8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 22, 2006

QI Systems Inc.
(Exact name of registrant as specified in its charter)

000-30948

(Commission File Number)

Delaware
(State or other jurisdiction of incorporation) 20-5126146
(IRS Employer Identification No.)

609 Cheek Sparger Road, Suite 300, Colleyville, Texas, USA 76034
(Address of principal executive offices and Zip Code)

(817) 427-8611
Registrant's telephone number, including area code

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

On September 22, 2006, QI Systems Inc. (the "Company") became obligated to repay a 5-year, subordinated, convertible, 10% interest-bearing loan (the "Loan") in the amount of $150,000 to a shareholder of the Company. The agreement, pursuant to which the Loan was made to the Company by the shareholder, provides that the Loan can be converted into restricted common stock of the Company at a price of seven cents ($0.07) per share. In addition, for each share of stock issued, a warrant to purchase additional shares of common stock of the Company will be issued at an exercise price of twenty cents ($0.20) per share. The warrants will expire two years from the date the Loan is converted. The Company may repay this Loan at any time prior to maturity with no prepayment penalty.

Item 3.02 Unregistered Sales of Equity Securities.

On October 3, 2006, the Company completed a private placement of 2,408,873 Units (the "Units") at seven cents ($0.07) per Unit for gross proceeds of $168,621. Each Unit is comprised of one restricted share of common stock of the Company and one share purchase warrant. Each warrant entitles the holder to purchase one share of common stock of the Company at $0.20 per share. The warrants expire on October 3, 2008. Included in this total are 244,588 Units sold to officers of the Company.

The issuance of the Units was made without registration under the Securities Act of 1933, as amended (the "Act") in reliance upon Section 4(2) and Regulation D promulgated under the Act. All of the purchasers of the Units are "accredited investors" as that term is defined under the Act and received the Units for their own account and for investment and not with a view to distribute or resell the Units. The issuance of theUnits to the purchasers did not involve any form of general solicitation or advertising or the use of underwriters, and no commissions were paid in connection therewith. A copy of the form of the subscription agreement for the offering and a copy of the form of share purchase warrant issued to the purchasers are attached to this report as Exhibits 10.1 and 10.2, respectively and are incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(c)	Exhibits.
Exhibit Number		Description
10.1		Form of Subscription Agreement.
10.2		Form of Share Purchase Warrant.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

QI SYSTEMS INC.

By: /s/ Steve R. Garman

Name: Steven R. Garman
Title: President and Chief Executive Officer
Dated: October 4, 2006

I:\CORPORATE\CLIENTS\QI Systems\General\2006\SEC Filings\8-K\20061003 SEC 8-K Sub Convert Debt PP-v3-C&Hsbc(10-4-06).doc

EX-10.1

SUBSCRIPTION AGREEMENT

QI Systems Inc.

Private Placement Offering

SUBSCRIPTIONS WILL BE ACCEPTED ONLY FROM "ACCREDITED INVESTORS" AS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")

The undersigned agrees to purchase Units of QI Systems, Inc. ("QI SYSTEMS") at a purchase price of $0.07 per Unit in the Private Placement Offering dated September 06, 2006. "). Each Unit consists of one share of common stock with a $0.001 par value ("Shares") and one warrant to purchase an additional share of common stock at the additional purchase price of $0.20 per share which is exercisable one hundred eighty (180) days after the close of the offering. Such warrant to purchase an additional share of common stock shall expire two (2) years from the closing of the Offering. If the Subscription stated below is accepted by QI SYSTEMS, the undersigned hereby executes and agrees to all the terms of offering and that the undersigned is an "Accredited Investor" as defined in Rule 501 of Regulation D under the Securities Act.

PLEASE, MAKE ALL CHECKS PAYABLE TO
QI Systems Inc.

___________________________________

Purchaser:		Subscription $:
		# of shares:
(Signature / Title, if applicable)		Tax Year Ends:
Date:	,	Tax I.D.# or SS#:
Mailing Address:		Residence Address:
Telephone Number:		Telephone Number:

THIS IS A SPECULATIVE INVESTMENT SUITABLE ONLY FOR THOSE ACCREDITED INVESTORS CAPABLE OF SUSTAINING A TOTAL LOSS.

