2017

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SIGNAL BAY, INC.
CONSOLIDATED BALANCE SHEETS

	September 30,
	2016			2015
ASSETS

Current assets
Cash	$	57,486		$	25,966
Accounts receivable		9,483			11,546
Prepaid expenses		-			5,000
Other current asset		40,000			-
Note receivable		25,000			-
Total current assets		131,969			42,512

Fixed assets, net of accumulated depreciation of $72,182 and $26,994, respectively		237,020			132,040
Cost basis investment		-			40,000
Security deposits		6,476			-
Intangible assets, net of accumulated amortization of $45,747 and $0, respectively		395,123			67,428
Goodwill		1,415,408			446,743

Total assets	$	2,185,996		$	728,723

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities
Accounts payable and accrued liabilities	$	245,816		$	57,983
Convertible notes payable, net of discounts of $121,496 and $64,062, respectively		257,605			38,438
Interest payable		27,197			-
Derivative liability		775,246			200,460
Loan payable, current		77,375			-
Loans payable, related party, current		333,007			133,507
Total current liabilities		1,716,246			430,388

Loans payable, related party, net of current portion		876,751			13,047
Total liabilities		2,592,997			443,435

Commitments and contingencies.

Stockholders' (deficit) equity
Series A Convertible Preferred Stock, Par Value $0.0001, 1,850,000 authorized, 1,840,000 shares issued and outstanding at September 30, 2016 and 2015		184			184
Series B Convertible Preferred Stock, Par Value $0.0001, 5,000,000 authorized, 5,000,000 shares issued and outstanding at September 30, 2016 and 2015		500			500
Series C Convertible Preferred Stock, Par Value $0.0001, 500,000 authorized, 500,000 and 0 shares issued and outstanding at September 30, 2016 and 2015, respectively		50			-
Series D Convertible Preferred Stock, Par Value $0.0001, 1,000,000 authorized, 48,000 and 0 shares issued and outstanding at September 30, 2016 and 2015, respectively		5			-
Common Stock, Par Value $0.0001, 3,000,000,000 authorized, 850,064,268 and 398,648,595 issued and outstanding at September 30, 2016 and 2015, respectively		85,006			39,865
Additional Paid In Capital		3,351,452			1,654,597
Accumulated Deficit		(4,032,177	)		(1,506,975	)
Total stockholders' (deficit) equity		(594,980	)		188,171
Non-controlling interest		187,979			97,117
Total (deficit) equity		(407,001	)		285,288

Total liabilities and stockholders' (deficit) equity	$	2,185,996		$	728,723

The accompanying notes are an integral part of these consolidated financial statements.

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SIGNAL BAY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

	Year ended September 30,
	2016			2015
Revenues
Testing services	$	305,679		$	2,835
Consulting services		255,282			122,364
Total revenue		560,961			125,199

Cost of revenues
Testing services		391,753			19,458
Consulting services		110,135			72,834
Total cost of revenues		501,888			92,292

Gross profit		59,073			32,907

Operating expenses
Selling, general and administrative		785,758			1,313,234
Depreciation and amortization		65,863			17,010
Total operating expenses		851,621			1,330,244

Loss from operations		(792,548	)		(1,297,337	)

Other expense
Interest expense		324,282			38,438
Loss on disposal of asset		720			-
Loss on change in fair market value of derivative liabilities		1,434,540			120,460
Total other expense		1,759,542			158,898

Net loss	$	(2,552,090	)	$	(1,456,235	)
Loss attributable to non-controlling interest		(26,888	)		(2,883	)
Net loss attributable to Signal Bay, Inc.	$	(2,525,202	)	$	(1,453,352	)

Basic and diluted loss per common share	$	(0.00	)	$	(0.00	)

Weighted average common shares outstanding, basic and diluted		514,879,824			331,669,771

The accompanying notes are an integral part of these consolidated financial statements.

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SIGNAL BAY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

	Series A Preferred Stock				Series B Preferred Stock				Series C Preferred Stock				Series D Preferred Stock				Common Stock				Additional Paid			Non-controling			Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		In Capital			Interest			Deficit			Total
Balance, September 30, 2014		1,840,000	$	184		5,000,000	$	500		-	$	-		-	$	-		290,144,844	$	29,014	$	(32,364	)	$	-		$	(53,623	)	$	(56,289	)
Common stock issued for cash		-		-		-		-		-		-		-		-		6,460,001		646		78,854			-			-			79,500
Common stock issued for software purchases		-		-		-		-		-		-		-		-		7,500,000		750		88,833			-			-			89,583
Common stock issued under employee equity incentive plan		-		-		-		-		-		-		-		-		37,043,750		3,705		883,124			-			-			886,829
Common stock issued for the conversion of notes payable		-		-		-		-		-		-		-		-		12,000,000		1,200		148,800			-			-			150,000
Common stock issued for financing commitment		-		-		-		-		-		-		-		-		3,500,000		350		60,550			-			-			60,900
Common stock issued for acquisition		-		-		-		-		-		-		-		-		40,000,000		4,000		396,000			-			-			400,000
Common stock issued for services		-		-		-		-		-		-		-		-		2,000,000		200		30,800			-			-			31,000
Minority interest in acquisition		-		-		-		-		-		-		-		-		-		-		-			100,000			-			100,000
Net loss, year ended September 30, 2015		-		-		-		-		-		-		-		-		-		-		-			(2,883	)		(1,453,352	)		(1,456,235	)
Balance September 30, 2015		1,840,000		184		5,000,000		500		-		-		-		-		398,648,595		39,865		1,654,597			97,117			(1,506,975	)		285,288
Series C preferred stock issued for acquisition		-		-		-		-		500,000		50		-		-		-		-		214,950			-			-			215,000
Series D preferred stock issued for cash		-		-		-		-		-		-		48,000		5		-		-		47,995			-			-			48,000
Common stock issued under employee equity incentive plan		-		-		-		-		-		-		-		-		6,087,500		609		45,864			-			-			46,473
Common stock issued for the conversion of notes payable		-		-		-		-		-		-		-		-		401,032,581		40,103		167,264			-			-			207,367
Common stock issued for the conversion of interest payable		-		-		-		-		-		-		-		-		1,468,582		147		3,988			-			-			4,135
Common stock issued for services		-		-		-		-		-		-		-		-		42,827,010		4,282		134,165			-			-			138,447
Common stock options issued under employee equity incentive plan		-		-		-		-		-		-		-		-		-		-		7,875			-			-			7,875
Reclassification of derivative liability to additional paid in capital		-		-		-		-		-		-		-		-		-		-		1,074,754			-			-			1,074,754
Minority interest in acquisition		-		-		-		-		-		-		-		-		-		-		-			117,750			-			117,750
Net loss, year ended September 30, 2016		-		-		-		-		-		-		-		-		-		-		-			(26,888	)		(2,525,202	)		(2,552,090	)
Balance, September 30, 2016		1,840,000	$	184		5,000,000	$	500		500,000	$	50		48,000	$	5		850,064,268	$	85,006	$	3,351,452		$	187,979		$	(4,032,177	)	$	(407,001	)

The accompanying notes are an integral part of these consolidated financial statements.

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SIGNAL BAY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended September 30,
	2016			2015
Cash flows from operating activities
Net loss	$	(2,552,090	)	$	(1,456,235	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		192,795			917,829
Depreciation and amortization expense		89,454			17,010
Amortization of debt discount		236,816			38,438
Loss on derivative liability		1,434,540			120,460
Default penalty on convertible debenture		51,229			-
Loss on disposal of asset		720			-
Loss on extinguishment of debt		-			110,000
Shares issued for financing commitment fee		-			60,900
Changes in operating assets and liabilities:
Accounts receivable		42,063			(18,409	)
Prepaid expenses		5,000			(5,000	)
Other current asset		(40,000	)		-
Security deposit		(6,476	)		-
Accounts payable		238,511			8,614
Accrued liabilities		(848	)		10,885
Interest payable		31,333			-
Customer deposits		-			774
Net cash used in operating activities		(276,951	)		(194,734	)

Cash flows from investing activities
Purchase of equipment		(13,451	)		(2,194	)
Note receivable		(25,000	)		-
Intangible assets		-			(3,500	)
Cash received in acquisition		9,055			2,970
Net cash used in investing activities		(29,396	)		(2,724	)

Cash flows from financing activities
Proceeds from issuance of common stock		-			79,500
Proceeds from the issuance of series D preferred stock		48,000			-
Proceeds from convertible notes, net of original issue discounts and fees		349,640			75,000
Proceeds from loan payable		59,587			-
Payment on loan payable		(57,862	)		-
Proceeds from notes payable - related party		26,000			-
Payments on notes payable - related party		(87,496	)		(1,076	)
Proceeds from related party advances		-			70,000
Net cash provided by financing activities		366,019			223,424

Net cash increase for period		31,520			25,966
Cash balance, beginning of period		25,966			-
Cash balance, end of period	$	57,486		$	25,966

Supplemental disclosure of cash flow information:
Cash paid for interest	$	12,098		$	-
Cash paid for income tax	$	-		$	-

