UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2009
[ ] TRANSITION REPORT UNDER 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
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33133
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(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
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N/A
|
N/A
|
Securities registered pursuant to Section 12(g) of the Act:
N/A
(Title of class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 the Securities Act.
Yes [ ] No
[X]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act
Yes [ ]
No [X]
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 if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[
]
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]
The aggregate market value of Common Stock held by
non-affiliates of the Registrant on April 13, 2010 was $1,144,377 based on a
$0.075 closing price for the Common Stock on April 13, 2010. For purposes of
this computation, all executive officers and directors have been deemed to be
affiliates. Such determination should not be deemed to be an admission that such
executive officers and directors are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the
registrants classes of common stock as of the latest practicable date.
21,917,233 as of April 13, 2010
DOCUMENTS INCORPORATED BY REFERENCE
None.
2
TABLE OF CONTENTS
3
PART I
Item 1.
|
Description of Business
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Forward Looking Statements
This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as may,
should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors, that may cause our or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.
In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States dollars and all references to common
shares refer to the common shares in our capital stock.
Company History and Business
Alternet Systems, Inc. (the "Company"), was organized under the
laws of the State of Nevada on June 26, 2000 under the name North Pacific
Capital Corp. On June 26, 2000 the Company increased its authorized share
capital from 20,000 shares with no par value to 100,000,000 shares with a par
value of $0.00001. On December 20, 2001 the Company received shareholder
approval to change its name from North Pacific Capital Corp. to "SchoolWeb
Systems Inc.".
On April 26, 2002, the Company received shareholder approval to
change its name from SchoolWeb Systems Inc. to Alternet Systems, Inc. and in May
of 2002 this change of name was completed.
Alternet Systems, Inc. developed, markets and sells Internet
application software and systems, marketed under the names "SchoolWeb" and
HealthWeb.
Each SchoolWeb "system" or software / hardware package is
comprised of the SchoolWeb virtual library software, Linux Operating System, a
network server, redundant file system, software configuration, SchoolWeb user
license, 24 hour technical support , on-site installation, training , system
maintenance and 5X9 on-site warranty.
A SchoolWeb system and software were sold to Burnaby School
District, near Vancouver, Canada. Burnaby School District placed an order for
SchoolWeb for installation in 52 schools. This installation was completed in
February of 2003.
SchoolWeb has been granted trademark rights in the Canada for
the trademark "SchoolWeb". The initial application was filed in Canada on March
30, 2001 and it was granted in March of 2003. The trademark is also registered
on the supplemental register in the United States, as the United States
trademark was applied for based on the Canadian trademark application. Once a
company has used a supplemental register mark in the United States for five
years, the company's mark is placed on the full register. In the meantime, its
rights in the United States are protected.
TekVoice Inc. Merger
Alternet Systems Inc. executed a merger with TekVoice
Communications, Inc. of Miami, Florida, on December 31, 2007 . TekVoice is a
telecommunications services company with operations in North America and Latin
America. The combined entity is called Alternet Systems Inc. and its primary
business is delivering telecom services; education / healthcare application
software and content; and mobile transaction services to customers primarily
located in Latin America, North America and the Caribbean.
Alternet offers a portfolio of next-generation solutions for
government, business, schools, hospitals and residents in this region.
About TekVoice Communications Inc.
TekVoice Communications, Inc.
is a Voice over IP
telecommunications company that since 2002, offers convergent voice and data
services over IP networks. With sales of over $3 million in both 2006 and 2007,
it has capitalized on its in-depth knowledge of the Hispanic and Latin American
market, the quality of its telecommunications network and the dramatic cost
savings that the network delivers to its customers. As a pioneer in the VOIP
industry, TekVoice has been at the leading edge in the design and deployment of
new products and services for the corporate and residential markets. TekVoice
Communications, Inc. is a U.S. corporation with offices in Miami, Florida.
On December 31, 2007, Alternet Systems, Inc. (the Company)
Fabio Alvino, Eduardo & Monica Bello, Henryk Dabrowski, Manfred Koroschetz,
New Market Technology, Inc., John Puente, Red Hawke, Inc., Hector Rodriguez
(each, a Transferor and collectively, the Transferors) and TekVoice
Communications, Inc. (TekVoice)entered into and closed a Stock Acquisition
Agreement (the Agreement) pursuant to which the Company acquired all of the
issued and outstanding shares of capital stock of TekVoice from the Transferors
in consideration for an aggregate amount of four million (4,000,000) shares of
common stock of the Company (the Acquisition Shares).
Competition
The Company competes in two distinct technology sectors,
telecommunications and network systems. Although the Company has unique features
in its product offerings, it competes with companies that may be better financed
to survive any adverse economic conditions.
Research and Development
The Company has incurred $Nil in research and development
expenditures over the last fiscal year.
Employees
Currently our only employees are our directors, officers, and
an office manager. We will continue to outsource contract employment as
needed.
Item 1A. Risk Factors
The Company is exposed to a number of risks, including the
following:
-
The Company may be unable to market and sell its software and
telecommunications products;
-
The Company has a history of operating its software business at a
significant loss;
-
The Company requires additional equity financing to continue operations
and may be unable to obtain this financing;
-
If further equity financing is obtained, it will dilute the value of
existing shareholders stock;
-
The Company has limited working capital with which to continue operations;
-
The telecom and software industries are extremely competitive and the
Company faces competition from more established distributors and producers
with greater financial resources and established sales and distribution
capabilities;
-
The Company has a significant number of shares outstanding which may be
eligible for resale under Rule 144 and which, if sold, could depress the
market price of the Companys shares;
-
The profit margins in the telecom industry have been steadily eroding such
that, even if it is able to make sales for its products, the Company may be
unable to do so at a profitable margin.
Our business operations are also subject to a number of risks
and uncertainties, including, but not limited to those set forth below:
We have had negative cash flows from operations. If we are
unable to obtain financing in the amounts and on terms deemed acceptable to us,
we may be unable to continue our business and as a result may be required to
scale back or cease operations for our business, the result of which would be
that our stockholders would lose some or all of their investment.
To date we have had negative cash flows from operations and we
have been dependent on sales of our equity securities and debt financing to meet
our cash .We do not expect positive cash flow from operations in the near term
and there is no assurance that actual cash requirements will not exceed our
estimates, or that our sales projections will be realized as estimated. The
occurrence of any of the aforementioned events could adversely affect our
ability to meet our business plans.
We will depend almost exclusively on outside capital to pay for
the continued development of our business. Such outside capital may include the
sale of additional stock and/or commercial borrowing. Capital may not continue
to be available if necessary to meet these continuing development costs or, if
the capital is available, that it will be on terms acceptable to us. The
issuance of additional equity securities by us would result in a significant
dilution in the equity interests of our current stockholders. Obtaining
commercial loans, assuming those loans would be available, will increase our
liabilities and future cash commitments.
If we are unable to obtain financing in the amounts and on
terms deemed acceptable to us, we may be unable to continue our business and as
a result may be required to scale back or cease operations for our business, the
result of which would be that our stockholders would lose some or all of their
investment.
A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our operations.
A prolonged decline in the price of our common stock could
result in a reduction in the liquidity of our common stock and a reduction in
our ability to raise capital. Because our operations have been primarily
financed through the sale of equity securities, a decline in the price of our
common stock could be especially detrimental to our liquidity and our continued
operations. Any reduction in our ability to raise equity capital in the future
would force us to reallocate funds from other planned uses and would have a
significant negative effect on our business plans and operations, including our
ability to develop new products and continue our current operations. If our
stock price declines, we may not be able to raise additional capital or generate
funds from operations sufficient to meet our obligations.
We have a history of losses and fluctuating operating
results.
There is no assurance that we will operate profitably or will
generate positive cash flow in the future. In addition, our operating results in
the future may be subject to significant fluctuations due to many factors not
within our control, such as the unpredictability of when customers will purchase
our products and/or services, the size of customers purchases, the demand for
our production and/or services, and the level of competition and general
economic conditions. If we cannot generate positive cash flows in the future, or
raise sufficient financing to continue our normal operations, then we may be
forced to scale down or even close our operations.
We have a limited operating history and if we are not
successful in continuing to grow our business, then we may have to scale back or
even cease our ongoing business operations.
We have limited history of revenues from operations and have
limited significant tangible assets. We have yet to generate positive earnings
and there can be no assurance that we will ever operate profitably. Our company
has a limited operating history and must be considered in the development stage.
Our companys operations will be subject to all the risks inherent in the
establishment of a developing enterprise and the uncertainties arising from the
absence of a significant operating history. We are in the development stage and
potential investors should be aware of the difficulties normally encountered by
enterprises in the development stage. If our business plan is not successful,
and we are not able to operate profitably, investors may lose some or all of
their investment in our company.
Trading of our stock may be restricted by the SEC's "Penny
Stock" regulations, which may limit a stockholder's ability to buy and sell our
stock.
The U.S. Securities and Exchange Commission has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors." The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC, which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to
trade our securities. We believe that the penny stock rules discourage investor
interest in and limit the marketability of, our common stock.
The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements which may also limit a stockholder's ability
to buy and sell our stock.
In addition to the "penny stock" rules described above, FINRA
has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for our shares.
Trading in our common shares on the OTC Bulletin Board is
limited and sporadic making it difficult for our shareholders to sell their
shares or liquidate their investments.
Our common shares are currently listed for public trading on
the OTC Bulletin Board. The trading price of our common shares has been subject
to wide fluctuations. Trading prices of our common shares may fluctuate in
response to a number of factors, many of which will be beyond our control. The
stock market has generally experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance
of companies with no current business operation. There can be no assurance that
trading prices and price earnings ratios previously experienced by our common
shares will be matched or maintained. These broad market and industry factors
may adversely affect the market price of our common shares, regardless of our
operating performance.
In the past, following periods of volatility in the market
price of a company's securities, securities class-action litigation has often
been instituted. Such litigation, if instituted, could result in substantial
costs for us and a diversion of management's attention and resources.
Because of the early stage of development and the nature of
our business, our securities are considered highly speculative.
Our securities must be considered highly speculative, generally
because of the nature of our business and the early stage of its
development.
Item 1B.
|
Unresolved Staff Comments
|
None.
Executive Offices
Our corporate headquarters are located at 2665 S. Bayshore Dr.
Miami Florida, 33133. At the present time, we do not have any real estate
holdings and there are no plans to acquire any real property interests.
Item 3.
|
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 March 14, 2005 the Company was named as a defendant in a
Writ of Summons and Statement of Claim in the Supreme Court of British Columbia,
Vancouver Registry in which the Native Trade and Investment Association
requested an order to pay the Plaintiff Cdn $53,500 and 100,000 common shares
for trade shows attended by the Company. On February 6 2007 The Supreme Court of
British Columbia ordered the Company to pay NITA $53,500 plus interest of $4,126
and costs of $5,673 and 100,000 common shares.
On June 30, 2008, the Company filed an action in the Circuit
Court in and for Miami-Dade County, Florida against a customer seeking to
recover a total of $142,121 for services and loans provided. The Company is also
seeking to recover interest and attorneys' fees and costs. The likelihood of any
results from the above lawsuit is not determinable at this time, consequently
the company has made bad debt provisions for the entire amounts.
On October 16 2009 the Company received notice that they had
been named as Defendants in a lawsuit whereby the Plaintiffs are seeking a
judgement of $39,000 plus interest thereon from March 11 2009 for breach of
contract. As at September 30 2009 no amounts have been accrued as the result of
the lawsuit is not determinable at this time.
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 4.
|
Submission of Matters to a Vote of Security
Holders
|
There were no matters submitted to a vote of our security
holders either through solicitation of proxies or otherwise in the fourth
quarter of the fiscal year ended December 31, 2008.
PART II
Item 5.
|
Market for Common Equity and Related
Stockholder Matters
|
Market for Common Stock
The Companys securities trade on the NASDs OTCBB under the
symbol ALYI .
