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EX-32.2 - EXHIBIT 32.2 SECTION 906 CERTIFICATIONS - APT Systems Incf10q103115_ex32z2.htm
EX-32.1 - EXHIBIT 32.1 SECTION 906 CERTIFICATIONS - APT Systems Incf10q103115_ex32z1.htm
EX-31.3 - EXHIBIT 31.3 SECTION 302 CERTIFICATIONS - APT Systems Incf10q103115_ex31z3.htm
EX-32.3 - EXHIBIT 32.3 SECTION 906 CERTIFICATIONS - APT Systems Incf10q103115_ex32z3.htm
EX-31.2 - EXHIBIT 31.2 SECTION 302 CERTIFICATIONS - APT Systems Incf10q103115_ex31z2.htm
EX-31.1 - EXHIBIT 31.1 SECTION 302 CERTIFICATIONS - APT Systems Incf10q103115_ex31z1.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 October 31, 2015


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

SECURITIES EXCHANGE ACT OF 1934

 

_______________________________________________________________________________

 

Commission File No. 000-54865



APT SYSTEMS, INC.

 (Exact name of issuer as specified in its charter)

 

Delaware

99-0370904

(State or other jurisdiction

(IRS Employer File Number)


  

  

505 Montgomery Street

11th Floor

  

San Francisco, CA

94111

(Address of principal executive offices)

(zip code)

 

 (415)-200-1105

 (Registrant's telephone number, including area code)

Formerly

 (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 December 21, 2015, registrant had outstanding 115,915,000 shares of the registrant's common stock.  


 




  



FORM 10-Q

 

APT SYSTEMS, INC.

TABLE OF CONTENTS



PART I  FINANCIAL INFORMATION

PAGE

Item 1.

Unaudited Condensed Financial Statements for the nine months period ended October 31, 2015 and 2014

1

Condensed Balance Sheets

2

Condensed Statements of Operations

3

Condensed Statements of Cash Flows

5

Notes to Unaudited  Condensed Financial Statements

6

Item 2.

Management’s Discussion and Analysis and Plan of Operation

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

20

 

 

PART II  OTHER INFORMATION

 

Item 1.

Legal Proceedings 

21

Item 1A.

Risk Factors

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

21

Item 3.

Defaults Upon Senior Securities

21

Item 4.

Mine Safety Disclosures

21

Item 5.

Other Information

21

Item 6.

Exhibits

22

  

 

Signatures

23





ii



  


 

PART I  FINANCIAL INFORMATION


For purposes of this report, unless otherwise indicated or the context otherwise requires, all references herein to “APT Systems,” “APT,” “the Company,” “we,” “us,” and “our,” refer to APT Systems, Inc., a Delaware corporation.


 

ITEM 1. FINANCIAL STATEMENTS

 

 _______________________________________________________________________



APT SYSTEMS, INC.


UNAUDITED CONDENSED FINANCIAL STATEMENTS



For the Nine Month Periods Ended October 31, 2015 and 2014


_________________________________________________________________________

 

 

 APT Systems, Inc.

Condensed Financial Statements

(Unaudited)

 

TABLE OF CONTENTS


 

  

PAGE

Condensed Balance Sheets

2

Condensed Statements of Operations

3

Condensed Statements of Cash Flows

5

Notes to Condensed Financial Statements

6





1



  



APT SYSTEMS, INC.

Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

October 31, 2015

 

January 31,2015

 

 

(Unaudited)

 

 

ASSETS

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

$

1,228

$

776

Accounts receivable

 

1,215

 

330

  Total current assets

 

2,443

 

1,106

 

 

 

 

 

Other Assets

 

 

 

 

Software (net of $8,691 and $7,079 accumulated amortization respectively)

 

2,914

 

4,526

Website (net of $2,080 and $2,080 accumulated amortization respectively)

 

-

 

-

  Total other assets

 

2,914

 

4,526

 

 

 

 

 

Total Assets

$

5,357

$

5,632

 

 

 

 

 

LIABILITIES & STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

Accounts payable and accrued expenses

$

41,010

$

38,516

Accrued officer compensation

 

120,000

 

75,000

Convertible note payable, net of discount of $52,111 and $0

 

14,695

 

50,000

Convertible loan payable

 

5,000

 

-

Notes payable

 

52,339

 

7,189

Accrued interest payable

 

1,510

 

10,253

Loan from director

 

4,483

 

8,402

  Total current liabilities

 

239,037

 

189,360

 

 

 

 

 

Total Liabilities

 

239,037

 

189,360

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

 

Preferred stock $0.001 par value, 10,000,000 shares authorized;

  None issued as of October 31, and January 31, 2015, respectively

 

-

 

-

Common stock $0.0001 par value, 200,000,000 shares authorized;

  115,915,000 and 8,915,000 shares issued and outstanding as  of

  October 31, 2015 and January 31, 2015, respectively.

 

11,592

 

892

Stock receivable

 

(10,200)

 

-

Additional paid-in capital

 

215,039

 

112,608

Accumulated deficit

 

(450,111)

 

(297,228)

Total Stockholders' Deficit

 

(233,680)

 

(183,728)

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

$

5,357

$

5,632






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


2



  



APT SYSTEMS, INC

Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

Three Months

 

Nine Months

 

Nine Months

 

 

Ended

 

Ended

 

Ended

 

Ended

 

 

October 31, 2015

 

October 31, 2014

 

October 31, 2015

 

October 31, 2014

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

Consulting revenue

$

1,715

$

6,400

$

19,910

$

6,400

E-book sales

 

10

 

-

 

10

 

17

Total revenue

 

1,725

 

6,400

 

19,920

 

6,417

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

Contract labor - related party

 

3,723

 

-

 

17,088

 

3,000

Total cost of goods sold

 

3,723

 

-

 

17,088

 

3,000

 

 

 

 

 

 

 

 

 

Gross Profit

 

(1,998)

 

6,400

 

2,832

 

3,417

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Accounting

 

4,500

 

2,500

 

14,400

 

10,725

Amortization

 

500

 

894

 

1,612

 

2,682

Compensation to officer

 

15,000

 

15,000

 

45,000

 

45,000

General and administrative

 

12,611

 

5,897

 

32,473

 

13,254

Legal

 

-

 

-

 

-

 

62,750

Gain on settlement of accounts payable for stock

 

