Phoenix Apps Inc. - Quarter Report: 2018 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2018

or

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 333-209591

(239) 451-36016

 (Registrant’s telephone number, including area code) 

N/A

(Former name, former address and former fiscal year, if changed since last report) 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ YES   x NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨ YES   x NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ¨ YES   ¨ NO

APPLICABLE ONLY TO CORPORATE ISSUERS

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

45,300,000 common shares issued and outstanding as of August 14, 2018.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

FINANCIAL STATEMENTS INDEX

PHOENIX APPS, INC.

BALANCE SHEETS

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

PHOENIX APPS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

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

PHOENIX APPS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

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

PHOENIX APPS INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2018

(Unaudited)

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

Phoenix Apps, Inc. (“we”, or the “Company”) was incorporated in the State of Nevada on November 18, 2015, and commenced operations on November 30, 2015. The Company develops Android and Apple mobile applications. The Company’s fiscal year end is December 31.

On November 30, 2015, we acquired a portfolio of mobile software applications for smartphones and tablets (“Apps”) pursuant to an Asset Purchase Agreement (the “Agreement”), by and between the Company and third parties.

Under the terms of the Agreement, the parties agreed to sell certain assets, properties and contractual rights to the Company for $60,000 (the “Acquisition”). The $60,000 was paid by a related party, and subsequently, the Company provided 30,000,000 shares of its common stock to the related party for the $60,000 payment, and for a $12,500 payment for legal fees. Further, under the terms of the Agreement, the Company will employ two managers for a minimum term of one year. In addition, the individuals will be entitled to 10% of the Company’s annual profits as defined by the Agreement. The Company allocated the $60,000 purchase price to intangible assets as the assets purchased were without physical substance, and were paid by the related party. The intangible asset value was recorded as the full purchase price, and subsequently impaired as at December 31, 2015. In addition, under the terms of the Agreement, the employees were issued a total of 300,000 shares of common stock valued at par, $0.002 per share.

On May 13, 2016, the Company’s offering of 15,000,000 shares at $0.01 per share for total proceeds of $150,000 received a notice of effect from the Securities and Exchange Commission (“SEC”), and the Company commenced raising capital to fully implement its business plan. The offering was closed, and proceeds of $150,000 were received in relation to the 15,000,000 shares being issued, of which $25,000 was recorded as additional paid-in capital (“APIC”) resulting from direct legal costs to complete the offering.

On July 1, 2017, the Company entered into an agreement to dispose of their portfolio of revenue generating mobile software applications. Per the terms of the agreement, the Company’s two managers acquired the revenue generating assets from the Company, while forgiving all amounts owed to them as of July 1, 2017, and terminating the employment agreements held with the two managers.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for fiscal year 2017 have been omitted. This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2017 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on April 17, 2018.

Use of Estimates

The preparation of financial statements in conformity with 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. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

Revenue Recognition

The Company recognizes revenue from the sale of products and services in accordance with ASC 606,”Revenue Recognition” following the five steps procedure:

Step 1: Identify the contract(s) with customers

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to performance obligations

Step 5: Recognize revenue when the entity satisfies a performance obligation

The Company recognizes revenue when it satisfies its obligation by transferring control of the good or service to the customer. A performance obligation is satisfied over time if one of the following criteria are met:

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments

ASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.

Basic and Diluted Income (Loss) Per Share

The Company computes income (loss) per share in accordance with FASB ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

No potentially dilutive debt or equity instruments were issued or outstanding during the years ended December 31, 2017 and 2016.

Recent accounting pronouncements

Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 3 – GOING CONCERN

As of the three months ended March 31, 2018, the Company had an accumulated deficit of $(387,118). The Company believes that its existing capital resources may not be adequate to enable it to execute its business plan. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. The Company disposed of all revenue generating assets and is currently revising their future business operations and strategy. The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans.

NOTE 4 – CONVERTIBLE PROMISSORY NOTES

On September 30, 2017, the Company issued three convertible promissory notes for a total of $30,768 to non-related parties for payment made to vendors for operating expenses on behalf of the Company. The convertible promissory notes are unsecured, bear interest at 35%, are due on demand, and are convertible at $0.005 per share.