Accepted this ________ day of _______________________, _____________

QI Systems, Inc.

BY: _______________________________________

THE SHARES SUBSCRIBED FOR HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

EX-10.2

Form of Warrant

NO WARRANT MAY BE EXERCISED PRIOR TO A REGISTRATION STATEMENT COVERING THE SHARES OF COMMON STOCK UNDERLYING THE WARRANTS BEING DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933. UNLESS OTHERWISE PROVIDED HEREIN, THE FILING OF ANY SUCH REGISTRATION STATEMENT SHALL BE AT THE SOLE DISCRETION OF THE COMPANY. THE WARRANTS MAY ONLY BE EXERCISED IN THOSE STATES IN WHICH IT IS LEGALLY PERMISSIBLE TO DO SO.

QI SYSTEMS INC.

(Incorporated Under the Laws of British Columbia)

WARRANT NUMBER NUMBER OF WARRANTS

WA-

Warrants to Purchase Common Stock

CERTIFICATE FOR WARRANTS TO PURCHASE COMMON STOCK

This Warrant Certificate Certifies that or registered assigns (the "Warrant Holder"), is the registered owner of the above indicated number of Warrants that are two (2) year Warrants. One (1) Warrant entitles the Warrant Holder to purchase one share of common stock (the " Common Stock"), $0.001 par value (the "Share" or "Shares"), from the Company at a purchase price of $0.20 per share of Common Stock (the "Exercise Price").

Upon surrender of this Warrant Certificate with the exercise form hereon duly completed and executed with payment of the Exercise Price at the office of the Company's Transfer Agent, or its successors or assigns (the "Warrant Agent"), subject to the conditions set forth herein and in a Warrant Agreement between the Company and the Warrant Agent, which Warrant Agreement is incorporated herein by this reference.

The Exercise Price, the number of Shares purchasable upon exercise of each Warrant, the number of Warrants outstanding and the Expiration Date are subject to adjustments upon the occurrence of certain events enumerated in the Warrant Agreement between the Company and the Warrant Agent, to which this Warrant Certificate to the end of this Warrant Certificate.

The Warrant Holder may exercise all or any number of Warrants. Reference is hereby made to the provisions of the Warrant Agreement, all of which are incorporated by reference in and made a part of this Warrant Certificate.

Upon due presentment for transfer of this Warrant Certificate at the office of the Warrant Agent, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants, subject to any adjustments made in accordance with the provisions of the Warrant Agreement, shall be issued to the transferee in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, upon payment of any applicable transfer fee to the Warrant Agent and any tax or governmental charge imposed in connection with such transfer.

The Warrant Holder of the Warrants evidenced by this Warrant Certificate may exercise all during the Exercise Period and in the manner stated hereon. The Exercise Price shall be payable in lawful money of the United States of America and in cash or by certified or bank cashier's check or bank draft payable to the order of the Company. If upon exercise of any Warrants evidenced by this Warrant Certificate the number of Warrants exercised shall be less than the total number of Warrants so evidenced, there shall be issued to the Warrant Holder a new Warrant Certificate evidencing the number of Warrants not so exercised. No fractional shares may be purchased.

No Warrant may be exercised after 5:00 p.m. Central Standard Time on the Expiration Date and any Warrant not exercised by such time shall expire and become void unless extended by the Company.

This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent.

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its President.

Dated: ____________________________

QI SYSTEMS INC.

By_______________________________

Steven R. Garman, President and CEO

COUNTERSIGNED AND REGISTERED:

By________________________________

WARRANT EXERCISE FORM

The undersigned Warrant Holder hereby elects to exercise warrants to purchase a total of ____________ Shares of the Common Stock of QI SYSTEMS, INC., a British Columbia corporation (the "Company"), in accordance with the Warrant Certificate and the Warrant Agreement of the Company.

Simultaneous with the surrender of this Warrant Exercise Form, the undersigned hereby tenders to the Warrant Agent the sum of $___________, representing the full Exercise Price for the above-referenced Warrant Shares.

___________________________________

Signature Date

___________________________________

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