Quarterly Report (10-q)

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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, 2017

 

[   ] 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 Website, 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 20, 2017, registrant had 293,004,004 outstanding shares of common stock.  

 

 

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FORM 10-Q

 

APT SYSTEMS, INC.

TABLE OF CONTENTS

 

 

PART I FINANCIAL INFORMATION	PAGE
Item 1. Unaudited Consolidated Financial Statements as of October 31, 2017 and for the Three and Nine Month Periods Ended October 31, 2017 and 2016	4
Consolidated Balance Sheets	5
Consolidated Statements of Operations	6
Consolidated Statements of Cash Flows	7
Notes to Unaudited Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis and Plan of Operation	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	21
Item 4. Controls and Procedures	21
PART II OTHER INFORMATION
Item 1. Legal Proceedings	22
Item 1A. Risk Factors	22
Item 2. Properties	22
Item 3. Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 4. Defaults Upon Senior Securities	23
Item 5. Mine Safety Disclosures	23
Item 6. Other Information	23
Item 7. Exhibits	24
Signatures	25

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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.

 

 

 

 

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ITEM 1. FINANCIAL STATEMENTS

 

 

_______________________________________________________________________

 

 

APT SYSTEMS, INC.

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

For the Three and Nine Month Periods Ended October 31, 2017 and 2016

 

_________________________________________________________________________

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

	PAGE
Consolidated Balance Sheets	5
Consolidated Statements of Operations	6
Consolidated Statements of Cash Flows	7
Notes to Unaudited Consolidated Financial Statements	8

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APT SYSTEMS, INC.
Consolidated Balance Sheets
		October 31, 2017		January 31,2017
		(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	16,760	$	7,713
Trading investments		15,024		14,681
Prepaid expenses		-		17,141
Other current assets		268		268
Total current assets		32,052		39,803
Other Assets
Software (net of $36,463 and $22,291 accumulated amortization respectively)		88,329		82,494
Total other assets		88,329		82,494
Total Assets	$	120,381	$	122,297
LIABILITIES & STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable and accrued expenses	$	137,238	$	113,170
Accrued officer compensation		215,300		170,300
Convertible notes payable (net of discounts of $15,640 and $9,937)		179,648		139,267
Notes payable		75,299		76,619
Loan from director		4,560		4,465
Derivative Liability		46,982		-
Total current liabilities		659,027		503,821
Convertible notes payable - related party		26,276		26,276
Total Liabilities		685,303		530,097
Series B 6% Convertible Cumulative Preferred Stock; $0.001 par value, 1,000,000
shares designated; 65,000 and 0 shares issued and outstanding as of
October 31, 2017 and January 31, 2017 respectively		65,000		-
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 and 0 issued as of October 31, 2017 and January 31, 2017, respectively		1,000		-
Common stock $0.0001 par value, 750,000,000 shares authorized;
301,008,696 issued and 300,121,947 outstanding as of October 31, 2017
and 229,252,036 shares issued and outstanding as of January 31, 2017		30,101		22,926
Additional paid-in capital		1,919,026		855,511
Common stock payable		-		1,180
Treasury Stock, 886,749 and 0 shares at cost as of October 31, 2017
and January 31, 2017, respectively		(10,000)		-
Accumulated deficit		(2,570,049)		(1,287,417)
Total Stockholders’ Deficit		(629,922)		(407,800)
Total Liabilities And Stockholders’ Deficit	$	120,381	$	122,297

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

 

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APT SYSTEMS, INC.
Consolidated Statements of Operations
(Unaudited)
		Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
		October 31, 2017		October 31, 2016		October 31, 2017		October 31, 2016
Revenue
E-book sales	$	11	$	11	$	22	$	38
Total Revenue		11		11		22		38
Cost of Revenue		-		-		-		-
Gross Profit		11		11		22		38
Operating Expenses
Amortization		4,555		5,055		14,172		6,055
Compensation to officer and directors		15,000		15,000		913,654		45,000
General and administrative		76,015		55,848		188,352		353,783
Total Operating Expenses		95,570		75,903		1,116,178		404,838
Net Operating Loss		(95,559)		(75,892)		(1,116,156)		(404,800)
Other Income (Expense)
Other income		-		2,593		371		8,150
Gain (loss) on settlements of notes and accounts payable		-		82,287		(73,497)		82,287
(Loss) on change in derivative liability		(40,628)		(374,990)		(40,628)		(374,990)
Interest expense and amortization of debt discount		(27,402)		(62,777)		(52,722)		(95,435)
Total Other Income (Expense)		(68,030)		(352,887)		(166,476)		(379,988)
Net Loss		(163,589)		(428,779)		(1,282,632)		(784,788)
Dividends Applicable to Preferred Stock		(952)		-		(1,807)		-
Net Loss Applicable to Common Stockholders	$	(164,541)	$	(428,779)	$	(1,284,439)	$	(784,788)
Net loss per common share:
Basic and diluted	$	(0.00)	$	(0.00)	$	(0.00)	$	(0.01)
Weighted average number of
common shares outstanding:
Basic and diluted		278,179,364		135,748,354		263,466,212		125,130,595

