It's gonna be a bloodbath.
5. CONVERTIBLE NOTE PAYABLE
On January 8, 2014, the Company issued an unsecured convertible note to one accredited investor (as that term is defined under the Securities Act of 1933, as amended) in the aggregate amount of $50,000 This convertible note accrues interest at the rate of 19% per annum and is convertible only when a “qualifying financing” event takes place. The note was initially due and payable on May 7, 2014. The Company secured an initial extension of term of the convertible note to January 29, 2015 and subsequently a further extension to December 31, 2015.
The Note, but none of the accrued unpaid interest thereon, may convert into equity securities of the Company at the option of the holder if the Company issues equity securities and any other indebtedness in aggregate with gross proceeds of $1,200,000, including conversion of the Note (a “Qualified Financing”).
The original conversion price was equal to 80% of the per share price paid by the purchasers of such equity securities in the Qualified Financing. All accrued and unpaid interest will be paid by the Company at time of conversion.
If a Qualified Financing has not occurred and the Company elects to consummate a sale of the company prior to the maturity date of the Note, the Company will give the holder a minimum ten days prior written notice of an anticipated closing date of such sale of the Company in order that the holder may consider a conversion of their Note into equity in advance of a sale transaction.
No value has been assigned to the conversion feature attached to this convertible note payable as the possibility of the Company completing such a Qualifying Financing or completing a sale of the Company was, and continues to be, considered to be extremely remote.
Accrued interest payable as of October 31, 2015 and January 31, 2015 was $17,306 and $10,253, respectively. Interest expense was $2,390 and $7,180 for the three and nine months ended October 31, 2015, and $2,395 and 7,106 for the three and nine months ended October 31, 2014, respectively.
On 14th October, 2015 the company entered into an definitive convertible promissory note wherein the Promissory Note dated January 8, 2014 issued to Donald Meador for $ 50,000 was amended to state that the holder of the note may elect payment of the principal and/ or interest or part thereof, owed pursuant to this note to issue or exchange the requisite number of common stock shares of the company. The company has agreed to allow the holder to convert the shares at fixed price of 0.0001. Also, the holder shall not have the right and the company shall not have the obligation to convert all or any portion of the Convertible Promissory Note if and to the extent that the issuance to the Holder of shares of the Company’s Common Stock upon such conversion would result in the Holder being deemed the beneficial owner of the more than 4.99% of the then outstanding shares of Common Stock within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules promulgated there under.
Per ASC Topic 470 “Modification or Extinguishment of Debt the terms of the debt instrument have been substaintially modified such that the present value of the cash flows under the modified debt instrument is at least 10% lower than the present value of the remaining cash flows under the orginal convertible promissory note. The difference between the cash flows generated a gain on extinguishment of debt of $14,376 for the three and nine months ended October 31, 2015.
In addition, pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount; the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method. The beneficial conversion feature (debt discount) on the note payable pursuant to the Definitive Conversion Agreement is calculated to be $67,306 as of October 14, 2015. Of that amount, $15,195 was amortized and included in interest expense for the three and nine months ended October 31, 2015.
On October 14, 2015, the noteholder had opted to assign a portion of the loan for payment of $500 and received the approval of the board of directors. There was no change in terms. The principal amount due to the Noteholder has been reduced by $500 and the interest due has been adjusted accordingly. The Directors further agreed to renegotiate the conversion terms of the debt but with the condition that the noteholder may only convert shares providing the total holdings of the noteholder remain at less than five percent ownership of shares of the Company. On October 26, 2015, the Company issued 5,000,000 shares of its common stock valued at $.0001 per share to an unrelated third party in satisfaction of $500 in notes payable that were assigned on October 14, 2015, as referred to above. As such, the Company recognized a loss on the conversion of notes payable of $49,500 for the three and nine months ended October 31, 2015.
The convertible note payable and accrued interest was scheduled for repayment on May 31, 2015. However, we did not have the funds to make any repayment on the scheduled repayment date and were in default until June 29, 2015. We had further reached agreement with the convertible noteholder on September 20, 2015 to further extend the term of the convertible note payable to December 31, 2015.
