VERDE BIO HOLDINGS, INC. - Quarter Report: 2018 January (Form 10-Q)

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Condensed Consolidated Financial Statements

For the Three and Nine Months Ended January 31, 2018

Condensed Consolidated Balance Sheets (unaudited)2 

Condensed Consolidated Statements of Operations (unaudited)3 

Condensed Consolidated Statements of Cash Flows (unaudited)4 

Notes to the Condensed Consolidated Interim Financial Statements (unaudited)5 

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Consolidated Balance Sheets

(Expressed in US dollars)

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

3

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Consolidated Statements of Operations

(Expressed in US dollars)

(unaudited)

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

4

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Consolidated Statements of Cash Flows

(Expressed in US dollars)

(unaudited)

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

5

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

1.Nature of Operations and Continuance of Business 

Appiphany Technologies Holdings Corp. (the “Company”) was incorporated in the State of Nevada on February 24, 2010. Currently, the Company is in the business of online fraud protection services.

Going Concern

These condensed consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at January 31, 2018, the Company has not recognized significant revenue, has a working capital deficit of $965,548, and has an accumulated deficit of $4,576,829. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. The Company will continue to rely on equity sales of its common shares in order to continue to fund business operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the date these financial statements are issued.  These condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  

2.Summary of Significant Accounting Policies 

(a)Basis of Presentation and Principles of Consolidation 

The accompanying interim condensed consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and accompany notes filed with the U.S. Securities and Exchange Commission for the year ended April 30, 2017. These interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

These interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The condensed consolidated financial statements are comprised of the records of the Company and its wholly owned subsidiary, IP Control Risk Inc., a company incorporated in the State of Nevada, United States. All intercompany transactions have been eliminated on consolidation. The Company’s fiscal year end is April 30.

(b)Use of Estimates 

The preparation of financial statements in conformity with US GAAP 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. The Company regularly evaluates estimates and assumptions related to the collectability of accounts receivable, fair value and estimated useful life of long-lived assets, fair value of convertible debentures, derivative liabilities, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

2.Summary of Significant Accounting Policies (continued) 

(c)Basic and Diluted Net Loss per Share  

The Company computes net loss per share in accordance with 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 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. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.  As of January 31, 2018, the Company had 113,614,036(April 30, 2017 – 5,691,592) potentially dilutive common shares outstanding.

(d)Recent Accounting Pronouncements 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

3.Related Party Transactions 

As at January 31, 2018, the Company owed $20,070 (April 30, 2017 - $nil) to the President and Director of the Company for financing of day-to-day expenditures incurred on behalf of the Company. The amount owing is unsecured, non-interest bearing, and due on demand. During the nine months ended January 31, 2018, the Company incurred $36,267 (2017 - $nil) in management fees to the President and Director of the Company.

4. Notes Payable 

(a) As at January 31, 2018, the Company owed $4,616 (April 30, 2017 - $4,616) in notes payable to non-related parties. Under the terms of the notes, the amounts are unsecured, bear interest at 6% per annum, and were due on July 31, 2016. The notes bear a default interest rate of 18% per annum.   

(b)On June 6, 2016, the Company issued a note payable to a non-related party for proceeds of $10,000. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on July 6, 2017. The note bears a default interest rate of 12% per annum, and is now due on demand.  

(c)On February 1, 2017, the Company issued a note payable to a non-related party for proceeds of $2,500. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and is due on February 1, 2018. The note bears a default interest rate of 12% per annum. 

(d)On March 15, 2017, the Company issued a note payable to a non-related party of $15,000. The note payable was issued as a commitment fee and was recorded to additional paid-in capital. Under the terms of the note, the amount is unsecured, bears interest at 8% per annum, and was due on September 15, 2017. The note bears a default interest rate of 20% per annum, and is now due on demand. 

