Company Quick10K Filing
Quick10K
APT Systems
10-Q 2018-10-31 Quarter: 2018-10-31
10-Q 2018-07-31 Quarter: 2018-07-31
10-Q 2018-04-30 Quarter: 2018-04-30
10-K 2018-01-31 Annual: 2018-01-31
10-Q 2017-10-31 Quarter: 2017-10-31
10-Q 2017-07-31 Quarter: 2017-07-31
10-Q 2017-04-30 Quarter: 2017-04-30
10-K 2017-01-31 Annual: 2017-01-31
10-Q 2016-10-31 Quarter: 2016-10-31
10-Q 2016-07-31 Quarter: 2016-07-31
10-Q 2016-04-30 Quarter: 2016-04-30
10-K 2016-01-31 Annual: 2016-01-31
10-Q 2015-10-31 Quarter: 2015-10-31
10-Q 2015-07-31 Quarter: 2015-07-31
10-Q 2015-04-30 Quarter: 2015-04-30
10-K 2015-01-31 Annual: 2015-01-31
10-Q 2014-10-31 Quarter: 2014-10-31
10-Q 2014-07-31 Quarter: 2014-07-31
10-Q 2014-04-30 Quarter: 2014-04-30
10-K 2014-01-31 Annual: 2014-01-31
10-Q 2013-10-31 Quarter: 2013-10-31
8-K 2019-02-06 Accountant
8-K 2019-01-17 Enter Agreement, Exhibits
8-K 2019-01-17 Enter Agreement, Exhibits
8-K 2018-09-14 Regulation FD
8-K 2018-06-13
8-K 2018-04-12 Other Events
8-K 2017-11-10 Enter Agreement
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IGSC IGS Capital 6
DRNG Drone Guarder 5
ITDN Interdyne 0
WRAP Wrap Technologies 0
TSOI Therapeutic Solutions 0
DGJI Dragon Jade 0
SCY Scandium International Mining 0
ARS Aleris 0
RRI GenOn Energy 0
APTY 2018-10-31
Item 1. Financial Statements
Note 1 - Nature of Operations
Note 2 - Going Concern and Liquidity
Note 3 - Summary of Significant Accounting Policies
Note 4 - Related Party Transactions
Note 5 - Software and Website
Note 6 - Convertible Note Payable
Note 7 - Notes Payable
Note 8 - Derivative Liabilities
Note 9 - Commitments and Contingencies
Note 10 - Stockholders' Deficit
Note 11 - Subsequent Events
Item 2. Management's Discussion and Analysis and Plan of Operation
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 3. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 4. Defaults Upon Senior Securities
Item 5. Mine Safety Disclosures
Item 6. Other Information
Item 8. Exhibits
EX-31.1 f10q103118_ex31z1.htm
EX-31.2 f10q103118_ex31z2.htm
EX-32.1 f10q103118_ex32z1.htm
EX-32.2 f10q103118_ex32z2.htm

APT Systems Earnings 2018-10-31

APTY 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 f10q103118_10q.htm FORM 10-Q QUARTERLY REPORT Form 10-Q Quarterly Report

 

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, 2018

 

[   ] 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)

 

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 [X] No [   ]

 

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]

Emerging growth company

[X]

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 

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

 

As of December 19, 2018, registrant had 419,717,730 outstanding shares of common stock.

 

 


1


 

 

FORM 10-Q

 

APT SYSTEMS, INC.

TABLE OF CONTENTS

 

PART I FINANCIAL INFORMATION

PAGE

 

Item 1. Unaudited Financial Statements as of October 31, 2018 and for the Three and Nine Months Ended October 31, 2018 and 2017

4

Balance Sheets

5

Statements of Operations

6

Statements of Cash Flows

7

Notes to Unaudited Financial Statements

8

Item 2. Management’s Discussion and Analysis and Plan of Operation

18

Item 3. Quantitative and Qualitative Disclosures About Market Risk

24

Item 4. Controls and Procedures

24

 

 

PART II OTHER INFORMATION

 

 

Item 1. Legal Proceedings

25

Item 1A. Risk Factors

25

Item 2. Properties

Item 3. Unregistered Sales of Equity Securities and Use of Proceeds

-

25

Item 4. Defaults Upon Senior Securities

25

Item 5. Mine Safety Disclosures

25

Item 6. Other Information

26

Item 7. Exhibits

26

 

 

Signatures

27


2


 

 

FINANCIAL INFORMATION

 

Certain Terms Used in this Report

 

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.

 

FORWARD LOOKING STATEMENTS

 

The following notes contains 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. APTY may also opt to disseminate information about itself, including the results of its operations and financial information, via social media platforms such as Facebook, LinkedIn and Twitter. 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.


3


 

 

ITEM 1. FINANCIAL STATEMENTS

 

 

 

 

APT Systems, Inc.

CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended October 31, 2018 and 2017

(unaudited)

 

 

 

TABLE OF CONTENTS

 

 

Page 

 

Consolidated Balance Sheets1 

 

Consolidated Statements of Operations2 

 

Consolidated Statements of Cash Flows3 

 

Notes to Consolidated Financial Statements4 


4


 

 

APT SYSTEMS, INC.

Consolidated Balance Sheets

(Unaudited)

 

 

 

 

 

 

 

 

 

 

October 31, 2018

 

January 31, 2018

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

$

19,447

$

46,700

 

 

Trading investments

 

17,715

 

15,122

 

 

Prepaid expenses and other current assets

 

28,507

 

5,268

 

 

Deferred offering costs

 

21,000

 

-

 

 

Total current assets

 

86,669

 

67,090

 

 

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

Software and website (net of $67,506 and $41,015  accumulated amortization respectively)

 

130,786

 

108,777

 

 

Total other assets

 

130,786

 

108,777

 

 

 

 

 

 

 

 

 

Total Assets

$

217,455

$

175,867

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable and accrued expenses

$

497,643

$

156,920

 

 

Accrued officer compensation

 

275,300

 

230,300

 

 

Convertible notes payable (net of discounts of $95,458 and $26,481)

 

430,792

 

229,519

 

 

Convertible notes payable - related party, current portion

 

26,276

 

26,276

 

 

Notes payable

 

69,699

 

74,699

 

 

Derivative liability

 

326,541

 

-

 

 

Total current liabilities

 

1,626,251

 

717,714

 

 

 

 

 

 

 

 

 

Total Liabilities

 

1,626,251

 

717,714

 

 

 

 

 

 

 

 

 

Preferred B 6% Convertible Cumulative stock $0.001 par value, 1,000,000 shares authorized; 65,000 shares and 65,000 shares issued and outstanding as of October 31, 2018 and January 31, 2018, respectively

 

74,607

 

65,000

 

 

 

 

 

 

 

 

 

Preferred C 12% Convertible Cumulative stock $0.001 par value, 750,000 shares authorized; 107,500 shares and 32,500 shares issued and outstanding as of October 31, 2018 and January 31, 2018, respectively

 

42,378

 

32,500

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 100,000,000 authorized

 

 

 

 

 

 

Preferred A stock $0.001 par value, 1,000,000 shares designated;

 

 

 

 

 

 

1,000,000 issued and outstanding as of October 31, 2018 and January 31, 2018

 

1,000

 

1,000

 

 

Common stock $0.0001 par value, 750,000,000 shares authorized;

 

 

 

 

 

 

380,072,891 shares issued and 379,186,142 shares outstanding as of October 31, 2018 and 302,724,086 shares issued and 301,837,337 outstanding as of January 31, 2018

 

38,007

 

30,273

 

 

Additional paid-in capital

 

2,557,858

 

2,135,619

 

 

Treasury Stock, 886,749 shares at cost as of October 31, 2018 and January 31, 2018

 

(10,000)

 

(10,000)

 

 

Accumulated deficit

 

(4,112,646)

 

(2,796,239)

 

 

Total Stockholders' Deficit

 

(1,525,781)

 

(639,347)

 

 

 

 

 

 

 

 

 

Total liabilities and Stockholders' Deficit

$

217,455

$

175,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 


5


 

 

APT SYSTEMS, INC.

Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

Nine Months Ended

 

Nine Months Ended

 

 

 

October 31, 2018

 

October 31, 2017

 

October 31, 2018

 

October 31, 2017

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

1,046

$

11

$

8,230

$

22

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

Amortization

 

9,230

 

4,555

 

26,491

 

14,172

 

Compensation to officer and directors

 

15,000

 

15,000

 

45,000

 

913,654

 

General and administrative

 

205,505

 

76,015

 

647,346

 

188,352

 

Total Operating Expenses

 

229,735

 

95,570

 

718,837

 

1,116,178

 

 

 

 

 

 

 

 

 

 

 

Net Operating Loss

 

(228,689)

 

(95,559)

 

(710,607)

 

(1,116,156)

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

 

Other income

 

729

 

-

 

2,593

 

371

 

Gain (loss) on change in derivative liability

 

18,206

 

(40,628)

 

(423,975)

 

(40,628)

 

Loss on settlement or modification of notes and accounts payable

 

-

 

-

 

-

 

(73,497)

 

Interest expense and amortization of debt discount

 

(94,803)

 

(27,402)

 

(184,418)

 

(52,722)

 

Total Other Income (Expense)

 

(75,868)

 

(68,030)

 

(605,800)

 

(166,476)

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

(304,557)

 

(163,589)

 

(1,316,407)

 

(1,282,632)

 

 

 

 

 

 

 

 

 

 

 

Dividends Applicable to Preferred Stock

 

(3,642)

 

(952)

 

(10,646)

 

(1,807)

 

Accretion of Preferred Stock to Redemption Values

 

(2,690)

 

-

 

(8,839)

 

-

 

 

 

 

 

 

 

 

 

 

 

Net Loss Applicable to Common Stockholders

$

(310,889)

$

(164,541)

$

(1,335,892)

$

(1,284,439)

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

Basic and diluted

$

(0.00)

$

(0.00)

$

(0.00)

$

(0.00)

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of

 

 

 

 

 

 

 

 

 

common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

348,625,613

 

278,179,364

 

327,822,158

 

263,466,212

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


6


 

APT SYSTEMS, INC.

Consolidated Statement of Cash Flows

(Unaudited)

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

Nine Months Ended

 

 

 

October 31, 2018

 

October 31, 2017

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(1,316,407)

$

(1,282,632)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Amortization expense

 

26,491

 

14,172

 

Gain on investments

 

(2,593)

 

(343)

 

Loss on change in derivative liability

 

423,975

 

40,628

 

Amortization of debt discount

 

149,653

 

27,094

 

Loss on settlement or modification of notes and accounts payable

 

-

 

73,497

 

Stock issued for consulting services

 

-

 

868,654

 

Changes in operating assets and liabilities:

 

 

 

 

 

Prepaid expenses and other current assets

 

51,761

 

17,141

 

Accounts payable and accrued expenses

 

345,617

 

44,163

 

Accrued officer compensation

 

45,000

 

45,000

 

Net cash used in operating activities

 

(276,503)

 

(152,626)

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Investment in software development

 

(48,500)

 

(20,007)

 

Net cash used in investing activities

 

(48,500)

 

(20,007)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

Payment of loan from director

 

-

 

(5,000)

 

Issuance of convertible notes and short-term notes payable

 

-

 

-

 

Proceeds from convertible notes and short-term notes payable, net of fees

 

328,500

 

94,500

 

Payments on convertible notes payable

 

(25,750)

 

(26,500)

 

Payments on notes payable

 

(5,000)

 

(1,320)

 

Purchase of treasury shares

 

-

 

(10,000)

 

Proceeds from issuance of common and preferred shares

 

-

 

130,000

 

Net cash provided by financing activities

 

297,750

 

181,680

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(27,253)

 

9,047

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

46,700

 

7,713

 

Cash and cash equivalents at end of period

$

19,447

$

16,760

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Cash paid for :

 

 

 

 

 

Interest

$

14,057

$

-

 

Income Taxes

$

-

$

-

 

 

 

 

 

 

 

Non-Cash Transactions

 

 

 

 

 

Common stock issued for stock payable

$

-

$

1,180

 

Common stock issued to settle accounts and notes payable

$

164,894

$

39,713

 

Payment of expenses by director

$

-

$

5,095

 

Common stock issued for deferred offering costs

$

21,000

$

-

 

Accretion of dividend and redemption value of preferred stock (Series B & Series C)

$

19,485

$

-

 

Settlement of derivative liability

$

263,564

$

23,646

 

Convertible note payable issued for prepaid expenses

$

75,000

$

-

 

Debt discount created by derivative liability

$

166,130

$

30,000

 

 

 

 

 

 

 

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


7


 

 

APT SYSTEMS, INC.

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2018 AND 2017

 

NOTE 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 operate as a Fintech Company to engage in the creation of innovative financial platforms, financial apps and pioneering visualization solutions for charting the financial markets. We intend utilizing real time and delayed data networks along with graphic techniques pioneered in the gaming industry, so that APT’s solutions can speak to the mobile needs demanded by the next generation of traders. To facilitate our business plans, we applied for and were approved to access Know Your Customer (KYC) and Anti-Money Laundering (AML) data used by large financial institutions to create risk management reports and validate identity claims for persons accessing financial applications. Regulators require our platforms actively vet members and we can provide this service and reports to third parties for additional revenues. We are also developing credentials for verifying and reporting on an accredited investor’s status. We completed work on redesigning all of the logos for our brands and then updated our main website at www.aptsystemsinc.com.

 

In August of 2017, the company launched a wholly owned Delaware subsidiary Snapt Games, Inc. Management admires graphic techniques used in the gaming industry and wants to selectively introduce these to its charting tools and financial platforms. The company acquired its first game app on August 24, 2017 and rebranded it Chick Chick Boom for release worldwide. In November, the company formally launched its second game called Hogg Wild.

 

On September 1, 2017, the Company formed and incorporated a second wholly owned subsidiary named RCPS Management, Inc. in Colorado. This company will concentrate on the development of payment and escrow systems under the brand Verifundr.

 

During the quarter ending April 30, 2018, the Company acquired a novelty app for $36,000. Apple deducts a 30% handling fee and there are marketing costs to maintain this income stream for Snapt Games. The Company analyzed the acquisition in accordance with ASC 805 and determined it to be a group of similar identifiable asset and as such is being accounted for as an asset acquisition. The Company has completed initial work on its third game app and its Candy Chefs game was released on June 28, 2018.

