Item 1. Business.
Business Strategy Overview and Products
APT Systems, Inc. (“APT Systems”, “the Company”, "We" or "Us") was incorporated in the state of Delaware on October 29, 2010 (“Inception”) to engage in the creation of innovative stock trading platforms, market scans with proprietary indicators, financial apps and exclusive visualization solutions for charting the financial markets.
While management works to deliver stock trading software for hand held devices, it is also seeking to strategically acquire and grow other compatible fintech businesses which demonstrate strong growth potential stemming from a solid business plan. Particular interest is shown in those businesses that own or have licensed software dedicated to trading equities, commodities and or foreign exchange. We have identified prospective opportunities and continue with due diligence efforts that will and do include testing software performance within funded trading accounts.
Management will continually expand upon trading its software products, those acquired as well as those developed in-house. Any profits generated from funds used in live trading tests can be used to offset development costs, which operation is planned to be included in a wholly-owned subsidiary. We constantly strive to pioneer original trading tools along with new approaches for managing risk. Our proprietary custom charting tools and trading platforms will later be available to subscribers and licensees.
The Company has not as yet generated significant product sales revenues as its key products are still under development. Further product advancements will be commenced upon securing necessary funding. Our limited start-up operations have consisted of development of a business plan, identification of our target market and limited research towards the development of its software architecture. The Company has launched a publication using its Apple developer account to test revenue deliveries and has been concentrating on improving its intellectual property for charting applications.
During the latter part of 2014, the Company had commenced providing technical writing and computer assisted design services to other startups using a contractor, a related person (family member to the Chief Executive Officer), to generate certain additional revenues. This revenue will eventually diminish entirely as we are able to raise the necessary funding to allow the contractor to work exclusively on in-house projects.
We obtained approval for electronic trading of our symbol APTY in November 2015, and we plan on raising additional funds by issuing shares of our common stock, but do not rule out the possibility of taking out additional loans. However, there is no guarantee we will be successful in raising sufficient funding to progress with the implementation of our business plan. We have not been subject to any bankruptcy, receivership or similar proceeding.
In order to advance itself, APT Systems can also roll out traditional trading tools and publish charts for the hand held market to test its plans and generate cash flow. We are focusing our early attention on the charting software we own. This charting tool and the charts that it produces can be configured to the user’s preferred view such as a line chart or candlestick chart, and the user shall be able to adjust the chart intervals as the user desires. We plan to utilize real time and delayed data networks along with graphic techniques which will provide solutions that can speak to the mobile needs to be demanded by the next generation of equity and commodity traders. However, these tools would be invigorated with leading edge graphics and networking technology to become desirable real-time and interactive trading assistance software.
APT services can later extend to include:
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Financial Software and Analytical Software Development
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Algorithmic Applied Technology
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Trading Platform Refinement and Linking to Brokerage Accounts
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Analytical Charting Software Development
The steps remaining for us to begin selling our products listed above are to finalize the programming of the software used in our products, specifically our dimensional charting tools, begin sales and marketing campaigns, contact prospective licensees, and deliver our products, which we expect to complete in less than 180 days after our initial contact with prospective licensees. Our app would be available to users on a subscription fee plan and we plan to grant licenses in our app to financial companies and brokerage firms for use by their employees and clients. The goal is to have our product used by both handheld (tablet and Smartphone application users) and web based clients.
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 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 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. 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 financial information in new ways that can better assist novice users learning about publicly traded companies and those users who are trading equities in the public markets.
Distribution methods of the products or services
To facilitate marketing plans, our products and platforms will be available initially in the “App Store” managed by Apple Inc. Later, these same products will be available to audiences that prefer using other Smartphones such as Google’s Android or the BlackBerry. Especially in the case of Apple, these companies will provide marketing infrastructure to help developers reach their users and justify costs 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.
Organization
We are comprised of one corporation and do not have any subsidiaries but do not rule out the future possibility of acquiring or creating subsidiaries. At this time, all of our operations are conducted through this corporation but we are actively researching the requirements and impact of opening a subsidiary office in Nevada.
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 clients and providing them with better trading tools. The trading tools such as dimensional charts may be licensed to these same banks and brokers or subscribed to by users, directly. We 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 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.
Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for Ms. Dowie on an ongoing basis. As of January 31, 2016, accrued officer compensation was $125,300. The accrued compensation will only be paid as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued. Ms. Dowie can elect at any time to convert some, or all, of her accrued compensation into shares of the Company’s common stock as determined by the Board of Directors and its legal advisers. Market price can be determined as either the publicly quoted share price, when such a publicly quoted price is available or the last cash price the Company received for the sale of its common shares.
During the twelve months ended January 31, 2016, the Company was providing technical writing and computer assisted design services to other startups provided by a contractor, a related person, a family member to the Chief Executive Officer, to generate certain additional revenues. The Company paid $17,855 and $11,450 to the related party consultant in respect of the provision of these services during the twelve months ended January 31, 2016 and 2015, respectively.
Intellectual Property Information
Our success and ability to compete will be dependent to a significant degree on our intellectual property, which may include our trade name, trading models, and visual chart styling. We intend to develop our technology internally and we will rely primarily on trade secret, trademark, copyright, domain name, patent and contract law to protect our intellectual property. It is our intention to enter into confidentiality, intellectual property invention assignment and/or non-competition and non-solicitation agreements or restrictions with our employees, independent contractors and business partners, and to control access to and distribution of our intellectual property. Currently, we do not have any registered copyrights or patents; however, we may obtain such registrations in the future.
Government Regulation
We do not expect to be subject to material governmental regulation. However, it is our policy to fully comply with all governmental regulation and regulatory authorities.
Research and Development
We have incurred minimal cost in the fiscal years ended January 31, 2016 and 2015, 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.
Environmental Compliance
We believe that we are not subject to any material costs for compliance with any environmental laws.
Item 1A.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to provide the information required by this section.
Item 2.
Item 2. Properties.
Our mailing address is in an executive suite facility at 505 Montgomery Street, 11th Floor, San Francisco, CA 94111. We consider this current executive office space and services arrangement adequate for our current operations and will reassess our needs based upon the future growth of the Company
Item 3.
Item 3. Legal Proceedings.
