APHD Apogee 21 Holdings Inc (CE)

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

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. On May 1, 2010, the Company entered into a share exchange agreement with Appiphany Technologies Corporation (“ATC”) to acquire all of the outstanding common shares of ATC in exchange for 1,500,000 common shares of the Company.  As the acquisition involved companies under common control, the acquisition was accounted for in accordance with ASC 805-50, Business Combinations – Related Issues, and the consolidated financial statements reflect the accounts of the Company and ATC since inception. On November 18, 2015, ATC was dissolved. Currently, the Company is in the business of online fraud protection services.

Going Concern

These 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 April 30, 2019, the Company has not recognized significant revenue, has a working capital deficit of $2,006,707, and has an accumulated deficit of $5,946,338. 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 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 consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The consolidated financial statements are comprised of the records of the Company and its wholly owned subsidiaries, IP Risk Control Inc., a company incorporated in the State of Nevada. 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 fair value and estimated useful life of long-lived assets, fair value of convertible debentures, derivative liabilities, stock-based compensation, 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.

F-6

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued) 

(c)Cash and cash equivalents 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As at April 30, 2019 and 2018, the Company had no items representing cash equivalents.

(d)Accounts Receivable 

Accounts receivable represents amounts owed from customers for services. Amounts are presented net of the allowance for doubtful accounts, which represents the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable balance. The Company determines allowance for doubtful accounts based upon historical experience and current economic conditions.  The Company reviews the adequacy of its allowance for doubtful accounts on a regular basis.  As of April 30, 2019, the Company had $nil (2018 - $7,245) in allowances for doubtful accounts.   

(e)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 April 30, 2019, the Company had 1,450,289,067 (2018 – 569,554,940) potentially dilutive common shares outstanding.

(f)   Fair Value Measurements

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:

Level 1 – quoted prices for identical instruments in active markets;

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial instruments consist principally of cash, accounts receivable and other receivables, accounts payable and accrued liabilities, notes payable, convertible debentures and amounts due to related parties. The fair value of cash is determined based on Level 1 inputs. There were no transfers into or out of “Level 3” during the years ended April 30, 2019, and 2018. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.  

F-7

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

2.Summary of Significant Accounting Policies (continued) 

(f) Fair Value Measurements (continued)

The following table presents assets and liabilities that are measured and recognized at fair value as of April 30, 2019 and 2018 on a recurring basis:

(h)Revenue Recognition 

The Company recognizes revenue from online fraud protection services. Revenue will be recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured.  The Company is not exposed to any credit risks as amounts are prepaid prior to performance of services.

(i)Stock-based Compensation 

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation and ASC 505, Equity Based Payments to Non-Employees, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options.  

ASC 718 requires company to estimate the fair value of share-based awards on the date of grant using an option-pricing model.  The Company uses the Black-Scholes option pricing model as its method of determining fair value.  This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables.  These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviours.  The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

(j)Income Taxes  

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized.

F-8

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

2.  Summary of Significant Accounting Policies (continued)

(j)   Income Taxes (continued)

As of April 30, 2019, and 2018, the Company did not have any amounts recorded pertaining to uncertain tax positions.

The Company files federal and provincial income tax returns in Canada and federal, state and local income tax returns in the U.S., as applicable. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2016 to 2019. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not examined any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above.

(k)Recent Accounting Pronouncements 

In February 2016, Topic 842, Leases was issued to replace the leases requirements in Topic 840, Leases. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. Topic 842 will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods and is to be retrospectively applied. Earlier application is permitted. The adoption of this standard is not expected to have a material impact on the Company´s consolidated financial statements.  

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods and is to be retrospectively applied. The adoption of this standard did not have a material impact on the Company´s consolidated financial statements.  

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 

During the year ended April 30, 2019, the Company incurred $nil (2018 - $56,337) in management fees to the former President and Director of the Company.  Refer to Note 12.

F-9

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

4. Notes Payable 

(a) As at April 30, 2019, the Company owed $4,616 (2018 - $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)As at April 30, 2019, the Company owed $10,000 (2018 – $10,000) in a note payable to a non-related party. 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.  

(c)As at April 30, 2019, the Company owed $2,500 (2018 – $2,500) in a note payable to a non-related party. Under the terms of the note, the amount is unsecured, bears interest at 5% per annum, and was due on February 1, 2018. The note bears a default interest rate of 12% per annum. 

(d)As at April 30, 2019, the Company owed $15,000 (2018 – $15,000) in a note payable to a non-related party. The note payable was issued as a commitment fee and was recorded to additional paid-in capital during the year ended April 30, 2017. 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. 

5.Convertible Debentures 

(a)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 was 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. In the event of default, the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2019, the Company incurred $1,020 in penalties that were added to the principal balance 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 year ended April 30, 2018, the Company issued 29,327,000 shares of common stock for the conversion of $97,030 of the note and $30,321 of accrued interest. As at April 30, 2019, the loan was in default, the carrying value of the note was $8,990 (2018 - $7,970), the unamortized total discount was $nil (2018 - $nil) and accrued interest payable was $1,763 (2018-$169).