The following table summarizes the high and low bid prices for
our common stock for the periods indicated as reported by the OTC Bulletin
Board:
|
2009
|
|
HIGH
|
|
|
LOW
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
$
|
0.20
|
|
$
|
0.15
|
|
|
Second Quarter
|
$
|
0.15
|
|
$
|
0.10
|
|
|
Third Quarter
|
$
|
0.12
|
|
$
|
0.10
|
|
|
Fourth Quarter
|
$
|
0.12
|
|
$
|
0.10
|
|
Holders of Common Stock
On December 31, 2009, there were 101 holders of record of our
common stock and there were 21,917,233 shares outstanding. There are 205
indirect holders of common shares in outside institutions or stock brokerage
firms, and we estimate that there are no additional beneficial shareholders
beyond the 101 registered shareholders and 205 non-registered shareholders at
December 31, 2009.
Dividend Policy
We have not paid any cash dividends on our common stock and
have no present intention of paying any dividends on the shares of our common
stock. Our current policy is to retain earnings, if any, for use in our
operations and in the development of our business. Our future dividend policy
will be determined from time to time by our board of directors.
Recent Sales of Unregistered Securities
Sales in 2009
During the year ended December 31 2009 the Company issued
312,500 shares valued at $25,000 for cash received and 200,000 shares valued at
$20,000 for services to be rendered over a one year period. The Company has
received a total of $225,415 in respect of a further private placement of common
stock. These shares were not issued as at December 31, 2009 and this amount is
reported as private placement subscriptions within stockholders deficit.
Sales in 2008
During the year, a total of 970,218 shares valued at $339,572
were issued with respect to private placement.
Where the offerings described in Sales in 2009 and Sales in
2008 above were made to Canadian residents they were undertaken under
Regulation S and they were made under Rule 903 (Category 3, equity securities)
and:
-
the sale was made in an offshore transaction;
-
no directed selling efforts were made in the United States by the Company;
-
the purchaser certified that it is not a US person and is not acquiring
the securities for the account or benefit of any US person;
-
the purchaser agreed to resell such securities only in accordance with the
provisions of the Securities Act of 1933 or regulations applicable to their
securities;
-
the securities contained a legend to the effect that transfer was
prohibited unless the securities were first registered under the Securities
Act of 1933 or resale was made pursuant to an exemption therefrom.
No commission or professional fees were paid in connection with
the Company's sales of unregistered securities under Regulation S.
Where the sales were made to residents of the United States
under Regulation D each person to whom the sale was made was asked by the
Company to confirm in writing that they were accredited investors, as that term
is defined in the rules and regulations of the Securities Exchange
Commission.
Neither we nor any person acting on our behalf offered or sold
the foregoing securities by means of any form of general solicitation or general
advertising. All purchasers represented in writing that they acquired the
securities for their own accounts. A resale legend has been provided for the
stock certificates stating that the securities have not been registered under
the Securities Act of 1933 and cannot be resold or otherwise transferred without
registration or an exemption (such as that provided by Regulation S or Rule
144).
Convertible Debenture Notes
On February 4, 2008, the Company issued a note payable in the
amount of $50,000. The note carries interest at the rate of 8% per annum and is
due on May 4, 2008. If the note is not repaid on maturity or in any other event
of default, 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 equal to 50% of the average market price of the Companys stock
for the 30 days prior to the date of conversion.
On February 13, 2008, the Company issued a note payable in the
amount of $50,000. The note carries interest at the rate of 8% per annum and is
due on May 13, 2008. If the note is not repaid on maturity or in any other event
of default, 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 equal to 50% of the average market price of the Companys stock
for the 30 days prior to the date of conversion.
On April 9, 2008, the Company issued a note payable in the
amount of $10,000. The note carries interest at the rate of 8% per annum and is
due on July 9, 2008. If the note is not repaid on maturity or in any other event
of default, 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 equal to 50% of the average market price of the Companys stock
for the 30 days prior to the date of conversion.
On April 28, 2008, the Company issued a note payable in the
amount of $20,000. The note carries interest at the rate of 8% per annum and is
due on July 16, 2008. If the note is not repaid on maturity or in any other
event of default, 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 equal to 50% of the average market price of the
Companys stock for the 30 days prior to the date of conversion.
On July 16, 2008, the Company issued a total of 383,364 shares
to repay the above four convertible notes valued at $130,000
On January 8, 2009, the Company issued a note payable in the
amount of $48,464. The note carries interest at the rate of 10% per annum and is
due on January 8, 2010. If the note is not repaid on maturity or in any other
event of default, 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 equal to 50% of the average market price of the
Companys stock for the 30 days prior to the date of conversion. On December 30,
2009, the Company repaid the total outstanding interest plus $10,347 of the
principal on the note. As such, the corresponding liability was reduced to
reflect this repayment.
On January 8, 2009, the Company issued a note payable in the
amount of $48,517. The note carries interest at the rate of 10% per annum and is
due on January 8, 2010. If the note is not repaid on maturity or in any other
event of default, 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 equal to 50% of the average market price of the
Companys stock for the 30 days prior to the date of conversion. On December 30,
2009, the Company repaid the note in full and as such the corresponding
derivative liability was written off.
On January 8, 2009, the Company issued a note payable in the
amount of $42,085. The note carries interest at the rate of 10% per annum and is
due on January 8, 2010. If the note is not repaid on maturity or in any other
event of default, 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 equal to 50% of the average market price of the
Companys stock for the 30 days prior to the date of conversion. On September
15, 2009, the balance outstanding on the note payable was agreed to be settled prior
to the conversion date and as such the corresponding derivative liability was
written off.
On December 18, 2009, the Company issued a note payable in the
amount of $100,000. The note carries interest at the rate of 12% per annum and
is due on March 18, 2010. If the note is not repaid on maturity or in any other
event of default, 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 equal to 80% of the average market price of the
Companys stock for the 30 days prior to the date of conversion.
The Company accounts for debt with embedded conversion features
and warrant issues in accordance with EITF 98-5: Accounting for convertible
securities with beneficial conversion features or contingency adjustable
conversion and EITF No. 00-27: Application of issue No 98-5 to certain
convertible instruments. Conversion features determined to be beneficial to the
holder are valued at fair value and recorded to additional paid in capital. The
Company determines the fair value to be ascribed to the detachable warrants
issued with the convertible debentures utilizing the
Black-Scholes
method. Any discount derived from determining the fair value to the
debenture conversion features and warrants is amortized to financing cost over
the life of the debenture. The unamortized costs if any, upon the conversion of
the warrants is expensed to financing cost on a pro rata basis over the life of
the warrant.
Debt issued with the variable conversion features are
considered to be embedded derivatives and are accountable in accordance with
FASB 133; Accounting for Derivative Instruments and Hedging Activities. The fair
value of the embedded derivative is recorded to derivative liability. This
liability is required to be marked each reporting period. The resulting discount
on the debt is amortized to interest expense over the life of the related
debt.
Recent Issuance of Non- Restricted Securities
Employee and Consultant Retainer Stock Plan 2008
The Company adopted a retainer stock plan on January 29 2008.
The 2008 Retainer Stock Plan authorizes the issuance of a maximum of 6,000,000
shares of our common stock granted to our or our subsidiarys employees or
directors and to consultants performing work for us or our subsidiary. All of
the shares issuable under the 2008 Retainer Stock Plan were registered under a
Registration Statement on Form S-8. 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 maybe awarded under this plan.
Purchase of Equity Securities by the Issuer and
Affiliated Purchasers
We did not purchase any of our shares of common stock or other
securities during our fourth quarter of our fiscal year ended December 31,
2009.
Item 6.
|
Selected Financial Data
|
As a smaller reporting company, we are not required to
provide the information required by this Item.
Item 7.
|
Managements Discussion and Analysis of
Financial Condition and Results of Operations
|
The following discussion should be read in conjunction with our
consolidated audited financial statements and the related notes that appear
elsewhere in this annual report. 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 audited financial statements are stated in
United States Dollars and are prepared in accordance with United States
Generally Accepted Accounting Principles.
Overview
Alternet Systems Inc. offers long-distance telecommunications
services, mobile transaction services and internet content management solutions
for the North and South American markets.
Results of Operations :
Results of Operations are for the year ended December 31, 2009
compared to the year ended December 31, 2008.
The Companys results, on a consolidated basis, reflected its
own results consolidated with its subsidiary TekVoice Communications Inc. For
the remainder of this part, the term Company refers to both the Company and
its wholly owned subsidiary above.
On July 29, 2009 the Company incorporated Alternet Transactions
Systems, Inc. (ATS) in the State of Florida in partnership with Utiba PTE Ltd.
The Company owns 5,100 shares (51%) of the outstanding shares o ATS with Utiba
PTE Ltd. owning the remaining 4,900 (49%). ATS is doing business as Utiba
Americas. As at December 31, 2009, ATS has not incurred nay transactions.
On September 17, 2009 the Company incorporated International
Mobile Security, Inc. (IMS) in the State of Florida in partnership with
General Services Holdings, LLC. The Company owns 6,000 shares (60%) of the
outstanding shares of IMS with General Services Holdings, LLC. owning the
remaining 4,000 (40%). As at December 31, 2009, IMS has not incurred nay
transactions
Net Sales
For the year ending December 31, 2009, the Company had sales of
$227,551. During the corresponding year ended December 31, 2008, the Company had
sales of $664,736. The decrease in sales is attributable to the fact that the
Company re-organized its sales and marketing personnel to concentrate on the
sales of its e-transactions products and experienced less demand for the
Telecommunication Services division.
The objective of the Companys marketing plan is to have three
distinct product divisions over the next twelve months: Mobile Transaction
Services, Telecommunication Services; and network systems for Education and
Healthcare.
Net Loss
For the year ending December 31, 2009, the Company had a net
loss of $685,896 or ($0.03) per share, which was a decrease of 65% when compared
to the net loss for the corresponding year to December 31, 2008 of $1,840,477 or
$(0.11) per share. The decreased loss was due primarily to a 97% decrease in bad
debt in the telecom services division and a 44% decrease in management and
consulting fees for the year ended December 31 2009 compared to the year ended
December 31, 2008.
Selling, General and Administrative Expenses
For the year ended December 31 2009 the Company incurred office
and general expenses of $32,550, compared to the $32,898 incurred in the
previous year ending December 31 2008. Marketing expenses for the year ending
December 31 2009 were -$2230 were 80% higher than the marketing expenses of
$37,228 for the year ending December 31 2008. Investor relations costs were
$80,888 for the year ending December 31 2009, compared to $197,582 for the year
ending 2008
Management and consulting fees of $534,266 for the year ending
December 31 2009represents a 44% decrease from the management and consulting
fees of $946,779 incurred in the year ending December 31 2008. Professional fees
of $61,657 were incurred in the period ending December 31 2009, which was a 50%
decrease from the professional fees of $110,646 incurred in the previous year
ending December 31 2008. The decrease in management consulting expense for the
year ended December 31 2009 is a result of decreased staffing levels compared to
the corresponding year ending December 31, 2008.
Accounts payable were $907,353 at December 31 2009, which was a
68% increase when compared to accounts payable of $288,457 at December 31 2008.
Accounts receivable were $36,585 for the year ended December 31 2008 which was a
39% increase from accounts receivable of $22,515 for the previous year ended
December 31 2008.
Interest and other expenses
The Company had no material interest expenses.
Liquidity and Capital Resources
As at December 31, 2009, the Company had $17,584 cash in the
bank, share subscriptions receivable of $8900 and accounts receivable of $36,585. At December
31 2009, the Company had a working capital deficiency of $1,490,025. The Company
is currently pursuing financing to fund ongoing operations and to pay current
debts. The Companys ability to continue as a going concern will be negatively
affected if it is unsuccessful.
Plan of Operation
Over the next 12 months, the Company will be concentrating on
marketing its mobile financial transaction and telecommunications platforms, in
the telecommunication, public utility, government and financial industries.
Sales and marketing is accomplished through the Companys
existing sales staff, who contact potential clients through personal and agent
sales, trade shows and industry associations.
Sales will come from organic growth from its existing
operations. The Company may identify in the course of business, strategic
acquisition targets.
