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EX-31.1 - EXHIBIT 31.1 - APT Systems Incv355534_ex31-1.htm

  

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

______________________________________________________________________________________________

FORM 10-Q

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly period ended   July 31, 2013

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

______________________________________________________________________________________________

 

Commission File No. 333-181597

 

APT SYSTEMS, INC.

 (Exact Name of Small Business Issuer as specified in its charter)

 

Delaware 99-0370904
(State or other jurisdiction (IRS Employer File Number)

 

   

3400 Manulife Place

10180-101 Street

 
Edmonton, AB Canada T5J 3S4
(Address of principal executive offices) (zip code)

 

 (780)-270-6048

 (Registrant's telephone number, including area code)

 

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes x  No ¨

 

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

 

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

 

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

 

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

 

As of September 13, 2013, registrant had outstanding 8,795,000 shares of the registrant's common stock.

 

 
 

 

FORM 10-Q

 

APT SYSTEMS, INC.

TABLE OF CONTENTS

 

PAGE
PART I  FINANCIAL INFORMATION  
Item 1. Unaudited Financial Statements for the periods ended July 31, 2013 1
  Balance Sheets 2
  Statements of Operations 3
  Statements of Shareholders’ Equity (Deficit) 4
  Statements of Cash Flows 5
  Notes to Unaudited  Financial Statements 6
Item 2. Management’s Discussion and Analysis and Plan of Operation 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Item 4. Controls and Procedures 15
Item 4T. Controls and Procedures 16
     
PART II  OTHER INFORMATION  
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Mine Safety Disclosures 17
Item 5. Other Information 17
Item 6. Exhibits 18
     
Signatures 19

 

ii
 

  

PART I FINANCIAL INFORMATION

 

References in this document to "us," "we," or "Company" refer to APT SYSTEMS, INC.

 

ITEM 1. FINANCIAL STATEMENTS

  

______________________________________________________________________________________________

 

APT SYSTEMS, INC.

 

UNAUDITED FINANCIAL STATEMENTS

 

For the Three and Six Month Periods Ended July 31, 2013 and 2012

 And

The Period from Inception (October 29, 2010) Through July 31, 2013

______________________________________________________________________________________________

 

 APT Systems, Inc.

Financial Statements

(Unaudited)

 

TABLE OF CONTENTS

 

  PAGE
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders’ Equity (Deficit) 4
Statements of Cash Flows 5
Notes to Financial Statements 6

 

1
 

 

APT SYSTEMS, INC.

(A Development-Stage Company)

Balance Sheets

  

   (Unaudited)   (Audited) 
   July 31, 2013   January 31,2013 
ASSETS          
Current Assets          
Cash and cash equivalents  $2,028   $2,428 
Total current assets   2,028    2,428 
           
Other Assets          
           
Software (net of $3,275 & $2,007 accumulated amortization respectively)   8,330    9,598 
Web site (net of $520 & $0 accumulated amortization respectively)   1,560    2,080 
           
 Total other assets   9,890    11,678 
           
Total Assets  $11,918   $14,106 
           
LIABILITIES & STOCKHOLDERS' DEFICIT          
Current Liabilities          
Accounts payable  $27,563   $23,961 
Loan from director   20    20 
Total Liabilities   27,583    23,981 
           
Stockholders' Deficit          
           
Preferred stock $0.001 par value, 10,000,000 shares authorized; None issued as of July 31, 2013 and January 31,2013 respectively   -    - 
           
Common stock $0.001 par value, 90,000,000 shares authorized; 8,795,000 and 8,694,000 shares issued and outstanding as  of July 31, 2013 and January 31, 2013 respectively.   8,795    8,694 
Additional paid-in capital   80,705    60,606 
Deficit accumulated during the development stage   (105,165)   (79,175)
Total Stockholders' Deficit   (15,665)   (9,875)
           
TOTAL STOCKHOLDERS' DEFICIT          
           
Total Liabilities and Stockholders' Deficit  $11,918   $14,106 

 

See Accompanying Notes to Financial Statements

 

2
 

 

APT SYTEMS, INC.