We were not party to any legal proceedings during the twelve months ended January 31, 2016 or 2015, and, to the best of our knowledge and belief, no legal proceedings are threatened or pending.
Item 4.
Item 4. Mine Safety Disclosures.
Not applicable to our Company.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Stockholders
As of January 31, 2016, there were approximately 45 stockholders of record. Because shares of our common stock are held by depositaries, brokers and other nominees, the number of beneficial holders of our shares is substantially larger than the number of stockholders of record. As of January 31, 2016, there were 115,941,670 shares of our common stock outstanding.
Market Information
The Company’s common stock was been approved for price quotation on the OTC Bulletin Board under the symbol “APTY” on November 16, 2015. However, at this time the trading of our stock is limited and sporadic. We prepared an application for FAST eligibility to further allow the markets access to trade our shares electronically and plan to add direct share deposit services, all in an order to help shareholders manage their holdings.
Equity Compensation Plan Information
2012 Equity Incentive Plan
As of January 31, 2012, the Company adopted the 2012 Equity Incentive Plan (the “Plan”) of APT Systems, Inc. as approved by the Company’s board of directors and stockholders. The purpose of the Plan is to enable the Company to offer its employees, officers, directors, consultants and others whose past, present and/or potential contributions to the Company have been, are or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. Stock options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. A total of 5,500,000 shares of common stock are eligible for issuance under the Plan, which may consist of authorized and unissued shares or treasury shares. The maximum amount of shares of stock that may be granted as Incentive Stock Options shall be 2,500,000. Since our inception (October 29, 2010), no equity compensation has been granted under the Plan.
Dividend Policy
We have not previously declared or paid any dividends on our common stock and do not anticipate declaring any dividends in the foreseeable future. The payment of dividends on our common stock is within the discretion of our board of directors. We intend to retain any earnings for use in our operations and the expansion of our business. Payment of dividends in the future will depend on our future earnings, future capital needs and our operating and financial condition, among other factors that our board of directors may deem relevant. We are not under any contractual restriction as to our present or future ability to pay dividends.
Unregistered Sales of Equity Securities
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.
In December 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.
Convertible Notes
On January 8, 2014 the Company issued an unsecured convertible note to one accredited investor (as that term is defined under the Securities Act of 1933, as amended) in the aggregate amount of $50,000 This convertible note accrues interest at the rate of 19% per annum and is convertible only when a “qualifying financing” event takes place. The note was due and payable on May 7, 2014. The note has been reduced to $49,500 through the sale of part of the debt to unrelated third party. The Company secured an initial extension of the convertible note to June 8, 2014 and subsequently a further extension to December 31, 2016.
The Note, but none of the accrued unpaid interest thereon, may convert into equity securities at the option of the holder if the Company issues equity securities and any other indebtedness in aggregate with gross proceeds of $1,200,000, including conversion of the Note (a “Qualified Financing”).
The conversion price is equal to 80% of the per share price paid by the purchasers of such equity securities in the Qualified Financing. Accrued and unpaid interest will be paid by the Company at time of conversion
If a Qualified Financing has not occurred and the Company elects to consummate a sale of the company prior to the maturity date of the Note, the Company will give the holder a minimum ten days prior written notice of an anticipated closing date of such sale of the Company in order that the holder may consider a conversion of their Note into equity in advance of a sale transaction.
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 is equal to the fair market value of the Company’s common stock on the date of conversion.
The Company had executed three lending arrangements with a related party, who is affiliated to the CEO of the company. The effective dates of the loans are November 23, 2015, December 28, 2015 and January 12, 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 notes are convertible, at the holder’s request, into shares of the Company’s common stock at the rate of $9.50 per share.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During the years ended January 31, 2016 and 2015, there were no purchases of equity securities by the Company and affiliated purchasers.
Item 6.
Item 6. Selected Financial Data.
A smaller reporting company is not required to provide the information in this Item.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
This Management’s Discussion and Analysis or Plan of Operation contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases, you can identify forward-looking statements by the use of words such as “may”, “will”, “should”, “anticipate”, “believe”, “expect”, “plan”, “future”, “intend”, “could”, “estimate”, “predict”, “hope”, “potential”, “continue”, or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including, but not limited to, the matters discussed in this report under the caption “Risk Factors”. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. We undertake no obligation to publicly update any forward looking-statements, whether as a result of new information, future events or otherwise.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this report.
The following table provides selected financial data about us for the fiscal years ended January 31, 2016 and 2015. For detailed financial information, see the audited Financial Statements included in this report.
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. We have operated at a loss in all relevant periods.
For our fiscal years ended January 31, 2016 and 2015, our accountants have expressed substantial doubt about our ability to continue as a going concern as a result of our history of losses. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to raise the necessary funding to implement our business plan and to successfully develop and market our software, generate revenues and operate a profitable business.
Revenue
We generated revenues of $ 20,199 for the fiscal year ended January 31, 2016, as compared to $13,574 for the fiscal year ended January 31, 2015, an increase of $6,625. This increase was attributable to revenue generated in consulting services consisting mostly of technical writing provided by the Company.
Cost of Revenue
During the twelve months ended January 31, 2016 we incurred contract labor - related party costs of $17,855, as compared to $11,450 for the fiscal year ended January 31, 2015 directly related to the consulting services revenue we generated in the period.
Operating (Income) Expense
Operating expenses, which consisted of accounting, legal, research and development and general and administrative expenses for the fiscal year ended January 31, 2016, were $182,004 which is an decrease of $7,213, or 4% as compared to the operating expenses for the fiscal year ended January 31, 2015 of $174,791. The decrease in our operating expenses was primarily attributable to decrease in the professional fees during the year.
Other income (Expense)
Interest expense and amortization of debt discount for the fiscal year ended January 31, 2016 was $68,938 compared with $11,479 in the fiscal year ended January 31, 2015, an increase of $57,459 or 501%. The increase was due primarily to the Company’s increase in borrowings and primarily due to the beneficial conversion feature on notes payable calculated under the definitive convertible promissory note for the fiscal year ended January 31, 2016.
Net Loss
As a result of the foregoing, we incurred a net loss of $283,222 for the fiscal year ended January 31, 2016, which was an increase of $142,568, or 101.4%, as compared to the net loss for the fiscal year ended January 31, 2015 of $140,654.
