UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2014
[ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________________ to ________________
Commission file number 000-31909
ALTERNET SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Nevada | 88-0473897 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2665 S Bayshore Drive Miami FL | 33133 |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: | 786-265-1840 |
Securities registered pursuant to Section 12(b) of the Act: |
Title of Each Class | Name of Each Exchange On Which Registered |
N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the last 90 days.
Yes
[X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes [
] No [X]
Indicate the number of shares outstanding of each of the
registrants classes of common stock as of the latest practicable date.
96,599,064 as of May 12, 2014
TABLE OF CONTENTS
Page | |
PART I - FINANCIAL INFORMATION | |
Item 1. Condensed Consolidated Financial Statements | 5 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 23 |
Item 3. Quantitative and Qualitative Disclosures about Marketing Risk | 32 |
Item 4. Controls and Procedures | 32 |
PART II - OTHER INFORMATION | |
Item 1. Legal Proceedings | 34 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 34 |
Item 3. Defaults Upon Senior Securities | 35 |
Item 4. Mine Safety Disclosures | 35 |
Item 5. Other Information | 35 |
Item 6. Exhibits | 35 |
SIGNATURES | 35 |
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Our unaudited interim consolidated financial statements for the three month period ended March 31, 2014 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
ALTERNET SYSTEMS INC.
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
ALTERNET SYSTEMS INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
As at March 31, 2014 and December 31, 2013 |
March 31, | December 31, | |||||
2014 | 2013 | |||||
(Unaudited) | ||||||
$ | $ | |||||
ASSETS | ||||||
Current Assets | ||||||
Cash | 2,151,028 | - | ||||
Accounts receivable, net | 11,370 | |||||
Sale proceeds held in escrow | 667,264 | - | ||||
Deposits and other assets | 13,500 | 21,785 | ||||
Investment in digital currency | 125,000 | - | ||||
Current assets of discontinued operations | - | 2,048,824 | ||||
Total current assets | 2,968,162 | 2,070,609 | ||||
Fixed assets, net | - | 2,733 | ||||
TOTAL ASSETS | 2,968,162 | 2,073,342 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | ||||||
Current liabilities | ||||||
Checks issued in excess of bank balance | - | 168 | ||||
Accounts payable and accrued charges | 2,054,303 | 1,466,546 | ||||
Wages payable | 1,739,705 | 1,672,273 | ||||
Accrued taxes | 1,240,711 | 1,671,353 | ||||
Deferred gain on sale | 667,264 | - | ||||
Other loans payable, net of beneficial conversion feature | 610,731 | 1,543,509 | ||||
Due to related parties | 109,952 | 102,464 | ||||
Current liabilities of discontinued operations | - | 783,145 | ||||
Total current liabilities | 6,422,666 | 7,239,458 | ||||
Long term debt | - | 312,667 | ||||
6,422,666 | 7,552,125 | |||||
Stockholders' equity (deficiency) | ||||||
Capital stock | ||||||
Authorized:
100,000,000 common shares with a par value of
$0.00001 Issued and outstanding: 97,050,722 common shares (2013 95,737,389) |
970 | 957 | ||||
Additional paid-in capital | 14,583,380 | 14,453,693 | ||||
Private placement subscriptions | 630,362 | 130,362 | ||||
Share subscription receivable | (375,000 | ) | - | |||
Obligation to issue shares | 153,500 | 2,800 | ||||
Deferred compensation | (181,250 | ) | (113,125 | ) | ||
Accumulated other comprehensive income | (331,409 | ) | (331,332 | ) | ||
Accumulated deficit | (17,513,228 | ) | (17,939,881 | ) | ||
(3,032,675 | ) | (3,796,526 | ) | |||
Non-controlling interest | (421,829 | ) | (1,682,257 | ) | ||
(3,454,504 | ) | (5,478,783 | ) | |||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | 2,968,162 | 2,073,342 |
The accompanying notes are an integral part of these condensed consolidated financial statements
ALTERNET SYSTEMS INC. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(Unaudited) |
Three months ended | ||||||
March 31, | ||||||
2014 | 2013 | |||||
$ | $ | |||||
REVENUE | - | 141 | ||||
OPERATING EXPENSES | ||||||
Bad debts | - | 1,771 | ||||
Depreciation | 2,733 | 282 | ||||
Investor relations | 80,509 | 24,447 | ||||
Licenses, dues, and insurance | 1,727 | 686 | ||||
Research and development | 500,000 | - | ||||
Management and consulting | 222,651 | 13,977 | ||||
Office and general | 33,472 | 10,360 | ||||
Professional fees | 58,545 | 57,818 | ||||
Rent | 7,333 | 8,962 | ||||
Salaries | 30,723 | 79,002 | ||||
Travel | 56,069 | 15,715 | ||||
993,762 | 213,020 | |||||
NET LOSS BEFORE OTHER ITEMS | (993,762 | ) | (212,879 | ) | ||
OTHER ITEMS | ||||||
Interest expense | (39,118 | ) | (97,414 | ) | ||
Gain on foreign exchange | 1,098 | 148 | ||||
(38,020 | ) | (97,266 | ) | |||
NET LOSS FROM CONTINUING OPERATIONS | (1,031,782 | ) | (310,145 | ) | ||
NON-CONTROLLING INTEREST FROM CONTINUING OPERATIONS | (12,618 | ) | (161 | ) | ||
NET LOSS ATTRIBUTABLE TO ALTERNET SYSTEMS INC. FROM CONTINUING OPERATIONS | (1,019,164 | ) | (309,984 | ) | ||
DISCONTINUED OPERATIONS | 2,922,523 | (193,801 | ) | |||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ALTERNET SYSTEMS INC. | 1,903,359 | (503,785 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements
ALTERNET SYSTEMS INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
Three months ended | ||||||
March 31, | ||||||
2014 | 2013 | |||||
$ | $ | |||||
OPERATING ACTIVITIES | ||||||
Net income attributable to Alternet Systems Inc. | 1,903,359 | (503,785 | ) | |||
Non-controlling interest | (12,618 | ) | (161 | ) | ||
Add items not affecting cash | ||||||
Depreciation | 2,733 | 282 | ||||
Interest accrued | (2,114 | ) | 33,685 | |||
Bad debt expense | - | 1,771 | ||||
Shares for services | 129,700 | 133,482 | ||||
Accretion of debt discount | - | 63,321 | ||||
Unrealized foreign exchange loss (gain) | 1,481 | (42,864 | ) | |||
Deferred compensation | 81,875 | (91,875 | ) | |||
Changes in non-cash working capital: | ||||||
Accounts receivable | (11,370 | ) | 13,087 | |||
Deposits and other assets | 8,285 | - | ||||
Accounts payable and accrued charges | 588,457 | 318,535 | ||||
Wages payable | 67,432 | 110,379 | ||||
Accrued taxes | (430,642 | ) | 59,186 | |||
Due to related parties | 6,007 | (9,522 | ) | |||
Net cash provided by operating activities | 2,332,585 | 85,521 | ||||
FINANCING ACTIVITIES | ||||||
Proceeds from loans payable | 150,000 | 313,000 | ||||
Payments for loans payable | (1,080,664 | ) | (20,000 | ) | ||
Payments for long term debt | (312,667 | ) | - | |||
Checks issued in excess of bank balance | (168 | ) | (3,713 | ) | ||
Net cash (used in) provided by financing activities | (1,243,499 | ) | 289,287 | |||
EFFECT OF EXCHANGE RATES ON CASH | (77 | ) | 11 | |||
CASH FLOWS FROM CONTINUING OPERATIONS | 1,089,009 | 374,819 | ||||
CASH FLOWS FROM DISCONTINUED OPERATIONS | 1,062,019 | (373,059 | ) | |||
NET INCREASE IN CASH DURING THE PERIOD | 2,151,028 | 1,760 | ||||
CASH, BEGINNING OF PERIOD | - | - | ||||
CASH, END OF PERIOD | 2,151,028 | 1,760 |
The accompanying notes are an integral part of these condensed consolidated financial statements
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Alternet Systems Inc., through its subsidiaries (Alternet or the Company), plans to enter the digital currency space and provide end to end security for digital currencies, launch its digital currency bank, fully compliant with government regulations, FX exchange capabilities, offer micro payment services to the unbanked and global diasporas and alternative financial services to the retail industry emerging markets. Previously, the Company provided leading edge mobile financial solutions and mobile security and related solutions with the former being offered throughout the Western Hemisphere, but most actively in Central and South America and the Caribbean, and the latter being offered globally. As detailed in Note 8, Discontinued Operations, the Company, with the ATS Transaction discontinued providing mobile financial solutions and mobile security.
These condensed consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At March 31, 2014 the Company had a working capital deficiency of $3,454,504. The Companys continued operations are dependent on the successful implementation of its business plan, its ability to obtain additional financing as needed, continued support from creditors, settling its outstanding debts, and ultimately attaining profitable operations. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. Results for interim periods should not be considered indicative of results for a full year. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the companys Annual Report on Form 10-K for the year ended December 31, 2013, collectively referred to as the 2013 Annual Report. The consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained.
Principles of Consolidation
These condensed consolidated financial statements include the accounts of the following companies:
. | Alternet Systems Inc. | |
. | AI Systems Group, Inc., a wholly owned subsidiary of Alternet | |
. | Tekvoice Communications, Inc., a wholly owned subsidiary of Alternet | |
. |
Alternet Transactions Systems, Inc. (ATS), a wholly owned subsidiary of Alternet (formerly a 51% owned subsidiary. See Note 8, Discontinued Operations) | |
. |
Utiba Guatemala, S.A., a wholly-owned subsidiary of Alternet Transactions Systems Inc. | |
. |
International Mobile Security (IMS), Inc, a 60% owned subsidiary of Alternet | |
. |
Megatecnica, S.A., a wholly owned subsidiary of International Mobile Security, Inc. | |
. |
Alternet Financial Solutions, L.L.C, wholly-owned subsidiary of Alternet | |
. |
Alternet Payment Solutions, L.L.C, wholly-owned subsidiary of Alternet |
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the financial statement date and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, fair value of convertible notes payable and derivative liabilities. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between estimates and the actual results, future results of operations will be affected.