-

 

-

 

-

 

(38,250)

Total operating expenses

 

32,611

 

24,291

 

93,485

 

96,161

 

 

 

 

 

 

 

 

 

Net operating loss

 

(34,609)

 

(17,891)

 

(90,653)

 

(96,161)

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

    Other income

 

-

 

-

 

500

 

-

    Interest expense

 

(19,838)

 

(2,873)

 

(27,606)

 

(8,484)

    Loss on conversion of notes payable

 

(35,124)

 

-

 

(35,124)

 

-

Total other income (expense)

 

(54,962)

 

(2,873)

 

(62,230)

 

(8,484)

 

 

 

 

 

 

 

 

 

Net loss

$

(89,571)

$

(20,764)

$

(152,883)

$

(101,228)

 

 

 

 

 

 

 

 

 

Loss per share:

   basic and diluted

$

(0.01)

$

0.00

$

(0.01)

$

(0.01)

 

 

 

 

 

 

 

 

 

Weighted average number of

   common shares outstanding:

       basic and diluted

 

16,491,087

 

8,915,000

 

11,449,545

 

8,867,703





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


3



  



APT SYSTEMS,  INC

Statements of  Changes in Stockholders' Deficit

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

Additional

 

 

 

Total

 

Common

 

Stock

 

Paid-in

 

Accumulated

 

Stockholders'

 

Shares

 

Amount

 

Capital

 

Deficit

 

Deficit

 

 

 

 

 

 

 

 

 

 

Balance January 31, 2015 (Audited)

8,915,000

$

8,915

$

104,585

$

(297,228)

$

(183,728)

 

 

 

 

 

 

 

 

 

 

Restatement of common shares at revised par value of $.0001 per share

-

 

(8,023)

 

8,023

 

-

 

-

 

 

 

 

 

 

 

 

 

 

Balance January 31, 2015 (restated)

8,915,000

$

892

$

112,608

$

(297,228)

$

(183,728)

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for repayment of notes payable

5,000,000

 

500

 

-

 

-

 

500

 

 

 

 

 

 

 

 

 

 

Conversion of notes payable

-

 

-

 

102,430

 

-

 

102,430

 

 

 

 

 

 

 

 

 

 

Issuance of common stock to directors

102,000,000

 

10,200

 

(10,200)

 

-

 

-

 

 

 

 

 

 

 

 

 

 

Net loss for the period ended October 31, 2015 (Unaudited)

-

 

-

 

-

 

(152,883)

 

(152,883)

 

 

 

 

 

 

 

 

 

 

Balance October 31, 2015 (Unaudited)

115,915,000

$

11,592

$

204,838

$

(450,111)

$

(233,681)






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


4



  



APT SYSTEMS,  INC

Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

 

 Nine Months Ended

 

 Nine Months Ended

 

 

October 31, 2015

 

October 31, 2014

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

    Net loss

$

(152,883)

$

(101,228)

    Adjustments to reconcile net loss to net cash

 

 

 

 

       provided by (used in) operating activities:

 

 

 

 

       Amortization expense

 

1,612

 

2,682

       Amortization of discount on notes payable

 

15,195

 

-

       Loss on conversion of notes payable

 

35,124

 

-

       Gain on settlement of accounts payable for stock

 

-

 

(38,250)

    Changes in operating assets and liabilities:

 

 

 

 

       (Increase) in accounts receivable

 

(885)

 

(1,650)

        Increase in accounts payable and accrued expenses

 

11,058

 

65,724

        Increase in accrued officer compensation

 

45,000

 

45,000

           Net cash used in operating activities

 

(45,779)

 

(27,722)

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

     Issuance of loan from director

 

6,706

 

16,594

     Repayment of loan from director

 

(10,625)

 

(8,690)

     Issuance of short-term notes payable

 

50,150

 

-

     Decrease (increase) in deferred financing costs

 

-

 

1,500

          Net cash provided by financing activities

 

46,231

 

9,404

 

 

 

 

 

         Net change in cash and cash equivalents

 

452

 

(18,318)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

776

 

18,830

 

 

 

 

 

Cash and cash equivalents at end of period

$

1,228

$

512

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

Cash paid  for :

 

 

 

 

 

 

 

 

 

   Interest

$

3,848

$

1,378

   Income Taxes

$

-

$

-

 

 

 

 

 

Equity Securities issued for services:

 

 

 

 

 

 

 

 

 

   Loan issued settlement of accounts payable

$

-

$

-

   Stock issued settlement of accounts payable

$

-

$

55,250

   Stock issued settlement of notes payable

$

500

$

-

   Stock issued for services

$

-

$

-

   Stock issued for receivable

$

10,200

$

-





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


5






APT SYSTEMS, INC.

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE NINE MONTH PERIODS ENDED OCTOBER 31, 2015 AND 2014


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 charting the financial markets. The Company has launched a publication using its Apple developer account and has been concentrating on researching and improving its intellectual property for trading systems, in order to facilitate rolling out new software. Management will continually test trading software products and any profits generated from funds used in live trading tests will be to the benefit of the Company. We constantly strive to pioneer original trading tools along with new approaches for managing risk. Our proprietary custom charting tools and trading platforms will later be available to licensees.


While management works to deliver stock trading software, it is also seeking to strategically acquire other compatible financial businesses which demonstrate strong growth potential stemming from a solid business plan. Particularly interest is shown in those businesses that own or have licensed software dedicated to trading equities, commodities and or foreign exchange.


In the fiscal year ending January 31, 2015, the Company commenced providing technical writing and computer assisted design services to other startups using a contractor, a related person (family member to the Chief Executive Officer), to generate certain additional revenues. We would anticipate that this revenue will diminish if we are able to raise the necessary funding to allow the contractor to work exclusively on in-house projects.


Within the quarter ending October 31, 2015, the Company’s application to Depository Trust and Clearing Corporation (DTCC) was approved and subsequently the Company’s symbol APTY began trading on the OTC Markets on November 17, 2015.


The Company is required to file its annual and quarterly financial reports with SEDAR in Canada and will continue to do so for the foreseeable future. The requirement to file is a result of the Issuer being deemed a reporting issuer under MI 51-105 as advised by the Alberta Securities Commission.


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 nine months ended October 31, 2015 are not necessarily indicative of the final results that may be expected for the year ended January 31, 2016.  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, 2015 included in our Form 10-K filed with the SEC.


