[X] Quarterly report pursuant section 13 or 15(d) of the
Securities Exchange Act of 1934
[ ] Transition report pursuant section 13 or 15(d)
of the Securities Exchange Act of 1934
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
|
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.
115,724,295 as of May 16, 2016
TABLE OF CONTENTS
ALTERNET SYSTEMS INC.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
As at March 31,
2016 and December 31, 2015
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
$
|
|
|
$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
4,862
|
|
|
78,780
|
|
Accounts
receivable, net
|
|
5,531
|
|
|
5,000
|
|
Due from related parties
|
|
6,442
|
|
|
-
|
|
Investment in digital currency
|
|
116,672
|
|
|
114,763
|
|
Deposits and other assets
|
|
7,625
|
|
|
2,000
|
|
Total current assets
|
|
141,132
|
|
|
200,543
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
141,132
|
|
|
200,543
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable and
accrued charges
|
|
763,017
|
|
|
746,508
|
|
Wages
payable
|
|
1,395,457
|
|
|
1,308,207
|
|
Accrued payroll taxes
|
|
168,753
|
|
|
168,753
|
|
Other
loans payable, net of beneficial conversion feature
|
|
458,992
|
|
|
474,377
|
|
Due to related parties
|
|
-
|
|
|
1,796
|
|
Current
liabilities of discontinued operations
|
|
118,861
|
|
|
123,574
|
|
Total current liabilities
|
|
2,905,080
|
|
|
2,823,215
|
|
|
|
|
|
|
|
|
Stockholders' (deficit)
|
|
|
|
|
|
|
Capital
stock
|
|
|
|
|
|
|
Authorized:
500,000,000 common stock with a par value of $0.00001
and
10,000,000
preferred stock with a par value of
$0.00001
Issued
and outstanding: 115,724,295 common stock (2015 - 108,224,295)
|
|
1,157
|
|
|
1,083
|
|
Additional paid-in capital
|
|
15,455,139
|
|
|
15,351,463
|
|
Private placement
subscriptions
|
|
505,362
|
|
|
505,362
|
|
Share
subscription receivable
|
|
(375,000
|
)
|
|
(375,000
|
)
|
Accumulated other
comprehensive income
|
|
(1,943
|
)
|
|
(2,000
|
)
|
Accumulated deficit
|
|
(18,348,663
|
)
|
|
(18,103,580
|
)
|
|
|
(2,763,948
|
)
|
|
(2,622,672
|
)
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|
|
141,132
|
|
|
200,543
|
|
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,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
REVENUE
|
|
18,689
|
|
|
-
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
Investor
relations
|
|
9,000
|
|
|
-
|
|
Management and consulting
|
|
120,250
|
|
|
175,386
|
|
Office and
general
|
|
10,114
|
|
|
12,518
|
|
Payroll
|
|
4,199
|
|
|
28,758
|
|
Professional fees
|
|
12,822
|
|
|
26,500
|
|
Rent
|
|
7,107
|
|
|
6,876
|
|
Travel
|
|
15,292
|
|
|
9,802
|
|
|
|
178,784
|
|
|
259,840
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE OTHER
ITEMS
|
|
(160,095
|
)
|
|
(259,840
|
)
|
|
|
|
|
|
|
|
OTHER ITEMS
|
|
|
|
|
|
|
Interest
expense, net
|
|
(19,615
|
)
|
|
(20,575
|
)
|
Gain on foreign exchange
|
|
1,468
|
|
|
451
|
|
Unrealized
gain (loss) on investment
|
|
1,909
|
|
|
(2,574
|
)
|
(Loss) on debt settlement
|
|
(68,750
|
)
|
|
-
|
|
|
|
(84,988
|
)
|
|
(22,698
|
)
|
|
|
|
|
|
|
|
NET LOSS
|
|
(245,083
|
)
|
|
(282,538
|
)
|
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,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
$
|
|
|
$
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss
|
|
(245,083
|
)
|
|
(282,538
|
)
|
Add items
not affecting cash
|
|
|
|
|
|
|
Interest accrued
|
|
19,615
|
|
|
20,575
|
|
Shares for services
|
|
-
|
|
|
7,500
|
|
Unrealized (gain) loss on
investments
|
|
(1,909
|
)
|
|
2,574
|
|
Unrealized foreign exchange (gain)
|
|
(1,701
|
)
|
|
-
|
|
Loss on debt settlement
|
|
68,750
|
|
|
-
|
|
Changes in
non-cash working capital:
|
|
|
|
|
|
|
Accounts receivable, net