Supplemental disclosure of non-cash investing and financing activities:
Conversion of convertible note and accrued interest into common stock	$	211,504		$	-
Reclassification of derivative liability to additional paid in capital	$	1,074,754		$	-
Acquisition of Oregon Analytical Services' assets through issuance of preferred stock, common stock and note payable	$	852,500		$	-
Acquisition of Smith Scientific through issuance of preferred stock, common stock and note payable	$	471,000		$	-
Expenses paid by note payable	$	52,000		$	-
Exchange of cost investment for account receivable	$	40,000		$	-
Debt discount from derivative liability	$	215,000		$	102,500
Common stock issued for purchase of software	$	-		$	58,333
Common stock issued for intangible assets	$	-		$	31,250
Related party note payable entered into for a 4% Interest in Libra Wellness Center, LLC	$	-		$	40,000
Common stock issued for settlement of account payable	$	-		$	40,000
Common stock issued for acquisition of CR Labs	$	-		$	400,000
Non-controlling interest in CR Labs	$	-		$	100,000
Equipment acquired in exchange of account receivable	$	-		$	10,413

The accompanying notes are an integral part of these consolidated financial statements.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – NATURE OF ACTIVITIES AND CONTINUANCE OF BUSINESS

Signal Bay, Inc., a Colorado corporation and its subsidiaries provide advisory, management and analytical testing services to the emerging legalized cannabis industry. Signal Bay, Inc. was originally incorporated in the State of New York, December 12, 1977 under the name 3171 Holding Corporation. On February 22, 1979 the name was changed to Electronomic Industries Corp. and on February 23, 1983 the name was changed to Quantech Electronics Corp. The Company was reincorporated in the State of Colorado on December 15, 2003. On August 29, 2014, the Company completed a reverse merger with Signal Bay Research, Inc., a Nevada Corporation, and assumed its operations. In September 2014, the Company changed its name from Quantech Electronics Corp. to Signal Bay, Inc. The Company has selected September 30 as its fiscal year end. Signal Bay, Inc. is domiciled in the State of Colorado, and its corporate headquarters is located in Bend, Oregon.

As a part of and prior to the consummation of the reverse merger, William Waldrop and Lori Glauser, principals of Signal Bay Research, Inc., purchased 28,811,933 shares of the Company (80% of the issued and outstanding common stock) from WB Partners. The merger between the Company and Signal Bay Research was finalized and closed contemporaneously with the share purchase. As part of this share purchase, Mr. Waldrop and Ms. Glauser became the officers and directors of the Company. Signal Bay Research was acquired through the issuance of 254,188,067 shares of common stock and 5,000,000 shares of Series B Preferred Stock to Mr. Waldrop and Ms. Glauser, pro rata. After the reverse merger, William Waldrop and Lori Glauser individually each own 127,500,000 shares of common stock and 2,500,000 shares of Series B Preferred stock in the Company. Immediately prior to the reverse merger, neither William Waldrop nor Lori Glauser had any interest in the Company. Immediately after to the reverse, WB Partners owned less than 5% of the common stock. The company filed a Form 10-12G on November 25, 2014, and was determined to be a shell company by the SEC as per the Form 10-12G/A which went effective on January 24, 2015. On January 29, 2015, the company filed an 8-K stating it entered into a material agreement and was no longer a shell company.

After the reverse merger, Signal Bay Research, Inc. continues to operate as a wholly owned subsidiary providing compliance, research and advisory services for Signal Bay, Inc.

Signal Bay Services was formed on January 25, 2015, as the management services division of Signal Bay.

On September 17, 2015, Signal Bay entered into a share exchange agreement with CR Labs, Inc., an Oregon Corporation, pursuant to which the company issued 40,000,000 shares of the Company’s common stock resulting in exchange for 80% of the outstanding common stock of CR Labs, Inc.

EVIO Inc. was formed on April 4, 2016 to become the holding company for all laboratory operations.

EVIO Labs Eugene was formed on May 23, 2016, as a wholly owned subsidiary of EVIO Inc. Subsequently on May 24, 2016, EVIO Labs Eugene acquired all of the assets of Oregon Analytical Services, LLC, inclusive of client lists, equipment, trade names and personnel.

On June 1, 2016, EVIO Inc. entered into a share purchase agreement to purchase 80% of the outstanding common stock of Smith Scientific Industries, Inc. d/b/a Kenevir Research in Medford, OR.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

A summary of significant accounting policies of Signal Bay, Inc. (the “Company”) is presented to assist in understanding the Company’s financial statements. The accounting policies presented in these footnotes conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the accompanying financial statements. These financial statements and notes are representations of the Company’s management who are responsible for their integrity and objectivity.

Principles of Consolidation

The Company prepares its financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and its wholly and partially owned subsidiaries, all of which have a fiscal year end of September 30. All intercompany accounts, balances and transactions have been eliminated in the consolidation.

The Company consolidates its subsidiaries in accordance with ASC 810, and specifically ASC 810-10-15-8 which states, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, or over 50% of the outstanding voting shares of another entity is a condition pointing toward consolidation."

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with original maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2016 or 2015.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at their original invoice amounts. We regularly review collectability and establish an allowance for uncollectible amounts as necessary. Management has determined that a reserve for uncollectible amounts was not required in the periods presented.

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment annually or more often if indicators of a potential impairment are present. Our annual impairment tests are conducted at the beginning of the fourth quarter. We use a two-step process to quantitatively evaluate goodwill for impairment. In the first step, we compare the fair value of each reporting unit with the carrying amount of the reporting unit, including goodwill. If the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, we complete a second step to determine the amount of the goodwill impairment that we should record. In the second step, we determine an implied fair value of the reporting unit's goodwill by allocating the reporting unit's fair value to all of its assets and liabilities other than goodwill (including any unrecognized intangible assets). We compare the resulting implied fair value of the goodwill to the carrying amount and record an impairment charge for the difference. We test individual indefinite-lived intangible assets by comparing the estimated fair value with the book values of each asset.

The Company recognizes an acquired intangible apart from goodwill whenever the intangible arises from contractual or other legal rights, or whenever it can be separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination with a related contract, asset or liability. Such intangibles are amortized on a straight-line basis over their estimated useful lives unless the estimated useful life is determined to be indefinite.

Business Combinations. We have adopted the amendment to ASC 805 for the accounting for business acquisitions both during the period of the acquisition and in subsequent periods. Among the more significant changes in the accounting for acquisitions are the following:

	·	Contingent consideration is recorded at fair value as an element of purchase price with subsequent adjustments recognized in operations.
	·	Subsequent decreases in valuation allowances on acquired deferred tax assets are recognized in operations after the measurement period.
	·	Upon gaining control of an entity in which an equity method or cost basis investment was held, the carrying value of that investment is adjusted to fair value with the related gain or loss recorded in earnings.

Reclassification

Certain amounts in the 2015 financial statements have been reclassified to conform to the 2016 financial presentation. These reclassifications have no impact on net loss.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

The preparation of financial statements in accounting principles generally accepted in the United States of America 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. A change in managements’ estimates or assumptions may have a material impact on the financial condition and results of operations of the Company during the period in which such changes occurred. Actual results could differ from those estimates. The Company’s financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.

Revenue Recognition

It is the Company’s policy that revenues and gains will be recognized in accordance with ASC Topic 605-10-25, “Revenue Recognition.” Under ASC Topic 605-10-25, revenue earning activities are recognized upon the sale and delivery of its products and services. The Company generates revenue from consulting services provided to clients in the cannabis industry as well as testing of cannabis and cannabis derived oils for both medicinal and recreational consumption. The Company accepts orders for testing services which are generally completed within a week of receiving the order. Revenue is recognized from testing services upon delivery of the testing results to the client. Consulting engagements vary in length and scope but generally include reviewing regulatory filings, business plans and providing financial models to partners within the same industry. Revenue is recognized from consulting services upon completion of deliverables as outlined in the consulting agreement. The Company generated revenues of $560,961 and $125,199 during the years ended September 30, 2016 and 2015.

Cost of Revenue Recognition

The Company recognizes all costs incurred that are directly related to revenue generating activities as a cost of revenue. These costs include salaries and payroll taxes associated with lab employees, rent and utilities on lab facilities, depreciation of lab equipment and outsourced professional services utilized for consulting engagements. Cost of revenues totaled $501,888 and $92,292 during the years ended September 30, 2016 and 2015, respectively.

Stock-Based Compensation

The Company applies Topic 718 “Share-Based Payments” (“Topic 718”) to share-based compensation, which requires the measurement of the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized when the event occurs. The Black-Scholes option-pricing model is used to estimate the fair value of options granted.

The Company accounts for equity-based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740-10, “Accounting for Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken on a tax return. Under ASC 740-10, a tax benefit from an uncertain tax position taken or expected to be taken may be recognized only if it is “more likely than not” that the position is sustainable upon examination, based on its technical merits. The tax benefit of a qualifying position under ASC 740-10 would equal the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all the relevant information. A liability (including interest and penalties, if applicable) is established to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of an uncertain tax position. Related interest and penalties, if any, are included as components of income tax expense and income taxes payable.

Property and Equipment

Property and equipment are carried at cost. Expenditures for maintenance and repairs are expensed in the period incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.