We expect to incur operating losses in future foreseeable periods because we will be incurring expenses and not generating sufficient revenues to fund these expenses. We expect at a minimum $355,000 in operating costs over the next twelve months based on current operations. We cannot guarantee that we will be successful in generating sufficient revenues or finding other funds in the future to cover these operating costs. Failure to generate sufficient revenues or secure additional financing when needed could cause us to go out of business.
Liquidity and Capital Resources
As of January 31, 2016, we had cash and cash equivalents of $833 but were in the process of negotiating additional funding. As of January 31, 2015, we had cash and cash equivalents of $776.
Net cash used for operating activities was $65,484 for the fiscal year ended January 31, 2016. This compares to net cash used for operating activities of $31,433 for the fiscal year ended January 31, 2015. During the fiscal year ended January 31, 2016, we incurred a loss of $283,222 which was partially reduced by $138,918 of non-cash expenses and increased by a non-cash gain of $14,376 on the conversion of notes payable to shares of our common stock. There was an $885 increase in accounts receivable, a $60,000 increase in accrued officer compensation and a $42,081 increase in accounts payable and accrued expenses to arrive at cash used in operations of $65,484. By comparison, during the fiscal year ended January 31, 2015 we incurred a loss of $140,654 which was partially reduced by $15,076 of non-cash expenses and increased by a non-cash gain of $43,492 on the settlement of accounts payable for debt and shares of our common stock. There was a $330 increase in accounts receivable, a $60,000 increase in accrued officer compensation and a $77,967 increase in accounts payable and accrued expenses to arrive at cash used in operations of $31,433.
Cash flows used in or generated by investing activities were $0 for the fiscal years ended January 31, 2016 and 2015 as we lacked the funding to be able to pursue investing opportunities.
Cash flows provided by financing activities were $65,541 for the fiscal year ended January 31, 2016, which compares to cash flows provided by financing activities of $13,379 for fiscal year ended January 31, 2015. During the fiscal year ended January 31, 2016, we received $2,223 of additional loans from one of our directors and repaid $7,953 to director, $38,150 of loans from unrelated third parties and $ 32,621 from related party. By comparison, during the fiscal year ended January 31, 2015 we received $6,879 of additional loans from one of our directors, secured short-term borrowings of $5,000 and received $1,500 in reimbursement of certain previously paid deferred financing costs.
Over the next twelve months we do not expect substantial material capital costs to develop operations and charting products. Our estimated operating costs of $155,000 will be used for operations, contract workers, travel, and reporting, but none will be used to pay salaries unless deemed reasonable by management and directors.
To date, we have realized only nominal revenue. As a result, we expect that we may need to engage in the private placement of our debt and equity securities in order to continue to fund operations. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to raise an estimated $1.5 million to fully implement our business plan and to successfully develop and market our software, generate revenues and operate a profitable business.
In any case, we try to operate with minimal overhead while we undertake to attract participants to help build our products. Our primary activity will be to seek to develop clients for our services and, consequently, our sales. If we succeed in developing clients for our services and generating sufficient sales, we will have the potential to become profitable. We cannot guarantee that this will ever occur. Our plan is to build our company in any manner which will be successful and provide value for our shareholders.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements with any party.
Plan of Operation
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:
·
the competitive environment in the app sector that may force us to reduce prices below the optimal desired pricing level or increase promotional spending;
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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.
Concurrent Developments
Future Trends use E-Books as a method for Training: Future product considerations revolve around enhanced or animated e-books. We believe consumers enjoy e-books because of their convenience and accessibility but they are similar in format to the traditional book. As animation is added to traditional images such as charts, this same technology can be applied to e-books to animate the content to better engage the reader. It is believed customers will soon demand interactive books that provide a much better, more informed educational experience and replace standard training techniques. New E-books with a view to training support will be made available after the sale of apps has commenced.
Consulting Services
During the twelve months ended January 31, 2016 and 2015, the Company provided technical writing and computer assisted design services to other startups using a contractor, a related person, a family member to the Chief Executive Officer, to generate certain additional revenues. We would anticipate that this revenue will eventually diminish completely if we are able to raise the necessary funding to allow the contractor to work exclusively on in-house projects.
Critical Accounting Policies
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires that management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Foreign Currency Transactions
Foreign currency transaction gains and losses are recorded in the statements of operations as a component of other income (expense).
Software
The Company has software that it uses for the development of certain mobile phone applications. The software and any upgrades are being amortized over useful lives ranging from 3-5 years.
Website
The Company accounts for website development costs in accordance with FASB ASC 350-50, “Website Development Costs”. Cost incurred to register domain names, integrate databases and add additional functionality or features to the website are capitalized and amortized over 1-3 years. Costs incurred in general maintenance of the website or hosting costs, are expensed as incurred.
Financial Instrument
The Company measures its financial assets and liabilities in accordance with the requirements of FASB ASC 825 “Financial Instruments”. The carrying values of cash, accounts receivable, accounts payable, and accrued expenses, note payable, accrued interest payable and loan form director approximate fair value due to the short-term maturities of these instruments.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. It recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer; (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Research and Development Costs
Costs incurred in research and development activities are listed separately and expensed as incurred.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740 “Income Taxes”. Under FASB ASC 740, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. FASB ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. At January 31, 2016 and 2015, the Company has no unrecognized tax benefits.
Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive
During the years ended January 31, 2016 and 2015, the Company did have potentially dilutive debt instruments that have been excluded from the earnings per share calculation as their effect would have been anti-dilutive.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. ASU 2014-09 will be effective for the Company beginning in its first quarter of 2017. Early adoption is not permitted. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the impact of adopting the new revenue standard on its financial statements.
In August 2014, the FASB issued guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity's ability to continue as a going concern. If such conditions or events exist, disclosures are required that enable users of the financial statements to understand the nature of the conditions or evens, management's evaluation of the circumstances and management's plans to mitigate the conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. The Company will be required to perform an annual assessment of its ability to continue as a going concern when this standard becomes effective on January 1, 2017; however, the adoption of this guidance is not expected to impact our financial position, results of operations or cash flows.
Seasonality.
We do not expect our revenues to be impacted by seasonal demands for our services.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
A smaller reporting company is not required to provide the information in this Item.