|
|
(531
|
)
|
|
-
|
|
Deposits and other assets
|
|
(5,625
|
)
|
|
(625
|
)
|
Accounts payable and
accrued charges
|
|
9,687
|
|
|
64,506
|
|
Wages payable
|
|
87,250
|
|
|
140,883
|
|
Accrued payroll taxes
|
|
-
|
|
|
(12,776
|
)
|
Due to related parties
|
|
(4,428
|
)
|
|
(12,200
|
)
|
Net cash provided by (used
in) operating activities
|
|
(73,975
|
)
|
|
(72,101
|
)
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Net cash (used in) financing
activities
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATES
ON CASH
|
|
57
|
|
|
23
|
|
|
|
|
|
|
|
|
NET (DECREASE) IN CASH
DURING THE PERIOD
|
|
(73,918
|
)
|
|
(72,078
|
)
|
|
|
|
|
|
|
|
CASH, BEGINNING OF
PERIOD
|
|
78,780
|
|
|
74,907
|
|
|
|
|
|
|
|
|
CASH, END OF PERIOD
|
|
4,862
|
|
|
2,829
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements
ALTERNET SYSTEMS INC.
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
March 31, 2016
|
(Unaudited)
|
NOTE 1 NATURE OF OPERATIONS AND BASIS OF
PRESENTATION
Alternet Systems Inc.s (the Company) focus has evolved into
the digital payments and data analytics, micro segmentation and marketing
intelligence. The target markets include the mass consumer goods, payments,
financial services and telecommunications sectors. Its vision is to be the
leading digital commerce solutions provider into global markets, and its mission
is to provide innovative solutions that facilitate and expedite commerce,
enriching our partners and their customers experience, and improving
efficiency.
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 5, Discontinued Operations, the Company, pursuant to a
transaction in Alternet Transactions Systems (ATS Transaction), discontinued
providing mobile financial solutions and mobile security. ATS is dormant and
being closed this year.
The Company and its wholly owned subsidiaries, started to
provide its services on a commercial basis. These services include:
-
Alternet Payment Solutions, LLC (APS) developing and deploying, retail
and consumer multichannel payment mechanisms
-
Modernization of the electronics point of sale legacy infrastructure
expanding the useful life of the electronic point of sale, and including new
payment functions in the terminals, such as bill payment, electronic top-up
and native payments with digital currency at the point of sale.
-
Data analytics tools and services for the Telecommunications and Financial
Services industries.
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, 2016 the Company had a working capital deficiency of $2,763,898
(December 31, 2015 - $2,622,672). 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
of the Securities and Exchange Commission (the SEC). 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, 2015, filed with SEC on March 31,
2016. The consolidated financial statements include the accounts of the Company
and all of its subsidiaries in which a controlling interest is maintained.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Principles of Consolidation
These condensed consolidated financial statements include the
accounts of the following wholly owned subsidiaries:
|
.
|
Alternet Systems Inc. (Alternet)
|
|
.
|
AI Systems Group, Inc.
|
|
.
|
Tekvoice Communications, Inc.
|
|
.
|
Alternet Transactions Systems (ATS), Inc., a wholly
owned subsidiary of Alternet (formerly a 51% owned subsidiary. See Note 8,
Discontinued Operations)
|
|
.
|
Utiba Guatemala, S.A.
|
|
.
|
International Mobile Security, Inc. (IMS)
|
|
|
|
|
.
|
Megatecnica, S.A.
|
|
.
|
Alternet Financial Solutions, LLC (AFS)
|
|
.
|
Alternet Payment Solutions, LLC (APS)
|
|
.
|
OneMarket, Inc.
|
All significant intercompany transactions and account balances
have been eliminated.
