IPTK AS IP Tech Inc (CE)

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

(UNAUDITED)

Note 1. Organization, Business and Summary of Significant Accounting Policies

Organization and Description of Business

AS-IP Tech, Inc. (the “Company”) was formed on April 29, 1998 as a Delaware corporation.

The Company’s technology comprises two product lines called BizjetMobile and fflya. The products deliver inflight connectivity for business aviation and commercial airlines respectively. The Company receives revenue share from sales by distributors of products and serviced developed from its intellectual property.

Basis of Presentation

The accompanying unaudited condensed financial statements of AS-IP Tech, Inc., (the “Company”) have been prepared in accordance with generally accepted accounting principles used in the United States of America and with the rules and regulations of the United States Securities and Exchange Commission for interim financial information. The Company uses the same accounting policies in preparing quarterly and annual financial statements. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position and results of operations.

The functional currency of the Company is the United States dollar. The unaudited condensed financial statements are expressed in United States dollars. It is management’s opinion that any material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.  The results for the interim period are not necessarily indicative of the results to be expected for the year.

For further information, refer to the financial statements and footnotes included in the Company’s Form 10-K for the year ended June 30, 2020.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Such estimates and assumptions impact, among others, the collectability of accounts receivables, valuation allowance for deferred tax assets due to continuing and expected future losses, and share-based payments.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

Reclassifications

Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income.

Recent pronouncements

The company has evaluated the recent accounting pronouncements and believes that none of them have a material effect on the Company’s financial statements.

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Note 2. Going Concern

The accompanying unaudited condensed 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 raised substantial doubt about the Company’s ability to continue as a going concern.

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 provides the additional opportunity for the Company to continue as a going concern for the next twelve months after these financial statements are issued. However, there is no assurance of additional funding being available or on acceptable terms, if at all. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Note 3. Related Party Transactions

As of December 31, 2020 and June 30, 2020, the Company has recorded as “related party payables”, $579,717 and $826,716, respectively. As these related party payables have become core debt of the Company, the terms on which they are provided are currently being renegotiated. A large component of the payables is 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. As a result, in the three months ended December 31, 2020 and December 31, 2019, the Company recorded Interest - related party of $4,335 and $4,065 respectively. In the six months ended December 31, 2020 and December 31, 2019, the company recorded Interest - related party of $8,601 and $8,064 respectively.

As of December 31, 2020 and June 30, 2020, the Company had “Due to related parties” of $228,811 and $228,811 respectively which are advances made by related parties to provide capital and outstanding directors fees. These amounts are non-interest bearing, unsecured and due on demand.

In 2016, the Company acquired the BizjetMobile intellectual property from a related party for $450,000. In 2018, management re-assessed the net book value of the intellectual property and as a result, wrote off $113,832 as a loss of impairment. As of December 31, 2020 and June 30, 2020, the Company has accumulated $336,168 and $322,431 respectively for amortization of the value of the intellectual property.

In the three months ended December 31, 2020 and December 31, 2019 respectively, the Company recorded net revenue of $20,786 and $3,006 from entities affiliated through common stockholders and directors for BizjetMobile service fees. In the six months ended December 31, 2020 and December 31, 2019 respectively, the Company recorded net revenue of $28,817 and $10,721 from entities affiliated through common stockholders and directors for BizjetMobile service fees. In the three months ended December 31, 2020 and December 31, 2019 respectively, the Company recorded revenue of nil and $5,738 from entities affiliated through common stockholders and directors for BizjetMobile system sales. In the six months ended December 31, 2020 and December 31, 2019 respectively, the Company recorded net revenue of $8,001 and $13,032 from entities affiliated through common stockholders and directors for BizjetMobile system sales.

In the three months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred expenses of approximately $9,750 and $24,000 respectively to entities affiliated through common stockholders and directors for management expenses. In the six months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred expenses of approximately $17,750 and $48,000 respectively to entities affiliated through common stockholders and directors for management expenses.

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In the three months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred marketing expense of $54,000 and $69,000 to entities affiliated through common stockholders and directors. In the six months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred marketing expense of $218,000 and $108,065 to entities affiliated through common stockholders and directors. The marketing expense in the six months ended December 31, 2020 included a fee to related parties of $110,000 following the successful negotiation for the evaluation of the Company’s fflya system on the UK fleet of Wizz Air This has been satisfied with the issue of 11,000,000 shares of the Company’s common stock.

In the three months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred expense of $12,000 and $12,000 to entities affiliated through common stockholders and directors for technical service support. In the six months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred expense of $24,000 and $24,000 to entities affiliated through common stockholders and directors for technical service support.

