Attached files
| file | filename |
|---|---|
| EX-31.2 - CERTIFICATION - AS-IP TECH INC | asiq_ex312.htm |
| EX-31.1 - CERTIFICATION - AS-IP TECH INC | asiq_ex311.htm |
| EX-32.2 - CERTIFICATION - AS-IP TECH INC | asiq_ex322.htm |
| EX-32.1 - CERTIFICATION - AS-IP TECH INC | asiq_ex321.htm |
| EXCEL - IDEA: XBRL DOCUMENT - AS-IP TECH INC | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal period ended JUNE 30, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
Commission file number 000-27881
ASI ENTERTAINMENT, INC.
(Exact name of small business issuer as specified in its charter)
| Delaware | 522101695 |
| (State or other jurisdiction of | (IRS Employer Identification No.) |
| incorporation or organization) |
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Level 7, 24 Collins Street
Melbourne, Victoria, 3000, Australia
(Address of principal executive officers)
+61 3 9016 3021
(Issuer's telephone number)
Securities registered under Section 12(g) of the Exchange Act: Common Stock
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark whether 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) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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 past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate by check mark if there is no disclosure of delinquent files in response to Item 405 of Regulation S-K is not contained in this form, and no disclosure will 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. [X]
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 the definitions 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] |
| (do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of June 30, 2013, the aggregate market value of shares held by non-affiliates (based on the closing price of $0.012 on that date) was approximately $670,915.
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
Class Outstanding at September 20, 2013
Common Stock, par value $.0001 per share, 81,577,481
Documents incorporated by reference None
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| PART I | 3 |
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| ITEM 1. DESCRIPTION OF BUSINESS | 3 |
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| ITEM 2. DESCRIPTION OF PROPERTY | 9 |
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| ITEM 3. LEGAL PROCEEDINGS | 9 |
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| ITEM 4. MINE SAFETY DISCLOSURE | 9 |
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| PART II | 10 |
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| ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS | 10 |
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| ITEM 6. SELECTED FINANCIAL DATA | 10 |
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| ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION | 10 |
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| ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 13 |
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| ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 14 |
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| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 16 |
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| PART III | 19 |
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| ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT | 19 |
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| ITEM 11. EXECUTIVE COMPENSATION | 20 |
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| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 21 |
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| ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE | 22 |
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| ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES | 23 |
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| ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K | 24 |
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PART I.
FORWARD LOOKING STATEMENTS
THIS ANNUAL REPORT ON FORM 10-K INCLUDES "FORWARD-LOOKING STATEMENTS" AS DEFINED BY THE SECURITIES AND EXCHANGE COMMISSION. THESE STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY ANY FORWARD- LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS, WHICH INVOLVE ASSUMPTIONS AND DESCRIBE FUTURE PLANS, STRATEGIES AND EXPECTATIONS, ARE GENERALLY IDENTIFIABLE BY USE OF THE WORDS "MAY," "WILL," "COULD", "SHOULD," "EXPECT," "ANTICIPATE," "ESTIMATE," "BELIEVE," "INTEND" OR "PROJECT" OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS ON THESE WORDS OR COMPARABLE TERMINOLOGY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON ASSUMPTIONS THAT MAY BE INCORRECT. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.
ITEM 1. DESCRIPTION OF BUSINESS.
THE COMPANY
(1) Form and year of organization
ASI Entertainment, Inc was formed on April 29, 1998 as a Delaware corporation. The Company has an authorized capitalization of 100,000,000 shares of Common Stock, par value of $.0001 per share (the "Common Stock") and 20,000,000 shares of preferred stock, par value $.0001 per share. All shares of Common Stock have equal voting rights, are non-assessable, and have one vote per share. The executive offices of the Company are located at Level 7, 24 Collins Street, Melbourne, Victoria, 3000 Australia and its telephone number is +61 3-9016-3021. The United States offices of the Company are located at 954 Lexington Ave, Suite 242, New York, NY 10021.
BUSINESS
(1) Principal products or services and their markets;
The Company's product is intellectual property named SafeCell, “The Product”. The intellectual property comprises a proof of concept, an approved patent in Australia and China and a patent application with national filings in the European Union. The concept is based on turning a personal electronic device “PED” into a wireless communicator utilizing a secondary communications port such as Bluetooth or USB rather than WiFi or GSM. The licensing of the intellectual property has produced two unique applications:
1. In-flight messaging for airline and business jet passengers, licensed to ASiQ Limited “ASiQ”. ASiQ has developed the aviation concept so a mobile phone or tablet in “flight mode” is able to send and receive SMS, emails or activate a call on the satellite phone (business jet only). The technology has the potential to be integrated with message based activities (eg. Twitter or Facebook). The user interface is an Application (“App”) that connects a user’s mobile device to an on-board Bluetooth network and utilizes the inexpensive narrowband satellite links provided by Iridum and Inmarsat. Inmarsat is the predominant airline satellite network outside the USA, and Iridium holds the same status on corporate aircraft globally. Alternate connectivity systems utilize Wi-Fi or GSM technology. They require much more expensive hardware, broadband connection and have significantly higher usage charges and certification costs.
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While the initial concept was flight tested with applications developed for Nokia, Blackberry and Android devices, ASiQ’s primary focus has shifted to Apple devices which, based on independent research, are proliferating through the aircraft industry with both passengers and crew. ASiQ has been granted approval from Apple Inc. for two Apps for use on iPhones and iPads. The Apps, named BizjetMobile (for corporate jets) and IjetCell (for airlines), are downloaded via the Apple iTunes App Store. The first fully paid BizjetMobile installation commenced operation in December 2012
2. ASiQ also developed a ground based concept of the technology for an on-ground messaging and content delivery system called PicoBlue, in conjunction with Chapman Reid Ltd who were licensed to promote the technology. However the program has been shelved:
a. To allow ASiQ to focus all its efforts on aviation.
b. With ASiQ’s sole focus on Apple devices, plus the advent of 4G and low cost telco data plans, the potential on the ground is limited.
(2) Distribution methods of the products or services;
The Company’s exclusive development and distribution licensee is as follow:
a. ASiQ Ltd, a related party, for the global marketing and implementation of the aviation platform. Material terms:
i) Date of agreement - May 29, 2008
ii) Term - ongoing
iii) License fee - not applicable
iv) As required by the Company, ASiQ will develop, manufacture and market the products to the aviation industry.
v) ASiQ will secure the services of Ron Chapman to assist in any product development and marketing.
vi) ASiQ will pay the Company a royalty fee of 10% of the revenue generated by the products and received by ASiQ. Royalties of $6,703 were received in the year ended June 30, 2013.
vii) The agreement was originally non exclusive but subsequently changed to exclusive.
b. Under a Heads of Agreement dated February 11, 2013, subsequently formalized in an Agreement dated March 25, 2013, it was agreed:
i) The Company’s wholly owned subsidiary, AS-IP Finance Inc. (“AS-IP”) will manage the billing and credit card collections for the North American telecommunication services designated BizjetMobile and iJetCell on behalf of ASiQ.
ii) AS-IP will receive an administration fee of 5% of the net proceeds from the BizjetCell and iJetCell services, in addition to the 10% royalty the Company is entitled to receive. Net administration fees of $160 were received in the year ended June 30, 2013.
iii) The Agreement will expire on February 8, 2014, 30 days prior to which, the Company has the option to acquire the permanent rights for managing the BizjetCell and iJetCell services.
iv) The fee for purchasing the permanent rights will be $400,000 which can be satisfied either in cash on terms to be agreed, or by the issue of 20,000,000 of the Company’s preference shares. After exercise of the option, AS-IP will retain 20% of the net revenue from the BizjetMobile and iJetCell North American services, including the 10% royalties.