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.


Foreign currency transaction gains and losses are recorded in the statements of operations as a component of other income (expense).



6






2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Cash and Cash Equivalents


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


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, accounts payable, accrued expenses, note payable and loan from director approximate their market values as of October 31, 2015 and January 31, 2015 due to the intended short term maturities of these financial instruments.


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.


Deferred Financing Costs


Costs with respect to issue of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized as debt discount over the term of any debt funding if successful or expensed if the proposed equity or debt transaction is unsuccessful.


For the nine month period ended October 31, 2015 and for the year ended January 31, 2015, the Company had paid refundable deposits of $13,000 and $0, respectively.  The deposits were made to two consulting companies that were to assist the Company in obtaining a $125,000 bridge loan to be utilized by the Company for its public registration purposes, and to assist the Company with an $8,000,000 private equity placement.  The deposits are refundable for non-performance.  As of the date of this report, neither the bridge loan nor the private placement had been secured.


During the quarter ended October 31, 2015, one consulting firm refunded to the Company $1,500 of the $4,000 that they were paid as part of their obligation to refund amounts on deposit for non-performance under the agreements.  As of October 31, 2015, collection of the remaining amounts owed to the Company on these agreements was uncertain, therefore, $11,500, or 100% of the outstanding balance of the deferred financing costs, was written off effective January 31, 2015.  Subsequently, additional funds were recovered in May in the amount of $500 which are recognized as income under the other income and expense head in the statement of operations. No additional refunds were received during the quarter.



7






2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


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 will be performed. If an evaluation is 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 is required.


Income Taxes


The Company accounts for income taxes in accordance with FASB ASC 740 “Income Taxes”. Under FASB ASC 740, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. FASB ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. At October 31, 2015 and 2014, the Company has no unrecognized tax benefits.


Revenue Recognition


The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer; (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.


Advertising costs


Advertising costs are expensed as incurred. The Company recorded no advertising costs during the nine months ending October 31, 2015 and 2014.


Research and Development Costs


Costs incurred in research and developments are expensed as incurred.


Stock Based Compensation


The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. The Company has adopted a stock option plan, as disclosed in Note 8 – Stockholders’ Deficit below. During the nine month periods ended October 31, 2015 and 2014, no stock options had been issued or outstanding.


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. For the three and nine months ended October 31, 2015 and 2014, the Company did have potentially dilutive debt instruments that have been excluded from the earnings per share calculation; as such an inclusion would have been anti-dilutive due to the losses incurred in both periods.



8






2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Beneficial Conversion Features


If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.


Recently Issued Accounting Pronouncements


In August 2014, the FASB issued guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity's ability to continue as a going concern. If such conditions or events exist, disclosures are required that enable users of the financial statements to understand the nature of the conditions or evens, management's evaluation of the circumstances and management's plans to mitigate the conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. The Company will be required to perform an annual assessment of its ability to continue as a going concern when this standard becomes effective on January 1, 2017; however, the adoption of this guidance is not expected to impact our financial position, results of operations or cash flows.


3.  GOING CONCERN AND LIQUIDITY


As of October 31, 2015, the Company had cash of $1,228, insufficient revenue to meet its ongoing operating expenses, liabilities of $239,037, accumulated losses of $450,111 and a shareholders’ deficit of $233,680.


In the audited financial statements for the fiscal years ended January 31, 2015 and 2014, the Reports of our Independent Registered Public Accounting Firm included an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.


The unaudited financial statements for the nine months ended October 31, 2015 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, obtaining 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, loans from directors and, or, the sale of common stock. There is no assurance that this series of events will be satisfactorily completed. Financial statements do not include adjustments that may be necessary if the Company is unable to continue as a going concern.


4.  RELATED PARTY TRANSACTIONS


Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the President on an ongoing basis. Accrued officer compensation as of October 31, 2015 and January 31, 2015, was $120,000 and $75,000 respectively. The accrued compensation will only be paid when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued. The President of the Company can elect at any time to convert some, or all, of her accrued compensation into shares of the Company’s common stock as determined by the Board of Directors in consultation with its legal advisors.  The Directors elected to increase the number of shares the company is authorized to issue is 210,000,000 at a par value of $.0001 for common and $.001 for preferred. Breakdown of class of shares shall be 200,000,000 common shares, par value $.0001 and 10,000,000 preferred shares, par value $.001. The Directors then issued management shares under subscription agreements to Glenda Dowie (97,000,000), Joseph Gagnon (2,000,000), Carl Hussey (2,000,000) and Jeffrey Jolliffe (1,000,000) maintaining the controlling interest of Director, Glenda Dowie. Glenda Dowie elected to pay for her shares from funds due to her and the others paid cash for their additional shares.


As of October 31, 2015 and January 31, 2015, the Company owed the President $4,483 and $8,402 respectively by way of loans. The loans are unsecured, due on demand and interest free.


During the nine months ended October 31, 2015, the Company commenced providing consulting, technical writing and computer assisted design services to other startups provided by a contractor, a related person (family member to the Chief Executive Officer), to generate certain additional revenues. The Company paid $3,723 and $17,088 and $0 and $3,000 to the related party contractor in respect of the provision of these services during the three and six months ended October 31, 2015 and 2014, respectively.



9






5.  CONVERTIBLE NOTE PAYABLE


On January 8, 2014, the Company issued an unsecured convertible note to one accredited investor (as that term is defined under the Securities Act of 1933, as amended) in the aggregate amount of $50,000  This convertible note accrues interest at the rate of 19% per annum and is convertible only when a “qualifying financing” event takes place. The note was initially due and payable on May 7, 2014. The Company secured an initial extension of term of the convertible note to January 29, 2015 and subsequently a further extension to December 31, 2015.


The Note, but none of the accrued unpaid interest thereon, may convert into equity securities of the Company at the option of the holder if the Company issues equity securities and any other indebtedness in aggregate with gross proceeds of $1,200,000, including conversion of the Note (a “Qualified Financing”).  


The original conversion price was equal to 80% of the per share price paid by the purchasers of such equity securities in the Qualified Financing.  All accrued and unpaid interest will be paid by the Company at time of conversion.


