UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 FORM 10-Q

 ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2017

 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______ to _______

Commission File Number 000-54524

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

 (Name of small business issuer in its charter)

358 South 300 East

Salt Lake City, UT 84111

 (Address of principal executive offices)

(385) 212-3305

(Registrant's telephone number)

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      ☐ 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 sho rter period that the registrant was required to submit and post such files).  ☒  Yes    ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 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  ☒ No

As of December 13, 2017 there were 13,266,258 shares of the registrant's $0.001 par value common stock issued and outstanding.

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.*

Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act").  This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Appiphany Technologies Holdings Corp. (the "Company"), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.  Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," or "project" or the negative of these words or other variations on these words or comparable terminology.  These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass.  Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.  Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

*Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references in this report to "Company", "APHD", "we", "us" and "our" are references to Appiphany Technologies Holdings Corp. 

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PART I - FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Consolidated Balance Sheets

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Consolidated Statements of Operations

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Consolidated Statements of Cash Flows

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APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Condensed Consolidated Financial Statements

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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.

(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 October 31, 2017, the Company had 14,489,908 (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 October 31, 2017, the Company owed $nil (April 30, 2017- $0) 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 six months ended October 31, 2017, the Company incurred and paid $23,860 (2016 - $nil) in management fees to the President and Director of the Company.

4. Notes Payable 

(a) As at October 31, 2017, 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,  

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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.

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. In May 2017, 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 October 31, 2017, 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 period ended October 31, 2017, 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 October 31, 2017, 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 three months ended July 31, 2017, 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 October 31, 2017, 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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(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 six months ended October 31, 2017, the Company issued 2,708,000 common shares for the conversion of $43,149 of the note and $29,191 of accrued interest and penalties.  As at October 31, 2017, the carrying value of the note was $55,967 (April 30, 2017 - $29,231), and the unamortized total discount was $5,884 (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 October 31, 2017, 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 six months ended October 31, 2017, 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 October 31, 2017, 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 three months ended July 31, 2017, the Company issued 1,055,371 shares of common stock for the conversion of $50,000 of the note. As at October 31, 2017, the carrying value of the note was $nil (April 30, 2017 - $50,000).

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(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 October 31, 2017, the carrying value of the note was $30 (April 30, 2017 - $nil), and the unamortized total discount was $36,420 (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. As at October 31, 2017, the carrying value of the note was $19 (April 30, 2017 - $nil), and the unamortized total discount was $57,231 (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 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 $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 October 31, 2017, the carrying value of the note was $3 (April 30, 2017 - $nil), and the unamortized total discount was $33,330 (April 30, 2017 - $nil).

(k)On September 19, 2017, the Company issued a convertible debenture, to a non-related party, for proceeds of $36,000. 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 the lesser of the 60% of the lowest trading price of the Company’s common stock of the past ten 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 $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.

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As at October 31, 2017, the carrying value of the note was $nil (April 30, 2017 - $nil), and the unamortized total discount was $36,000 (April 30, 2017 - $nil).

(l)On September 28, 2017, the Company issued a convertible debenture, to a non-related party, in the amount of $33,333. Pursuant to the agreement, the note was issued with an original issue discount and as such the amount of proceeds received 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 October 31, 2017, the carrying value of the note was $nil (April 30, 2017 - $nil), and the unamortized total discount was $33,333 (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 October 31, 2017 and at the date of filing, no proceeds have been received on the back end note.

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 period ended October 31, 2017, the Company recorded a loss on the change in fair value of derivative liability of $56,982 (2016 – $237,379). As at October 31, 2017, the Company recorded a derivative liability of $499,508 (April 30, 2017 -$1,082,050).

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

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

7.Common Shares 

During the six months ended October 31, 2017, the Company issued an aggregate of 8,182,189 post-split common shares upon the conversion of $214,667 of convertible debentures and $54,083 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 for all periods presented.  

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

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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 one 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 October 31, 2017, 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 October 31, 2017, no commission has been earned, paid, or accrued.  

11.Subsequent Events 

(a) On November 8, 2017, the Company issued 544,000 common shares for the conversion of $8,028 of convertible debenture and $132 of accrued interest, as noted in Note 5(d).

(b) On November 14, 2017, the Company issued 572,000 common shares for the conversion of $5,634 of convertible debenture and $86 of accrued interest, as noted in Note 5(d).

(c) On November 16, 2017, the Company issued 600,000 common shares for the conversion of $5,884 of convertible debenture and $26 of accrued interest, as noted in Note 5(d).

(d) On November 20, 2017, the Company issued 630,000 common shares for the conversion of $3,105 of convertible debenture and $45 of accrued interest, as noted in Note 5(d).

(e) 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.  

(f)On November 18, 2017, the Company received $30,000 for the second tranche of a convertible note agreement finalized on September 19, 2017.  Refer to Note 5(k).   