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(3) Status of any publicly announced new product or service;
Refer (7) Patents, below.
The Agreement with Chapman Reid Ltd. for the previously disclosed PicoBlue ground based application of the SafeCell intellectual property, is deemed to have expired as neither the Company or the licensee intend to develop or market the service in the future.
(4) Competitive business conditions and the small business issuer's competitive position in the industry and methods of competition;
The SafeCell concept was originally created for the airline industry. As the technology evolved, corporate jets were used as the test platform and as a result of flight testing, an opportunity opened up to launch the platform in the corporate aircraft world which is a faster route to market. Paralleling the development is the airline program, which is initially planned to be launched in the cockpit and for cabin crew use. This would then open up the opportunity to flight test the airline passenger solution.
Competition
In the United States, one organization, namely GOGO Inc. (previously known as Aircell) dominates the aviation communications market. GOGO’s system connects passenger devices via Wi-Fi and have implemented an exclusive terrestrial wireless network across the United States for transmission off the aircraft. At June 30, 2013, GOGO had 1,982 airliners and 1,684 business jets connected to its system. GOGO also provides satellite communications to 5,105 corporate aircraft.
Internationally, there are two major industry players with full blown in-flight mobile phone solutions for airlines, OnAir (fully owned by SITA) and Aeromobile (owned by Panasonic). Both companies have developed technologies to allow passengers to use their cellular phones on aircraft. Their technologies revolve around what is called "Picocell" technology. This is a computer at the base of a cellular tower, designed to control the cellular phones in a small GSM (Global System for Mobile communications) network. In these systems, two cable antennas must be installed along either side of the passenger cabin, above the luggage racks. When the mobile is switched on, the Picocell intercepts it and sends a signal to the phone to reduce the transmitter's power, while at the same time, switching the phone to the 1800 MHz frequency which is documented as safe for use in aircraft. When a call is made, the phone connects with the in-cabin network, the signal is sent to a Picocell. A Picocell is a series of processors that translates the phone's GSM (global system for mobile communication) signal into one that can be read by a satellite. The message is then relayed from a satellite to the ground where it connects into the Global cellular roaming network via a Telco. Initially the Aeromobile system could only handle six connections simultaneously because of the limited capacity of existing aircraft satellite communication voice systems although passengers are able to send unlimited texts and SMS. Airbus/OnAir are using the newer Inmarsat broadband satellites which can handle more phone lines, however Aeromobile will have to upgrade their hardware and they both plan to set an upper limit of 28 calls at one time.
For corporate aircraft outside the United States, a satellite-based system is required and is provided by companies including GOGO, ARINC, VIASAT, OnAir and Aeromobile utilizing the Iridium, Inmarsat and Intelsat satellite networks.
ASiQ’s airline concept will provide flexible terms on equipment cost and revenue sharing. The system designed for airlines that will be attracted to this structure, which allows the airline to offer the service at little cost to the passengers.
The Company believes licensees and agents will be able to compete with the other companies in both the Bizjet and airlines field due to its very low equipment costs, little or no certification issues unlike Wi-FI and GSM based systems, and that fact that Bluetooth has been tested and documented as safe for use in aircraft.
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(5) Sources and availability of raw materials and the names of principal suppliers;
Not applicable.
(6) Dependence on one or a few major customers;
The Company will be dependant on the licensees to market the product to generate the income from which the Company will receive royalties. The timing and extent of that marketing will be dependant on the resources and efforts of the licensees.
(7) Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration;
The Company has acquired the application for an Australian patent on its "SafeCell" system and has filed an International application under the Patent Co-operation Treaty "PCT". In September 2008, the Company received notification that the International Preliminary Report on Patentability had been established. The Company has subsequently filed national phase patent applications in Australia, the United States, China and European Union. In January 2010, the Company received notification of the approval of the Australian patent application. In January 2012, the Company received notification of the approval of the Chinese patent application. The Company is still waiting for the outcome of the European Union application and has decided not to continue with its application for the United States patent, as the modifications proposed by the US patents office were unacceptable and the cost to contest the existing claims was prohibitive.
(8) Need for any government approval of principal products or services. If government approval is necessary and the small business issuer has not yet received that approval, discuss the status of the approval within the government approval process;
The business aircraft system is installed as a Portable Electronic Device and as such little or no certification is required.
Installation and use of aircraft avionics in airline category aircraft requires prior certification and approval by the Federal Aviation Administration ("FAA") and regulatory authorities of foreign governments on each aircraft type and for each airline.
The certification process begins with the installation of the system on an aircraft after which it is certified by an FAA accredited engineer. The certification is then applicable to similar aircraft types and modified for other aircraft type. In countries other than the United States, the equivalent aviation authority procedures will apply to the certification of the system, but the United States FAA is generally accepted by local certifying authorities throughout the world. Prior to certification and approval, the manufacturer must demonstrate that the system has been designed and manufactured and complies with the appropriate aviation standards, namely DO160 for hardware and DO178 for software. Following this step, the system must be installed on an aircraft and tested, including a ground and flight test.
As the App is installed on a mobile phone or tablet, which are regarded as carry on devices, and operated in “flight” or “offline” mode, no aircraft certification is required however, in the majority of cases the final approval for use in flight will be at the discretion of the airline.
(9) Effect of existing or probable governmental regulations on the business;
The company must maintain good standing, comply with applicable local business licensing requirements, prepare and file periodic reports under the Securities Exchange Act of 1934, as amended, and comply with other applicable securities laws, rules and regulations.
Existing or probable governmental regulations have not impacted our operations except for the increased costs of compliance with reporting obligations. These additional costs remain consistent as long as the company continues as a reporting corporation.
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(10) Estimate of the amount spent during each of the last two fiscal years on research and development activities, and if applicable the extent to which the cost of such activities are borne directly by customers;
The Company has not carried out any research and development in the last two years.
(11) Costs and effects of compliance with environmental laws (federal, state and local); and
Not applicable
(12) Number of total employees and number of full time employees.
The company does not have any employees, instead contracts the Chief Executive Officer and Chief Financial Officer (same person).
ITEM 2. DESCRIPTION OF PROPERTY.