If a Qualified Financing has not occurred and the Company elects to consummate a sale of the company prior to the maturity date of the Note, the Company will give the holder a minimum ten days prior written notice of an anticipated closing date of such sale of the Company in order that the holder may consider a conversion of their Note into equity in advance of a sale transaction.


No value has been assigned to the conversion feature attached to this convertible note payable as the possibility of the Company completing such a Qualifying Financing or completing a sale of the Company was, and continues to be, considered to be extremely remote.


Accrued interest payable as of October 31, 2015 and January 31, 2015 was $17,306 and $10,253, respectively.  Interest expense was $2,390 and $7,180 for the three and nine months ended October 31, 2015, and $2,395 and 7,106 for the three and nine months ended October 31, 2014, respectively.


On 14th October, 2015 the company entered into an definitive convertible promissory note wherein the Promissory Note dated January 8, 2014 issued to Donald Meador for $ 50,000 was amended to state that the holder of the note may elect payment of the principal and/ or interest or part thereof, owed pursuant to this note to issue or exchange the requisite number of common stock shares of the company. The company has agreed to allow the holder to convert the shares at fixed price of 0.0001. Also, the holder shall not have the right and the company shall not have the obligation to convert all or any portion of the Convertible Promissory Note if and to the extent that the issuance to the Holder of shares of the Company’s Common Stock upon such conversion would result in the Holder being deemed the beneficial owner of the more than 4.99% of the then outstanding shares of Common Stock within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules promulgated there under.


Per ASC Topic 470 “Modification or Extinguishment of Debt the terms of the debt instrument have been substaintially modified such that the present value of the cash flows under the modified debt instrument is at least 10% lower than the present value of the remaining cash flows under the orginal convertible promissory note.  The difference between the cash flows generated a gain on extinguishment of debt of $14,376 for the three and nine months ended October 31, 2015.


In addition, pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount; the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.  The beneficial conversion feature (debt discount) on the note payable pursuant to the Definitive Conversion Agreement is calculated to be $67,306 as of October 14, 2015.  Of that amount, $15,195 was amortized and included in interest expense for the three and nine months ended October 31, 2015.


On October 14, 2015, the noteholder had opted to assign a portion of the loan for payment of $500 and received the approval of the board of directors.  There was no change in terms.  The principal amount due to the Noteholder has been reduced by $500 and the interest due has been adjusted accordingly.  The Directors further agreed to renegotiate the conversion terms of the debt but with the condition that the noteholder may only convert shares providing the total holdings of the noteholder remain at less than five percent ownership of shares of the Company.  On October 26, 2015, the Company issued 5,000,000 shares of its common stock valued at $.0001 per share to an unrelated third party in satisfaction of $500 in notes payable that were assigned on October 14, 2015, as referred to above.  As such, the Company recognized a loss on the conversion of notes payable of $49,500 for the three and nine months ended October 31, 2015.


The convertible note payable and accrued interest was scheduled for repayment on May 31, 2015. However, we did not have the funds to make any repayment on the scheduled repayment date and were in default until June 29, 2015. We had further reached agreement with the convertible noteholder on September 20, 2015 to further extend the term of the convertible note payable to December 31, 2015.



10






5.  CONVERTIBLE NOTE PAYABLE (Continued)


There can be no assurance that we will be able to reach a further agreement to extend or amend the terms of the convertible note payable with the convertible noteholder or that we will be able to raise the funding necessary to repay the balance due under the convertible note payable.


On April 17, 2015, APT Systems, Inc. received $5,000 in additional short-term borrowing from the holder of the Convertible Note Payable, Mr. Donald Meador. This was a 60 day demand note. The note payable was scheduled to be repaid on June 16, 2015. However, we did not have the funds to make any repayment on the scheduled repayment date, of June 16, 2015. We had entered into discussions prior to the due date to extend the term of the note payable and effective June 29, 2015, we received confirmation that we had reached agreement with the noteholder to further extend the term of the note payable to October 31, 2015.


As of October 20, 2015 the Directors agreed that the noteholder be allowed to convert the loan to shares at the noteholder’s option for an extension of the loan until April 23, 2017. There was no additional cost due to the extension agreement.  The note carries an interest rate of 8% per annum.  Even with this extension, there can be no assurance that we will be able to raise the funding necessary to repay the balance due under the note payable at that time.


Accrued interest payable as of October 31, 2015 and January 31, 2015 was $101 and $0, respectively.  Interest expense was $101 for the three and nine months ended October 31, 2015, and $0 for the three and nine months ended October 31, 2014, respectively.


6.  NOTES PAYABLE


On  November 21, 2014, the Company received $5,000 by way of an unsecured short-term loan from a non-related party for a term of nine months at 10% interest due upon repayment  Accrued interest of $492 and $118 is included in the financial statements as of October 31, 2015 and January 31, 2015, respectively.  The note payable and accrued interest was scheduled to be repaid on May 21, 2015. However, we did not have the funds to make any repayment on the scheduled repayment date and accordingly we went into default under the terms of this note payable on May 21, 2015 and the liability remains outstanding in full as of the date of the issuance of this report. The Company was successful in obtaining an extension until December 31, 2015 upon making an interim renewal payment of $400.00.   There can be no assurance that we will be able to raise the funding necessary to repay the balance due under the extended note payable.


The Company entered into a stock transfer agency agreement dated November 19, 2014 with Pacific Stock Transfer. As part of the agreement, amounts owed to the Company’s previous stock transfer agent of $7,430 were paid by Pacific Stock Transfer, of which $2,189 is to be repaid to Pacific Stock Transfer by the Company in installments of $250 per month beginning on January 3, 2015. Accordingly we also recognized a $5,242 gain on the settlement of the $7,430 balance of accounts payable by assuming a loan of $2,189. Interest at 5% per annum accrues on the unpaid balance of the loan for each month. As of October 31, 2015 and January 31, 2015, accrued interest on this loan was $93 and $9, respectively. As of October 31, 2015, and as of the date of the issuance of this report, we have not had the funds to make any payments under the term of this agreement and consequently were in default under the terms of this agreement as of October 31, 2015 and continue to be in default under the terms of this agreement as of the date of the issuance of this report. There can be no assurance that we will be able to reach a further agreement to extend or amend the terms of the agreement or that we will be able to raise the funding necessary to repay the balance due under this agreement. The initiation of any collection action by this creditor could affect our ability to execute on our business plan and operations.  