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

5.Convertible Debentures 

(a)On May 21, 2014, the Company issued a convertible debenture, to a non-related party, for proceeds of $37,500. Under the terms of the debenture, the amount is unsecured, bears interest at 8% per annum, and is due on February 23, 2015. After 180 days or November 17, 2014, the debenture is convertible into common shares of the Company at a conversion price equal to 51% of the lowest two trading prices of the Company’s common shares for the past 30 trading days prior to notice of conversion. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $37,500. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $37,500.  During the year ended April 30, 2015, the Company issued 360,000 shares of common stock for the conversion of $2,920.  During the year ended April 30, 2016, the Company issued 18,500 shares of common stock for the conversion of $8,772 of the note.  During the year ended April 30, 2017, the Company issued 101,790 shares of common stock for the conversion of $16,889 of the note. During the nine months ended January 31, 2018, the Company issued 256,937 shares of common stock for the conversion of $8,919 of the note and $6,418 of accrued interest. As at January 31, 2018, the carrying value of the note was $nil (April 30, 2017 - $8,919).

(b)On May 23, 2014, the Company issued a convertible debenture, to a non-related party, for proceeds of $40,000. Under the terms of the debenture, the amount is unsecured, bears interest at 8% per annum, and is due on May 23, 2015. After 180 days or November 19, 2014, the debenture is convertible into common shares of the Company at a conversion price equal to 55% of the lowest trading price of the Company’s common shares for the past 15 trading days prior to notice of conversion. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $25,215. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $40,000. During the year ended April 30, 2015, the Company issued 1,277 shares of common stock for the conversion of $1,335 of the note and $69 of accrued interest. During the year ended April 30, 2016, the Company issued 918 shares of common stock for the conversion of $188 of the note and $19 of accrued interest.  During the nine months ended January 31, 2018, the Company issued 1,314,451 common shares for the conversion of $38,477 of the note and $10,545 of accrued interest.  As at January 31, 2018, the carrying value of the note was $nil (April 30, 2017 - $38,477).

(c)On July 21, 2016, the Company issued a convertible debenture, to a non-related party, for proceeds of $56,750. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and is due on April 21, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock of either (i) the twenty-five prior trading days immediately preceding the issuance of the note or (ii) the twenty-five prior trading days including the day upon which a notice of conversion is received by the Company.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $56,750, of which $6,250 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $56,750. During the year ended April 30, 2017, the Company issued 766,800 shares of common stock for the conversion of $48,508 of the note and $4,757 of accrued interest. During the nine months ended January 31, 2018, the Company issued 481,298 shares of common stock for the conversion of $8,242 of the note and $15,056 of accrued interest. As at January 31, 2018, the carrying value of the note was $nil (April 30, 2017 - $7,367), and the unamortized total discount was $nil (April 30, 2017 - $875).

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

5.Convertible Debentures (continued) 

(d)On February 13, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $105,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $94,500. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and is due on November 13, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $105,000, of which $20,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $105,000. During the nine months ended January 31, 2018, the Company issued 8,559,000 common shares for the conversion of $82,720 of the note and $29,870 of accrued interest and penalties.  As at January 31, 2018, the carrying value of the note was $22,280 (April 30, 2017 - $29,231), and the unamortized total discount was $nil (April 30, 2017 - $75,769).

(e)On February 24, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and is due on November 30, 2017. The debenture is convertible into common shares of the Company at a conversion price equal to 58% of the average of the lowest two trading prices of the Company’s common stock of the fifteen prior trading days immediately preceding the issuance of the note. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging. As at January 31, 2018, the carrying value of the note was $33,000 (April 30, 2017 - $33,000).

(f)On April 21, 2017, the Company issued a $57,411 convertible debenture to a non-related party in extinguishment of a convertible debenture originally issued on November 4, 2016 of $55,000 and $2,411 of accrued interest as at April 21, 2017 as noted in Note 6(i). Due to the change of conversion terms, the fair value of the derivative liability increased from $95,302 to $97,264, resulting in a loss in extinguishment of $1,962. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and is due on July 21, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading prices of the Company’s common shares for the past twenty-five trading days prior to notice of conversion.   

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. During the nine months ended January 31, 2018, the Company issued 2,366,131 shares of common stock for the conversion of $57,411 of the note and $1,342 of accrued interest. As at January 31, 2018, the carrying value of the note was $nil (April 30, 2017 - $57,411).

(g)On April 28, 2017, the Company issued a $50,000 convertible debenture to a non-related party in extinguishment of a convertible debenture originally issued on November 4, 2016 of $50,000 as noted in Note 6(j). Due to the change of conversion terms, the fair value of the derivative liability increased from $192,604 to $197,630, resulting in a loss in extinguishment of $5,026. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and is due on July 30, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading prices of the Company’s common shares for the past twenty-five trading days prior to notice of conversion.   

