Attached files
file | filename |
---|---|
EX-32 - CERTIFICATION - ROBERTSON GLOBAL HEALTH SOLUTIONS CORP | asi_ex32.htm |
EX-31.1 - CERTIFICATION - ROBERTSON GLOBAL HEALTH SOLUTIONS CORP | asi_ex3101.htm |
EX-31.2 - CERTIFICATION - ROBERTSON GLOBAL HEALTH SOLUTIONS CORP | asi_ex3102.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
quarterly period ended December 31,
2009
Commission
File Number 0-6428
ASI
Technology Corporation
(Exact
name of small business issuer as specified in its charter)
Nevada
|
88-0105586
|
|
(State
or other jurisdiction of
|
(IRS
Employer Identification No.)
|
|
incorporation
or organization)
|
980 American Pacific
Drive, Suite #111
|
89014
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(702)
734-1888
(Issuer's
telephone number)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES [X] NO [_]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). [_]
Yes [_] No (not required)
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer [_]
|
Accelerated
filer
[_]
|
|
Non-accelerated
filer [_] (Do not check if a smaller
reporting company)
|
Smaller
reporting company [X]
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes [ ] No [X]
State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date:
Common Stock, $.02 par
value
|
17,093,723
|
|
(Class)
|
(Outstanding
at February 9, 2010)
|
1
ASI
Technology Corporation
INDEX
Page
|
|
PART
I. FINANCIAL INFORMATION
|
|
Item
1. Consolidated Financial Statements:
|
|
Balance
Sheets as of December 31, 2009 (unaudited) and September 30,
2009
|
3
|
Statements
of Operations for the three months ended December 31, 2009 and 2008
(unaudited)
|
4
|
Statements
of Comprehensive Loss and Stockholders’ Equity for the three months ended
December 31, 2009 and 2008 (unaudited)
|
5
|
Statements
of Cash Flows for the three months ended December 31, 2009 and 2008
(unaudited)
|
6
|
Notes
to Interim Consolidated Financial Statements (unaudited)
|
7
|
Item
2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
|
12
|
Item
3. Quantitative and Qualitative Disclosure About Market
Risk
|
n/a
|
Item
4. Controls and Procedures
|
15
|
PART
II. OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
15
|
Item
1A. Risk Factors
|
n/a
|
Item
2. Unregistered Sales of Equity Securities and Use
of Proceeds
|
15
|
Item
3. Defaults upon Senior Securities
|
15
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
15
|
Item
5. Other Information
|
15
|
Item
6. Exhibits
|
15
|
SIGNATURES
|
16
|
2
PART
I. FINANCIAL INFORMATION
Item
1. Consolidated Financial Statements (unaudited):
ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||||
|
||||||||
December
31,
|
||||||||
2009
|
September
30,
|
|||||||
(unaudited)
|
2009
(a)
|
|||||||
|
||||||||
ASSETS
|
||||||||
Cash and
equivalents
|
$ | 26,985 | $ | 115,746 | ||||
Marketable
securities
|
38,208 | 36,975 | ||||||
Notes
receivable, net of allowance
|
- | 2,211,125 | ||||||
Real
estate owned
|
2,245,000 | - | ||||||
Finance
lease receivable
|
366,937 | 364,759 | ||||||
Other
investments
|
381,000 | 381,000 | ||||||
Property
and equipment, net
|
8,855 | 10,084 | ||||||
Prepaid
expenses
|
14,152 | 21,027 | ||||||
$ | 3,081,137 | $ | 3,140,716 | |||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Liabilities
|
||||||||
Accounts
payable
|
$ | 32,657 | $ | 3,173 | ||||
Unearned
income
|
1,593 | - | ||||||
Facility
exit liability
|
146,763 | 156,862 | ||||||
|
181,013 | 160,035 | ||||||
Stockholders'
equity
|
||||||||
Preferred
stock, 1,000,000 shares authorized,
|
||||||||
none
issued or outstanding
|
||||||||
Common
stock, $.02 par value; 30,000,000 shares authorized,
|
||||||||
17,093,723
and 17,114,723 shares issued
|
341,882 | 342,302 | ||||||
Additional
paid-in capital
|
9,324,134 | 9,321,703 | ||||||
Treasury
stock, 21,000 common shares at September 30
|
- | (9,538 | ) | |||||
Deficit
|
(6,766,600 | ) | (6,673,261 | ) | ||||
Accumulated
other comprehensive gain (loss)
|
708 | (525 | ) | |||||
|
2,900,124 | 2,980,681 | ||||||
$ | 3,081,137 | $ | 3,140,716 | |||||
See
notes to interim consolidated financial statements.
