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. The executive offices of the Company are located at Level 1, 45 Exhibition 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 the "SafeCell" intellectual property. The SafeCell intellectual property comprises a proof of concept and patent applications with national filings in the U.S.A., China, Australia and the European Union. The licensing of the intellectual property has produced two applications:
1. In-flight messaging and content delivery for airline and corporate jet passengers (Licensed to ASiQ Limited)
SafeCell turns a mobile phone into a wireless communicator and entertainment system as it utilises the Bluetooth link instead of the normal mobile phone transmitter. SafeCell delivers its messages off the aircraft via an inexpensive satellite link. The SafeCell software is downloaded via SMS onto the mobile phone and provides an easy to operate menu that suits all modern mobile phones including Blackberries, PDA's and new generation mobile phones which have wireless capabilities. The SafeCell software is delivered at no charge to a user's mobile phone using the same process that downloads games or ringtones. Once onboard a SafeCell equipped aircraft, switching on the mobile
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phone in "flight mode", SafeCell activates the Bluetooth link. SafeCell is targeted at the regional low cost airlines committed to generating new revenues from value added services and corporate jet operators who need low cost communications to stay in touch.
2. On ground for messaging and content delivery (Licensed to Chapman Reid Ltd)
The ground system utilises the SafeCell technology to provide a social and special purpose communication networks. The mobile phone software for the ground system is based on the aircraft application however it communicates via the internet, outside the cellular roaming network. SafeCell provides a free mobile phone social network with messaging, global music and media sharing/broadcast capabilities. Social networking has developed quickly over the past decade with major players MSN, MySpace, Facebook and Twitter. The target market for the SafeCell ground system is 15 to 25 year olds.
(2) Distribution methods of the products or services;
The Company plans to distribute SafeCell via its existing licencees.
(3) Status of any publicly announced new product or service; Refer Patents below
(4) Competitive business conditions and the small business issuer's competitive position in the industry and methods of competition;
SafeCell was originally developed for the airline industry where a small number of companies offer competitive communication services. The market is at an early stage of development, and most competitors are backed by large organizations. There are two major industry players, OnAir (Airbus/SITA) and Aeromobile (ARINC/Telenor). 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 can only handle six people 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.
The Company believes SafeCell licensees will be able to compete with the other companies due to its low cost to equip an aircraft and based on its marketing plan SafeCell has the ability to be funded off the revenue stream from SMS revenue only. The SafeCell program provides flexible terms on equipment cost and revenue sharing. The SafeCell system is designed for airlines that will be attracted to this structure which allows the airline to offer the service at little cost to the passengers. - 3 -
The Company has been advised that the licensee's plan to market and distribute PicoBlue will be by viral marketing, the same method by which other social networking sites have been successfully developed. Content can be distributed free of charge with trailing adverting revenues or on a user pay basis. The Company will receive royalties from any revenue streams developed. In developing their revenue base, the licensees will be competing with established social network sites as well as other forms of advertising.
(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 SafeCell licensees to market SafeCell 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 and is awaiting outcomes from those applications.
(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 installation and use of aircraft avionics 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 SafeCell software is installed on a mobile phone, which is regarded as a carry on device, 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.
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The ground based application of the SafeCell technology does not require government approvals as it operates on the unlicensed S band using Bluetooth, which is generally accepted world wide.
(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.
(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 outsources all development work and incurred a cost for such work of $102,000 and $1,600 in the 2008 and 2009 years respectively. The Company's customers have not borne any of this cost.
(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 the Chief Financial Officer.
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ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company does not own any property other than the SafeCell intellectual property and shares in ASiQ Limited. The Company maintains its corporate administration office at Level 1, 45 Exhibition Street, Melbourne, Victoria, 3000, Australia.
ITEM 3.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II. ITEM 5.
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. As of the date hereof, the Company has 69,918,137 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. 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.
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.
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ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Not required for a smaller reporting company.
ITEM 7.
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.