Item 8.
Item 8. Financial Statements and Supplementary Data.
For the years ending January 31, 2016 and 2015.
APT Systems, Inc.
FINANCIAL STATEMENTS
With Report of Independent Registered Public Accounting Firm
For the years ended January 31, 2016 and 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
APT Systems, Inc.
We have audited the accompanying balance sheet of APT Systems, Inc. (“the Company”) as of January 31, 2016 and the related statements of operations, changes in stockholders’ equity, and cash flows for the year in the one-year period ended January 31, 2016. APT Systems Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of APT Systems, Inc. as of January 31, 2016, and the results of its operations and its cash flows for the one-year period ended January 31, 2016, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the accompanying financial statements, the Company has suffered losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3 of the financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ RBSM LLP
Henderson, Nevada
April 25, 2016
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
APT Systems, Inc.
San Francisco, CA 94111
We have audited the accompanying balance sheet of APT Systems, Inc. as of January 31, 2015 and the related statements of operations, changes stockholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of APT Systems, Inc. as of January 31, 2015 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Cutler & Co, LLC
Cutler & Co., LLC
Wheat Ridge, Colorado
June 5, 2015
________________________________________________________________________________________________________________
9605 West 49th Ave. Suite 200 Wheat Ridge, Colorado 80033 ~ Phone 303-968-3281 ~ Fax 303-456-7488 ~ www.cutlercpas.com
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
APT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
For the fiscal years ended January 31, 2016 and 2015
__________________________________________________________________________
1. NATURE OF OPERATIONS
APT Systems, Inc. (“APT Systems”, “the Company”, "We" or "Us") was incorporated in the State of Delaware on October 29, 2010 (“Inception”) to engage in the creation of innovative stock trading platforms, financial apps and visualization solutions for charting the financial markets. While management works to deliver equities trading software it also is strategically acquiring other compatible financial businesses or software which demonstrates strong growth potential stemming from a solid business plan. The Company has launched a publication promoting a trading strategy using its Apple developer account and has successfully tested revenue payments. Our proprietary custom charting tools and trading platforms will later be available to licensees and subscribers.
During the twelve months ended January 31, 2016, the Company was providing technical writing and computer assisted design services to other startups using a contractor, a related person (family member to the Chief Executive Officer, to generate certain additional revenues. We would anticipate that this revenue will diminish entirely if we are able to raise the necessary funding to allow the contractor to work exclusively on in-house projects.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires that management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Due to uncertainties inherent in the estimation process, it is possible that these estimates could be materially revised within the next year.
Foreign Currency Transactions
The financial statements are presented in United States dollars. In accordance with ASC 830, “Foreign Currency Matters”, foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year. Gains or losses resulting from foreign currency transactions are included in results of operations.
Foreign currency transaction gains and losses are recorded in the statements of operations as a component of other income (expense).
Software
The Company has software that it uses for the development of certain mobile phone applications. The software and any upgrades are being amortized over useful lives ranging from 3-5 years.
Website
The Company accounts for website development costs in accordance with FASB ASC 350-50, “Website Development Costs”. Costs incurred to register domain names, integrate databases and add additional functionality or features to the website are capitalized and amortized over 1-3 years. Costs incurred in general maintenance of the website or hosting costs, are expensed as incurred.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer; (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Research and Development Costs
Any costs incurred in research and developments are listed separately and expensed as incurred.
Deferred Financing Costs
Costs with respect to issue of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized as debt discount over the term of any debt funding if successful or expensed if the proposed equity or debt transaction is unsuccessful.
As of fiscal years ended January 31, 2016 and 2015, the Company had refundable deposits outstanding of $11,500 and $13,000, respectively. The deposits were made to two consulting companies that were to assist the Company in obtaining a $125,000 bridge loan to be utilized by the Company for its public registration purposes, and to assist the Company with an $8,000,000 private equity placement. The deposits are refundable for non-performance. As of the date of this report, neither the bridge loan nor the private placement had been secured.
To date, one consulting firm has refunded to the Company $1,500 of the $4,000 that they were paid as part of their obligation to refund amounts on deposit for non-performance under the agreements. As of January 31, 2016, no successful equity or debt funding is expected to arise from these payments and as repayment of the remaining amounts owed to the Company on these agreements is uncertain $11,500, or 100% of the outstanding balance of the deferred financing costs has been written off effective January 31, 2015.
Impairment of Long-Lived and Intangible Assets
In the event that facts and circumstances indicate that the cost of long-lived and intangible assets may be impaired, an evaluation of recoverability will be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset's carrying amount to determine if a write-down to market value or discounted cash flow value is required.
Advertising costs
Advertising costs are expensed as incurred. The Company recorded $12,003 and $0 advertising costs during for the years ended January 31, 2016 and 2015.
Financial Instrument
Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. Accounting Standards Codification (“ASC”) 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs which reflect a reporting entity’s own assumptions about the assumptions that market participants would use for pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.
The recorded amounts of financial instruments, including cash, unbilled revenue, accounts payable, accrued expenses, note payable and loan from director approximate their market values as of January 31, 2016 and 2015 due to the short term maturities of these financial instruments.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740 “Income Taxes”. Under FASB ASC 740, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. FASB ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. At January 31, 2016 and 2015, the Company has no unrecognized tax benefits.
Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
During the years ended January 31, 2016 and 2015, the Company did have potentially dilutive debt instruments that have been excluded from the earnings per share calculation as their effect would have been anti-dilutive.
Stock Based Compensation
The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. The Company has adopted a stock option plan, as disclosed in Note 8 - Stockholders’ Deficit below. As of the fiscal years ended January 31, 2016 and 2015, no stock options had been issued or were outstanding.
The Company accounts for stock-based payments to non-employees in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date.
Comprehensive Income (Loss)
Comprehensive income is defined as all changes in stockholders’ equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our Inception there were no differences between our comprehensive loss and net loss.
Beneficial Conversion Features
If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Business Segments
The Company believes that its activities during the twelve months ended January 31, 2016 and 2015 comprised a single segment.
Reclassifications
Certain reclassifications have been made to the prior period financial statements to conform to the 2015 presentation.
Recently Adopted Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, and early adoption is prohibited. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is currently assessing the impact the adoption of ASU 2014-09 will have on our financial statements and disclosures.