Revenue Recognition
Up to March 4, 2014, the Company entered into sales arrangements that may provide for multiple deliverables to a customer. Software sales may include the sale of a software license, implementation/customization services, and/or ongoing support services.
In order to treat deliverables in a multiple-deliverable arrangement as separate units of accounting, the deliverables must have standalone value upon delivery. If the deliverables have standalone value upon delivery, the Company accounts for each deliverable separately. Licenses, support fees, and hosted services have standalone value as such services are often sold separately. In determining whether implementation/customization services have standalone value, the Company considers the following factors for each agreement: availability of the services from other vendors, the nature of the services, the timing of when the services contract was signed in comparison to the services start date, and the contractual dependence of the customization service on the customer’s satisfaction with the implementation/customization services work.
To date, the Company has concluded that all of the services included in multiple-deliverable arrangements executed have standalone value when multiple deliverables included in an arrangement are separated into different units of accounting. The arrangement consideration is allocated to the identified separate units based on a relative selling price hierarchy. The Company determines the relative selling price for a deliverable based on its vendor-specific objective evidence of selling price (“VSOE”), if available, or its best estimate of selling price (“BESP”), if VSOE is not available. The Company has determined that third-party evidence of selling price (“TPE”) is not a practical alternative due to differences in its service offerings compared to other parties and the availability of relevant third party pricing information. The amount of revenue allocated to delivered items is limited by contingent revenue, if any.
The Company has not established VSOE for a majority of its revenue due to lack of pricing consistency, the customer specific requests, and other factors. Accordingly, the Company uses its BESP to determine the relative selling price.
The Company determined BESP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of the Company’s transactions, the geographic area where services are sold, its market strategy, historic contractually stated prices and prior relationships, and future service sales with certain customers. The determination of BESP is made through consultation with and approval by the Company’s management, taking into consideration the market strategy. As the Company’s market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes in selling prices.
Revenue was recognized upon delivery or when services were performed, provided that persuasive evidence of a sales arrangement exists, both title and risk of loss have passed to the customer, and collection was reasonably assured. Persuasive evidence of a sales arrangement existed upon execution of a written sales agreement or signed purchase order that constituted a fixed and legally binding commitment between the Company and the buyer. Specifically, revenue from the sale of licenses is recognized when the title of the license transfers to the customer while revenue from implementation/customization services performed is recognized upon successful completion of a User Acceptance Test (“UAT”). If a successful UAT was never achieved and the sales arrangement was cancelled, the Company recognized any deferred revenue not required to be refunded to the customer.
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
The Company’s payment terms vary by client. To reduce credit risk in connection with software license and support sales, the Company may, depending upon the circumstances, require significant deposits prior to delivery. In some circumstances, the Company may require payment in full for its products prior to delivery. For support and hosted services, the Company sold customers service agreements that were recorded as deferred revenue and provided for payment in advance on either an annual or other periodic basis. Revenue for these support services was recognized ratable over the term of the agreement.
Subsequent to March 4, 2014 the Company is implementing the criteria outlined in SAB 104 and recognizing revenue when:
Research and Development
The Company expenses costs when incurred for items associated with researching and developing new sources of revenue.
Digital Currency Transactions
The Company enters into transactions that are denominated in digital currency (Ven). These transactions result in digital currency denominated assets and liabilities that are revalued periodically. Upon revaluation, transaction gains and losses are generated and are reported as unrealized gains and losses in other gain (loss), net in the Consolidated Statements of Operations. The Company determines fair value as of the balance sheet date based on Level I inputs which consist of quoted prices in active markets. The value of the Company’s digital currency is $125,000 as of March 31, 2014 Due to the uncertainty regarding the current and future accounting treatment and tax, legal and regulatory requirements relating to digital currencies or transactions utilizing digital currencies, such accounting, legal, regulatory and tax developments or other requirements may adversely affect us.
Long-Lived Assets Including Other Acquired Intellectual Property
Management monitors the recoverability of long-lived assets and intangibles based on estimates using factors such as current market value, future asset utilization, and future undiscounted cash flows expected to result from its investment or use of the related assets. The Company’s policy is to record any impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable. Any impairment loss is calculated as the excess of the carrying value over estimated realizable value. The Company did not record any significant impairments on long-lived assets during the three months ended March 31, 2014 and 2013.
Intangible assets deemed to have an indefinite life are not amortized but are subject to impairment tests at each reporting date. The Company assesses the impairment of intangible assets on a quarterly basis or whenever events or changes in circumstances indicate that the fair value is less than its carrying value. If the carrying amount of the intangible asset exceeds its fair value, the intangible asset is considered impaired and the second step of the test is performed to determine the amount of impairment loss, if any. The Company did not recognize any impairment charges related to indefinite lived intangible assets during the three months ended March 31, 2014 and 2013.
Income (Loss) per Share
The Company computes net earnings (loss) per share in accordance with ASC Topic 260, Earnings Per Share. Topic 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations. 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 warrants using the treasury stock method. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
At March 31, 2014 and December 31, 2013 the Company had no warrants or options outstanding to consider in income (loss) per share calculation.
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-Based Compensation
The Company accounts for its share-based compensation plans in accordance with the fair value recognition provisions of ASC 718 Compensation-Stock Compensation . The Company utilizes the Black-Scholes option pricing model as its method for determining the fair value of stock option grants. ASC 718 requires the fair value of all share-based awards that are expected to vest to be recognized in the statements of operations over the service or vesting period of each award. The Company uses the straight-line method of attributing the value of share-based compensation expense for all stock option grants over the requisite service period.
Reclassification
Certain comparative figures have been reclassified in order to conform to the current years presentation.
Recent Accounting Pronouncements
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU is to be applied prospectively for all disposals of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods beginning on or after December 15, 2015. Additionally, this ASU is to be applied to all business activated that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015. ASU No 2014-08 addresses concerns about the accounting for discontinued operations and the disposal of small groups of assets that are recurring in nature but qualify as discontinued operations under subtopic 205-20 Management does not anticipate that this accounting pronouncement will have any material future effect on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.
NOTE 3 FIXED ASSETS
March 31, 2014 | |||||||||
Accumulated | Net Book | ||||||||
Cost | Depreciation | Value | |||||||
$ | $ | $ | |||||||
Computer equipment | 320,933 | 320,933 | - | ||||||
Computer software | 75,128 | 75,128 | - | ||||||
Equipment | 10,576 | 10,576 | - | ||||||
406,637 | 406,637 | - |
December 31, 2013 | |||||||||
Accumulated | Net Book | ||||||||
Cost | Depreciation | Value | |||||||
$ | $ | $ | |||||||
Computer equipment | 320,933 | 319,700 | 1,233 | ||||||
Computer software | 75,128 | 73,866 | 1,262 | ||||||
Equipment | 10,576 | 10,338 | 238 | ||||||
406,637 | 403,904 | 2,733 |
Depreciation expense for the three months ended March 31, 2014 and March 31, 2013 was $2,733 and $282, respectively.
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 5 - CONVERTIBLE DEBENTURE NOTES AND OTHER LOANS PAYABLE
Convertible Debentures
On August 29, 2012, the Company issued a note payable in the amount of $44,438. The note carries interest at the rate of 10% per annum and was due on February 28, 2013. Since the note was not repaid on maturity, the holder is entitled to convert all or any portion of the original principal face value of the note into shares of common stock of the Company at a conversion value of $0.075. The beneficial conversion feature discount resulting from the conversion price being $0.045 below the market price on August 29, 2012 of $0.12 provided a value of $26,663. During the quarter ended March 31, 2014, $Nil (March 31, 2013 – $8,596) of the debt discount was amortized. As of March 31, 2014, $51,146 (December 31, 2013 - $50,051) of principal, accrued interest, and unamortized debt discount on this note was included in other loans payable. The note is past due and continues to accrue interest at the rate of 10% per annum.
On September 26, 2012, the Company issued a note payable in the amount of $60,000. The note carries interest at the rate of 10% per annum and was due on March 31, 2013. Since the note was not repaid on maturity, the holder is entitled to convert all or any portion of the original principal face value of the note into shares of common stock of the Company at a conversion value of $0.075. The beneficial conversion feature discount resulting from the conversion price being $0.045 below the market price on September 26, 2012 of $0.12 provided a value of $36,000. During the quarter ended March 31, 2014, $Nil (March 31, 2013 - $17,419) of the debt discount was amortized. As of March 31, 2014, $68,597 (December 31, 2013 - $67,118) of principal and accrued interest, and unamortized debt discount on this note was included in other loans payable. The note is past due and continues to accrue interest at the rate of 10% per annum.
On October 19, 2012, the Company issued a note payable in the amount of $80,000. The note carries interest at the rate of 10% per annum and was due on April 30, 2013. Since the note was not repaid on maturity, the holder is entitled to convert all or any portion of the original principal face value of the note into shares of common stock of the Company at a conversion value of $0.075. The beneficial conversion feature discount resulting from the conversion price being $0.085 below the market price on October 19, 2012 of $0.16 provided a value of $80,000. During the quarter ended March 31, 2014, $ Nil (March 31, 2013 - $37,306) of the debt discount was amortized. As of March 31, 2014, $90,959 (December 31, 2013 - $88,986) of principal, accrued interest, and unamortized debt discount on this note was included in other loans payable. The note is past due and continues to accrue interest at the rate of 10% per annum.
