NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
AS-IP Tech, Inc. (AS-IP, the Company) formerly ASI Entertainment, Inc., was incorporated in the State of Delaware on April 29, 1998.
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. The Companys fiscal year ends June 30.
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 financial statements, the Company has recurring operating losses, limited funds and has accumulated deficits. 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 the BizjetMobile and fflya businesses from the sale of hardware and provision of on-going services. 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.
Accounts Receivable, net
Accounts receivable are recognized at invoiced amounts and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company reviews its allowance for doubtful accounts receivable on an ongoing basis. In establishing the required allowance, management considers any historical losses, the customers financial condition, the accounts receivable aging, and the customers payment patterns. After all attempts to collect a receivable have failed and the potential for recovery is remote, the receivable is written off against the allowance.
As of June 30, 2018 and 2017, the allowance for doubtful account balances are $0 and $0, respectively. The bad debt expense, including the direct written-off accounts receivables, incurred for the years ended June 30, 2018 and 2017 are $14,733 and $0, respectively.
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AS-IP TECH, INC.
NOTES TO FINANCIAL STATEMENTS
Stock Options
We estimate the fair value of stock option awards on the date of grant using the Black-Scholes-Merton pricing model, which is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, risk free interest rates and expected dividends.
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 provides 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 entitys own assumptions (unobservable inputs). The hierarchy consists of three levels:
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 Companys financial instruments are level one and are carried at fair 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.
Intangible Assets
In accordance with ASC 350, Intangibles - Goodwill and Other, 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.
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 which is estimated and calculated by discounted cash flow method. 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.
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.
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AS-IP TECH, INC.
NOTES TO FINANCIAL STATEMENTS
At June 30, 2018 the Company had net operating loss carryforwards of $10,706,680 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 $2,474,392 in 2018, compared to an allowance of $2,263,324 in 2017. The change in the valuation allowance for U.S. tax purposes in 2018 and 2017 was $211,442 and $206,500, respectively.
On December 22, 2017, the U.S. Tax Cuts and Jobs Act was enacted. U.S. tax reform introduced many changes, including lowering the U.S. corporate tax rate to 21 percent, changes in incentives, provisions to prevent U.S. base erosion and significant changes in the taxation of international income, including provisions which allow for the repatriation of foreign earnings without U.S. tax. The enactment of U.S. tax reform had no impact on our income taxes for the year ended June 30, 2018.
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.
Earnings (Loss) Per Share
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by FASB, 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 ASC topic 605 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.
Deferred revenue
The Company receives payment for services in advance before the subscription service is provided. The company recognizes the revenue as being earned as the services are provided.
Recent Accounting Pronouncements
The company has evaluated the recent accounting pronouncements and believes that none of them have a material effect on the Companys financial statements.
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AS-IP TECH, INC.
NOTES TO FINANCIAL STATEMENTS
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.2014-09, Revenue from Contracts with Customers (Topic 606), and has since issued several additional amendments thereto (collectively referred to herein as ASC 606). ASC 606 establishes a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Under ASC 606, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company will adopt this guidance effective July 1, 2018 using the modified retrospective approach, and the Company believes the adoption of this standard will not have a significant impact on the Companys sales.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718) which simplifies certain aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Certain areas of the simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments of the ASU are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our financial statements.
NOTE 2 - RELATED PARTY TRANSACTIONS
As of June 30, 2018 and 2017, the Company has incurred as related parties payables, $351,019 and $273,717 respectively, which are due mainly to advances made by the CFO to pay for operating expenses. From July 1, 2016, interest has accrued on amounts due to the CFO calculated quarterly at a rate of 6.5% per annum. Interest accrued for the advance in the years ended June 30, 2018 and 2017 was $17,905 and $16,282. The loan and accumulated interest will be repaid from surplus operating cash, when funds are available.
As of June 30, 2018 and 2017, the Company had due to related parties of $228,811 which are advances made by related parties to provide operating funds. The due to related parties balances are non-interest bearing and unsecured. 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.
As of June 30, 2018 and 2017, the Company had Accounts receivable -related parties of $0 and $60,871 due from entities affiliated through common stockholders and directors, which operate as distributors for the Companys products and services.
In 2016, the Company acquired the BizjetMobile intellectual property from a related party for $450,000. In 2018 and 2017, the Company provided $90,000 and $90,000 respectively for amortization of the value of the intellectual property. In 2018, management re-assessed the net book value of the intellectual property, and as a result, has written off $113,832 as a Loss of impairment.
In 2018 and 2017, the Company recorded revenue of $21,990 and $75,969 respectively from entities affiliated through common stockholders and directors for BizjetMobile system sales.
In 2018 and 2017, the Company recorded revenue of $45,817 and $94,679 respectively from entities affiliated through common stockholders and directors for BizjetMobile service fees.
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AS-IP TECH, INC.
NOTES TO FINANCIAL STATEMENTS
In 2018 and 2017, the Company incurred expenses of $96,000 and $75,783 respectively to entities affiliated through common stockholders and directors for management expenses.
In 2018 and 2017, the Company incurred expense of $267,235 and $202,217 to entities affiliated through common stockholders and directors for marketing expenses. This includes fees of $96,000 and $78,000 paid to the President, Ron Chapman in 2018 and 2017.
In 2018 and 2017, the Company incurred expense of $192,000 and $206,315 to entities considered related parties for engineering services.
In 2018 and 2017, the Company incurred expense of $48,000 and $46,896 to entities affiliated through common stockholders and directors for technical service support.