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

 

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APT SYSTEMS, INC.
Consolidated Statement of Cash Flows
(Unaudited)
		Nine Months Ended		Nine Months Ended
		October 31, 2017		October 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,282,632)	$	(784,788)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization expense		14,172		67,259
Gain on investments		(343)		-
Loss on change in derivative liability		40,628		374,990
Amortization of debt discount		27,094		(7,936)
(Gain) loss on settlement of notes and accounts payable		73,497		(52,772)
Stock issued for consulting services		868,654		221,479
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		17,141		7,732
Accounts payable and accrued expenses		44,163		16,688
Accrued officer compensation		45,000		45,000
Net cash (used in) operating activities		(152,626)		(112,348)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments		-		(20,550)
Proceeds from sale of investments		-		13,905
Investment in software development		(20,007)		-
Net cash (used in) investing activities		(20,007)		(6,645)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from director loan		-		6,163
Payment of loan from director		(5,000)		(4,264)
Proceeds from convertible notes and short-term notes payable		94,500		95,751
Payments on convertible notes payable		(26,500)		-
Proceeds from long-term notes payable		-		57,563
Payments on notes payable		(1,320)		(35,750)
Purchase of treasury shares		(10,000)		-
Proceeds from issuance of common and preferred shares		130,000		-
Net cash provided by financing activities		181,680		119,463
Net change in cash and cash equivalents		9,047		470
Cash and cash equivalents at beginning of period		7,713		833
Cash and cash equivalents at end of period	$	16,760	$	1,303
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for :
Interest	$	-	$	4,716
Income Taxes	$	-	$	-
Non-Cash Transactions
Stock and stock payable issued for software acquisition	$	-	$	91,100
Common stock issued to settle notes and accounts payable	$	39,713	$	172,691
Notes issued on settlement of notes payable and accounts payable	$	-	$	5,500
Common stock issued for stock payable	$	1,180	$	-
Settlement of derivative liability	$	23,646	$	-
Expenses paid by director	$	5,095	$	-
Debt discount created by derivative liability	$	30,000	$	-

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

 

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APT SYSTEMS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTH PERIODS ENDED OCTOBER 31, 2017 AND 2016

 

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 and intuitive trading platforms, financial apps and visualization solutions for charting the financial markets. Utilizing real time and delayed data networks along with graphic techniques pioneered in the gaming industry, APT’s solutions can speak to the mobile needs to be demanded by the next generation of traders. While management works to deliver its mobile trading platforms, it also is strategically acquiring other compatible software or financial businesses which demonstrate strong growth potential. After we identify prospective acquisition opportunities we then continue with due diligence efforts that will and do include testing software performance and within funded external trading accounts as necessary. In this third quarter, the Company continued its development of separate native charting apps branded as KenCharts.

 

In this third quarter of fiscal 2017, the company launched a wholly owned Delaware incorporate subsidiary 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 platforms. The company acquired its first game app for $3,500 and rebranded it Chick Chick Boom and in September released the app worldwide. In November, the company formally launched its second game called Hogg Wild.

 

Subsequent to October 31, 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. .

 

2.  GOING CONCERN AND LIQUIDITY

 

As of October 31, 2017, the Company had cash of $16,760, insufficient revenue to meet its ongoing operating expenses, and liabilities of $685,303, accumulated losses of $2,570,049 and a shareholders’ deficit of $629,922. The Company has not, as yet generated significant product sales revenues as its key products are still under development.

 

The unaudited financial statements for the three and nine months ended October 31, 2017 have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company anticipates future losses in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans, loans from directors and, or, the sale of common stock. There is no assurance that this series of events will be satisfactorily completed.

 

Financial statements do not include 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.