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12.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

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Consolidated Statement of Stockholders’ Equity

Consolidated Statement of Cash Flows

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

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 six months ended October 31, 2017, the Company earned revenues of $16,800 and $27,900 respectively compared with $19,433 and $31,000 for the three and six month periods ended October 31, 2016 related to the sale of online fraud protection services.  Overall, revenues were consistent on a year-to-year basis.  

The Company had gross profit of $7,110 for the three months ended October 31, 2017 compared to gross profit of $8,250 for the three months ended October 31, 2016.  For the six months ended October 31, 2017, the Company had a gross margin of $13,203 compared with $14,150 for the six months ended October 31, 2016.  Overall, the gross margins were consistent within periods as there were no significant changes in the Company’s operations or costs.  

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Operating Expenses and Net Income (Loss)

Three Months Ended October 31, 2017 and 2016

For the three months ended October 31, 2017, the Company incurred operating expenses of $109,537 compared to $111,253 during the three months ended October 31, 2016.  Operating expenses were consistent on a period-to-period basis with an increased general and administrative fees and management fees which corresponded with a decrease in consulting fees, as the Company relied less on consultants in order to keep operating costs in-house.  There was also an increase in professional fees of $6,639 due to increases in accounting, audit, and legal expenses.  

During the three months ended October 31, 2017, the Company recorded a net loss of $380,217 compared to $309,241 during the three months ended October 31, 2016.  In addition to revenues and operating expenses, the Company incurred a loss of $190,734 during the three months ended October 31, 2017 relating to the change in fair value of the derivative liability and $87,056 for interest and accretion expense on the Company’s outstanding loans.  During the three months ended October 31, 2016, the Company recorded a loss of $197,529 for change in fair value of the derivative liability and interest and accretion expense of $8,709, as the Company had more debt financing during 2017 as compared to the same period in 2016.  

Six Months Ended October 31, 2017 and 2016

For the six months ended October 31, 2017, the Company incurred operating expenses of $289,487 compared to $198,085 for the six months ended October 31, 2016.  The increase in operating expenses was due to an increase in general and administrative fees of $37,181 and management fees of $23,860 due to higher day-to-day operating costs that were borne partly by a decrease in the use of consultants and consulting expense of $13,817 during the period.  Furthermore, the Company incurred an increase in professional fees of $44,178 due to increases in accounting, audit, and legal fees with respect to the overall increase in business activity.   

During the six months ended October 31, 2017, the Company recorded a net loss of $464,749 compared to $636,442 during the six months ended October 31, 2016.  In addition to revenues and operating expenses, the Company incurred a loss of $56,982 during the six months ended October 31, 2017 relating to the change in fair value of the derivative liability and $131,483 for interest and accretion expense on the Company’s outstanding loans.  During the six months ended October 31, 2016, the Company recorded a loss of $13,094 for change in fair value of the derivative liability and interest and accretion expense of $434,908 along with a loss of $4,505 for the settlement of debt.   

The Company had a loss per share of $0.07 for the six months ended October 31, 2017 compared to a loss per share of $1.67 for the six months ended October 31, 2016 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 October 31, 2017, the Company had cash of $7,354 and total assets of $44,287 compared to cash of $17,154 and total assets of $57,391 at April 30, 2017.  The decrease in cash and total assets were due to the use of cash for operating activities and the expense of prepaid expense items during the six months ended October 31, 2017.  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.  

As at October 31, 2017, the Company had total liabilities of $953,731 compared to $1,606,676 at April 30, 2017.  The decrease in total liabilities is due to a decrease in convertible debenture of $135,386 as a number of the convertible debenture amounts were converted during the period, and a decrease in derivative liability of $582,492.  The decreases were offset by an increase in accounts payable of $64,933 due to lack of sufficient cash flow for the company to pay outstanding obligations as they became due.   

As at October 31, 2017, the Company had a working capital deficit of $909,444 compared with a working

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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 and 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 period ended October 31, 2017, the Company used $167,800 of cash for operating activities as compared to $130,425 during the six months ended October 31, 2016.  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 six months ended October 31, 2017 and 2016, the Company did not have any investing activities.

Cash Flow from Financing Activities

During the six months ended October 31, 2017, the Company received $158,000 of net cash from financing activities from the issuance of convertible debentures. During the six months ended October 31, 2016, the Company received $170,000 from the issuance of convertible debentures, $10,000 from issuance of notes payable, and the repayment of $37,156 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.

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

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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.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4.  CONTROLS AND PROCEDURES

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

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interest.

ITEM 1A.  RISK FACTORS.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

ITEM 4.  MINE SAFETY DISCLOSURES.

ITEM 5.  OTHER INFORMATION.

ITEM 6.  EXHIBITS

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*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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