 

NOTE 2 - GOING CONCERN AND LIQUIDITY

 

As of October 31, 2018, the Company had cash of $19,447, insufficient revenue to meet its ongoing operating expenses, liabilities of $1,626,251, accumulated losses of $4,112,646 and a shareholders’ deficit of $1,525,781.  The Company has not, as yet generated significant revenues as its key products are still under development.

 

The financial statements for the period ended October 31, 2018 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.

 

These financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that may be necessary if the Company is unable to continue as a going concern.

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

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 8 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 condensed financial statements not misleading.  Operating results for the three and nine months ended October 31, 2018 are not necessarily indicative of the final results that may be expected for the year ended January 31, 2019.   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, 2018 included in our Form 10-K filed with the SEC.  Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.


8


 

 

Fair Value Measurements

 

The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy.

 

The following table presents information about the Company’s liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of October 31, 2018:

 

Fair value measured at October 31, 2018

 

 

Total carrying

value

at October 31,

2018

 

Quoted prices in active

markets

(Level 1)

 

Significant other

observable

inputs

(Level 2)

 

Significant

Unobservable

inputs

(Level 3)

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency investments

 

$

17,715

 

$

-

 

$

-

 

$

17,715

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

326,541

 

$

-

 

$

-

 

$

326,541

 

There were no transfers between Level 1, 2 or 3 during the period.

 

Recently issued accounting pronouncements

 

Compensation—Stock Compensation: On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The Company elected to early adopt this standard in the second quarter of fiscal 2019. The adoption had no impact on the Company’s historic financial statements.

 

Reclassifications

 

Certain reclassifications have been made to the prior periods to conform to the current period presentation.

 

NOTE 4 - RELATED PARTY TRANSACTIONS

 

Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the CEO and President on an ongoing basis. Accrued officer compensation as of October 31, 2018 and January 31, 2018 was $275,300 and $230,300, respectively. As resolved, the accrued compensation will only be paid after January 1, 2018 as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued in cash or by issuing shares. The President of the Company can also consider submitting a request to the Board of Directors for permission to convert some, or all, of her accrued compensation into shares of the Company’s common stock on payments due above of $170,300, but only after January 1, 2019. The share price considerations will be either the publicly quoted share price, when such a publicly quoted price is available; or equal to or above the last cash price the Company recorded for the sale of its common shares to third parties.


9


 

 

NOTE 5 – SOFTWARE AND WEBSITE

 

The Company has software that it uses for the development of certain mobile applications. The Company recorded amortization expense of $26,491 and $18,724 for the periods ended October 31, 2018 and January 31, 2018, respectively.  No impairment was recorded for the periods ended October 31, 2018 and January 31, 2018.

 

 

 

October 31, 2018

 

January 31, 2018

Charting software

$

102,705

$

102,705

Ken Chart Native Apps

 

57,507

 

45,007

Website

 

2,080

 

2,080

ThemeZone

 

36,000

 

-

 

 

198,292

 

149,792

Accumulated amortization

 

(67,506)

 

(41,015)

Net book value

$

130,786

$

108,777

 

NOTE 6 - CONVERTIBLE NOTE PAYABLE

 

Noteholder 1

 

On January 8, 2014, the Company issued an unsecured convertible note to one 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 at $0.0001. The Company secured an initial extension of the convertible note to January 29, 2015 and subsequently obtained a further extension to December 31, 2016. The note has been reduced to $28,500 through the sales of part of the debt to unrelated third parties in prior periods as of January 31, 2018 and October 31, 2018.

 

The Company is currently in discussions with the lender to further extend the maturity date.  The note has been verbally extended, we are working to document the extension in writing.  Until such time as that is completed the note is considered past due.

 

During the quarter ending January 31, 2018, the noteholder sold $5,000 of this note to an unrelated party. During the quarter ending April 30, 2018, this note was converted to 10,000,000 shares of common stock.

 

On April 17, 2015, the Company received $5,000 by way of an unsecured short-term loan from a non-related party for a term of 60 days that was later extended until April 23, 2017. Principal and interest at 8% per annum accrued thereon are due and payable on April 23, 2017 and is further renewable. Also, the lender has the right to convert the principal and accrued interest into shares of the Company’s common stock at $0.01 cents. The Company is currently in discussions with the lender to further extend the maturity date. The note has been verbally extended, we are working to document the extension in writing. Until such time, as that is completed, the note is considered past due.

 

Noteholder 2

 

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. Also, the lender has the right to convert the principal and accrued interest into shares of the Company’s common stock. The conversion rate was equal to the fair market value of the Company’s common stock on the date of issuance or $0.20 per share. This loan has been extended until October 1, 2017. This note is currently in default and Management is working with the lender to resolve the best path to retire this debt.

 

During the nine months ended October 31, 2018, a payment of $750 was made on the note bringing the balance down to $11,750.

 

Noteholder 3

 

On August 28, 2017 the Company received proceeds of $44,500 related to a convertible note payable of $50,000. The note is due and payable twelve months from the issuance date and bears interest at 8% per annum with an original issuance discount of $5,500. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a scaled penalty ranging from 10% to 35% depending on the repayment date. Also noted, after 181 days from the issuance date, the Note is convertible into the shares of the Company’s common stock. The conversion rate is equal to 55% of the market price during the previous 10 trading days.

 

On February 25, 2018, due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $73,612 resulting in a discount of $25,000 on the note payable and a day one loss of $48,612. In conjunction with this derivative liability other convertible instruments were evaluated for derivative liability treatment.


10


 

 

During the quarter ending April 30, 2018 a payment of $35,000 was made to the debt holder with $25,000 being applied to the principal balance and the remaining to fees related to a temporary agreement to remove the conversion feature from the instrument.  The fees were included in interest expense on the Statement of Operations.  

 

During the quarter ended October 31, 2018, the remaining $25,000 of principal and interest of $2,926 was converted into 9,822,634 shares of common stock in accordance with the terms of the agreement, leaving a balance of $0.  As a result of the conversions $72,597 of the derivative liability was reclassified to additional paid in capital.

 

Noteholder 4

 

The Company entered into an agreement on November 14, 2017 for a new convertible note for $155,000. The note is due and payable six months from the issuance date and bears interest at 0% per annum with an original issuance discount of $25,000 plus $5,000 of legal fees due at closing. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a penalty of 25%. Also noted, after 181 days from the issuance date, the Note is convertible into the shares of the Company’s common stock. The conversion rate is equal to 55% of the market price during the previous 15 trading days.

 

On May 14, 2018, the Company amended this agreement to extend the maturity date to July 14, 2018 and was charged $11,000. On July 14, 2018, the Company amended this agreement to extend the maturity date to August 14, 2018 and was charged $5,500. On August 14, 2018, September 13, 2018 and October 14, 2018 the Company amended this agreement to extend the maturity date by approximately one month each time.  Each of these extension fees was charged to a day one loss on derivative liability.

 

On May 14, 2018, the note holder converted $15,000 of the note into 5,928,854 shares of stock in accordance with the conversion terms. As a result of the conversion $17,490 of the derivative liability was reclassified to additional paid in capital.