 

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation of Financial Statements

 

The accompanying unaudited financial statements of APT Systems have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 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 month ended October 31, 2017 are not necessarily indicative of the final results that may be expected for the year ended January 31, 2018.   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, 2017 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.

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Derivative Financial Instruments

 

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815.  The Company applies the guidance in ASC 815-40-35-12 to determine the order in which each convertible instrument would be evaluated for derivative classification.  The Company’s policy is to evaluate for reclassification contracts with the earliest maturity date first.

 

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.

 

Principles of Consolidation

 

The Company prepares its financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, all of which have a fiscal year end of January 31. All intercompany accounts, balances and transactions have been eliminated in the consolidation.

 

Reclassifications

 

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

 

4.  RELATED PARTY TRANSACTIONS

 

Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the President on an ongoing basis. Accrued officer compensation as of October 31, 2017 and January 31, 2017 was $215,300 and $170,300 respectively. The accrued compensation will only be paid as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued. 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, but only after January 1, 2018. 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.

 

As of October 31, 2017 and January 31, 2017, the Company owed the President $4,560 and $4,465 respectively by way of loans. The loans are unsecured, due on demand and interest free.

 

5.  SOFTWARE

 

The Company has software that it uses for the development of certain mobile applications. The software and any upgrades are being amortized over useful lives ranging from 3 - 5 years. The Company recorded amortization expense of $14,172 and $6,055 for the nine months ended October 31, 2017 and 2016, respectively.

 

		October 31, 2017		January 31, 2017
Charting software	$	102,705	$	102,705
Ken Chart Native Apps		20,007		-
Website		2,080		2,080
		124,792		104,785
Accumulated amortization		(36,463)		(22,291)
Net book value	$	88,329	$	82,494

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6. CONVERTIBLE NOTES 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 $43,500 through the sales of part of the debt to unrelated third parties in prior periods.  

 

During the quarter ending July 31, 2017, the noteholder sold $10,000 of this note to an unrelated party.  The $10,000 note was then settled with the issuance of 20,000,000 shares of common stock.  This settlement resulted in the recording of a $62,000 loss on settlement of notes payable.

 

The Company is currently in discussions with the lender to further extend the maturity date and has been verbally extended to be later written. Until such time as that is completed the note is considered past due.

 

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 and has been verbally extended to be later written. 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.

 

Noteholder 3

 

The Company took on a loan of $52,500, in the form of a convertible note, in November 2016. The note is due and payable twelve months from the issuance date and bear interest at 5% per annum with an original issuance discount of 5%. If the Note is paid off prior to 181 days, the Company is required to pay the face amount plus a penalty of 30% otherwise the investor may convert loan to common shares.  Once convertible the conversion rate is equal to 60% of the lowest traded market price during the previous 15 trading days.  The holder is limited to converting no more than 20% percent of the previous week’s dollar volume during any given trading week.  

 

The Company reached an agreement on May 4, 2017 with Convertible Noteholder where by half of the note has been repaid in cash and the balance of the loan has been extended for an additional six months up to November 4, 2017 during which time the note is not convertible. The total cash payment of $34,438 is being applied $26,250 to the principle and the remaining to interest and prepayment penalties.  Subsequent to quarter end, this debt has been retired in full with a partial principal conversion of $7,500 and the remaining principle and interest was repaid with cash on November 20, 2017.

 

Noteholder 4

 

The Company took on a further loan of $30,000, in the form of a convertible note on January 31, 2017 with unrelated parties. 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 $3,000. 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. The loan is convertible at the end of July 2017. By agreement of both parties, any right of conversion date has been postponed until September 12, 2017.  On October 2, 2017 $6,738 of the note was converted into 1,250,000 common shares in accordance with the agreement.  On October 16, 2017, $7,975 of the note was converted into 1,450,000 common shares in accordance with the agreement.  Subsequent to October 31, 2017, the remaining balance of $15,288 plus accrued interest of $1,427 was converted into 5,958,980 common shares.

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On September 12, 2017, 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 $38,937 resulting in a discount of $30,000 on the note payable and a day one loss of $8,937.  On each day the note was converted the associated derivative liability was re-valued and reclassified to equity, resulting in a total reclassification of $23,647 during the period.  On October 31, 2017 the remaining derivative liability was valued at $46,982.  In conjunction with this derivative liability other convertible instruments were evaluated for derivative liability treatment.  

 

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.

 

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.