Reclassifications
Certain prior period balances have been reclassified to conform with current period presentation. Changes have not impact on net losses or loss per share information.
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 investment in
digital currency. 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.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic
605,
Revenue Recognition
, whereby revenue is recognized when persuasive
evidence of an arrangement exists, the related services have been provided, the
price is fixed and determinable and collectability is reasonably assured. The
Company currently generates its revenues from providing consulting services,
primarily consisting of project management on existing projects in Colombia and
Peru, on a contract basis in regards to data analytics solutions.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Digital Currency Transactions
The Company can enter 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 items in the Consolidated Statements of
Operations. The Company determines fair value as of the balance sheet date based
on Level 1 inputs which consist of quoted prices in active markets. The value of
the Companys digital currency is $116,672 (December 31, 2015 $114,763), net
of $8,328 (December 31, 2015 - $10,237) of unrealized losses. 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.
Income (Loss) per Share
The Company computes net income (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). 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, 2016 and December 31, 2015 the Company had no
warrants or options outstanding to consider in the income (loss) per share
calculations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from
Contracts with Customers (Topic 606)
(ASU 2014-09). The core principle of
ASU 2014-09 is that an entity should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those
goods or services. To achieve that core principle, an entity should apply the
following steps: identify the contract(s) with a customer; identify the
performance obligations in the contract; determine the transaction price;
allocate the transaction price to the performance obligations in the contract;
and recognize revenue when (or as) the entity satisfies a performance
obligation. ASU 2014-09 supersedes the revenue recognition requirements in
Accounting Standards Codification Topic No. 605, Revenue Recognition, most
industry-specific guidance throughout the industry topics of the accounting
standards codification, and some cost guidance related to construction-type and
production-type contracts. ASU 2014-09 is effective for public entities for
annual periods and interim periods within those annual periods beginning after
December 15, 2017. Early adoption is not permitted. Companies may use either a
full retrospective or a modified retrospective approach to adopt ASU 2014-09. In
August 2015, the FASB subsequently issued ASU No. 2015-14,
Revenue from
Contracts with Customers (Topic 606): Deferral of Effective Date,
which
defers the effective date of ASU 2014-09 by one year for all entities. In March
2016, the FASB subsequently issued ASU 2016-08,
Revenue from Contracts with
Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue
Gross versus Net),
which reduce the potential for diversity in practice
arising from inconsistent application. In April 2016, the FASB subsequently
issued ASU 2016-10,
Revenue from Contracts with Customers (Topic 606):
Indentifying Performance Obligations and Licensing,
which reduce the
potential for diversity in practice at initial application and reduces the cost
and complexity of applying Topic 606 on transition and on an ongoing basis. The
Company is currently evaluating the potential impact of adopting this guidance
on its financial statements.
In August 2014, the FASB issued ASU No. 2014-15,
Presentation
of Financial Statements - Going Concern (Subtopic 205-40)
. The new guidance
addresses management's responsibility to evaluate whether there is substantial
doubt about an entity's ability to continue as a going concern and in certain
circumstances to provide related footnote disclosures. The standard is effective
for the annual period beginning after December 15, 2016 and for annual and
interim periods thereafter. Early adoption is permitted. Management is currently evaluating the impact this pronouncement will have on the Company’s financial statements.
In January 2016, the FASB issued ASU No. 2016-01,
Financial
Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial
Assets and Financial Liabilities.
This ASU is effective for annual and
interim reporting periods beginning after December 15, 2017. ASU No 2016-01
enhances the reporting model for financial instruments to provide users of
financial statements with more decision-useful information. Management does not
anticipate that this accounting pronouncement will have any material future
effect on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases
(Topic 842).
This ASU is effective for annual and interim reporting periods
beginning after December 15, 2018. ASU No 2016-02 increases transparency and
comparability among organizations to improve financial reporting. Management is currently evaluating the impact this pronouncement will have on the Company’s financial statements.
In March 2016, the FASB issued ASU No. 2016-07,
Investments
Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to
the Equity Method of Accounting.