In 2017, the Company incurred expense of $72,000 to entities affiliated through common stockholders and directors for capital raising fees.
In 2017, the Company incurred a loss on debt settlement of $20,000 to entities affiliated through common stockholders and directors.
In 2018 and 2017, the Company incurred cost of sales, comprising commissions and hardware costs, of $16,099 and $60,711 to entities affiliated through common stockholders and directors.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company does not have any arrangements to lease premises for its operations. The Company does not have any legal matters outstanding.
NOTE 4 - STOCKHOLDERS' EQUITY
Common stock
The Company has authorized capital of 500,000,000 shares of common stock and 50,000,000 shares of preferred stock, both with a par value $0.0001. The Company as of June 30, 2016 had 131,939,482 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, 2017, the Company issued a total of 1,031,867 shares for cash valued at $0.015 per share.
During the year ended June 30, 2017, the Company issued a total of 2,342,500 shares for cash valued at $0.02 per share.
During the year ended June 30, 2017, the Company issued a total of 14,651,357 shares for cash valued at $0.03 per share.
During the year ended June 30, 2017, the Company issued a total of 727,855 shares for services valued at $0.05 per share.
During the year ended June 30, 2017, the Company issued a total of 1,333,333 shares to related parties for services valued at $0.05 per share and issued a total of 1,166,667 shares for services to a related-party valued at $0.04 per share.
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AS-IP TECH, INC.
NOTES TO FINANCIAL STATEMENTS
During the year ended June 30, 2017, the Company issued a total of 1,000,000 shares for services valued at $0.05 per share.
During the year ended June 30, 2017, the Company issued a total of 751,642 shares for services valued at $0.04 per share.
During the year ended June 30, 2017, the Company issued a total of 3,543,167 shares from Subscriptions Payable at a nominal price of $0.0184 per share.
During the year ended June 30, 2018, the Company issued a total of 322,500 shares for cash valued at $0.025 per share.
During the year ended June 30, 2018, the Company issued a total of 3,000,000 shares for cash valued at $0.018 per share.
During the year ended June 30, 2018, the Company issued a total of 250,005 shares in lieu of interest valued at $0.038 per share.
The Company as of June 30, 2018 had 161,960,376 shares issued and outstanding, and 50,000 shares in treasury. Treasury shares are accounted for by the par value method.
Preferred stock
As of June 30, 2018, the Company had 50,000,000 shares of authorized preferred stock, $0.0001 par value, with no shares issued and outstanding.
Subscriptions payable
As of June 30, 2018, the Company has a total of 1,422,389 shares payable to an individual with a net value of $26,185.
Stock Options
During the year ended June 30, 2017, the Company issued stock options to acquire 341,500 shares of the Companys common stock at a price of $0.10 per share. The term of the options is 5 years from the date of issue. The options were issued in return for capital raising services and the accounts reflect an option cost of $7,360.
NOTE 5 - INTANGIBLE ASSETS
In the year ended June 30, 2016, the Company took up Intangible Assets of $450,000 which represented the termination fee negotiated with the licensee of the Companys technology. The Company has provided for amortization of $90,000 in the year ended June 30, 2017 and $90,000 in the year ended June 30, 2018 on the basis that the technology has a useful life of 5 years. In 2018, management re-assessed the net book value of the intellectual property, and as a result, has written off $113,832 as a Loss of impairment.
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AS-IP TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - LOANS
Loans in the Companys balance sheet are made up of:
1. The Company has an unsecured loan from a third party with balance outstanding at June 30, 2018 of $38,281 (June 30, 2017 $44,871). Interest is calculated at a rate of 20% per annum with interest of $8,409 and $8,694 taken up in the years ended June 30, 2018 and 2017 respectively. The Company is making principal and interest payments for the loan of $1,250 per month.
2. The Company has outstanding unsecured loans totalling $70,295 from shareholders at June 30, 2018 and 2017. The terms of the loans provide that if they are not repaid by the loan anniversary (December 31 each year), the Company will issue 16,667 shares of common stock for each $5,000 of the loan outstanding in lieu of interest. At June 30, 2018 and 2017, the Company had accumulated interest on the loans of $3,338 and $4,340 calculated at the Companys prevailing share price. The interest will be converted, in due course, by the issue of shares of common stock. As stated in Note 4, during the year ended June 30, 2018, the Company issued a total of 250,005 shares in lieu of interest outstanding for the year ended December 31, 2017.
3. In 2018, the Company issued Convertible Notes which totalled $585,000 at June 30, 2018, to fund production of its fflya systems. Two issues were made as follows:
The first convertible note for $337,500 finances the initial 15 system shipsets. Terms of the issue are:
- Interest rate: 20% per annum, payable monthly in arrears
- Conversion price: $0.03 per share.
- Maturity date: December 1, 2020
A second convertible note issue for $247,500 is to finance a further 11 system shipsets, on the following terms:
- Interest rate: 20% per annum, payable monthly in arrears
- Conversion price: $0.05 per share
- Maturity date: December 1, 2020
In return for providing system funding, each investor will receive a royalty for a period of three years on each shipset on terms to be agreed, based on the net revenue received once the systems commence operation,. To date, no systems have been installed and no royalties have been paid. None of the Notes have been converted to shares to date.
NOTE 7 - SIGNIFICANT SUBSEQUENT EVENTS
Since June 30, 2018, the Company has continued to raise capital to fund its operations through the sale of shares, and has received a total of $370,000 up to the date of this report.
There have not been any significant events since balance date, June 30, 2018 until October 25, 2019, the date of this report.
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