(A Development-Stage Company)

Statements of Operations

 

   (Unaudited)
Three Months Ending
   (Unaudited)
Six Months Ending
   (Unaudited)
Inception
(October 29, 2010)
Through July 31,
 
   July 31, 2013   July 31, 2012   July 31, 2013   July 31, 2012   2013 
Revenue  $-   $-   $22   $-   $33 
                          
Operating Costs                         
Accounting   4,100    1,500    9,100    6,110    24,185 
Amortization   894    -    1,788    -    3,795 
Consulting services   -    7,500    -    15,000    21,849 
General and administrative   6,761    6,864    11,108    10,610    16,511 
Legal   -    4,950    250    17,450    19,387 
Research & development   -    -    2,928    12,500    17,659 
Total Operating Costs   11,755    20,814    25,174    61,670    103,386 
                          
Income(Loss) from Operations   (11,755)   (20,814)   (25,152)   (61,670)   (103,353)
                          
Other Income (Expense)                         
Interest income (expense), net   (419)   4    (838)   7    (1,812)
                          
Net  Income(Loss)  $(12,174)  $(20,810)  $(25,990)  $(61,663)  $(105,165)
                          
Basic earnings (loss) per share: Basic and Diluted  $(0.00)*  $(0.00)*  $(0.00)*  $(0.01)     
                          
Weighted average number of common shares outstanding:
Basic and Diluted
   8,757,983    8,644,000    8,757,983    8,644,000      

 

* denotes less than $(0.01) per share.

 

See Accompanying Notes to Financial Statements

 

3
 

 

APT SYSTEMS, INC.

(A Development-Stage Company)

Statements of Stockholders' Equity (Deficit)

Period from Inception (October 29, 2010) through July 31, 2013

 

   Common
Shares
   Stock
Amount
   Additional
Paid-in
Capital
   Deficit
Accumulated
During
Development
Stage
   Total 
Balance, October 29, 2010 (Inception) - audited   -   $-   $-   $-   $- 
                          
Net loss   -    -    -    (280)   (280)
                          
Balance January 31, 2011 - audited   -    -    -    (280)   (280)
                          
Common stock issued for cash   8,644,000    8,644    63,156    -    71,800 
                          
Net loss   -    -    -    (15,187)   (15,187)
                          
Balance  January 31, 2012 - audited   8,644,000    8,644    63,156    (15,467)   56,333 
                          
Common stock issued for cash   50,000    50    9,950    -    10,000 
                          
Offering costs   -    -    (12,500)   -    (12,500)
                          
Net loss   -    -    -    (63,708)   (63,708)
                          
Balance January 31, 2013  - audited   8,694,000    8,694    60,606    (79,175)   (9,875)
                          
Common stock issued for cash   101,000    101    20,099    -    20,200 
                          
Net loss   -    -    -    (25,990)   (25,990)
                          
Balance July 31, 2013 (Unaudited)   8,795,000   $8,795   $80,705   $(105,165)  $(15,665)

 

See Accompanying Notes to Financial Statements

 

4
 

  

APT SYSTEMS, INC.

(A Development-Stage Company)

Statements of Cash Flows

 

   (Unaudited)
Six Months
July 31, 2013
   (Unaudited)
Six Months
July 31, 2012
   (Unaudited)
Inception
(October 29, 2010)
Through
July 31, 2013
 
CASH FLOWS FROM OPERATING ACTIVITIES               
Net loss  $(25,990)  $(61,663)  $(105,165)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:               
Amortization expense   1,788    -    3,795 
Changes in operating assets and liabilities:               
Decrease (increase) in prepaid expenses   -    12,500    - 
Increase (decrease) in accounts payable   3,602    22,402    27,563 
Net cash provided by (used in) operating activities   (20,600)   (26,761)   (73,807)
                
CASH FLOWS FROM INVESTING ACTIVITIES               
Software purchased   -    -    (11,605)
Web site development costs   -    -    (2,080)
Net cash (used in) investing activities   -    -    (13,685)
                
CASH FLOWS FROM FINANCING ACTIVITIES               
Loan from shareholder   -    -    20 
Issuance of common stock for cash   20,200    -    89,500 
Net cash provided by financing activities   20,200    -    89,520 
                
Net change in cash and cash equivalents   (400)   (26,761)   2,028 
                
Cash and cash equivalents at beginning of period  $2,428   $39,068   $- 
                
Cash and cash equivalents at end of period  $2,028   $12,307   $2,028 
                
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION               
                
Cash paid  for :               
                
Interest  $-   $-   $- 
Income Taxes  $-   $-   $- 

 

During the fiscal year ended January 31, 2012, the Company pre-paid deferred offering costs in the amount of $12,500. Upon the effective of the S-1 Registration Statement during the fiscal year ended January 31, 2013, this amount was offset against the offering proceeds in a non-cash transfer between prepaid expenses and additional paid in capital.