This ASU is effective for annual and
interim reporting periods beginning after December 15, 2016. ASU No 2016-07
eliminates the requirement to retroactively adopt the equity method when a
change in ownership occurs. 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 - NOTES AND OTHER LOANS PAYABLE
Other Loans Payable
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. On January 21, 2016, the creditor
elected to convert $15,000 of the outstanding balance into 2,500,000 shares of
the Companys common stock. As of March 31, 2016, the balance owing to this
creditor was $53,120 (December 31, 2015 - $66,815) which includes $817 (December
31, 2015 - $14,335) of accrued interest.
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, 2016, the balance owing
to this creditor was $33,659 (December 31, 2015 - $33,005) which includes $7,419
(December 31, 2015 - $6,765) of accrued interest.
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. On December 2, 2014, the Company
paid the creditor $72,907 of which $9,055 was applied to the accrued interest
and $63,852 was applied to the principal outstanding. On January 21, 2016, the
creditor elected to convert $20,000 of the outstanding balance into 5,000,000
shares of the Companys common stock. As of March 31, 2016, the balance owing to
this creditor was $32,333 (December 31, 2015- $51,323) which includes $324
(December 31, 2015- $5,012) of accrued interest. The note is past due and
continues to accrue interest at the rate of 10% per annum.
On July 24, 2014, the Company signed a promissory note whereby
the Company agreed to repay a creditor $250,000 plus interest at 24% per annum
on January 24, 2015. On January 25, 2015, this loan was renewed with the unpaid
principal and interest of $280,411 being capitalized to the loan balance on
renewal and the maturity being extended to July 6, 2015. All other terms
remained the same. On August 10, 2015, the Company repaid the creditor $50,000
of which $13,677 was applied to principal and $36,323 was applied to outstanding
interest. As of March 31, 2016, the balance owing to this creditor was $307,950
(December 31, 2015- $291,989) which includes $41,216 (December 31, 2015-
$25,256) of accrued interest. The note is past due and continues to accrue
interest at the rate of 10% per annum.
On October 5, 2015, the Company signed a promissory note
whereby the Company agreed to repay a creditor $7,500 plus interest at 10% per
annum on April 4, 2016. As of March 31, 2016, the balance owing to this creditor
was $7,868 (December 31, 2015 - $7,681) which includes $368 (December 31, 2015 -
$181) of accrued interest. The note is past due and continues to accrue interest
at the rate of 10% per annum.
On November 20, 2015, the Company signed a promissory note
whereby the Company agreed to repay a creditor $20,000 on May 18, 2016. As of
March 31, 2016, the balance owing to this creditor was $20,729 (December 31,
2015 - $20,230) which includes $729 (December 31, 2015 - $230) of accrued
interest.
NOTE 4 CAPITAL STOCK
Common Stock
The Company is authorized to issue up to 500,000,000 shares of
the Companys common stock with a par value of $0.00001.
During the three months ended March 31, 2016, the Company
issued 7,500,000 common shares valued at $103,750 for the settlement of $35,000
of debt (see Note 3).
As of March 31, 2016, the Company had $505,362 (December 31,
2015 - $505,362) in private placement subscriptions which are reported as
private placement subscriptions within stockholders deficit.
The shares which were not issued as at March 31, 2016 or
December 31, 2015, were not used to compute the total weighted average shares
outstanding as at March 31, 2016 or December 31, 2015, respectively, and were
not used in the basic net loss per share calculation.
Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of
the Companys preferred stock with a par value of $0.00001.
Loss Per Share
For the three months ended March 31, 2016 and 2015, the Company
had a weighted average of 111,823,196 and 101,717,537 common shares outstanding,
respectively, resulting in basic and diluted net loss per common share of
$(0.00) (March 31, 2015 - $(0.00)).