The Company does not own any property other than the SafeCell intellectual property. The Company maintains its corporate administration office at Level 7, 24 Collins Street, Melbourne, Victoria, 3000, Australia.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any litigation and management has no knowledge of any threatened or pending litigation against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
The Company has authorized capital of 100,000,000 shares of Common Stock, $.0001 par value, and 20,000,000 shares of preferred stock, $.0001 par value. All shares of Common Stock have equal voting rights, are non-assessable, and have one vote per share. As of the date hereof, the Company has 81,577,481 shares of Common Stock issued and outstanding and no shares of Preferred Stock outstanding.
Since March, 2000, the Company's Common Stock has been quoted on the NASD OTC Bulletin Board and more recently, the OTCQB. Prior to that date, there was no public market for the Company's securities. The following table sets out the range of the high and low sales prices for the Company's securities.
| Quarter Ended | Common | Stock |
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| High | Low |
June 30, 2011 | $0.028 | $0.02 |
| September 30, 2011 | $0.023 | $0.025 |
December 31, 2011 | $0.02 | $0.025 |
| March 31, 2012 | $0.022 | $0.03 |
June 30, 2012 | $0.02 | $0.029 |
| September 30, 2012 | $0.021 | $0.012 |
December 31, 2012 | $0.028 | $0.012 |
| March 31, 2013 | $0.02 | $0.02 |
June 30, 2013 | $0.02 | $0.0021 |
The Company currently intends to retain substantially all of its earnings, if any, to support the development of its business and has no present intention of paying any dividends on its Common Stock in the foreseeable future. Any future determination as to the payment of dividends will be at the discretion of the Board, and will depend on the Company's financial condition, results of operations and capital requirements, and such other factors as the Board deems relevant.
ITEM 6. SELECTED FINANCIAL DATA.
Not required for a smaller reporting company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
Following the re-structure of the ASI Group and the acquisition of the SafeCell intellectual property in 2007, the business of the Company is the licensing of the SafeCell technology to generate license fees and royalties. The Company maintains a low cost structure as it has no employees, contracting the services of executives and support engineers as required. Because of the low cost structure, the Company anticipates that the proceeds from stock issues and revenue from license sales, will be sufficient to meet the Company's operating and capital requirements for approximately 12 months.
LICENSE AGREEMENTS
The Company has the following marketing arrangements in place:
a. ASIQ Ltd, a related party, for the global marketing and implementation of SafeCell.
Material terms:
i) Date of agreement - May 29, 2008
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ii) Term - ongoing
iii) License fee - not applicable
iv) As required by the Company, ASiQ will develop, manufacture and market SafeCell to the airline industry.
v) ASiQ will secure the services of Ron Chapman to assist in any product development and marketing.
vi) ASiQ will pay the Company a royalty fee of 10% of the revenue generated by SafeCell and received by ASIQ. Royalties of $4,892 were received in the year ended June 30, 2013.
vii) Should ASiQ develop other applications for the SafeCell concept outside the aviation industry, ASiQ and the Company will enter into separate agreements setting out the basis on which ASiQ can use the SafeCell concept as set out in the International PCT application, such agreement will include license and royalty payments payable under the agreement.
viii) The agreement was originally non exclusive but subsequently changed to exclusive.
b. Under a Heads of Agreement dated February 11, 2013, subsequently formalized in an Agreement dated March 25, 2013, it was agreed:
i) The Company’s wholly owned subsidiary, AS-IP Finance Inc. (“AS-IP”) will manage the billing and credit card collections for the North American telecommunication services designated BizjetMobile and iJetCell on behalf of ASiQ.
ii) AS-IP will receive an administration fee of 5% of the net proceeds from the BizjetCell and iJetCell services, in addition to the 10% royalty the Company was currently entitled to receive. Administration fees of $160 were received in the year ended June 30, 2013.
iii) The Agreement will expire on February 8, 2014, 30 days prior to which, the Company has the option to acquire the permanent rights for managing the BizjetCell and iJetCell services.
iv) The fee for purchasing the permanent rights will be $400,000 which can be satisfied either in cash on terms to be agreed, or by the issue of 20,000,000 of the Company’s preference shares. After exercise of the option, AS-IP will retain 20% of the net revenue from the BizjetMobile and iJetCell North American services, including the 10% royalties.
RESULTS AND PLAN OF OPERATIONS
The Company had accumulated losses from inception to June 30, 2013 of $8,872,587. Major components of the loss include depreciation, stock impairment, consulting and management fees, and operations costs. The Company may be required to make significant additional expenditures in connection with the patent applications and development of the SafeCell technology and promotion. The Company's ability to continue its operations is dependent upon its receiving funds through its anticipated sources of financing including capital raisings and revenues from operations. The Company may be required to raise additional capital through debt financing.
YEAR ENDED JUNE 30, 2013 COMPARED WITH YEAR ENDED JUNE 30, 2012
The Company received revenue of $7,768 in the year ending June 30, 2013, compared to nil in the year ended June 30, 2012.
Expenses decreased from $120,814 for the twelve month period ending June 30, 2012 to $68,106 for the twelve month period ending June 30, 2013. Operating expenses for the twelve month period ending June 30, 2013 decreased due mainly to lower directors fees.
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The Company recorded a net loss for the twelve month period ending June 30, 2013 of $63,055, compared to a loss of $120,814 for the twelve month period ending June 30, 2012
There was no foreign currency translation gain or loss for the year ended June 30, 2012 or for the year ended June 30, 2013.
LIQUIDITY AND CAPITAL RESOURCES
The Company has used the proceeds from the sale of the securities for payment of operating costs to date.
The Company's cash and cash equivalents cash equivalents increased from $101 at June 30, 2012 to $38,977 at June 30, 2013 as a result of capital raising, but after operating losses.
The Company had a net loss of $63,055 from operating activities for the period July 1, 2012 to June 30, 2013, primarily consisting of officers’ management fees and audit fees. The Company's revenue for the twelve months ending June 30, 2013 was $7,768, compared to nil in the twelve month period to June 30, 2012. The net loss from operating activities for the period July 1, 2012 to June 30, 2013 was lower than the net loss from operating activities for the period July 1, 2011 to June 30, 2012 primarily as a result of decreased directors fees.
The cash flow of the Company from investing activities for the twelve months ending June 30, 2013 was nil.
The cash flow of the Company from financing activities for the twelve months ending June 30, 2013 was from increased related party payables and the proceeds from issue of common stock.
The Company's marketing plan is based on licensing the SafeCell intellectual property from which it will receive royalties and license fees. This plan may require significant capital from the Company for promotion and patent costs. The Company may not have sufficient funds to finance its operations in which case it will have to seek additional capital. The Company may raise additional capital by the sale of its equity securities, through an offering of debt securities, or from borrowing from a financial institution. The Company does not have a policy on the amount of borrowing or debt that the Company can incur.
The Company has no commitment for capital expenditure in the near future.