 

See Accompanying Notes to Financial Statements

 

5
 

 

APT SYSTEMS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JULY 31, 2013

 

1. NATURE OF OPERATIONS

 

APT Systems, Inc. (“APT Systems”, “the Company”, "We" or "Us") was incorporated in the State of Delaware on October 29, 2010 (“Inception”) to engage in the creation of innovative stock trading platforms, financial apps and visualization solutions for the financial markets. The Company is in the development stage with nominal revenues and a limited operating history.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Preparation of Financial Statements

The accompanying unaudited financial statements of APT Systems have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. Operating results for the three months and six months ended July 31, 2013 are not necessarily indicative of the final results that may be expected for the year ended January 31, 2014. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited financial statements for the year ended January 31, 2013 included in our Form 10-K filed with the SEC.

 

Development Stage Company

The Company is a development stage company in accordance with Financial Accounting Standards Codification (“ASC”) 915 "Development Stage Entities". Among the disclosures required as a development stage company are that our financial statements are identified as those of a development stage company, and that the statements of operations, stockholders' deficit and cash flows disclose activity since the date of our Inception (October 29, 2010) as a development stage company.

 

Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires that management makes 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 period. Actual results could differ from those estimates. Due to uncertainties inherent in the estimation process, it is possible that these estimates could be materially revised within the next year.

 

Foreign Currency Translation

The financial statements are presented in United States dollars. In accordance with ASC 830, “Foreign Currency Matters”, foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year. Gains or losses resulting from foreign currency transactions are included in results of operations.

 

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents.

 

Software

The Company has software that it uses for the development of certain mobile phone applications. The software and any upgrades are being amortized over useful lives ranging from 3 – 5 years.

 

Website

The Company accounts for website development costs in accordance with ACS 350-50 “Website Development Costs”. Costs incurred to register domain names, integrated databases and add additional functionality are being amortized over 1 – 3 years. Costs incurred in general maintenance of the website or hosting costs are expensed as incurred.

 

Research and Development Costs

Costs incurred in research and developments are expenses as incurred.

 

6
 

 

APT SYSTEMS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JULY 31, 2013

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONT

 

Impairment of Long-Lived and Intangible Assets

 

In the event that facts and circumstances indicated that the cost of long-lived and intangible assets may be impaired, an evaluation of recoverability would be performed. If an evaluation was required, the estimated future undiscounted cash flows associated with the asset were compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value was required.

 

Financial Instruments

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability.  Accounting Standards Codification (“ASC”) 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

 

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.

 

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3: Significant unobservable inputs which reflect a reporting entity’s own assumptions about the assumptions that market participants would use for pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.

 

The recorded amounts of financial instruments, including cash equivalents and accounts payable, approximate their market values as of July 31 and January 31, 2013.

 

Income Taxes

The Company follows the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At July 31 and January 31, 2013, a full deferred tax asset valuation allowance has been provided and no deferred tax asset has been recorded.

 

Basic and Diluted Net Income (Loss) per Share

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

 

Basic and diluted EPS were identical for the three and six months ended July 31, 2013 and 2012 as there were no potentially dilutive debt or equity instruments outstanding.

 

Comprehensive Income (Loss)

Comprehensive income is defined as all changes in stockholders’ equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our Inception there were no differences between our comprehensive loss and net loss.

 

The comprehensive loss was identical to the net loss for the three months and six months ended July 31 2013 and 2012.

 

Reclassifications

Certain reclassifications have been made to prior period financial statements to conform to the 2013 presentation.

 

7
 

 

APT SYSTEMS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JULY 31, 2013

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONT

 

Business Segments

 

The Company believes that its activities during the three months and six months ended July 31, 2013 and 2012 comprised a single segment.

 

Recently Issued Accounting Pronouncements

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of its operations.

 

3. GOING CONCERN AND LIQUIDITY

 

At July 31, 2013 the Company had cash of $2,028, no profitable business activities or other source of income, liabilities of $27,583, accumulated losses of $105,165 and a stockholders’ deficit of $15,665.

 

In the audited financial statements for the fiscal years ended January 31, 2013 and 2012, the Reports of our Independent Registered Public Accounting Firms include an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.

 

The unaudited financial statements for the three months and six months ended July 31, 2013 have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company anticipates future losses in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and/or issuance of common shares. There is no assurance that this series of events will be satisfactorily completed.

 

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

4. RELATED PARTY TRANSACTIONS

 

The President of the Company provides management and office premises to the Company for no compensation.

 

As of July 31, 2013 and January 31, 2013, the Company owed the President $20.

 

The Company entered into a Consulting Agreement with Joseph J. Gagnon, the Secretary of the Board of Directors, on February 3, 2012. This agreement was amended jointly by the Board of Directors and Mr. Gagnon. As of June 15, 2012, it was agreed and accepted by all that Mr. Gagnon should discontinue his full-time services for a specified period of time. As of July 31, 2013 Mr. Gagnon is scheduled to resume his duties on or about September 30, 2013 unless otherwise agreed in writing. Mr. Gagnon was paid $600 (2012 - $7,500) and $1,000 (2012 - $15,000) during the three months and six months ending July 31, 2013 respectively, however, no balance was owed to Mr. Gagnon by the Company as at July 31 and January 31, 2013.