 

On October 2, 2015, the Company received $12,500 by way of an unsecured short-term loan from a non-related party for a term of one year.  Principal and interest at 8% per annum accrued thereon are due and payable on October 1, 2016.  Accrued interest of $82 and $0 is included in the financial statements as of October 31, 2015 and January 31, 2015, respectively.


The Company had executed three short-term lending arrangements with non-related party, Mr. Raymond C. Dove, by July 31, 2015.  The effective dates of the loans are May 1, 2015, June 22, 2015 and June 27, 2015.  The loan amounts are $25,000, $3,000 and $2700, respectively, with interest accruing at 5% per annum.  Repayment is in one lump sum due and payable on or before December 4 through December 31, 2015.  Additional short term loans were provided in September in the amount of $1,950, with a maturity date of January 31, 2016



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7.  COMMITMENTS AND CONTINGENCIES


On July 8, 2014, the Company entered into an agreement to issue 100,000 shares of its common stock as a deposit for an option to acquire 100% of the issued share capital of AZUR Universal Inc., subject to certain terms and conditions. As at the date of this report certain due diligence remains to be completed, no shares have been issued as yet and no liability for this potential future issuance has been recognized in these financial statements. It is anticipated these shares will be issued within the terms and new timelines of the agreement.


The Company is required to file its annual and quarterly financial reports with SEDAR in Canada. Due to delays in filing its financial statements and other possible forms, the Company believes it may be subject to certain potentially significant penalties to be levied by the Alberta Securities Commission (ASC). These fines have now been stated to be CDN$10,120 or approximately $7,500 as advised and invoiced by the ASC, and have been accrued into the financial statements as of October 31, 2015. The Company is considering engaging its legal counsel to assist in reducing or eliminating these penalties within the next quarter.


8.  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 nine months ended October 31, 2015 and 2014.


COMMON SHARES


The Company is authorized to issue 200,000,000 shares of common stock, par value $0.0001 per share.


On October 16, 2015, 102,000,000 shares of the Company's common stock were issued at $.0001 per share to management as follows: Jeffrey Jolliffe – 1,000,000; Carl Hussey, Treasurer – 2,000,000; Joseph Gagnon, Secretary - 2,000,000; Glenda Dowie, President & CEO – 97,000,000.  All shares are restricted Section144 shares. $10,200 is added in the stockholders' equity section of the financial statements for the value of these shares.


The following equity securities were issued during the nine month periods ended October 31, 2015 and 2014 to management and officers as follows: Jeffrey Jolliffe – 1,000,000 restricted 144 shares; Carl Hussey, Treasurer – 2,000,000 restricted 144 shares; Joseph Gagnon, Secretary - 2,000,000 restricted 144 shares; Glenda Dowie, President & CEO – 97,000,000 restricted 144 shares in 2015 and are recorded as stock receivable and no securities were issued to management or officers in 2014.   In addition, the Directors approved the new conversion terms for outstanding loan to Meador and subsequently, part of the debt was sold to an unrelated party.  The Directors agreed the acquired debt could be converted to unrestricted shares and undertook a resolution to issue 5,000,000 additional shares bringing the total of both restricted and none restricted shares to 115,915,000 for 2015. While there were cash proceeds of $500 that directly benefited the Company immediately, there was also a reduction of debt, and the Directors hoped to improve upon the liquidity and availability of shares to be traded in public markets.


Shares issued during the nine months ended October 31, 2015 were as follows:


Period

Total Number

of Shares

Issued

 

Par value

per Share

0.0001

 

Total Number

of Shares

Purchased

by Cash

 

Total Number

of Shares

Purchased by

reduction of Debt

August 1 – 31, 2015

—  

  

$

—  

  

—  

  

 

—  

September 1 – 30, 2015

—  

  

  

—  

  

—  

  

 

—  

October 1 – 31, 2015

107,000,000

  

 

10,700

  

500

  

 

10,200

Total

107,000,000

  

$

10,700

  

500

  

 

10,200


On October 26, 2015, the Company issued 5,000,000 shares of its common stock valued at $.01 per share to an unrelated third party in satisfaction of $500 in notes payable that was assigned to the third party as referred to in Note 5. Convertible Notes Payable.




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8.  SHAREHOLDERS’ DEFICIT (Continued)


In addition, the Directors approved the new conversion terms for outstanding loan to Meador and subsequently, part of the debt was sold to an unrelated party.  2015  On October 26, 2015, the Company issued 5,000,000 shares of its common stock at a fair value of $0.0001 per share to an unrelated third party in satisfaction of $500 in notes payable that was assigned to the third party as referred to in Note 5.-- Convertible Notes Payable. The fair value of $0.0001 per share was established with the unrelated third party based on the fact that the Company has had only limited operations to date, incurred losses since inception and has a shareholder deficit in excess of $200,000.


As of October 31, 2015, there are a total of 115,915,000 of the Company’s common shares issued and outstanding.  The majority of these recently issued shares are restricted and 5,000,000 shares were issued as unrestricted.


STOCK OPTIONS


The Company adopted the 2013 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.  As of October 31, 2015 and January 31, 2015, no options have been issued or are outstanding under this Plan.


9.  SUBSEQUENT EVENTS


On October 16, 2015, 102,000,000 shares of the Company's common stock were issued at $.0001 per share to management and officers of the Company.  Payments by personal cheques were replaced with bank drafts due banking policies and deposited after October 31, 2015 to be accounted for in banking reconciliation for next quarter.


The Company has retained TESO Communications as its Investor Relations and Public Relations and under the agreement the company is able to pay the invoice with cash or by issuing shares against the invoices submitted.  The Directors opted to issue shares before the end of the initial agreement period of January 16, 2015.  The agreement represented a cash payment of $25,000 or the issuance of 50,000 restricted common shares and has been recorded accordingly.


The Company also retained the firm, Small Cap Financial Wire, to manage social media campaigns and investor relations for their existing investor clients.  The Directors opted to issue shares in lieu of cash payment for invoices rendered and agreed to amount of 26,670 restricted common shares that was reflective of the current value of the shares in lieu of cash payment for $20,000. These restricted shares will be issued in the upcoming quarter and before year end.

 

In accordance with ASC 855, Subsequent Events, the Company has evaluated events that occurred subsequent to the balance sheet date through the date of available issuance of these financial statements. The Company determined that other than as disclosed above, there were no material reportable subsequent events to be disclosed.