OUTLOOK
The following are forward looking statements and should be read in conjunction with the Forward Looking Statement in Part I. of this Form 10-K. The Company received the first royalty revenues from its SafeCell intellectual property in the year ended June 30, 2013. In addition, the Company has entered into an arrangement detailed above, to manage the billing and credit card collections for the North American communications of the BizjetMobile and iJetCell services for which it will receive an additional administration fee of 5% of net proceeds of the services. The Company has the option to enter into a permanent arrangement for management of the services from February 8, 2014 for which it will receive a 10% administration fee in addition to the 10% royalties. The Company expects that sales of BizjetMobile and iJetCell hardware and services will continue to expand, which the Company believes will generate increasing royalty and administration fees.
REVENUE RECOGNITION
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
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GOING CONCERN
The financial statements appearing elsewhere in this report have been prepared assuming that the Company will continue as a going concern. As such, they do not include adjustments relating to the recoverability of recorded asset amounts and classification of recorded assets and liabilities. As noted in the auditor's report included in this 10-K, "The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty."
The Company's ability to continue its operations is dependent upon its raising of capital through debt or equity financing in order to meet its working needs. These conditions raise substantial doubt about the Company's ability to continue as a going concern, and if substantial additional funding is not acquired or alternative sources developed, management will be required to curtail its operations.
The Company may raise additional capital by the sale of its equity securities, through an offering of debt securities, or from borrowing from a financial institution. The Company does not have a policy on the amount of borrowing or debt that the Company can incur. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
OVERVIEW
ASI ENTERTAINMENT, INC.
FINANCIAL STATEMENTS
June 30, 2013 and 2012
ASI ENTERTAINMENT, INC.
Financial Statements
TABLE OF CONTENTS
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| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-1, F2 |
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| FINANCIAL STATEMENTS |
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| Balance sheets | F-3 |
| Statements of operations | F-4 |
| Statements of stockholders' deficit | F-5 |
| Statements of cash flows | F-6 |
| Notes to financial statements | F-7, F-13 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of ASI Entertainment, Inc.:
We have audited the accompanying consolidated balance sheet of ASI Entertainment, Inc. (“the Company”) as of June 30, 2013 and the related statement of operations, stockholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
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, 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.
In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of ASI Entertainment, Inc., as of June 30, 2013, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles in the United States of America.
The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ B F Borgers CPA PC
Denver, CO
September 20, 2013
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
ASI Entertainment, Inc.
We have audited the accompanying consolidated balance sheet of ASI Entertainment, Inc. (the “Company”) as of June 30, 2012 and the related statements of operations, stockholders’ deficit and cash flows for the year then ended. ASI Entertainment, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the 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. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ASI Entertainment, Inc. as of June 30, 2012 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ De Joya Griffith, LLC
Henderson, Nevada
October 5, 2012
F-2
ASI ENTERTAINMENT, INC.
BALANCE SHEETS
(AUDITED)
|
| June 30, | ||||
|
| 2013 |
| 2012 | ||
| ASSETS |
|
|
| ||
| Current Assets |
|
|
| ||
| Cash | $ | 38,978 |
| $ | 101 |
| Prepaid expenses |
| - |
|
| 500 |
|
|
|
|
|
|
|
| Total current assets |
| 38,978 |
|
| 601 |
|
|
|
|
|
|
|
| Intangible assets, net |
| 4,614 |
|
| 4,614 |
|
|
|
|
|
|
|
| Total assets | $ | 43,592 |
| $ | 5,215 |
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
| Accounts payable and accrued expenses | $ | 25,590 |
| $ | 23,186 |
| Related party payables |
| 288,606 |
|
| 289,579 |
| Due to related parties |
| 228,811 |
|
| 228,811 |
|
|
|
|
|
|
|
| Total current liabilities |
| 543,007 |
|
| 541,576 |
|
|
|
|
|
|
|
| Total liabilities |
| 543,007 |
|
| 541,576 |
|
|
|
|
|
|
|
| Stockholders' Deficit |
|
|
|
|
|
| Preferred stock $0.0001 par value; 20,000,000 shares authorized; none issued and outstanding |
| - |
|
| - |
| Common stock, $0.0001 par value; 100,000,000 shares authorized; 2012: 75,910,814 shares issued and outstanding; 2013: 81,577,481 shares issued and outstanding |
| 8,158 |
|
| 7,591 |
| Additional paid-in capital |
| 8,225,079 |
|
| 8,113,145 |
| Subscriptions payable |
| 139,940 |
|
| 152,440 |
| Treasury stock - par value (50,000 shares) |
| (5) |
|
| (5) |
| Accumulated deficit |
| (8,872,587) |
|
| (8,809,532) |
|
|
|
|
|
|
|
| Total stockholders' deficit |
| (499,415) |
|
| (536,361) |
|
|
|
|
|
|
|
| Total liabilities and stockholders' deficit | $ | 43,592 |
| $ | 5,215 |
See Accompanying Notes to Financial Statements.
F-3
ASI ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
(AUDITED)
|
| For the year ended June 30, 2012 |
| For the year ended June 30, 2011 | ||
|
|
|
|
| ||
| Royalties | $ | 6,703 |
| $ | - |
| Administration fees |
| 1,065 |
|
| - |
|
|
|
|
|
|
|
| Total revenue |
| 7,768 |
|
| - |
|
|
|
|
|
|
|
| Cost of sales |
| 2,717 |
|
| - |
|
|
|
|
|
|
|
| Gross profit |
| 5,051 |
|
| - |
|
|
|
|
|
|
|
| Selling, general and administrative expenses |
| 38,106 |
|
| 46,814 |
| Officers management fee |
| 30,000 |
|
| 24,000 |
| Directors fees |
| - |
|
| 50,000 |
|
|
|
|
|
|
|
| Loss from operations |
| (68,106) |
|
| (120,814) |
|
|
|
|
|
|
|
| Net loss | $ | (63,055) |
| $ | (120,814) |
|
|
|
|
|
|
|
| Net loss per share - (Basic) | $ | (0.00) |
| $ | (0.00) |
|
|
|
|
|
|
|
| Weighted average number of common shares outstanding |
| 77,277,481 |
|
| 74,361,498 |
See Accompanying Notes to Financial Statements.