Company has accomplished the execution of framework agreements
with critical vendors, and is in the process of launching its mobile financial
and mobile commerce suite of services.
We have also initiated a program to participate in the
financial services industry, by enabling cellular phone technologies that will
allow customers to make mobile to mobile, mobile to cash and mobile to
money remittances.
Demand for our services is driven primarily by mobile
subscriber purchasing activity via their cellular phone. The global mobile
commerce industry is in its early growth and adoption stages. The drivers for
growth are cellular phone penetration, large unbanked population worldwide, user
acceptance of the cell phone as a means of payment. Subscriber adoption of new
wireless technologies and services can also drive demand for our services due to
the resulting increase in interoperability complexities. We believe that as
wireless usage expands and complexity continues to increase, the demand for our
services will grow.
A structured plan has been defined to close and pursue
opportunities. The company has a funnel of potential prospects in different
stages of closing. The needs and opportunities of these initial prospects have
been identified and we are preparing offers and agreements.
The Company will be updating its marketing material, including
web presence and technical information. It will also be focusing on its
electronic transaction products, targeting specific vertical industries,
specifically the telecom, financial, utilities and transportation sectors.
Currently our sales and business development partners have
identified and pursued projects in Colombia, Ecuador, Bolivia, Guatemala,
Panama, Mexico, Brasil, Costa Rica, El Salvador, Honduras, Venezuela, Guyana,
Haiti, Dominican Republic and the United States.
Although the Company believes that demand exists for its
products and services, there can be no assurance that sales will increase in the
future. The Company is expected to remain dependent upon debt or equity
financing unless revenues from operations grow significantly.
Funds Required For the Next 12 Months of Operations
The Company anticipates the following for monthly cash expenses
in the next 12 months (excluding the cost of any share issuances which may be
made pursuant to management agreements between the Company and senior
management):
Management Fees and Salaries
|
$
|
65,000
|
|
Product Development Expense:
|
$
|
15,000
|
|
Office Rent
|
$
|
6,000
|
|
Telephones
|
$
|
2,000
|
|
|
|
|
|
Travel
|
$
|
30,000
|
|
Marketing Expenses
|
$
|
25,000
|
|
Professional Fees
|
$
|
25,000
|
|
|
|
|
|
Accounting fees
|
$
|
6,000
|
|
Total Monthly Expenses:
|
$
|
174,000
|
|
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
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. Our company has
produced significant revenue from its principal business and in fiscal years
prior to December 31, 2008 was considered an Exploration Stage Company, as
defined by Statement of Financial Accounting Standard (SFAS) No. 7 Accounting
and Reporting for Development Stage Enterprises. These financial statements
include the accounts of the Company and its wholly owned subsidiaries,. Our
fiscal year-end is December 31.
Use of Estimates
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles 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 date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Our company regularly evaluates estimates and assumptions. Our
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 values of assets and liabilities and the accrual of costs and
expenses that are not readily apparent from other sources. The actual results
experienced by our company may differ materially and adversely from our
companys estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be
affected.
Foreign Currency Translation
Our companys and its United States subsidiaries functional
and reporting currency is the United States dollar. The functional currency of
our companys Canadian subsidiary is the Canadian dollar. The financial
statements of the subsidiary are translated to United States dollars in
accordance with SFAS No. 52
Foreign Currency
Translation
using period-end rates of exchange for
assets and liabilities, and average rates of exchange for the period for
revenues and expenses. Translation gains (losses) are recorded in accumulated
other comprehensive income as a component of stockholders equity. Foreign
currency transaction gains and losses are included in current operations. Gains
and losses arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of income. Foreign
currency transactions are primarily undertaken in Canadian dollars. Our company
has not, to the date of these financials statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.
Long-Lived Assets
In accordance with SFAS No. 144,
Accounting for the
Impairment or Disposal of Long-Lived Assets
", the carrying value of
intangible assets and other long-lived assets is reviewed on a regular basis for
the existence of facts or circumstances that may suggest impairment. Our company
recognizes impairment when the sum of the expected undiscounted future cash
flows is less than the carrying amount of the asset. Impairment losses, if any,
are measured as the excess of the carrying amount of the asset over its
estimated fair value.
Loss Per Share
Our company computes net loss per share in accordance with SFAS
No. 128 "
Earnings per Share
" which 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 loss available to common shareholders by
the weighted average number of shares outstanding during the period. Diluted EPS
gives effect to all dilutive potential common shares outstanding during the
period including convertible debt, stock options, and warrants, using the
treasury stock method. Diluted EPS excludes all dilutive potential shares if
their effect is anti dilutive. Diluted loss per share figures are equal to those
of basic loss per share for each period since the effects of convertible debt,
stock options and warrants have been excluded as they are anti-dilutive.
Other Comprehensive Income (Loss)
SFAS No. 130,
Reporting Comprehensive Income
,
establishes standards for the reporting and display of comprehensive loss and
its components in the financial statements.
Financial Instruments
The carrying value of our companys financial instruments,
consisting of cash and cash equivalents, restricted cash, receivables, and
accounts payable and accrued liabilities, approximate fair value due to the
relatively short maturity of these instruments.
Income Taxes
Our company follows the liability method of accounting for
income taxes as set forth in SFAS No. 109,
Accounting for Income Taxes
. Under this method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of assets and liabilities and their respective tax
balances. Deferred tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment.
Debt Issue Costs
In accordance with the Accounting Principles Board Opinion 21
Interest on Receivables and Payables
, our company recognizes debt issue
costs on the balance sheet as deferred charges, and amortizes the balance over
the term of the related debt. Our company follows the guidance
in the EITF 95-13
Classification of Debt Issue Costs in the Statement of
Cash Flows
and classifies cash payments for debt issue costs as a
financing activity.
Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (revised 2007),
Business Combination,
which
is
e
ffective for fiscal years
beginning after December 15, 2008. The standard requires the acquiring entity in
a business combination to recognize all (and only) the assets acquired and
liabilities assumed in the transaction; establishes the acquisition-date fair
value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose to investors and other users all
of the information they need to evaluate and understand the nature and financial
effect of the business combination. This standard did not effect the Companys
reported financial position or results of operations.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements,
which
is
effective for fiscal years beginning after December 15, 2008. The
statement requires all entities to report noncontrolling or minority interests
in subsidiaries in the same way as equity in the consolidated financial
statements. Moreover, the Statement eliminates the diversity that currently
exists in accounting for transactions between an entity and noncontrolling
interests by requiring they be treated as equity transactions. The Company has
reported all noncontrolling interests as an equity transaction.
In March 2008, the FASB issued SFAS No.161,
Disclosures
about Derivative Instruments and Hedging Activities
, which is effective for
fiscal years and interim periods beginning after November 15, 2008. The
statement amends and expands the disclosure requirements of Statement 133 and
requires qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of and gains and
losses on derivative instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. The Company has expanded the
information included in Note 4 Convertible Debenture Notes to include the new
requirements. This standard did not effect the Companys reported financial
position or results of operations.
In May 2008, the FASB issued SFAS No.162,
The Hierarchy of
Generally Accepted Accounting Principles,
which
is effective 60 days
following the SECs approval of the Public Company Accounting Oversight Board
amendments to AU Section 411. This statement identifies the sources of
accounting principles and framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States, the GAAP hierarchy. This standard did not effect the Companys
reported financial position or results of operations.
In May 2008, the FASB issued SFAS No.163,
Accounting for
Financial Guarantee Insurance Contract,
which
is effective for
financial statements issued for fiscal years beginning after December 15, 2008.
This statement requires that an insurance enterprise recognize a claim liability
prior to an event of default when there is evidence that credit deterioration
has occurred in an insured financial obligation. This Statement also clarifies
how Statement 60,
Accounting and Reporting by Insurance Enterprises,
applies to financial guarantee insurance contract, including the recognition
and measurement to be used to account for premium revenue and claim liabilities.
This standard did not effect the Companys reported financial position or
results of operations.
In May 2009, the FASB issued SFAS No.165,
Subsequent Events,
which
is effective for interim or annual financial statements issued
after June 15, 2009. This statement requires the Company to disclose the period
for which subsequent events have been reported and clarifies when subsequent
events should be disclosed. This standard did not effect the Companys reported
financial position or results of operations.
In June 2009, the FASB issued SFAS No.166,
Accounting for
Transfers of Financial Assets,
which
is effective for financial
statements issued for fiscal years beginning after November 15, 2009. This
statement amends SFAS No.140,
Accounting for Transfers and Servicing of
Financial Assets and extinguishments of Liabilities,
by removing the concept of special purpose entity from SFAS
No.140. This statement also clarifies the objective of paragraph 9 of SFAS
No.140 which is to determine whether a transferor and all of the entities
included in the transferors financial statements being presented have
surrendered control of transferred financial assets. This standard is not
expected to have a significant effect on the Companys reported financial
position or results of operations
In June 2009, the FASB issued SFAS No.167,
Amendments to
FASB Interpretation No.46(R),
which
is effective for financial
statements issued for fiscal years beginning after November 15, 2009. This
statement amends FASB Interpretation No.46(R),
Consolidation of Variable
Interest Entities,
by requiring an entity to perform an analysis to
determine whether the entitys variable interest or interest give it a
controlling financial interest in a variable interest entity. This standard is
not expected to have a significant effect on the Companys reported financial
position or results of operations
In June 2009, the FASB issued SFAS No.168,
The FASB
Accounting Standards Codification and
t
he Hierarchy of Generally Accepted
Accounting Principles,
which replaces SFAS 162 and
is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. This statement identifies the sources of accounting
principles and framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles in the United States,
the GAAP hierarchy. This standard did not effect the Companys reported
financial position or results of operations..
In January 2010, the FASB issued ASU 2010-01,
Accounting for
Distributions to Shareholders with Components of Stock and Cash,
which is
effective for financial statements issued for interim and annual periods ending
after December 15, 2009. This update identifies how companies should be
reporting distributions to shareholders that offers them the ability to elect to
receive the distribution in cash or an equivalent number of shares. It was
determined that all distributions of shares relating to these payments should be
recorded as new share issuances. This standard did not effect the Companys
reported financial position or results of operations.
In January 2010, the FASB issued ASU 2010-02,
Consolidation,
which replaces SFAS No. 160 and is effective for financial statements issued
for interim and annual periods ending after December 15, 2009. This update
establishes the accounting and reporting guidance for noncontrolling interest
and changes in ownership interests of a subsidiary. This standard is not
expected to have a significant effect on the Companys reported financial
position or results of operations. This standard did not effect the Companys
reported financial position or results of operations.
In January 2010, the FASB issued ASU 2010-06,
FairValue
Measurements and Disclosures,
which replaces SFAS No. 157 and is effective
for financial statements issued for interim and annual periods ending after
December 15, 2009 except for the disclosures about purchases, sales, issuances,
and settlements in the roll forward activity in Level 3 fair value measurements
which are effective for financial statements issued for fiscal years ending
after December 15, 2010 and interim periods commencing December 16, 2009. This
update identifies new disclosure requirements relating to fair value
measurements. This standard did not effect the Companys reported financial
position or results of operations.
In February 2010, the FASB issued ASU 2010-09,
Subsequent
Events,
which is effective for financial statements issued for interim and
annual periods ending after June 15, 2010. This update addresses both the
interaction of the requirements of Topic 855 with the SECs reporting
requirements and the intended breadth of the reissuance disclosure provision
related to subsequent events. This standard is not expected to have a
significant effect on the Companys reported financial position or results of
operations.
Item 7A.
|
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
8.
|
Financial Statements and Supplementary
Data
|
Hamilton PC
|
|
2121 S. Oneida St., Suite 312
|
Denver, CO 80224
|
P: (303) 548-8072
|
F: (888) 466-4216
|
cpaeah@msn.com
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Board of Directors and Stockholders
Alternet Systems,
Inc.
Miami, FL
We have audited the accompanying balance sheets of Alternet
Systems, Inc., as of December 31, 2009, and the related statements of
operations, stockholders equity (deficit) and cash flows for the year then
ended. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financials statements of Alternet Systems,
Inc. as of December 31, 2008, were audited by other auditors whose report dated
April 14, 2009, expressed an unqualified opinion with a going concern.