 

Noteholder 6

 

The company took on further loan of $53,000 in the form of a convertible note on May 8, 2017 with unrelated parties and received funds on May 15.  The note is due and payable nine months from the issuance date and bears interest at 8% per annum with an original issuance discount of $3,000. 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, 181 days after funding the, the Note becomes convertible on or about November 15, 2017.  Once the conversion terms are effective the note is convertible into shares at the greater of $0.00008 or 61% of the market value as calculated per the agreement.  Subsequent to quarter end, this loan was fully retired by November 17, 2017 with two cash payments for principal and interest due.

 

The following table summarizes all convertible notes outstanding as of October 31, 2017:

 

Holder	Issue Date	Due Date	Principal	Unamortized Debt Discount	Carrying Value
Third Parties
Noteholder 1a	1/8/2014	Past Due	$   33,500	$               -	$      33,500
Noteholder 1b	4/23/2015	Past Due	5,000	-	5,000
Noteholder 2	10/2/2015	Past Due	12,500	-	12,500
Noteholder 3	11/1/2016	11/4/2017	26,000	-	26,000
Noteholder 4a	1/30/2017	1/30/2018	15,288	(9,937)	5,351
Noteholder 4b	8/28/2017	8/28/2018	50,000	(4,536)	45,464
Noteholder 6	5/15/2017	2/20/2018	53,000	(1,167)	51,833
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			$ 221,564	$    (15,640)	205,924
Less: Current Portion					(179,648)
Long Term Portion					$      26,276

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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 will come due December 31, 2017.

 

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 will come due December 31, 2017.

 

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 October 31, 2017, we are default under the loan agreement.

 

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 as 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 October 31,2017, 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.

 

The following table summarizes all notes outstanding as of October 31, 2017:

 

Holder	Issue Date	Due Date	Principal	Unamortized Debt Discount	Carrying Value
Third Parties
Noteholder 1a	8/12/2016	12/31/17	$   26,000	$               -	$    26,000
Noteholder 1b	9/21/2016	12/31/17	25,909	-	25,909
Noteholder 2	11/7/2014	Past Due	5,000	-	5,000
Noteholder 3a	6/15/2015	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	8/11/18	3,740	-	3,740
Total Convertible Notes Payable			$   75,299	$                -	75,299
Less: Current Portion					(75,299)
Long Term Portion					$              -

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8.  DERIVATIVE LIABILITIES

 

As discussed in  Note 6 – Convertible Notes Payable , the Company issued a $30,000 Convertible Promissory Note to Noteholder 4 that matures on January 31, 2018. 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 quarter: (1) dividend yield of 0%, (2) expected volatility ranging from 258 - 273%, (3) risk-free interest rate ranging from 1.01 – 1.15%, (4) expected life ranging from 0.25 – 0.38 of a year, and (5) estimated fair value of the Company’s common stock ranging from $0.019 - $.0129 per share.  The instrument was fair valued on the date it became convertible, each conversion date and the period end date of October 31, 2017.

 

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 .

 

10.  STOCKHOLDERS’ DEFICIT

 

Preferred Shares

 

The Company is authorized to issue 100,000,000 shares of preferred stock, par value $0.001 per share.

 

During the quarter ending April 30, 2017, the directors signed a resolution to restructure the preferred shares.  The preferred shares were changed to Preferred Series A shares with a par value of $.001 and the Series B preferred shares with a par value of $.001.

 

The Series A Preferred Stock has 2,000 votes per share and is convertible into shares of the Company’s common stock at a conversion ratio of 2,000 shares of common stock for each share of preferred stock.  The Series A Preferred Stock has a liquidation preference equal to the original issue price.  

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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.  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.  

During the nine months ending October 31, 2017 the Company received proceeds of $65,000 for the issuance of 65,000 shares of Series B Preferred shares.

 

For the three and nine months ended October 31, 2017, total dividends applicable to Series B Preferred Stock was $952 and $1,807, respectively. The Company did not declare or pay any dividends in 2017. Although no dividends have been declared, the cumulative total of preferred stock dividends due to these stockholders upon declaration was $1,807 as of October 31, 2017.

 

During the six months ending July 31, 2017 the Company issued 1,000,000 shares of Series A preferred shares to the current board of directors.  Each preferred share gets 2,000 votes and is convertible into 2,000 shares of common stock.  The preferred shares were valued at $868,654 and recorded as director compensation.  The Company’s CEO, who was issued 920,000 of the Series A preferred shares has agreed to forgo her conversion rights associated with the Series A shares.