 

On May 14, 2018, due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $384,016 and recorded as a day one loss due to the note being fully matured. The conversion features related to the increase in the principal balances of $11,000 and $5,500 were also bifurcated from the note and recorded as a derivative liability.  Related to the May 14, 2018 amendment, the day one derivative liability was $17,808 resulting in a discount of $11,000 on the note payable and a day one loss of $6,808.  Related to the July 14, 2018 amendment, the day one derivative liability was $5,970 resulting in a discount of $5,500 on the note payable and a day one loss of $470.

 

During the quarter ended October 31, 2018, the note holder executed five, $15,000 conversions and converted a total of $75,000 of the note into 26,772,201 shares of common stock.  As a result of the conversion $119,943 of the derivative liability was reclassified to additional paid in capital.  In addition, during the quarter ending October 31, 2018 related to the three amendments discussed above the company recorded a day one derivative liability of $10,268 which was allocated as a debt discount of $7,500 and a day one loss of $2,768.  As of October 31, 2018, the remaining balance on the convertible note was $89,000.

 

Subsequent to quarter end the note was extended for addition one-month terms and now matures January 14, 2019.

 

Noteholder 5

 

The Company had executed three lending arrangements with a related party, affiliated to the CEO of the company. The effective dates of the loans are November 24, 2015, December 8, 2015 and January 14, 2016. The loan amounts are $3,000, $16,121 and $1,500, respectively, with interest accruing at 5% per annum. Repayment is in one lump sum due and payable on or before December 31, 2018, December 31, 2018 and January 31, 2019, respectively.

 

The Company has executed two additional notes with the same related party. The effective dates of the additional loans are March 10, 2016 and March 15, 2016. The loan amounts are $2,770 and $2,885, respectively, with interest accruing at 5% per annum. Repayment is in one lump sum due and payable on or before January 31, 2019. All notes are convertible, at the holder’s request, into shares of the Company’s common stock at the rate of $9.50 per share.

 

As of October 31, 2018 and January 31, 2018, $26,276 was outstanding.


11


 

 

Noteholder 6

 

The Company entered into an agreement with an accredited investor on April 4, 2018 for a new convertible note for $150,000. The note is due and payable twelve months from the issuance date and bears interest at 8% per annum with an original issuance discount of $15,000 plus $2,500 of legal fees due at closing. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a penalty up to 50% depending on the timing. Also noted, after 181 days from the issuance date, the Note becomes convertible into the shares of the Company’s common stock. The conversion rate is equal to the lower of $0.006 or 55% of the market price during the previous 12 trading days.

 

On October 1, 2018, due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $215,939 and recorded as a debt discount of $141,130 and a day one loss of $74,809.

 

During the quarter ended October 31, 2018, the note holder executed two conversions and converted a total of $40,000 of the note and $1,967 of interest and fees into 19,825,116 shares of common stock.  As a result of the conversion $53,534 of the derivative liability was reclassified to additional paid in capital.

 

Noteholder 7

 

The Company entered into an agreement on May 18, 2018 for a new convertible note for $43,000 and received cash proceeds of $40,000. The note is due and payable on February 28, 2019 and bears interest at 8% per annum. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a penalty up to 42% depending on when it is prepaid. Also noted, after 181 days from the issuance date, the Note is convertible into the shares of the Company’s common stock. The conversion rate is equal to the greater of 58% of the average of the two lowest trading prices during the previous 15 trading days or $0.00008.

 

The Company entered into an additional agreement with this party on June 15, 2018 for a new convertible note for $63,000 and received cash proceeds of $60,000.  The note is due and payable on March 30, 2019 and bears interest at 8% per annum. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a penalty up to 42% depending on when it is prepaid. Also noted, after 181 days from the issuance date, the Note is convertible into the shares of the Company’s common stock. The conversion rate is equal to 58% of the average of the two lowest trading prices during the previous 15 trading days.

 

The Company entered into an additional agreement with this party on September 26, 2018 for a new convertible note for $43,000 and received cash proceeds of $40,000.  The note is due and payable on July 15, 2019 and bears interest at 8% per annum. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a penalty up to 42% depending on when it is prepaid. Also noted, after 181 days from the issuance date, the Note is convertible into the shares of the Company’s common stock. The conversion rate is equal to 58% of the average of the two lowest trading prices during the previous 15 trading days.

 

Noteholder 8

 

The Company entered into an agreement on August 24, 2018 for a new convertible note for $25,000 and received cash proceeds of $24,000. The notes is due and payable February 24, 2019 and bears interest at 8% per annum with no original issuance discount but includes $1,000 of legal fees due at closing. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a penalty up to 40%. The Note becomes convertible 180 days after issuance into the shares of the Company’s common stock. The conversion rate is equal to the 70% of the lowest trading price the five trading days prior to conversion.

 

Noteholder 9

 

The Company entered into an agreement on August 24, 2018 for a new convertible note for $25,000 and received cash proceeds of $24,000. The notes is due and payable February 24, 2019 and bears interest at 8% per annum with no original issuance discount but includes $1,000 of legal fees due at closing. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a penalty up to 40%. The Note becomes convertible 180 days after issuance into the shares of the Company’s common stock. The conversion rate is equal to the 70% of the lowest trading price the five trading days prior to conversion.

 

Noteholder 10

 

The Company entered into an agreement on October 26, 2018 for a new convertible note for $8,000 and received cash proceeds of $8,000. The notes is due and payable October 25, 2019 and bears interest at 8% per annum. The Note becomes convertible 180 days after issuance into the shares of the Company’s common stock. The conversion rate is equal to the 55% of the trading price on the date of conversion.


12


 

 

Noteholder 11

 

On August 24, 2018 the company entered into an advertising agreement with Cicero Consulting Group for a combination of payments including $75,000 note and issuance of $75,000 worth of preferred shares. The note is due six months following issuance and carries an interest rate of 8%.  The Note becomes convertible 180 days after issuance into the shares of the Company’s common stock. The conversion rate is equal to the 70% of the lowest trading price the five trading days prior to conversion.

 

Summary

 

The following table summarizes all convertible notes outstanding as of October 31, 2018 and January 31, 2018:

 

 

 

 

 

 

 

Carrying Value

Holder

 

Issue Date

 

Due Date

 

October 31, 2018

 

January 31, 2018

Third Parties

 

 

 

 

 

 

 

 

Noteholder 1a

 

1/8/2014

 

Past Due

$

28,500

$

28,500

Noteholder 1b

 

4/23/2015

 

Past Due

 

5,000

 

5,000

Noteholder 1c

 

11/27/2017

 

 

 

-

 

5,000

Noteholder 2

 

10/2/2015

 

Past Due

 

11,750

 

12,500

Noteholder 3

 

8/28/2017

 

 

 

-

 

50,000

Noteholder 4

 

11/14/2017

 

11/14/2018

 

89,000

 

155,000

Noteholder 6

 

4/4/2018

 

4/4/2019

 

110,000

 

-

Noteholder 7a

 

5/18/2018

 

2/28/2019

 

43,000

 

-

Noteholder 7b

 

6/15/2018

 

3/30/2019

 

63,000

 

-

Noteholder 7c

 

9/26/818

 

7/15/2019

 

43,000

 

-

Noteholder 8

 

8/24/2018

 

2/24/2019

 

25,000

 

-

Noteholder 9

 

8/24/2018

 

2/24/2019

 

25,000

 

-

Noteholder 10

 

10/26/2018

 

10/25/2019

 

