AS-IP TECH INC - Quarter Report: 2019 September (Form 10-Q)

AS-IP TECH, INC.

CONDENSED BALANCE SHEETS

(UNAUDITED)

The accompanying notes are an integral part of these financial statements.

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AS-IP TECH, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these financial statements.

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AS-IP TECH, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT

(UNAUDITED)

The accompanying notes are an integral part of these financial statements.

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AS-IP TECH, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these financial statements.

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AS-IP TECH, INC.

NOTES TO FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2019

(UNAUDITED)

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

Organization and Description of Business

AS-IP Tech, Inc. (the “Company”) was formed as ASI Entertainment, Inc. 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.

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, 2019.

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.

Recent pronouncements

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.

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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 non-public 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 Company adopted this guidance effective July 1, 2019, and the Company believes the adoption of this standard did not have a significant impact on the Company’s sales.

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, among others, may indicate that the Company will be unable 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 September 30, 2019 and June 30, 2019, the Company has recorded as "related party payables", $648,355 and $562,564, respectively, the main component of which was 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 September 30, 2019 and September 30, 2018, the Company recorded Interest - related party of $3,999 and $4,718 respectively.

As of September 30, 2019 and June 30, 2019, 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 September 30, 2019 and June 30, 2019, the Company has accumulated $291,519 and $281,215 respectively for amortization of the value of the intellectual property.

In the three months ended September 30, 2019 and September 30, 2018 respectively, the Company recorded revenue of $10,481 and $12,801 from entities affiliated through common stockholders and directors for BizjetMobile service fees. In the three months ended September 30, 2019 and September 30, 2018 respectively, the Company recorded revenue of $12,990 and $0 from entities affiliated through common stockholders and directors for BizjetMobile system sales.

In the three months ended September 30, 2019 and September 30, 2018 respectively, the Company incurred expenses of approximately $24,000 and $24,000 respectively to entities affiliated through common stockholders and directors for management expenses. These expenses have been classified as officer’s management fees in the accompanying financial statements.

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In the three months ended September 30, 2019 and September 30, 2018 respectively, the Company incurred marketing expense of $39,065 and $31,697 to entities affiliated through common stockholders and directors.

In the three months ended September 30, 2019 and September 30, 2018 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 three months ended September 30, 2019 and September 30, 2018 respectively, the Company incurred cost of sales of commissions of $6,375 and $2,153, and hardware cost of sales of $2,087 and $0 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 September 30, 2019 and September 30, 2018 respectively, the Company incurred engineering service costs of $48,000 and $48,000 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 September 30, 2019, the Company had 500,000,000 shares of authorized common stock, $0.0001 par value, with 182,112,766 shares issued and outstanding, and 50,000 shares in treasury. Treasury shares are accounted for by the par value method.

As of September 30, 2019, the Company had 50,000,000 shares of authorized preferred stock, $0.0001 par value, with no shares issued and outstanding.

In the period to September 30, 2019, the Company received Subscriptions for capital of $96,935, for which it has issued 8,333,333 shares of common stock subsequent to September 30, 2019.

The Company has Subscriptions payable of $26,186 which represents 1,422,389 shares of common stock to be issued when directed.

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.

Note 6. Loans

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

1.  The Company has an unsecured loan from a third party with balance outstanding at September 30, 2019 of $27,878 (June 30, 2019 $30,170). Interest is calculated at a rate of 20% per annum with interest of $1,458 and $1,871 taken up in the three months ended September 30, 2019 and September 30, 2018 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 September 30, 2019 and June 30, 2019. 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 September 30, 2019 the Company had accumulated interest on the loans of $9,363 calculated at the Company’s prevailing share price, which included $937 for the three months ended September 30, 2019. The interest will be converted to shares of common stock as stated above.

3.  In 2018, the Company issued Convertible Notes which totalled $607,500 at September 30, 2019 (balance at June 30, 2019 $607,500) to fund production of its fflya systems. Two issues were made as follows:

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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 $270,000 is to finance a further 12 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. 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 $281,215 up to June 30, 2019 and $291,519 at September 30, 2019.

Note 8. Subsequent Events

In the period since September 30, 2019, the company has received $329,447 as Subscriptions for capital and for which it has issued 19,901,166 shares to date and will issue a further 4,347,000 shares.