Depreciation is computed for financial statement purposes on a straight-line basis over estimated useful lives of the related assets and the modified accelerated cost recovery system for federal income tax purposes. The estimated useful lives of depreciable assets are:

		Estimated
		Useful Lives

Laboratory and Computer Equipment		5 years
Furniture and Fixtures		7 years
Software		3 years
Domains		15 years

Impairment of Long-Lived Assets

The Company evaluates, on a periodic basis, long-lived assets to be held and used for impairment in accordance with the reporting requirements of ASC 360-10. The evaluation is based on certain impairment indicators, such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If these impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, then an estimate of the undiscounted value of expected future operating cash flows is used to determine whether the asset is recoverable and the amount of any impairment is measured as the difference between the carrying amount of the asset and its estimated fair value. The fair value is estimated using valuation techniques such as market prices for similar assets or discounted future operating cash flows.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Financial Instruments

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 Company's financial instruments consist principally of cash, accounts payable, and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

The following table sets forth by level with the fair value hierarchy the Company's financial assets and liabilities measured at fair value on September 30, 2015:

	Level 1		Level 2		Level 3		Total
Liabilities
Derivative financial instruments	$	-	$	-	$	200,460	$	200,460

The following table sets forth by level with the fair value hierarchy the Company's financial assets and liabilities measured at fair value on September 30, 2016:

	Level 1		Level 2		Level 3		Total
Liabilities
Derivative financial instruments	$	-	$	-	$	775,246	$	775,246

Basic Earning (Loss) Per Share

The Company computes net income (loss) per share in accordance with Accounting Standards Codification (“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 income (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. Given the net losses of the Company during the years ended September 30, 2016 and 2015, the effects of convertible equity and debt instruments were anti-dilutive resulting in basic and diluted loss per weighted average common shares outstanding equal.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Accounting Pronouncements

In April 7, 2015 the FASB issued Accounting Standards Update “ASU” 2015-03 on “Interest — Imputation of Interest (Subtopic 835-30)” To simplify presentation of debt issuance costs, the amendments in this Update would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this Update. This ASU 2015-3 is effective for annual periods ending after December 15, 2015, and interim periods and annual periods thereafter. We reviewed the provisions of this ASU and determined there was an impact on our consolidated financial position and results of operations.

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers," ("ASU 2014-09"). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition ("ASC 605") and most industry-specific guidance throughout ASC 605. The standard requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective on December 15, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial position and results of operations.

In July 2015, the FASB issued ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," ("ASU 2015-11"). ASU 2015-11 amends the existing guidance to require that inventory should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out or the retail inventory method. ASU 2015- 11 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-11 on its consolidated financial position or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its consolidated financial position or results of operations.

In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers - Principal versus Agent Considerations." This Update provides clarifying guidance regarding the application of ASU No. 2014-09 - Revenue From Contracts with Customers when another party, along with the reporting entity, is involved in providing a good or a service to a customer. In these circumstances, an entity is required to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The amendments in the Update clarify the implementation guidance on principal versus agent considerations. The Update is effective, along with ASU 2014-09, for annual and interim periods beginning after December 15, 2017. The adoption of ASU 2016- 08 is not expected to have a material impact on our consolidated financial position or results of operations.

In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718)" ("ASU 2016- 09"). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating ASU 2016-09 and its impact on its consolidated financial position or results from operations.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Accounting Pronouncements (continued)

In April 2016, the FASB issued ASU 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing" ("ASU 2016-1O"). The amendments in this update clarify the following two aspects to Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The entity first identifies the promised goods or services in the contract and reduce the cost and complexity. An entity evaluates whether promised goods and services are distinct. Topic 606 includes implementation guidance on determining whether an entity's promise to grant a license provides a customer with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). The Company is currently evaluating ASU 2016-10 and its impact on its consolidated financial statements or disclosures.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.

Non-Controlling Interest

The Company reports the non-controlling interest in its majority owned subsidiaries in the consolidated balance sheets within the stockholders’ deficit section, separately from the Company’s stockholders’ deficit. Non-controlling interest represents the non-controlling interest holders’ proportionate share of the equity of the Company’s majority-owned subsidiaries. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses and other comprehensive income (loss) and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

Derivative Financial Instruments

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.

Related Parties

The registrant follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the Related parties include (a) affiliates of the registrant; (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the registrant; (e) management of the registrant; (f) other parties with which the registrant may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

NOTE 3 – ACQUISITIONS

CR Labs, Inc.

On September 17, 2015 the Company performed a share exchange for 80% ownership of CR Labs, Inc., from its founders. CR Labs is an Oregon company engaged in providing analytical testing services for the medical marijuana industry in compliance with the Oregon Health Authority. The costs related to the transaction were $42,193 and were expensed during 2015.

The Company applied the acquisition method to the business combination and valued each of the assets acquired (cash, accounts receivable, and property, plant and equipment) and liabilities assumed (accounts payable) at fair value as of the acquisition date. The cash, accounts receivable and accounts payable were deemed to be recorded at fair value as of the acquisition date. The Company determined the fair value of property, plant and equipment to be historical book value. The preliminary allocation of the purchase price was based on estimates of the fair value of the assets and liabilities assumed. Under the purchase agreement, the Company issued 40,000,000 shares of common stock. These shares had an acquisition date fair value of $400,000. The following table shows the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

ASSETS ACQUIRED
	CASH	$	2,970
	ACCOUNT RECEIVABLE		3,550
	PROPERTY PLANT AND EQUIPMENT		43,360
	CUSTOMER LIST		67,428
	GOODWILL		446,743
	TOTAL ASSETS ACQUIRED		564,051

LIABILITIES ASSUMED
	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES		(36,421	)
	NOTES PAYABLE		(27,630	)
	TOTAL LIABILITIES ASSUMED		(64,051	)

NONCONTROLLING INTEREST			(100,000	)

NET ASSETS ACQUIRED FROM CR LABS ACQUISITION		$	400,000

Oregon Analytical Services, LLC

On May 24, 2016 the Company through its subsidiary EVIO Inc., executed an asset purchase agreement to acquire 100% of the assets of Oregon Analytical Services, LLC. from its founder. Oregon Analytical Services, LLC was an Oregon company engaged in providing analytical testing services for the medical marijuana industry in compliance with the Oregon Health Authority. The costs related to the transaction were $2,780 and were expensed during the year ended September 30, 2016.

The Company applied the acquisition method as a business combination and valued each of the assets acquired and liabilities assumed at fair value as of the acquisition date. The notes payable was deemed to be recorded at fair value as of the acquisition date. The Company determined the fair value of property, plant and equipment to be market value. The preliminary allocation of the purchase price was based on estimates of the fair value of the assets and liabilities assumed. Under the purchase agreement, the Company issued a promissory note in the amount of $700,000 which is due and payable by May 23, 2010, the company is required to make annual payments of $100,000 if the minimum trailing revenue for EVIO Labs Eugene exceeds $700,000 annually during the term of the promissory note, the Company issued another promissory note in the amount of $72,500 in connection with the acquisition, and 200,000 shares of Preferred Series C Stock. These shares had an acquisition date fair value of $80,000. The following table shows the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – ACQUISITIONS (CONTINUED)

Oregon Analytical Services, LLC (continued)

ASSETS ACQUIRED
	PROPERTY PLANT AND EQUIPMENT	$	123,143
	CUSTOMER LIST		227,595
	GOODWILL		529,262
	TOTAL ASSETS ACQUIRED		880,000

LIABILITIES ASSUMED
	NOTES PAYABLE		(27,500	)
	TOTAL LIABILITIES ASSUMED		(27,500	)

NET ASSETS ACQUIRED FROM OAS ACQUISITION		$	852,500

Smith Scientific Industries, Inc.

On June 1, 2016 the Company through its subsidiary EVIO Inc. executed a share purchase agreement for 80% ownership of Smith Scientific Industries, Inc. d/b/a Kenevir Research., from a related party, Anthony Smith, Company Director. Smith Scientific Industries is an Oregon company engaged in providing analytical testing services for the medical marijuana industry in compliance with the Oregon Health Authority. The costs related to the transaction were $2,780 and were expensed during 2016.

The Company applied the acquisition method to the business combination and valued each of the assets acquired and liabilities assumed at fair value as of the acquisition date. The cash and accounts payable were deemed to be recorded at fair value as of the acquisition date. The Company determined the fair value of property, plant and equipment to be historical book value. The preliminary allocation of the purchase price was based on estimates of the fair value of the assets and liabilities assumed. Under the purchase agreement, the Company issued a promissory note for $336,000, with required $25,000 to be paid at closing, $75,000 to be paid in two installments within 180 days, and the remaining balance in three annual installments of $58,475, and 300,000 shares of Preferred Series C Stock. These shares had an acquisition date fair value of $135,000. The following table shows the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

ASSETS ACQUIRED
	CASH	$	9,055
	PROPERTY PLANT AND EQUIPMENT		11,076
	CUSTOMER LIST		145,847
	GOODWILL		439,402
	TOTAL ASSETS ACQUIRED		605,380

LIABILITIES ASSUMED
	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES		(430	)
	NOTES PAYABLE		(16,200	)
	TOTAL LIABILITIES ASSUMED		(16,630	)

NONCONTROLLING INTEREST			(117,750	)

NET ASSETS ACQUIRED FROM SMITH SCIENTIFIC ACQUISITION		$	471,000

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – ACQUISITIONS (CONTINUED)

In accordance with ASC 805-10-50, the Company is providing the following unaudited pro-forma to present a summary of the combined results of the Company’s consolidated operations with all acquisitions. as if the acquisitions had been completed as of the beginning of the reporting period. Adjustments were made to eliminate any inter-company transactions in the periods presented.