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. During the nine months ended January 31, 2018, the Company issued 1,055,371 shares of common stock for the conversion of $50,000 of the note. As at January 31, 2018, the carrying value of the note was $nil (April 30, 2017 - $50,000).

9

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

5.Convertible Debentures (continued) 

(h)On May 9, 2017, the Company issued a convertible debenture, to a non-related party, totaling $36,450. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and is due on February 9, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 60% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,450, of which $6,450 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $36,450. As at January 31, 2018, the carrying value of the note was $1,062 (April 30, 2017 - $nil), and the unamortized total discount was $35,388 (April 30, 2017 - $nil).

(i)On June 28, 2017, the Company issued a convertible debenture, to a non-related party, totaling $57,250. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price and proceeds received was $49,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and is due on March 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $57,250, of which $7,750 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $57,250. During the nine months ended January 31, 2018, the Company issued 797,115 common shares for the conversion of $3,188 of accrued interest, penalties, and financing costs.  As at January 31, 2018, the carrying value of the note was $1,069 (April 30, 2017 - $nil), and the unamortized total discount was $56,181 (April 30, 2017 - $nil).

(j)On July 19, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $28,000. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and is due on July 19, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lessor of 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,333, of which $5,333 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $33,333. As at January 31, 2018, the carrying value of the note was $81 (April 30, 2017 - $nil), and the unamortized total discount was $33,252 (April 30, 2017 - $nil).

Included in the convertible debenture agreement is a $30,000 collateralized secured promissory note and a $33,333 back end note (with the same terms as the convertible debenture mentioned above).  As of January 31, 2018 and at the date of filing, no proceeds have been received on the collateralized secured promissory note or the back end note.

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

5.Convertible Debentures (continued) 

(k)On September 19, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $36,000, which was the first tranche of a convertible debenture totaling $102,000. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $25,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and is due on June 19, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to  50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $36,000, of which $11,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $36,000. As at January 31, 2018, the carrying value of the note was $19 (April 30, 2017 - $nil), and the unamortized total discount was $35,981 (April 30, 2017 - $nil).

(l)On September 28, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $25,500. Under the terms of the debenture, the amount is unsecured, bears interest at 12% per annum, and is due on September 28, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 50% of the lowest trading price of the Company’s common stock of the past twenty-five trading days prior to notice of conversion or the issuance of the note.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,333, of which $7,833 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $33,333. As at January 31, 2018, the carrying value of the note was $6 (April 30, 2017 - $nil), and the unamortized total discount was $33,327 (April 30, 2017 - $nil).

Included in the convertible debenture agreement is a back end note for up to $33,333 (with the same amount of proceeds, original issue discount, maturity date, interest rate and conversion terms as the convertible debenture mentioned above).  As of January 31, 2018 and at the date of filing, no proceeds have been received on the back end note.

(m)On November 8, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000, which was the second tranche of the September 19, 2017 agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and is due on August 8, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to the  50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $33,000. As at January 31, 2018, the carrying value of the note was $nil (April 30, 2017 - $nil), and the unamortized total discount was $33,000 (April 30, 2017 - $nil).

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

5.Convertible Debentures (continued) 

(n)On December 26, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000, which was the final tranche of the September 19, 2017 agreement. Pursuant to the agreement, the note was issued with an original issue discount and as such the purchase price was $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum, and is due on September 26, 2018. The debenture is convertible into common shares of the Company at a conversion price equal to 50% of the lowest trading price of the Company’s common stock of the past ten trading days prior to notice of conversion.  

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $33,000, of which $3,000 of the discount resulted from debt issuance costs. The carrying value of the convertible note will be accreted over the term of the convertible note up to the face value of $33,000. As at January 31, 2018, the carrying value of the note was $nil (April 30, 2017 - $nil), and the unamortized total discount was $33,000 (April 30, 2017 - $nil).

6.Derivative Liability 

The Company records the fair value of the of the conversion price of the convertible debentures disclosed in Note 5 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a Binomial model. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. During the nine months ended January 31, 2018, the Company recorded a loss on the change in fair value of derivative liability of $138,455 (January 31, 2017 – loss of $275,039). As at January 31, 2018, the Company recorded a derivative liability of $548,742 (April 30, 2017 -$1,082,050).