(b)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 pre-default and 20% per annum thereafter, and was 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. During the year ended April 30, 2019, the Company incurred a $38,965 (2018 - $22,000) default fee on the note. 

Due to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging. As at April 30, 2019, the loan was in default, the carrying value of the note was $93,965 (2018 - $55,000) and accrued interest payable was $20,128 (2018- $8,028).

F-10

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

5.Convertible Debentures (continued) 

(c)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 was 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. In the event of default the conversion price decreases to 50% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2019, the Company incurred $27,902 in penalties that were added to the principal balance 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 $36,450, 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 April 30, 2019, the loan was in default and the carrying value of the note was $64,352 (2018 - $36,450) and accrued interest payable was $10,854 (2018 - $3,564).

(d)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 was 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. In the event of default the interest rate increases to 24%. 

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 year ended April 30, 2018, the Company issued 9,637,404 shares of common stock for the conversion of $340 of the note and $8,874 of accrued interest, penalties, and financing costs.  During the year ended April 30, 2019, the Company issued 16,793,000 shares of common stock for the conversion of $1,569 of the note and $2,712 of accrued interest and $2,500 of conversion fees and finance costs. As at April 30, 2019, the loan was in default, the carrying value of the note was $55,341 (2018 - $56,910) and accrued interest payable was $11,688 (2018-$1,028).

(e)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 was due on July 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 twenty-five trading days prior to notice of conversion or the issuance of the note. In the event of default the interest rate increases to 24%. During the year ended April 30, 2019, the Company incurred $854 in penalties that were added to the principal balance of the note. 

F-11

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

5.  Convertible Debentures (continued)

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. During the year ended April 30, 2018, the Company issued 15,689,698 shares of common stock for the conversion of $11,593 of the note and $928 of accrued interest.

During the year ended April 30, 2019, the Company issued 27,766,139 shares of common stock for the conversion of $13,196 of the note and $1,395 of accrued interest. As at April 30, 2019, the loan was in default, the carrying value of the note was $9,398 (2018 - $5,948), the unamortized total discount was $nil (2018 - $15,792) and accrued interest payable was $4,016 (2018 - $2,057).

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 April 30, 2019, and at the date of filing, no proceeds have been received on the collateralized secured promissory note or the back-end note.

(f)On October 4, 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 was due on July 9, 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 ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2019, the Company incurred $21,910 in penalties that were added to the principal balance 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. As at April 30, 2019, the loan was in default, the carrying value of the note was $57,910 (2018 - $862), the unamortized total discount was $nil (2018 - $35,138) and the accrued interest payable was $8,520 (2018 - $2,220).

F-12

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

(g)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 was 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. In the event of default there is a penalty of 10% of the principal balance of the outstanding note and the interest rate increases to 24%. 

5.  Convertible Debentures (continued)

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. During the year ended April 30, 2019, the Company recorded a $3,333 principal penalty. As at April 30, 2019, the loan was in default, the carrying value of the note was $36,666 (2018 - $118), the unamortized total discount was $nil (2018 - $33,215) and accrued interest payable was $9,282 (2018 - $2,367).

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 April 30, 2019, and at the date of filing, no proceeds have been received on the back-end note.

F-13

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

(h)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 October 4, 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 was due on August 8, 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 ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2019, the Company incurred $20,084 in penalties that were added to the principal balance 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 $33,000, 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 April 30, 2019, the loan was in default, the carrying value of the note was $53,084 (2018 - $30), the unamortized total discount was $nil (2018 - $32,970) and accrued interest payable was $7,285 (2018 - $1,565).

(i)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 October 4, 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 was due on September 26, 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 ten trading days prior to notice of conversion or the issuance of the note. In the event of default, the conversion price decreases to 40% of the lowest trading price of the Company’s common stock of the ten prior trading days immediately preceding the issuance of the note and the interest rate increases to 20%. During the year ended April 30, 2019, the Company incurred $20,084 in penalties that were added to the principal balance 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 $33,000, 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 April 30, 2019, the loan was in default, the carrying value of the note was $53,084 (2018 - $17), the unamortized total discount was $nil (2018 - $32,983) and accrued interest payable was $6,405 (2018 - $1,125).

F-14

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

5.  Convertible Debentures (continued)

(j)On March 15, 2019, 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 $30,000. Under the terms of the debenture, the amount is unsecured, bears interest at 10% per annum (20% default interest rate), and is due on December 15, 2019. The debenture is convertible into common shares of the Company at a conversion price equal to the lesser of the 65% of the lowest trading price of the Company’s common stock of the past twenty 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 $6,000 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 April 30, 2019, the carrying value of the note was $nil (2018 - $nil), and the unamortized total discount was $36,000 (2018 - $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 year ended April 30, 2019, the Company recorded a gain on the change in fair value of derivative liability of $158,657 (2018 – loss of $601,635). As at April 30, 2019, the Company recorded a derivative liability of $1,080,589 (2018 - $928,252).