 

 5. SHAREHOLDERS’ DEFICIT

 

PREFERRED SHARES

 

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001.

 

No shares of preferred stock were issued and outstanding during the three and six months ended July 31, 2013 or 2012.

 

8
 

 

APT SYSTEMS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JULY 31, 2013

 

5. SHAREHOLDERS’ DEFICIT CONT.

 

COMMON SHARES

 

The Company is authorized to issue 90,000,000 shares of common stock with a par value of $0.001.

 

In February 2013, the Company issued 1,000 shares of $0.001 par value common stock for $200 cash or $0.20 per share.

 

In April 2013, the Company issued 100,000 shares of $0.001 par value common stock for $20,000 cash or $0.20 per share.

 

As at July 31, 2013, 8,795,000 shares of common stock were issued and outstanding.

 

STOCK OPTIONS

 

The Company adopted the 2012 Equity Incentive Plan (the “Plan”) on January 31, 2012, reserving 5,500,000 shares for future issuances, of which a maximum of 2,500,000 may be issued as incentive stock options. The Plan provides for the issuance of non-statutory stock options or restricted stock to officers and employees, with an exercise price that is at least equal to the fair market value of the Company’s common stock on the date of grant. Vesting terms and the lives of the options are to be determined by the Board of Directors upon grant.

 

No stock options have been issued to date.

 

6. INCOME TAXES

 

The Company accounts for income taxes in accordance with ASC 740. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.

 

The provision for refundable federal income tax consists of the following for the periods ending:

 

   July 31,
2013
   January 31,
2013
 
Federal income tax benefit attributed to:          
           
Net operating loss  $35,756   $21,661 
Valuation   (35,756)   (21,661)
Net benefit  $-   $- 

 

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows: 

 

   July 31,
2013
   January 31, 2013 
Deferred tax attributed:          
Net operating loss carryover  $35,756   $21,661 
Less: change in valuation allowance   (35,756)   (21,661)
Net deferred tax asset  $-   $- 

 

At July 31, 2013 the Company had an unused net operating loss carry-forward approximating $105,165 that is available to offset future taxable income; the loss carry-forward will start to expire in 2030.

 

9
 

 

APT SYSTEMS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JULY 31, 2013

 

7. SUBSEQUENT EVENTS

 

On August 2, 2013 the Company filed a Form 10-Q/A for the three months ended April 30, 2013.

 

On August 21, 2013 the Company filed a Form 10-K/A in respect of the year ended January 31, 2013, a further Form 10-Q/A for the three months ended April 30, 2013 and Post Effective Amendment No. 2 to Form S-1.

 

On September 5, the Company filed a Post Effective Amendment No. 3 to Form S-1.

 

In accordance with ASC 855, Subsequent Events, the Company has evaluated subsequent events through September 16, 2013, the date of available issuance of these unaudited financial statements. During this period, other than as disclosed above, the Company did not have any material recognizable subsequent events.

 

10
 

  

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

 

The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in, Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth herein and in other reports and documents that we file from time to time with the Securities and Exchange Commission, particularly the Report on Form 10-K, Form 10-Q and any Current Reports on Form 8-K.

 

Overview and History

 

APT Systems, Inc. was incorporated in the State of Delaware on October 29, 2010. It is a development stage company and has not yet generated any significant revenues. Its limited start-up operations have consisted of the formation of the Company, development of its business plan, identification of its target market and active research and development of its products. We plan on raising additional funds within the next six months but do not rule out the possibility of shareholder loans. We have not been subject to any bankruptcy, receivership or similar proceeding.

 

The Company operations were being conducted out of the premises of its President, Glenda Dowie on a rent-free basis during its development stage until June 15th. The operations were moved to its new office is at 3400 Manulife Place, 10180-101 Street, Edmonton, AB Canada T5J 3S4. The Company considers its principal office space arrangement adequate and will reassess its needs based upon the future growth of the Company. Its fiscal year end is January 31st.

 

“APT” is an acronym for ‘Applied Proprietary Trading’. APT Systems, Inc. is a company that will be specializing in the creation of innovative equities trading platforms, market indicators, stock research tools, financial apps and visualization solutions for the financial markets. APT, a technology solution provider, is focusing on the hand held market where we will develop and publish custom technical analysis indicators and trading systems both in-house and for third parties. In addition, the Company intends to develop a user friendly charting tool that displays price action and historic pricing for publicly traded companies. This charting tool and the charts that it produces can be configured to the user’s preferred view such as a line chart or candlestick chart, and the user shall be able to adjust the chart intervals as the user desires. Utilizing real time and delayed data networks along with graphic techniques pioneered in the gaming industry, APT’s charting solutions can speak to the mobile needs to be demanded by the next generation of equities traders.