RESULTS AND PLAN OF OPERATIONS
The Company had accumulated losses from inception to June 30, 2009 of $8,279,142. Major components of the loss include depreciation, amortisation, 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, 2009 COMPARED WITH YEAR ENDED JUNE 30, 2008
The Company revenue for the year ending June 30, 2009 was $0, compared to revenue of $300,000 for the year ended June 30, 2008. Revenue in 2008 was from license fees.
Expenses decreased from $325,603 for the twelve month period ending June 30, 2008 to $226,902 for the twelve month period ending June 30, 2009. Expenses for the twelve month period ending June 30, 2009 decreased due to lower engineering expenses, and management fees, but after increased capital raising costs.
Despite the decreased expenses, because of the decreased revenue, the net losses increased from $25,603 in the twelve month period ending June 30, 2008, to $226,902 for the twelve month period ending June 30, 2009.
There was no foreign currency translation gain or loss for the year ended June 30, 2008 or for the year ended June 30, 2009.
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 decreased from $640 at June 30, 2008 to $231 at June 30, 2009 as a result of operating losses but after capital raising.
The Company had a net loss of $226,902 from operating activities for the period July 1, 2008 to June 30, 2009, primarily consisting of management fees,
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capital raising costs and patent attorney expenses. The Company's revenue for the twelve months ending June 30, 2009 was $0, compared to $300,000 in the twelve month period to June 30, 2008. The net loss from operating activities for such period was greater than the net loss from operating activities for the period July 1, 2007 to June 30, 2008 primarily as a result of the decreased licensing revenue and increased capital raising costs, but after reduced management fees and engineering costs. The cash flow of the Company from financing activities for the twelve months ending June 30, 2009 was from 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 fund 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.
GOING CONCERN QUESTION
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.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
OVERVIEW
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ASI ENTERTAINMENT, INC.
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 & 2009
ASI ENTERTAINMENT, INC. Consolidated Financial Statements
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet Consolidated statement of income and comprehensive income Consolidated statement of stockholders' equity Consolidated statement of cash flows Notes to consolidated financial statements ,
Larry O'Donnell, CPA, PC Telephone (303) 745-4545 2228 South Fraser Street Fax (303)369-9384 Unit 1 e-mail larryodonnelcpa@msn.com Aurora, Colorado 80014 www.larryodonnellcpa.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors ASI Entertainment, Inc. Melbourne, Vic., 3000, Australia
I have audited the accompanying consolidated balance sheets of ASI Entertainment, Inc., as of June 30, 2009, and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows for the years ended June 30, 2009 and 2008. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ASI Entertainment, Inc. as of June 30, 2009, and the results of its operations and cash flows for the years ended June 30, 2009 and 2008 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 5 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 5 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Larry O'Donnell, CPA, P.C. September 25, 2009 Aurora, Colorado
ASI ENTERTAINMENT, INC. CONSOLIDATED BALANCE SHEET JUNE 30, 2009
ASSETS
Current Assets Cash $ 231 -------------- Total Assets $ 231 ==============
LIABILITIES AND SHARHOLDERS' EQUITY
Current Liabilities Accounts payable and accrued expenses $ 177,673 Due to related parties 81,916 Advances $ 146,895 -------------- Total Current Liabilities 406,484 -------------- Total Liabilities $ 406,484 --------------
Stockholders' Equity 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; 69,918,137 shares issued and 69,918,137 outstanding $ 6,992
Additional paid-in capital $ 8,000,150 Treasury stock - par value (50,000 shares) $ (5) Accumulated deficit $ (8,279,142) Accumulated other comprehensive loss $ - -------------- Total Stockholders' Equity $ (272,005) -------------- Total Liabilities and Stockholders' Equity $ 134,478 ==============
The accompanying notes are an integral part of the consolidated financial statements.