In August 2014, the FASB issued guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity's ability to continue as a going concern. If such conditions or events exist, disclosures are required that enable users of the financial statements to understand the nature of the conditions or evens, management's evaluation of the circumstances and management's plans to mitigate the conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. The Company will be required to perform an annual assessment of its ability to continue as a going concern when this standard becomes effective on January 1, 2017; however, the adoption of this guidance is not expected to impact our financial position, results of operations or cash flows.
3. GOING CONCERN AND LIQUIDITY
At January 31, 2016 the Company had cash of $833, insufficient revenue to meet its ongoing operating expenses, liabilities of $346,281, of which approximately $40,000 of notes payable are in default, accumulated losses of $580,450 and a stockholders’ deficit of $333,819.
In the audited financial statements for the fiscal years ended January 31, 2016 and 2015, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.
These audited financial statements 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 software 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, loans from directors and, or, the sale shares of common stock. There is no assurance that this series of events will be satisfactorily completed.
The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that may be necessary if Company is unable to continue as a going concern.
4. RELATED PARTY TRANSACTIONS
Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the President on an ongoing basis. Accrued officer compensation as of January 31, 2016 and 2015, was $125,300 and $75,000 respectively. During the year ended January 31, 2016, the President elected to convert $9,700 of the accrual in to 97,000,000 shares of the Company’s common stock. 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. The President of the Company can elect at any time to convert some, or all, of her accrued compensation into shares of the Company’s common stock at the market price at the date of conversion. Market price will be either the publicly quoted share price, when such a publicly quoted price becomes available, or the last cash price the Company received for the sale of its common shares. The President has deferred her decision until January 15, 2017 and will be provided to the Board of Directors before our financial year end.
For the year ended January 31, 2016, the Company repaid the President’s short term advance of $2,672.
During the twelve months ended January 31, 2016, the Company was providing technical writing and computer assisted design services to other startups provided by a contractor, a related person (family member to the Chief Executive Officer, to generate certain additional revenues. The Company paid $20,450 and $11,450 to the related party consultant in respect of the provision of these services during the years ended January 31, 2016 and 2015, respectively.
The Company entered into a Consulting Agreement with Joseph J. Gagnon, the Secretary of the Board of Directors, on February 3, 2012. This agreement was amended jointly by the Board of Directors and Mr. Gagnon. As of June 15, 2012, it was agreed and accepted by all that Mr. Gagnon should discontinue his full-time services for a non-specified period of time. As of January 31, 2016, Mr. Gagnon is not scheduled to resume his duties unless otherwise agreed to in writing. Mr. Gagnon was paid a $0 and $1,000 during the years ended January 31, 2016 and 2015, respectively. No balance was owed to Mr. Gagnon by us as of January 31, 2016.
5. CONVERTIBLE NOTE PAYABLE, RELATED AND UNRELATED PARTIES
On January 8, 2014 the Company issued an unsecured convertible note to one accredited investor (as that term is defined under the Securities Act of 1933, as amended) in the aggregate amount of $50,000 This convertible note accrues interest at the rate of 19% per annum and is convertible only when a “qualifying financing” event takes place. The Company secured an initial extension of the convertible note to January 29, 2015 earlier this year and subsequently a further extension to December 31, 2016. The note has been reduced to $49,500 through the sale of part of the debt to unrelated third party.
The Note, but none of the accrued unpaid interest thereon, may convert into equity securities at the option of the holder if the Company issues equity securities and any other indebtedness in aggregate with gross proceeds of $1,200,000, including conversion of the Note (a “Qualified Financing”). The conversion price is equal to 80% of the per share price paid by the purchasers of such equity securities in the Qualified Financing. Accrued and unpaid interest will be paid by the Company at time of conversion.
If a Qualified Financing has not occurred and the Company elects to consummate a sale of the company prior to the maturity date of the Note, the Company will give the holder a minimum ten days prior written notice of an anticipated closing date of such sale of the Company in order that the holder may consider a conversion of their Note into equity in advance of a sale transaction.
No value has been assigned to the conversion feature attached to this note payable as the possibility of the Company completing such a Qualifying Financing or completing a sale of the Company before May 7, 2015 was considered to be extremely remote.
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 is equal to the fair market value of the Company’s common stock on the date of conversion.
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 23, 2015, December 28, 2015 and January 12, 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 notes are convertible, at the holder’s request, into shares of the Company’s common stock at the rate of $9.50 per share.
6. NOTES PAYABLE
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 $400.00. As of January 31, 2016, we are default under the loan agreement.
The Company entered into a stock transfer agency agreement dated November 19, 2014 with Pacific Stock Transfer. As part of the agreement, amounts owed to the Company’s previous stock transfer agent of $7,430 were paid by Pacific Stock Transfer, of which $2,189 is to be repaid to Pacific Stock Transfer by the Company in installments of $250 per month beginning on January 3, 2015. Accordingly we also recognized a $5,242 gain on the settlement of the $7,430 balance of accounts payable by assuming a loan of $2,189. Interest at 5% per annum accrues on the unpaid balance of the loan for each month. As of January 31, 2016, we are in default under this loan agreement.
The Company had executed four short-term lending arrangements with non-related party by. The effective dates of the loans are May 1, 2015, June 22, 2015, June 27, 2015 and September 22, 2015. The loan amounts are $25,000, $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 through January 31, 2016. The repayment dates have been extended through July 31, 2016.
7. COMMITMENTS AND CONTINGENCIES
On July 8, 2014, the Company entered into an agreement to issue 100,000 shares of its common stock as a deposit for an option to acquire 100% of the issued share capital of AZUR Universal Inc., subject to certain terms and conditions. As at the date of this report certain due diligence remains to be completed, no shares have been issued as yet and no liability for this potential future issuance has been recognized in these financial statements. It is anticipated these shares will be issued within the terms and new timelines of the agreement. See Note 1 - Subsequent Events.