 

In order to advance itself during its development stage, APT Systems can roll out traditional trading tools and publish charts for the hand held market to test plans and generate cash flow. However, these tools would be refreshed with leading edge graphics and networking technology to become desirable real-time and interactive trading assistance software.

 

APT services can extend to include:

 

-Mobile Trading App Development
-Robust Mobile Security Solutions
-Financial Software and App Development
-Analytical Software Development
-Algorithmic Applied Technology
-Trading Platform Refinement and Linking to Brokerage accounts

 

The steps remaining for the company to begin selling its above listed products are to finalize the programming of the software used in its products, specifically its dimensional charting tools, begin sales and marketing campaigns, contact prospective licensees, which the company expects to complete within 90 days, and deliver its products, which the company expects to complete in less than 180 days after its initial contact with prospective licensees. The new app with user friendly charts will be available to users on a subscription fee plan and will be available under license from other financial companies and brokerage firms who we will attempt to sell our product to. The goal is to have our product used by both handheld (tablet and Smartphone application) users and web based clients.

 

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Recent Events

 

During the last six months, we have largely been focused on correcting and refilling our forms S-1, 10-K and 10-Q which we had previously been filed with the SEC.

 

On May 16, 2013, the Board of Directors of APT filed a Form 8-K stating that it had concluded that the financial statements issued for the fiscal year ended January 31, 2012 should no longer be relied upon because of an error in such financial statements. The Board of Directors arrived at this conclusion because in each of the drafts of the form S1 filed between May 23, 2012 and November 16, 2012, it was disclosed that effective January 31, 2012, APT’s three directors had been granted a total of 2.25 million fully vested stock options with an exercise price of $0.10 and a term of 5 years. However, the compensation expense for these stock options had not been reflected in the financial statements for the year ended December 31, 2012. Accordingly the Board of Directors concluded that the January 31, 2012 financial statements had been misstated.

 

On July 1, 2013, The Board of Directors filed a Form 8-K announcing that it had performed a detailed review of the operation of the Company’s 2012 Equity Incentive Plan (the “Plan”) since its formation on January 31, 2012. While at times the Company’s management had indicated verbally and in emails that certain stock options had been granted, the Company has been unable to locate any signed stock option agreements. The Company contacted its former corporate advisors who had prepared the initial draft of the S1 disclosing the granting of the stock options and requested that they review their files for any documentation relating to disclosure made in the draft S1 relating to the Plan. At the date of this filing, the former corporate advisors have not provided the Company with any such documents or other information as to the circumstances leading to the disclosure of the grant of any stock options.

 

 Based on its detailed review, the Board of Directors concluded that no stock options have been granted since the formation of the Plan and all three directors have now confirmed in writing that they do not own, and have never owned, any APT stock options. Accordingly the information in the various S1 filings relating to the grant of APT stock options was incorrect and the Company would be filing an amended S1 to reflect the fact that, to the best of its knowledge and belief, no stock options have been granted by the Company. As no stock options have been granted, the Board of Directors now believed that the financial statements for the twelve months ended January 31, 2012 had been correctly stated and can be relied upon.

 

On July 2, 2013 the Company filed a Post–Effective Amendment to its registration statement to reflect the fact that, to the best of the Company’s knowledge and belief, no stock options have been granted by the Company to date and to correct the previously incorrect disclosure of the issuance of such options.

 

On July 17, 2013 the Company filed its Form 10-K for the year ended January 31, 2013.

 

On July 31, 2013 the Company filed its Form 10-Q for the three months ended April 30, 2013 without an XBRL file.

 

On August 2, 2013 the Company filed its Form 10-Q/A for the three months ended April 30, 2013 with an XBRL file.

 

On August 21, 2013 the Company filed a Form 10-K/A in respect of the year ended January 31, 2013, a further Form 10-Q/A for the three months ended April 30, 2013 and Post Effective Amendment No. 2 to Form S-1.

 

On September 5, the Company filed a Post Effective Amendment No. 3 to Form S-1.

 

Throughout this period, the Company has operated without an effective registration statement and therefore has been unable to raise the necessary equity investment to implement its business plan effectively. Consequently, with its currently limited financial resources, the Company has only been able to make very limited progress in developing its business activities in the last six months.