ASI ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME For the Years Ended JUNE 30, 2009
2008 2009 ----------- ----------- Sales, net $ - $ - Licence Fees $ 300,000 -
Cost of Sales - - ----------- ----------- Gross Margin 300,000 -
Selling, general and administrative expenses 325,603 226,902 Option expense - - ----------- -----------
Loss from operations (25,603) (226,902)
Other income (expense) Interest income - - Interest expense - - Loss on equipment disposal ----------- -----------
Income (loss) before provision for income taxes (25,603) (226,902)
Provision for income tax - -
Net income (loss) (25,603) (226,902)
Other comprehensive income (loss) - net of tax Foreign currency translation gains (losses) - - ----------- -----------
Comprehensive profit (loss) $ (25,603) $ (226,902) =========== ===========
Net income (loss) per share (Basic and fully diluted) $ (0.0004) $ (0.0037) =========== =========== Weighted average number of common shares outstanding 57,293,809 61,634,081 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
ASI ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY For the Years Ended JUNE 30, 2008 and JUNE 30, 2009
The accompanying notes are an integral part of the consolidated financial statements.
ASI ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF CASH FLOWS For the Years Ended JUNE 30, 2008 and JUNE 30, 2009
The accompanying notes are an integral part of the consolidated financial statements.
ASI ENTERTAINMENT, INC. NOTES TO CONSOLIDATED 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.
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.
Accounts receivable
The Company reviews accounts receivable at each balance sheet date and makes allowance for non-recoverability the Directors and Management consider appropriate. An allowance for doubtful accounts has been established, with accounts over one year old from date of invoicing deemed uncollectible and written off to bad debt expense. The Company did not have a bad debt expense during the years ended June 30, 2008 and 2009.
ASI ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Income tax
The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 ("SFAS 109"). Under SFAS 109 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.
At June 30, 2009 the Company had net operating loss carryforwards of approximately $3,400,000 for U.S. tax purposes 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 $1,200,000. The change in the valuation allowance for U.S. tax purposes in 2009 was $40,000.
Net income (loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding.
Property and equipment
Property and equipment are recorded at cost and depreciated under accelerated methods over each item's estimated useful life.
Revenue recognition
Revenue is recognized on an accrual basis as earned under contract or license terms. Revenue from ongoing services is recognized when invoiced monthly.
Comprehensive income (loss)
The Company accounts for comprehensive income (loss) under Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for reporting and display of comprehensive income and its components.
Financial instruments
The carrying value of the Company's financial instruments, including cash and cash equivalents, accounts payable, and due to related parties, as reported in the accompanying balance sheet, approximates fair value.
ASI ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Products and services, and geographic areas
Company sales will be derived from royalty and license fees from the Company's technology. The Company's SafeCell products is being marketed internationally but to date has not received any ongoing royalty income.
Stock Options
The Company applies APB Opinion 25 and Related Interpretations in accounting for employee stock options. Accordingly, no compensation cost has been recognized for its employee stock options (none were granted in 2008 and 2009).
Recent Accounting Pronouncements
In December 2007, the FASB issued FASB Statement No. 160 "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" ("SFAS No. 160"), which causes noncontrolling interests in subsidiaries to be included in the equity section of the balance sheet. SFAS No. 160 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company will adopt this standard at the beginning of the Company's fiscal year ending December 31, 2008 for all prospective business acquisitions. The Company has not determined the effect that the adoption of SFAS No. 160 will have on the financial results of the Company.
In March 2008, the Financial Accounting Standards board (FASB) issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" (SFAS 161). SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 requires enhanced disclosures about Fund's derivative and hedging activities. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Fund's financial statement disclosures.
ASI ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
The FASB has revised SFAS No. 141. This revised statement establishes uniform treatment for all acquisitions. It defines the acquiring company. The statement further requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, measured at their fair market values as of that date. It requires the acquirer in a business combination achieved in stages to recognize the identifiable assets and liabilities, as well as the non- controlling interest in the acquired, at the full amounts of their fair values. This changes the way that minority interest is recorded and modified as a parent's interest in a subsidiary changes over time. This statement also makes corresponding significant amendments to other standards that related to business combinations, namely, 109, 142 and various EITF's. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company believes the implementation of this standard will have no effect on our financial statements.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165"), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 is effective for interim and annual periods ending after June 15, 2009. We have complied with the requirements of SFAS 165.
In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles" ("SFAS 168"). The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification will supersede all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We do not expect the adoption of SFAS 168 will have a material impact on our financial condition or results of operation.