The Company is required to file its annual and quarterly financial reports with SEDAR in Canada. Due to delays in filing its financial statements and other possible forms, the Company believes it may be subject to certain potentially significant penalties to be levied by the Alberta Securities Commission (ASC). These fines have now been stated to be CDN$10,120 or approximately $7,500 as advised and invoiced by the ASC, and have been accrued into the financial statements as of January 31, 2016. The Company is considering engaging its legal counsel to assist in reducing or eliminating these penalties within the next quarter
8. SHAREHOLDERS’ DEFICIT
Preferred Shares
The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.001 per share.
No shares of preferred stock were issued or outstanding during the fiscal years ended January 31, 2016 and 2015.
Common Shares
The Company is authorized to issue 200,000,000 shares of common stock, par value $0.0001 per share.
On June 4, 2014, the Company issued 85,000 shares of its common stock to settle a liability of $55,250 for legal services provided to it by an attorney. The Company estimated the fair value of these shares to be $17,000, or $0.20 per share, based on its most recent cash sale of shares of its common stock. Accordingly the Company recognized a gain of $38,250 on the sale of settlement of the accounts payable to the Attorney.
On October 16, 2015, 102,000,000 shares of the Company's common stock were issued at $.0001 per share to management as follows: Jeffrey Jolliffe - 1,000,000; Carl Hussey, Treasurer - 2,000,000; Joseph Gagnon, Secretary - 2,000,000; Glenda Dowie, President & CEO - 97,000,000. All shares are restricted Section144 shares. $10,200 is added in the stockholders' equity section of the financial statements for the value of these shares.
In December 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.
In addition, the Directors approved the new conversion terms for outstanding loan to Meador and subsequently, part of the debt was sold to an unrelated party. On October 26, 2015, the Company issued 5,000,000 shares of its common stock at a fair value of $0.0001 per share to an unrelated third party in satisfaction of $500 in notes payable that was assigned to the third party as referred to in Note 5. Convertible Notes Payable. The fair value of $0.0001 per share was established with the unrelated third party based on the fact that the Company has had only limited operations to date, incurred losses since inception and has a shareholder deficit in excess of $200,000.
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 January 31, 2016 and 2015, no options have been issued under this Plan.
9. INCOME TAXES
The Company accounts for income taxes in accordance with ASC 740. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.
The provision for federal income tax consists of the following for the periods ending:
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
At January 31, 2016 and 2015, the Company had an unused net operating loss carry-forwards approximating $580,000 and $297,000, respectively that are available to offset future taxable income. The loss carry-forwards will start to expire in 2031.
In assessing the reliability of the deferred tax assets at January 31, 2016 and 2015 of $197,000 and $101,000, respectively, management considered whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income and tax planning strategies in making this assessment. Based on management’s analysis, the Company concluded not to retain a deferred tax asset since it is uncertain whether the Company can utilize this asset in future periods. Therefore, the Company has established a full reserve against this asset. The valuation allowance was $197,000 and $101,000 as of January 31, 2016 and 2015, respectively.
The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. As of January 31, 2016 and 2015, the Company has no accrued interest and penalties related to uncertain tax positions.
The Company is subject to taxation in the U.S. The tax years for 2010 and forward are subject to examination by tax authorities. The Company is not currently under examination by any tax authority.
Management has evaluated tax positions in accordance with FASB ASC 740, and has not identified any tax positions, other than those discussed above, that require disclosure.
10. SUBSEQUENT EVENTS
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.
In February and March of 2016, the Company entered into two loan agreements with Crown Bridge Partners for $33,000 and $25,600 respectively. The notes are due and payable twelve months from the issuance date and bear interest at 8% per annum. If the notes are paid off prior to the due day, the Company is required to pay the face amount plus penalty ranging from 10% to 35% depending on the repayment date. Also, 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 lowest trade during the previous 10 trading days.
In April 2016, the Company entered into an agreement (“Investment Agreement”) for a unrelated third party (“Investor”) to purchase up to $5,000,000 of the Company’s common stock. In conjunction with the Investment Agreement, the Company entered into a registration rights agreement (“Registration Agreement”). The Registration Agreement requires the Company to use its best effort, with in thirty days, to file with the SEC a Form S-1 (“Registration Statement”) covering a certain number of shares to be used for the Investment Agreement. Upon the effective date of the Company’s Registration Statement, the Company has the right to put (“Put Notice”) to the investor, for purchase, certain amount of shares of the Company’s common stock. For each Put Notice, the number of shares shall be equal to one-hundred and fifty percent of the average of the daily trading dollar volume of the Company’s common stock for the ten consecutive trading days immediately prior to the Put Notice, so long as such amount does not exceed an accumulative amount per month of $150,000, unless prior approval of the Investor.
In Conjunction with Investment Agreement, the Company entered issued two promissory notes to the investor in the amounts of $20,000 and $55,000. Both promissory notes accrue interest at the rate of 10% per annum and are due seven months from the effective date of the Company’s Registration Statement. The proceeds from the $20,000 promissory note were used to pay the Company’s legal fees associated with the Investment Agreement. The proceeds from the $55,000 promissory note were used to pay the Company’s commitment fee to the Investor.
In accordance with the agreement entered into on July 8, 2014 with AZUR Universal, Inc. we issued the required deposit of 100,000 shares of our common stock in March 2016. This transaction has not closed, as we are still in the due diligence process.
In accordance with ASC 855, Subsequent Events, the Company has evaluated events that occurred subsequent to the balance sheet date through the date of available issuance of these audited financial statements. The Company determined that other than as disclosed above, there were no material reportable subsequent events to be disclosed.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.
None.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of January 31, 2016, 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 Annual Report on Internal Control Over Financial Reporting.
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Despite these controls, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies, like us, face additional limitations. Smaller reporting companies employ fewer individuals and can find it difficult to employ resources for complicated transactions and effective risk management. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.
Our management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of January 31, 2016 based on the criteria established in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that as of January 31, 2016, 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.
This annual report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act that permit us to provide only management’s report in this annual report.
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.
Attestation Report of the Registered Public Accounting Firm.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report on Form 10-K.
Item 9B.
Item 9B. Other Information.
The information required by this Item 9B with respect to unregistered sales of equity securities is incorporated by reference to Item 5 of this Form 10-K.
PART III
Item 10.