 

Needs Assessment

 

Management believes the principal growth area in the personal computer market today is that of Smartphones and portable tablet devices; aside from being a large and quickly growing market, these mobile devices usually allow full time internet connectivity.  This makes them an ideal stage for a mobile equity-trading platform. Instead of merely porting existing software to allow on-the-go research and trading, APT Systems envisions for its future products an information-dense and interactive display of the financial markets. At this time, the Company believes that the future interactive display will include three dimensional imaging that the Company intends to use to provide financial information in new ways that can better assist novice users learning about publicly traded companies and those users who are trading equities in the public markets.

 

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Distribution methods of the products or services

 

To facilitate marketing plans, our products and platforms will be available initially in the “App Store” managed by Apple Inc. Later, these same products will be available to audiences that prefer using other Smartphones such as Google’s Android or the BlackBerry. Especially in the case of Apple, these companies will provide marketing infrastructure to help developers reach their users and justify costs related to selling products from their app stores. These options will be fully explored and implemented as it makes sense to do so.

 

To further facilitate viral marketing plans, the Company products will be available for a very small downloading charge or in some cases free.  The Company is investigating a tiered subscription revenue model and revenue for providing licenses to others.

 

The Company will identify and address the target market for its services with apps, and demonstrate how it can help users optimize mobile devices for trading of equities in the North American markets.

 

Results of Operations

 

For the Three Months Ended July 31, 2013 Compared to the Three Months Ended July 31, 2012

 

Revenue

 

The Company generated $0 in revenue in the three months ended July 31, 2013 (2012 - $0).

 

Operating Expenses

 

Operating expenses, which consisted solely of professional fees, general and administrative expenses, web development and research and development costs were $11,755 for the three month ended July 31, 2013 compared to $20,814for the three month period ended July 31, 2012, a decrease of $9,059. The decrease was largely due reduced consulting costs in the three months ended July 31, 2013 as we did not have the funding available to pursue our business plan more aggressively.

 

Operating Loss

 

In the three months ended July 31, 2013 we incurred an operating loss of $11,755 compared to an operating loss of $20,814 for the three month ended July 31, 2012 due to the factors discussed above.

 

Interest Expense

 

We incurred interest expense of $419 in the three month ended July 31, 2013 compared to interest income $4 for the three month period ended July 31, 2012. During the three months ended July 31, 2013 we funded some of our expenditure on credit card and consequently we incurred finance charges that we had not incurred during the three months ended July 31, 2012.

 

Net Loss

 

In the three months ended July 31, 2013 we incurred a net loss of 12,174 compared to a net loss of $20,810 for the three month ended July 31, 2012 due to the factors discussed above.

 

For the Six Months Ended July 31, 2013 Compared to the Six Months Ended July 31, 2012

 

Revenue

 

The Company generated $22 in revenue in the six months ended July 31, 2013 (2012 - $0).

 

Operating Expenses

 

Operating expenses, which consisted solely of professional fees, general and administrative expenses, web development and research and development costs were $25,174 for the six month ended July 31, 2013 compared to $61,670 for the six month period ended July 31, 2012, a decrease of $36,496. The decrease was largely due reduced consulting costs in the six months ended July 31, 2013 as we did not have the funding available to implement our business plan more effectively.

 

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Operating Loss

 

In the six months ended July 31, 2013 we incurred an operating loss of $25,152 compared to an operating loss of $61,670 for the six month ended July 31, 2012 due to the factors discussed above.

 

Interest Expense

 

We incurred interest expense of $838 in the six month ended July 31, 2013 compared to interest income $7 for the six month period ended July 31, 2012. During the six months ended July 31, 2013 we funded some of our expenditure on credit card and consequently we incurred finance charges that we had not incurred during the six months ended July 31, 2012.

 

Net Loss

 

In the six months ended July 31, 2013 we incurred a net loss of $25,990 compared to a net loss of $61,663 for the six month ended July 31, 2012 due to the factors discussed above.

 

Cash flow information for the six months ended July 31, 2013 is compared to the six months ended July 31, 2012

 

At July 31, 2013, the Company had cash of $2,028, no profitable business activities or other source of income, liabilities of $27,583, accumulated losses of $105,165 and a shareholders’ deficit of $15,665.

 

In the financial statements for the fiscal years ended January 31, 2013 and 2012, the Reports of the Independent Registered Public Accounting Firms include an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.

 

Currently, the Company expects to require a minimum of $100,000 over the next 12 months, which will be funded either through operations or through the sale of its common stock.

 

The Company anticipates future losses in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and/or issuance of common shares. There is no assurance that this series of events will be satisfactorily completed.