On January 25, 2013, the Company issued a note payable in the amount of $80,000. The note carries interest at the rate of 10% per annum and was due on October 22, 2013. Since the note was not repaid on maturity, the holder is entitled to convert all or any portion of the original principal face value of the note into shares of common stock of the Company at a conversion value of $0.075. The beneficial conversion feature discount resulting from the conversion price being $0.055 below the market price on January 25, 2013 of $0.13 provided a value of $58,667. During the quarter ended March 31, 2014, $Nil (March 31, 2013 - $Nil) of the debt discount was amortized. As of March 31, 2014, $89,447 (December 31, 2013 - $87,474) of principal, accrued interest, and unamortized debt discount on this note was included in other loans payable. The note is past due and continues to accrue interest at the rate of 10% per annum.
On April 24, 2013, the Company issued a note payable in the amount of $50,000. The note carries interest at the rate of 10% per annum and was due on October 31, 2013. Since the note was not repaid on maturity, the holder is entitled to convert all or any portion of the original principal face value of the note into shares of common stock of the Company at a conversion value of $0.075. The beneficial conversion feature discount resulting from the conversion price being $0.025 below the market price on April 24, 2013 of $0.10 provided a value of $16,667. During the quarter ended March 31, 2014, $Nil (March 31, 2013 - $Nil) of the debt discount was amortized. As of March 31, 2014, $54,685 (December 31, 2013 - $53,452) of principal, accrued interest, and unamortized debt discount on this note was included in other loans payable. The note is past due and continues to accrue interest at the rate of 10% per annum.
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 5 - CONVERTIBLE DEBENTURE NOTES AND OTHER LOANS PAYABLE (continued)
Other Loans Payable
On January 25, 2011, the Company signed a promissory note whereby the Company agreed to repay a director $20,000 plus interest at 10% per annum on April 25, 2011. This loan was not repaid on its maturity and has since been renewed several times with the unpaid principal and interest being capitalized to the loan balance on each renewal. On July 1, 2013, the director combined this loan with a total unpaid principal and interest balance of $2,864 with two other matured loans and extended the maturity date to December 29, 2013. All other terms remained the same.
On February 9, 2011, the Company signed a promissory note whereby the Company agreed to repay a director $5,000 plus interest at 10% per annum on May 9, 2011. This loan was not repaid on its maturity and has since been renewed several times with the unpaid principal and interest being capitalized to the loan balance on each renewal. On July 1, 2013, the director combined this loan with a total unpaid principal and interest balance of $6,324 with two other matured loans and extended the maturity date to December 29, 2013. All other terms remained the same.
On February 11, 2011, the Company signed a promissory note whereby the Company agreed to repay a director $8,988 plus interest at 10% per annum on May 11, 2011. This loan was not repaid on its maturity and has since been renewed several times with the unpaid principal and interest being capitalized to the loan balance on each renewal. On July 1, 2013, the director combined this loan with a total unpaid principal and interest balance of $11,365 with two other matured loans and extended the maturity date to December 29, 2013. All other terms remained the same.
On July 1, 2013, the above three promissory notes to one director of the Company were combined which capitalized the unpaid principal and interest on the three separate promissory notes totaling $20,553 into one promissory note and extended the maturity date to December 29, 2013. All other terms remained the same. In April 2014, the note was renewed retroactively from December 29, 2013 until December 29, 2014 which included interest of $1,025 being capitalized to the principal. As of March 31, 2014, the Company has accrued $550 (December 31, 2013 - $1,036) of interest relating to this loan. The balance owing of $22,128 is included in due to related parties.
On February 1, 2012, the Company signed a promissory note whereby the Company agreed to repay a creditor $200,000 plus interest at 24% per annum on May 1, 2012. On May 1, 2012, the Company signed a new promissory note with the creditor which capitalized the unpaid principal and interest of $211,836 under the previous promissory note and extended the maturity date to September 30, 2012. On October 1, 2012, the Company signed a new promissory note with the creditor which capitalized the unpaid principal and interest of $233,147 under the previous promissory note and extended the maturity date to January 31, 2013. The note was not repaid by January 31, 2013; as a result, $18,856 of unpaid interest was capitalized to the principal resulting in a total principal balance outstanding of $252,003 which is incurring a late payment charge of 0.10% per day on any unpaid balances. As of December 31, 2013, the Company had accrued $75,507 of late payment charges which was included in the outstanding principal and interest balance of $309,274. On March 6, 2014, the Company paid the creditor $293,480 as full repayment of the loan and realized a gain of $15,794 which was recorded against interest expense.
On October 10, 2012, the Company signed a promissory note whereby the Company agreed to repay a creditor $50,000 plus interest at 10% per annum on April 8, 2013. On April 9, 2013, the Company signed a new promissory note with the creditor which capitalized the unpaid principal and interest of $52,479 under the previous promissory note and extended the maturity date to October 6, 2013. The note was not repaid by October 6, 2013 and continues to accrue interest at the rate of 10% per annum. As of March 31, 2014, the Company has accrued $5,133 (December 31, 2013 - $3,839) of interest relating to this loan.
On November 19, 2012, the Company signed a promissory note whereby the Company agreed to repay a creditor $100,000 plus interest at 10% per annum on May 18, 2013. The loan was not repaid by its maturity date; as such, a late payment charge is being accrued on the unpaid principal and interest of $104,959. On December 9, 2013, the Company paid the creditor $15,000 towards the late payment charges. As of December 31, 2013, the Company had accrued $13,260 of interest relating to this loan. On March 6, 2014, the Company paid the creditor $119,059 as full repayment of the loan.
On November 19, 2012, the Company signed a promissory note whereby the Company agreed to repay a creditor $100,000 plus interest at 10% per annum on May 18, 2013. The loan was not repaid by May 18, 2013 and continues to accrue interest at the rate of 10% per annum. On July 24, 2013, the creditor combined this loan with another matured loan and extended the maturity date to January 20, 2014. All other terms remained the same. Refer to the promissory note dated July 24, 2013 for further details. The combined loan was repaid in full on March 6, 2014.
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 5 - CONVERTIBLE DEBENTURE NOTES AND OTHER LOANS PAYABLE (continued)
Other Loans Payable (continued)
On December 5, 2012, the Company signed a promissory note whereby the Company agreed to repay a creditor $25,000 plus interest at 10% per annum on June 3, 2013. On June 3, 2013, the Company signed a new promissory note with the creditor which capitalized the unpaid principal and interest of $26,240 under the previous promissory note and extended the maturity date to December 1, 2013. The note was not repaid by December 1, 2013 and continues to accrue interest at the rate of 10% per annum. As of March 31, 2014, the Company has accrued $2,164 (December 31, 2013 - $1,517) of interest relating to this loan.
On January 24, 2013, the Company signed a promissory note whereby the Company agreed to repay a creditor $50,000 plus interest at 10% per annum on July 23, 2013. On July 24, 2013, the creditor combined this loan with another matured loan and extended the maturity date to January 20, 2014. All other terms remained the same. Refer to the promissory note dated July 24, 2013 for further details. The combined loan was repaid on March 6, 2014.
On February 8, 2013, the Company signed a promissory note whereby the Company agreed to repay a creditor $100,000 plus interest at 10% per annum on August 7, 2013. This loan was not repaid on its maturity and has since been renewed several times with the unpaid principal and interest being capitalized to the loan balance on each renewal. All other terms remained the same. The loan matures on February 4, 2015. As of March 31, 2014, Company has accrued $1,660 (December 31, 2013 - $4,198) of interest on a principal balance of $110,164 (December 31, 2013 - $104,959).
On February 19, 2013, the Company signed a promissory note whereby the Company agreed to repay a creditor $33,000 plus interest at 10% per annum on May 20, 2013. The loan was not repaid by May 18, 2013 and continued to accrue interest at the rate of 10% per annum. On July 17, 2013, the Company paid the creditor $34,338 resulting in a full repayment of the loan.
On February 28, 2013, the Company signed a promissory note whereby the Company agreed to repay a creditor $50,000 plus interest at 10% per annum on August 27, 2013. This loan was not repaid on its maturity and has since been renewed several times with the unpaid principal and interest being capitalized to the loan balance on each renewal. All other terms remained the same. The loan matures on February 25, 2015. As of March 31, 2014, Company has accrued $528 (December 31, 2013 - $1,812) of interest on a principal balance of $55,082 (December 31, 2013 - $52,479).
On July 24, 2013, the Company signed a new promissory note with a creditor which capitalized the unpaid principal and interest on two separate loans totaling $164,295 under previous promissory notes and extended the maturity date to January 20, 2014. The note was not repaid by January 20, 2014 and continued to accrue interest at the rate of 10% per annum. As of December 31, 2013, the Company has accrued $7,247 of interest relating to this loan. On March 6, 2014, the Company paid the creditor $174,468 as full repayment of the loan.
On October 15, 2013, the Company signed a new promissory note with a creditor for a total of $500,000 which is to be disbursed to the Company in three tranches: Tranche A - $200,000 (received in November 2013); Tranche B - $150,000 (received in December 2013); and Tranche C - $150,000 (received in January 2014). The note matures on April 15, 2014 and bears interest at 5% per annum. In the event of default, the creditor is able to convert the unpaid principal and interest into common shares of ATS as is required in order for the shareholding of the creditor, when added to the 49% shareholding of Utiba, be equal to 52.57% of the entire issued share capital of ATS. As of December 31, 2013, the balance on the loan was $351,382 which includes $1,382 of accrued interest. On March 6, 2014, the Company paid the creditor $505,063 as full repayment of the loan.