Item 10. Directors, Executive Officers, and Corporate Governance
The following table sets forth our directors and executive officers, their ages and the positions they hold:
Name
Age
Positions and Offices Held
Glenda Dowie
Director, President, Chief Executive Officer
Joseph Gagnon
Director, Secretary, Chief Technology Officer
Carl Hussey
Director, Treasurer, Chief Financial Officer
Glenda Dowie has been President, Chief Executive Officer and a Director of the Company since inception. She is a full-time equities trader. She is the President and Founder of the stock trading site TraderZone.com and its affiliated newsletter-inspired BuyZoneReview.com. For the past eleven years, she has focused her energy and talents on stock trading indicators, refining her methodology for active trading and developing formulas that capture market momentum. During the past five years, Ms. Dowie had worked for the company that she owned: The TraderZone Corporation. Ms. Dowie is the director of TraderZone. Ms. Dowie has shared her experience through Published Articles on Investopedia (division of Forbes) as well as published a book entitled “6 Steps to Buying a Winning Stock” made available through the Apple Store.
Joseph Gagnon has been Secretary, Chief Technology Officer and a Director of the Company since inception. From 1997 to 2011 Mr. Gagnon was the Owner of JJG Consulting providing computer software consulting services. From February 2006 to 2011 Mr. Gagnon was a Java programmer with Branagh Information Group, a privately held computer networking company. Mr. Gagnon co-founded Abacus Concepts in 1984. With two MacUser Eddies, six MacWorld World Class awards and a 60% market share world-wide, Abacus was a leader of Macintosh Statistical Analysis and a significant player in the Win32 world. Mr. Gagnon served as Chief Technology Officer and served on the Board of Directors. His technical responsibilities were the user interface design, software architecture and implementation of the StatView product line. Mr. Gagnon left Abacus in 1997 when the business was sold to SAS Institute. Mr. Gagnon obtained a BS in Computer Science in 1981 from the University of Wisconsin-Madison.
Carl Hussey has been Treasurer, Chief Financial Officer and a Director of the Company since inception. From January 2006 to the present Mr. Hussey has been the Owner of CH Strategic Management Group, providing management consulting to a broad range of companies. From June 2004 to August 2005 Mr. Hussey was the Chief Logistics Officer UNDOF at the United Nations. He was responsible for logistics for United Nations in UNDOF situated on Israel, Lebanon and Syria borders maintaining the disputed area of separation between the countries. From July 1999 to June 2004 he was a Comptroller for the Canadian Air Division of the Canadian Forces. Prior to this position he headed the Review and Audit Services within the Corporate Services Directorate of 1 Canadian Air Division. Mr. Hussey attended the University of New Brunswick.
Family Relationships
There are no family relationships among our directors and executive officers. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it. No director or executive officer has been convicted of a criminal offense within the past five years or is the subject of a pending criminal proceeding. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. No director or officer has been found by a court to have violated a federal or state securities or commodities law.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
·
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
·
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
·
been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
·
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
·
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
Term of Office
Our directors are elected for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Committees of the Board of Directors
There is a new committee consisting of the Board of Directors formed January 31, 2015. Going forward into the new fiscal year, the Audit Committee can review, add policies and procedures; further, it will seek to add new members.
Audit Committee Financial Expert
The Board of Directors does not have an “audit committee financial expert,” as such term is defined in Item 401(h)(2) of Regulation S-K.
Section 16(a) Beneficial Ownership Reporting Compliance
The members of our Board of Directors, our executive officers and persons who hold more than 10% of our outstanding Common Stock are subject to the reporting requirements of Section 16(a) of the Exchange Act, which requires them to file reports with respect to their ownership of our Common Stock and their transactions in such Common Stock.
Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we believe that as of the date of this Report, our executive officers, directors and greater than 10 percent beneficial owners have complied on a timely basis with all Section 16(a) filing requirements, with the exception of our officers, directors and greater than 10 percent beneficial owners listed in the table below:
Name
Form
Description
Glenda Dowie
Was not filed timely on the effective date of the registration statement on Form 8-A (SEC File No. 000-54865)
Joseph Gagnon
Was not filed timely on the effective date of the registration statement on Form 8-A (SEC File No. 000-54865).
Carl Hussey
Was not filed timely on the effective date of the registration statement on Form 8-A (SEC File No. 000-54865).
Code of Ethics
Our board of directors has adopted a general code of ethics guideline. All directors, officers and employees of the Company must comply with the law and regulations and must act honestly and in good faith with a view to the best interests of the Company in exercising their powers and discharging their duties. Any director or officer of the Company shall disclose in writing or request to have it entered into the minutes of Board of Directors’ meeting or any of the committees of the directors the nature and extent of any interest in a material contract or a material transaction, whether made or proposed, as soon as the director or officer becomes aware of such a contract or transaction. In the event of such a case, the director shall abstain from voting on any resolution to approve such a contract or transaction.
Options/SAR Grants and Fiscal Year End Option Exercises and Values
We have not had a stock option plan or other similar incentive compensation plan for officers, directors and employees, and no stock options, other than as is discussed in this Annual Report.
Item 11.
Item 11. Executive Compensation
Summary Compensation Table
The following table shows for the fiscal years ended January 31, 2016 and 2015, compensation awarded to or paid to, or earned by, our Chief Executive Officer, our Chief Technology Officer, and our Chief Financial Officer (the “Named Executive Officers”).
(1)
Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for Ms. Dowie on an ongoing basis. As of January 31, 2016, accrued officer compensation was $125,300. The accrued compensation will only be paid as and when the directors decide the Company has sufficient liquidity to pay some, or all, of the amounts accrued. Ms. Dowie can elect at any time to convert some, or all, of her accrued compensation into shares of the Company as determined by the Board of Directors in consultation with its legal advisors. Market price will be the publicly quoted share price, when such a publicly quoted price becomes available or the last cash price the Company received for the sale of its common shares.
Outstanding Equity Awards at the End of the Fiscal Year
No equity compensation has been paid under the Plan.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Employment Agreements
Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for Ms. Glenda Dowie on an ongoing basis. As of January 31, 2016 and January 31, 2015 accrued officer compensation was $125,300 and $75,000 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. The President of the Company can elect at any time to convert some, or all, of her accrued compensation into shares of the Company as determined by the Board of Directors in consultation with its legal advisors. Market price will be either the publicly quoted share price, when such a publicly quoted price becomes available, or the last cash price the Company received for the sale of its common shares. The Company has no other employment agreements in effect.