|
||||||||
______________
|
||||||||
(a)
Derived from the audited financial statements as of September 30,
2009.
|
3
ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||||||
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
|
||||||||
Revenues:
|
||||||||
Interest
and fees
|
$ | 14,178 | $ | 46,303 | ||||
Other
investment income
|
157 | 1,173 | ||||||
14,335 | 47,476 | |||||||
Expenses:
|
||||||||
Research
and development
|
4,358 | 9,515 | ||||||
Collection,
general and administrative
|
103,316 | 159,222 | ||||||
107,674 | 168,737 | |||||||
Loss
before noncontrolling interest
|
(93,339 | ) | (121,261 | ) | ||||
Noncontrolling
interest in losses of affiliated variable interest entity
|
- | 30,000 | ||||||
Net
loss
|
$ | (93,339 | ) | $ | (91,261 | ) | ||
Loss
per share (basic)
|
$ | (0.01 | ) | $ | (0.01 | ) | ||
|
||||||||
Weighted
average number of common
|
||||||||
shares
outstanding
|
17,093,723 | 17,118,506 | ||||||
See
notes to interim consolidated financial statements.
|
4
ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
|
||||||||||||||||||||||||||||||||
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS AND STOCKHOLDERS' EQUITY
|
For
the Three Months Ended December 31, 2009 and 2008
Comprehensive
|
Common
Stock
|
Additional
|
Treasury
|
Accumulated
Other
Comprehensive
|
||||||||||||||||||||||||||||
Income
(Loss)
|
Shares
Issued
|
Dollars
|
Paid-In
Capital
|
Shares
(at cost)
|
Deficit
|
Income
(Loss)
|
Total
|
|||||||||||||||||||||||||
Balances,
October 1, 2009
|
17,114,723 | $ | 342,302 | $ | 9,321,703 | $ | (9,538 | ) | $ | (6,673,261 | ) | $ | (525 | ) | $ | 2,980,681 | ||||||||||||||||
Contributed
services
|
- | - | 6,000 | - | - | - | 6,000 | |||||||||||||||||||||||||
Retirement
of 21,000 common
|
||||||||||||||||||||||||||||||||
shares
for treasury
|
(21,000 | ) | (420 | ) | (9,118 | ) | 9,538 | - | - | - | ||||||||||||||||||||||
Stock-based
compensation
|
- | - | 5,549 | - | - | - | 5,549 | |||||||||||||||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||||||||||
Net
loss
|
$ | (93,339 | ) | - | - | - | - | (93,339 | ) | - | (93,339 | ) | ||||||||||||||||||||
Unrealized
gain on marketable
|
||||||||||||||||||||||||||||||||
securities
|
1,233 | - | - | - | - | - | 1,233 | 1,233 | ||||||||||||||||||||||||
Total
comprehensive loss for the period
|
$ | (92,106 | ) | |||||||||||||||||||||||||||||
Balances,
December 31, 2009
|
17,093,723 | $ | 341,882 | $ | 9,324,134 | $ | - | $ | (6,766,600 | ) | $ | 708 | $ | 2,900,124 | ||||||||||||||||||
Balances,
October 1, 2008
|
17,136,723 | $ | 342,742 | $ | 9,287,746 | $ | (4,994 | ) | $ | (6,460,146 | ) | $ | (5,639 | ) | $ | 3,159,709 | ||||||||||||||||
Contributed
services
|
- | - | 6,000 | - | - | - | 6,000 | |||||||||||||||||||||||||
Purchase and
retirement of 22,000 common shares for
treasury
|
(22,000 | ) | (440 | ) | (9,460 | ) | - | - | - | (9,900 | ) | |||||||||||||||||||||
Purchase of
10,000 common shares for treasury
|
- | - | - | (4,544 | ) | - | - | (4,544 | ) | |||||||||||||||||||||||
Stock-based
compensation
|
- | - | 3,595 | - | - | - | 3,595 | |||||||||||||||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||||||||||
Net
income
|
$ | (91,261 | ) | - | - | - | - | (91,261 | ) | - | (91,261 | ) | ||||||||||||||||||||
Unrealized
loss on marketable securities
|
(5,972 | ) | - | - | - | - | - | (5,972 | ) | (5,972 | ) | |||||||||||||||||||||
Total
comprehensive loss for the period
|
$ | (97,233 | ) | |||||||||||||||||||||||||||||
Balances,
December 31, 2008
|
17,114,723 | $ | 342,302 | $ | 9,287,881 | $ | (9,538 | ) | $ | (6,551,407 | ) | $ | (11,611 | ) | $ | 3,057,627 | ||||||||||||||||
See
notes to interim consolidated financial statements.