Long-Lived Assets
In accordance with Statement of Financial Accounting Standard 144 "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.
ASI ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. RELATED PARTY TRANSACTIONS
As of June 30, 2009 the Company owed officers, directors, and related parties $209,000.
The Company in 2008 and 2009 incurred expenses of approximately $161,000 and $113,690 respectively to entities affiliated through common stockholders and directors for management expenses. These expenses normally remain as a liability until paid, but in 2009 $250,000 of the debt was converted to equity at $0.03 per share, resulting in the issue of 8,333,333 shares.
NOTE 3. LEASE COMMITMENTS
Since January 1, 2007 the Company has entered into an arrangement under which it uses premises at a cost of $100 per month, but has not entered into a formal lease agreement.
NOTE 4. STOCKHOLDERS' EQUITY
Common stock
The Company as of June 30, 2008 had 100,000,000 shares of authorized common stock, $.0001 par value, with 58,213,654 shares issued, 58,213,654 outstanding, and 50,000 shares in treasury. Treasury shares are accounted for by the par value method.
The Company as of June 30, 2009 had 100,000,000 shares of authorized common stock, $.0001 par value, with 69,918,137 shares issued, 69,918,137 outstanding, and 50,000 shares in treasury. Treasury shares are accounted for by the par value method.
Preferred stock
The Company as of June 30, 2009 had 20,000,000 shares of authorized preferred stock, $.0001 par value, with no shares issued and outstanding.
Stock options
At June 30, 2008 and 2009 the Company had stock options outstanding as described below.
ASI ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. STOCKHOLDERS' EQUITY (Continued):
Non-employee stock options
The Company accounts for non-employee stock options under SFAS 123, whereby option costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
At the beginning of fiscal year 2009, the Company had 341,500 non-employee stock options outstanding. At December 31, 2008, 341,500 options expired, leaving a 2009 year end outstanding balance of nil.
Employee stock options
During 2008 and 2009 the Company issued no employee stock options.
NOTE 5. GOING CONCERN
The Company has suffered recurring losses from operations and in all likelihood will be required to make significant future expenditures in connection with its ongoing operation. These conditions raise substantial doubt about the Company's ability 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.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable
ITEM 9A.
ITEM 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures: The Company's Chief Executive Officer / Chief Financial Officer and President reviewed and evaluated the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 10-K. Based on that evaluation, the Company's Chief Executive Officer / Chief Financial Officer and President concluded that the Company's disclosure controls and procedures are effective in timely providing them with material information relating to the Company, as required to be disclosed in the reports the Company files under the Exchange Act.
(b) There have been no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting during the last fiscal year that have materially affected or could materially affect these internal controls over financial reporting.
ITEM 9B.
ITEM 9B. Other Information.
None.
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PART III ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
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, 76, 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, 57, 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., a shareholder of the Company.
GRAHAM O. CHAPPELL, 64, 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, 57, 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
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Director of Finance for ASI Holdings Pty. Ltd. Mr. Shiels received a Bachelor of Business (Accountancy) Degree from the Royal Melbourne Institute of Technology in 1976 and has been a Member of the Institute of Chartered Accountants in Australia since 1978.
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ITEM 11.
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.
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 2009. 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, 2009:
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL FISCAL ANNUAL COMPENSATION OTHER POSITION YEAR SALARY BONUS/AWARDS COMPENSATION ALL OTHER
Richard Lukso 2009 $0 Chairman
Ronald Chapman, President 2009 0 0 $0
Philip Shiels, Chief Executive Officer 2009 0 0 $113,690 Chief Financial Officer
Graham Chappell 2009 $0 Director
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ITEM 12.
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.