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5. CONVERTIBLE NOTE PAYABLE (Continued)
There can be no assurance that we will be able to reach a further agreement to extend or amend the terms of the convertible note payable with the convertible noteholder or that we will be able to raise the funding necessary to repay the balance due under the convertible note payable.
On April 17, 2015, APT Systems, Inc. received $5,000 in additional short-term borrowing from the holder of the Convertible Note Payable, Mr. Donald Meador. This was a 60 day demand note. The note payable was scheduled to be repaid on June 16, 2015. However, we did not have the funds to make any repayment on the scheduled repayment date, of June 16, 2015. We had entered into discussions prior to the due date to extend the term of the note payable and effective June 29, 2015, we received confirmation that we had reached agreement with the noteholder to further extend the term of the note payable to October 31, 2015.
As of October 20, 2015 the Directors agreed that the noteholder be allowed to convert the loan to shares at the noteholder’s option for an extension of the loan until April 23, 2017. There was no additional cost due to the extension agreement. The note carries an interest rate of 8% per annum. Even with this extension, there can be no assurance that we will be able to raise the funding necessary to repay the balance due under the note payable at that time.
Accrued interest payable as of October 31, 2015 and January 31, 2015 was $101 and $0, respectively. Interest expense was $101 for the three and nine months ended October 31, 2015, and $0 for the three and nine months ended October 31, 2014, respectively.
6. NOTES PAYABLE
On November 21, 2014, the Company received $5,000 by way of an unsecured short-term loan from a non-related party for a term of nine months at 10% interest due upon repayment Accrued interest of $492 and $118 is included in the financial statements as of October 31, 2015 and January 31, 2015, respectively. The note payable and accrued interest was scheduled to be repaid on May 21, 2015. However, we did not have the funds to make any repayment on the scheduled repayment date and accordingly we went into default under the terms of this note payable on May 21, 2015 and the liability remains outstanding in full as of the date of the issuance of this report. The Company was successful in obtaining an extension until December 31, 2015 upon making an interim renewal payment of $400.00. There can be no assurance that we will be able to raise the funding necessary to repay the balance due under the extended note payable.
The Company entered into a stock transfer agency agreement dated November 19, 2014 with Pacific Stock Transfer. As part of the agreement, amounts owed to the Company’s previous stock transfer agent of $7,430 were paid by Pacific Stock Transfer, of which $2,189 is to be repaid to Pacific Stock Transfer by the Company in installments of $250 per month beginning on January 3, 2015. Accordingly we also recognized a $5,242 gain on the settlement of the $7,430 balance of accounts payable by assuming a loan of $2,189. Interest at 5% per annum accrues on the unpaid balance of the loan for each month. As of October 31, 2015 and January 31, 2015, accrued interest on this loan was $93 and $9, respectively. As of October 31, 2015, and as of the date of the issuance of this report, we have not had the funds to make any payments under the term of this agreement and consequently were in default under the terms of this agreement as of October 31, 2015 and continue to be in default under the terms of this agreement as of the date of the issuance of this report. There can be no assurance that we will be able to reach a further agreement to extend or amend the terms of the agreement or that we will be able to raise the funding necessary to repay the balance due under this agreement. The initiation of any collection action by this creditor could affect our ability to execute on our business plan and operations.
On October 2, 2015, the Company received $12,500 by way of an unsecured short-term loan from a non-related party for a term of one year. Principal and interest at 8% per annum accrued thereon are due and payable on October 1, 2016. Accrued interest of $82 and $0 is included in the financial statements as of October 31, 2015 and January 31, 2015, respectively.
The Company had executed three short-term lending arrangements with non-related party, Mr. Raymond C. Dove, by July 31, 2015. The effective dates of the loans are May 1, 2015, June 22, 2015 and June 27, 2015. The loan amounts are $25,000, $3,000 and $2700, respectively, with interest accruing at 5% per annum. Repayment is in one lump sum due and payable on or before December 4 through December 31, 2015. Additional short term loans were provided in September in the amount of $1,950, with a maturity date of January 31, 2016