The following inputs and assumptions were used to value the convertible debentures outstanding during the periods ended January 31, 2018 and April 30, 2017:

12

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

6.Derivative Liability (continued) 

13

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

6.Derivative Liability (continued) 

14

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

6.Derivative Liability (continued) 

A summary of the activity of the derivative liability is shown below:

7.Common Shares 

During the nine months ended January 31, 2018, the Company issued an aggregate of 14,830,304 common shares with a fair value of $1,231,487 upon the conversion of $254,238 of convertible debentures and $57,951 of accrued interest, as noted in Note 5.

On November 17, 2017, the Company effected a reverse stock split on a basis of 1 new common share for every 100 old common shares.  The impact of the reverse stock split has been applied on a retroactive basis.  

8.Preferred Shares 

Authorized: 10,000,000 preferred shares with a par value of $0.001 per share

Convertible Preferred Series A stock

On April 18, 2017, the Company designated 500,000 shares of preferred stock as Series A. The holders of Series A preferred shares are entitled to receive dividends equal to the amount of the dividend or distribution per share of common stock payable multiplied by the number of shares of common stock the shares of Series A preferred shares held by such holder are convertible into. Each Series A preferred shares is convertible into 100 post-split common shares (one pre-split common share). Each holder of Series A preferred shares is entitled to cast 10,000 votes for every one Series A preferred share held.

9.Subscriptions Receivable 

As at January 31, 2018, 9,000 (April 30, 2017 – 9,000) common shares with a fair value of $13,410 (April 30, 2017 - $13,410) has been issued in excess of the original consulting agreements in error. The agreements are discussed in Note 10. Due to the fact that the shares were issued in error and that the Company intends on cancelling these shares, the amount receivable has been recorded in subscription receivable. Refer to Note 10.

10.Commitments 

On August 26, 2016, the Company entered in consulting agreements with five consultants. Pursuant to the agreements, each consultant is to be compensated by the following:

i)10% commission on all net revenues derived by the Company through the consultant in the first year; 

ii)5% commission on all net revenues derived by the Company through the consultant in years two and three; 

iii)1,800 common shares payable on the date of the agreement (see Note 9); 

iv)1,800 common shares payable on February 26, 2016 (see Note 9); 

v)1,800 common shares payable on August 26, 2017 (see Note 9); and 

vi)1,800 common shares payable on February 26, 2018 (see Note 9). 

Either party may terminate the agreement by providing written thirty days’ notice.  As at January 31, 2018, no commission has been earned, paid, or accrued.  

15

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

11.Revision of Prior Year Financial Statements 

While preparing the financial statements for period ending July 31, 2017, the Company noted that there was an error with the calculation of the conversion price of the February 13, 2017 convertible debenture as described in Note 5(d) and accordingly, has revised its consolidated financial statements as at April 30, 2017 and for the year then ended to reflect the change in fair value of derivative liability during the period and the fair value of the derivative liability as at April 30, 2017. This revision resulted in a decrease to net loss of $169,730 and no change to net loss per share.

In accordance with the guidance provided by the SEC’s Staff Accounting Bulletin 99, Materiality and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements the Company has determined that the impact of adjustments relating to the correction of this accounting error are not material to previously issued annual audited consolidated financial statements. Accordingly, these changes are disclosed herein and will be disclosed prospectively.

The impact of the error as at April 30, 2017 and for the year then ended is summarized below:

Consolidated Balance Sheet

Consolidated Statement of Operations and Comprehensive Loss

Consolidated Statement of Stockholders’ Equity

16

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

(Expressed in US dollars)

(unaudited)

11.Revision of Prior Year Financial Statements (continued) 

Consolidated Statement of Cash Flows

12.Subsequent Events 

(a)On February 5, 2018, the Company issued 875,770 common shares for the conversion of $1,645 of convertible debenture and $107 of accrued interest, as noted in Note 5(j). 

(b)On February 7, 2018, the Company issued 800,000 common shares for the conversion of $300 of accrued interest and $500 of conversion fees, as noted in Note 5(i). 

(c)On February 12, 2018, the Company issued 960,000 common shares for the conversion of $1,111 of convertible debenture and $137 of accrued interest, as noted in Note 5(d). 