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 6 LONG-TERM DEBT
On August 5, 2013, the Company signed a new promissory note with a creditor for a total of $550,000 which was to be disbursed to the Company in three tranches: Tranche A - $100,000 (received in June 2013); Tranche B - $200,000 by August 31, 2013 (received $100,000 in August 2013 and $100,000 in September 2013); and Tranche C - $250,000 by September 30, 2013 (outstanding as it has not yet been received by the Company). The note matured on December 31, 2015 and bears interest at 10% per annum with 5% per annum being capitalized to the loan and 5% per annum being payable in cash at each disbursements respective anniversary date. In the event of default, the creditor is able to convert the unpaid principal and interest into common shares of ATS at two times the principal amount outstanding with an exercise price being equal to ATSs capital stock and paid in capital for the month immediately prior to the Event of Default divided by the total outstanding shares of ATS of the same month. As of December 31, 2013, the balance on the loan was $312,667 which included $12,667 of accrued interest. On March 6, 2014, the Company paid the creditor $318,084 as full repayment of the loan.
NOTE 7 CAPITAL STOCK
Common Shares
The Company is authorized to issue up to 100,000,000 shares of the Companys common stock with a par value of $0.00001.
Effective January 29, 2008, the Company adopted a Retainer Stock Plan for Professional and Consultants (the “2008 Professional/Consultant Stock Compensation Plan”) for the purpose of providing the Company with the means to compensate, in the form of common stock of the Company, eligible consultants that have previously rendered services or that will render services during the term of this 2008 Professional/Consultant Stock Compensation Plan. A total of 6,000,000 common shares may be awarded under this plan. The Company filed a Registration Statement on Form S-8 to register the underlying shares included in the 2008 Professional/Consultant Stock Compensation Plan. To date, 5,998,542 common shares valued at $431,631 relating to services provided have been awarded, leaving a balance of 1,458 shares which may be awarded under this plan.
During the year ended December 31, 2013, the Company:
. |
issued 1,140,590 common shares valued at $145,388 for employment incentives in accordance with employment agreements; | |
. |
issued 2,840,596 common shares valued at $199,048 for legal, consulting, and investor relations services rendered; | |
. |
issued 700,000 common shares valued at $105,000 for investor relations to be rendered over a twelve month period which were included in deferred compensation (See Note 10); and | |
. |
issued 2,000,000 common shares valued at $100,000 for investor relations to be released upon achieving certain benchmarks which were included in deferred compensation (See Note 10). |
During the three months ended March 31, 2014, the Company issued 1,313,333 common shares valued at $129,700 for legal, consulting, and investor relations services rendered.
As of March 31, 2014, the Company had $630,362 (December 31, 2013 - $130,362) in private placement subscriptions which are reported as private placement subscriptions within stockholders deficit.
As of March 31, 2014, the Company is obligated to issue 1,023,333 common shares valued at $153,500 of which 1,000,000 common shares valued at $150,000 are for consulting services to be rendered over a twelve month period and 23,333 common shares valued at $3,500 are for services rendered by a consultant during the three months ended March 31, 2014.
Income (Loss) Per Share
As at March 31, 2014, the Company had a weighted average of 96,240,685 (March 31, 2013 83,498,695) common shares outstanding resulting in basic and diluted net and comprehensive income (loss) per common share from continuing operations of $(0.01) (March 31, 2013 - $(0.00)), basic and diluted net and comprehensive income (loss) per common share from discontinued operations of $0.03 (March 31, 2013 $(0.00)), and basic and diluted net and comprehensive income (loss) per common share of $0.02 (March 31, 2013 - $(0.01)) ..
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 8 DISCONTINUED OPERATIONS
On October 15, 2013 and subsequently amended in its entirety on January 6, 2014, the Company, Utiba Pte. Ltd. (Utiba), a non-controlling interest investor in ATS, ATS, and Utiba Guatemala entered into an Asset Purchase Agreement in order to effect the sale by ATS of all of its business and assets to Utiba, as described below (the ATS Transaction). For such transaction to proceed, the Company required shareholders approval which was granted on February 21, 2014.
Overview of the ATS Transaction and Consideration Payable
1 |
The sale pursuant to the Asset Purchase Agreement by ATS of substantially all of its business and assets to Utiba (including the assumption by Utiba of certain liabilities related to such business and assets), in consideration for up to $3,100,000 in cash (the "Cash Purchase Price") subject to certain adjustments related to certain net receivables or liabilities, as the case may be, and reduction to the extent of certain tax liabilities of ATS. The amount of $300,000 of the Cash Purchase Price will be held back to cover certain claims that may be made under the indemnification provisions of the Asset Purchase Agreement; | |
2 |
The entry by the Company into a non-compete covenant in favor of Utiba and its affiliates in the mobile payment, top up and mobile financial services industry for a period of 36 months, in consideration for a payment in cash on closing of the transactions contemplated by the Asset Purchase Agreement (the Closing) of $2,200,000. The Company is recognizing the full amount as income on closing as it does not intend to compete in the this industry in the future; | |
3 |
The release by the Company of Utiba from all its obligations under the ATS Shareholders Agreement in consideration for a payment in cash on Closing of $200,000; | |
4 |
Upon Closing, Utiba shall transfer its 49% interest in ATS to the Company so that the Company will own 100% of ATS after Closing. |
On March 4, 2014, the ATS Transaction closed with the Company receiving $4,928,036 in proceeds. An additional $667,264 is being held in escrow to cover certain claims that may be made under the indemnification provisions of the Asset Purchase Agreement. The escrow funds are included in sale proceeds held in escrow and deferred gain on sale.
As of December 31, 2013, the associated assets and liabilities of the consolidated ATS business have been classified as discontinued operations and are presented below:
December 31, | |||
2013 | |||
$ | |||
ASSETS | |||
Cash | 44,107 | ||
Accounts receivable, net of allowance for doubtful accounts of $789,565 | 301,991 | ||
Prepaid cost of sales | 25,056 | ||
Deposits and other assets | 40,500 | ||
Fixed assets, net of accumulated amortization of $119,006 | 137,170 | ||
Intellectual property | 1,500,000 | ||
CURRENT ASSETS OF DISCONTINUED OPERATIONS | 2,048,824 | ||
LIABILITIES | |||
Accounts payable and accrued charges | 555,914 | ||
Deferred income | 153,150 | ||
Long-term debt | 69,039 | ||
Capital leases | 5,042 | ||
CURRENT LIABILITIES OF DISCONTINUED OPERATIONS | 783,145 |
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 8 DISCONTINUED OPERATIONS (continued)
The following table summarizes the financial results of ATSs consolidated discontinued operations for the three months ended March 31, 2014 and 2013:
Three Months Ended | ||||||
March 31, | ||||||
2014 | 2013 | |||||
$ | $ | |||||
Revenue | 155,036 | 436,835 | ||||
Cost of Sales | 142,441 | 316,698 | ||||
Gross Margin | 12,595 | 120,137 | ||||
Operating Expenses | 549,266 | 529,741 | ||||
Net Loss Before Other Items | (536,671 | ) | (409,604 | ) | ||
Other Items | (6,060 | ) | 29,602 | |||
Non-Compete Income | 2,200,000 | - | ||||
Shareholder Release Income | 200,000 | - | ||||
Gain on Disposal of Assets | 867,653 | - | ||||
Net Income (Loss) Before Non-Controlling Interest | 2,718,863 | (380,002 | ) | |||
Non-Controlling Interest | (203,660 | ) | (186,201 | ) | ||
Discontinued Operations for Alternet Systems, Inc. | 2,922,523 | (193,801 | ) |
The Company will not have any taxes owing on the income earned from the discontinued operation as it has tax losses from prior years which are available to be utilized for tax purposes.
The table below details the Companys gain on disposal of assets at March 31, 2014:
Three Months | |||
Ended | |||
March 31, | |||
2014 | |||
$ | |||
Total funds received | 4,928,036 | ||
Less: Funds relating to non-compete and shareholder release income | (2,400,000 | ) | |
Net funds received | 2,528,037 | ||
Liabilities assumed by the purchaser | 177,401 | ||
Total proceeds | 2,705,438 | ||
Assets sold | (1,837,785 | ) | |
Gain on disposal of assets | 867,653 |
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 8 DISCONTINUED OPERATIONS (continued)
The following table summarizes the cash flow of ATSs consolidated discontinued operations for the three months ended March 31, 2014 and 2013:
Three Months Ended | ||||||
March 31, | ||||||
2014 | 2013 | |||||
$ | $ | |||||
Operating Activities | (494,210 | ) | (327,508 | ) | ||
Investing Activities | 1,630,311 | - | ||||
Financing Activities | (74,082 | ) | (45,551 | ) | ||
Cash Flows From Discontinued Operations | 1,062,019 | (373,059 | ) |
All other Notes to the consolidated financial statements that were impacted by this discontinued operation have been reclassified accordingly.
NOTE 9 - RELATED PARTY TRANSACTIONS
As of March 31, 2014, a total of $1,692,741 (December 31, 2013 - $1,637,710) was payable to directors and officers of the Company of which $223,801 (December 31, 2013 $668,195) was non-interest bearing and had no specific terms of repayment, $22,128 (December 31, 2013 - $21,589) related to loans detailed in Note 5, and $1,446,812 (December 31, 2013 - $947,926) related to unpaid wages of prior years and accrued interest at 10% per annum effective January 1, 2013. Of the amount payable, $117,919 (December 31, 2013 - $145,229) was included in accounts payable for expense reimbursements, $1,566,604 (December 31, 2013 - $1,484,802) was included in wages payable for accrued fees and interest, and $8,218 (December 31, 2013 - $7,679) was included in due to related parties.