 

Net cash used for operating activities was $20,600 for the six month period ended July 31, 2013. This compares to net cash used for operating activities of $26,761 for the six month period ended July 31, 2012. During the six months ended July 31, 2013 we incurred a loss of $25,990 which was partially reduced by $1,788 of non cash expenses and a $3,602 increase in operating liabilities to arrive at cash used in operations of $20,600. By comparison, during the six months ended July 31, 2012 we incurred a loss of $61,663 which was partially reduced by a $34,902 arising from the movement in our net operating assets and liabilities to arrive at cash used in operations of $26,761.

 

Cash flows generated by (used in) investing activities were at $0 for the six month periods ended July 31, 2013 and 2012.

 

Cash flows provided by financing activities were $20,200 for the six month period ended July 31, 2013 which compares to cash flows provided by financing activities of $0 for the six month period ended July 31, 2012. During the six months ended July 31, 2013 we received $20,200 through the sale of 101,000 shares of our common stock. No shares of our common stock were sold during the six months ended July 31, 2012.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements with any party.

 

Plan of Operation

 

Our plan for the nine months beginning July 31, 2013 is to operate at a break even or a profit. Our plan is to attract sufficient additional product sales and services within our present organizational structure and resources to become profitable in our operations.

 

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Begin Marketing and Sales efforts:

 

The Company marketing efforts will primarily be related to assuring its product is easily found in app stores and create a smooth downloading experience. The Company has budgeted $1,500 for the initial three months of marketing efforts to be supplemented by the lists it is developing. It is believed that there will be sufficient funds remaining for additional methods of marketing if a suitable opportunity presents itself. The Company intends to engage in marketing and sales efforts during the next twelve months, however, the amount of funds that the Company can dedicate to such efforts will be determined based on the overall amount of funds available during the next twelve months.

 

Once the app is live and the Company has begun initial Search Engine Optimization (“SEO”) work and internet marketing, it is believed sales will be supported through the app stores and the Company website. The website will be set up to record all visitors automatically and billing will be handled by Apple’s extensive billing backend. This system will allow the Company minimize staff, maintain efficient delivery of products, and keep records for both accounting and marketing.

 

Successful implementation of the Company’s business strategy depends on factors specific to the internet, regulations regarding equities trading, app development licenses and the hand held device industry and numerous other factors that may be beyond its control. Adverse changes in the following factors could undermine its business strategy and have a material adverse effect on its business, its financial condition, and results of operations and cash flow:

 

·the competitive environment in the app sector that may force the Company to reduce prices below the optimal desired pricing level or increase promotional spending;

 

·the ability to anticipate changes in consumer preferences and to meet customers’ needs for trading products in a timely cost effective manner; and

 

·the ability to establish, maintain and eventually grow market share in a competitive environment.

 

For delivery of Company information globally, geopolitical changes, changes in trading regulations, currency fluctuations, natural disasters, pandemics and other factors beyond its control may increase the cost of items it purchases, create communication issues or render product delivery difficult which could have a material adverse effect on its sales and profitability.

 

Concurrent Developments (0-12 months)

 

Future Trends use E-Books as a method for Training and Revenue:

 

Future product considerations revolve around enhanced or animated e-books. Consumers have confirmed they enjoy e-books for their convenience and accessibility but they are similar in format to the traditional book. As animation is added to traditional images such as charts, this same technology can be applied to e-books to animate the content to better engage the reader. It is hoped the learning experience will be enriched and the lessons learned more thoroughly. It is believed customers will soon demand interactive books that provide a much better, more informed educational experience and replace standard training techniques.

 

 Recently Issued Accounting Pronouncements

 

We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

 

Seasonality

 

We do not expect our revenues to be impacted by seasonal demands for our services.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Not applicable.

 

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ITEM 4T. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

An evaluation was performed under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of January 31, 2013, our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms due to material weaknesses in our internal controls described below.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our internal control system is intended to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements and that we have controls and procedures designed to ensure that the information required to be disclosed by us in our reports that we will be required to file under the Exchange Act is accumulated and communicated to our management as appropriate to allow timely and informed decisions regarding financial disclosure.

 

Our management assessed the effectiveness of our internal control over financial reporting as of July 31, 2013. Based on this assessment, management believes that as of July 31, 2013, our internal control over financial reporting was not effective based on those criteria.

 

Management’s assessment identified several material weaknesses in our internal control over financial reporting. These material weaknesses include the following:

 

Lack of appropriate segregation of duties;

 

Limited capability to interpret and apply accounting principles generally accepted in the United States;

 

Lack of formal accounting policies and procedures that include multiple levels of review.