(d)On February 13, 2018, the Company issued 1,007,696 common shares for the conversion of $1,179 of convertible debenture and $81 of accrued interest, as noted in Note 5(j).   

(e)On February 16, 2018, the Company issued 1,008,100 common shares for the conversion of $508 of accrued interest and $500 of conversion fees, as noted in Note 5(i).   

(f)On February 22, 2018, the Company issued 1,108,345 common shares for the conversion of $1,138 of convertible debenture and $81 of accrued interest, as noted in Note 5(j). 

(g)On February 23, 2018, the Company issued 1,100,000 common shares for the conversion of $1,134 of convertible debenture and $76 of accrued interest, as noted in Note 5(d). 

(h)On February 27, 2018, the Company issued 1,218,900 common shares for the conversion of $1,073 of convertible debenture, $465 of accrued interest, and $500 of conversion fees, as noted in Note 5(i). 

(i)On March 5, 2018, the Company issued 1,270,000 common shares for the conversion of $1,346 of convertible debenture and $51 of accrued interest, as noted in Note 5(d). 

(j)On March 6, 2018, the Company issued 1,343,127 common shares for the conversion of $1,374 of convertible debenture and $103 of accrued interest, as noted in Note 5(j).   

(k)On March 9, 2018, the Company issued 1,410,100 common shares for the conversion of $158 of convertible debenture, $188 of accrued interest, and a $500 conversion fee, as noted in Note 5(i).   

(l)On March 15, 2018, the Company issued 1,410,000 common shares for the conversion of $1,010 of convertible debentures and accrued interest of $47, as noted in Note 5(d). 

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FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our 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 those forward-looking statements.  You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms.  These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements.  Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

RESULTS OF OPERATIONS

Working Capital

Cash Flows

Operating Revenues

For the three and nine months ended January 31, 2018, the Company earned revenues of $13,950 and $41,850 respectively compared with $22,497 and $53,497 for the three and nine month periods ended January 31, 2017 related to the sale of online fraud protection services.  Overall, revenues were slightly lower in the current year due to the fact that the Company only has two main customers compared to three main customers in the prior year.

The Company had gross profit of $5,326 for the three months ended January 31, 2018 compared to gross profit of $18,570 for the three months ended January 31, 2017.  The decrease is due to the fact that the Company only had two customers for the current year compared to five customers in the prior year and the overall margins that the Company earned on its customers were less than prior year.  For the nine months ended January 31, 2018, the Company had a gross margin of $18,529 compared with $32,720 for the nine months ended January 31, 2017.  Overall, the gross margins were slightly lower compared to prior year as the Company incurs costs in GBP, which increased in value relative to the Company’s reporting currency (US dollars).  

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Operating Expenses and Net Loss

Three Months Ended January 31, 2018 and 2017

For the three months ended January 31, 2018, the Company incurred operating expenses of $98,097 compared to $150,347 during the three months ended January 31, 2017.  The decrease in operating expenses is due to a decrease of $93,656 in professional fees related to the issuance of 6,000,000 common shares with a fair value of $89,400 for legal fees in the prior year.  The decrease was offset by an increase of $21,067 in consulting fees and $32,477 in management fees as the Company used more consultants and commenced management fees during fiscal 2018.  

During the three months ended January 31, 2018, the Company recorded a net loss of $197,831 compared to $12,903 during the three months ended January 31, 2017.  In addition to revenues and operating expenses, the Company incurred a loss of $81,473 during the three months ended January 31, 2018 relating to the change in fair value of the derivative liability and $23,587 for interest and accretion expense on the Company’s outstanding loans.  During the three months ended January 31, 2017, the Company recorded a gain of $159,869 for the change in fair value of the derivative liability offset by interest and accretion expense of $41,116.

Nine Months Ended January 31, 2018 and 2017

For the nine months ended January 31, 2018, the Company incurred operating expenses of $387,584 compared to $348,432 for the nine months ended January 31, 2017.  The increase in operating expenses was due to an increase in general and administrative fees of $25,043 and management fees of $56,337 due to higher day-to-day operating costs.  The increase was offset by a decrease in professional fees of $49,478 due to the issuance of 6,000,000 common shares in the prior year for legal fees with a fair value of $89,400.  Outside of the one-time cost for legal fees, there was an overall increase in professional fees due in part to added complexity in the Company’s operations which require additional time and cost for accounting and audit services.     