We conducted our audit in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying financial statements have been prepared
assuming that Alternet Systems, Inc. will continue as a going concern. As
discussed in Note 1 to the financial statements, Alternet Systems, Inc. suffered
recurring losses from operations which raises substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Alternet
Systems, Inc. as of December 31, 2009, and the results of its operations and its
cash flows for the year then ended, in conformity with U.S. generally accepted
accounting principles.
Hamilton, PC
/s/ Hamilton, PC
Denver, Colorado
April 15, 2010
1
ALTERNET SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
CONSOLIDATED BALANCE SHEETS
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
ALTERNET SYSTEMS INC.
|
CONSOLIDATED BALANCE SHEET
|
(Unaudited)
|
|
As at December
31, 2009 and 2008
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
$
|
17,854
|
|
$
|
4,326
|
|
Accounts
receivable
|
|
36,585
|
|
|
22,515
|
|
Share subscriptions receivable
|
|
8,900
|
|
|
-
|
|
Prepaids and
deposits
|
|
-
|
|
|
10,169
|
|
Deferred financing costs
|
|
30,920
|
|
|
-
|
|
Total Current Assets
|
|
94,259
|
|
|
37,010
|
|
|
|
|
|
|
|
|
Fixed Assets (Note 3)
|
|
4,592
|
|
|
6,457
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
98,851
|
|
$
|
43,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Accounts payable
|
$
|
907,353
|
|
$
|
288,457
|
|
Accrued taxes
|
|
81,739
|
|
|
61,979
|
|
Other loans
payable
|
|
359,397
|
|
|
54,238
|
|
Due to related parties (Note 4
and 6)
|
|
82,916
|
|
|
501,702
|
|
Demand loan
|
|
-
|
|
|
125,000
|
|
Derivative liability
|
|
71,879
|
|
|
-
|
|
TOTAL LIABILITIES
|
|
1,503,284
|
|
|
1,031,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
Capital Stock
(Note 5)
|
|
202
|
|
|
197
|
|
Additional paid-in capital
|
|
5,257,695
|
|
|
5,212,700
|
|
Private
placement subscriptions
|
|
225,415
|
|
|
225,415
|
|
Obligation to issue shares
|
|
83,196
|
|
|
90,000
|
|
Deferred
compensation (Note 7)
|
|
(645,181
|
)
|
|
(872,143
|
)
|
Deficit
|
|
(6,334,660
|
)
|
|
(5,644,078
|
)
|
|
|
(1,413,333
|
)
|
|
(987,909
|
)
|
Noncontrolling interest
|
|
8,900
|
|
|
-
|
|
TOTAL STOCKHOLDERS' DEFICIENCY
|
|
(1,404,433
|
)
|
|
(987,909
|
)
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
|
$
|
98,851
|
|
$
|
43,467
|
|
The accompanying notes are an intergral part of these
consolidated financial statements.
ALTERNET SYSTEMS INC.
|
CONSOLIDATED STATEMENT OF LOSS AND DEFICIT
|
(Unaudited)
|
|
Years ended
December 31, 2009 and 2008
|
|
|
|
2009
|
|
|
2008
|
|
REVENUE
|
|
|
|
|
|
|
Sales
|
$
|
277,551
|
|
$
|
664,736
|
|
COST OF SALES
|
|
|
|
|
|
|
Direct Cost of Sales
|
|
81,527
|
|
|
498,547
|
|
GROSS PROFIT
|
|
196,024
|
|
|
166,189
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
Bad Debt
|
|
13,894
|
|
|
414,036
|
|
Bank Charges and
Interest
|
|
51,247
|
|
|
19,682
|
|
Commissions
|
|
-
|
|
|
1,450
|
|
Depreciation and
Amortization
|
|
2,148
|
|
|
2,365
|
|
Financing Costs
|
|
127,625
|
|
|
143,480
|
|
Investor
Relations
|
|
80,888
|
|
|
197,582
|
|
License Fees
|
|
299
|
|
|
133
|
|
Management and
Consulting
|
|
534,266
|
|
|
946,779
|
|
Marketing (recovery)
|
|
(2,230
|
)
|
|
37,288
|
|
Office and
General
|
|
32,550
|
|
|
32,898
|
|
Professional fees
|
|
61,657
|
|
|
110,646
|
|
Rent
|
|
26,574
|
|
|
48,064
|
|
Salaries
|
|
254,032
|
|
|
82,365
|
|
Telephone and
Utilities
|
|
6,110
|
|
|
35,230
|
|
Travel
|
|
16,154
|
|
|
65,478
|
|
TOTAL OPERATING EXPENSES
|
|
1,205,214
|
|
|
2,137,476
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE OTHER ITEMS
|
|
(1,009,190
|
)
|
|
(1,971,287
|
)
|
|
|
|
|
|
|
|
OTHER ITEMS
|
|
|
|
|
|
|
Customer fees
|
|
4,827
|
|
|
-
|
|
Other
income/(expense)
|
|
(6,922
|
)
|
|
(12,670
|
)
|
Gain on sale of investment
|
|
196,628
|
|
|
-
|
|
Gain on debt
settlement
|
|
35,237
|
|
|
-
|
|
Increase in Derivative Liability
|
|
93,524
|
|
|
143,480
|
|
|
|
|
|
|
|
|
NET LOSS FOR THE YEAR
|
$
|
(685,896
|
)
|
$
|
(1,840,477
|
)
|
|
|
|
|
|
|
|
BASIC NET LOSS PER SHARE
|
$
|
(0.03
|
)
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
WEIGHTED COMMON SHARES OUTSTANDING
|
|
20,100,921
|
|
|
17,513,381
|
|
The accompanying notes are an intergral part of these
consolidated financial statements.
ALTERNET SYSTEMS INC.
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(Unaudited)
|
|
Years ended
December 31, 2009 and 2008
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net Loss From Operations
|
$
|
(685,896
|
)
|
$
|
(1,840,477
|
)
|
Add: Items Not
Affecting Cash
|
|
|
|
|
|
|
Depreciation
|
|
2,148
|
|
|
2,365
|
|
Shares for services
|
|
36,250
|
|
|
438,240
|
|
Shares for debt
|
|
26,946
|
|
|
-
|
|
Reversal of shares for debt
|
|
(50,000
|
)
|
|
-
|
|
Stock-based compensation
|
|
-
|
|
|
133,125
|
|
Deferred compensation
|
|
226,962
|
|
|
-
|
|
Changes In Non-Cash Working
Capital:
|
|
|
|
|
|
|
Accounts receivable
|
|
(14,070
|
)
|
|
407,982
|
|
Share subscriptions receivable
|
|
(8,900
|
)
|
|
-
|
|
Prepaids and deposit
|
|
10,169
|
|
|
1,938
|
|
Accounts payable and accrued charges
|
|
618,896
|
|
|
(105,638
|
)
|
Accrued taxes
|
|
19,760
|
|
|
(4,406
|
)
|
Due to related parties
|
|
(615,414
|
)
|
|
460,305
|
|
|
|
(236,521
|
)
|
|
(506,566
|
)
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Acquisition of fixed assets
|
|
(283
|
)
|
|
(1,271
|
)
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Change in loans
payable
|
|
180,159
|
|
|
32,238
|
|
Derivative liability
|
|
71,879
|
|
|
-
|
|
Deferred
financing costs
|
|
(30,920
|
)
|
|
-
|
|
Net proceeds on sale of common
stock and subscriptions
|
|
25,000
|
|
|
464,087
|
|
Minority shares
issued
|
|
8,900
|
|
|
-
|
|
|
|
255,018
|
|
|
496,325
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME
|
|
(4,686
|
)
|
|
(2,766
|
)
|
|
|
|
|
|
|
|
NET CHANGE IN CASH DURING THE YEAR
|
|
13,528
|
|
|
(14,278
|
)
|
|
|
|
|
|
|
|
CASH, BEGINNING OF YEAR
|
|
4,326
|
|
|
18,604
|
|
|
|
|
|
|
|
|
CASH, END OF YEAR
|
$
|
17,854
|
|
$
|
4,326
|
|
The accompanying notes are an intergral part of these
consolidated financial statements.
ALTERNET SYSTEMS INC.
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
|
|
For the Period
from May 16, 2002 (Inception) to December 31, 2009
|
|
|
|
Shares
|
|
|
Common Stock
|
|
|
Additional Paid in Capital
|
|
|
Treasury Shares
|
|
|
Treasury Stock
|
|
|
Private Placement subscriptions
|
|
|
Accumulated Deficit
|
|
|
Deferred Compensation
|
|
|
Obligation to Issue
shares
|
|
|
Other Comprehensive Income
|
|
|
Noncontrolling Interest
|
|
|
Total
|
|
Balance May 16, 2002
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance of common stock for
cash at
$0.223 per share - May 17,
2002
|
|
448,400
|
|
|
448
|
|
|
99,552
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
Issuance of common stock for
services at $0.223 per share -
December 31, 2002
|
|
2,394,854
|
|
|
2,396
|
|
|
531,684
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
-
|
|
|
- 534,080
|
|
Issuance of common stock for
cash at
$0.223 per share -
December 31, 2002
|
|
156,776
|
|
|
157
|
|
|
34,805
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
34,962
|
|
Net Loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(88,038
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(88,038
|
)
|
Balance December 31, 2002
|
|
3,000,030
|
|
|
3,001
|
|
|
666,041
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(88,038
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
581,004
|
|
Net Loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(387,426
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(387,426
|
)
|
Balance December 31, 2003
|
|
3,000,030
|
|
|
3,001
|
|
|
666,041
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(475,464
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
193,578
|
|
Issuance of common stock for
cash at $0.31 per share - April 30,
2004
|
|
363,669
|
|
|
364
|
|
|
112,256
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
112,620
|
|
Issuance of common stock for
services at
$0.31 per share - April
30, 2004
|
|
475,914
|
|
|
475
|
|
|
146,905
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
147,380
|
|
Redemption of shares
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,615,445
|
|
|
360,260
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(360,260
|
)
|
Issuance of common stock at
$0.42 per
share
|
|
-
|
|
|
-
|
|
|
148,698
|
|
|
(762,122
|
)
|
|
(167,668
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
316,366
|
|
Issuance of common stock for
acquisition at $0.50 per share -
June 30, 2004
|
|
-
|
|
|
-
|
|
|
115,321
|
|
|
(411,268
|
)
|
|
(90,479
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
205,800
|
|
Issuance of common stock for
services at
$0.50 per share - June
30, 2004
|
|
-
|
|
|
-
|
|
|
28,018
|
|
|
(99,919
|
)
|
|
(21,982
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
Issuance of common stock for
cash at $0.60 per share -
September 30, 2004
|
|
33,516
|
|
|
34
|
|
|
76,917
|
|
|
(154,988
|
)
|
|
(36,299
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
113,250
|
|
Issuance of common stock for
Services at
$0.60 per share -
September 30, 2004
|
|
40,471
|
|
|
40
|
|
|
92,878
|
|
|
(187,148
|
)
|
|
(43,832
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
136,750
|
|
Issuance of common stock for
cash at $0.50 per share -
September 30, 2004
|
|
204,834
|
|
|
205
|
|
|
102,295
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
102,500
|
|
Issuance of common stock for
services at
$0.50 per share -
September 30, 2004
|
|
644,600
|
|
|
644
|
|
|
321,856
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
322,500
|
|
Issuance of common stock for
cash at $0.48 per share - October
1, 2004
|
|
413,956
|
|
|
414
|
|
|
199,586
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
Issuance of common stock for
services at
$0.48 per share -
October 1, 2004
|
|
150,000
|
|
|
150
|
|
|
71,850
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
72,000
|
|
Net Loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,619,425
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,619,425
|
)
|
Balance December 31, 2004
|
|
5,326,990
|
|
|
5,327
|
|
|
2,082,621
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,094,889
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(6,941
|
)
|
Issuance of common stock for
cash at $0.48 per share - June 30,
2005
|
|
357,477
|
|
|
357
|
|
|
172,304
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
172,661
|
|
Issuance of common stock for
services at
$0.48 per share - June
30, 2005
|
|
1,137,880
|
|
|
1,138
|
|
|
548,201
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
549,339
|
|
ALTERNET SYSTEMS INC.