F-4
ASI ENTERTAINMENT, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Years Ended June 30, 2012 and June 30, 2013
(AUDITED)
|
| Preferred | Shares | Common | Stock | Paid-In | Subscriptions | Treasury | Accumulated | Stockholders' |
|
| Shares | Amount | Shares | Amount | Capital | Payable | Stock | Deficit | Equity |
|
|
|
|
|
|
|
|
|
|
|
| Balances at June 30, 2011 |
|
| 71,460,814 | 7,146 | 7,999,340 | 144,940 | (5) | (8,688,718) | (537,297) |
| Issuance of shares for settlement of debt |
|
| 750,000 | 75 | 21,675 |
|
|
| 21,750 |
| Issuance of common stock payable for services |
|
|
|
|
| 100,000 |
|
| 100,000 |
| Issuance of common stock for stock payable |
|
| 3,700,000 | 370 | 92,130 | (92,500) |
|
| - |
| Net loss for the year ended June 30, 2012 |
|
|
|
|
|
|
| (120,814) | (120,814) |
|
|
|
|
|
|
|
|
|
|
|
| Balances at June 30, 2012 |
|
| 75,910,814 | 7,591 | 8,113,145 | 152,440 | (5) | (8,809,532) | (536,361) |
| Issuance of shares for settlement of debt |
|
| 2,000,000 | 200 | 39,800 |
|
|
| 40,000 |
| Issuance of common stock for stock payable |
|
| 500,000 | 50 | 12,450 | (12,500) |
|
| 0 |
| Issuance of stock for cash |
|
| 3,166,667 | 316 | 59,684 |
|
|
| 60,000 |
| Net loss for the year ended |
|
|
|
|
|
|
| (63,055) | (63,055) |
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2013 |
|
| 81,577,481 | 8,157 | 8,225,079 | 139,940 | (5) | (8,872,587) | (499,416) |
See Accompanying Notes to Financial Statements.
F-5
ASI ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
(AUDITED)
|
| For the years Ended June 30, | ||||
|
| 2013 |
| 2012 | ||
|
|
|
|
| ||
| Cash flows from operating activities: |
|
|
| ||
| Net loss | $ | (63,055) |
| $ | (120,814) |
| Adjustments to reconcile net loss to net cash used by operating activities: |
|
|
|
|
|
| Compensatory stock issuances - directors |
| - |
|
| 50,000 |
| Compensatory stock issuances - consultants |
| - |
|
| - |
| Loss on shares issued to settle accounts payable |
|
|
|
| 6,750 |
| Changes in operating assets and liabilities |
|
|
|
|
|
| Increase (Decrease) in accounts payable |
| 2,404 |
|
| 5,113 |
| Increase in related party payables |
| - |
|
| 24,000 |
| Decrease in prepaid expenses |
| 500 |
|
| (500) |
|
|
|
|
|
|
|
| Net cash used in operating activities |
| (60,151) |
|
| (35,451) |
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
| Increase in intangible assets |
| - |
|
| (4,614) |
|
|
|
|
|
|
|
| Net cash used by investing activities |
| - |
|
| (4,614) |
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
| Expenses paid on behalf of the company by a related party |
| 38,619 |
|
| 38,529 |
| Advances from related party |
| 408 |
|
| 1,479 |
| Proceeds from issuance of common stock |
| 60,000 |
|
| - |
|
|
|
|
|
|
|
| Net cash provided by financing activities |
| 99,027 |
|
| 40,008 |
|
|
|
|
|
|
|
| Net Increase/(Decrease) in cash |
| 38,876 |
|
| (57) |
| Cash, beginning of period |
| 101 |
|
| 158 |
|
|
|
|
|
|
|
| Cash, end of period | $ | 38,977 |
| $ | 101 |
|
|
|
|
|
|
|
| Supplemental schedule of non-cash activities |
|
|
|
|
|
|
|
|
|
|
|
|
| Stock issued for payables conversion | $ | - |
| $ | 15,000 |
|
|
|
|
|
|
|
| Stock issued for payable conversion | $ | 40,000 |
| $ | 50,000 |
See Accompanying Notes to Financial Statements.
F-6
ASI ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ASI Entertainment, Inc. ("ASI", the "Company"), was incorporated in the State of Delaware on April 29, 1998. ASI owns the intellectual property in the SafeCell product.
Basis of Presentation
The financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America. The financial statements are expressed in United States dollars.
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company has a limited operating history and limited funds and has an accumulated deficit of $8,872,587 at June 30, 2013. These factors, among others, may indicate that the Company will be unable to continue as a going concern.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions. The Company expects to generate revenue in the future from license and royalty fees from its SafeCell technology. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should the Company be unable to continue as a going concern. The continuation as a going concern is dependent upon the ability of the Company to meet our obligations on a timely basis, and, ultimately to attain profitability.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect 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. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. At certain times, cash in bank may exceed the amount covered by FDIC insurance. At June 30, 2013 and 2012 there were deposit balances in a United States bank of $38,978 and $101 respectively.
Income tax
The Company accounts for income taxes under FASB ASC 740 "Income Taxes". Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
F-7
ASI ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
At June 30, 2013 and 2012 the Company had net operating loss carryforwards of $2,120,002 which begin to expire in 2019. The deferred tax asset created by the U.S. net operating losses has been offset by a 100% valuation allowance of $8,872,587 in 2013, compared to an allowance of $8,809,532 in 2012. The change in the valuation allowance for U.S. tax purposes in 2013 and 2012 was $63,055 and $120,814, respectively.
Stock-based compensation
The Company records stock based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
ASC 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.
Per Share Data
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share". Basic earnings per common share ("EPS") calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Revenue recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Revenue is recognized on an accrual basis as earned under contract or license agreements. License fees are taken up in the period they become due. Revenue from ongoing royalties is recognized on an accrual basis in the period it is earned and invoiced.
Financial instruments
The Company has adopted the provisions of ASC Topic 820, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
F-8
ASI ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
·
Level one - Quoted market prices in active markets for identical assets or liabilities;
·
Level two - Inputs other than level one inputs that are either directly or indirectly observable; and
·
Level three - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
All of the Company’s financial instruments are level one and are carried at market value, requiring no adjustment to book value. The financial instruments were deemed to qualify as that classification because their value was determined by the price of identical instruments traded on an active exchange.
Products and services, and geographic areas
Company sales will be derived from royalty and license fees from the Company's technology. The technology is being marketed internationally under license agreements. To date, the Company has received two license fees, and has received nominal royalty income.
Stock Options
The Company has no outstanding stock options.
Recent Accounting Pronouncements
The company has evaluated the recent accounting pronouncements through ASU 2013-09 and believes that none of them have a material effect on the Company’s financial statements.
Long-Lived Assets
In accordance with ASC 360, Property Plant and Equipment the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
Goodwill, Trademarks and Other Intangible Assets
In accordance with SFAS No. 142, ‘‘Goodwill and Other Intangible Assets,’’ we classify intangible assets into three categories: (1) intangible assets with definite lives subject to amortization; (2) intangible assets with indefinite lives not subject to amortization; and (3) goodwill. For intangible assets with definite lives, tests for impairment must be performed if conditions exist that indicate the carrying value may not be recoverable. For intangible assets with indefinite lives and goodwill, tests for impairment must be performed at least annually or more frequently if events or circumstances indicate that assets might be impaired.
F-9
ASI ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
When facts and circumstances indicate that the carrying value of intangible assets determined to have definite lives may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of future cash flows. If the sum of the expected future cash flows is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. We test intangible assets determined to have indefinite useful lives, including trademarks, franchise rights and goodwill, for impairment annually, or more frequently if events or circumstances indicate that assets might be impaired.
