Frederick C. Bauman, Esq.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF INFORMATION STATEMENT MATERIALS IN CONNECTION WITH THIS NOTICE OF STOCKHOLDER ACTION BY WRITTEN CONSENT:
APT SYSTEMS, INC.
505 Montgomery Street, 11
th
Floor
San Francisco, CA 94111
(415) 200-1105
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
This Information Statement is being furnished to the stockholders of APT Systems, Inc., a Delaware corporation (the "Company," "we" or "us"), to advise them of the corporate actions that have been authorized by written consent of one of the Company's stockholders, who owns approximately 51.2 % of the Company's common stock as of the record date of February 1, 2017 (the "Record Date"). These actions are being taken without notice, meetings or votes in accordance with the Delaware General Corporation Law (DGCL), the Company’s Certificate of Incorporation and its Bylaws. This Information Statement is being mailed to the stockholders of the Company, as of the Record Date, on February 17, 2017.
On February 1, 2017, the Board of Directors approved, and recommended to the stockholders for approval, an amendment to the Company's Certificate of Incorporation (the "Certificate of Amendment") that will increase the Company’s authorized shares of common stock to 750,000,000 shares from 300,000,000 shares and increase the Company’s authorized shares of preferred stock to 100,000,000 shares from10,000,000 shares. The full text of the Certificate of Amendment is attached to this Information Statement as Appendix A.
On February 1, 2017, a stockholder holding 117,162,000 shares, or approximately 51.2%, of our issued and outstanding Common Stock (and thus a majority of our voting power) consented in writing to the Certificate of Amendment. This consent was sufficient to approve the Certificate of Amendment under Delaware law.
NO VOTE REQUIRED
We are not soliciting consents to approve the Certificate of Amendment. Delaware law and our Certificate of Incorporation permit the Company to take any action which may be taken at an annual or special meeting of its stockholders by written consent, if the holders of a majority of the shares of its Common Stock sign and deliver a written consent to the action to the Company.
NO APPRAISAL RIGHTS
Under Delaware corporate law, stockholders have no appraisal or dissenters' rights in connection with the Certificate of Amendment.
INTERESTS OF CERTAIN PARTIES IN THE MATTERS TO BE ACTED UPON
None of the directors or executive officers of the Company has any substantial interest resulting from the Certificate of Amendment that is not shared by all other stockholders pro rata, and in accordance with their respective interests.
COST OF THIS INFORMATION STATEMENT
The entire cost of furnishing this Information Statement will be borne by us. We will request brokerage houses, nominees, custodians, fiduciaries and other like parties to forward this Information Statement to the beneficial owners of our Common Stock held of record by them.
HOUSEHOLDING OF STOCKHOLDER MATERIALS
In some instances we may deliver only one copy of this Information Statement to multiple stockholders sharing a common address. If requested by phone or in writing, we will promptly provide a separate copy to a stockholder sharing an address with another stockholder. Requests by phone should be directed to our President and CEO at (415) 200-1105, and requests in writing should be sent to APT Systems, Inc., Attention President, 505 Montgomery Street, 11
th
Floor, San Francisco, CA 94111. Stockholders sharing an address who currently receive multiple copies and wish to receive only a single copy should contact their broker or send a signed, written request to us at the above address.
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AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK AND CREATING “BLANK CHECK” PREFERRED STOCK.
General
Our Certificate of Incorporation currently authorizes 300,000,000 shares of common stock and 10,000,000 shares of preferred stock.
On February 1, 2017 the Board of Directors, and on February 1, 2017 the consenting stockholder(s), approved the filing of an amendment to our Certificate of Incorporation to increase the authorized shares of common stock to 750,000,000 shares from 300,000,000 shares and to increase the Company’s authorized shares of preferred stock to 100,000,000 shares from 10,000,000 shares (the “Amendment”). The Preferred Stock may be issued from time to time in one or more series by our Board of Directors. Our Board of Directors will be expressly authorized to provide, by resolution(s) duly adopted by it prior to issuance, for the creation of each such series and to fix the designation and the powers, preferences, rights, qualifications, limitations and restrictions relating to the shares of each such series of Preferred Stock.
Reasons for the Increase in Authorized Shares of Common Stock
Our Certificate of Incorporation presently authorize 300,000,000 shares of common stock. As of January 31, 2017, there were 229,252,036 shares of common stock outstanding. In order to provide funding for the Company’s operations and exploration program, it will be necessary to issue additional shares of common stock, or promissory notes that are convertible into common stock. Most lenders that fund convertible notes require that the borrower direct its stock transfer agent to establish a reserve of authorized shares to be available for conversion of the lender’s convertible notes. If the market price of the borrower’s convertible stock declines, the reserve may be required to be increased. In the event that there are insufficient authorized shares to honor a conversion notice, there may be contractual penalties payable by the borrower. The increase in the Company’s authorized shares to 750,000,000 shares from 300,000,000 shares is intended to provide adequate authorized shares to cover the Company’s funding needs for at least the next 12 months.
Principal Effects of the Increase in Authorized Shares of Common Stock
While the authorization of additional shares of common stock is intended to increase our financial flexibility, it could also lead to dilution of the existing stockholders in the event that additional shares are sold for less than the current market price (or in the case of convertible debt, if the conversion price is less than our present market price). This is likely in the case of convertible debt, as convertible lenders typically require that they be permitted to convert at a discount from the market price at the time of conversion.