During the three months ended March 31, 2014, the Company expensed a total of $150,208 (March 31, 2013 - $113,750) in consulting fees and salaries paid to directors and officers of the Company. Of the amounts incurred, $50,000 (March 31, 2013 - $113,750) has been accrued and $100,208 (March 31, 2013 - $Nil) has been paid in cash.
As of March 31, 2014, the Companys discontinued operations held an accounts receivable from a company with a director in common with the Company for $789,565; 6,674,709 Venezuelan bolivar fuerte (VEF) (December 31, 2013 - $789,565; VEF 6,674,709) which the Company fully allowed for during the year ended December 31, 2013 due to collectability uncertainty caused by the uncertainty of obtaining foreign currency in Venezuela. In addition, the Company owes this company $93,303 (VEF 5,971,438) (December 31, 2013 - $94,784; VEF 5,971,438) which is non-interest bearing, has no specific terms of repayment, and is included in due to related parties.
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 10 - DEFERRED COMPENSATION
On February 15, 2013, the Company signed an investor relations agreement with a consultant to provide investor relations services for a term of one year. The consultant will be compensated with monthly payments of $5,000 if the Company was able to raise $1,000,000 by May 16, 2013. As the Company did not raise the $1,000,000 by May 16, 2013, the monthly payments of $5,000 did not commence. The consultant will also receive 700,000 common shares, which are deliverable in four equal tranches of 175,000 each on or before February 20, 2013, May 16, 2013, August 14, 2013, and November 12, 2013. On February 19, 2013, the Company issued 700,000 shares in the name of the consultant valued at $0.15 per share, the closing price of the stock on the issue date, for a total value of $105,000. As of December 31, 2013, all of the shares had been issued to the consultant. The value of the services is being expensed on a straight-line basis over the life of the contract. During the three months ended March 31, 2014, the Company expensed $13,125 (March 31, 2013 - $13,125) to investor relations. The contract was expensed in full by February 15, 2014.
In October 2013, the Company signed an investor relations agreement with another consultant to provide investor relations services for a term of one year. The consultant will be compensated with two monthly payments of $10,000 from the date of signing (paid). The consultant will also receive 2,000,000 common shares, which are deliverable upon certain benchmarks of the Company’s share price. On November 6, 2013, the Company issued 2,000,000 common shares in the name of the consultant valued at $0.05 per share, the closing price of the stock on the issue date, for a total value of $100,000 of which none have been delivered to the consultant. The 2,000,000 shares will be delivered to the consultant when the benchmarks of the contract have been met. If the contract is terminated and the consultant does not meet the stages of the benchmarks, the Company can cancel any shares not delivered to the consultant. The value of the services is being expensed when the benchmarks are met. As at March 31, 2014, two of the benchmarks were met (December 31, 2013 – none); as such, the Company issued 1,000,000 common shares (December 31, 2013 – Nil) to the consultant and expensed $50,000 to investor relations. Subsequent to March 31, 2014, the Company terminated the contract with the consultant and cancelled 875,000 of the remaining 1,000,000 common shares. The remaining 125,000 common shares are pending cancellation.
On February 18, 2014, the Company signed a consulting agreement with a consultant to provide strategic business consulting services for a term of one year. The consultant will be compensated with monthly payments of $6,500 and be issued 1,000,000 common shares. As of March 31, 2014, none of the common shares had been issued to the consultant; as such, the common shares obligated to be issued have been valued at the Company’s closing stock price on March 31, 2014, $0.15 per share. The value of the services is being expensed on a straight-line basis over the life of the contract. During the three months ended March 31, 2014, the Company expensed $18,750 to consulting fees.
The Company recorded the aggregate fair value of the shares issued pursuant to the above agreements as deferred compensation. During the three months ended March 31, 2014, the Company expensed $81,875 (three months ended March 31, 2013 -$13,125) relating to the above contracts. The shares issued were all valued at their market price on the date of issuance.
NOTE 11 – OPERATING LEASES
The Company leases its office facilities under a one-year lease agreement with a monthly cost of $1,800. The lease expires in March 2015 and can be renewed at such time for a similar or longer term. In the normal course of business, it is expected that this lease will be renewed or replaced by a lease on another property.
Lease expense totaled $4,678 and $4,192 during the three months ended March 31, 2014 and 2013, respectively.
The Company is required to make $19,800 in future minimum rental payments under the operating lease agreement.
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 12 SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Three months ended | ||||||
March 31, | ||||||
2014 | 2013 | |||||
$ | $ | |||||
Supplemental cash flow disclosures: | ||||||
Interest paid during the period in cash | 87,354 | 8,492 | ||||
Cash paid for income taxes | - | - | ||||
Supplemental non-cash disclosures: | ||||||
Shares obligated to be issued | 153,500 | 2,800 | ||||
Shares issued for share issue costs | - | 21,000 | ||||
Shares issued for deferred compensation | 150,000 | 105,000 | ||||
Shares issued for wages and related benefits payable | - | 85,795 | ||||
Deferred gain from funds held in escrow | 667,264 | - | ||||
Shares issued for investment in digital currency | 125,000 | - |
NOTE 13 FAIR VALUE
Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 |
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | |
Level 2 |
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; | |
Level 3 |
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
The fair value of the Company’s accounts receivable, share subscriptions receivable, accounts payable and accrued liabilities, wages payable, accrued taxes, deferred income, other loans payable, and due to related parties approximate their carrying values. The Company’s other financial instruments, being cash and investment in digital currency, are measured at fair value using Level 1 inputs.
NOTE 14 LAWSUIT
On May 10, 2010, the Company received noticed that they had been named as Defendants in a lawsuit whereby the Plaintiffs are seeking a judgment of $6,889 including interest of $1,444 for unpaid invoices. The Company had 30 days to respond to the notice before a default judgment is awarded. As of March 31, 2014 and December 31, 2013, the full amount has been accrued and is included in accounts payable.
In January 2014, the Company received notice of a $39,000 plus interest thereon default judgment issued by the State of New York related to an unpaid service agreement entered with the Plaintiffs on February 11, 2009. The Company has filed a motion to vacate the foreign judgment or in the alternative stay the enforcement. The Company, until receipt of such notice, was unaware of any such demand. No prior notice had been served to the Company or its chief executive. As of March 31, 2014, no provision for this claim has been made.
ALTERNET SYSTEMS INC. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2014 |
(Unaudited) |
NOTE 15 SUBSEQUENT EVENTS
Events occurring after March 31, 2014 were evaluated through the date this Interim Report was issued, in compliance FASB ASC Topic 855 Subsequent Events, to ensure that any subsequent events that met the criteria for recognition and/or disclosure in this report have been included.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled "Risk Factors”.
Our consolidated interim financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Overview
As mentioned in Note 8, effective March 4, 2014, Alternet Systems Inc. sold effectively all of Alternet Transaction Systems, Inc,s (ATS) business and assets to Utiba, As a result the Company is no longer engaged in providing mobile financial services. Along the vision outlined below, in the first quarter, the Company entered into its first arrangement in the digital currency industry. The Company also expects to pursue potential opportunities to grow through mergers and acquisitions. Several opportunities have been identified and the Company has initiated initial discovery processes.
Alternets vision is based on the following principles
Cloud based, secure, regulatory compliant, global currencies are needed to service this emerging market. As the usage and dependence of Smart Mobile Devices continues to increase there will be a need for more intelligent and effective Money.
In 2014, the Companys expected milestones are:
. to enter into arrangements with select digital currencies, with the first having taken place in February 2014 with Ven; | |
. to provide end to end security for digital currencies; | |
. to launch the digital currency bank, fully compliant with government regulations, FX exchange capabilities; | |
. to invest in micro payment services to the unbanked and global diasporas; | |
. to invest in alternative financial services to the retail industry emerging markets; | |
. to attract key talent specialized in the digital economy; and | |
. to prepare to up-list into a national exchange. |
VEN is a global digital currency traded in international financial markets and originally used by members of a social network service, Hub Culture, to buy, share, and trade knowledge, goods, and services. The value of Ven is determined on the financial markets from a basket of currencies, commodities and carbon futures. It trades against major currencies at floating exchange rates.
Hub Culture is an invitation-led social network service that operates the global digital currency Ven, and according to its website, is "the first to merge online and physical world environments. It was founded in November 2002. The Hub Culture group of companies is privately held with offices in Bermuda, Hong Kong, London and New York, with a network of knowledge brokers in over 20 locations worldwide. The web site is www.hubculture.com.
In the first quarter we entered into a relationship with VEN and Hub Culture to become a VEN Authority. This relationship will allow us to become an issuer of the VEN Currency on a global basis, leveraging the experience and the strength of this Digital Currency. We expect to start generating revenues from the sale of the currency, by the end of the second quarter 2014.
The Companys digital bank initiative, will focus on bringing to market innovative consumer products, including a multi-asset debit and credit card. This initiative is the first of its kind with dynamic currency conversion from digital to physical currency, digital currency exchange and merchant acquisition solutions. All of these services will include the seamless integration of existing digital currencies, including Bitcoin, Ven, Ripple and others. The company expects to have a global reach, initially launching in Latin America and the Caribbean, with expansion opportunities into Africa and Eastern Europe.
We will actively participate in the industry associations and promoting organizations, expecting to have an active involvement. We will also seek speaking and industry show participation, promoting our new initiatives.
Digital and Mobile Security Software and Services
In 2013 International Mobile Security (IMS) was wound down. IMS is expected to be restructured in 2014 and be used as the vehicle to provide services and products securing financial transactions and digital currency.