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

7.Common Shares 

Share Transactions for the Year Ended April 30, 2019

During the year ended April 30, 2019, the Company issued an aggregate of 44,559,139 common shares with a fair value of $54,716 upon the conversion of $14,765 of convertible debentures, $4,130 of accrued interest, $2,500 in conversion fees, and $42,320 of derivative liabilities resulting in a gain on settlement of debt of $8,977.

F-15

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

7.Common Shares 

Share Transactions for the Year Ended April 30, 2018

During the year ended April 30, 2018, the Company issued an aggregate of 60,128,290 common shares with a fair value of $1,506,541 upon the conversion of $280,481 of convertible debentures, $61,531 of accrued interest and $3,500 in conversion fees, 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.

During the year ended April 20, 2018, the Company cancelled $13,410 of subscription receivable for the issuance of common shares.

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 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.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 year two and three 

iii)180,000 common shares payable on the date of the agreement  

iv)180,000 common shares payable on February 26, 2016  

v)180,000 common shares payable on August 26, 2017  

vi)180,000 common shares payable on February 26, 2018  

Either party may terminate the agreement by providing written thirty days’ notice.

F-16

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

As at April 30, 2019 and 2018, no commission has been earned, paid, or accrued.

On February 19, 2019, the former Chief Executive Officer and Director of the Company entered into a Stock Purchase Agreement to sell his Series A Preferred Stock, the closing of which is pending certain closing conditions, including, but not limited to the Company getting current with its SEC filings and restricting some of its outstanding debt. This transaction was completed on November 22, 2019.  

10.   Income Taxes

The Company has $2,335,879 of net operating losses carried forward to offset taxable income in future years which expire commencing in fiscal 2030.  The income tax benefit differs from the amount computed by applying the US federal income tax rate of 21% and the Canada federal and provincial tax rate of 26% to net loss before income taxes for the year ended April 30, 2019 and 2018 as a result of the following: 

The significant components of deferred income tax assets and liabilities as at April 30, 2019 and 2018 after applying enacted corporate income tax rates are as follows:

Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset by a valuation allowance.  As at April 30, 2019, the Company has no uncertain tax positions.  

F-17

APPIPHANY TECHNOLOGIES HOLDINGS CORP.

Notes to the Consolidated Financial Statements

(Expressed in US dollars)

11.   Subsequent Events

Subsequent to the year ended April 30, 2019, the Company issued 67,342,227 common shares upon the conversion of $6,496 of convertible debentures, $20,490 of accrued interest, and $3,000 of conversion fee penalties.  Furthermore, the Company authorized the designation of the Series B preferred shares, with an authorized capital of 1,000,000 Series B preferred shares with a par value of $0.001 per preferred share.  Each Series B preferred share will have rank on the Company’s common shares upon wind up or dissolution but will have no voting rights, receive first payment of $1.10 per Series B preferred share before any payment or distribution to any junior common shares upon liquidation, and be convertible into common shares of the Company, at the option of the Series B preferred shareholder, at a conversion rate of $1.10 divided by the closing price of the Company’s common shares on the trading day prior to the date of conversion limited to the fact that the conversion of the Series B preferred shares does not result in an individual shareholder holding more than 4.99% of the Company’s issued and outstanding common shares.  

On June 17, 2019 the Company issued 250,000 Series B preferred shares issued to an unrelated party to settle debt in the amount of $111,500; 250,000 Series B preferred shares issued to a director of the Company to settle debt in the amount of $156,012; and 30,000 Series B preferred shares issued to the sole officer and director of the Company for management fees

On September 12, 2019 the Company issued a convertible debenture, to a non-related party, for proceeds of $33,000. 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 June 12, 2020. The debenture is convertible into common shares of the Company at a conversion price equal to 65% of the lowest trading price of the Company’s common stock of the past twenty trading days prior to notice of conversion or the issuance of the note.

On November 13, 2019, the Company issued a convertible promissory note to an unrelated party for $28,193. Pursuant to the agreement, the note was issued with a 10% original issue discount and as such the purchase price was $25,630. The note is convertible into common stock of the Company at a price equal to 65% of the lowest trading price of the Company’s common stock of the twenty prior trading days including the day upon which a notice of conversion is received by the Company. The promissory note shall bear interest at 10% per annum and is due on August 13, 2020.

On November 22, 2019, the former Chief Executive Officer completed a transaction to sell 500,000 shares of his Series A Preferred Stock for consideration of $5,000, leading to a change in control for the Company.  

On January 10, 2020, the Company authorized a reverse stock split of the Company’s common shares on a basis of one new common share for every 100 old common shares to be effective on January 31, 2020.

On January 15, 2020, the Company entered into a Securities Purchase Agreement with GHS Investments, LLC (“GHS”) whereby GHS purchased a convertible promissory note (“Note”) in the original principal amount of $35,000.  The Note has a maturity date of nine months from the date of an advance, an interest rate of ten percent (10%), a ten percent (10%) original issuance discount and is convertible at a conversion price equal to $0.0006 per share.

F-18