On October 27, 2017, the Company issued a convertible promissory note of $5,977 to a non-related party for an advancement to the Company. The convertible promissory note is unsecured, bears interest at 50%, is due on demand, and is convertible at $0.005 per share.

On December 31, 2017, the Company issued a convertible promissory note of $6,015 to a non-related party for payment made to vendors for operating expense on behalf of the Company. The convertible promissory note is unsecured, bears interest at 50%, is due on demand, and is convertible at $0.005 per share.

On June 30, 2018, the Company issued a convertible promissory note of $26,134 to a non-related party for payment made to vendors for operating expense on behalf of the Company. The convertible promissory note is unsecured, bears interest at 50%, is due on demand, and is convertible at $0.005 per share.

During the year ended December 31, 2017, the Company recognized amortization of discount, included in interest expense, of $42,760.

During the six months ended June 30 2018, the Company recognized amortization of discount, included in interest expense, of $26,134.

 As of June 30, 2018, the accrued interest related to these convertible notes was $11,721.

NOTE 5 – NOTE PAYABLE

On January 11, 2017, the Company issued a promissory note for $21,977. The note bears interest at a rate of 5% per annum and the maturity date is December 31, 2019.

As of June 30, 2018, the accrued interest related to this promissory note was $1,633.

NOTE 6 – STOCKHOLDER’S EQUITY

Preferred Stock

The Company has authorized 10,000,000 preferred shares with a par value of $0.002 per share. The Board of Directors are authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. No shares of preferred stock have been issued.

Common Stock

The Company has authorized 190,000,000 common shares with a par value of $0.002 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

As of June 30, 2018, the Company has 45,300,000 shares of common stock issued and outstanding.

NOTE 7 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to June 30, 2018 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. 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. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our consolidated unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly 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 such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to shares of our common stock.

As used in this quarterly report, the terms “we”, “us”, “our company”, mean Phoenix Apps Inc., a Nevada corporation, unless otherwise indicated.

Corporate Overview

We were originally organized as a corporation in the State of Nevada on November 18, 2015, and on November 30, 2015, we acquired a portfolio of mobile software applications for smartphones and tablets (“Apps”) pursuant to an Asset Purchase Agreement, entered into by and between the Company and the owners of the Apps, Corey Wadden and Saba Mirzaagha, both individuals residing in Ontario, Canada (“Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, we purchased the portfolio of Apps from Mr. Wadden and Mr. Mirzaagha for an aggregate purchase price of $60,000 and entered into an employment agreement with each of them. Pursuant to the employment agreements, which are effective January 6, 2016, each of Mr. Wadden and Mr. Mirzaagha are required to devote at least ten (10) hours per week to the Company’s business during their term of employment, which is for a minimum of one (1) year. After one (1) year, either party may terminate the agreement upon sixty (60) days notice to the other party.

Under each employment agreement, we agreed to provide to Mr. Wadden and Mr. Mirzaagha each: (a) five hundred dollars ($500.00) for the first three (3) months following the effective date of January 6, 2016; (b) one thousand dollars ($1,000.00) per month thereafter; (c) 150,000 restricted shares of the Company’s common stock effective November 30, 2015; and (d) an appointment to our Board of Directors. In addition, after the effective date of January 6, 2016, as an incentive payment, each of Mr. Wadden and Mr. Mirzaagha will be paid ten percent (10%) of the Company’s profits (with “profits” defined as the Company’s total revenue minus total expenses) on an annual basis while they are employed by the Company, pro-rated for partial years.

On July 1, 2017, the employment agreements with Mr. Wadden and Mr. Mirzaagha were terminated, and the portfolio of mobile software applications were transferred to Mr. Wadden and Mr. Mirzaagha as part of a debt forgiveness agreement.

Our company is currently researching other mobile application opportunities.

Currently, we do not have a source of revenue. We are not able to fund our cash requirements through our current operations. We have been reliant on loans by affiliated and non-affiliated parties to provide financial contributions and services to keep our company operating. Further, we believe that our company may have difficulties raising capital from other sources until we locate a prospective merger candidate through which we can pursue our plan of operation. If we are unable to secure adequate capital to continue our acquisition efforts, our shareholders may lose some or all of their investment and our business may fail. We currently have no written or oral agreement from our majority shareholder to continue to provide financial contributions.