|
5
ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
|
Three
Months Ended
|
|||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
Operating
activities
|
||||||||
Net
loss
|
$ | (93,339 | ) | $ | (91,261 | ) | ||
Adjustments
to reconcile net loss to net cash
|
||||||||
used
in operating activities:
|
||||||||
Depreciation
and amortization of property and equipment
|
1,229 | 13,119 | ||||||
Amortization
of loan fees and unearned income
|
(12,585 | ) | (2,000 | ) | ||||
Noncontrolling
interest in losses of affiliated variable interest entity
|
- | (30,000 | ) | |||||
Amortization
of deferred rent and facility exit liability
|
(10,099 | ) | (5,349 | ) | ||||
Contributed
services
|
6,000 | 6,000 | ||||||
Stock-based
compensation
|
5,549 | 3,595 | ||||||
Loan
recoveries
|
(7,089 | ) | - | |||||
Increase
in interest receivable
|
- | (4,786 | ) | |||||
Decrease
in prepaid expenses
|
6,875 | 6,670 | ||||||
Increase
in accounts payable and accruals
|
29,484 | 16,768 | ||||||
Net
cash used in operating activities
|
(73,975 | ) | (87,244 | ) | ||||
Investing
activities
|
||||||||
Sale
of marketable securities
|
- | 75,000 | ||||||
Collections
on direct financing lease
|
12,000 | - | ||||||
Real
estate foreclosure costs
|
(26,786 | ) | - | |||||
Collections
from borrowers
|
- | 105,000 | ||||||
Net
cash (used in) provided by investing activities
|
(14,786 | ) | 180,000 | |||||
Financing
activities
|
||||||||
Investment
by noncontrolling interest in affiliated variable interest
entity
|
- | 121,613 | ||||||
Purchase
of treasury shares
|
- | (9,494 | ) | |||||
Net
cash provided by financing activities
|
- | 112,119 | ||||||
Net
increase (decrease) in cash and equivalents
|
(88,761 | ) | 204,875 | |||||
Cash
and equivalents, beginning of period
|
115,746 | 256,171 | ||||||
Cash
and equivalents, end of period
|
$ | 26,985 | $ | 461,046 | ||||
Supplemental
cash flow information
|
||||||||
Cash
paid during the period for interest
|
$ | 7 | $ | - | ||||
Non-cash
financing and investing activities:
|
||||||||
Real
estate acquired through foreclosure
|
$ | 2,245,000 | $ | - | ||||
Treasury
stock purchased with payable obligaton
|
$ | - | $ | 4,950 | ||||
Treasury
stock retired
|
$ | 9,538 | $ | - | ||||
See
notes to interim consolidated financial statements.
|
6
1.
Nature of Operations and Basis of Presentation
These
unaudited interim consolidated financial statements include the accounts of ASI
Technology Corporation (“ASI”) and its two wholly-owned subsidiaries
(collectively, the Company), which are ASI Capital Corporation (“ASI Capital”),
primarily a specialty “high risk” finance company and ASI Land Holdings, Inc.
(“ASI Land”) an investment holding company. The consolidated financial
statements include the accounts of the subsidiaries, after elimination of
intercompany transactions and balances. As substantially all of the Company’s
assets are finance or investment related, the accompanying consolidated balance
sheet is presented on an unclassified basis as is customary in the finance
industry.
The
Company’s specialty financing activities have included commercial and venture
capital loans and a direct financing lease. The Company’s limited other activity
has been focused on plasma technology for sterilization and
decontamination.
The
accompanying unaudited interim financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission (“SEC”) applicable to interim financial information. Accordingly,
certain information normally included in financial statements prepared in
accordance with generally accepted accounting principles (“GAAP”) has been
omitted. In the opinion of management, the accompanying unaudited financial
statements include all adjustments necessary for a fair presentation of the
financial position of the Company at December 31, 2009, and its results of
operations and cash flows for all periods presented. Management evaluated
subsequent events in accordance with Financial Accounting Standards Board
(“FASB”) Accounting Standards
Codification (“ASC”) 855-10 through the date of issuance of these interim
consolidated financial statements, February 12, 2010.