 

Common Shares

 

During the quarter ending April 30, 2017, the Company restructured its common shares by increasing authorized shares from 300,000,000 to 750,000,000 common shares with a par value of $.0001.  

 

During the quarter ending April 30, 2017, 11,800,000 shares of common stock were issued in settlement of the $1,180 stock payable.

 

During the nine months ending October 31, 2017 the Company received proceeds of $65,000 for the issuance of 28,424,030 shares of common stock.

 

During the nine months ending October 31, 2017 the Company issued 8,832,530 shares of common stock in settlement of $15,000 of accounts payable.  In conjunction with this settlement a loss of $11,497 was recognized.

 

During the nine months ending October 31, 2017 the Company issued 20,000,000 shares of common stock as settlement of a $10,000 note payable.  A loss on settlement of $62,000 was recorded in conjunction with the settlement.

 

During the nine months ending October 31, 2017 the Company issued 2,700,000 shares of common stock as settlement of convertible notes payables.

 

During the nine months ending October 31, 2017 the Company has purchased 886,749 common shares from the market for $10,000 (average of $0.0113 per share) under the registered Buy Back plan that is in effect until January 31, 2018 and may be extended by the Directors.  The Buy Back plan was approved by the board on October 3, 2017 and authorized the repurchase of up to 25,000,000 common shares.

 

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, 2017, no options have been issued under this Plan.

 

11.  SUBSEQUENT EVENTS

 

The Company entered into a letter of intent to acquire an active business in June, releasing a press release at that time.  The discussions continue as will due diligence.  In order to facilitate the funding of acquisitions, the company entered into a formal fundraising agreement with North South Capital, LLC on September 1, 2017. The terms outline the Broker will seek to raise between $1M and $5M dollars for operations for a fee.  Management has decided to not pursue the business acquisition after conducting due diligence completed in October and broker released from us contract under a termination clause on November 30, 2017.

 

The company announced its application to the open source Blockchain initiative, the Enterprise Ethereum Alliance, to support its stated intent to build charts and publish information for cryptocurrency and ICO (Initial Coin Offerings). Application was subsequently accepted and membership was approved in November.

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The Company has entered into a non-binding agreement upon signing an LOI to explore possible joint venture for the development and marketing of a payment platform. As part of its commitment, the Company incorporated a subsidiary called RCPS Management, Inc. on September 1, 2017. After additional early stage due diligence is completed, the Company will release further information to the public via a press release. In November, the Company abandoned the original LOI upon undertaking due diligence but has since restructured the business plan and is currently negotiating with new parties.  The Company continues to explore how to deliver under the Verifundr brand and the development of the exCanna Marketplace.

 

The Company entered into an agreement on November 14, 2017 for a new convertible note for $155,000. The note is due and payable twelve 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 30%. 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.

 

The CEO and President return 15,000,000 shares back to the Company under the Buy Back plan and the shares will be retired from circulation.  

 

Convertible Noteholder 1 sold part of their debt on November 29, 2017 in the amount of $5,000 and which is now convertible into a total of 10,000,000 shares of common stock.

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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 financial statements and notes thereto included in, Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements regarding us, our business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: our ability to successfully develop new products and services for new markets; the impact of competition on our revenues, changes in law or regulatory requirements that adversely affect or preclude clients from using us for certain applications; delays our introduction of new products or services; and our failure to keep pace with our competitors.

 

When used in this discussion, words such as “believes”, “anticipates”, “expects”, “intends” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, particularly the Report on Form 10-K, Form 10-Q and any Current Reports on Form 8-K.

 

Overview and History

 

APT Systems, Inc. was incorporated in the State of Delaware on October 29, 2010. The Company has not as yet generated significant sales revenues as its key products are still under development but our first charting app is likely to be released in the second quarter. Limited 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 software Intuitrader, and limited research towards the development of its software. However, the company was able to engage in testing trading strategies and products in a limited fashion in 2016.

 

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

 

APT is a Fintech company that specializes in the creation of innovative equities trading platforms. We are focusing on the mobile device market where we intend to develop and publish custom technical analysis indicators and trading systems both in-house and for third parties. In addition, we intend to develop a user friendly charting tool that displays price action and historic pricing for publicly traded companies. This separate app and the charts that it produces can be configured to the user’s preferred view such as a line chart or candlestick chart, and the user shall be able to adjust the chart intervals as the user desires. We plan to utilize real time and delayed data networks along with gaming graphic techniques which will provide solutions that can speak to the mobile needs to be demanded by the next generation of equity, currency, futures and commodity traders.