SIGNAL BAY, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

	Year ended September 30,
Revenues	2016			2015
Testing services	$	616,874		$	348,195
Consulting services		255,282			123,642
Total revenue		872,156			471,837
Cost of revenue		592,131			372,154
Gross profit		280,025			99,683

Operating expenses
Selling, general and administrative		834,669			1,357,288
Depreciation and amortization		64,683			24,549
Total operating expenses		899,352			1,381,837

Loss from operations		(619,327	)		(1,282,154	)

Other expense
Interest expense		310,261			38,587
Loss on disposal of asset		720			-
Loss on change in fair market value of derivative liabilities		1,434,540			120,460
Total other expense		1,745,521			159,047

Net loss	$	(2,364,848	)	$	(1,441,201	)

Future Amortization

The future amortization associated with the intangible assets acquired in the above mentioned acquisitions is as follows:

For the years ended September 30,	Amortization
2017	$	88,174
2018		88,174
2019		88,174
2020		88,174
2021		45,999
Thereafter		-
Total	$	398,695

NOTE 4 – GOING CONCERN

The Company's consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has negative working capital, recurring losses, and does not have a source of revenues sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – GOING CONCERN (CONTINUED)

NOTE 5 – RELATED PARTY TRANSACTIONS

During the years ended September 30, 2016 and 2015, the Company received loans from its Chief Operating Officer totaling $26,000 and $70,000 and made repayments totaling $14,295 and $0. There was $91,705 and $80,000 due as of September 30, 2016 and 2015, respectively and are included in the accompanying consolidated balance sheets as a current portion of notes payable to related parties. The loans carry a 0% interest rate and are due on demand.

During the years ended September 30, 2016 and 2015, the Company incurred total expenses of $60,026 and $64,300 for management consulting services performed by Newport Commercial Advisors, an entity fully owned and controlled by our Chief Executive Officer. There was not a balance payable to Newport Commercial Advisors as of September 30, 2016 or 2015.

On June 22, 2015, the Company purchased a 4% ownership of Libra Wellness Center, LLC from Lori J Glauser, our COO for $40,000. Libra Wellness Center, LLC subsequently obtained additional financing resulting in our ownership being diluted to 1.5%. The $40,000 was to be paid in one installment due no later than April 1, 2016. On June 16, 2016, the Company was engaged by Libra Wellness Center, LLC to provide advisory services in the amount of $12,750. The Company received regulatory approval to sell its interest in Libra Wellness Center on September 29, 2016. As of September 30, 2016, the company had not received payment for the divesture resulting in a $40,000 receivable as of September 30, 2016.

During the years ended September 30, 2016 and 2015 the Company made repayments to Eric Ezrine, a shareholder of CR Labs, on an outstanding note payable totaling $13,285 and $1,076, respectively. The loans carry an interest rate of 0% per annum. There was $13,269 and $26,554 due as of September 30, 2016 and 2015, respectively. Additionally, the Company entered into a severance agreement with Mr. Ezrine whereby it agreed to make payments totaling $44,500 through August 2018. There was $44,500 accrued as of September 30, 2016.

Through March 31, 2016, our executive, administrative and operating offices were located at 2996 Panorama Ridge Dr. Henderson, NV 89052. The office space was being provided by one of our Directors at no cost to the Company.

On May 24, 2016, the Company executed an asset purchase agreement with Sara Lausmann, managing member owner of Oregon Analytical Services, LLC, for $972,500. The terms of the purchase required the issuance of 200,000 shares of Series C Preferred Stock, valued at $80,000, $72,500 in a short-term loan and $700,000 in a long-term note. During the year ended September 30, 2016, the Company repaid $34,916 to Sara Lausmann, Vice President Client Services. The total amount owed is $737,584 and $0 as of September, 2016 and September 30, 2015, respectively. As of September 30, 2016, $37,584 and $700,000 are included in the accompanying consolidated balance sheets as current and long-term portions of notes payable to related party, respectively. The notes carry interest at a rate of 5% per annum and had accrued interest totaling $13,521 due as of September 30, 2016.

On June 1, 2016, the company executed a share purchase agreement with Anthony Smith, for the purchase of 80% of Smith Scientific Industries for $636,000. The terms of the purchase required the issuance of 300,000 shares of Series C Preferred Stock, valued at $135,000 and $336,000 in a promissory note. During the year ended September 30, 2016, the Company repaid $25,000 to Anthony Smith, our Chief Science Officer. The note carries interest at a rate of 5% per annum. There was $311,000 and $0 of principal due as of September 30, 2016 and 2015 and $5,155 and $0 of accrued interest due as of September 30, 2016 and 2015, respectively.

During the year ended September 30, 2016, the Company borrowed a total of $16,200 from our Chief Science Officer to fund operations. The loans are non-interest bearing, due on demand and as such are included in current liabilities. There was $16,200 and $0 due as of September 30, 2016 and 2015, respectively.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – STOCKHOLDERS’ EQUITY

Series A Convertible Preferred Stock

The Company designated 1,850,000 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) with a par value of $0.0001 per share. Initially, there will be no dividends due or payable on the Series A Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

All shares of the Series A Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series A Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series A Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

The Series A Preferred shall have no liquidation preference over any other class of stock.

Except as otherwise required by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock or any other class or series of preferred stock) for the taking of any corporate action.

Conversion at the Option of the Holder. From 12 months from the date of issuance, each holder of shares of Series A Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series A Preferred Stock into fully paid and nonassessable shares of Common Stock at a rate equal to 4.9% of the Common Stock.

For a period of 18 months after the Preferred is convertible, the conversion price of the Series A Preferred will be subject to adjustment to prevent dilution in the event that the Company issues additional shares at a purchase price less than the applicable conversion price. The conversion price will be subject to adjustment on a weighted basis that takes into account issuances of additional shares. At the expiration of the antidilution period, the conversion rate in Section VI (A) above shall be equal to a conversion rate equal to 4.9% on the Common Stock. For example, if on the date of expiration of the antidilution clause there are 500,000,000 shares of Common Stock issued and outstanding then each Series A Preferred Stock shall convert at a rate of 13.24 common shares for each 1 Series Preferred Share.

The company has evaluated the Series A Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 does not apply.

The company has evaluated the Series A Preferred Stock in accordance with FASB ASC Subtopic 470-20, and has determined that there is no beneficial conversion feature that must be accounted.

The Company has 1,840,000 shares of Series A Convertible Stock issued and outstanding as September 30, 2016 and 2015.

Series B Convertible Preferred Stock

The Company designated 5,000,000 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”) with a par value of $0.0001 per share.

Initially, there will be no dividends due or payable on the Series B Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

All shares of the Series B Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

The Series B Preferred shall have no liquidation preference over any other class of stock.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – STOCKHOLDERS’ EQUITY (CONTINUED)

Series B Convertible Preferred Stock (continued)

Each holder of outstanding shares of Series B Preferred Stock shall be entitled to the number of votes equal to one hundred (100) Common Shares. Except as provided by law, or by the provisions establishing any other series of Preferred Stock, holders of Series B Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as a single class.

Each holder of shares of Series B Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series B Preferred Stock into a 100 of fully paid and nonassessable shares of Common Stock; provided, however, that any Optional Conversion must involve the issuance of at least 100 shares of Common Stock.

In the event of a reverse split the conversion ratio shall not change. However, in the event a forward split shall occur then the conversion ratio shall be modified to be increased by the same ratio as the forward split.

The company has evaluated the Series B Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 does not apply.

The company has evaluated the Series B Preferred Stock in accordance with FASB ASC Subtopic 470-20, and has determined that there is no beneficial conversion feature that must be accounted.

The Company has 5,000,000 shares of Series B Convertible Stock issued and outstanding as of September 30, 2016 and 2015.

Series C Convertible Preferred Stock

The Company designated 500,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) with a par value of $0.0001 per share.

Initially, there will be no dividends due or payable on the Series C Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

All shares of the Series C Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

In any liquidation, dissolution, or winding up of the Corporation, the holders of the Series C Preferred Stock shall be entitled to receive (a) in preference to the holders of the Common Stock (b) on a pari passu basis to any sum that the holders of the Series B Preferred Stock shall be entitled to receive, but (c) subordinate in preference to any sum that the holders of any shares of any other series of the Corporation's Preferred Stock shall be entitled, an amount equal to $1 per share (subject to appropriate adjustment in the event of any stock dividend, forward stock split, or other similar recapitalization). After payment of such sums, (i) the holders of the Series A Preferred Stock and (ii) the holders of the Common Stock, shall be entitled to receive any remaining assets of the Corporation on a pro rata, as-converted basis assuming conversion of the Series A Preferred Stock into Common Stock at the then- current Conversion Rate.

Each holder of outstanding shares of Series C Preferred Stock shall be entitled to the number of votes equal to five hundred (500) Common Shares. Except as provided by law, or by the provisions establishing any other series of Preferred Stock, holders of Series B Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as a single class.

Each holder of shares of Series C Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series C Preferred Stock into a 500 of fully paid and nonassessable shares of Common Stock; provided, however, that any Optional Conversion must involve the issuance of at least 10,000 shares of Common Stock.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – STOCKHOLDERS’ EQUITY (CONTINUED)

Series C Convertible Preferred Stock (continued)

The company has evaluated the Series C Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 does not apply.

The company has evaluated the Series C Preferred Stock in accordance with FASB ASC Subtopic 470-20, and has determined that there is no beneficial conversion feature that must be accounted.

During the year ended September 30, 2016, the Company issued 300,000 shares of Series C Preferred Stock for the acquisition of Smith Scientific Industries, Inc. and 200,000 shares of Series C Preferred Stock for the acquisition of the assets of Oregon Analytical Services.

There were 500,000 and 0 shares of Series C Convertible Stock issued and outstanding as of September 30, 2016 and 2015.

Series D Convertible Preferred Stock

The Company designated 1,000,000 shares of Series D Convertible Preferred Stock (“Series D Preferred Stock”) with a par value of $0.0001 per share.

Initially, there will be no dividends due or payable on the Series D Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Corporation’s Certificate of Incorporation. Any and all such future terms concerning dividends shall be reflected in an amendment to this Certificate, which the Board shall promptly file or cause to be filed.