Intangible Assets
In the year ended June 30, 2012, the Company took up Intangible Assets of $4,614 which represented part of the cost of obtaining the patent for the Company’s SafeCell technology in China. The Company has not made any adjustment to the balance in the year ended June 30, 2013.
License Agreements
The Company has the following marketing arrangements in place:
a. ASiQ Ltd, a Corporation with similar management and ownership to ASI, for the global marketing and implementation of SafeCell.
Material terms:
i. Date of agreement - May 29, 2008
ii. Term - ongoing
iii. License fee - not applicable
iv. As required by the Company, ASiQ will develop, manufacture and market SafeCell to the airline industry.
v. ASiQ will secure the services of Ron Chapman to assist in any product development and marketing.
vi. ASiQ will pay the Company a royalty fee of 10% of the revenue generated by SafeCell and received by ASiQ. Royalties of $4,892 were received in the year ended June 30, 2013.
vii. Should ASiQ develop other applications for the SafeCell concept outside the aviation industry, ASiQ and the Company will enter into separate agreements setting out the basis on which ASiQ can use the SafeCell concept as set out in the International PCT application, such agreement will include license and royalty payments payable under the agreement.
viii. The agreement was originally non exclusive but subsequently changed to exclusive
b. Under a Heads of Agreement dated February 11, 2013, subsequently formalized in an Agreement dated March 25, 2013, it was agreed:
i) The Company’s wholly owned subsidiary, AS-IP Finance Inc. (“AS-IP”) will manage the billing and credit card collections for the North American telecommunication services designated BizjetMobile and iJetCell on behalf of ASiQ.
F-10
ASI ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
ii) AS-IP will receive an administration fee of 5% of the net proceeds from the BizjetCell and iJetCell services, in addition to the 10% royalty the Company was currently entitled to receive. Administration fees of $160 were received in the year ended June 30, 2013.
iii) The Agreement will expire on February 8, 2014, 30 days prior to which, the Company has the option to acquire the permanent rights for managing the BizjetCell and iJetCell services.
iv) The fee for purchasing the permanent rights will be $400,000 which can be satisfied either in cash on terms to be agreed, or by the issue of 20,000,000 of the Company’s preference shares. After exercise of the option, AS-IP will retain 20% of the net revenue from the BizjetMobile and iJetCell North American services, including the 10% royalties.
NOTE 2 - RELATED PARTY TRANSACTIONS
As of June 30, 2012 and 2011, the Company has incurred as "related parties payables", $288,606 and $289,579 respectively, which are due mainly to advances made by the CEO to pay for operating expenses.
As of June 30, 2012 & 2011, the Company had "due to related parties" of $228,811 which are advances made by related parties to provide capital.
The “related parties payables” and “due to related parties balances are non-interest bearing, unsecured and due on demand. Due to the short term structure of these notes the company does not impute interest expense or recognize a discount on the face value of the notes.
The Company in 2013 and 2012 incurred expenses of approximately $30,000 and $24,000 respectively to entities affiliated through common stockholders and directors for management expenses.
NOTE 3 - LEASE COMMITMENTS
The Company has entered into an arrangement with a related party under which it uses premises at no cost and has not entered into a formal lease agreement. From July 1, 2013, the Company has entered into an arrangement with a related party under which it uses premises at A$2,400 per annum and has not entered into a formal lease agreement.
NOTE 4 - STOCKHOLDERS' EQUITY
Common stock
The Company as of June 30, 2011 had 100,000,000 shares of authorized common stock, $.0001 par value, with 71,460,814 shares issued and outstanding, and 50,000 shares in treasury. Treasury shares are accounted for by the par value method.
During the year ended June 30, 2012, the Company issued a total of 1,700,000 shares for directors fees valued at $0.025 per share.
During the year ended June 30, 2012, the Company issued a total of 2,000,000 shares for reduction of related accounts payable valued at $0.025 per share.
F-11
ASI ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
During the year ended June 30, 2012, the Company issued a total of 750,000 shares for reduction of related accounts payable valued at $0.02 per share.
During the year ended June 30, 2013, the Company issued a total of 2,000,000 shares for reduction of related accounts payable valued at $0.02 per share.
During the year ended June 30, 2013, the Company issued a total of 500,000 shares for directors fees valued at $0.025 per share.
During the year ended June 30, 2013, the Company issued a total of 666,667 shares $10,000 in cash valued at $0.015 per share.
During the year ended June 30, 2013, the Company issued a total of 2,500,000 shares for $50,000 in cash valued at $0.02 per share.
Subscriptions payable
The Company as of June 30, 2012 had a total of 6,071,573 shares payable valued at $152,440.
As of June 30, 2013, the Company has a total of 5,571,573 shares payable to 3 individuals with a net value of $139,940.
Preferred stock
The Company as of June 30, 2013 had 20,000,000 shares of authorized preferred stock, $.0001 par value, with no shares issued and outstanding.
F-12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On April 12, 2013, the Company filed a Form 8-K to record that on April 10, 2013, the Company’s Board of Directors had dismissed De Joya Griffith LLC as its certifying independent accountant and had approved the appointment of B F Borgers CPA PC as the Company's certifying independent accountant.
There have not been any disagreements with either De Joya Griffith or B F Borgers in the year ended June 30, 2013.
ITEM 9A. Controls and Procedures.
(a) Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 reports are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer / Chief Financial Officer and President, as appropriate, to allow timely decisions regarding required disclosure.
Our Chief Executive Officer / Chief Financial Officer and President evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(C) and under the Securities Exchanged Act of 1934, as amended (the "Exchange Act"), as of June 30, 2013.
Based on this evaluation, the Chief Executive Officer / Chief Financial Officer and President concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that are filed or submitted under the Exchange Act recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
(b) Management's Annual Report on Internal Control over Financial Reporting
As of June 30, 2013, management performed, with the participation of our Chief Executive Officer/Chief Financial Officer (who is the same person) and President and an external advisor, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 (e) and 15c-15 (e) of the Exchange Act. Our Disclosure controls and procedures controls and procedures are designed to ensure that information required to be disclosed in the report we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's forms, and that such information is accumulated and communicated to our management including our Chief Executive Officer/Chief Financial Officer and President, to allow timely decisions regarding required disclosures. Based on the evaluation, our Chief Executive Officer/Chief Financial Officer and President concluded that, as of June 30, 2013, our disclosure controls and procedures were effective.
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a- 15(f) and 15d-15(f) under Exchange Act). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial policies and procedures that:
* pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
* provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our Company are being made only in accordance with authorizations of our management and directors; and
* provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
14
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also 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. Under the supervision and with the participation of our management, the Company assessed the effectiveness of the internal control over financial reporting as of June 30, 2013. In making this assessment, we used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of this assessment and on those criteria the Company concluded that no material weaknesses exist in the internal controls as of June 30, 2013.