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
|
|
For the Period
from May 16, 2002 (Inception) to December 31, 2009
|
|
|
|
Shares
|
|
|
Common Stock
|
|
|
Additional Paid in Capital
|
|
|
Treasury Shares
|
|
|
Treasury Stock
|
|
|
Private Placement subscriptions
|
|
|
Accumulated Deficit
|
|
|
Deferred Compensation
|
|
|
Obligation to Issue
shares
|
|
|
Other Comprehensive Income
|
|
|
Noncontrolling Interest
|
|
|
Total
|
|
Issuance of common stock for acquisition at $0.48 per share - June 30, 2005
|
|
425,961
|
|
|
426
|
|
|
205,374
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
205,800
|
|
Net Loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(837,842
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(837,842
|
)
|
Balance December 31,
2005
|
|
7,248,308
|
|
|
7,248
|
|
|
3,008,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,932,731
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
83,017
|
|
Issuance of common stock for cash at
$0.48 per share - June 30, 2006
|
|
594,585
|
|
|
595
|
|
|
286,676
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
287,271
|
|
Issuance of common stock for
services at $0.48 per share - June
30, 2006
|
|
781,818
|
|
|
782
|
|
|
376,947
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
377,729
|
|
Issuance of common stock for
services at
$0.35 per share - June
30, 2006
|
|
425,961
|
|
|
426
|
|
|
146,574
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
147,000
|
|
Net Loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(553,314
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(553,314
|
)
|
Balance December 31, 2006
|
|
9,050,672
|
|
|
9,051
|
|
|
3,818,697
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,486,045
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
341,703
|
|
Net Loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(320,322
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(320,322
|
)
|
Balance December 31, 2007
|
|
9,050,672
|
|
|
9,051
|
|
|
3,818,697
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,806,367
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
21,381
|
|
Alternet Systems Inc. balance
before reverse acquisition
|
|
6,278,146
|
|
|
63
|
|
|
5,136,702
|
|
|
-
|
|
|
-
|
|
|
231,487
|
|
|
(5,540,778
|
)
|
|
(29,677
|
)
|
|
-
|
|
|
256
|
|
|
-
|
|
|
(201,947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued to effect reverse
acquisition
|
|
4,000,000
|
|
|
40
|
|
|
21,791
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
21,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse acquisition
recapitalization adjustment
|
|
(9,050,672
|
)
|
|
(9,051
|
)
|
|
(5,552,854
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,540,778
|
|
|
-
|
|
|
-
|
|
|
(256
|
)
|
|
-
|
|
|
(21,383
|
)
|
Balance December 31, 2007
|
|
10,278,146
|
|
|
103
|
|
|
3,424,336
|
|
|
-
|
|
|
-
|
|
|
231,487
|
|
|
(3,806,367
|
)
|
|
(29,677
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(180,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation at
$0.025 per
share - January 2, 2008
|
|
4,500,000
|
|
|
45
|
|
|
112,455
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
112,500
|
|
Stock-based compensation at
$0.025 per share - January 15,
2008
|
|
750,000
|
|
|
7
|
|
|
18,743
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
18,750
|
|
Stock-based compensation at
$0.025 per
share - January 23,
2008
|
|
75,000
|
|
|
1
|
|
|
1,874
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,875
|
|
Issuance of common stock for
services at $0.30 per share - May
23, 2008
|
|
23,542
|
|
|
-
|
|
|
7,063
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,063
|
|
Issuance of common stock for
services at
$0.51 per share - May
23, 2008
|
|
150,000
|
|
|
2
|
|
|
76,498
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
76,500
|
|
Issuance of common stock for
services at $0.50 per share - June
6, 2008
|
|
100,000
|
|
|
1
|
|
|
49,999
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
Issuance of common stock for
services at
$0.42 per share - June
26, 2008
|
|
1,500,000
|
|
|
15
|
|
|
629,985
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
630,000
|
|
Issuance of common stock for
debenture note at $0.36 per share -
July 16, 2008
|
|
277,778
|
|
|
3
|
|
|
99,997
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
Issuance of common stock for
debenture
note at $0.21 per share -
July 16, 2008
|
|
48,443
|
|
|
-
|
|
|
10,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
Issuance of common stock for
debenture note at $0.35 per share -
July 16, 2008
|
|
57,143
|
|
|
1
|
|
|
19,999
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
ALTERNET SYSTEMS INC.
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
|
|
For the Period
from May 16, 2002 (Inception) to December 31, 2009
|
|
|
|
Shares
|
|
|
Common Stock
|
|
|
Additional Paid in Capital
|
|
|
Treasury Shares
|
|
|
Treasury Stock
|
|
|
Private Placement subscriptions
|
|
|
Accumulated Deficit
|
|
|
Deferred Compensation
|
|
|
Obligation to Issue
shares
|
|
|
Other Comprehensive Income
|
|
|
Noncontrolling Interest
|
|
|
Total
|
|
Issuance of common stock for
cash at $0.35 per share - July 16,
2008
|
|
670,000
|
|
|
7
|
|
|
234,493
|
|
|
-
|
|
|
-
|
|
|
(234,500
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance of common stock for
services at
$0.42 per share - July
16, 2008
|
|
500,000
|
|
|
5
|
|
|
209,995
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
210,000
|
|
Issuance of common stock for
services at $0.42 per share -
August 6, 2008
|
|
310,000
|
|
|
3
|
|
|
130,197
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
130,200
|
|
Issuance of common stock for
cash at
$0.35 per share - August 7,
2008
|
|
14,100
|
|
|
-
|
|
|
4,930
|
|
|
-
|
|
|
-
|
|
|
(4,930
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance of common stock for
cash at $0.35 per share - August
11, 2008
|
|
241,158
|
|
|
2
|
|
|
84,403
|
|
|
-
|
|
|
-
|
|
|
(84,405
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance of common stock for
cash at
$0.35 per share - August
13, 2008
|
|
44,960
|
|
|
-
|
|
|
15,735
|
|
|
-
|
|
|
-
|
|
|
(15,735
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance of common stock for
services at $0.41 per share -
September 16, 2008
|
|
200,000
|
|
|
2
|
|
|
81,998
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
82,000
|
|
Private placement subscriptions
received
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
333,498
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
333,498
|
|
Foreign exchange translation
adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,766
|
|
|
-
|
|
|
2,766
|
|
Increase in derivative liability
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
143,480
|
|
|
-
|
|
|
143,480
|
|
Obligation to issue shares
per
consulting agreement
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
90,000
|
|
|
-
|
|
|
-
|
|
|
90,000
|
|
Services provided per term of
contracts
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(842,466
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(842,466
|
)
|
Net loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,983,957
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,983,957
|
)
|
Balance December 31, 2008
|
|
19,740,270
|
|
|
197
|
|
|
5,212,700
|
|
|
-
|
|
|
-
|
|
|
225,415
|
|
|
(5,790,324
|
)
|
|
(872,143
|
)
|
|
90,000
|
|
|
146,246
|
|
|
-
|
|
|
(987,909
|
)
|
Issuance of common stock for
cash at $0.08 per share - April 9,
2009
|
|
312,500
|
|
|
3
|
|
|
24,997
|
|
|
-
|
|
|
-
|
|
|
(25,000
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance of common stock for
services at
$0.10 per share - May
5, 2009
|
|
200,000
|
|
|
2
|
|
|
19,998
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
Private placement
subscriptions
received
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Foreign exchange translation
adjustment
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,686
|
)
|
|
-
|
|
|
(4,686
|
)
|
Increase (decrease) in
derivative
liability
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
93,524
|
|
|
-
|
|
|
93,524
|
|
Services provided per term of
contracts
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
226,962
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
226,962
|
|
Reversal of obligation to
issue
shares
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(50,000
|
)
|
|
-
|
|
|
-
|
|
|
(50,000
|
)
|
Obligation to issue shares per
consulting
agreement
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
16,250
|
|
|
-
|
|
|
-
|
|
|
16,250
|
|
Obligation to issue shares
per debt
settlement agreement
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
26,946
|
|
|
-
|
|
|
-
|
|
|
26,946
|
|
Subsidiary shares issued to
noncontrolling interest
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,900
|
|
|
8,900
|
|
Net loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(779,420
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(779,420
|
)
|
Balance December 31, 2009
|
|
20,252,770
|
|
|
202
|
|
|
5,257,695
|
|
|
-
|
|
|
-
|
|
|
225,415
|
|
|
(6,569,744
|
)
|
|
(645,181
|
)
|
|
83,196
|
|
|
235,084
|
|
|
8,900
|
|
|
(1,404,433
|
)
|
ALTERNET SYSTEMS INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
2009 and 2008
|
|
NOTE 1 NATURE OF OPERATIONS AND BASIS OF
PRESENTATION
Alternet Systems Inc. (Alternet or the Company) designs,
markets and sells proprietary software and hardware systems known as SchoolWeb
and CommunityWeb. The Companys products provide high speed Internet access to
schools and rural communities, in North America and internationally. The Company
also provides Voice over IP services, primarily in Latin America.
The Company was incorporated on June 26, 2000 in the State of
Nevada as North Pacific Capital Corp. and was organized for the purpose of
creating a corporate vehicle to locate and acquire an operating business. On
December 19, 2001, the Company changed its name to Schoolweb Systems Inc. and on
May 14, 2002 the Company changed its name to Alternet Systems Inc. (Alternet
or the Company). On November 6, 2000, the Company filed a Form 10SB
registration statement with the United States Securities and Exchange Commission
(SEC) and as a result is subject to the regulations governing reporting
issuers in the United States. On March 14, 2003, the Company was listed for
quotation on the Over-the-Counter Bulletin Board.
By agreement entered into December 31, 2007, Alternet issued
4,000,000 shares of restricted common stock to the shareholders of TekVoice
Communications, Inc., a Company incorporated on May 17, 2002 in the State of
Florida, in exchange for all of the issued and outstanding shares of TekVoice
Communications, Inc.
The acquisition resulted in the former shareholders of TekVoice
Communications, Inc. acquiring 38.92% of the then outstanding shares of the
Company and has been accounted for as a reverse merger with TekVoice
Communications, Inc., the legal subsidiary, being treated as the accounting
parent and Alternet, the legal parent, being treated as the accounting
subsidiary. Accordingly, the consolidated results of operations of the Company
include those of TekVoice Communications, Inc. for all periods shown and those
of Alternet since the date of the reverse acquisition.
On July 29, 2009 the Company incorporated Alternet Transactions
Systems, Inc. (ATS) in the State of Florida in partnership with Utiba PTE Ltd.
The Company owns 5,100 shares (51%) of the outstanding shares o ATS with Utiba
PTE Ltd. owning the remaining 4,900 (49%). ATS is doing business as Utiba
Americas. As at December 31, 2009, ATS has not incurred nay transactions.
On September 17, 2009 the Company incorporated International
Mobile Security, Inc. (IMS) in the State of Florida in partnership with
General Services Holdings, LLC. The Company owns 6,000 shares (60%) of the
outstanding shares of IMS with General Services Holdings, LLC. owning the
remaining 4,000 (40%). As at December 31, 2009, IMS has not incurred nay
transactions.
The 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 December 31,
2009 the Company had a working capital deficiency of $1,490,025. 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.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America.
Principles of Consolidation
The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries, AI Systems Group, Inc., AI Systems Group (Canada) Ltd., TekVoice
Communications, Inc., Alternet Transactions Systems, Inc., and International
Mobile Security, Inc. All significant intercompany transactions and account
balances have been eliminated.
Use of Estimates and Assumptions
Preparation of the
Companys financial statements in conformity with generally accepted accounting
principles in the United States of America requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
ALTERNET SYSTEMS INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
2009 and 2008
|
|
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
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.