Shares of Common Stock Beneficially Percentage of Name, Position and Address Owned Shares Owned
Ronald J. Chapman (2) 9,757,951 13.96% President and director 160 Silvan Road, Wattle Glen Victoria, 3096, Australia
Graham O. Chappell (3) 1,771,406 2.53% Director 5 Marine Parade, Suite 2 St. Kilda, Victoria, 3148, Australia
Philip A. Shiels (4) 7,448,522 10.65% Chief Financial Officer and director 39 Alta Street Canterbury, Victoria, 3126, Australia
Richard Lukso 1,140,000 1.63% Director 5610 Via Arbolado Tucson, AZ, 85750
Ocean View Investments Pty. Ltd. (5) 13,888,889 19.86% 100 Barkly St St Kilda, Victoria, 3182 Australia
Eric P. van der Griend (5) 14,157,639 20.25% 100 Barkly St St Kilda, Victoria, 3182 Australia
All the officers and directors as a group (4 persons) 20,117,879 28.77%
(1) Assumes 69,918,137 shares of Common Stock issued and outstanding, or committed and to be issued. (2) Ronald J. Chapman, President and a director of the Company, owns 125,006 shares directly and is the managing director (president) and majority shareholder of Chapman International Pty. Ltd., and may be considered the beneficial owner of the 450,000 Shares owned by it. Chapman International Pty. Ltd. is the controlling shareholder of ASIT Australia - 17 -
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 940,000 shares. (4) Philip A. Shiels, 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 6,250,000 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.
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 airline 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 world wide 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 $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.
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ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
The audit fees for the fiscal year ended June 30, 2008 and 2009 for professional services rendered by Larry O'Donnell, CPA, P.C. were $12,600 and $12,600, respectively.
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 2008 and 2009.
TAX FEES
None
ALL OTHER FEES
There were no other fees filled for services.
ITEM 15.
ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits Exhibit No. Description
31.1 Certification of the Chief Executive Officer under Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)
31.2 Certification of the Chief Financial Officer under Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)
32.1 Certification Pursuant To Section 906 Of The Sarbanes- Oxley Act of 2002 (18 U.S.C. Section 1350)
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, 2009:
September 30, 2008: Notification received from patent attorneys, Watermark, that an International Preliminary Report on Patentability ("IPRP") has been established for the Company's SafeCell patent application.
March 12, 2009: Company was advised 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 that all other terms and conditions of the Agreement remained unchanged; 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; and that all other terms and conditions of the Agreement remained unchanged.
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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 - - - - - --------- ----- ----
/s/ Richard Lukso Director 09/25/09 - - - - - -------------------------------- Richard Lukso
/s/ Ronald J. Chapman Director 09/25/09 - - - - - -------------------------------- Ronald J. Chapman
/s/ Graham O. Chappell Director 09/25/09 - - - - - -------------------------------- Graham O. Chappell
/s/ Philip A. Shiels Director 09/25/09 - - - - - -------------------------------- Philip A. Shiels
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CERTIFICATIONS EX-31.1 CERTIFICATIONS OF CEO PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Philip A. Shiels, certify that:
1. I have reviewed this annual report on Form 10-K of ASI Entertainment, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 25, 2009
/s/ Philip A. Shiels
Philip A. Shiels Chief Executive Officer
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EX-31.2 CERTIFICATIONS OF CFO PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Philip A. Shiels, certify that:
1. I have reviewed this annual report on Form 10-K of ASI Entertainment, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: September 25, 2009
/s/ Philip A. Shiels
Philip A. Shiels Chief Financial Officer
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)
In connection with the Annual Report of ASI Entertainment, Inc., a Delaware corporation (the "Company"), on Form 10-K for the period ending June 30, 2009, as filed with the Securities and Exchange Commission (the "Report"), Philip A. Shiels, Chief Executive Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Philip A. Shiels
Philip A. Shiels Chief Executive Officer September 25, 2009
[A signed original of this written statement required by Section 906 has been provided ASI Entertainment, Inc. and will be retained by ASI Entertainment, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)
In connection with the Annual Report of ASI Entertainment, Inc., a Delaware corporation (the "Company"), on Form 10-K for the period ending June 30, 2009, as filed with the Securities and Exchange Commission (the "Report"), Philip A. Shiels, Chief Financial Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to his knowledge:
(3) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(4) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Philip A. Shiels
Philip A. Shiels Chief Financial Officer September 25, 2009
[A signed original of this written statement required by Section 906 has been provided ASI Entertainment, Inc. and will be retained by ASI Entertainment, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]