IPTK AS IP Tech Inc (CE)

NOTES TO CONDENSED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 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 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.

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.

8

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 financial statements.

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, 2019 and June 30, 2019, the Company has recorded as “related party payables”, $701,105 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 December 31, 2019 and December 31, 2018, the Company recorded Interest - related party of $4,065 and $4,794 respectively. In the six months ended December 31, 2019 and December 31, 2018, the Company recorded Interest - related party of $8,064 and $9,512 respectively.

As of December 31, 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 December 31, 2019 and June 30, 2019, the Company has accumulated $301,823 and $281,215 respectively for amortization of the value of the intellectual property.

In the three months ended December 31, 2019 and December 31, 2018 respectively, the Company recorded revenue of $3,838 and $11,699 from entities affiliated through common stockholders and directors for BizjetMobile service fees. In the three months ended December 31, 2019 and December 31, 2018 respectively, the Company recorded revenue of $9,990 and $29,970 from entities affiliated through common stockholders and directors for BizjetMobile system sales. In the six months ended December 31, 2019 and December 31, 2018 respectively, the Company recorded revenue of $14,318 and $24,500 from entities affiliated through common stockholders and directors for BizjetMobile service fees. In the six months ended December 31, 2019 and December 31, 2018 respectively, the Company recorded revenue of $22,980 and $29,970 from entities affiliated through common stockholders and directors for BizjetMobile system sales.

9

In the three months ended December 31, 2019 and December 31, 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. In the six months ended December 31, 2019 and December 31, 2018 respectively, the Company incurred expenses of approximately $48,000 and $48,000 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.

In the three months ended December 31, 2019 and December 31, 2018 respectively, the Company incurred marketing expense of $69,000 and $62,027 to entities affiliated through common stockholders and directors. In the six months ended December 31, 2019 and December 31, 2018 respectively, the Company incurred marketing expense of $108,065 and $93,724 to entities affiliated through common stockholders and directors.

In the three months ended December 31, 2019 and December 31, 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 six months ended December 31, 2019 and December 31, 2018 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, 2019 and December 31, 2018 respectively, the Company incurred cost of sales of commissions of $2,997 and $11,323, and hardware cost of sales of $2,087 and $6,260 to entities affiliated through common stockholders and directors. In the six months ended December 31, 2019 and December 31, 2018 respectively, the Company incurred cost of sales of commissions of $9,371 and $13,476, and hardware cost of sales of $4,174 and $6,260 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, 2019 and December 31, 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. In the six months ended December 31, 2019 and December 31, 2018 respectively, the Company incurred engineering service costs of $96,000 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, 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 December 31, 2019, the Company had 50,000,000 shares of authorized preferred stock, $0.0001 par value, with no shares issued and outstanding.

During the period to December 31, 2019, the Company received subscriptions for capital of $236,813, for which it has issued 18,661,000 shares of common stock subsequent to December 31, 2019. The Company issued a total of 8,000,000 shares for $80,000 cash at $0.01 per share, 1,000,000 shares for $12,000 cash at $0.012 per share and 9,661,000 shares for $144,813 cash at $0.015 per share.

The Company has Subscriptions payable of $26,186, included in Stockholders’ Deficit, 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.

10

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 December 31, 2019 of $25,496 (June 30, 2019 $30,170). Interest is calculated at a rate of 20% per annum with interest of $1, 368 and $1,775 taken up in the three months ended December 31, 2019 and December 31, 2018, respectively and $2,826 and $3,646 taken up in the six months ended December 31, 2019 and December 31, 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 December 31, 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 December 31, 2019 the Company had accumulated interest on the loans of $11,319 calculated at the Company’s prevailing share price, which included $1,956 for the three months ended December 31, 2019 and $2,893 for the six months in December 31, 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 December 31, 2019 (balance at June 30, 2019 $607,500) to fund production of its fflya systems. Two issues were made as follows:

The first convertible note for $337,500 finances the initial 15 system shipsets. Terms of the issue are:

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

-Conversion price:  $0.03 per share. 

-Maturity date: December 1, 2020 

A second convertible note issue for $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 $301,823 at December 31, 2019.