Stock Options and Restricted Stock
Effective July 17, 2014, the Company adopted the 2014 Equity
Incentive Plan (the Plan) for the purpose of providing the Company with the
means to compensate, in the form of common stock of the Company, directors,
officer, consultants, advisors, and employees of the Company or any of its
subsidiaries. The Plan was approved by the Companys stockholders at a special
meeting held on September 25, 2014. The Plan will terminate on July 17, 2024
following which no new Options or Restricted Stock can be granted under the
Plan. The Company is authorized to issue a maximum 5,000,000 common shares under
the Plan, which will automatically increase each time the Company issues
additional shares of common stock for a maximum of 5% of the total outstanding
common stock.
As at March 31, 2016 and December 31, 2015, the Company had no
outstanding stock options or restricted stock units.
NOTE 5 DISCONTINUED OPERATIONS
On October 15, 2013 and as 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, approval of the Companys shareholder was required,
which approval was obtained 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
recognized the full amount as income in 2014 as it did not intend to
compete in 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 pursuant to which
the Company received $4,928,036 in proceeds. An additional $667,264 was held in
escrow to cover certain claims that may be made under the indemnification
provisions of the Asset Purchase Agreement. During the year ended December 31,
2014, $367,264 was released. The remaining $300,000 was included in sales
proceeds held back and a deferred gain on sale. Proceeds of $150,000 were
received in April 2015 with the remaining balance received in September 2015.
During the year ended December 31, 2015, the Company wrote off
$32,167 to discontinued operations for wages payable from ATSs operations prior
to the ATS Transaction which were determined not to be payable. Additionally,
the Company settled its lawsuit with Utiba (see Note 10) for $80,000 plus the
release of all amounts payable to and from to Utiba for a total of $1,055,177.
As of March 31, 2016 and December 31, 2015, the associated
liabilities of the consolidated ATS business have been classified as
discontinued operations and are presented below
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
$
|
|
|
$
|
|
LIABILITIES
|
|
|
|
|
|
|
Accounts payable and
accrued charges
|
|
118,861
|
|
|
123,574
|
|
CURRENT LIABILITITES OF
DISCONTINUED OPERATIONS
|
|
118,861
|
|
|
123,574
|
|
There is no discontinued operations effect on the statement of
operations for the three month periods ended March 31, 2016 and 2015
NOTE 6 - RELATED PARTY TRANSACTIONS
As of March 31, 2016, a total of $1,033,592 (December 31, 2015
- $947,260) was payable to directors and officers of the Company, which was
non-interest bearing and had no specific terms of repayment. Of the amount
payable, $21,518 (December 31, 2015 - $21,840) was included in accounts payable
for expense reimbursements, $1,021,460 (December 31, 2015 - $934,209) was
included in wages payable for accrued fees and capitalized interest, and
$(9,386) (December 31, 2015 - $(8,789)) was included in due from related
parties.
During the three months ended March 31, 2016, the Company
expensed a total of $87,250 (March 31, 2015 - $87,250) in consulting fees and
salaries paid to directors and officers of the Company. The amounts incurred
have been accrued and none has been paid in cash.
As of March 31, 2016, the Company owes a company with a
director in common with the Company $6,753 (VEF 5,971,438) (December 31, 2015 -
$6,753; VEF 5,971,438) which is non-interest bearing, has no specific terms of
repayment, and is included in due to related parties.
NOTE 7 OPERATING LEASES
The Company leased its office facilities under a one-year lease
agreement with a monthly cost of $1,800. The lease expired in March 2015 and was
renewed at a monthly rate of $1,872 which expired on February 28, 2016. On
February 29, 2016 the lease was further renewed for an additional year at a
monthly rate of $1,944 and expires on February 28, 2017.
Lease expense totaled $5,616 and $4,678 during the three months
ended March 31, 2016 and 2015, respectively.
The Company is required to make future minimum rental payments
under the operating lease agreement of $17,568 during the 2016 fiscal year and
$3,889 during the 2017 fiscal year.