 

In order to advance itself, APT Systems can also roll out technical trading tools and will publish KenCharts for the hand held market to test its business plans and generate cash flow. We are focusing our early attention on the charting software we own and rewriting the code to provide a native chart only app for both Android and iOS 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 chart, and the user shall be able to adjust the chart intervals as the user desires. We plan to utilize delayed time initially and later real time data networks along with graphic techniques which will provide solutions that can speak to the mobile needs to be demanded by the next generation of equity and commodity traders.  However, these tools would be invigorated with leading edge graphics and networking technology to become desirable real-time and interactive trading assistance software.

 

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

 

- Financial Software and Analytical Software Development 

- Algorithmic Applied Technology 

- Trading Platform Refinement and Linking to Brokerage Accounts 

- Analytical Charting Software Development 

- Explore plans for upcoming proposed National Banking Charters for Fintech companies 

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

 

In addition, the Company created a games subsidiary that is incorporated as Snapt Games, Inc., a Delaware corporation, on August 4, 2017. Management admires graphic techniques used in the gaming industry and wants to selectively introduce these to its charting tools and platforms. The company acquired its first game app and rebranded it Chick Chick Boom and in September released app worldwide. In November, the company formally launched its second game called Hogg Wild. These apps are beginning to generate ad based revenues in both Google and Apple app stores.

 

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

 

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.

 

Organization

 

We are comprised of three corporations 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 dimensional 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.

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Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the President on an ongoing basis. Accrued officer compensation as of October 31, 2017 and January 31, 2017 was $215,300 and $170,300 respectively. The accrued compensation will only be paid as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued. 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, but only after January 1, 2018. 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 and any further acquisitions, which may include our operating and trade names such as Intuitrader, proprietary trading platforms and indicators, and visual charting software. We intend to mostly develop our technology internally and we will rely primarily on domain registration, trade secret, trademark, copyright, domain name, patent and contract law to protect our intellectual property. It is our intention to enter into confidentiality, intellectual property invention assignment and/or non-competition and non-solicitation agreements or restrictions with our employees, independent contractors and business partners, and to control access to and distribution of our intellectual property. Currently, we do not have any registered copyrights or patents; however, we may secure such registrations in the future.

 

Government Regulation

 

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

 

Research and Development

 

We have spent $9,782 and $0 in the nine month periods ended October 31, 2017 and 2016, respectively on research and development of our website and mobile applications. We plan to spend further funds on research and development activities in the future as the development of our software applications continue and we raise the necessary funding required.  

 

Environmental Compliance

 

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

 

Results of Operations

 

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.

 

For the three months ended October 31, 2017 compared to the three months ended October 31, 2016

 

Revenue

 

The Company generated $0 in consulting revenue during the three months ended October 31, 2017 and 2016.  Revenue from e-books sales were $11 and $11, respectively. As a startup company, we have generated only nominal revenue.

 

Operating Expenses

 

Operating expenses were $95,570 for the three month period ended October 31, 2017 compared to $75,903 for the three month period ended October 31, 2016, which is an increase of $19,667. The increase in operating expenses for the three months ended October 31, 2017 as compared to the three months ended October 31, 2016 was due to increases in various general and administrative expenses.

 

Operating Loss

 

We incurred an operating loss of $95,559 and $75,892 for the three months ended October 31, 2017 and 2016, respectively.  The increase of $19,667 or 26% is due to the factors described above.

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Other Income (Expense)

 

We incurred a total other expense of $68,030 and $352,887 for the three months ended October 31, 2017 and 2016, respectively. The decrease of $284,857 or 81% is due to the decrease in loss on derivative liability and interest expense as well as the decrease in gain on settlement of notes and accounts payable.

 

Net Loss

 

The Company incurred a net loss of $163,589 for the three months ended October 31, 2017 compared to a net loss of $428,779 for the three months ended October 31,2016, an decrease of $265,190 or 61% due to the factors discussed above.  

 

For the nine months ended October 31, 2017 compared to the nine months ended October 31, 2016

 

Revenue

 

The Company generated $0 in consulting revenue during the nine months ended October 31, 2017 and 2016.  Revenue from e-books sales were $22 and $38, respectively.  As a startup company, we have generated only nominal revenue.