Results of Operations:
Results of Operations are for the quarter ended March 31, 2014 compared to the similar prior year quarter ended March 31, 2013.
The Companys results, on a consolidated basis, reflect its own results consolidated with its subsidiaries. For the remainder of this part, the term Company refers to both the Company and its wholly owned and one majority owned subsidiary, International Mobile Security, Inc. (IMS). Alternet has a controlling interest in IMS.
Upon closing of the ATS Transaction described in Note 8 of the financial statements, the Company acquired the 49% non-controlling in Alternet Transactions Systems, Inc. (ATS), doing business as Utiba Americas, increasing the Companys ownership to 100%.
Net Sales
For the quarter ending March 31, 2014, the Company had net sales of $Nil versus $141, a decrease of $141. The low sales were a result of the Company focusing its efforts on ATS, which was classified as a discontinued operation at December 31, 2013. All revenue earned by ATS up to March 4, 2014 is included in discontinued operations.
Selling, General and Administrative Expenses
The operating and administrative expenses for the quarter ended March 31, 2014 totaled $993,762 as compared to $213,020 for the similar prior year quarter. The table below details the major changes in administrative expenditures for the quarter ended March 31, 2014 as compared to the corresponding quarter ended March 31, 2013.
Expenses |
Increase / Decrease in
Expenses |
Explanation for Change
Quarter Ended March 31, 2014 as Compared to Quarter Ended March 31, 2013 |
Investor relations | Increase of $56,062 |
Additional investor communications was required during the quarter ended March 31, 2014 due to the ATS Transaction. |
Research and development | Increase of $500,000 |
In 2014, the Company paid a Fee of $500,000 in connection with the ability to offer and promote digital currency. |
Management and consulting | Increase of $208,674 |
A majority of the management and consulting fees incurred in 2013 related to ATS. Subsequent to the ATS Transaction, the management fees incurred by Alternet were no longer charged to ATS. |
Office and general | Increase of $23,112 |
Increased online marketing due to the Company rebranding its image after the closing of the ATS Transaction. |
Salaries | Decrease of $48,279 |
The quarter ended March 31, 2013 included an estimate for payroll tax penalties. No estimate was made in the quarter ended March 31, 2014 as the full penalty had been accrued at December 31, 2013. |
Travel | Increase of $40,354 |
Increased need for travel for meetings and due diligence on new initiatives being explored by the Company. |
Interest and Other Expenses
The Companys interest expense decreased to $39,118 for the quarter ended March 31, 2014 compared to $97,414 for the previous year quarter due to the decrease in loans outstanding during the period, reflecting the repayment of several loans payable.
Net Income (Loss)
For the quarter ending March 31, 2014, the Company had a net and comprehensive loss attributable to Alternet System, Inc. from continuing operations of $(1,019,164) or $(0.01) per share and an overall net and comprehensive income (loss) of $1,903,359 or $0.02 per share, an increase of 228.78% and a decrease of 477.81% respectively, when compared to the corresponding period of March 31, 2013 which had a net and comprehensive loss attributable to Alternet System, Inc. from continuing operations of $(309,984) or $(0.00) per share and an overall net and comprehensive income (loss) of $(503,785) or $(0.01) per share. The increased loss from continuing operations is mostly attributable to an Authority fee the Company was required to pay to be able to promote the Ven digital currency while the overall income is primarily attributable to the sale of ATSs Assets.
Liquidity and Capital Resources
As of March 31, 2014, the Company had $2,151,028 cash in the bank and accounts receivable of $11,370 and sale proceeds held in escrow relating to the ATS Transaction of $667,264. At March 31, 2014, the Company had a working capital deficiency of $3,454,504. The Company is currently pursuing financing, and has engaged an investment bank to raise additional capital to fund ongoing operations. The Company’s ability to continue as a going concern will be negatively affected if it is unsuccessful.
Accounts payable were $2,054,303 at March 31, 2014 compared to accounts payable of $1,466,546 at December 31, 2013. Sale proceeds held in escrow increased to $667,264 as of March 31, 2014 versus $Nil at December 31, 2013.
Plan of Operation
In 2014 Alternet will transform into an accelerator of high growth, emerging mobile and digital, technology and services companies, in the digital currency and the mobile and digital security fields. The goal is to expand the horizons of individuals and organizations, by providing a growth and networking platform, empowering them to go beyond their expectations and goals
The new vision of Alternet is to accelerate the future of money through the creation of a digital bank, building security around the digital monetary ecosystem, and providing an exchange that allows for the movement from virtual money to fiat currency
Our new product and service will offer consumers and businesses the cost savings and speed associated with the internet while being compliant with anti-money laundering procedures in place at US brokerage firms and banks
In 2014, the Companys expected milestones are:
. to enter into arrangements with select digital currencies, with the first having taken place in February 2014 with Ven; | |
. to provide end to end security for digital currencies; | |
. to launch the digital currency bank, fully compliant with government regulations, FX exchange capabilities; | |
. to invest in micro payment services to the unbanked and global diasporas; | |
. to invest in alternative financial services to the retail industry emerging markets; | |
. to attract key talent specialized in the digital economy; and | |
. to prepare to up-list into a national exchange. |
Conclusion
The Company is entering into its next phase which will leverage the experience and knowledge in mobile technology and financial services to provide solutions in the digital currency and the mobile and digital security fields. Investments in these fields are underway.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by managements application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.
Basis of Presentation and Consolidation
The consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in United States dollars. The financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. Our fiscal year-end is December 31.
The minority interests of ATS up to March 4, 2014, the date the Company gained 100% ownership, IMS, and ATSs and IMSs wholly owned subsidiaries have been deducted from earnings and equity. All significant intercompany transactions and account balances have been eliminated.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the financial statement date and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, fair value of convertible notes payable and derivative liabilities. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all liquid investments, with an original maturity of three months or less when purchased, to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Past due balances over 90 days and other higher risk amounts are reviewed individually for collectability. If the financial condition of the Companys customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on managements assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.
Equipment
Fixed assets are recorded at cost and depreciated at the following rates:
Computer equipment | - | 30% declining balance basis | |
Computer software | - | 30% declining balance basis | |
Equipment | - | 20% declining balance basis |
Long-Lived Assets Including Other Acquired Intellectual Property
Management monitors the recoverability of long-lived assets and intangibles based on estimates using factors such as current market value, future asset utilization, and future undiscounted cash flows expected to result from its investment or use of the related assets. The Companys policy is to record any impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable. Any impairment loss is calculated as the excess of the carrying value over estimated realizable value. The Company did not recognize an impairment charges related to long-lived assets during the year ended December 31, 2013 and 2012.
Intangible assets deemed to have an indefinite life are not amortized but are subject to impairment tests at each reporting date. The Company assesses the impairment of intangible assets on a quarterly basis or whenever events or changes in circumstances indicate that the fair value is less than its carrying value. If the carrying amount of the intangible asset exceeds its fair value, the intangible asset is considered impaired and the second step of the test is performed to determine the amount of impairment loss, if any. The Company did not recognized an impairment charges related to indefinite lived intangible assets during the quarters ended March 31, 2014 or 2013
Revenue Recognition
Up to March 4, 2014, the Company entered into sales arrangements that may provide for multiple deliverables to a customer. Software sales may include the sale of a software license, implementation/customization services, and/or ongoing support services.
In order to treat deliverables in a multiple-deliverable arrangement as separate units of accounting, the deliverables must have standalone value upon delivery. If the deliverables have standalone value upon delivery, the Company accounts for each deliverable separately. Licenses, support fees, and hosted services have standalone value as such services are often sold separately. In determining whether implementation/customization services have standalone value, the Company considers the following factors for each agreement: availability of the services from other vendors, the nature of the services, the timing of when the services contract was signed in comparison to the services start date, and the contractual dependence of the customization service on the customer’s satisfaction with the implementation/customization services work.
To date, the Company has concluded that all of the services included in multiple-deliverable arrangements executed have standalone value when multiple deliverables included in an arrangement are separated into different units of accounting. The arrangement consideration is allocated to the identified separate units based on a relative selling price hierarchy. The Company determines the relative selling price for a deliverable based on its vendor-specific objective evidence of selling price (“VSOE”), if available, or its best estimate of selling price (“BESP”), if VSOE is not available. The Company has determined that third-party evidence of selling price (“TPE”) is not a practical alternative due to differences in its service offerings compared to other parties and the availability of relevant third party pricing information. The amount of revenue allocated to delivered items is limited by contingent revenue, if any.
The Company has not established VSOE for a majority of its revenue due to lack of pricing consistency, the customer specific requests, and other factors. Accordingly, the Company uses its BESP to determine the relative selling price.
The Company determined BESP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of the Company’s transactions, the geographic area where services are sold, its market strategy, historic contractually stated prices and prior relationships, and future service sales with certain customers. The determination of BESP is made through consultation with and approval by the Company’s management, taking into consideration the market strategy. As the Company’s market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes in selling prices.
Revenue was recognized upon delivery or when services were performed, provided that persuasive evidence of a sales arrangement exists, both title and risk of loss have passed to the customer, and collection was reasonably assured. Persuasive evidence of a sales arrangement existed upon execution of a written sales agreement or signed purchase order that constituted a fixed and legally binding commitment between the Company and the buyer. Specifically, revenue from the sale of licenses is recognized when the title of the license transfers to the customer while revenue from implementation/customization services performed is recognized upon successful completion of a User Acceptance Test (“UAT”). If a successful UAT was never achieved and the sales arrangement was cancelled, the Company recognized any deferred revenue not required to be refunded to the customer.