All shares of the Series D Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation hereafter created and specifically ranking, by its terms, on par with the Series B Preferred Stock and (iii) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Series B Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

In any liquidation, dissolution, or winding up of the Corporation, the holders of the Series D Preferred Stock shall be entitled to receive (a) in preference to the holders of the Common Stock (b) on a pari passu basis to any sum that the holders of the Series B Preferred Stock shall be entitled to receive, but (c) subordinate in preference to any sum that the holders of any shares of any other series of the Corporation's Preferred Stock shall be entitled, an amount equal to $1 per share (subject to appropriate adjustment in the event of any stock dividend, forward stock split, or other similar recapitalization). After payment of such sums, (i) the holders of the Series A Preferred Stock and (ii) the holders of the Common Stock, shall be entitled to receive any remaining assets of the Corporation on a pro rata, as-converted basis assuming conversion of the Series A Preferred Stock into Common Stock at the then- current Conversion Rate.

Each holder of outstanding shares of Series D Preferred Stock shall be entitled to the number of votes equal to two hundred fifty (250) Common Shares. Except as provided by law, or by the provisions establishing any other series of Preferred Stock, holders of Series B Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as a single class.

Each holder of shares of Series D Preferred Stock may, at any time and from time to time, convert (an “Optional Conversion”) each of its shares of Series D Preferred Stock into a 250 of fully paid and nonassessable shares of Common Stock; provided, however, that any Optional Conversion must involve the issuance of at least 50,000 shares of Common Stock.

The company has evaluated the Series D Preferred Stock in accordance with ASC 815 and has determined their conversion options were for equity and ASC 815 does not apply.

The company has evaluated the Series C Preferred Stock in accordance with FASB ASC Subtopic 470-20, and has determined that there is no beneficial conversion feature that must be accounted.

During the year ended September 30, 2016, the Company issued 48,000 shares of Series D Preferred Stock for cash proceeds of $48,000.

There were 48,000 and 0 shares of Series D Convertible Stock issued and outstanding as of September 30, 2016 and 2015.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – STOCKHOLDERS’ EQUITY (CONTINUED)

Common Stock

During the year ended September 30, 2015, the Company issued 6,460,001 common shares for cash proceeds of $79,500; 7,500,000 common shares for software purchases totaling $89,583; 37,043,750 common shares valued at $886,829 under the Company’s employee equity incentive plan; 12,000,000 common shares for the conversion of $150,000 of notes payable; 3,500,000 common shares valued at $60,900 for a financing commitment; 40,000,000 common shares valued at $400,000 for an acquisition and 2,000,000 common shares for services valued at $31,000.

During the year ended September 30, 2016, the Company issued 6,087,500 common shares valued at $46,473 under its employee equity incentive plan; 401,032,581 common shares for the conversion of $207,367 of outstanding principal on convertible notes payable; 1,468,582 common shares for the conversion of $4,135 of convertible accrued interest and 42,827,010 common shares for services valued at $138,447. All conversions of outstanding principal and accrued interest on convertible notes payable were done so at contractual terms.

There were $850,064,268 and 398,648,595 shares of common stock issued and outstanding at September 30, 2016 and 2015, respectively.

NOTE 7 – LOANS PAYABLE

The Company had the following loans payable outstanding as of September 30, 2016 and September 30, 2015:

	September 30, 2016		September 30, 2015
On July 22, 2016, the Company entered into a Purchase and Sale of Future Receivables agreement (the “Agreement”) with 1 Global Capital, LLC (“1GC”) for $50,000. The Agreement calls for 160 daily payments of $437.50, due on business days, for total payments of $70,000. The Company recognized an original debt discount of $20,000 as interest expense.	$	49,875	$	-

On May 24, 2016, the Company assumed a $27,500 Promissory note with annual interest of 5%, as part of the acquisition of Oregon Analytical Services (see note 3). The note is due on demand and requires quarterly payments.		27,500		-
		77,375		-
Less: current portion of loans payable		77,375		-

Long-term portion of loans payable	$	-	$	-

As of September 30, 2016 and 2015, the Company accrued interest of $638 and $0, respectively. During the periods ended September 30, 2016 and 2015, the Company recorded interest expense of $20,638 and $0, respectively.

NOTE 8 – CONVERTIBLE NOTES PAYABLE

The following table summarizes all convertible notes outstanding as of September 30, 2016:

Holder	Issue Date	Due Date	Principal		Unamortized Debt Discount			Carrying Value		Accrued Interest
Noteholder 1	5/17/2016	5/18/2017	$	76,650	$	(5,867	)	$	70,783	$	2,268
Noteholder 1	8/26/2016	8/26/2017		76,650		(6,650	)		70,000		588
Noteholder 2	5/22/2016	5/23/2017		45,000		-			45,000		1,282
Noteholder 3	3/20/2016	3/21/2017		27,500		(12,959	)		14,541		1,454
Noteholder 3	5/18/2016	5/19/2017		76,650		(48,510	)		28,140		2,252
Noteholder 3	9/19/2016	5/19/2017		76,650		(47,510	)		29,140		185
			$	379,100	$	(121,496	)	$	257,604	$	8,029

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Table of Contents

SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

Noteholder 1

On May 17, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $76,650 of which $6,650 was an original issue discount resulting in cash proceeds to the Company of $70,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on May 18, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights on November 17, 2016. The Company may prepay the note during the first six months it is outstanding. There was $76,650 of principal and $2,268 of accrued interest due at September 30, 2016.

On August 26, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $76,650 of which $6,650 was an original issue discount resulting in cash proceeds to the Company of $70,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on August 26, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights on February 26, 2016. The Company may prepay the note during the first six months it is outstanding. There was $76,650 of principal and $588 of accrued interest due at September 30, 2016.

Noteholder 2

On May 23, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $45,000 resulting in cash proceeds to the Company of $45,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on May 23, 2017. The Note is convertible into the Company's common stock commencing 180 days from the date of issuance at a conversion price equal to 72% of the lowest trade price of the Company's common stock for the ten prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company will bifurcate the conversion feature of the note and record a derivative liability upon the note qualifying for conversion rights on November 23, 2016. The Company may prepay the note during the first 90 days it is outstanding for a sum of 115% of the unpaid principal and accrued interest outstanding and within the next 90 days at a rate of 130% of the unpaid principal and accrued interest outstanding. The note may not be prepaid after 180 days from issuance. There was $45,000 of principal and $1,282 of accrued interest due at September 30, 2016.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

Noteholder 3

On March 21, 2016, an unrelated party purchased from an existing convertible noteholder outstanding principal of $115,019. The Note is due on March 21, 2017 and carries an interest rate of 0% per annum. The Note is convertible into the Company's common stock at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company bifurcated the conversion feature of the note and recorded a derivative liability upon issuance. During the year ended September 30, 2016, the Company issued a total of 338,493,893 common shares for the conversion of $115,019 of principal. There was $0 of principal and $0 of accrued interest due at September 30, 2016.

On March 21, 2016 the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $27,500 of which $2,500 was an original issue discount resulting in cash proceeds to the Company of $25,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 10%, is due on March 21, 2017. The Note is convertible into the Company's common stock commencing from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty-five prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company bifurcated the conversion feature of the note and recorded a derivative liability upon the note qualifying for conversion rights. The Company may prepay the note during the first 180 days it is outstanding at a graduated scale of 100% of the principal amount if repaid within 30 days from issuance; 110% of the principal during the next 30 days; 120% of the principal during the next 30 days; 130% of the principal during the next 30 days; 140% of the principal during the next 30 days and 150% of the principal during the next 30 days. The note may not be prepaid after 180 days without the expressed written consent of the noteholder. There was $27,500 of principal and $1,454 of accrued interest due at September 30, 2016.

On May 19, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $76,650 of which $6,650 was an original issue discount resulting in cash proceeds to the Company of $70,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on May 19, 2017. The Note is convertible into the Company's common stock commencing from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company bifurcated the conversion feature of the note and recorded a derivative liability upon the note qualifying for conversion rights. The Company may prepay the note during the first 180 days it is outstanding at a rate of 115% of the outstanding principal amount during the first 90 days from issuance and 135% of the principal amount during the next 90 days. The note may not be prepaid without the consent of the noteholder after 180 days. There was $76,650 of principal and $2,252 of accrued interest due at September 30, 2016.

On September 19, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $76,650 of which $6,650 was an original issue discount and $7,000 was paid to a third party on our behalf resulting in cash proceeds to the Company of $63,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on May 19, 2017. The Note is convertible into the Company's common stock commencing from the date of issuance at a conversion price equal to 55% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company bifurcated the conversion feature of the note and recorded a derivative liability upon the note qualifying for conversion rights. The Company may prepay the note during the first 180 days it is outstanding at a rate of 115% of the outstanding principal amount during the first 90 days from issuance and 135% of the principal amount during the next 90 days. The note may not be prepaid without the consent of the noteholder after 180 days. There was $76,650 of principal and $185 of accrued interest due at September 30, 2016.

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Table of Contents

SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

Noteholder 4

On February 19, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $25,000 resulting in cash proceeds to the Company of $25,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on February 19, 2017. The Note is convertible into the Company's common stock commencing from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company bifurcated the conversion feature of the note and recorded a derivative liability upon the note qualifying for conversion rights. During the year ended September 30, 2016 the Company issued 10,638,298 shares of common stock for the conversion of $25,000 of principal and 479,906 shares of common stock for the conversion of $1,128 of accrued interest payable. There was $0 of principal and $0 of accrued interest due at September 30, 2016.