Equipment
Fixed assets are recorded at cost and
depreciated at the following rates:
Computer equipment and software
|
-
|
30% declining balance basis
|
Equipment
|
-
|
20% declining balance basis
|
Impairment of Long Lived Assets
Management monitors
the recoverability of long-lived assets 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.
Revenue Recognition
Revenues are recognized when
title transfers or services are rendered. Telecommunications services are billed
at the end of the month the services are provided.
Foreign Currency Translation
The financial
statements are presented in United States dollars. In accordance with Statement
of Financial Accounting Standards No. 52, Foreign Currency Translation,
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.
Fair Value of Financial Instruments
In accordance
with the requirements of SFAS No. 107, the Company has determined the estimated
fair value of financial instruments using available market information and
appropriate valuation methodologies. The fair value of financial instruments
classified as current assets or liabilities approximate carrying value due to
the short-term maturity of the 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 Companys 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 presently prepares
its tax returns on the cash basis and financial statement on the accrual basis.
No deferred tax assets or liabilities have been recognized at this time, since
the Company has shown losses for both tax and financial reporting.
Stock-Based Compensation
Prior to January 1, 2006,
the Company accounted for stock-based awards under the recognition and
measurement provisions of Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees
using the intrinsic value
method of accounting, under which compensation expense was only recognized if
the exercise price of the Companys employee stock options was less than the
market price of the underlying common stock on the date of grant. Effective
January 1, 2006, the Company adopted the fair value recognition provisions of
SFAS No. 123R
Share Based Payments
, using the modified prospective
transition method. Under that transition method, compensation cost is recognized
for all share-based payments granted prior to, but not yet vested as of January
1, 2006, based on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123, and compensation cost for all share-based
payments granted subsequent to January 1, 2006, based on the grant-date fair
value estimated in accordance with the provisions of SFAS 123R. Results for
prior periods have not been restated.
ALTERNET SYSTEMS INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
2009 and 2008
|
|
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Stock-Based Compensation (continued)
All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. Equity instruments issued to employees
and the cost of the services received as consideration are measured and
recognized based on the fair value of the equity instruments issued.
Loss per Share
The Company computes net earnings
(loss) per share in accordance with SFAS No. 128, Earnings per Share. SFAS No.
128 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
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. As the
Company has net losses, we did not include common equivalent shares in the
computation of diluted net loss per share as the effect would be anti-dilutive.
Risk Management
The Company is exposed to credit
risk through accounts receivable and therefore, the Company maintains adequate
provisions for potential credit losses.
The Companys functional currency is the United States dollar.
The Company operates in foreign jurisdictions, giving rise to exposure to market
risks from changes in foreign currency rates. The financial risk is the risk to
the Company's operations that arises from fluctuations in foreign exchange rates
and the degree of volatility of these rates. Currently, the Company does not use
derivative instruments to reduce its exposure to foreign currency risk.
Recent Accounting Pronouncements
In December 2007,
the FASB issued SFAS No. 141 (revised 2007),
Business Combination,
which
is
e
ffective for fiscal years beginning after December
15, 2008. The standard requires the acquiring entity in a business combination
to recognize all (and only) the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. This standard did not effect the Companys reported financial
position or results of operations.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements,
which
is
effective for fiscal years beginning after December 15, 2008. The
statement requires all entities to report noncontrolling or minority interests
in subsidiaries in the same way as equity in the consolidated financial
statements. Moreover, the Statement eliminates the diversity that currently
exists in accounting for transactions between an entity and noncontrolling
interests by requiring they be treated as equity transactions. The Company has
reported all noncontrolling interests as an equity transaction.
In March 2008, the FASB issued SFAS No.161,
Disclosures
about Derivative Instruments and Hedging Activities
, which is effective for
fiscal years and interim periods beginning after November 15, 2008. The
statement amends and expands the disclosure requirements of Statement 133 and
requires qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of and gains and
losses on derivative instruments, and disclosures about credit-risk-related
contingent features in derivative agreements. The Company has expanded the
information included in Note 4 Convertible Debenture Notes to include the new
requirements. This standard did not effect the Companys reported financial
position or results of operations.
In May 2008, the FASB issued SFAS No.162,
The Hierarchy of
Generally Accepted Accounting Principles,
which
is effective 60 days
following the SECs approval of the Public Company Accounting Oversight Board
amendments to AU Section 411. This statement identifies the sources of
accounting principles and framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States, the GAAP hierarchy. This standard did not effect the Companys
reported financial position or results of operations.
ALTERNET SYSTEMS INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
2009 and 2008
|
|
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Recent Accounting Pronouncements (continued)
In May 2008, the FASB issued SFAS No.163,
Accounting for
Financial Guarantee Insurance Contract,
which
is effective for
financial statements issued for fiscal years beginning after December 15, 2008.
This statement requires that an insurance enterprise recognize a claim liability
prior to an event of default when there is evidence that credit deterioration
has occurred in an insured financial obligation. This Statement also clarifies
how Statement 60,
Accounting and Reporting by Insurance Enterprises,
applies to financial guarantee insurance contract, including the recognition
and measurement to be used to account for premium revenue and claim liabilities.
This standard did not effect the Companys reported financial position or
results of operations.
In May 2009, the FASB issued SFAS No.165,
Subsequent Events,
which
is effective for interim or annual financial statements issued
after June 15, 2009. This statement requires the Company to disclose the period
for which subsequent events have been reported and clarifies when subsequent
events should be disclosed. This standard did not effect the Companys reported
financial position or results of operations.
In June 2009, the FASB issued SFAS No.166,
Accounting for
Transfers of Financial Assets,
which
is effective for financial
statements issued for fiscal years beginning after November 15, 2009. This
statement amends SFAS No.140,
Accounting for Transfers and Servicing of
Financial Assets and extinguishments of Liabilities,
by removing the concept
of special purpose entity from SFAS No.140. This statement also clarifies the
objective of paragraph 9 of SFAS No.140 which is to determine whether a
transferor and all of the entities included in the transferors financial
statements being presented have surrendered control of transferred financial
assets. This standard is not expected to have a significant effect on the
Companys reported financial position or results of operations
In June 2009, the FASB issued SFAS No.167,
Amendments to
FASB Interpretation No.46(R),
which
is effective for financial
statements issued for fiscal years beginning after November 15, 2009. This
statement amends FASB Interpretation No.46(R),
Consolidation of Variable
Interest Entities,
by requiring an entity to perform an analysis to
determine whether the entitys variable interest or interest give it a
controlling financial interest in a variable interest entity. This standard is
not expected to have a significant effect on the Companys reported financial
position or results of operations
In June 2009, the FASB issued SFAS No.168,
The FASB
Accounting Standards Codification and
t
he Hierarchy of Generally Accepted
Accounting Principles,
which replaces SFAS 162 and
is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. This statement identifies the sources of accounting
principles and framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles in the United States,
the GAAP hierarchy. This standard did not effect the Companys reported
financial position or results of operations..
In January 2010, the FASB issued ASU 2010-01,
Accounting for
Distributions to Shareholders with Components of Stock and Cash,
which is
effective for financial statements issued for interim and annual periods ending
after December 15, 2009. This update identifies how companies should be
reporting distributions to shareholders that offers them the ability to elect to
receive the distribution in cash or an equivalent number of shares. It was
determined that all distributions of shares relating to these payments should be
recorded as new share issuances. This standard did not effect the Companys
reported financial position or results of operations.
In January 2010, the FASB issued ASU 2010-02,
Consolidation,
which replaces SFAS No. 160 and is effective for financial statements issued
for interim and annual periods ending after December 15, 2009. This update
establishes the accounting and reporting guidance for noncontrolling interest
and changes in ownership interests of a subsidiary. This standard is not
expected to have a significant effect on the Companys reported financial
position or results of operations. This standard did not effect the Companys
reported financial position or results of operations.
ALTERNET SYSTEMS INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
2009 and 2008
|
|
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Recent Accounting Pronouncements (continued)
In January 2010, the FASB issued ASU 2010-06,
FairValue
Measurements and Disclosures,
which replaces SFAS No. 157 and is effective
for financial statements issued for interim and annual periods ending after
December 15, 2009 except for the disclosures about purchases, sales, issuances,
and settlements in the roll forward activity in Level 3 fair value measurements
which are effective for financial statements issued for fiscal years ending
after December 15, 2010 and interim periods commencing December 16, 2009. This
update identifies new disclosure requirements relating to fair value
measurements. This standard did not effect the Companys reported financial
position or results of operations.
In February 2010, the FASB issued ASU 2010-09,
Subsequent
Events,
which is effective for financial statements issued for interim and
annual periods ending after June 15, 2010. This update addresses both the
interaction of the requirements of Topic 855 with the SECs reporting
requirements and the intended breadth of the reissuance disclosure provision
related to subsequent events. This standard is not expected to have a
significant effect on the Companys reported financial position or results of
operations.
NOTE 3 FIXED ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
December 31, 2009
|
|
|
2008
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net Book Value
|
|
|
Net
Book Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer equipment
|
$
|
328,029
|
|
$
|
324,818
|
|
$
|
3,211
|
|
$
|
4,587
|
|
|
Computer software
|
|
72,560
|
|
|
71,759
|
|
|
801
|
|
|
1,145
|
|
|
Equipment
|
|
10,576
|
|
|
9,996
|
|
|
580
|
|
|
725
|
|
|
|
$
|
411,165
|
|
$
|
406,573
|
|
$
|
4,592
|
|
$
|
6,457
|
|
NOTE 4 CONVERTIBLE DEBENTURE NOTES
On February 4, 2008, the Company issued a note payable in the
amount of $50,000. The note carries interest at the rate of 8% per annum and is
due on May 4, 2008. If the note is not repaid on maturity or in any other event
of default, 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 equal to 50% of the average market price of the Companys stock
for the 30 days prior to the date of conversion.
On February 13, 2008, the Company issued a note payable in the
amount of $50,000. The note carries interest at the rate of 8% per annum and is
due on May 13, 2008. If the note is not repaid on maturity or in any other event
of default, 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 equal to 50% of the average market price of the Companys stock
for the 30 days prior to the date of conversion.
On April 9, 2008, the Company issued a note payable in the
amount of $10,000. The note carries interest at the rate of 8% per annum and is
due on July 9, 2008. If the note is not repaid on maturity or in any other event
of default, 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 equal to 50% of the average market price of the Companys stock
for the 30 days prior to the date of conversion.
On April 28, 2008, the Company issued a note payable in the
amount of $20,000. The note carries interest at the rate of 8% per annum and is
due on July 16, 2008. If the note is not repaid on maturity or in any other
event of default, 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 equal to 50% of the average market price of the
Companys stock for the 30 days prior to the date of conversion.
On July 16, 2008, the Company issued a total of 383,364 shares
to repay the above four convertible notes valued at $130,000
ALTERNET SYSTEMS INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
2009 and 2008
|
|
NOTE 4 CONVERTIBLE DEBENTURE NOTES
(continued)
On January 8, 2009, the Company issued a note payable in the
amount of $48,464. The note carries interest at the rate of 10% per annum and is
due on January 8, 2010. If the note is not repaid on maturity or in any other
event of default, 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 equal to 50% of the average market price of the
Companys stock for the 30 days prior to the date of conversion. On December 30,
2009, the Company repaid the total outstanding interest plus $10,347 of the
principal on the note. As such, the corresponding liability was reduced to
reflect this repayment.
On January 8, 2009, the Company issued a note payable in the
amount of $48,517. The note carries interest at the rate of 10% per annum and is
due on January 8, 2010. If the note is not repaid on maturity or in any other
event of default, 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 equal to 50% of the average market price of the
Companys stock for the 30 days prior to the date of conversion. On December 30,
2009, the Company repaid the note in full and as such the corresponding
derivative liability was written off.
On January 8, 2009, the Company issued a note payable in the
amount of $42,085. The note carries interest at the rate of 10% per annum and is
due on January 8, 2010. If the note is not repaid on maturity or in any other
event of default, 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 equal to 50% of the average market price of the
Companys stock for the 30 days prior to the date of conversion. On September
15, 2009, the balance outstanding on the note payable was agreed to be settled
prior to the conversion date and as such the corresponding derivative liability
was written off.