 

Failure to properly record transactions related to derivative liabilities and equity based payments to employees and non-employees

 

Limitations on Effectiveness of Controls and Procedures

 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our control systems are designed to provide such reasonable assurance of achieving their objectives. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

This report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Identified in connection with the evaluation required by paragraph (d) of Rule 240.13a-15 or Rule 240.15d-15 of this chapter that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

PART II OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no legal proceedings, to which we are a party, which could have a material adverse effect on our business, financial condition or operating results.

 

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ITEM 1A. RISK FACTORS

 

There have been no changes to our Risk Factors included in our Post Effective Amendment No. 3 to Registration Statement on Form S-1 that was filed with the Securities and Exchange Commission on September 9, 2013.  

 

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

 

Set forth below is information regarding the issuance and sales of securities without registration since inception. No such sales involved the use of an underwriter; no advertising or public solicitation was involved; the securities bear a restrictive legend; and no commissions were paid in connection with the sale of any securities.

 

On November 1, 2011, the Company issued a total of 5,000,000 shares of common stock to Glenda Dowie, our President and Chief Executive Officer for cash at $0.001 per share for a total of $5,000.

 

On November 1, 2011, the Company issued a total of 500,000 shares of common stock to Mark Anderson, an unaffiliated shareholder for cash at $0.001 per share for a total of $500.

 

On November 14, 2011, the Company issued a total of 200,000 shares of common stock to Carl Hussey, our Treasurer and Chief Financial Officer for cash at $0.005 per share for a total of $1,000.

 

On November 14, 2011, the Company issued a total of 200,000 shares of common stock to Joseph Gagnon, our Secretary and Chief Technology Officer for cash at $0.005 per share for a total of $1,000.

 

On December 7, 2011, the Company issued a total of 1,604,000 shares of common stock to 19 unaffiliated shareholders for cash at $0.005 per share for a total of $8,020.

 

On January 14, 2012, the Company issued a total of 962,000 shares of common stock to 15 unaffiliated shareholders for cash at $0.04 per share for a total of $38,480.

 

On January 31, 2012, the Company issued a total of 178,000 shares of common stock to 9 unaffiliated shareholders for cash at $0.10 per share for a total of $17,300.

 

In December of 2012, the Company authorized the issuance of 35,000 common shares of the Company at $0.20 per share to various investors for net cash proceeds of $7,000.

 

In January of 2013, the Company authorized the issuance of 15,000 common shares of the Company at $0.20 per share to various investors for net cash proceeds of $3,000.

 

In February 2013, the Company issued 1,000 shares of $0.001 par value common stock for $200 cash or $0.20 per share.

 

In April 2013, the Company issued 100,000 shares of $0.001 par value common stock for $20,000 cash or $0.20 per share.

 

These securities were issued in reliance upon an exemption provided by Regulation S promulgated under the Securities Act of 1933. The certificates for these securities were issued to a non-US resident and bear a restrictive legend.

 

At July 31, 2013 there are total of 8,795,000 common shares of the Company issued and outstanding.

 

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4.  MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.  OTHER INFORMATION

 

None.

 

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ITEM 6. EXHIBITS

 

Exhibits

EXHIBITS. The following exhibits required by Item 601 to be filed herewith are incorporated by reference to previously filed documents:

 

Exhibit Number   Description
     
3.1*   Articles of Incorporation
     
3.2*   Bylaws
     
31.1   Certification of Chief Executive Officer pursuant to Section 302
     
31.2   Certification of Chief Financial Officer pursuant to Section 302
     
31.3   Certification of Principal Accounting Officer pursuant to Section 302
     
32.1   Certification of Chief Executive Officer pursuant to Section 906
     
32.2   Certification of Chief Financial Officer pursuant to Section 906
     
32.3   Certification of Principal Accounting Officer pursuant to Section 906

 

 

* Previously filed with Form S-1 Registration Statement, May 23, 2012

 

 

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SIGNATURES

 

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on September 20, 2013.

 

APT Systems, Inc.

 

  By:      /s/ Glenda Dowie
   
  Glenda Dowie, President and Chief Executive Officer

 

  By:      /s/ Joseph Gagnon
   
  Joseph Gagnon, Secretary and Chief Financial Officer

 

  By:      /s/ Carl Hussey
   
  Carl Hussey, Treasurer and Principal Accounting Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed   below by the following person on behalf of the Registrant and in the capacity and on the date indicated.

 

/s/ Glenda Dowie   President, Chief Executive Officer and Director   September 20, 2013
Glenda Dowie   Title   Date
         
/s/ Joseph Gagnon   Secretary, Chief Financial Officer and Director   September 20, 2013
Joseph Gagnon   Title   Date
         
/s/ Carl Hussey   Treasurer, Principal Accounting Officer and Director   September 20, 2013
Carl Hussey   Title   Date

 

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