On February 19, 2016, the Company sold and issued a Convertible Promissory Note to an unrelated party, for the principal amount of $25,000 of which $2,000 was an original issue discount resulting in cash proceeds to the Company of $23,000 pursuant to the terms of a Securities Purchase Agreement of even date therewith. The Note, together with accrued interest at the annual rate of 8%, is due on February 19, 2017. The Note is convertible into the Company's common stock commencing from the date of issuance at a conversion price equal to 50% of the lowest trade price of the Company's common stock for the twenty prior trading days including the date of conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company bifurcated the conversion feature of the note and recorded a derivative liability upon the note qualifying for conversion rights. During the year ended September 30, 2016 the Company issued 10,204,082 shares of common stock for the conversion of $25,000 of principal. There was $0 of principal and $0 of accrued interest due at September 30, 2016.

Noteholder 5

On July 23, 2015, Signal Bay, Inc. (the "Company") executed a convertible promissory note with a principal amount of $102,500 (the "Note") to St. George Investments, LLC. ("Lender"). The Note was funded on July 23, 2015 (Purchase Date). The Company may repay this note at any time. This note shall be deemed paid in full if Company pays to Lender (a) the sum of $91,250 (meaning Borrower would receive a $11,250 discount) on or before the date that is ninety (90) days from the Purchase Price Date, or (b) the sum of $97,500 (meaning Borrower would receive a $5,000 discount) on any date after the date that is ninety (90) days from the Purchase Price Date but on or before the date that is one hundred thirty-five (135) days from the Purchase Price Date (the "Prepayment Opportunity Date"). If Borrower does not repay the entire Outstanding Balance of this Note on or before the Prepayment Opportunity Date, it shall receive no prepayment discount and must pay the entire Outstanding Balance of this Note in full on or before the Maturity Date. Lender has the right at any time following an Event of Default, at its election, to convert (each instance of conversion is referred to herein as a "Conversion") all or any part of the Outstanding Balance into shares ("Conversion Shares") of fully paid and non-assessable common stock, $0.0001 par value per share ("Common Stock"), of Borrower as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the "Conversion Amount") divided by the Conversion Price. The conversion price (the "Conversion Price") for each Conversion (as defined below) shall be equal to the product of 70% (the "Conversion Factor") multiplied by the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding the applicable Conversion. On March 31, 2016, Tangiers Global LLC Purchased $115,019 of the note from St. George Investments, resulting in a balance of $25,071 owing to St. George Investments. During the year ended September 30, 2016, principal and interest of $85,348 and $3,008, respectively, was converted into 162,246,500 shares of common stock. There was $0 of principal and $0 of accrued interest due as of September 30, 2016.

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Table of Contents

SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – DERIVATIVE LIABILITIES

As of September 30, 2016 and 2015 the Company had a $775,246 and $200,460 derivative liability balance on the balance sheets and recorded a loss from derivative liability fair value adjustments of $1,434,540 and $120,460 during the years ended September 30, 2016 and 2015, respectively. The derivative liability activity comes from convertible notes payable as follows:

As discussed in Note 7 – Convertible Notes Payable, the Company issued a $102,500 Convertible Promissory Notes to an unrelated party that matured on January 23, 2016. The note bears interest at a rate of 22% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the note was $200,460 which was recorded as a derivative liability on the balance sheet.

During the year ended September 30, 2016, the noteholder elected to assign $115,019 of principal to an unrelated party and converted all of the remaining outstanding principal and accrued interest to common stock. At September 30, 2016, the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $0 and recorded a $26,730 gain from change in fair value of derivatives and a write off of derivative liability due to conversion of $58,711 for the year ended September 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 289%, (3) risk-free interest rate of .23%, (4) expected life of 0.24 of a year, and (5) estimated fair value of the Company’s common stock of $0.0013 per share.

As discussed in Note 7 – Convertible Notes Payable, the Company issued a $25,000 Convertible Promissory Notes to an unrelated party that matures on February 19, 2017. The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the note was $48,841 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $25,000 which was up to the face value of the convertible note with the excess fair value at initial measurement of $23,841 being recognized as a loss on derivative fair value measurement.

During the year ended September 30, 2016, the noteholder elected to convert all outstanding principal and accrued interest to common stock. At September 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $0 and recorded a $115,343 loss from change in fair value of derivatives and a write off of derivative liability due to conversion of $164,184 for the year ended September 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 272%, (3) risk-free interest rate of .49%, (4) expected life of 0.43 of a year, and (5) estimated fair value of the Company’s common stock of $0.0172 per share.

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Table of Contents

SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – DERIVATIVE LIABILITIES (CONTINUED)

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the note was $88,643 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $25,000 which was up to the face value of the convertible note with the excess fair value at initial measurement of $88,643 being recognized as a loss on derivative fair value measurement.

During the year ended September 30, 2016, the noteholder elected to convert all outstanding principal and accrued interest to common stock. At September 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $0 and recorded a $0 loss from change in fair value of derivatives and a write off of derivative liability due to conversion of $88,643 for the year ended September 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 273%, (3) risk-free interest rate of .48%, (4) expected life of 0.42 of a year, and (5) estimated fair value of the Company’s common stock of $0.0103 per share.

As discussed in Note 7 – Convertible Notes Payable, the Company issued a $115,019 Convertible Promissory Notes to an unrelated party that matures on March 21, 2017. The note bears interest at a rate of 0% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the note was $115,019 which was transferred from the existing convertible noteholder. Due to changes in certain features of the note, the Company recorded an additional derivative liability of $38,767 which was recorded as a loss on the fair value measurement resulting in a total derivative liability of $153,786.

During the year ended September 30, 2016, the noteholder elected to convert all outstanding principal and accrued interest to common stock. At September 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $0 and recorded a $609,430 loss from change in fair value of derivatives and a write off of derivative liability due to conversion of $763,216 for the year ended September 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 294%, (3) risk-free interest rate of .47%, (4) expected life of 0.56 of a year, and (5) estimated fair value of the Company’s common stock of $0.0089 per share.

As discussed in Note 7 – Convertible Notes Payable, the Company issued a $27,500 Convertible Promissory Notes to an unrelated party that matures on March 21, 2017. The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – DERIVATIVE LIABILITIES (CONTINUED)

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the note was $36,769 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $25,000 which was up to the face value of the convertible note with the excess fair value at initial measurement of $11,769 being recognized as a loss on derivative fair value measurement.

At September 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $123,590 and recorded a $86,821 loss from change in fair value of derivatives for the year ended September 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 284%, (3) risk-free interest rate of .45%, (4) expected life of 0.47 of a year, and (5) estimated fair value of the Company’s common stock of $0.0174 per share.

As discussed in Note 7 – Convertible Notes Payable, the Company issued a $76,500 Convertible Promissory Notes to an unrelated party that matures on May 19, 2017. The note bears interest at a rate of 8% per annum and can be convertible into the Company’s common shares, at the holder’s option, at the conversion rate equal to a 50% discount from the lowest trading price in the twenty trading days prior to conversion. The Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the note was $166,260 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $70,000 which was up to the face value of the convertible note with the excess fair value at initial measurement of $96,260 being recognized as a loss on derivative fair value measurement.

At September 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $325,828 and recorded a $159,568 loss from change in fair value of derivatives for the year ended September 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 316%, (3) risk-free interest rate of .45%, (4) expected life of 0.63 of a year, and (5) estimated fair value of the Company’s common stock of $0.0174 per share.

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model. The aggregate fair value of the derivative at the issuance date of the note was $255,582 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $70,000 which was up to the face value of the convertible note with the excess fair value at initial measurement of $185,582 being recognized as a loss on derivative fair value measurement.

At September 30, 2016 the Company marked-to-market the fair value of the derivative liabilities related to notes and determined an aggregate fair value of $325,828 and recorded a $70,246 loss from change in fair value of derivatives for the year ended September 30, 2016. The fair value of the embedded derivatives for the notes was determined using the Black-Scholes option pricing model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 316%, (3) risk-free interest rate of .45%, (4) expected life of 0.63 of a year, and (5) estimated fair value of the Company’s common stock of $0.0174 per share.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – DERIVATIVE LIABILITIES (CONTINUED)

The following table summarizes the derivative liabilities included in the balance sheet at September 30, 2015:

Fair Value of Embedded Derivative Liabilities:
Balance, September 30, 2014	$	-
Initial measurement of derivative liabilities		126,987
Change in fair market value		73,473
Write off due to conversion		-
Balance, September 30, 2015	$	200,460

The following table summarizes the derivative liabilities included in the balance sheet at September 30, 2016:

Fair Value of Embedded Derivative Liabilities:
Balance, September 30, 2015	$	200,460
Initial measurement of derivative liabilities		634,862
Change in fair market value		1,014,678
Write off due to conversion		(1,074,754	)
Balance, September 30, 2016	$	775,246

The following table summarizes the loss on derivative liability included in the income statement for the financial years ended September 30, 2016 and 2015, respectively.

	September 30,
	2016		2015

Day one loss due to derivatives on convertible debt	$	419,862	$	24,487
Change in fair value of derivatives		1,014,678		95,973
Total derivative expense	$	1,434,540	$	120,460

NOTE 10 – INCOME TAXES

We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period.

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – INCOME TAXES (CONTINUED)

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended September 30, 2016 and 2015 applicable under FASB ASC 740. We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet. All tax returns for the Company remain open.