NOTE 8 SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH
FLOWS
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
$
|
|
|
$
|
|
Supplemental cash flow
disclosures:
|
|
|
|
|
|
|
Interest paid
|
|
-
|
|
|
20,575
|
|
Cash paid for income taxes
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Supplemental non-cash
disclosures:
|
|
|
|
|
|
|
Shares obligated to be issued
|
|
-
|
|
|
32,776
|
|
Shares issued for convertible debt
|
|
-
|
|
|
379,903
|
|
Shares issued for debt settlement
|
|
103,750
|
|
|
-
|
|
NOTE 9 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 Companys accounts receivable, due from
related parties, accounts payable, other loans payable, and due to related
parties approximate their carrying values. The Companys other financial
instruments, being cash and investment in digital currency, are measured at fair
value using Level 1 inputs.
NOTE 10 LAWSUIT
In January 2014, the Company received notice of a default
judgment in the amount of $39,000 plus interest entered by the State of New York
related to an unpaid service agreement entered into 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 Officer. On March 23, 2015, the Supreme Court of the State of New York
vacated and set aside the default judgments. As of March 31, 2016, no provision
for this claim has been made.
NOTE 11 SUBSEQUENT EVENTS
Events occurring after March 31, 2016 were evaluated through
the date this Interim Report was issued, in compliance with 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 in our annual report on Form 10-K for the year ended
December 31, 2015, filed with the Securities and Exchange Commission on March
31, 2016, particularly in the section entitled "Risk Factors.
Overview
2015 and Beyond
In 2015 Alternet (the Company) decided to cease pursuing
digital currency opportunities due to the market collapse for digital
currencies, mostly due to the volatility of such digital assets as Bitcoin, the
lack of a clear regulatory framework, a risky value and revenue generation
model, and the entrance of major players in the field, obliged management to
steer away from these opportunities.
The Company and its wholly owned
subsidiaries, started to provide its services on a commercial basis. These
services will include:
-
APS will develop and deploy, retail and consumer multichannel payment
mechanisms
-
Modernization of the electronics point of sale legacy infrastructure
expanding the useful life of the electronic point of sale, and including new
payment functions in the terminals, such as bill payment, electronic top-up
and native payments with digital currency at the point of sale.
-
Data analytics tools and services for the Telecommunications and Financial
Services industries.
In April 2015 APS signed an agreement with R4 Technologies, LLC
(R4) to market and promote R4s purpose-built cloud platform for microsegment
data, insight and engagement to help brands leverage data and automate yield
optimization. APS will partner with R4 across Latin America and the Caribbean.
In May 2015 APS signed a commercial distribution software
reseller agreement with APPI Tecnologia S/A (APPI), a leading information
technology company, based in Brazil, specializing in the integration and
development of technical solutions and software for the electronic transaction
payment industry. APS will promote APPIs unique, innovative, and efficient
solutions for the Payments and Services segments in the United States, Canada
and the Caribbean.
Solutions
Alternet delivers technology solutions to financial
organizations that manage a wide range of payment channels including development
engines that extend the capabilities of processing across all capture devices
such as point-of-sale (POS), mobile phones, tablets, PCs and web-based
applications. These solutions deliver channel specific abilities. Alternet
partners with leading manufacturers that deliver solutions that meet the needs
of device and channel management, now and in the future.
Growing demand from mobile point-of-sale terminals and
increased emphasis on advanced analytics features are significant factors for
the growing demand for software in the point-of-sale terminals market. Alternet
is strategically positioned to introduce MUXIs innovative, brand agnostic
point-of-sale terminal and disruptive payment technology to underserved U.S.
markets while providing timely and cost effective solutions across all devices
to facilitate multichannel capability to any merchant.
Payment Technologies Rapidly expanding
market
-
Legacy from multiple decades of infrastructure for credit card payments
and Point-of-Sale (POS) terminals
-
Omni-channel payments will require a complete refresh of the legacy
installed base
-
The only cost-effective, efficient solution is through software
Data Analytics
Revolutionizing how
leading organizations optimize data analytics and automate marketing research
operations, Alternets integrated analytics, micro segmentation and marketing
automation technology empower marketing organizations to create and develop
critical marketing decision matrixes. In addition, the Companys solutions give
clients a proprietary market view across diverse data sources, allows discovery
of unique audience and location micro-segments, automates data management, and
generates recommendations at micro level P&L-oriented yield optimization,
across products, price and promotion investment.