 

Operating Expenses

 

Operating expenses were $1,116,178 for the nine month period ended October 31, 2017 compared to $404,838 for the nine month period ended October 31, 2016, which is an increase of $711,340. The increase in operating expenses for the nine months ended October 31, 2017 as compared to the nine months ended October 31, 2016 was due primarily to an increase in compensation to officer and directors related to the issuance of Series A Preferred Shares to board members, partially offset by a decrease in general and administrative expenses.

 

Operating Loss

 

We incurred an operating loss of $1,116,156 and $404,800 for the nine months ended October 31, 2017 and 2016, respectively.  The increase of $711,356 or 176% is due to the factors described above.

 

Other Income (Expense)

 

We incurred a total other expense of $166,476 and $379,988 for the nine months ended October 31, 2017 and 2016, respectively. The decrease of $213,512 or 56% is due to the decrease in loss on derivative liability and interest expense as well as the decrease in gain on settlement of notes and accounts payable.

 

Net Loss

 

The Company incurred a net loss of $1,282,632 for the nine months ended October 31,2017 compared to a net loss of $784,788 for the nine months ended October 31,2016, an increase of $497,844 or 63% due to the factors discussed above.

 

Cash flow information for the nine months ended October 31, 2017 is compared to the nine months ended October 31, 2016

 

As of October 31, 2017, the Company had cash of $16,760, insufficient revenue to meet its ongoing operating expenses, and liabilities of $685,303 accumulated losses of $2,570,049 and a shareholders’ deficit of $629,922.

 

The unaudited financial statements for the three and nine months ended October 31, 2017 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 $152,626 for the nine month period ended October 31, 2017. This compares to net cash used for operating activities of $112,348 for the nine month period ended October 31, 2016.  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 $20,007 and $6,645 for the nine-month periods ended October 31, 2017 and 2016 arising from software development in the current year and investing in foreign currency trading accounts in the prior year.

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Cash flows provided by financing activities were $181,680 for the nine-month period ended October 31, 2017 which compares to cash flows provided by financing activities of $119,463 for the nine-month period ended October 31, 2016. During the nine months ended October 31, 2017 we received $130,000 of cash proceeds from the sale of common and Series B Preferred shares and we used $10,000 related to repurchase shares of our common stock on the market.  During the same period we received $94,500 from the issuance of notes payable offset by $32,820 to pay down Notes Payable. By comparison, during the nine months ended October 31, 2016, we received $101,914 from the issuance of notes payable offset by $40,014 to pay down Notes Payable.

 

Off-Balance Sheet Arrangements

 

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

 

Liquidity and Capital Resources

 

As of October 31, 2017, we had cash and cash equivalents of $16,670. As of January 31, 2017, we had cash and cash equivalents of $7,713.

 

Over the next twelve months we do expect some material capital costs to develop operations. Our estimated operating costs of $355,000 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.

 

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.

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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.

 

Concurrent Developments

 

Future Trends use E-Books as a method for Training: Future product considerations revolve around enhanced or animated e-books. We believe consumers enjoy e-books because of their convenience and accessibility but they are similar in format to the traditional book. As animation is added to traditional images such as charts, this same technology can be applied to e-books to animate the content to better engage the reader. It is believed customers will soon demand interactive books that provide a much better, more informed educational experience and replace standard training techniques. New E-books with a view to training support will be made available after the sale of apps has commenced. We have successfully tested posting an e-book and the receiving of revenues electronically to our bank account from Apple Inc.

 

Consulting Services

 

During the nine months ended October 31, 2017, the Company did not provide technical writing and computer assisted design services to other startups. This revenue source diminished as anticipated and is $0 for the quarter ending October 31, 2017.

 

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, 2017, 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 in our Form 10-K for the fiscal year ending January 31, 2017.

 

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.

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PART II OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

During the nine month periods ended October 31, 2017 and 2016, there were no legal proceedings, to which we are a party, which could have a material adverse effect on our business, financial condition or operating results and none are threatened or pending to the best of our knowledge. We are negotiating with a lender on how best to retire a debt including the possibility of converting debt of $12,500 to common shares. We consider this note to be in default as of October 31, 2017.