8,000

 

-

Noteholder 11

 

8/24/2018

 

2/24/2019

 

75,000

 

-

Related Parties

 

 

 

 

 

 

 

 

Noteholder 5a

 

11/23/2015

 

12/31/2018

 

3,000

 

3,000

Noteholder 5b

 

12/8/2015

 

12/31/2018

 

16,121

 

16,121

Noteholder 5c

 

1/12/2016

 

1/31/2019

 

1,500

 

1,500

Noteholder 5d

 

3/10/2016

 

1/31/2019

 

2,770

 

2,770

Noteholder 5e

 

3/15/2016

 

1/31/2019

 

2,885

 

2,885

 

 

 

 

 

 

 

 

 

Total Convertible Notes Payable

 

 

 

552,526

 

282,276

Less: net discount on convertible notes payable

 

(95,458)

 

(26,481)

Less, current portion

 

 

 

(457,068)

 

(255,795)

Long term portion of convertible notes payable

$

-

$

-

 

NOTE 7 - NOTES PAYABLE

 

Noteholder 1

 

On August 12, 2016, we borrowed $26,000 from an investor, being a non-convertible note at 5% interest, as a short-term loan to facilitate cash flow. The loan became due December 31, 2017 and is currently in default.

 

On September 21, 2016, we borrowed $25,909 from an investor, being a non-convertible note at 5% interest, as a short-term loan to facilitate cash flow. The loan became due December 31, 2017 and is currently in default.

 

Noteholder 2

 

On November 20, 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. The note payable and accrued interest was scheduled to be repaid on May 21, 2015. The Company was successful in obtaining an extension until December 31, 2015 upon making an interim renewal payment of $400. As of January 31, 2018, we are default under the loan agreement.  The principle of the note was paid back during the quarter ending April 30, 2018 and accrued interest was repaid during the quarter ended July 31, 2018. Interest adjustments of $ 246.64 were paid in September. The lender continues to demand additional payments, in an amount of $2,872, which remains in dispute.


13


 

 

Noteholder 3

 

The Company had executed short-term lending arrangements with a non-related party. The effective dates of the loans are June 22, 2015, June 27, 2015 and September 22, 2015. The loan amounts are $3,000, $2,700 and $1,950, respectively, with interest accruing at 5% per annum. Repayment is in one lump sum due and payable on or before December 4, 2015 through January 31, 2016. The outstanding notes were extended to September and December 2016. The Company is currently in discussions with the lender to further extend the maturity date. Until such time that is completed, the note is considered past due.

 

Noteholder 4

 

One of the trader agreements included monthly compensation and to this end, part of the fees were paid in cash and then part of the fees were offset with a non-convertible note for $7,000 that was payable on or before June of 2017. The note was not paid and is now considered past due.

 

Noteholder 5

 

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. Interest at 5% per annum accrues on the unpaid balance of the loan for each month. As of January 31, 2018, we are not in default under this loan agreement as in August 2016 we renegotiated the terms for this loan and interest payment commenced in November 2016. As of October 31, 2018 and January 31, 2018 the balance due was $3,140. The note was not paid and is now considered past due.

 

The following table summarizes all notes outstanding as of October 31, 2018 and January 31, 2018:

 

 

 

 

 

 

 

Carrying Value

Holder

 

Issue Date

 

Due Date

 

October 31, 2018

 

January 31, 2018

Third Parties

 

 

 

 

 

 

 

 

Noteholder 1a

 

8/12/2016

 

Past Due

$

26,000

$

26,000

Noteholder 1b

 

9/21/2016

 

Past Due

 

25,909

 

25,909

Noteholder 2

 

11/7/2014

 

 

 

-

 

5,000

Noteholder 3a

 

6/17/2015

 

Past Due

 

3,000

 

3,000

Noteholder 3b

 

6/28/2015

 

Past Due

 

2,700

 

2,700

Noteholder 3c

 

9/22/2015

 

Past Due

 

1,950

 

1,950

Noteholder 4

 

6/15/2016

 

Past Due

 

7,000

 

7,000

Noteholder 5

 

8/11/2016

 

Past Due

 

3,140

 

3,140

 

 

 

 

 

 

 

 

 

Total Notes Payable

 

 

 

 

$

69,699

$

74,699

 

NOTE 8 - DERIVATIVE LIABILITIES

 

As discussed in Note 6 – Convertible Notes Payable, the Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. As a result of the variable conversion feature on this note, the related party notes 5a through 5e disclosed in Note 6 – Convertible Notes Payable were considered tainted. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

 

The embedded derivative for the note is carried on the Company’s balance sheet at fair value. The derivative liability is marked- to-market each measurement period and any unrealized change in fair value is recorded as a component of the income statement and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using the Black-Scholes option pricing model.

 

The fair value of the embedded derivatives for the note was determined using the Black-Scholes option pricing model based on the following assumptions during the nine months ended October 31, 2018: (1) dividend yield of 0%, (2) expected volatility ranging from 147% - 310%, (3) risk- free interest rate ranging from 1.67 – 2.49%, (4) expected life ranging from 0.03 – 0.51 of a year, and (5) estimated fair value of the Company’s common stock ranging from $0.0039 - $.0135 per share. The instrument was fair valued on the date it became convertible, each conversion date and the period end date of October 31, 2018.


14


 

 

The table below presents the change in the fair value of the derivative liability during the nine months ending October 31, 2018:

 

Fair value as of January 31, 2018

$

-

Fair value on the date of issuance recorded as a debt discount

 

166,130

Fair value on the date of issuance recorded as a loss on derivatives

 

541,483

Settlement of derivative liability

 

(263,564)

Gain on change in fair value of derivatives

 

(117,508)

Fair value as of October 31, 2018

$

326,541

 

 

 

 

NOTE 9 - COMMITMENTS AND CONTINGENCIES

 

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 US$7,500 as advised and invoiced by the ASC and have been accrued into the financial statements as of October 31, 2017. The Company is considering engaging its legal counsel to assist in reducing or eliminating these penalties and requests to file. Further correspondence has been delivered to the ASC after filing the 10-K for January 31, 2016.

 

The Company had retained TESO Communications as its Investor Relations and Public Relations manager and under the agreement the Company may 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 but the same were not yet issued. The agreement represented a cash payment of $25,000 or the issuance of 50,000 restricted common shares at the completion of the agreement which has been extended to May 15, 2016. No invoice has been presented to the Company and no shares have been issued to date. Management has not received any correspondence recently.

 

APT Systems, Inc. agrees to pay Apollo Games, Inc. the amount of $3,500 payable in the combination of $500 cash or check, $1,500 in preferred shares and $1,500 in common restricted shares of APT Systems, Inc within 30 days of completion of this purchase agreement. Apollo Games, Inc. further agrees to provide marketing and administrative support for a period not less than three months from the date of the agreement first written above at the monthly rate of $1,820 beginning on October 1, 2017. Monthly rate to be paid in the combination of 50% common shares and 50% preferred shares of APT Systems or as otherwise mutually agreed by both parties in writing.  As of October 31, 2018 all amounts to be settled in shares are recorded in accounts payable as the shares have not been issued. As of October 31, 2018, $26,660 is due and will be settled in either cash or a combination of Series B Preferred Shares and Common Shares.