As of June 15, 2012, Mr. Gagnon took a leave of absence from his role under the consulting agreement; however, he will continue to serve as an officer and director of the Company during his leave of absence. Mr. Gagnon provides contract services for a fee connected to maintenance on the servers and software on a consultant basis. Mr. Hussey does not receive compensation for his services at this time. Based upon the amount of the proceeds from additional sales of our common stock, other future employees and directors may receive salaries. Once we generate revenue, future salaries will be evaluated at that time. Additional employees may be added in the future to assist in the monitoring and fulfillment of orders.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information, as of April 27, 2016, with respect to the holdings of (1) each person who is the beneficial owner of more than 5% of our common stock, (2) each of our directors, (3) each executive officer, and (4) all of our current directors and executive officers as a group.
Beneficial ownership of the common stock is determined in accordance with the rules of the Securities and Exchange Commission and includes any shares of common stock over which a person exercises sole or shared voting or investment power, or of which a person has a right to acquire ownership at any time within 60 days of April 27, 2016. Except as otherwise indicated, we believe that the persons named in this table have sole voting and investment power with respect to all shares of common stock held by them. Applicable percentage ownership in the following table is based on 116,041,670 shares of common stock outstanding as April 27, 2016 plus, for each individual, any securities that individual has the right to acquire within 60 days of April 27, 2016.
(1) All ownership is beneficial and of record, unless indicated otherwise.
(2) The Beneficial owner has sole voting and investment power with respect to the shares shown.
(3) An officer and director of the Company.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of January 31, 2016, regarding shares of common stock that may be issued under the Company’s 2012 Equity Incentive Award Plan (the “Equity Plan”). The Equity Plan was approved by the Company’s shareholders and is the Company’s sole equity compensation plan.
Plan category
(a)
Number of securities
to be issued
upon exercise
of outstanding
options, warrants
and rights
(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(c)
Number of securities
remaining available
for future issuance under equity
compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by security holders (1)
-
-
5,500,000
Equity compensation plans not approved by security holders (2)
Total
-
-
5,500,000
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with Related Persons
Except as set forth below, since February 1, 2013, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which the Company was or will be a party in which the amount involved exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at year end for the last two completed fiscal years; and in which any director, executive officer, other stockholders of more than 5% of the Company’s Common Stock or any member of their immediate family had or will have a direct or indirect material interest:
Effective November 1, 2013, the Company began to accrue a monthly salary of $5,000 per month for the President on an ongoing basis. As of January 31, 2016 accrued officer compensation was $125,300. 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. The President of the Company can elect at any time to convert some, or all, of her accrued compensation into shares of the Company’s common stock at the market price at the date of conversion. Market price will be either the publicly quoted share price, when such a publicly quoted price becomes available, or the last cash price the Company received for the sale of its common shares.
As of January 31, 2016 and 2015, the Company owed the President $2,673 and $8,402, respectively, by way of loan. The loan is unsecured, due on demand and interest free.
During the twelve months ended January 31, 2016, the Company was providing technical writing and computer assisted design services to other startups provided by a contractor, a related person, a family member to the Chief Executive Officer, to generate certain additional revenues. The Company paid $17,855 to the related party consultant in respect of the provision of these services during the twelve months ended January 31, 2016 (2015 - $11,450).
Director Independence
We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
·
the director is, or at any time during the past three years was, an employee of the company;
·
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
·
a family member of the director is, or at any time during the past three years was, an executive officer of the company;
·
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
·
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
·
the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
Ms. Dowie and Messrs. Gagnon and Hussey are not considered independent because they are executive officers of the Company.
We do not currently have a separately designated nominating or compensation committee but have created an audit committee.
Item 14:
Item 14: Principal Accountant Fees and Services.
Audit Fees
For the Company’s fiscal year ended January 31, 2016 and 2015, we were billed approximately $20,100 and $9,500, respectively for professional services rendered for the audit and reviews of our financial statements. Costs increased due to change in auditor from Cutler & Co., LLC to RBSM LLP this year.
Audit Related Fees
For the Company’s fiscal year ended January 31, 2016 and 2015, we were not billed for professional services related to our audits, other than the fees discussed in Audit Fees above.
Tax Fees
For the Company’s fiscal years ended January 31, 2016 and 2015, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning by our auditors.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended January 31, 2016 and 2015.
Pursuant to the requirements of Section 13 or 15(d) 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.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
·
approved by our audit committee; or
·
entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.
Currently our entire board of directors, the active members of the audit committee, pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees was pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered. An Audit Committee was created on January 31, 2015 to better manage the audit process and remains in place.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
The following financial information is filed as part of this report:
(a)
(1) FINANCIAL STATEMENTS
(2) SCHEDULES
(3) 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
4.1*
APT Systems, Inc. 2012 Equity Incentive Plan
4.2**
19% Convertible Note dated January 8, 2014
31.1
Certification of Principal Executive Officer pursuant to Section 302
31.2
Certification of Principal Financial Officer pursuant to Section 302
32.1
Certification of Principal Executive Officer pursuant to Section 906
32.2
Certification of Principal Financial Officer pursuant to Section 906
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Schema
101.CAL
XBRL Taxonomy Calculation Linkbase
101.DEF
XBRL Taxonomy Definition Linkbase
101.LAB
XBRL Taxonomy Label Linkbase
101.PRE
XBRL Taxonomy Presentation Linkbase
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
*Previously filed with Form S-1 Registration Statement, on May 23, 2012
** Previously filed with the Annual Report on Form 10-K for the year ended January 31, 2014, on May 29, 2014
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
APT Systems, Inc.
By:
/s/ Glenda Dowie
Glenda Dowie, President and Chief Executive Officer
(Principal Executive Officer)
By:
/s/ Carl Hussey
Carl Hussey, Chief Financial Officer and Director
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Glenda Dowie
President, Chief Executive Officer and Director
May 6, 2016
Glenda Dowie
Title
Date
/s/ Joseph Gagnon
Secretary, Chief Technology Officer and Director
May 6, 2016
Joseph Gagnon
Title
Date
/s/ Carl Hussey
Treasurer, Chief Financial Officer and Director
May 6, 2016
,Carl Hussey
Title
Date