Results of Operations:
Three months ended March 31, 2016 compared to three months
ended March 31, 2015
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 subsidiaries.
Net Sales
For the three months ended March 31, 2016 and 2015, the Company
had net sales of $18,689 and $Nil, respectively. The current sales have been
exclusively related to initial pilot projects within the Data Analytics
solution.
Selling, General and Administrative Expenses
The operating and administrative expenses for the three months
ended March 31, 2016 and 2015 totaled $178,784 and $259,840, respectively. The
table below details the major changes in administrative expenditures for the
three months ended March 31, 2016 and 2015.
Expenses
|
Increase / Decrease in
Expenses
|
Explanation for Change
Three Months Ended March 31, 2016 as
Compared to Three
Months Ended March 31, 2015
|
Management and consulting
|
Decrease of $55,136
|
The comparative quarter included consulting fees for
searching out new business ventures. During the current quarter, the
company had a more focused plan and did not require as much consulting
services. Additionally, the comparative quarter included management fees
or one additional person.
|
Payroll
|
Decrease of $24,559
|
Decreased employees during the current quarter
|
Professional fees
|
Decrease of $13,678
|
The Company had minimal activities during 2015 resulting
in reduced required fees during the period relative to 2014
|
Interest and Other Expenses
The Company’s net interest expense decreased to $19,615 for the three months ended March 31, 2016 compared to $20,575 for the three months ended March 31, 2015, respectively. This was due to the decrease in loans outstanding during the
period as a result of the settlement of notes amounting to $35,000 through the issuance of 7,500,000 common shares during the period.
Net Income (Loss)
For the three months ended March 31, 2016, the Company had a net loss of $(245,083) or $(0.00) per share, a decrease of 84.68%, when compared to the corresponding three months ended March 31, 2015 which had a net loss of $(282,538) or
$(0.00) per share. The decreased losses were mostly attributable to the Company commencing revenue generating services and decreasing the overall operating expenses.
Liquidity and Capital Resources
As of March 31, 2016, the Company had $4,862 (December 31, 2015 – $78,780) cash in the bank. At March 31, 2016, the Company had a working capital deficiency of $2,763,948 (December 31, 2015 – $2,622,672). The Company is
in discussion with investment bankers 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 $763,017 at March 31, 2016 compared to accounts payable of $746,508 at December 31, 2015. As at March 31, 2016, the Company’s current liabilities were $2,905,080, an increase of $81,865 from the current
liabilities of $2,823,215 at December 31, 2015.
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 management’s 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
These 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. These financial statements include the accounts of
the Company and its wholly owned and majority owned subsidiaries. Our fiscal year-end is December 31.
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.
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 Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional
allowances would be required. Based on management’s 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.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 605,
Revenue Recognition
, whereby revenue is recognized when persuasive evidence of an arrangement exists, the related services have been provided, the price is fixed and
determinable and collectability is reasonably assured. The Company currently generates its revenues from providing data analytics solutions..
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 items in the Consolidated Statements of Operations. The Company determines fair value as of the balance sheet date based on Level 1 inputs which consist of quoted prices in active
markets. The value of the Company’s digital currency is $116,672 (December 31, 2015 – $114,763), net of $8,328 (December 31, 2015 - $10,237) of unrealized losses, as of December 31, 2015. 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.
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’ (deficit), whereas gains or losses resulting
from foreign currency transactions are included in the results of operations.
Income (Loss) per Share
The Company computes net income (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). 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, 2016 and December 31, 2015 the Company had no warrants or options outstanding to consider in the income (loss) per share calculations.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
(“ASU 2014-09”). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the
contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity
satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification Topic No. 605, “Revenue Recognition,” most industry-specific guidance throughout the industry topics of
the accounting standards codification, and some cost guidance related to construction-type and production-type contracts. ASU 2014-09 is effective for public entities for annual periods and interim periods within those annual periods beginning after
December 15, 2017. Early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. In August 2015, the FASB subsequently issued ASU No. 2015-14,
Revenue from Contracts with
Customers (Topic 606): Deferral of Effective Date,
which defers the effective date of ASU 2014-09 by one year for all entities. In March 2016, the FASB subsequently issued ASU 2016-08,
Revenue from Contracts with Customers (Topic 606):
Principal versus Agent Considerations (Reporting Revenue Gross versus Net),
which reduce the potential for diversity in practice arising from inconsistent application. In April 2016, the FASB subsequently issued ASU 2016-10,
Revenue from
Contracts with Customers (Topic 606): Indentifying Performance Obligations and Licensing,
which reduce the potential for diversity in practice at initial application and reduces the cost and complexity of applying Topic 606 on transition and on
an ongoing basis. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements.