The
Company’s interim consolidated financial statements have been prepared on the
basis that it will be able to continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business for the foreseeable future. However, the Company has incurred
losses in each of the last two years primarily as a result of note losses and
has limited funds and liquidity with which to operate. While management has
reduced some operating costs due to reduced specialty finance activity, its
operating plans will likely require additional funds. Additional funds may be
obtained from sale or leverage of recovered or other assets or in the form of
debt or equity financings. There can be no assurance that any additional funds
will be available. Although normal asset impairment adjustments have been made
as required by generally accepted accounting principles, the accompanying
consolidated financial statements do not include any adjustments that would be
necessary should the Company be unable to continue as a going concern and,
therefore, be required to liquidate its assets and discharge its liabilities in
other than the normal course of business and at amounts different from those
reflected in the accompanying financial statements.
The
interim consolidated financial statements and notes thereto should be read in
conjunction with the Company's audited financial statements and notes thereto
included within the Company’s Annual Report on Form 10-K for the year ended
September 30, 2009, from which the balance sheet data as of that date was
derived. Certain minor reclassifications to previously reported amounts have
been made for consistency with the current period presentation.
2.
Loss Per Share
Loss per
share is calculated by dividing net loss by the weighted average number of
shares of the Company’s common stock outstanding during the period. Outstanding
shares consist of issued shares less treasury stock. Outstanding stock options
were excluded from the diluted computation, as their effect would be
anti-dilutive. At December 31, 2009 and 2008, a total of 375,000 and 335,000,
respectively, of potentially dilutive securities consisting of stock options
were excluded from any computation of dilution for each period then ended as
they were antidilutive.
3.
Real Estate Owned
During
the quarter ended December 31, 2009 the Company's net amount of impaired notes
receivable of $2,211,125, consisting of three notes from one developer, were
exchanged for three real estate properties through deeds in lieu of foreclosure.
The Company paid $26,786 of foreclosure costs and recorded a recovery gain of
$7,089 upon the exchange that is included in collection, general and
administrative expenses.
The three
properties were recorded at management’s estimated fair value at the time of
foreclosure based on Level 3 inputs based, in part, on an independent appraisal
and are currently being held for investment.
7
3.
Real Estate Owned (Continued)
Real
estate owned at December 31, 2009 consists of the following
properties:
Description
|
Value
|
|||
2.07
net acres of undeveloped residential land in North Las Vegas,
NV
|
$ | 515,000 | ||
2.14
net acres of undeveloped commercial land in Las Vegas, NV
|
920,000 | |||
2.16
net acres of undeveloped residential land in North Las Vegas,
NV
|
810,000 | |||
$ | 2,245,000 |
The Company’s policy is to capitalize costs relating to improvements of properties, subject to periodic impairment considerations. Holding costs are charged to expense as incurred. Properties are evaluated for impairment at each reporting date.
4. Finance Lease
Receivable
The
Company’s direct financing lease receivable had the following balances at
December 31, 2009:
Minimum
lease payments receivable
|
$ | 708,000 | ||
Unearned
finance income
|
(341,063 | ) | ||
Direct
finance lease receivable
|
$ | 366,937 |
5.
Stock-Based Compensation
The
Company has one stock plan, the 2000 Equity Incentive Plan, as amended (the
“Plan”) and is authorized to grant incentive and nonstatutory stock options to
acquire up to 950,000 shares of the Company’s common stock to employees and
consultants.
The
following table summarizes stock option activity:
Three
Months Ended
|
||||||||||||||||
December
31, 2009
|
||||||||||||||||
Shares
|
Weighted-Average
Exercise Price
|
Aggregate
Intrinsic Value (2)
|
Weighted-Average
Life (Years)
|
|||||||||||||
Outstanding
beginning of period
|
415,000 | $ | 0.41 | |||||||||||||
Granted
|
- | - |
|
|||||||||||||
Exercised
|
- | - | ||||||||||||||
Cancelled
|
(40,000 | ) | 0.375 |
|
||||||||||||
Outstanding
end of period (1)
|
375,000 | 0.38 | $ | - | 2.6 | |||||||||||
Options
exercisable at end of period
|
300,000 | 0.41 | $ | - | 2.2 |
(1)
|
Options
outstanding are exercisable at prices ranging from $0.25 to $0.45 and
expire over the period from 2010 to
2014.
|
(2)
|
Aggregate
intrinsic value is based on the closing price of our common stock on
December 31, 2009 of $0.18.
|
8
5.