On December 18, 2009, the Company issued a note payable in the
amount of $100,000. The note carries interest at the rate of 12% per annum and
is due on March 18, 2010. If the note is not repaid on maturity or in any other
event of default, 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 equal to 80% of the average market price of the
Companys stock for the 30 days prior to the date of conversion.
The Company accounts for debt with embedded conversion features
and warrant issues in accordance with EITF 98-5: Accounting for convertible
securities with beneficial conversion features or contingency adjustable
conversion and EITF No. 00-27: Application of issue No 98-5 to certain
convertible instruments. Conversion features determined to be beneficial to the
holder are valued at fair value and recorded to additional paid in capital. The
Company determines the fair value to be ascribed to the detachable warrants
issued with the convertible debentures utilizing the
Black-Scholes
method. Any discount derived from determining the fair value to the debenture
conversion features and warrants is amortized to financing cost over the life of
the debenture. The unamortized costs if any, upon the conversion of the warrants
is expensed to financing cost on a pro rata basis over the life of the warrant.
Debt issued with the variable conversion features are
considered to be embedded derivatives and are accountable in accordance with
FASB 161; Accounting for Derivative Instruments and Hedging Activities. The fair
value of the embedded derivative is recorded to derivative liability. This
liability is required to be marked each reporting period. The resulting discount
on the debt is amortized to interest expense over the life of the related debt.
NOTE 5 CAPITAL STOCK
The Company has 100,000,000 shares of Common Stock authorized,
of which 62,781,428 shares of Common Stock were outstanding as at December 27,
2007. On December 27, 2007, the Company held its annual and special meeting of
shareholders, at which the Companys shareholders approved a special resolution
authorizing a share consolidation of the issued and outstanding common shares on
the basis of a ratio of ten existing common shares for one new consolidated
common share. After this consolidation, the Company had 6,278,146 outstanding
shares. The amendment did not change the total authorized number of shares of
capital stock. The par value of the Common Stock remained unchanged at $0.00001
per share. As a result, as of the effective date, the stated capital
attributable to the Common Stock on the Companys balance sheet was reduced
proportionately based on the reverse stock split ratio of 10 for 1. The
additional paid in capital account has been credited with the amount by which
the stated capital is reduced. On December 31, 2007, the Company issued an
additional 4,000,000 shares for the acquisition of TekVoice Communications, Inc.
(refer to note 7). After this acquisition, the total issued and outstanding
shares of common stock as at December 31, 2007 were 10,278,146.
ALTERNET SYSTEMS INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
2009 and 2008
|
|
NOTE 5 CAPITAL STOCK (continued)
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 post consolidated 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 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 maybe awarded under this plan.
During the year ended December 31, 2008, a total of 970,218
shares valued at $339,572 were issued with respect to a private placement. The
Company has received a total of $225,415 (December 31, 2007 - $291,895) with
respect of a further private placement of common stock. This amount is reported
as private placement subscriptions within stockholders deficit.
The Company is obligated to issue 864,554 (2008 - 300,000)
common shares valued at $83,196 (2008 - $90,000) as at December 31, 2009 of
which 450,000 shares valued at $56,250 are for services rendered by consultants
during the year and 414,554 shares valued at $26,946 are for a debt settlement
agreed on October 1, 2009. During the year, a liability to issued 100,000 shares
valued at $50,000 owed to one consultant was written off to consulting fees as
the consultant had not performed the services in accordance with the
contract.
During the year ended December 31, 2009, the Company issued
312,500 shares valued at $25,000 for cash received during the three months ended
March 31, 2009 and 200,000 shares valued at $20,000 for services to be rendered
over a one year period. As at September 30, 2009, the Company has $225,415
(December 31, 2008 - $225,415) in private placement subscriptions which are
reported as private placement subscriptions within stockholders deficit.
The shares which were not issued as at December 31, 2009 or
December 31, 2008 were not used to compute the total weighted average shares
outstanding as at December 31, 2009 or December 31, 2008 respectively and were
thus are not used in the basic net loss per share calculation.
NOTE 6 - RELATED PARTY TRANSACTIONS
At December 31, 2009, a total of $566,714 (December 31, 2008 -
$444,299) was payable to directors of which $528,597 is non-interest bearing and
has no specific terms of repayment and $38,117 relates to the convertible
debentures detailed in Note 4.
During the year ended December 31, 2009, the company expensed a
total of $424,668 (December 31, 2008 - $605,202) in consulting fees and investor
relations paid to related parties.
Of the amounts incurred to directors and officers, $424,668
(December 31, 2008 - $473,952) was accrued or paid in cash and $Nil (December
31, 2008 - $131,250) was paid by way of zero (December 31, 2008 - 5,250,000)
common shares issued for services.
On September 15, 2009, a director of the Company resigned and
an agreement was reached whereby all amounts owing to him from accrued salaries,
vacations, loans, and expenses due would be fully settled through a transfer of
the Companys investment in 26,000 shares of another company with a book value
of $26,000 to the director. The net effect of this transaction, $196,628, has
been recorded to gain on sale of investment.
ALTERNET SYSTEMS INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
2009 and 2008
|
|
NOTE 7 DEFERRED COMPENSATION
On June 26, 2008, 1,500,000 common shares valued at $630,000
were issued to a consultant pursuant to a contract with certain terms and
benchmarks. As at September 30, 2009 these benchmarks have not been met, thus
the entire amount has been classified as deferred compensation.
On April 15, 2008, the Company entered into agreement with a
consultant for a one-year term whereby the consultant will provide investor
relations services to the Company in exchange for 200,000 shares of the
Companys common stock. On June 6, 2008, 100,000 common shares valued at $50,000
were issued to the consultant and 100,000 common shares valued at $50,000 were
recorded as obligation to issue share during the year (refer to note 5). These
amounts are being expensed over the life of the contract.
On May 12, 2008, the Company entered into an agreement with a
consultant for a one-year term whereby the consultant will provide business
consulting services to the Company (valued at $76,500) in exchange for 150,000
shares of the Companys common stock which was issued on May 23, 2008.
On September 15, 2008, the Company entered into agreement with
two consultants for a one-year term whereby the consultants will provide
marketing services to the Company (valued at $82,000) in exchange for 200,000
shares of the Companys common stock. The consultants will provide such services
as developing sales channels for the Companys products, developing marketing
plans and maintaining customer relations and reporting to the Companys board of
directors as determined by the board.
On October 15, 2008, the Company entered into agreement with a
consultant for a one-year term whereby the consultants will provide consulting
services to the Company in exchange for 200,000 shares of the Companys common
stock. As of the year ended date, 200,000 common shares valued at $40,000 were
recorded as obligation to issue share during the year (refer to note 5). These
amounts are being expensed over the life of the contract.
On January 5, 2009, the Company entered into an agreement with
a consultant for a one-year term whereby the consultant will provide business
consulting services to the Company in exchange for 200,000 shares of the
Companys common stock valued at $20,000.
On December 8, 2009, the Company entered into an agreement with
a consultant for a one-year term whereby the consultant will provide business
consulting services to the Company in exchange for 250,000 shares of the
Companys common stock valued at $16,250 based on the date of issuance.
The Company recorded the aggregate fair value of the shares
issued pursuant to the above agreements as deferred compensation and amortizes
the costs of all these services on a straight-line basis over the respective
terms of the contracts. During the year ended the Company expensed $263,212
relating to the above contracts. At December 31, 2009, the unamortized portion
of the deferred compensation totalled $645,181. The shares issued were all
valued at their market price on the date of issuance.
NOTE 8 LAWSUIT
On June 30, 2008, the Company filed an action in the Circuit
Court in and for Miami-Dade County, Florida against a customer seeking to
recover a total of $142,121 for services and loans provided. The Company is also
seeking to recover interest and attorneys' fees and costs. The likelihood of any
results from the above lawsuit is not determinable at this time, consequently
the company made a bad debt provision in the year ended December 31, 2008 for
the entire amount.
On October 16, 2009, the Company received noticed that they had
been named as Defendants in a lawsuit whereby the Plaintiffs are seeking a
judgment of $39,000 plus interest thereon from March 11, 2009 for breach of
contract. The Company had 30 days to respond to the notice before a default
judgment is awarded. As at December 31, 2009, no amounts have been accrued as
the likelihood of an unfavorable judgment is considered high.
ALTERNET SYSTEMS INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
December 31,
2009 and 2008
|
|
NOTE 9 SUBSEQUENT EVENTS
On January 5, 2010, the Company entered into an agreement with
a consultant for a one-year term whereby the consultant will provide business
consulting services to the Company in exchange for 300,000 shares of the
Companys common stock.
On February 23, 2010, Utiba Americas entered into a strategic
partnership agreement with WAU Movil to help Utiba Americas quickly and
effectively expand its services into more than 17 countries in the Americas and
Caribbean.
Item
9.
|
Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
|
There were no disagreements related to accounting principles or
practices, financial statement disclosure, internal controls or auditing scope
or procedure during the two fiscal years and interim periods, including the
interim period up through the date the relationship ended.
Change in Accountant
On March 15, 2010, the members of the Board of Directors of
Alternet Systems, Inc., a Nevada corporation (the
Registrant
),
unanimously approved the dismissal of Pollard Kelley Audit Services Inc. (PK),
as the Registrants independent registered public accounting firm.
No reports of PK on the
Registrants financial statements for the past two fiscal years; specifically
the fiscal years ended December 31, 2007 and 2008 and through March 24, 2010,
contained any adverse opinion or disclaimer of opinion or was qualified or
modified as to uncertainty, audit scope, or accounting principles.
During the fiscal years ended
December 31, 2007 and 2008 and through March 24, 2010, there were no
disagreements with PK on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of PK, would have caused it
to make reference thereto in any report.
During the fiscal years ended
December 31, 2007 and 2008 and through March 24, 2010, there were no reportable
events (as defined in Item 304(a)(1)(v) of Regulation S-K).
On March 24, 2010, the Registrant engaged the firm of Hamilton
PC as the Registrants principal independent accountant to audit the
Registrants financial statements. The members of the Registrants Audit
Committee unanimously approved the engagement of Hamilton PC.
Prior to the engagement of
Hamilton PC, neither the Registrant nor any person on the Registrants behalf
consulted Hamilton PC regarding either (i) the application of accounting
principles to a specified completed or proposed transaction or the type of audit
opinion that might be rendered on the Registrants financial statements, or (ii)
any matter that was the subject of a disagreement (as defined in Item
304(a)(1)(iv) of Regulation S-K and the related instructions to such Item) or a
reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
Item 9A.
|
Controls and Procedures
|
Managements 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 December 31, 2009, the end of our fiscal year covered by
this report, 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 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 accordances 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 December 31, 2009. 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
December 31, 2009, our internal control over financial reporting is 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 annual 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 year ended December 31, 2009
that have materially or are reasonably likely to materially affect, our internal
controls over financial reporting.
Item 9B.
|
Other Information
|
None.
PART III
Item 10.
|
Directors, Executive Officers and Corporate
Governance
|
The following discussion contains disclosure concerning the
directors, officers and control persons of the Company. There are no persons
which have acted as a promoter, controlling person, or significant employee of
the Company other than as disclosed below.
Name
|
Position
|
Term of Office*1*2
|
Henryk Dabrowski
|
President, Chairman and Director
|
Expires at next AGM
|
Patrick Fitzsimmons
|
Director
|
Expires at next AGM
|
Robin Bjorklund
|
Director
|
Expires at next AGM
|
1. Directors, whether appointed at a
meeting of stockholders or by the remaining directors, are appointed until the
next annual meeting of stockholders.
2. The President, Secretary,
CEO and Treasurer do not have a set term of office. They serve at the pleasure
of the Directors and can be removed at any time by the Directors.
Henryk Dabrowski, President and Chairman
Mr Dabrowski has over 21 years experience in the information
technology industry, data network and telecommunications industry. He is
President of TekVoice Communications Inc., a Miami FL based Voice over IP
telecommunications company that merged with Alternet Systems Inc.