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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 statements regarding us, our business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: our ability to successfully develop new products and services for new markets; the impact of competition on our revenues, changes in law or regulatory requirements that adversely affect or preclude clients from using us for certain applications; delays our introduction of new products or services; and our failure to keep pace with our competitors.

 

When used in this discussion, words such as "believes", "anticipates", "expects", "intends" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, 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. The Company has not as yet generated significant sales revenues as its key products are still under development. Its limited start-up operations have consisted of the formation of the Company, development of its business plan, identification of its target market and limited research towards the development of its software products. During the twelve months ended January 31, 2015, the Company commenced providing technical writing and computer assisted design services to other startups using a contractor, a related person (family member to the Chief Executive Officer), to generate certain additional revenues. We would anticipate that this consulting revenue will eventually diminish entirely if we are able to raise the necessary funding to allow the contractor to work exclusively on in-house projects. Upon obtaining approval for electronic trading of our symbol, we plan on raising additional funds by issuing shares but do not rule out the possibility of additional loans. However, there is no guarantee we will be successful in raising sufficient funding to progress with the implementation of our business plan.


We have not been subject to any bankruptcy, receivership or similar proceeding.


We are a company that specializes in the creation of innovative equities trading platforms. We are focusing on the mobile device market where we intend to develop and publish custom technical analysis indicators and trading systems both in-house and for third parties. In addition, we intend 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. We plan to utilize real time and delayed data networks along with graphic techniques which will provide solutions that can speak to the mobile needs to be demanded by the next generation of equity and commodity 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 invigorated with leading edge graphics and networking technology to become desirable real-time and interactive trading assistance software. In addition, the company was recently in contact with potential educators for its products and for general education of its clients in trading techniques.


APT services can extend to include:


·

Financial Software and Analytical Software Development

·

Algorithmic Applied Technology

·

Trading Platform Refinement and Linking to Brokerage Accounts

·

Analytical Charting Software Development



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The steps remaining for us to begin selling our products listed above are to finalize the programming of the software used in our products, specifically our dimensional charting tools, begin sales and marketing campaigns, contact prospective licensees, and deliver our products, which we expect to complete in less than 180 days after our initial contact with prospective licensees. Our app would be available to users on a subscription fee plan and we plan to grant licenses in our app to financial companies and brokerage firms for use by their employees and clients. The goal is to have our product used by both handheld (tablet and Smartphone application users) and web based clients.


With its currently limited financial resources, the Company has only been able to make very limited progress in developing its business activities since inception and is examining other acquisition opportunities as a means to enhance overall operations.


On February 19, 2014, the Company had received notice from FINRA that the trading symbol APTY has been allocated to the APT Systems, Inc.  We have been approved for DTCC eligibility to allow the markets access to trade our shares electronically and began trading on the OTC Markets on November 17, 2015.  We expect this approval would assist us in our financial goals and help to attract investors in the future.


Needs Assessment


Management believes the principal growth area in the personal computer market today is that of Smartphones and portable tablet devices.  These mobile devices usually allow full time internet connectivity which 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, we envision for our future products an information-dense and interactive display of the financial markets. At this time, we believe that the future interactive display will include three dimensional imaging that we intend 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.


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.


Organization


We are comprised of one corporation and do not have any subsidiaries but do not rule out the future possibility of acquiring or creating subsidiaries. At this time, all of our operations are conducted through this corporation.

 

Competition

 

The market for financial services software and services is competitive, rapidly evolving and highly sensitive to new product introductions and marketing efforts by industry participants, although high conversion costs can create barriers to adoption of new products or technologies. The market is fragmented and served by both large-scale firms with broad offerings as well as firms that target only local markets or specific types of clients. We also face competition from information systems developed and serviced internally by the IT departments of large financial services firms. We believe that we can compete effectively by providing software contained in a mobile application, which provides buy/sell suggestions, and trading ability, although some of our existing competitors and potential competitors have substantially greater financial, technical, distribution and marketing resources than we have and may offer products with different functions or features that are more attractive to potential customers than our offerings.


Moreover, it is not our intent to compete with larger financial services firms, but rather to facilitate more trades by better informing our clients and providing them with better trading tools. The trading tools such as dimensional charts may be licensed to these same banks and brokers or subscribed to by users, directly. We believe that we can work with the banks and brokerage firms who offer online and Smartphone trading access by providing them with a more effective analysis tool for their current and future clients. 



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Contracted Consultants

 

We currently have one consultant under contract. Mr. Gagnon is the only officer with a formal consulting agreement. Per the terms of the agreement Mr. Gagnon, in his position as the Chief Technology Officer, is paid a minimum of $2,500 per month for services writing technical documents while the Company awaits full funding. As of June 15, 2012, Mr. Gagnon took a leave of absence from his role under the consulting agreement; however, he will continue to serve as an officer and director of the Company during his leave of absence. Our other officers and directors currently provide some services on a consultant basis without compensation. Based upon the amount of the proceeds from additional sales of our common stock, other future employees and directors may receive salaries. Once we generate sufficient revenue, future salaries will be evaluated at that time


Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for Ms. Dowie on an ongoing basis.  As of January 31, 2015, accrued officer compensation was $90,000.  The accrued compensation will only be paid as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued.  Ms. Dowie can elect at any time to give notice to convert some, or all, of her accrued compensation into shares of the Company’s common stock as determined by the Board of Directors and its legal advisors.


During the nine months ended October 31, 2015, the Company continued providing technical writing and computer assisted design services to other startups provided by a contractor, a related person, a family member to the Chief Executive Officer, to generate certain additional revenues. The Company paid $17,088 and $3,000 to the related party contractor in respect of the provision of these services during the nine months ended October 31, 2015 and 2014.


Intellectual Property Information

 

Our success and ability to compete will be dependent to a significant degree on our intellectual property, which may include our trade name, trading models, and visual charts. We intend to develop our technology internally and we will rely primarily on trade secret, trademark, copyright, domain name, patent and contract law to protect our intellectual property. It is our intention to enter into confidentiality, intellectual property invention assignment and/or non-competition and non-solicitation agreements or restrictions with our employees, independent contractors and business partners, and to control access to and distribution of our intellectual property. Currently, we do not have any registered copyrights or patents; however, we may obtain such registrations in the future.