In the three months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred cost of sales of commissions of $8,908 and $2,997 and hardware cost of sales of $0 and $2,087, to entities affiliated through common stockholders and directors. In the six months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred cost of sales of commissions of $15,779 and $9,371 and hardware cost of sales of $2,087 and $4,174, to entities affiliated through common stockholders and directors. Sales commissions are normally 30% of the sale price of services or systems, but are negotiable on a case by case basis.

In the three months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred engineering service costs of $21,722 and $48,000 to entities affiliated through common stockholders and directors, on normal commercial terms in the course of the Company’s normal business. In the six months ended December 31, 2020 and December 31, 2019 respectively, the Company incurred engineering service costs of $39,722 and $96,000 to entities affiliated through common stockholders and directors, on normal commercial terms in the course of the Company’s normal business.

Note 4. Stockholders’ Deficit

As of December 31, 2020, the Company had 500,000,000 shares of authorized common stock, $0.0001 par value, with 219,622,125 shares issued and outstanding, and 50,000 shares in treasury. Treasury shares are accounted for by the par value method.

As of December 31, 2020, the Company had 50,000,000 shares of authorized preferred stock, $0.0001 par value, with no shares issued and outstanding.

During the six month period ended December 31, 2020, the Company received subscriptions for capital of $216,895, for which it has issued 2,821,000 shares of common stock at $0.01 per share and 18,868,579 shares of common stock at $0.01 per share, subsequent to December 31, 2020.

The Company has Subscriptions payable of $26,186, included in Stockholders’ Deficit, which represents 1,422,389 shares of common stock which were issued in February 2021.

Note 5. 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.

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Note 6. Loans

Loans in the Company’s balance sheet are made up of:

a.The Company has an unsecured loan from a third party with balance outstanding at December 31, 2020 of $14,689 (June 30, 2020 $20,348). Interest is calculated at a rate of 20% per annum with interest of $830 and $1,368 taken up in the three months ended December 31, 2020 and December 31, 2019, respectively and $1,801 and $2,826 taken up in the six months ended December 31, 2020 and December 31, 2019, respectively. The Company is making or accruing principal and interest payments for the loan of $1,250 per month. 

b.The Company has outstanding unsecured loans totalling $70,295 from shareholders at December 31, 2020 and June 30, 2020. 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 December 31, 2020 the Company had accumulated interest on the loans of $14,081 calculated at the Company’s prevailing share price. The interest will be converted to shares of common stock as stated above. 

Effective July 1, 2021, shareholders with $60,295 of the loans have agreed to change their loans to convertible notes on the following basis:

-Conversion price: $0.05 per share 

-Interest rate 20% per annum, which at the Company’s election, can be satisfied either in cash or shares at the Conversion Price 

-Maturity date: December 31 2023 

c.In 2018, the Company issued Convertible Notes which totalled $607,500 at December 31, 2020 (balance at June 30, 2020 $607,500) to fund the development of its fflya systems. 

Two issues were made as follows:

The first convertible note for $337,500 on the following terms:

-Interest rate:  20% per annum, payable monthly in arrears 

-Conversion price:  $0.03 per share. 

-Maturity date: December 1, 2020, which has now been extended to December 31, 2023. Conditional on the extension of the term, the holders agreed to advance an additional $200,000 on the same terms above, except the conversion price is to be $0.015 per share on the additional amount. 

A second convertible note issued for $270,000, on the following terms:

-Interest rate:  20% per annum, payable monthly in arrears 

-Conversion price:  $0.05 per share 

-Maturity date:  December 1, 2020, which has now been extended to December 31, 2023. In negotiating the extension of the term, the holders agreed to advance an additional $155,000 on the same terms above. 

In return for providing the original Convertible Note funding, investors will receive commissions on Viatour tours and attractions for the first 27 system installations. Each investor will receive a commission for three years 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 commissions have been paid. None of the Notes have been converted to shares to date.

d.In July 2021, related party contractors have agreed to accept convertible notes to reduce the debts they are owed. The full details of the convertible notes are still being finalised with proposed terms as follows: 

-Total amount: $375,000 

-Interest rate:  20% per annum, payable monthly in arrears in shares 

-Conversion price:  $0.015 per share of the Company’s preferred stock. 

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-Effective date: December 31, 2020 

-Maturity date: December 31, 2023 

Note 7. 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 Company’s technology. 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. On the basis that the technology has a useful life of 5 years, the Company has provided for amortization of $336,168 at December 31, 2020 and $322,431 at June 30, 2020.