 

In June 2018 the Company entered into an agreement with a consultant who is to provide strategic advice.  The agreement is for an initial term of six months with a total fee of 15,000,000 shares of common stock. As of October 31, 2018 the shares have not been issued. As of October 31, 2018 the Company recorded $71,000 to accounts payable related to this agreement.

 

NOTE 10 - STOCKHOLDERS’ DEFICIT

 

Common Shares

 

The Company entered into an agreement with Triton Funds LLC to provide equity funding to the Company under a registered offering. The Company has asked counsel to prepare the necessary S-1 for the $600,000 funding commitment at $0.01 per share.

 

The Company issued 5,000,000 to Triton Fund LLC as a donation; the donation supports the initiative founded by undergraduates from the University of California, San Diego (UC San Diego) and provided a press release accordingly on April 30, 2018.  The share issuance was recorded as deferred offering cost and valued at $21,000.

 

During the three months ending April 30, 2018 the Company issued 10,000,000 shares to settle $5,000 in convertible notes payable.

 

During the three months ending July 31, 2018 the Company issued 5,928,854 shares to settle $15,000 in convertible notes payable.

 

During the three months ending October 31, 2018 the Company issued 56,419,951 shares to settle $144,894 in convertible notes payable and accrued interest.


15


 

 

On August 22, 2018 the Company sent an Amendment to the APT SYSTEMS 10B-18 STOCK REPURCHASE PLAN. The company (Apt Systems Inc) and the broker dealer (Wilson Davis and Co. Inc) agreed to suspend the stock repurchase plan until December 1, 2018 after which the repurchase plan is once again effective. This amendment was voluntarily entered into by both parties. The company intends to return shares currently in the account to Treasury.

 

Preferred Shares

 

The directors signed a resolution to restructure the preferred shares and created Series B preferred shares with a par value of $0.001 and 1,000,000 shares authorized.  The Series B Preferred Stock bears dividends (interest) at an annual rate of six percent (6%) payable annually and is convertible into shares of the Company’s common stock at a conversion price of 90% of the average closing sale price for the Company’s common stock for the two trading days prior to conversion. If insufficient shares are available the Company is required to redeem the shares for cash.  The cash redemption price for Series B preferred shares will be face value plus 6% plus accrued dividends.  The Series B Preferred Stock may be redeemed by the Company at any time prior to conversion at its face amount plus accrued but unpaid dividends. The Series B Preferred Stock has a liquidation preference equal to the greater of (a) the value of the common shares into which it could be converted or (b) its face amount plus accrued but unpaid dividends. The Series B Preferred Stock is without voting rights except as required by the Delaware General Corporation Law.

 

The directors signed a resolution to restructure the preferred shares and created Series C preferred shares with a par value of $0.001 and 750,000 shares authorized.  The Series C Preferred Stock bears dividends (interest) at an annual rate of twelve percent (12%) payable annually and is convertible into shares of the Company’s common stock following the first anniversary of the issuance, at a conversion price of 70% of the average closing sale price for the Company’s common stock for the two trading days prior to conversion. If insufficient shares are available the Company is required to redeem the shares for cash.  The cash redemption price for Series C preferred shares will be face value plus 12% plus accrued dividends.  The Series C Preferred Stock may be redeemed by the Company at any time prior to conversion at its face amount plus accrued but unpaid dividends. The Series C Preferred Stock has a liquidation preference equal to the greater of (a) the value of the common shares into which it could be converted or (b) its face amount plus accrued but unpaid dividends. The Series C Preferred Stock is without voting rights except as required by the Delaware General Corporation Law.

 

As of January 31, 2018 the Company sold 65,000 shares of Series B preferred shares and 32,500 shares of Series C preferred shares all at $1 per share.  No shares were sold during the nine months ended October 31, 2018.

 

On August 28, 2018 the company entered into an advertising agreement with Cicero Consulting Group for a combination of payments including $75,000 note and issuance of $75,000 worth of preferred shares. The preferred shares were valued at $1 per shares and issued as fully vested at the beginning of the service period. The Company recognized expense during the nine months ended October 31, 2018 of $55,435 related to this issuance. The remaining value will be recognized in the fourth quarter of fiscal 2019 and is currently recorded as $19,565 in prepaid expenses related to the note payable issuance and $75,000 as a contra-equity account related to the preferred shares issued.

 

For the nine months ended October 31, 2018 and 2017, total dividends applicable to Series B and C Preferred Stock was $5,707 and $4,939 respectively. The Company did not declare or pay any dividends in fiscal 2019. Although no dividends have been declared, the cumulative total of preferred stock dividends due to these stockholders upon declaration was $10,646 as of October 31, 2018.

 

For the nine months ended October 31, 2018, the carrying value of the Series B and Series C was increased $3,900 and $4,939, respectively to reflect the possible cash redemption value to reflect accrued dividends (even if undeclared) and the cash redemption premium. The carrying value of the Series B preferred shares was $74,607 and $65,000 as of October 31, 2018 and January 31, 2018. The carrying value of the Series C preferred shares was $42,378 and $32,500 as of October 31, 2018 and January 31, 2018.

 

The Company evaluated the Series B and C Preferred Stock and concluded that the redemption features qualify for temporary equity presentation in accordance with ASC 480-10-S99.

 

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, 2018 no options have been issued under this Plan.


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NOTE 11 - SUBSEQUENT EVENTS

 

Subsequent to the period ending October 31, 2018, the Company issued 39,644,839 shares of common stock in settlement of $58,000 of convertible notes and $1,720 of accrued interest in accordance with the terms of the convertible notes.

 

The Company entered into an agreement on December 6, 2018 for a new convertible note for $73,000. The note is due and payable on September 30, 2019 and bears interest at 8% per annum. If the Note is paid off prior to the due date, the Company is required to pay the face amount plus a penalty up to 42% depending on when it is prepaid. Also noted, after 181 days from the issuance date, the Note is convertible into the shares of the Company’s common stock. The conversion rate is equal to the greater of 58% of the average of the two lowest trading prices during the previous 15 trading days.


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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 condensed 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.

 

APT Systems, Inc. was incorporated in the State of Delaware on October 29, 2010. APT is a Fintech company that specializes in the creation of innovative financial platforms. We are focusing on the mobile device market where we intend to develop trading systems and publish custom technical analysis indicators for in-house use and licensing to third parties. In order to advance itself, APT Systems recently published KenCharts for the handheld market to test its mobile development choices and business plan. We are focusing our early attention on the charting software we own and rewriting the code to provide a native chart app for both iOS and Android platforms. 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, and the user is able to adjust the chart indicators and intervals as desired. We plan to utilize delayed time feed initially and later, real time data networks for our subscription revenue model. Along with great graphic techniques, we will provide solutions that can speak to the mobile needs demanded by the next generation of equity and commodity traders. However, these tools can be invigorated with leading edge gaming graphics and networking technology to become fully interactive trading-assistance software within a vetted ecosystem.

 

We work to identify prospective acquisition opportunities with existing cash flow and then continue with due diligence efforts that will and do include testing software performance. We expect negotiations to result in purchases and recently included the lifestyle app Themezone providing dynamic live wallpapers for a downloading fee.