We do not have any subsidiaries.

We have not ever declared bankruptcy, been in receivership, or involved in any kind of legal proceeding.

Results of Operations

Three months ended June 30, 2018 and Three months ended June 30, 2017.

The following summary of our results of operations should be read in conjunction with our financial statements for the six months ended June 30, 2018, which are included herein.

Our operating results for the three months ended June 30, 2018 and the three months ended June 30, 2017 and the changes between those periods for the respective items are summarized as follows:

For the three months ended June 30, 2018, we had revenue of $NIL compared to revenue of $667 for the three months ended June 30, 2017. No revenue was generated during the three months ended June 30, 2018, as we disposed of their revenue generating mobile applications on July 1, 2017.

For the three months ended June 30, 2018, we incurred professional fees of $23,434, general and administrative expenses of $4,539 and interest expense of $30,650, resulting in a net loss of $58,623. For the three months ended June 30, 2017, we incurred professional fees of $22,703, software development of $775, general and administrative expenses of $15,641 and interest expense of $278, resulting in an operating and net loss of $38,730. The increase in net loss was due to the increase in accrued interest and amortization on debt discount from convertible notes for the three months ended June 30, 2018.

Six months ended June 30, 2018 and Six months ended June 30, 2017.

Our operating results for the six months ended June 30, 2018 and the six months ended June 30, 2017 and the changes between those periods for the respective items are summarized as follows:

For the six months ended June 30, 2018, we had revenue of $NIL compared to revenue of $1,258 for the six months ended June 30, 2017. No revenue was generated during the six months ended June 30, 2018, as we disposed of their revenue generating mobile applications on July 1, 2017.

For the six months ended June 30, 2018, we incurred professional fees of $23,434, general and administrative expenses of $4,539 and interest expense of $35,116, resulting in a net loss of $63,249. For the six months ended June 30, 2017, we incurred professional fees of $25,453, software development of $5,265, general and administrative expenses of $35,271 and interest expense of $519, resulting in an operating and net loss of $63,250. Net loss for the comparative periods remains relatively consistent with higher interest cost incurred during the six months ended June 30, 2018 and higher general and administration and software development cost incurred during the six months ended June 30, 2017.

Liquidity and Financial Condition

Working Capital

Cash Flows

As at June 30, 2018, our cash balance was $455 and total assets were $455. As at December 31, 2017, our cash balance was $3,984 and total assets were $3,984.

As at June 30, 2018, we had total current liabilities of $120,579, compared with total current liabilities of $86,993 as at December 31, 2017.

As at June 30, 2018, we had working capital deficit of $120,124 compared with working capital deficit of $83,009 as at December 31, 2017. The increase in working capital deficit was primarily attributed to the increase in convertible notes payable and accrued interest and the decrease in cash and cash equivalents.

Cash Flow from Operating Activities

During the six months ended June 30, 2018, net cash used in operating activities was $29,663, compared to $35,283 during the three months ended June 30, 2017.

The net cash used in operating activities for the six months ended June 30, 2018 was attributed to a net loss of $63,249, increased by a decrease in accounts payable and accrued liabilities of $1,530, and decreased by amortization of debt discount of $26,134 and an increase in accrued interest of $8,982.

The cash used from operating activities for the six months ended June 30, 2017 was attributed to a net loss of $63,250, decreased by an increase in accounts payable and accrued liabilities of $27,448, and an increase in accrued interest of $519.

Cash Flow from Investing Activities

We did not use any funds for investing activities in the six months ended June 30, 2018 or the six months ended June 30, 2017.

Cash Flow from Financing Activities

Net cash from financing activities was $26,134 for the six months ended June 30, 2018 derived from proceeds from proceeds from promissory notes, compared to net cash from financing activities of $21,977 for the six months ended June 30, 2017 derived from proceeds from promissory note.

Off-Balance Sheet Arrangements

We have no 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 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2018. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the three-month period ended March 31, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we area party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on us.

Item 1A. Risk Factors

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are included as part of this report:

* XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with 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.