The Company’s payment terms vary by client. To reduce credit risk in connection with software license and support sales, the Company may, depending upon the circumstances, require significant deposits prior to delivery. In some circumstances, the Company may require payment in full for its products prior to delivery. For support and hosted services, the Company sold customers service agreements that were recorded as deferred revenue and provided for payment in advance on either an annual or other periodic basis. Revenue for these support services was recognized ratable over the term of the agreement.
Subsequent to March 4, 2014 the Company is implementing the criteria outlined in SAB 104 and recognizing revenue when:
Research and Development
The Company expenses costs when incurred for items associated with researching and developing new sources of revenue.
Digital Currency Transactions
The Company enters into transactions that are denominated in digital currency (Ven). These transactions result in digital currency denominated assets and liabilities that are revalued periodically. Upon revaluation, transaction gains and losses are generated and are reported as unrealized gains and losses in other gain (loss), net in the Consolidated Statements of Operations. The Company determines fair value as of the balance sheet date based on Level I inputs which consist of quoted prices in active markets. The value of the Company’s digital currency is $125,000 as of March 31, 2014 Due to the uncertainty regarding the current and future accounting treatment and tax, legal and regulatory requirements relating to digital currencies or transactions utilizing digital currencies, such accounting, legal, regulatory and tax developments or other requirements may adversely affect us.
Debt with Conversion Options
The Company accounts for convertible debentures in accordance with ASC Topic 470-20, Debt with Conversion and Other Options , which applies to all convertible debt instruments that have a ‘‘net settlement feature,’’ which means instruments that by their terms may be settled either wholly or partially in cash upon conversion. Accordingly, the liability and equity components of convertible debt instruments that may be settled wholly or partially in cash upon conversion should be accounted for separately in a manner reflective of their issuer’s nonconvertible debt borrowing rate. Conversion features determined to be beneficial to the holder are valued at fair value and recorded to additional paid in capital. Any discount derived from determining the fair value to the debenture conversion features is amortized to interest expense over the life of the debenture. The unamortized costs, if any, upon the conversion of the debentures is expensed to interest immediately.
Leases
The Company leased operating facilities which include switches, other network equipment, and premises. Rentals payable under operating leases were charged to the statements of operation on a straight line basis over the term of the relevant lease. For capital leases, the present value of future minimum lease payments at the inception of the lease was reflected as an asset and a liability in the statement of financial position. Amounts due within one year are classified as short-term liabilities and the remaining balance as long-term liabilities.
Foreign Currency Translation
The Company’s functional currency and its reporting currency is the United States Dollar. Foreign denominated monetary assets and liabilities are translated to 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. Related translation adjustments are reported as a separate component of stockholders’ equity (deficit), whereas gains or losses resulting from foreign currency transactions are included in the results of operations.
Fair Value of Financial Instruments
The Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying value of the Company’s financial instruments, consisting of accounts receivable, checks in excess of bank balances, accounts payable and accrued liabilities, wages payable, accrued payroll taxes, other loans payable, stock-based compensation, warrants, and due to related parties, approximate their fair value due to the relatively short maturity of these instruments.
Income Taxes
The Company accounts for income taxes under a method which requires the Company to recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements carrying amounts and tax basis of assets and liabilities using enacted tax rates. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.
Stock-Based Compensation
The Company accounts for its share-based compensation plans in accordance with the fair value recognition provisions of ASC 718 Compensation—Stock Compensation . The Company utilizes the Black-Scholes option pricing model as its method for determining the fair value of stock option grants. ASC 718 requires the fair value of all share-based awards that are expected to vest to be recognized in the statements of operations over the service or vesting period of each award. The Company uses the straight-line method of attributing the value of share-based compensation expense for all stock option grants over the requisite service period.
Income (Loss) per Share
The Company computes net earnings (loss) per share in accordance with ASC Topic 260, Earnings Per Share. Topic 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations. 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 warrants using the treasury stock method. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
At March 31, 2014 and December 31, 2013 the Company had no warrants or options outstanding to consider in income (loss) per share calculation.
Recent Accounting Pronouncements
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU is to be applied prospectively for all disposals of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods beginning on or after December 15, 2015. Additionally, this ASU is to be applied to all business activated that, on acquisition, are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015. ASU No 2014-08 addresses concerns about the accounting for discontinued operations and the disposal of small groups of assets that are recurring in nature but qualify as discontinued operations under subtopic 205-20 Management does not anticipate that this accounting pronouncement will have any material future effect on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Management’s Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. 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 with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of March 31, 2014, we carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with managements authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2014. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Our management has concluded that, as of March 31, 2014, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles. Our management reviewed the results of their assessment with our Board of Directors.
This quarterly report does not include an attestation report of our companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by our companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit our company to provide only managements report in this annual report.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2014 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Other than as described below, management is not aware of any legal proceedings (either presently engaged in or contemplated) by any government authority or other party involving the Company, its properties or its products.
On May 10, 2010, the Company received noticed that they had been named as Defendants in a lawsuit whereby the Plaintiffs are seeking a judgment of $6,889 including interest of $1,444 for unpaid invoices. The Company had 30 days to respond to the notice before a default judgment is awarded. As of March 31, 2014 and December 31, 2013, the full amount has been accrued and is included in accounts payable.
In January 2014, the Company received notice of a $39,000 plus interest thereon default judgment issued by the State of New York related to an unpaid service agreement entered with the Plaintiffs on February 11, 2009. The Company has filed a motion to vacate the foreign judgment or in the alternative stay the enforcement. The Company, until receipt of such notice, was unaware of any such demand. No prior notice had been served to the Company or its chief executive. As of March 31, 2014, no provision for this claim has been made.
No directors, officers, or affiliate of the Company is (i) a party adverse to the Company in any legal proceedings, or (ii) has an adverse interest to the Company in any legal proceedings.
Item 2. Unregistered Sales of Equity and Use of Proceeds
During the three months ended March 31, 2014, the Company issued 1,313,333 common shares valued at $129,700 for legal, consulting, and investor relations services rendered.
As of March 31, 2014, the Company had $630,362 (December 31, 2013 - $130,362) in private placement subscriptions which are reported as private placement subscriptions within stockholders deficit.
As of March 31, 2014, the Company is obligated to issue 1,023,333 common shares valued at $153,500 of which 1,000,000 common shares valued at $150,000 are for consulting services to be rendered over a twelve month period and 23,333 common shares valued at $3,500 are for services rendered by a consultant during the three months ended March 31, 2014.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
Item 6. Exhibits
EXHIBIT INDEX
Number | Exhibit Description |
3.1 |
Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Registration Statement on Form 10SB filed on EDGAR on November 6, 2000) |
3.2 |
Certificate of amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.2 on the report on Form 8-K filed on May 23, 2002) |
14.1 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | Section 906 Certification of Chief Financial Officer |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALTERNET SYSTEMS INC.
By:/s/Henryk Dabrowski
Henryk
Dabrowski, President
(Principal Executive Officer)
May 15, 2014
By:/s/ Michael T. Viadero
Michael T.
Viadero, Secretary, Treasurer
(Principal Financial Officer and Principal
Accounting Officer)
May 15, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:/s/ Henryk Dabrowski | By:/s/ Michael T. Viadero |
Henryk Dabrowski, President | Michael T. Viadero, Secretary, Treasurer |
(Principal Executive Officer) | (Principal Financial Officer and Principal Accounting |
May 15, 2014 | Officer) |
May 15, 2014 |
Exhibit 14.1
Alternet Systems, Inc.
Code of Business Conduct
1. Introduction
In this Code of Business Conduct ("the Code"), the terms Alternet" and "Company" mean Alternet Systems, Inc. and all of its subsidiaries. The policies and procedures set forth in this Code govern the conduct of every aspect of the business of Alternet. While this Code provides a brief summary of the standards of conduct that are the foundation of Alternet's business operations, it is not possible to cover all situations confronting Alternet personnel in the day to day conduct of their many activities. Alternet must rely on the individual judgment, common sense and personal ethical standards of all personnel to maintain a high standard of honesty and integrity in the conduct of Alternet business.
This Code applies to all members of the Board of Directors (the "Board," with the members referred to herein as "Directors"), officers and employees of Alternet and to all Alternet business locations. Any violation of this Code must be promptly reported to management at the appropriate level, including, if necessary and appropriate, to a supervisor, the President, a Director or Directors, or a member or members of the Audit Committee of the Board, if and when appointed and established (the "Audit Committee"). The confidentiality of a report and the reporting person will be protected to the extent possible, consistent with the law and the requirements necessary to conduct an effective investigation of the conduct or matter, and no reporting person will suffer retaliation because of a report he or she makes in good faith and with respect to conduct or a matter which the reporting person reasonably believes constitutes a violation of this Code (except that appropriate disciplinary action may be taken against the reporting person if such person was involved in the violation).
2. General Policy
It is the policy of Alternet to conduct its business in compliance with applicable governmental laws, rules and regulations, with honesty and integrity, in a manner which demonstrates respect for all people and with a strong commitment to the highest standards of ethics. Alternet demands high standards of integrity and sound ethical judgment from its personnel at all times, and in performing their work for Alternet all personnel must comply with all applicable governmental laws, rules and regulations.
3. Conflicts of Interest
Directors, officers and employees of Alternet have a duty to avoid financial, business or other personal interests or relationships which might interfere, or even appear to interfere, with the interests of Alternet or make it difficult to perform their Alternet duties objectively and effectively. Directors, officers and employees should conduct themselves in a manner that avoids even the appearance of a conflict between their personal interests and those of the Company.
A conflict of interest situation may arise in many ways. It is not possible to discuss every circumstance that may lead to a conflict of interest, but the following examples are illustrative:
(a) Owning or holding a substantial financial interest in a company which has material business dealings with Alternet or which engages in any significant field of activity engaged in by Alternet.