Mr Dabrowski served as COO/President of Vox2Vox Communications
in Miami, a multi million dollar IP telecommunications and value added services
company, with presence in Europe (Italy, Spain, Portugal and Turkey) and Latin
America (Brazil, Venezuela, Mexico and Argentina) part of Ella Cisneros
Communications Holdings (ECC Holdings).
He has extensive experience in the US, Europe and Latin
American markets, is fluent in 4 languages and holds an MBA from Universidad
Metropolitana.
Patrick Fitzsimmons, Director
Pat Fitzsimmons, age 57. Mr. Fitzsimmons has extensive sales
and management experience gained from a 29-year career in the high-technology
sector. Mr. Fitzsimmons has represented firms such as NCR, Timeplex, Rogers
Cable, and Newbridge Networks, offering a wide range of technology solutions.
Previuos to joining Alternet Systems Inc. he was Manager, Major Accounts,
AT&T Canada, Vancouver B.C., Canada.
Robin Bjorklund, Director,
Robin Bjorklund, age 46. Mr. Bjorklund has an extensive
background in building successful multi-million dollar companies from start-up
to profitability. Over the past 5 years he has worked as a venture capitalist
and as a consultant with Alternet Systems Inc.
Item 11. Executive Compensation
The particulars of the compensation paid to the following
persons:
|
(a)
|
our principal executive officer;
|
|
|
|
|
(b)
|
each of our two most highly compensated executive
officers who were serving as executive officers at the end of the years
ended December 31, 2009 and 2008; and
|
|
|
|
|
(c)
|
up to two additional individuals for whom disclosure
would have been provided under (b) but for the fact that the individual
was not serving as our executive officer at the end of the years ended
December 31, 2009 and 2008,
|
who we will collectively refer to as the named executive
officers of our company, are set out in the following summary compensation
table, except that no disclosure is provided for any named executive officer,
other than our principal executive officers, whose total compensation did not
exceed $100,000 for the respective fiscal year:
Summary Compensation Table
Name and
principal
position
(a)
|
Year
(b)
|
Annual Compensation
|
Long-term compensation
|
Salary
($)
(c)
|
Bonus
($)
(d)
|
Other
Annual
Compen-
sation
($)
(e)
|
Awards
|
Payouts
|
|
Restricted
Stock
Award(s)
($)
(f)
|
Securities
Underlying
options/
SARs
(#)
(g)
|
LTIP
payouts
($)
(h)
|
All
other
Compen-
sation
($)
(i)
|
Henryk
Dabrowski
President
and
Chairman
|
2009
2008
|
140,000
140,000
|
0
|
0
|
0
43,750
|
0
|
0
|
0
|
Patrick
Fitzsimmons
Director,
Treasurer
|
2009
2008
|
100,000
100,000
|
0
0
|
0
0
|
0
18,750
|
0
0
|
0
0
|
0
0
|
Robin
Bjorklund
Director
|
2009
2008
|
102,000
72,495
|
0
|
0
|
0
25,000
|
0
|
0
|
0
|
Manfred
Koroschetz
Director,
Chief
Technical
Officer
|
2007
2008
|
30,000
120,000
|
0
|
0
|
0
43,750
|
0
|
0
|
0
|
Involvement in Certain Legal Proceedings
None of our directors, executive officers, promoters or control
persons has been involved in any of the following events during the past five
years:
1.
|
any bankruptcy petition filed by or against any business
of which such person was a general partner or executive officer either at
the time of the bankruptcy or within two years prior to that time;
|
|
|
2.
|
any conviction in a criminal proceeding or being subject
to a pending criminal proceeding, excluding traffic violations and other
minor offences;
|
|
|
3.
|
being subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; or
|
|
|
4.
|
being found by a court of competent jurisdiction in a
civil action, the Securities and Exchange Commission or the Commodity
Futures Trading Commission to have violated a federal or state securities
or commodities law and the judgment has not been reversed, suspended, or
vacated.
|
Compliance with Section 16(a) of the Securities Exchange Act
of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
our executive officers and directors and persons who own more than 10% of our
common stock to file with the Securities and Exchange Commission initial
statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of our common stock and other equity
securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and
greater than 10% shareholders are required by the SEC regulations to furnish us
with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received
by us, or written representations from certain reporting persons, we believe
that during fiscal year ended December 31, 2008, all filing requirements
applicable to our officers, directors and greater than 10% percent beneficial
owners were complied with.
Code of Ethics
Effective March 24, 2004, our company's board of directors
adopted a Code of Business Conduct and Ethics that applies to, among other
persons, our company's president and secretary (being our principal executive
officer, principal financial officer and principal accounting officer), as well
as persons performing similar functions. As adopted, our Code of Business
Conduct and Ethics sets forth written standards that are designed to deter
wrongdoing and to promote:
|
1.
|
honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between personal and
professional relationships;
|
|
2.
|
full, fair, accurate, timely, and understandable
disclosure in reports and documents that we file with, or submit to, the
Securities and Exchange Commission and in other public communications made
by us;
|
|
3.
|
compliance with applicable governmental laws, rules and
regulations;
|
|
4.
|
the prompt internal reporting of violations of the Code
of Business Conduct and Ethics to an appropriate person or persons
identified in the Code of Business Conduct and Ethics; and
|
|
5.
|
accountability for adherence to the Code of Business
Conduct and Ethics.
|
Our Code of Business Conduct and Ethics requires, among other
things, that all of our company's senior officers commit to timely, accurate and
consistent disclosure of information; that they maintain confidential
information; and that they act with honesty and integrity.
In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly senior officers, have a responsibility for
maintaining financial integrity within our company, consistent with generally
accepted accounting principles, and federal and state securities laws. Any
senior officer who becomes aware of any incidents involving financial or
accounting manipulation or other irregularities, whether by witnessing the
incident or being told of it, must report it to our company. Any failure to
report such inappropriate or irregular conduct of others is to be treated as a
severe disciplinary matter. It is against our company policy to retaliate
against any individual who reports in good faith the violation or potential
violation of our company's Code of Business Conduct and Ethics by another.
Our Code of Business Conduct and Ethics is filed with the
Securities and Exchange Commission as an Exhibit to our annual report.
Board and Committee Meetings
Our board of directors held no formal meetings during the year
ended December 31, 2009. All proceedings of the board of directors were
conducted by resolutions consented to in writing by all the directors and filed
with the minutes of the proceedings of the directors. Such resolutions consented
to in writing by the directors entitled to vote on that resolution at a meeting of the directors are,
according to the Nevada General Corporate Law and our Bylaws, as valid and
effective as if they had been passed at a meeting of the directors duly called
and held.
Nomination Process
As of December 31, 2009, we did not effect any material changes
to the procedures by which our shareholders may recommend nominees to our board
of directors. Our board of directors does not have a policy with regards to the
consideration of any director candidates recommended by our shareholders. Our
board of directors has determined that it is in the best position to evaluate
our companys requirements as well as the qualifications of each candidate when
the board considers a nominee for a position on our board of directors. If
shareholders wish to recommend candidates directly to our board, they may do so
by sending communications to the president of our company at the address on the
cover of this annual report.
Audit Committee
Currently our company does not have an audit committee.
Option Exercises and Stock Vested
During our Fiscal year ended December 31, 2009 there were no
options exercised by our named officers.
Compensation of Directors
We do not have any agreements for compensating our directors
for their services in their capacity as directors, although such directors are
expected in the future to receive stock options to purchase shares of our common
stock as awarded by our board of directors.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or
a committee thereof.
Indebtedness of Directors, Senior Officers, Executive
Officers and Other Management
None of our directors or executive officers or any associate or
affiliate of our company during the last two fiscal years, is or has been
indebted to our company by way of guarantee, support agreement, letter of credit
or other similar agreement or understanding currently outstanding.
Item 12.
|
Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder
Matters
|
The following table sets forth information regarding the
beneficial ownership of shares of the Companys common stock as of April 13 2010
(21,917,233) shares issued and outstanding) by (i) all stockholders known to the
Company to be beneficial owners of more than 5% of the outstanding common stock;
and (ii) all directors and executive officers of the Company, and as a group
(each person has sole voting power and sole dispositive power as to all of the
shares shown as beneficially owned by them):
Name and Address
|
Position
|
Amount of Stock
Beneficially Owned
|
Percentage of Class
|
Henryk Dabrowski
5500-SW 86
th
Street
Miami FL 33143
|
President, Director,
|
3,104,400
|
|
Patrick Fitzsimmons
One Glen Royal Parkway
Ste 40,
Miami FL 33125
|
Director
|
954,000
|
|
Manfred Koroschetz
14359 Miramar Prkwy,
Ste 351
Miramar FL 33027
|
|
2,940,000
|
|
Robin Bjorklund
473-1027 Davie Street
Vancouver BC
V6E 4L2
|
Director
|
2,600,500
|
|
Directors, Officers and 5% stockholders in total
|
|
9,598,900
|
|
Changes in Control
We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change in control of our
company.
Item 13.
|
Certain Relationships and Related
Transactions, and Director Independence
|
Except as disclosed herein, no director, executive officer,
shareholder holding at least 5% of shares of our common stock, or any family
member thereof, had any material interest, direct or indirect, in any
transaction, or proposed transaction since the year ended December 31, 2009, in
which the amount involved in the transaction exceeded or exceeds the lesser of
$120,000 or one percent of the average of our total assets at the year end for
the last three completed fiscal years.
At December 31, 2009, a total of $566,714 (December 2008 -
$444,299) was payable to directors. Amounts due to related parties are
non-interest bearing and have no specific terms of repayment.
During the year, the company has expensed for a total $424,299
(2007 - $605,202) in consulting fees to related parties.
Of the amounts incurred to directors and officers, $424,668 was
accrued or paid in cash and nil was paid by zero common shares issued. For the
year ended December 31 2008, $131,250 was paid by way of 5,250,000 common shares
for services.
Director Independence
We currently act with four (3) directors, consisting of Henryk
Dabrowski, Patrick Fitzsimmons and Robin Bjorklund. From inception to present
date, we believe that the members of our board of directors have been and are
collectively capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial reporting.
Item 14.
|
Principal Accounting Fees and Services
|
The aggregate fees billed for the most recently completed
fiscal year ended December 31, 2009 and for fiscal year ended December 31, 2008
for professional services rendered by the principal accountant for the audit of
our annual financial statements and review of the financial statements included
in our quarterly reports on Form 10-Q and services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for these fiscal periods were as follows:
|
Year
Ended
|
|
December
31,
2009
|
December
31,
2008
|
Audit Fees
|
$40,000
|
$40,000
|
Audit Related Fees
|
$24,500
|
$24,500
|
|
Year
Ended
|
|
December
31,
2009
|
December
31,
2008
|
Tax Fees
|
$6,500
|
$6500
|
All Other Fees
|
Nil
|
Nil
|
Total
|
$70,000
|
$70,000
|
Our board of directors pre-approves all services provided by
our independent auditors. All of the above services and fees were reviewed and
approved by the board of directors either before or after the respective
services were rendered.
Our board of directors has considered the nature and amount of
fees billed by our independent auditors and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining
our independent auditors independence.
PART IV
Item 15.
|
Exhibits, Financial Statement Schedules
|
EXHIBIT INDEX
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)
April 14, 2010
By:
/s/ Luz Villanueva
Luz Villanueva,
Secretary, Treasurer
(Principal Financial Officer and Principal Accounting
Officer)
April 14, 2010
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/
Luz
Villanueva
|
Henryk Dabrowski, President
|
Luz Villanueva, Secretary,Treasurer
|
(Principal Executive Officer)
|
(Principal Financial Officer and Principal Accounting
|
April 14, 2010
|
Officer)
|
|
April 14, 2010
|
Alternet Systems (PK) (USOTC:ALYI)
過去 株価チャート
から 6 2024 まで 7 2024
Alternet Systems (PK) (USOTC:ALYI)
過去 株価チャート
から 7 2023 まで 7 2024