This annual report does not include any attestation report of the company's registered public accounting firm regarding internal controls over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
(c) Changes in Internal Controls over Financial Reporting
In prior filings, the Company has reported that management had identified material weaknesses of internal control over financial reporting as disclosure controls and procedures were not effective. The material weaknesses identified were caused by (1) the limited segregation of duties in regard to the preparation and review of the Company’s financial statements, and (2) a limited financial background and lack of appropriate experience and knowledge of US GAAP and SEC reporting requirements amongst the executive officers and the board of directors. As a result of the identified weaknesses, the Company has now appointed an external CPA with appropriate US GAAP and SEC reporting experience, to review the accounts and filings of this Form 10-K and future 10-Q’s. As a result, since the appointment of the external accountant in August 2013, the directors are of the opinion that there are now adequate internal controls over financial reporting.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The officers and directors of the Company are as follows:
| Name: | Title: |
| Richard Lukso | Chairman and Director |
| Ronald J. Chapman | President and Director |
| Graham O. Chappell | Director |
| Philip A. Shiels | Chief Executive Officer, Chief Financial Officer and Director |
All directors of the Company hold office until the next annual meeting of shareholders or until their successors are elected and qualified. At present, the Company's Bylaws provide for not less than one, nor more than seven directors. Currently, there are four directors of the Company. The Bylaws permit the Board of Directors to fill any vacancy and such director may serve until the next annual meeting of shareholders or until his successor is elected and qualified. Officers serve at the discretion of the Board of Directors.
The principal occupation and business experience for each officer and director of the Company, for at least the last five years are as follows:
RICHARD LUKSO, 80, is the Chairman and Director of the Company. Mr Lukso commenced his career in aviation in 1953 at USMC in the Marine Air Wing. His career has included senior executive positions with Lear Inc., Garrett Airesearch and Learjet. In 1988, Mr Lukso joined Securaplane Technologies Inc. as President and General Manager and co-owner. The company has since grown from 5 employees and one product to 100 employees and five innovative products serving airlines and general aviation. In 2000, Mr Lukso sold Securaplane Technologies Inc. to Danaher Corporation.
RONALD J. CHAPMAN, 61, serves as President and a director of the Company. Commencing in 1985, Mr. Chapman founded and remains the managing director of ASI Holdings Pty. Ltd. and ASiQ Ltd. Since inception, Mr Chapman has overseen the product development and coordinated the marketing for ASiQ. Mr. Chapman is also managing director and the beneficial owner of 100% of Chapman International Pty Ltd., which is a shareholder of the Company through its shareholding in ASI Technologies Pty. Ltd.
GRAHAM O. CHAPPELL, 68, has been a director of the Company since its inception. Mr. Chappell has worked in the aerospace industry for 30 years. Since 1985, Mr. Chappell has operated as the principal of Chappell Salikin Weil Associates Pty. Ltd. ("Chappell Salikin"), Victoria, Australia, a private aerospace, technology and defence industries consultancy company. Mr. Chappell obtained a Diploma of Aeronautical Engineering degree from the Royal Melbourne Institute of Technology in 1968 and a Masters of Science (Air Transport Engineering) from Cranfield University in 1974.
PHILIP A. SHIELS, 61, has been a director of the Company since 1996. From 1992 to the present, Mr. Shiels has operated Shiels & Co., Victoria, Australia, a private consulting practice providing management and corporate advisory services. Shiels & Co. has served as a consultant to ASiQ Ltd. since 1994 and ASI Entertainment, Inc. since its inception. Mr Shiels has served as the Director of Finance for ASI Holdings Pty. Ltd. Mr. Shiels received a Bachelor of Business (Accountancy) Degree from the RMIT University in 1976 and has been a Member of the Institute of Chartered Accountants in Australia since 1978.
ITEM 11. EXECUTIVE COMPENSATION.
The Company has not entered into any employment agreements with its executive officers or directors nor has it obtained any key-man life insurance.
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Each director is entitled to receive reasonable expenses incurred in attending meetings of the Board of Directors of the Company. The members of the Board of Directors intend to meet at least quarterly during the Company's fiscal year, and at such other times duly called. The Company presently has four directors.
The following table sets forth the total compensation paid or accrued by the Company on behalf of the Chief Executive Officer and Chief Financial Officer of the Company during 2011. No other officer of the Company received a salary and bonus in excess of $100,000 for services rendered during the fiscal year ended June 30, 2012:
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL POSITION | FISCAL YEAR | ANNUAL SALARY | COMPENSATION BONUS/AWARDS | OTHER COMPENSATION ALL OTHER |
| Richard Lukso, Chairman | 2013 2012 | - - | - - | $ - $12,500 (2) |
| Ronald Chapman, President | 2013 2012 | - - | - - | $ - $12,500 (2) |
| Philip Shiels, Chief Executive Officer Chief Financial Officer | 2013 2012 | - - | - - | $30,000 (1) $36,500 (1)and(2) |
| Graham Chappell, Director | 2013 2012 | - - | - - | $ - $12,500 (2) |
(1) Officers management fee.
(2) Directors fee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of the date of this Report regarding the beneficial ownership of the Company's Common Stock by each officer and director of the Company and by each person who owns in excess of five percent of the Company's Common Stock giving effect to the exercise of warrants or options held by the named security holder.
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Name, Position and Address | Shares of Common Stock Beneficially Owned | Percentage of Shares Owned |
| Ronald J. Chapman (2) President and director 160 Silvan Road, Wattle Glen, Vic., 3096 Australia | 9,307,951 | 11.41% |
| Graham O. Chappell (3) Director 5 Marine Parade, Suite 2 St. Kilda, Vic., 3148, Australia | 2,271,406 | 2.78% |
| Philip A. Shiels (4) Chief Executive Officer, Chief Financial Officer and director 88 Elgin Street Hawthorn, Vic., 3122 Australia | 11,948,522 | 14.65% |
| Richard Lukso Director 5610 Via Arbolado Tucson, AZ, 85750 | 2,140,000 | 2.62% |
| Ocean View Investments Pty. Ltd. (5) 100 Barkly St St Kilda, Vic., 3182 Australia | 13,888,889 | 17.03% |
| Eric P. van der Griend (5) 100 Barkly St St Kilda, Vic., 3182 Australia | 14,157,639 | 17.35% |
| All the officers and directors as a group (4 persons) | 25,667,879 | 31.46% |
(1) Assumes 81,577,481 shares of Common Stock issued and outstanding.
(2) Ronald J. Chapman, President and a director of the Company, owns 125,006 shares directly. Mr Chapman is the managing director (president) and majority shareholder of Chapman International Pty. Ltd., which is the controlling shareholder of ASIT Australia through which Mr. Chapman is the beneficial owner of 51,190 Shares. Mr.Chapman holds the power of attorney for the trustee of the Research No.1 Trust which holds 6,631,755 Shares. Mr. Chapman is a trustee and a beneficiary of the Madanosaj Superannuation Fund which holds 2,500,000 shares.