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences for the periods presented are as follows:

Income tax provision at the federal statutory rate		35	%
Effect on operating losses	(35		%)
		-

Net deferred tax assets consisted of the following:

	September 30, 2016			September 30, 2015
Net operating loss carry forward	$	728,834		$	527,441
Valuation allowance		(728,834	)		(527,441	)
Net deferred tax asset	$	-		$	-

A reconciliation of income taxes computed at the statutory rate is as follows:

	September 30, 2016			September 30, 2015
Computed federal income tax expense at statutory rate of 35%	$	(893,232	)	$	(527,411	)
Depreciation and amortization		31,309			-
Common stock issued for services		48,456			-
Common stock issued under employee incentive plan		16,266			-
Stock option expense		2,756			-
Amortization of debt discounts		73,033			-
Default penalties on convertible notes payable		17,930			-
Change in derivative liability		502,089			-
Change in valuation allowance		201,393			527,441
Income tax expense	$	-		$	-

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – INDUSTRY SEGMENTS

This summary reflects the Company's current segments, as described below.

Corporate

The parent Company provides overall management and corporate reporting functions for the entire organization.

Consulting

The Company provides advisory, licensing and compliance services to the cannabis industry under its brand Signal Bay Research. Consulting clients are located in states that have state managed medical and/or recreational programs. Signal Bay Research assists these companies with license applications, business planning, state compliance and ongoing operational support.

Testing Services

The Company provides analytical testing services to the cannabis industry under the EVIO Labs brand. As of September 30, 2016, EVIO Labs has three operating labs, CR Labs, Inc. d/b/a EVIO Labs, Bend, EVIO Labs Eugene d/b/a Oregon Analytical Services and Smith Scientific Industries d/b/a Kenevir Research. EVIO Labs clients are located in Oregon and consist of growers, processors and dispensaries. Operating under the rules of the Oregon Health Authority, EVIO Labs certifies products have been tested and are free from pesticides and other containments before resale to patients and consumer in the State of Oregon.

Year ended September 30, 2016	Corporate			Consulting Services			Testing Services			Total Consolidated
Revenue	$	-		$	255,282		$	305,679		$	560,961
Segment loss from operations		(300,814	)		(252,512	)		(239,222	)		(792,548	)
Total assets		47,911			113,873			2,024,212			2,185,996
Capital expenditures		-			-			(11,699	)		(11,699	)
Depreciation and amortization		-			23,688			65,766			89,454

Year ended September 30, 2015	Corporate		Consulting Services			Testing Services			Total Consolidated
Revenue	$	-	$	122,364		$	2,835		$	125,199
Segment loss from operations		-		(1,282,921	)		(14,416	)		(1,297,337	)
Total assets		-		678,234			50,489			728,723
Capital expenditures		-		5,694			-			5,694
Depreciation and amortization		-		16,601			409			17,010

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – CONCENTRATIONS OF RISK

The Company had revenues of $560,961 and $125,199 for the years ended September 30, 2016 and 2015, respectively. The Company had two customers that represented 93% of revenue for year ended September 30, 2015. The Company did not have any customer that represented greater than 10% of revenues during the year ended September 30, 2016.

NOTE 13 – STOCK OPTIONS AND WARRANTS

The following table summarizes all stock option and warrant activity for the year ended September 30, 2016 and 2015:

	Shares		Weighted- Average Exercise Price Per Share
Outstanding, September 30, 2015		-	$	-
Granted		31,500,000		0.004
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding, September 30, 2016		31,500,000	$	0.004

The following table discloses information regarding outstanding and exercisable options and warrants at September 30, 2016:

		Outstanding						Exercisable
Exercise Prices		Number of Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)		Number of Option Shares		Weighted Average Exercise Price
$	0.004		31,500,000	$	0.004		4.88		-	$	0.004
			31,500,000	$	0.004		4.88		-	$	0.004

In determining the compensation cost of the stock options granted, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes option pricing model. The assumptions used in these calculations are summarized as follows:

	September 30, 2016
Expected term of options granted	5 years
Expected volatility		409	%
Risk-free interest rate		1.14	%
Expected dividend yield		0	%

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SIGNAL BAY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SUBSEQUENT EVENTS

On various dates from October 1, 2016 through February 8, 2017, the Company issued 9,269,900 shares of common stock for services valued at $166,273; 968,750 common shares valued at $25,381 to its employees under the employee equity incentive program; 41,851,494 common shares for the conversion of $302,450 of principal on convertible notes and 2,425,603 common shares for the conversion of $14,006 of accrued interest. All conversions of convertible note principal and accrued interest were done at contractual rates.

The Company issued 114,500 shares of Series D Preferred Stock for cash proceeds of $114,500.

On October 19, 2016, the Company issued a total of 4,500,000 incentive stock options to its employees under the employee equity incentive program. The options vest 50% upon the one year anniversary with the remaining 50% upon the two year anniversary, carry an exercise price of $0.013 per share and expire on October 19, 2021.

On October 19, 2016, the Company entered into a Membership Interest Purchase Agreement to purchase 100% of the ownership of Greenhaus Analytical Labs, LLC. for 460,000 shares of Series “D” preferred stock and a $340,000 promissory note. In conjunction with the acquisition, the Company entered into an employment agreement with Greenhaus founder Henry Grimmett. The term of the agreement is for 15 months at a rate of $4,000 per month. Mr. Henry Grimmett was also appointed to the Company’s Board of Directors. The Company also executed a $240,000 promissory note guaranteeing repayment of loan to company from Mr. Grimmett.

On October 26, 2016, the Company entered in to an Asset Purchase Agreement with Green Style Consulting, LLC. Effective, November 1, 2016, the company owned all assets of Green Style Consulting, LLC d/b/a Green Style Analytics, including 1,300 client names, analytical testing equipment, brands/websites, and the vanity toll-free number 844-420-TEST for 210,000 shares of Series “D” preferred stock, $20,000 cash down payment and a $50,000 promissory note.

On December 21, 2016, the Company received a conversion request from the Series A Convertible Preferred Shareholder. The shareholder converted 100% of the 1,840,000 Series A Preferred Shares in exchange for 43,875,285 common shares. Upon conversion of the Series A Convertible Shares, the Board of Directors voted to retire the Series A Preferred Stock.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

We have not had any disagreements with our auditors on any matters of accounting principles, practices, or financial statement disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our principal executive and principal financial officers have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to Rule 308(b) of Regulation S-K, which permits the Company to provide only management’s report in this Annual Report.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2016. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a result of the identified material weakness in our internal control over financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.

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Identified Material Weakness

A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.

Management identified the following material weakness during its assessment of internal controls over financial reporting as of September 30, 2016:

Independent Directors: The Company intends to obtain at least 3 independent directors at its 2017 annual shareholder meeting. The cost associated to the addition in minimal and not deemed material.

No Segregation of Duties: Ineffective controls over financial reporting: The Company hired additional staff members, either as employees or consultants, during October and November 2016. These additional staff members will be responsible for making sure that information required to be disclosed in our reports filed and submitted under the Exchange Act is recorded, processed, summarized and reported as and when required and will the staff members will have segregated responsibilities with regard to these responsibilities. The costs associated with the hiring the additional staff members will increase the Company's Sales, General and Administration (SG&A) Expense. It is anticipated the cost of the new staff members will be approximately $70,000 per year. As of September 30, 2016, we had no full-time employees with the requisite expertise in the key functional areas of finance and accounting. As a result, there is a lack of proper segregation of duties necessary to ensure that all transactions are accounted for accurately and in a timely manner.

No audit committee: After the election of the independent directors at the 2017 annual shareholder meeting, the Company expects that an Audit Committee will be established. The cost associated to the addition an audit committee are minimal and not deemed material.

Written Policies & Procedures: We need to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions, and prepare, review and submit SEC filings in a timely manner.

Management’s Remediation Initiatives

As our resources allow, we will add financial personnel to our management team. We plan to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions. Upon the addition of independent directors, we will create an audit committee made up of our independent directors.

As of September 30, 2016, the Company has not taken any remediation actions to address these weaknesses in our controls even though they were identified during the year. The Company’s management hired, as soon as its financial position permitted it to do so, additional staff in its accounting department to be able to segregate the duties. The Company expects that the expense will be approximately $100,000 per year which would allowed the Company to hire two new staff members.

(b) Changes in Internal Control Over Financial Reporting

We need to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity transactions, and prepare, review and submit SEC filings in a timely manner

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our directors and executive officers and additional information concerning them are as follows:

Name	Age	Position
William Waldrop	48	CEO and Director
Lori Glauser	47	COO, President, and Director
Henry Grimmett	67	Director
Anthony Smith, Ph.D.	47	CSO and Director

William H. Waldrop – Chairman of the Board and Chief Executive Officer

Mr. Waldrop is our CEO and member of the Board of Directors. Mr. Waldrop has over 20 years’ experience in corporate formation, operations, financing and leadership. Ms. Glauser formed Signal Bay in August, 2014 as an industry advisory firm. In 2010, Mr. Waldrop founded Newport Commercial Advisors, which assists start-up and high-growth companies in developing and executing their business strategies. From 2006 – 2009, Mr. Waldrop was the Co-Founder and President of CMP Capital, a national commercial finance company. CMP Capital provided finance solutions for the transportation and construction industries. From 2004 – 2005, Mr. Waldrop was the President and Chief Operating Officer of College Partnership. College Partnership was publicly traded company that assists high school students with their college selection and financial aid. From 2002 – 2005, Mr. Waldrop was the CEO and President of Vision Direct Marketing, a full-service marketing company. Vision Direct Marketing was acquired by College Partnership. From 2000 – 2002, Mr. Waldrop was Vice President of Operations at Leading Edge Broadband, a start-up international telecommunications company, he designed and operated network managing call traffic between the United States and the Philippines for International Call Centers. From 1992 – 2000, Mr. Waldrop was a Senior Manager at AirTouch Cellular, now Verizon Wireless, he managed a 44-Store, $100 million annual revenue distribution channel. Mr. Waldrop received a B.S. from California State University of Long Beach, 1991 and an MBA in Finance and Entrepreneurship from the University of Southern California, 1997.