 

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

 

On October 16, 2015, 102,000,000 shares of the Company’s common stock were issued at $.0001 per share to management as follows: Jeffrey Jolliffe – 1,000,000; Carl Hussey, Treasurer – 2,000,000; Joseph Gagnon, Secretary - 2,000,000; Glenda Dowie, President & CEO – 97,000,000 valued at $ 10,200.

 

On December 23, 2015, the Company issued 26,670 shares of its common stock at a fair value of $ 20,000, respectively, for service rendered by unrelated third parties.

 

On March 18, 2016, the directors approved 100,000 shares of the Company’s common stock be issued to Azur Universal Inc and were issued at $.65 per share for a total value of $65,000 as per the agreement signed July 8, 2014 The amount was recorded as deposit on software acquisition under other current assets. As of January 31, 2017, the amount has been recognized as acquisition of software.

 

The Company has retained three unrelated parties as Consultants to help develop investor awareness in the Company through varied campaigns that revolve around contacting known sophisticated investors through media outlets, newsletters, emails and direct telephone calls. The consultants are compensated in combination of cash and restricted common shares. In May and June, 2016 the Company issued 4,283,333 shares of its common stock for services rendered by unrelated third parties. This represents payments to invoices totaling $229,182.

 

On July 20, 2016, the directors approved 900,000 of the Company’s shares (book value of $26,100) be issued to Azur Universal Inc and were issued at $.029 cents per share to acquire the license rights and source code for the Global Trader software.

 

The directors proceeded with purchasing the asset and declined to purchase the company at this time. An 8-K form was filed and a press release was sent out. The shares were issued in August and the license and rights have been acquired.

 

The Company was able to partially pay its debt obligations and the balances of the outstanding notes were repaid from conversion of shares.  The Company issued 93,027,033 with a total value of $240,704 throughout the year.

 

On December 14, 2016, the Company issued 15,000,000 shares of it restricted common stock at the fair value of $57,000 to the CEO, Glenda Dowie, against accrued compensation.

 

In January 27 2017, a consultant returned a certificate for 1,500,000 common shares used to secure an agreement with the Company when the parties mutually agreed the services sought were not provided to the full extent both anticipated. The total number of outstanding shares was adjusted accordingly

 

The Company opted to pay consultant’s invoice by issuing 8,832,500 common shares.

 

During the nine months ending October 31, 2017 the Company received proceeds of $65,000 for the issuance of 65,000 shares of Series B Preferred shares.

 

During the nine months ending October 31, 2017 the Company received proceeds of $65,000 for the issuance of 28,424,030 shares of common stock.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

During the quarter ended October 31, 2017, 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, 2017 and 2016, no options have been issued under this Plan.

 

ITEM 4. DEFAULTS UPON SENIOR SECURITIES

 

In November 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 July 31, 2017, we are in default under the loan agreement. 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.

 

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 December 31, 2016.  This short-term lending arrangement is also past due, but does not carry any default penalty.

 

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.

 

On October 31, 2015 the company received 12,500 by way of unsecured short term note from a non-related party due in one year. The Company was successful in extending the note in 2016 for one year and subsequently extended until October 31, 2017. As of October 31, 2017 we are in default of the loan agreement. 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.

 

ITEM 5. MINE SAFETY DISCLOSURES

 

Not applicable to our Company.

 

ITEM 6. OTHER INFORMATION

 

None.

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ITEM 7. EXHIBITS

 

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

 

Exhibit Number	Description
3.1*	Articles of Incorporation
3.2*	Bylaws
31.1	Certification of Chief Executive Officer pursuant to Section 302
31.2	Certification of Chief Financial Officer pursuant to Section 302
31.3	Certification of Principal Accounting Officer pursuant to Section 302
32.1	Certification of Chief Executive Officer pursuant to Section 906
32.2	Certification of Chief Financial Officer pursuant to Section 906
32.3	Certification of Principal Accounting Officer pursuant to Section 906
Exhibit 101.INS		XBRL Instance Document (1)
Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document (1)
Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document (1)
Exhibit 101.DEF		XBRL Taxonomy Extension Definition Linkbase Document (1)
Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase Document (1)
Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document (1)

 

(1)

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

 

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

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SIGNATURES

 

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on December 20, 2017.

 

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 20, 2017
Glenda Dowie	Title	Date
/s/ Joseph Gagnon	Secretary, Chief Technical Officer and Director	December 20, 2017
Joseph Gagnon	Title	Date
/s/ Carl Hussey	Treasurer, Chief Financial Officer and Director	December 20, 2017
Carl Hussey	Title	Date

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