Government Regulation

 

We do not expect to be subject to material governmental regulation. However, it is our policy to fully comply with all governmental regulation and regulatory authorities.

 

Research and Development


We have spent $0 and $0 respectively in the nine months ended October 31, 2015 and 2014, on research and development of our website and mobile applications. We plan to spend further funds on research and development activities in the future as the development of our software applications continue and we raise the necessary funding required.  

 

Environmental Compliance

 

We believe that we are not subject to any material costs for compliance with any environmental laws.


Results of Operations


For the three and nine Months Ended October 31, 2015 Compared to the three and nine Months Ended October 31, 2014


Revenue


The Company generated $1,715 and $19,910 in consulting revenue in the three and nine months ended October 31, 2015 compared to $6,400 of revenue in the three and nine months ended October 31, 2014, and $10 for the three and nine months ended Octber 31, 2015 in book revenues compared to $17 in three and nine months ending October 31, 2014. As a startup company, we have generated only minimal revenues that do not exceed our expenses.


Cost of Revenue


During the three and nine months ended October 31, 2015 the Company paid $3,723 and $17,088 in contract labor – related party, associated with the consulting revenue generated for the same time period, as compared with $0 and $3,000 for the three and nine months ended October 31, 2014, increases of $3,723 and $14,088, respectively or 100% and  470%, respectively.



16






Operating Expenses


Operating expenses were $32,611 and $93,485 for the three and nine month period ended October 31, 2015 compared to $24,291 and $96,161 for the three and nine month period ended October 31, 2014, an increase of $8,320 and a decrease of $2,676, respectively. The increase in operating expenses for the three months ended October 31, 2015 was due primarily to an increase in general and administrative costs, more specifically, the $7,500 in ASC penalties accrued.  The decrease in operating expenses for the nine months ended October 31, 2015 was due primarily to a reduction in legal fees from $62,750 to $0 for the period. The legal fees incurred in the nine months ended October 31, 2014 primarily related to the preparation of the Company’s form 10K for the year ended January 31, 2014. We did not use external attorneys in the preparation of the Company’s form 10K for the year ended January 31, 2015 and consequently we did not incur any comparable legal fees during the nine months ended October 31, 2015.


Operating Loss


We incurred an operating loss of $34,609 and $90,653 for the three and nine months ended October 31, 2015 compared to an operating loss of $17,891 and $96,161 for the three and nine months ended October 31, 2014, an increase of $16,718 or 93% for the three months ended October 31, 2015, and a decrease of $5,508 or 6%. The increase was due to contract labor paid for consulting service revenue, an increase in accounting fees paid, and the accrual of ASC penalties of $7,500 as referred to in Note 10 Subsequent Events.  The decrease was due to the reduction in legal fees as described above.


Interest Expense


We incurred an interest expense of $4,643 and $12,411 for the three and nine month period ended October 31, 2015 compared to interest expense $2,873 and $8,484 for the three and nine month period ended October 31, 2014, increases of $1,770 and $3,927, respectively. In addition we continued to fund some of our expenditures on credit cards, and have executed certain new short-term notes at varying interest rates as described in Note 6 Notes Payable in the condensed unaudited financial statements presented above.


Also included in interest expense for the three and nine months ended October 31 2015 was $15,195 is amortization of note payable discount on the unsecured short-term convertible note payable in the amount of $50,000. due to the beneficial conversion feature as more fully described in Note 5 Convertible Notes Payable  


Net Loss


In the three and nine months ended October 31, 2015 we incurred a net losses of $89,571 and $152,883 compared to net losses of $20,764 and $101,228 for the three and nine months ended October 31, 2014, an increase of $68,807 or 331% for the three months ended October 31, 2015 and an increase of $51,655 or 51%, due to the factors discussed above and a loss on the conversion of notes payable of $35,124 for the three and nine months ended October 31, 2015.


Cash flow information for the nine months ended October 31, 2015 is compared to the nine months ended October 31, 2014


As of October 31, 2015, the Company had cash of $1,228, insufficient revenue to meet its ongoing operating expenses, liabilities of $239,037, accumulated losses of $450,111 and a shareholders’ deficit of $233,680.


The unaudited financial statements for the nine months ended October 31, 2015 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, obtaining 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, loans from directors and, or, the sale of common stock. There is no assurance that this series of events will be satisfactorily completed.



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Net cash used for operating activities was $45,779 for the nine month period ended October 31, 2015. This compares to net cash used for operating activities of $27,722 for the nine month period ended October 31, 2014.  During the nine months ended October 31, 2015 we incurred a loss of $152,883 which was partially reduced by $1,612 of non-cash amortization expense on intangible assets and amortization of discounts on notes payable of $15,195, and increases of $35,124 from the loss on conversion of notes payable, $56,058 in operating liabilities and an increase of $885 in accounts receivable, to arrive at cash used in operations of $45,779. By comparison, during the nine months ended October 31, 2014 we incurred a loss of $101,228 which was partially reduced by $2,682 of non-cash amortization expense, a gain on the settlement of accounts payable for stock of $38,250, an increases of $110,724 in operating liabilities, and a $1,650 increase in accounts receivable to arrive at cash used in operations of $27,722.


Cash flows generated by (used in) investing activities were at $0 for the nine month periods ended October 31, 2015 and 2014.


Cash flows provided by financing activities were $46,231 for the nine month period ended October 31, 2015 which compares to cash flows provided by financing activities of $9,404 for the nine month period ended October 31, 2014. During the nine months ended October 31, 2015 we received $6,706 of additional loans from one of our directors, made repayments to the same director in the amount of $10,625 and received $50,150 by way of short-term note payable.  By comparison, during the nine months ended October 31, 2014, we received $16,594 in loans from one of our directors and made repayments to the same director in the amount of $8,690. The Company received refunds of $1,500 on deferred financing costs as referred to in Note 2 Summary of Significant Accounting Policies.  


The following equity securities were issued during the nine month periods ended October 31, 2015 and 2014 to management and officers as follows: Jeffrey Jolliffe – 1,000,000 restricted 144 shares; Carl Hussey, Treasurer – 2,000,000 restricted 144 shares; Joseph Gagnon, Secretary - 2,000,000 restricted 144 shares; Glenda Dowie, President & CEO – 97,000,000 restricted 144 shares in 2015 and no securities were issued to management or officers in 2014.   In addition, the Directors approved the new conversion terms for outstanding loan to Meador and subsequently, part of the debt was sold to an unrelated party.  The Directors agreed the acquired debt could be converted to unrestricted shares and undertook a resolution to issue 5,000,000 additional shares bringing the total of both restricted and non restricted shares to 115,915,000 for October 31, 2015.