 

The Company has not as yet generated substantial sales revenues as many of its key products are still under development but our first charting app was released in January for iOS and the Android version launched in June. Snapt Games Inc, wholly owned subsidiary, acquired the ThemeZone app in April and launched its Candy Chefs games in June (both have a download fee). Start-up operations to date have consisted of the formation of the Company, development of its business plan, identification of its target market, naming its trading software Intuitrader, incorporating subsidiaries and expanded research towards the development of its platform software. However, the company was able to engage in selling advertising in apps, obtaining download revenues, eBook sales, and testing its trading strategies in a limited fashion that all contributed modest revenues for this quarter.

 

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

 

In our third quarter, the company launched a wholly owned Delaware subsidiary named Snapt Games, Inc. on August 4, 2017. Management admires graphic techniques used in the gaming industry and wants to selectively introduce these to its charting tools and trading platforms. The company acquired its first game app for $3,500, rebranded it Chick Chick Boom and then in September released the app worldwide in both Apple and Android app stores. In November, the company formally launched its second ‘swipe three’ game called Hogg Wild. The Company has completed initial work on its third game app and its Candy Chefs game was released on June 28, 2018.


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On September 1, 2017, the Company formed and incorporated a second wholly owned subsidiary named RCPS Management, Inc. in Colorado. This company will concentrate on the development of payment and escrow systems under the brand Verifundr. The global financial system continues to undergo disruptive changes resulting in our emerging mobile “less-cash” society.  Verifundr technologies and platform offer unique solutions for verification, escrow, and fund distribution to assist the public in navigating this new environment. To further embrace trends, we are implementing smart contract and have built a stable coin. The technical documentation is completed and the company is ready to begin building this platform that will employ Blockchain to build its escrow contracts. The company became a member of the Enterprise Ethereum Alliance last November. The Company continues to explore blockchain technology and cryptocoins, SperaSM, our stable coin pegged to the US dollar. The Company has built the Spera coin with help from MLG Blockchain and requires an audit for security testing, which is not yet completed, before it can be released as a beta product.  A website outlining these achievements with a video demonstration was launched in November.

 

As a Fintech company developing its platforms, APT services and products can later extend to include:

 

Financial Software and Analytical Software Development  

Algorithmic Applied Technology  

Trading Platforms and Exchanges, Linked to User Brokerage Accounts  

Explore Smart Contracts  

Use Blockchain to develop platforms for a Spera cryptoasset based on ERC-20 protocols  

 

The steps remaining for us to begin selling our products listed above are to finalize the programming and rewriting of the existing software used in our products, specifically our dimensional charting tools and trading platform, begin sales and marketing campaigns, contact prospective licensees, and deliver our products, which we expect to complete in less than 90 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 for 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 the boards approval we started an application process for a broker license and the completion of the application is subject to raising and additional $200,000 to complete all requirements. To date, the Company has succeeded in obtaining an approval to access KYC (Know Your Customer) and AML (Anti-money Laundering) reports.  This will become a future source of revenue when we are able to create a separate dashboard for clients to access run custom APT reports for their risk management.

 

On December 13, 2018, the company released the CEO’s update to shareholders as a press release. Announced was the opening of a new operation for the recycling of e-waste and recovery of precious metals. Our business model is to promote technology for use by our clients and managing waste before it lands in dumps and is a corporate commitment to help keep the environment clean. We believe this operation will generate predictable cash flow and the company estimates becoming cash flow positive in the first half of 2019. Management’s goal is to reduce its dependence on loans and notes.

 

Our mailing address is in an executive suite facility at 505 Montgomery Street, 11th Floor, San Francisco, CA 94111 which also provides office services, computer access and meeting space on demand. We consider this current executive office space with on-demand offices is an arrangement adequate for our current operations and will reassess our needs quarterly based upon the future growth of the Company. Our fiscal year end is January 31st.

 

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 and charting tool. Instead of merely importing 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 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.

 

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 and other platforms. Especially in the case of Apple, these companies will provide marketing infrastructure to help developers reach their users and justify costs charged related to selling products from their app stores. All new marketing options within North America will be fully explored and implemented as it makes sense to do so. We plan to launch beta testing campaigns as well to attract prospective subscribers and garner suggestions for improvements.


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Organization

 

We are comprised of three corporations to date and do not rule out the future possibility of acquiring or creating additional subsidiaries.

 

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 by the different offers and served by both large-scale firms as well as firms that target only local markets or specific types of clients such as the millennial crowd. 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 proprietary buy/sell suggestions, and a platform to enhance trading ability of users, although some of our existing competitors and potential competitors have substantially greater financial, technical, distribution and marketing resources than we have currently 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 joint clients and providing them with better trading tools. The trading tools such as charts may be licensed to these same banks and brokers or subscribed to by users, directly in apps. We are broker agnostic and believe that we can work with the banks and brokerage firms who offer online and Smartphone trading access by providing them with the opportunity to generate additional commissions from their existing client base.

 

Contracted Consultants

 

Our directors currently provide their time and undertake duties as directors without compensation for these services. At the time the Company derives sufficient cash flow from operations or financing, the Company will evaluate the ability to compensate our directors and future directors.

 

Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the CEO and President on an ongoing basis. Accrued officer compensation as of October 31, 2018 and January 31, 2018 was $275,300 and $230,300, respectively. As resolved, the accrued compensation will only be paid after January 1, 2018 as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued in cash or by issuing shares. The President of the Company can also consider submitting a request to the Board of Directors for permission to convert some, or all, of her accrued compensation into shares of the Company’s common stock on payments due above of $170,300, but only after January 1, 2019. The share price considerations will be either the publicly quoted share price, when such a publicly quoted price is available; or equal to or above the last cash price the Company recorded for the sale of its common shares to third parties.

 

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, visual chart styling and platform functionality. We intend to develop our technology internally and further acquire software. 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 non­competition 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 incurred minimal cost in the fiscal years ended October 31, 2018 and 2017, respectively, on research and development of our website and mobile applications that was included as part of consulting services incurred to date. We plan to spend further funds on research and development activities in the future as the development of our software applications continue if we are able to raise the necessary funding.


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Environmental Compliance

 

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

 

Results of Operations

 

We have little operating history upon which to evaluate our intended business and sales. In addition, we have a history of losses. Our activities have been directed at developing our business plans as to eventually generate significant revenues while marketing gaming and lifestyle apps inside of Snapt Games.

 

For the Three Months Ended October 31, 2018 Compared to the Three Months Ended October 31, 2017

 

Revenue

 

The Company generated $1,046 in Games revenue during the three months ended October 31, 2018 compared to $11 in 2017.

 

Operating Expenses

 

Operating expenses were $229,735 for the three month period ended October 31, 2018 compared to $95,570 for the three month period ended October 31, 2017, which is an increase of $134,165. The increase in operating expenses for the three months ended October 31, 2018 as compared to the three Months ended October 31, 2017 was due primarily to increases in advertising, software development and professional fees.

 

Operating Loss

 

We incurred an operating loss of $228,689 and $95,559 for the three months ended October 31, 2018 and 2017, respectively. The increase of $133,130 is due to the factors described above.

 

Other Income (Expense)

 

Other Income (Expense) for the three months ended October 31, 2018 totaled ($75,868) compared to ($68,030) for the three months ended October 31, 2017. The increase in Other Expenses of $7,838 was mainly attributed to the in change of derivative liabilities and an increase of interest expense and amortization of debt discount.