In August 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial Statements - Going Concern (Subtopic 205-40)
. The new guidance addresses management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and in certain circumstances to provide related footnote disclosures. The standard is effective for the annual period beginning after December 15, 2016 and for annual and interim periods thereafter. Early adoption is permitted. Management is currently evaluating the impact this pronouncement will have on the Company’s financial statements.
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities.
This ASU is effective for annual and interim reporting periods
beginning after December 15, 2017. ASU No 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. Management does not anticipate that this accounting
pronouncement will have any material future effect on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842).
This ASU is effective for annual and interim reporting periods beginning after December 15, 2018. ASU No 2016-02 increases transparency and comparability among
organizations to improve financial reporting. Management does not anticipate that this accounting pronouncement will have any material future effect on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-07,
Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.
This ASU is effective for annual and interim reporting periods
beginning after December 15, 2016. ASU No 2016-07 eliminates the requirement to retroactively adopt the equity method when a change in ownership occurs. 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
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 (the Exchange
Act), 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 chief financial
officer (also our principal financial 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.
As of March 31, 2016, we carried out an evaluation, under the
supervision and with the participation of our president (also our principal
executive officer) and our chief financial officer (also our principal financial
officer), of the effectiveness of the design and operation of our disclosure
controls and procedures. In conducting his evaluation, our officers determined
that there may be material weaknesses in our internal controls over financial
reporting. Specifically, the following deficiency is are noted:
-
We do not have an Audit Committee. Although we are not legally required to
have one, this means that we do not have entity control over our financial
statements.
-
We do not have any independent (or outside) board members. To provide
arms-length oversight and comply with regulations, it is critical that
As of March 31, 2016, with the resignation of Mr. Fernando
Cisneros, the Companys Board of Directors does not include an outside director.
The Company has identifying potential outside directors and is discussing the
position with the candidates. Mr. Cisneros resignation was not the result of any
disagreement with the Board and he was not aware of any matter in relation to
his resignation that needed to be brought to the attention of the shareholders
of the Company.
Changes in Internal Control over Financial Reporting
During the three months ended March 31, 2016, changes in our
internal controls over financial reporting consisted in ensuring timely
follow-up on pending receipt of invoices from third party providers, primarily
those based overseas. While such occurrences are limited, the change to internal
controls ensure proper timing of recording expenses.
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.
In January 2014, the Company received notice of a default
judgment in the amount of $39,000 plus interest entered by the State of New York
related to an unpaid service agreement entered into 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 Officer. On March 23, 2015, the Supreme Court of the State of New York
vacated and set aside the default judgments. As of December 31, 2015, no
provision for this claim has been made.
Item 2. Unregistered Sales of Equity and Use of Proceeds
During the three months ended March 31, 2016, the Company:
-
issued 7,500,000 common shares valued at $103,750 for the settlement of
$35,000 of debt (see Note 3).
In connection with the foregoing, the Company relied upon the
exemption from registration provided by Section 4(a)(2) under the Securities Act
of 1933, as amended, for transactions not involving a public offering.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
EXHIBIT INDEX
SIGNATURES
Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
ALTERNET SYSTEMS INC.
By:
/s/Henryk
Dabrowski
Henryk Dabrowski, President
(Principal Executive Officer)
May 16, 2016
By:
/s/ Michael T.
Viadero
Michael T. Viadero, Chief Financial Officer
(Principal Financial
Officer and Principal Accounting Officer)
May 16, 2016
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