In the period since September 30, 2019, the company has issued 4,236,860 shares of common stock in lieu of interest, fees and debt satisfaction.

There have not been any other significant events since balance date, September 30, 2019 until the date of this report.

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This quarterly report on form 10-Q 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.

The following discussion should be read in conjunction with the accompanying unaudited condensed financial statements for the three months ended September 30, 2019 and the Form 10-K for the fiscal year ended June 30, 2019.

OVERVIEW

The Company’s inflight connectivity technology is targeted at two distinct markets. BizjetMobile and Chiimp are designed for business jets and has been sold in North America, Europe and the Middle East. The Company’s fflya system is designed for, and marketed to, low-cost airlines in Europe and Asia.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2019 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2018

In the three months period ended September 30, 2019, the Company recorded revenue of $23,471, compared to revenue of $12,801 in the corresponding three month period ended September 30, 2018 as a result of a Chiimp system sale. After Cost of Sales of $8,461, the Company had a Gross Profit of $15,010 in the three months ended September 30, 2019. In the three months ended September 30, 2018, the Company recorded Cost of Sales of $2,153, which resulted in a Gross Profit of $10,648.

The Company continued investing in the development and marketing of the airline versions of its fflya and CrewX technology. As a result, the product is now in production and has received favourable responses from potential airline customers and strategic partners. In addition, the airline product will be used to upgrade the business jet offering which is expected to open new marketing opportunities for the Company. The Company incurred operating costs of $195,461 in the three months ended September 30, 2019 and $165,780 in the three months ended September 30, 2018. Main components are engineering, management, marketing and audit expenses. In the three months ended September 30, 2019, the Company recorded an Operating Loss of $180,451 compared to an Operating Loss of $155,132 in the three months ended September 30, 2018.

The development and marketing costs have been funded in part through interest bearing convertible notes. As a result, the Company’s Other Expenses, were interest of $36,770 and $36,214 in the three months ended September 30, 2019 and 2018 respectively. This resulted in Net Losses of $217,221 and $191,346 in the three months ended September 30, 2019 and 2018 respectively.

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LIQUIDITY AND CAPITAL RESOURCES

The cash and cash equivalents balance increased from $192 at June 30, 2019 to $366 at September 30, 2019.

The Company reported revenue of $23,471 in the three months ended September 30, 2019 compared to $12,801 in the three month period ended September 30, 2018. The Company incurred a net loss of $180,451 from operating activities for the three months to September 30, 2019, compared to a net loss of $155,132 from operating activities for the three months to September 30, 2018. Net cash used in operating activities for the three months ended September 30, 2019 was $80,406 compared to $116,126 during the three months ended September 30, 2018. Operating cash requirement in the three months ended September 30, 2019 was reduced through increased related party payables.

The cash flow of the Company from financing activities for the three months ended September 30, 2019 was $81,935 as a result of funds received pending issue of common stock. In the three months ended September 30, 2018, the cash flow from financing activities was $97,096 mainly from issue of common stock.

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 or other funding sources. The Company does not have a policy on the amount of borrowing or debt that the Company can incur. There are no guarantees on the company’s ability to raise additional capital and hence its ability to continue as a going concern.

Not applicable.

(a) Evaluation of disclosure controls and procedures.

Our management, including the Company's President, and the Company's Chief Financial Officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based upon that evaluation, our management concluded that our disclosure controls and procedures as of the end of the period covered by this report are ineffective and have material weaknesses as set out in the June 30, 2019 Form 10-K, such that the information required to be disclosed by us in the reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in SEC's rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance however, that the effectiveness of the controls system are met and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud if any, within a company have been detected.

(b) Changes in internal controls.

The Company's management, including the President and Chief Financial Officer, evaluated whether any changes in our internal controls over financial reporting, occurred during the quarter ended September 30, 2019. Based on that evaluation, our management concluded that no change occurred in the Company's internal controls over financial reporting during the quarter ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

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None

The Company is a smaller reporting company and is not required to provide this information.

None

None

None

None

(a) Exhibits:

(b) Reports on Form 8-K was filed in the quarter ended September 30, 2019:

Nil

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In accordance with the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AS-IP TECH, INC.

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