Lori Glauser– COO, President and Director

Ms. Glauser is our COO, President and member of the Board of Directors. Ms. Glauser formed Signal Bay in August, 2014 as an industry advisory firm. Ms. Glauser has over 20 years’ experience in engineering, consulting, and startups, and has expertise in business planning, business process design, financial forecasting, risk, customer experience, supply chain management, energy management, and utility rates design. She has experience with regulatory and policy issues, and has supported development of witness testimony documents. From 2011 – 2014, Ms. Glauser worked as a Senior Manager at Ernst & Young where led programs related to energy management, smart grid programs, and energy theft and security issues for electric utilities. From 2010 – 2012, Ms. Glauser was a managing consultant at IBM where she primarily led the development of business processes for NV Energy’s smart thermostat program. From 2006 – 2010, she worked at Itron Inc. as product manager for smart grid software systems. In 2008, Lori was a finalist in the California Clean Tech Open competition for Tangerine Network Devices, a smart energy and water management platform for commercial businesses. From 2004 – 2006 as Associate Director at SNL Financial, she had a key role in developing s business intelligence platform for energy companies which provided financial and operating data, as well as original news and research to the investment community. From 1997 – 2004, Lori worked with emerging companies including Resource Data International, where Ms. Glauser provided advisory services to the energy industry. She also formed Signal Bay, LLC to provide independent consulting services in the area of sustainability. From 1991 – 1997, Ms. Glauser performed design and field engineering work at nuclear power plants, and worked as a management consultant to the utility industry. Lori has a BS in mechanical engineering from the University of New Hampshire, 1991, and an MBA from University of Alabama, 1995. Lori was also adjunct instructor of Project Management at the Metropolitan State College of Denver.

Anthony Smith, Ph.D., Director and Chief Science Officer of EVIO Labs

Executive Scientist and founder of Kenevir Technologies, LLC and Kenevir Research Labs, Dr. Anthony Smith received his Ph.D. from Oregon State University in Molecular & Cellular Biology with an emphasis on biochemistry, metabolism and nutrition. He brings over 15 years of natural product research, quality assurance, product development, GMP manufacturing, FDA & regulatory experience and analytical expertise to Kenevir Research. Dr. Smith was recently appointed to the Oregon governor’s Task Force on Researching the Medicinal and Public Health Properties of Cannabis.

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Henry Grimmett, MA, Director and President of EVIO Labs

Mr. Grimmett, co-founder of GreenHaus Analytical Labs, has been a successful career entrepreneur. Mr. Grimmett started his first business while still in college harvesting abalone and sea weed. Mr. Grimmett had the great fortune of studying plant biochemistry and plant physiology with David Rayle and Steve Johnson at San Diego State University, who were conducting pioneering research on IA (auxin) and other growth hormones in plants and received his degree in Botany. Over the years, he worked extensively with pesticides and herbicides studying their efficacy and environmental effects. Mr. Grimmett was a licensed real estate broker where he owned three Red Carpet real estate franchises. He had obtained a securities license and syndicated real estate and more recently he and his wife Susan founded Glass Alchemy where they introduced many new colors into the borosilicate glass palette. Henry brings a strong research bent to the company as well as experience with regulatory compliance and accreditation protocols.

Code of Ethics

We have adopted a Code of Ethics which is designed to ensure that our directors and officers meet the highest standards of ethical conduct. The Code of Ethics requires that our directors and officers comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in our best interest. A copy of the Company's code of ethics has been attached to this prospectus as Exhibit 14.

Committees of the Board of Directors

The Company does not presently have a separately designated audit committee, compensation committee, nominating committee, executive committee or any other committees of its Board of Directors. As such, the Board of Directors acts in those capacities. The Company believes that committees of the Board are not necessary at this time given that the Company is in its exploration stage. However, the Board of Directors will continue to study this matter, and the Company plans to add Board members and/or committees of the Board as its business develops.

Audit Committee Financial Expert

Neither, Mr. Waldrop or Ms. Glauser does not qualify as an “audit committee financial expert.” The Company believes that the cost related to retaining such a financial expert at this time is prohibitive, given its current operating and financial condition. Further, because the Company is in the development stage of its business operations, it believes the services of an audit committee financial expert are not warranted at this time.

ITEM 11. EXECUTIVE COMPENSATION

The Companies’ officers and director have received the annual salary listed below for the services rendered on behalf of the Company:

	Year	Salary		Bonus		Stock Awards		All Other Compensation		Total
William Waldrop,	2016	$	1	$	-	$	-	$	60,026	$	60,027
CEO, Director (1)(2)	2015		1		-		276,000		60,000		336,001

Lori Glauser, President,	2016		1		-		-		11,000		1
COO, Director (1)(2)	2015		1		-		276,000		-		276,001

________________

(1)	Mr. Waldrop's company Newport Commercial Advisors received compensation for his management services.
(2)	Commencing in Fiscal Year 2017, it is projected that the CEO and COO will begin to earn a base salary upon receipt of funding or significant company revenues.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of the date of this filing, certain information concerning the beneficial ownership of our common stock by (i) each stockholder known by us to own beneficially five percent or more of our outstanding common stock; (ii) each director; (iii) each named executive officer; and (iv) all of our executive officers and directors as a group, and their percentage ownership and voting power.

Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of our common stock, except to the extent authority is shared by spouses under community property laws. Except as otherwise indicated in the table below, addresses of named beneficial owners are in care of the Company, 62930 O. B. Riley Rd, Suite 300, Bend, OR 97703.

						Series B					Series C
	Common Stock SharesBeneficially		Percentage			Preferred Stock SharesBeneficially		Percentage			Preferred Stock SharesBeneficially		Percentage			Total Voting
Name	Owned		Class			Owned		Class			Owned		Class			Power
William Waldrop		139,500,000		8.7	%		2,500,000		50	%							24.2	%
Lori Glauser		139,500,000		8.7	%		2,500,000		50	%							24.2	%
Anthony Smith												300,000		60	%		9.3	%
Sara Lausmann												200,000		40	%		6.2	%


All officers and directors as a group (3 persons)	57.70	%

All officers, directors and 5% holders as a group (4 persons)	63.90	%

____________
(1)	Beneficial ownership is determined in accordance with Rule 13d-3(a) of the Exchange Act and generally includes voting or investment power with respect to securities.
(2)	Figures may not add up due to rounding of percentages.
	(a)	The Series B Preferred converts into Common Stock at a ratio of 1:100.
	(b)	The Series B Preferred Stock has voting rights equal to 100 votes for each 1 share of owned.
	(c)	The Series C Preferred converts in Common Stock at a ratio of 1:500.
	(d)	The Series C Preferred Stock has voting rights equal to 500 votes for each 1 share of owned.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Libra Wellness Center, LLC Related Transactions and Divestiture

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Asset Purchase Agreement of Oregon Analytical Services, LLC

Acquisition of Smith Scientific Inc.

Director Independence

Our board of directors currently consists of William, our Chief Executive Officer; Lori Glauser, our President and Chief Operating Officer; Anthony Smith, our Chief Science Officer and Henry Grimmett, President of EVIO Labs. As executive officers, none of our current Board members qualify as “independent” under standards of independence set forth by national securities exchanges, thus we do not have a majority of our board comprised of “independent directors”. However, as our common stock is currently quoted on the OTC Bulletin Board, we are not currently subject to corporate governance standards of listed companies.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

INDEPENDENT AUDITOR FEES

The following is a summary of the fees billed to us by our independent auditors for the fiscal years ended September 30, 2016 and 2015:

Fiscal Year

2016

Fiscal Year

2015

Audit Fees

52,050

16,500

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ITEM 15. EXHIBITS

Exhibit No.		Exhibit Description
10.1		2015 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of the Form S-8 filed with the Securities and Exchange Commission by Signal Bay, Inc. on April 6, 2015)
10.2		Amended and Restated 2015 Equity Incentive Plan (See Exhibit 10.2)
10.3		Agreement for Sale and Purchase of Business Assets of Oregon Analytical Services, LLC (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission by Signal Bay, Inc. on May 25, 2016)
10.4		Stock Purchase Agreement for 80% of Smith Scientific Industries, Inc. (Exhibit 10.4)
10.5		Employment Agreement between EVIO Inc. and Anthony R. Smith dated as of June 1, 2016 (Exhibit 10.5)
10.6		Membership Interest Purchase Agreement with Greenhaus Analytical Labs, LLC dated October 19, 2016 (Exhibit 10.6)
10.7		Employment Agreement between EVIO Inc. and Henry Grimmett dated as of October 19, 2016 (Exhibit 10.7)
10.8		Agreement for Sale and Purchase of Business Assets of Green Style Consulting, LLC dated November 1, 2016.
31.1		Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002
31.2		Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1		Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002
32.2		Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 23, 2017.

	SIGNAL BAY, INC.

	By:	/s/ William Waldrop
		William Waldrop
		Chief Executive Officer


	By:	/s/ Christian Carnell
		Christian Carnell
		Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on February 23, 2017.

	By:	/s/ William Waldrop
		William Waldrop
		Director & Principal Executive Officer


	By:	/s/ Lori Glauser
		Lori Glauser
		Director


	By:	/s/ Anthony Smith
		Anthony Smith
		Director


	By:	/s/ Henry Grimmett
		Henry Grimmett
		Director