Reasons for the Increase in Authorized Shares of “Blank Check” Preferred Stock
We believe that for us to successfully execute our business strategy we will need to raise investment capital and it may be preferable or necessary to issue preferred stock to investors. Preferred stock usually grants the holders certain preferential rights in voting, dividends, liquidation or other rights in preference over a company’s common stock. Accordingly, in order to grant us the flexibility to issue our equity securities in the manner best suited for our Company, or as may be required by the capital markets, the Amendment will increase our authorized shares of “blank check” Preferred Stock to 100,000,000 shares from 10,000,000 shares of “blank check” Preferred Stock.
The term “blank check” refers to preferred stock, the creation and issuance of which is authorized in advance by our Stockholders and the terms, rights and features of which are determined by our Board of Directors upon issuance. The authorization of such “blank check” Preferred Stock permits our Board of Directors to authorize and issue Preferred Stock from time to time in one or more series without seeking further action or vote of our Stockholders.
Principal Effects of the Creation of More Authorized Shares of “Blank Check” Preferred Stock
Subject to the provisions of the Amendment and the limitations prescribed by law, our Board of Directors would be expressly authorized, at its discretion, to adopt resolutions to issue shares, to fix the number of shares and to change the number of shares constituting any series and to provide for or change the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, including dividend rights (including whether the dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption prices, conversion rights and liquidation preferences of the shares constituting any series of the Preferred Stock, in each case without any further action or vote by our stockholders. Our Board of Directors would be required to make any determination to issue shares of Preferred Stock based on its judgment as to what is in our best interests and the best interests of our stockholders. The Amendment will give our Board of Directors flexibility, without further stockholder action, to issue Preferred Stock on such terms and conditions as our Board of Directors deems to be in our best interests and the best interests of our stockholders.
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The authorization of the “blank check” Preferred Stock will provide us with increased financial flexibility in meeting future capital requirements. It will allow Preferred Stock to be available for issuance from time to time and with such features as determined by our Board of Directors for any proper corporate purpose. It is anticipated that such purposes may include, without limitation, exchanging Preferred Stock for Common Stock, the issuance for cash as a means of obtaining capital for our use, or issuance as part or all of the consideration required to be paid by us for acquisitions of other businesses or assets.
The issuance by us of Preferred Stock could dilute both the equity interests and the earnings per share of existing holders of our Common Stock. Such dilution may be substantial, depending upon the amount of shares issued. The newly authorized shares of Preferred Stock could also have voting rights superior to our Common Stock, and therefore would have a dilutive effect on the voting power of our existing Stockholders.
Any issuance of Preferred Stock with voting rights could, under certain circumstances, have the effect of delaying or preventing a change in control of our Company by increasing the number of outstanding shares entitled to vote and by increasing the number of votes required to approve a change in control of our Company. Shares of voting or convertible Preferred Stock could be issued, or rights to purchase such shares could be issued, to render more difficult or discourage an attempt to obtain control of our Company by means of a tender offer, proxy contest, merger or otherwise. The ability of our Board of Directors to issue such shares of Preferred Stock, with the rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of our Company by tender offer or other means. Such issuances could therefore deprive our stockholders of benefits that could result from such an attempt, such as the realization of a premium over the market price that such an attempt could cause. Moreover, the issuance of such shares of Preferred Stock to persons friendly to our Board of Directors could make it more difficult to remove incumbent managers and directors from office even if such change were to be favorable to stockholders generally.
There are currently no plans, arrangements, commitments or understandings for the issuance of the additional authorized shares of Preferred Stock.
Anti-Takeover Effects
The Amendment will provide us with additional shares of Preferred Stock which would permit us to issue additional shares of capital stock that could dilute the ownership of the holders of our Common Stock by one or more persons seeking to effect a change in the composition of our Board of Directors or contemplating a tender offer or other transaction for the combination of the Company with another company. The creation of the additional shares of Preferred Stock is not being undertaken in response to any effort of which our Board of Directors is aware to enable anyone to accumulate shares of our Common Stock or gain control of the Company. The purpose of the creation of the additional shares of Preferred Stock is to grant us the flexibility to issue our equity securities in the manner best suited for our Company, or as may be required by the capital markets. However, we presently have no plans, proposals, or arrangements to issue any of the newly authorized shares of Preferred Stock for any purpose whatsoever, including future acquisitions and/or financings.
Other than the creation of additional authorized shares of the “blank check” Preferred Stock, our Board of Directors does not currently contemplate the adoption of any other amendments to our Certificate of Incorporation that could be construed to affect the ability of third parties to take over or change the control of the Company. While it is possible that management could use the additional authorized shares of Common Stock or Preferred Stock to resist or frustrate a third-party transaction that is favored by a majority of the independent stockholders, we have no intent, plans or proposals to use the newly created Preferred Stock as an anti-takeover mechanism or to adopt other provisions or enter into other arrangements that may have anti-takeover consequences.
While the creation of the additional shares of “blank check” Preferred Stock may have anti-takeover ramifications, our Board of Directors believes that the financial flexibility offered by such corporate actions will outweigh the disadvantages. To the extent that these corporate actions may have anti-takeover effects, third parties seeking to acquire us may be encouraged to negotiate directly with our Board of Directors, enabling us to consider the proposed transaction in a manner that best serves the stockholders’ interests.
Effective Date
Under Rule 14c-2, promulgated pursuant to the Securities Exchange Act of 1934, as amended, the Amendment shall be effective twenty (20) days after this Information Statement is mailed to stockholders of the Company. We anticipate the effective date to be on or about March 9, 2017.
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