 

Net Loss

 

The Company incurred a net loss of $304,557 for the three months ended October 31, 2018 compared to a net loss of $163,589 for the three months ended October 31, 2017, an increase of $140,968 due to the factors discussed above.

 

For the Nine Months Ended October 31, 2018 Compared to the Nine Months Ended October 31, 2017

 

Revenue

 

The Company generated $8,230 in App revenue during the nine months ended October 31, 2018 compared to $22 in 2017.

 

Operating Expenses

 

Operating expenses were $718,837 for the nine month period ended October 31, 2018 compared to $1,116,178 for the nine month period ended October 31, 2017, which is a decrease of $397,341. The decrease in operating expenses for the nine months ended October 31, 2018 as compared to the nine Months ended October 31, 2017 was due primarily to a decrease in one time compensation to officers and directors related to a stock grant.

 

Operating Loss

 

We incurred an operating loss of $710,607 and $1,116,156 for the nine months ended October 31, 2018 and 2017, respectively. The decrease of $405,549 is due to the factors described above.


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Other Income (Expense)

 

Other Income (Expense) for the nine months ended October 31, 2018 totaled ($605,800) compared to ($166,476) for the nine months ended October 31, 2017. The increase in Other Expenses of $439,324 was mainly attributed to a loss in change of derivative liabilities.

 

Net Loss

 

The Company incurred a net loss of $1,316,407 for the nine months ended October 31, 2018 compared to a net loss of $1,282,632 for the nine months ended October 31, 2017, an increase of $33,775 due to the factors discussed above.

 

Cash flow information for the Nine Months ended October 31, 2018 compared to the Nine Months ended October 31, 2017

 

As of October 31, 2018, the Company had cash of $19,447, insufficient revenue to meet its ongoing operating expenses, and liabilities of $1,626,251 accumulated losses of $4,112,646 and a shareholders’ deficit of $1,525,781.

 

The unaudited financial statements for the nine months ended October 31, 2018 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.

 

Net cash used for operating activities was $276,503 for the nine month period ended October 31, 2018. This compares to net cash used for operating activities of $152,626 for the nine month period ended October 31, 2017. In both periods our negative cash flow from operations is the result of insufficient revenue and profits to offset ongoing operating expenses.

 

Cash flows used in investing activities were at $48,500 and $20,007 for the nine month periods ended October 31, 2018 and 2017 arising from software development.

 

Cash flows provided by financing activities were $297,750 for the nine month period ended October 31, 2018 which compares to cash flows provided by financing activities of $181,680 for the nine month period ended October 31, 2017. During the nine months ended October 31, 2018 we received $328,500 of cash proceeds from the issuance of convertible notes payable. During the same period we made payments of $30,750 to pay down Notes Payable and Convertible Notes Payable. By comparison, during the nine months ended October 31, 2017, we made repayments to a director in the amount of $5,000, received $130,000 from the issuance of common and preferred shares, received $94,500 from issuance of convertible notes, made payments of $27,820 to pay down Notes Payable and Convertible Notes Payable and paid $10,000 to purchase treasury shares.

 

Off-Balance Sheet Arrangements

 

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

 

Liquidity and Capital Resources

 

As of October 31, 2018, we had cash and cash equivalents of $19,447.

 

Over the next twelve months we do expect some material capital costs to develop operations. Our estimated operating costs of $655,000 will be used for operations and reporting, but will be used to pay salaries as deemed reasonable by management.

 

To date, we have realized only nominal sales revenue. As a result, we expect that we may need to further 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 apps, 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.


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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.

 

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 or promotional opportunity presents itself.

 

Once the app is live and we have had to begin 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 our 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 our control. Adverse changes in the following factors could undermine our business strategy and have a material adverse effect on our business, financial condition, and results of operations and cash flow.

 

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 or promotional opportunity presents itself.

 

Once the app is live and we have had to begin 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 our 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 our control. Adverse changes in the following factors could undermine our business strategy and have a material adverse effect on our business, financial condition, and results of operations and cash flow:

 

the competitive environment in the app sector that may force us 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 our information globally, geopolitical changes, changes in trading regulations, currency fluctuations, natural disasters, pandemics and other factors beyond our control may increase the cost of items we purchase, create communication issues or render product delivery difficult which could have a material adverse effect on our sales and profitability.

 

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

 

Consulting Services

 

During the nine months ended October 31, 2018, the Company no longer provides technical writing and computer assisted design services to other startups. This revenue source diminished as was anticipated and is $0 for the quarter ending October 31, 2018.


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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

 

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, 2018, 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, 2018. Based on this assessment, management believes that as of October 31, 2018, 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.


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Changes in Internal Control Over Financial Reporting

 

We have made no change in our internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

During the nine month periods ended October 31, 2018 and 2017, there was one legal proceeding, to which we are a party, which would not have a material adverse effect on our business, financial condition or operating results and none other 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 3. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

Common Stock

 

The Company issued 5,000,000 to Triton Fund LLC as a donation; the donation supports the initiative founded by undergraduates from the University of California, San Diego (UC San Diego) and provided a press release accordingly on April 30, 2018. The share issuance was recorded as deferred offering costs and valued at $21,000.

 

During the three months ending April 30, 2018 the Company issued 10,000,000 shares to settle $5,000 in convertible notes payable.

 

During the three months ending July 31, 2018 the Company issued 5,928,854 shares to settle $15,000 in convertible notes payable.

 

During the three months ending October 31, 2018 the Company issued 56,419,951 shares to settle $144,894 in convertible notes payable and accrued interest.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

During the quarter ended October 31, 2018, there were no purchases of equity securities by the Company and affiliated purchasers.

 

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, 2018, no options have been issued under this Plan.

 

ITEM 4. DEFAULTS UPON SENIOR SECURITIES

 

On June 17, 2015 and June 28, 2015, the Company received $3,000 and $2,700, respectively, by way of unsecured short-term loans from a non-related party for a term of six months at 5% interest due upon repayment. The loans and accrued interest were scheduled to be repaid on December 31, 2015. The Company was successful in obtaining an extension until September 1, 2016. Currently, these short-term loans are past due, however there are no default penalties associated with these loan agreements. There can be no assurance that we will be able to reach any further agreement to extend or amend the terms of the agreement with this creditor or that we will be able to raise the funding necessary to repay the balances due under this agreement. The initiation of any collection action by any creditor may affect our ability to execute on our business plan. Additional short term loans were provided in September, 2015 in the amount of $1,950, with a maturity date of January 31, 2016. This short-term lending arrangement is also past due, but does not carry any default penalty.

 

ITEM 5. MINE SAFETY DISCLOSURES

 

Not applicable to our Company.


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ITEM 6. OTHER INFORMATION

 

None.

 

ITEM 8. 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

 

 

32.1

Certification of Chief Executive Officer pursuant to Section 906

 

 

32.2

Certification of Chief Financial 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


26


 

 

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 19, 2018.

 

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 19, 2018

Glenda Dowie

Title

Date

 

 

 

/s/ Joseph Gagnon

Secretary, Chief Technical Officer and Director

December 19, 2018

Joseph Gagnon

Title

Date

 

 

 

/s/ Carl Hussey

Treasurer, Chief Financial Officer and Director

December 19, 2018

Carl Hussey

Title

Date

 

 


27