While there were nominal cash proceeds of $500 that directly benefited the Company immediately, there was also a reduction of debt as payment for shares amounting to a total of $10,700 for October 31, 2015 and $0 for October 31, 2014.


Off-Balance Sheet Arrangements


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


Liquidity and Capital Resources


As of October 31, 2015, we had cash and cash equivalents of $1,228. As of January 31, 2015, we had cash and cash equivalents of $776.


Over the twelve months we do not expect any material capital costs to develop operations. Our estimated operating costs of $85,000 will be used for operations and reporting, but none will be used to pay salaries unless deemed reasonable by management.


To date, we have realized only nominal revenue.  As a result, we expect that we may need to engage in the private placement of our debt and equity securities in order to continue to fund operations. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to raise an estimated $1.5 million to fully implement our business plan and to successfully develop and market our software, generate revenues and operate a profitable business.


In any case, we try to operate with minimal overhead while we undertake to attract participants to help build our products. Our primary activity will be to seek to develop clients for our services and, consequently, our sales. If we succeed in developing clients for our services and generating sufficient sales, we will have the potential to become profitable. We cannot guarantee that this will ever occur. Our plan is to build our company in any manner which will be successful and provide value for our shareholders.


Plan of Operation


Our business plan is to attract additional capital and sufficient product sales, and provide services within our present organizational structure and resources, to become profitable in our operations.




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Marketing and Sales efforts:


Our marketing efforts will primarily be related to assuring our product is easily found in app stores and create a smooth downloading experience. We anticipate allocating seven percent of funds raised for marketing as well as generating product awareness through paid investor relations programs. We believe that there will be sufficient funds available if a suitable advertising opportunity presents itself.


Once the app is live and we have has begun initial Search Engine Optimization (“SEO”) work and internet marketing, we believe sales will be initially supported through the Apple store and our 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 us to 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


Future Trends use E-Books as a method for Training: Future product considerations revolve around enhanced or animated e-books. We believe consumers enjoy e-books because of 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 believed customers will soon demand interactive books that provide a much better, more informed educational experience and replace standard training techniques. New E-books with a view to training support will be made available after the sale of apps has commenced.


Consulting Services


During the nine months ended October 31, 2015, the Company continued providing technical writing and computer assisted design services to other startups using a contractor, a related person, a family member to the Chief Executive Officer, to generate certain additional revenues. We would anticipate that this revenue will eventually diminish if we are able to raise the necessary funding to allow the contractor to work exclusively on in-house projects.


Recently Issued Accounting Pronouncements


In August 2014, the FASB issued guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity's ability to continue as a going concern. If such conditions or events exist, disclosures are required that enable users of the financial statements to understand the nature of the conditions or evens, management's evaluation of the circumstances and management's plans to mitigate the conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. The Company will be required to perform an annual assessment of its ability to continue as a going concern when this standard becomes effective on January 1, 2017; however, the adoption of this guidance is not expected to impact our financial position, results of operations or cash flows.


Seasonality


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




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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


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 Quarterly Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of October 31, 2015, 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 October 31, 2015. Based on this assessment, management believes that as of October 31, 2015, 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.


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.



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PART II  OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


During the nine months ended October 31, 2015 and 2014, there were no legal proceedings, to which we are a party, which could have a material adverse effect on our business, financial condition or operating results and none are threatened or pending to the best of our knowledge.


ITEM 1A. RISK FACTORS


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


The following equity securities were issued during the nine month periods ended October 31, 2015 and 2014 to management and officers as follows: Jeffrey Jolliffe – 1,000,000 restricted 144 shares; Carl Hussey, Treasurer – 2,000,000 restricted 144 shares; Joseph Gagnon, Secretary - 2,000,000 restricted 144 shares; Glenda Dowie, President & CEO – 97,000,000 restricted 144 shares in 2015 and no securities were issued to management or officers in 2014.   In addition, the Directors approved the new conversion terms for outstanding loan to Meador and subsequently, part of the debt was sold to an unrelated party.  The Directors agreed the acquired debt could be converted to unrestricted shares and undertook a resolution to issue 5,000,000 additional shares bringing the total of both restricted and none restricted shares to 115,915,000 for October 31, 2015.


While there were nominal cash proceeds of $500 that directly benefited the Company immediately, there was also a reduction of debt as payment for shares amounting to a total of $10,700 for October 31, 2015 and $0 for October 31, 2014.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES


As of October 31, 2015, we were in default under the terms of an agreement to repay $2,189, together with accrued interest at 5% per annum, to Pacific Stock Transfer in installments of $250 per month beginning on January 3, 2015.


There can be no assurance that we will be able to reach an agreement to extend or amend the terms of the agreement or the notes payable with the creditors or that we will be able to raise the funding necessary to repay the balances due under agreement or the note payable.  The initiation of any collection action by these creditors may affect our ability to execute on our business plan and operations.  


ITEM 4.  MINE SAFETY DISCLOSURES


Not applicable to our Company.


ITEM 5.  OTHER INFORMATION


None.



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ITEM 6. 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

 

 


Exhibit 101.INS

XBRL Instance Document (1)

 

 

Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document (1)

 

 

Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document (1)

 

 

Exhibit 101.DEF

XBRL Taxonomy Extension Definition Linkbase Document (1)

 

 

Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document (1)

 

 

Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document (1)


 

(1)

Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.


    * 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 December 15, 2015.


APT Systems, Inc.


 

By: /s/ Glenda Dowie

 

Glenda Dowie, President and Chief Executive Officer



 

By: /s/ Carl Hussey

 

Carl Hussey, Treasurer and Chief Financial 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

December 21, 2015

Glenda Dowie

Title

Date

 

 

 

/s/ Joseph Gagnon

Secretary, Chief Technical Officer and Director

December 21, 2015

Joseph Gagnon

Title

Date

 

 

 

/s/ Carl Hussey

Treasurer, Chief Financial Officer and Director

December 21, 2015

Carl Hussey

Title

Date








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