(3) Graham O. Chappell, a director of the Company, is the managing director (president) and sole shareholder of Chappell Salikin Weil Associates Pty. Ltd. and is considered the beneficial owner of the 788,006 Shares. Mr. Chappell is the sole shareholder of International Aviation Services Pty. Ltd. which owns 43,400 shares of which Mr. Chappell is considered the beneficial owner. Mr. Chappell is a trustee and a beneficiary of the Chappell Salikin Weil Associates Pty. Ltd. Staff Superannuation Fund which holds 1,140,000 shares.
(4) Philip A. Shiels, Chief Executive Officer and Chief Financial Officer and a director of the Company, holds the power of attorney for the trustee of the Research No. 2 Trust which holds 1,198,522 Shares. Mr. Shiels is a trustee and a beneficiary of the Shiels Superannuation Fund which holds 8,250,000 shares. Mr. Shiels is a trustee and a beneficiary of The Shiels Trust which holds 2,500,000 shares.
(5) Eric P. van der Griend is a director and shareholder of Ocean View Investment Pty. Ltd. which owns 13,888,889 shares and a director and shareholder of Swiss Time Australia Pty. Ltd. which owns 268,750 shares. Mr. van der Griend is considered the beneficial owner of 14,157,639 Shares.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
Ronald Chapman, Graham Chappell, and Philip Shiels are directors of the Company and directors of the Company's former subsidiary ASiQ Pty. Ltd., now named ASiQ Ltd. ("ASiQ").
On February 28, 2007, the Company entered into an agreement to purchase the SafeCell intellectual property from ASiQ for $250,000. Since the SafeCell acquisition, the Company has looked to ASiQ and the SafeCell creators to develop the flight test system and to promote SafeCell to the aviation industry. Future licensing of SafeCell to ASiQ for airline opportunities will be negotiated on a case by case basis.
On May 29, 2008 the Company entered into a License Agreement with its former subsidiary, ASiQ, under which ASiQ will:
1. Continue to develop, manufacture and have a non exclusive right to market SafeCell.
2. Secure the services of the SafeCell inventor, Mr Ron Chapman to assist in product development and marketing.
3. Pay to ASIE a Royalty Fee of 10% of the revenue generated by SafeCell and received by ASiQ.
In addition, should ASiQ develop other applications for the SafeCell concept outside the aviation industry, ASiQ and the Company will enter into separate agreements setting out the basis on which ASiQ can use the SafeCell concept as set out in the International PCT application, such agreements including license and royalty payments.
On June 18, 2008, the Company entered into a Product License Agreement with ASiQ, under which:
1. The Company granted ASiQ the exclusive worldwide license to the SafeCell intellectual property for development, marketing and sale for any ground based applications, including the PicoBlue application which has been developed by ASiQ.
2. The Company agreed to contract ASiQ exclusively to integrate the PicoBlue application with SafeCell for use in the SafeCell in-flight program.
3. The Company agreed not to utilize the PicoBlue software in any application other than the in-flight program.
4. ASiQ agreed to pay the Company a license fee of $200,000 plus royalty fees of 5% of the revenue received by ASiQ from Pico Blue.
The Company was advised on March 12, 2009 that:
1. The License Agreement between the Company and ASiQ Ltd for the ground based application of its SafeCell product had been assigned to Chapman Reid Ltd., a UK company; and ,
2. The License Agreement between ASI Entertainment and ASIQ Ltd. for the aviation application of the SafeCell product had been changed from a non-exclusive to an exclusive license following the commercialization of the aviation system.
All other terms and conditions of the agreements were unchanged.
Barry Chapman, CEO and 50% shareholder of Chapman Reid is a sibling of Ron Chapman. Barry Chapman also owns 278,612 shares in ASI Entertainment (0.4%) and 278,612 shares in ASiQ Limited (0.9%).
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On February 11, 2013, the Company entered into a Heads of Agreement with its former subsidiary, ASiQ, under which the Company would become responsible for managing the billing and credit card collections for the North American telecommunication services designated BizjetMobile and iJetCell on behalf of ASiQ. The Heads of Agreement was formalized on March 25, 2013, with an Agreement including the Company’s wholly owned subsidiary, AS-IP Finance Inc. (“AS-IP”), which will expire on February 8, 2013. Under the Agreement, AS-IP will receive an administration fee of 5% of the net proceeds from the BizjetCell and iJetCell services, in addition to the 10% royalty the Company was currently entitled to receive. The Agreement will expire on February 8, 2014, 30 days prior to which, the Company has the option to acquire the permanent rights for managing the BizjetCell and iJetCell services. The fee for purchasing the permanent rights will be $400,000 which can be satisfied either in cash on terms to be agreed, or by the issue of 20,000,000 of the Company’s preference shares. After exercise of the option, AS-IP will retain 20% of the net revenue from the BizjetMobile and iJetCell North American services, including the 10% royalties.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
The audit fees for the fiscal years ended June 30, 2012 and June 30, 2013 for professional services rendered by De Joya Griffith & Company, LLC were $20,400 and $16,864 respectively. Audit fees paid to B F Borgers in the fiscal year ended June 30, 2013 were $1,620.
AUDIT-RELATED FEES
There were no fees billed for services reasonably related to the performances of the audit or review of our financial statements other then those disclosed under the caption Audit Fees for fiscal years 2012 and 2013.
TAX FEES
None
ALL OTHER FEES
There were no other fees filled for services.
ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
| Exhibit No. | Description |
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31.1 | Certification of the Chief Executive Officer under Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Actof 2002) |
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31.2 | Certification of the Chief Financial Officer under Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002) |
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32.1 | Certification Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) |
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32.2 | Certification Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) |
(b) Reports filed on Form 8-K for the year ending June 30, 2013:
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On February 11, 2013, the Company announced that it had entered into a Heads of Agreement with its former subsidiary, ASiQ Limited ("ASiQ") under which the Company would become responsible for managing certain services provided to the business aircraft market in North American on behalf of ASiQ. The Heads of Agreement provided for the Company to receive an administration fee of 5% of the net revenue, in addition to its royalty entitlements of 10% of net revenue received from the BizjetMobile and iJetcell telecommunication services in North America. The Company will also have the option to acquire the permanent rights for the management of the BizjetMobile and iJetcell telecommunication services in North America. The Heads of Agreement was formalized on March 25, 2013, with an Agreement expiring February 8, 2013.
On April 10, 2013, the Company announced that the Board of Directors had dismissed De Joya Griffith LLC as its certifying independent accountant and had approved the appointment of B F Borgers CPA PC as the Company's certifying independent accountant.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ASI ENTERTAINMENT, INC.
By: /s/ Philip A. Shiels
Principal Executive Officer and Principal
Financial Officer
Pursuant to 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.
| Signature | Title | Date |
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| /s/ Richard Lukso | Director | 9/20/2013 |
| Richard Lukso |
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| /s/ Ronald J. Chapman | Director | 9/20/2013 |
| Ronald J. Chapman |
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| /s/ Graham O. Chappell | Director | 9/20/2013 |
| Graham O. Chappell |
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| /s/ Philip A. Shiels | Director | 9/20/2013 |
| Philip A. Shiels |
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