(b) Acting as a director, officer, consultant or employee for any business enterprise with which Alternet has a competitive or significant business relationship, unless so requested or approved by the Company.
(c) Accepting gifts, payments, or services of significant value from those seeking to do business with Alternet.
(d) Knowingly competing with Alternet in the purchase or sale of property or diverting from Alternet a business opportunity in which Alternet has or is likely to have an interest.
(e) Placing of business with a firm owned or controlled by a Alternet employee, officer or Director without the prior specific approval of the Board.
It is Alternet's policy that actual or apparent conflicts of interest must be avoided, and any material transaction or relationship involving a potential conflict of interest must be approved in advance by the Board. In addition, all related party transactions of Alternet must be reviewed and approved by the Board.
Conflicts of interest may also arise if an employee, officer or Director, or a member of his or her family, receives improper personal benefits as a result of his or her position with Alternet. Company loans to or guarantees of obligations of such persons are of special concern, and personal loans to executive officers and Directors are prohibited by the Sarbanes-Oxley Act of 2002. It is Alternet's policy that such conflicts of interest involving improper personal benefits are prohibited. No loans may be made to any person for the purpose of exercising incentive stock options granted by the Company.
4. Unauthorized Use of Company Property and Services
No employee, officer or Director may use any Company property or services for his or her own personal benefit, or for the personal benefit of anyone else. It should be noted that, with regard to some activities, there are both personal and Company benefits. These would include, for example, employee participation in continuing education programs. Therefore, any employee use of Company property or services which is not solely for the Company's benefit must be approved beforehand by the employee's immediate supervisor. Computer work stations and computer software are provided for the furtherance of Company business only. The Company's computer facilities should not be utilized for individual or outside projects for any purpose without the specific permission of your immediate supervisor. The Company's software programs are in many instances proprietary to the Company or are utilized by the Company through license and usage agreements with outside authors. Software programs should not be copied or transmitted by any means to any third party for private usage.
5. Accounting Records
Financial statements and the books and records on which they are based must accurately reflect all corporate transactions. All receipts and disbursements of Company funds must be properly recorded in the books, and records must disclose the nature and purpose of the Company's transactions. All records and transactions are subject to review by internal and external auditors. Full cooperation with the auditors is expected and under no circumstances will any relevant information be intentionally withheld from them.
The following requirements apply to all Company records:
(a) No undisclosed or unrecorded fund or asset of the Company shall be established for any purpose.
(b) No false or artificial entries shall be made in the books and records of the Company for any reason, and no employee or officer shall engage in any arrangement that results in such prohibited act.
(c) All transactions shall be executed in accordance with management's general or specific authorization.
(d) Transactions shall be properly recorded to permit preparation of financial statements in accordance with generally accepted accounting principles and to maintain accountability for assets.
(e) No payment on behalf of the Company shall be approved or made with the intention or understanding that any part of such payment is to be used for any purpose other than that described by the documents supporting the payment.
Where any person associated with the Company becomes aware of an example of a breach of the statements above, they should bring this breach to their immediate supervisor attention or to the attention of the Board.
6. Political Contributions and Activities
Alternet encourages its employees to maintain an interest in political matters, but recognizes that participation in politics is primarily a matter of individual choice. Involvement and participation in political activities must be on an individual basis, on the employee's own
time, and at the employee's own expense. Further, when an employee speaks on public issues, it must be made clear that comments or statements made are those of the individual and not the Company.
No Company funds or assets, including the work time of any employee, will be contributed, loaned, or made available, directly or indirectly, to any political party or the campaign of any candidate for political office.
7. Trade Secrets and Confidential Information
With regard to trade secrets and confidential information of Alternet, employees must be guided by loyalty to Alternet and prudence in maintaining the secrecy of such trade secrets and confidential information. Employees should take care to refuse to allow the public or any other company, including our competitors, to obtain improper access to trade secret and confidential information. The following policies should be followed:
(a) Confidential information and trade secrets should be discussed only on a need-to-know basis with other employees.
(b) Be careful to avoid inadvertent disclosures of information in the course of social conversations or normal business relations with suppliers and customers.
(c) Any disclosure of trade secret or confidential information outside of the Company should be done only when appropriate protective agreements have been signed which have been approved by Alternet’s attorneys.
Alternet's policy is to provide good jobs and to operate under sound and legal personnel policies. Our objective is to be equitable and fair in the treatment of all our employees in all situations. This includes the following:
(a) The selection and placement of any employee is based on that employee's qualifications, and such decisions are always made without regard to race, religion, national origin, sex, age or physical or mental disabilities (so long as the employee/applicant is qualified for and can perform the job).
(b) Compensation shall be in accordance with the employee's contribution to the Company, and compensation decisions shall also be made entirely independent of the considerations listed above.
(c) The Company will make every effort to provide a safe and healthy work environment for all employees. The Company will not tolerate any sexual harassment in the workplace, and appropriate disciplinary action will be taken should any instances of sexual harassment be discovered.
9. Drug and Alcohol Abuse
Company policy precludes the use or possession of any illegal drugs on Company property. Employees are also prohibited from being on Company property under the influence of illegal drugs. Alcohol may not be brought or consumed on Company property without the consent of the executive officer of the Company and such consent will be given normally only for social functions such as a Christmas party or retirement party, if then.
10. Consultants
Alternet's policy is that all consultants that we retain should abide by the same code of business conduct as our employees. It is the responsibility of any Company employee retaining a consultant for any purpose to make sure the consultant is aware of our Code and agrees to abide by all of its provisions.
11. Disclosures in SEC Reports and Other Public Communications
The United States Securities and Exchange Commission (the "SEC") requires prompt public disclosure of material information about the Company. It is Alternet's policy that all disclosures to the public, including disclosures in reports and documents that the Company files with or submits to the SEC, press releases, speeches and investor and other public communications by the Company, will be full, fair, accurate, timely and understandable.
12. Insider Trading
Directors, officers and employees must not use for personal gain, or reveal outside of the Company, material information which is neither known nor available to the general public. Where doubt exists as to the advisability or disclosure, employees should seek guidance from an executive officer of the Company.
13. Discipline and Compliance
Failure to comply with this Code may result in disciplinary actions, including warnings, suspensions, termination of employment or such other actions as may be appropriate under the circumstances. The responsibility for compliance with this Code , including the duty to seek interpretation when in doubt , rests with each person subject to this Code.
14. Searches
Alternet policy allows the use of any lawful method of investigation which Alternet believes is necessary to determine whether any
person has engaged in conduct that interferes with or adversely affects Alternet's business. This includes the theft of any Company property or any property of any Company employee or visitor. It also includes suspicion of possession of drugs, alcohol, firearms or anything else, the possession of which on Company property is prohibited or restricted. All Company employees are expected to participate in Alternet's reasonable security efforts. Failure to do so may result in disciplinary action, including dismissal.
15. Questions and Interpretations
Routine questions concerning this Code should be directed to the employee's immediate supervisor. Requests for specific interpretations of this Code should be referred to any officer of the Company. The Code is intended to provide a general statement of Company policies and to provide guidance to Alternet personnel. No representation is made, however, either express or implied, that the policies stated in the Code are all of the relevant policies, nor that they are a comprehensive, full or complete explanation of the laws, rules and regulations which are applicable to the Company and its personnel.
16. Changes to or Waivers from the Code
The Board shall review this Code as circumstances dictate, and when necessary or desirable amend the Code to ensure that Alternet continues to comply with applicable laws, rules and regulations, including those of the SEC.
Any changes to this Code and any waiver from this Code, including an implicit waiver resulting from inaction with respect to a reported or known violation of this Code, for an executive officer or Director of Alternet may be made only by the Board in writing and shall be promptly disclosed to Alternet’s corporate counsel, shareholders and others as required by law and SEC rules and regulations. Any other change or waiver may be made only by an executive officer of Alternet or the Board.
17. Summary
It is expected that all Alternet personnel will transact the Company's business with the highest standards of integrity. By maintaining a sensitivity to and an awareness of the ethical aspects of business, we can ensure that our business conduct in all respects is exemplary. Alternet and its employees enjoy an outstanding reputation. Adherence to this Code will uphold and enhance that reputation.
EXHIBIT 31.1
CERTIFICATION PURSUANT TO 18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Henryk Dabrowski, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Alternet Systems Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| ||
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; | |
| ||
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| ||
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 15, 2014
/s/ Henryk Dabrowski | |
Henryk Dabrowski | |
President and Director |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO 18 U.S.C. ss 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael T. Viadero, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Alternet Systems Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| ||
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; | |
| ||
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| ||
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 15, 2014
/s/Michael T. Viadero | |
Michael T. Viadero | |
Secretary, Treasurer, | |
(Principal Financial Officer and Principal |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Henryk Dabrowski, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
the Quarterly Report on Form 10-Q of Alternet Systems Inc. for the period ended March 31, 2014 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Alternet Systems Inc.. |
Dated: May 15, 2014
/s/ Henryk Dabrowski | ||
Henryk Dabrowski | ||
President and Director | ||
(Principal Executive Officer) | ||
Alternet Systems Inc. |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Alternet Systems Inc. and will be retained by Alternet Systems Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael T. Viadero, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
the Quarterly Report on Form 10-Q of Alternet Systems Inc. for the period ended March 31, 2014 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Alternet Systems Inc.. |
Dated: May 15, 2014
/s/ Michael T. Viadero | ||
Michael T. Viadero | ||
Secretary, Treasurer, | ||
(Principal Financial Officer and Principal | ||
Accounting Officer) | ||
Alternet Systems Inc. |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Alternet Systems Inc. and will be retained by Alternet Systems Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
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