During the nine months ended January 31, 2018, the Company recorded a net loss of $662,580 compared to $649,345 during the nine months ended January 31, 2017.  In addition to revenues and operating expenses, the Company incurred a loss of $138,455 during the nine months ended January 31, 2018 relating to the change in fair value of the derivative liability and $155,070 for interest and accretion expense on the Company’s outstanding loans.  During the nine months ended January 31, 2018, the Company recorded a loss of $275,039 for change in fair value of the derivative liability and interest and accretion expense of $54,210 along with a loss of $4,384 for the loss on settlement of debt.   

The Company had a loss per share of $0.07 for the nine months ended January 31, 2018 compared to a loss per share of $1.55 for the nine months ended January 31, 2017 after accounting for the retroactive application of a reverse stock split on a basis of 1 new common share for every 100 old common share which was approved and finalized in November 2017.  

Liquidity and Capital Resources

As at January 31, 2018, the Company had cash of $22,274 and total assets of $42,514 compared to cash of $17,154 and total assets of $57,391 at April 30, 2017.  Overall, there was an increase in cash due to proceeds received from the issuance of convertible debentures for which the cash has not been completely spent, and due to timing differences on the receipt of cash from financing activities and the repayment of outstanding accounts payable and accrued liabilities.  The decrease in total assets were due to the use of cash for operating activities and the expense of prepaid expense items during the nine months ended January 31, 2018.  The decreases were offset by an increase in accounts receivable, which was due to timing difference between the billing of services and the timing of collection.  

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As at January 31, 2018, the Company had total liabilities of $1,008,062 compared to $1,606,676 at April 30, 2017.  The decrease in total liabilities is due to a decrease in convertible debenture of $166,888 as a number of the convertible debenture amounts were converted during the period, and a decrease in derivative liability of $533,308.  The decreases were offset by an increase in accounts payable of $81,512 due to lack of sufficient cash flow for the company to pay outstanding obligations as they became due.   

As at January 31, 2018, the Company had a working capital deficit of $965,548 compared with a working capital deficit of $1,549,285 as at April 30, 2017.  The decrease in working capital deficit was due to a decrease in total liabilities from the decrease in convertible debentures due to conversion into common shares and the fair value of the derivative liabilities.

In November 2017, the Company finalized a reverse stock split on a basis of 1 new common share for every 100 old common shares, which has been applied on a retroactive basis.  

Cash Flow from Operating Activities

During the nine months ended January 31, 2018, the Company used $212,880 of cash for operating activities as compared to $185,274 during the nine months ended January 31, 2017.  The increase in the use of cash for operating activities was due to increased operations in the current year as compared to prior year, due in part to more proceeds received from financing activities which allowed the Company to disburse more cash for operating activities during the period.

Cash Flow from Investing Activities

During the nine months ended January 31, 2018 and 2017, the Company did not have any investing activities.

Cash Flow from Financing Activities

During the nine months ended January 31, 2018, the Company received $218,000 of net cash from financing activities from the issuance of convertible debentures. During the nine months ended January 31, 2017, the Company received $219,500 from the issuance of convertible debentures, $10,000 from issuance of notes payable, and the repayment of $38,156 of related party payables.

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities.  For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing. 

Future Financings

We will continue to rely on equity sales of our Common Shares in order to continue to fund our business operations.  Issuances of additional shares will result in dilution to existing stockholders.  There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

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 are material to stockholders.

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Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis.  The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements.  In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.  Actual results could differ from those estimates made by management.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

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.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act").  Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of January 31, 2018, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.  Please refer to our Annual Report on Form 10-K/A as filed with the SEC on August 18, 2016, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.

Changes in Internal Control over Financial Reporting

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's

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internal control over financial reporting.

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation.  There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

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.

1.Quarterly Issuances: 

Other than as previously disclosed in the above Notes to the Condensed Consolidated Financial Statements, we did not issue any unregistered securities during the quarter.

2.Subsequent Issuances: 

Other than as previously disclosed in the above Notes to the Condensed Consolidated Financial Statements, we did not issue any unregistered securities subsequent to the quarter.

None.

Not Applicable.

None.

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ITEM 6.  EXHIBITS

*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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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.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

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