Stock-Based Compensation (continued)
The
Company’s employee stock options have various restrictions that reduce option
value, including restrictions on transfer, among others, and may be exercised
prior to their contractual maturity. The Company plans to issue shares on each
option exercise and has no plans to repurchase option shares. No options were
granted or exercised during the periods ended December 31, 2009 or 2008. At
December 31, 2009, total estimated compensation cost of options granted but not
yet vested was $9,718 and is expected to be recognized over the weighted average
period of 1.0 years. Subsequent to December 31, 2009 the Company
granted options on 220,000 shares of common stock at an exercise price of $0.20
per share vesting at grant and exercisable for five years subject to continued
service.
6.
Facility Exit Liability and Costs
Facility
exit costs relate to an operating office lease intended for use in real estate
lending activities that is vacant and was accrued as an exit liability in July
2009 in accordance with ASC 420, Exit or Disposal Cost
Obligation. The Company is seeking to sublease the 3,750 feet of improved
office space. The landlord granted a 50% rent concession for the six months
ending December 2009 and, although the Company is negotiating further
concessions there can be no assurance of future concessions or that management’s
attempts to sublet the space will be successful during any portion of the
remaining term of the lease.
The
following table summarizes facility exit liability activity for the three months
ended December 31, 2009:
Accrual
balance at September 30, 2009
|
$ | 156,862 | ||
Accretion
expense
|
2,545 | |||
Cash
paid, net
|
(12,644 | ) | ||
Accrual
balance at December 31, 2009
|
$ | 146,763 |
All facility exit costs and related accretion expense are included in collection, general and administrative expenses in the accompanying statement of operations.
The
Company is committed to aggregate minimum lease payments of $238,340 through the
term of the lease ending March 2012, the present value of which is included in
computing the facility exit liability.
7.
Related Party Transactions
The
Company pays a company owned by its President and Board Chairman monthly for
office rent, bookkeeping and administrative services at the current rate of
$1,250 per month. Such payments aggregated $3,500 and $3,000 for the three-month
periods ended December 31, 2009 and 2008, respectively.
During
the three-month periods ended December 31, 2009 and 2008, officers contributed
services to the Company without compensation. The fair value of these services
has been estimated at $6,000 for each period, expensed and treated as capital
contributions.
One
parcel of land with a value of $515,000 (see Note 3) is subject to a subordinate
amount of up to $74,100 payable from sale proceeds in excess of the original
loan amount of $760,000. The subordinate amount, without interest, is payable to
Davric Corporation (“Davric”), controlled by the Company’s Chairman and
President Jerry E. Polis, and resulted from subordinated cash advances made to
the borrower in 2008 that were applied to interest payments to ASI Capital prior
to loan default.
8.
Income Taxes
The
Company has estimated net operating and capital loss carryforwards available to
reduce future tax income, if any, of approximately $3.0 million and $534,000,
respectively, as of December 31, 2009, that expire between 2021, and 2026 and
may be subject to limitations in some circumstances under the Internal Revenue
Code in the event of a change in control of the Company.
A
valuation allowance has been provided for the deferred tax assets arising
primarily from net operating losses that management believes are not likely to
be realized. Realization is dependent upon future earnings during the period
loss carryforwards are expected to be available. Management believes it is not
more likely than not that its net deferred tax assets will be realized due to
recent losses. A valuation allowance is also maintained against a deferred tax
asset related to capital loss carryforwards due to improbability of the
occurrence of future capital gains necessary to realize the loss
carryforward.
ASC Topic
740, Accounting for Income
Taxes, requires the Company to recognize in its financial statements
uncertainties in tax positions taken that may not be sustained upon examination
by the taxing authorities. If interest or penalties are assessed, the Company
would recognize these charges as income tax expense. The Company has not
recorded any income tax expense or benefit for uncertain tax positions and does
not anticipate any adjustments over the next 12 months.
9
9.
Fair Value Measurements
The
carrying amounts of cash and equivalents, receivables and accounts payable
approximate fair values due to the short-term maturities of these
instruments.
Assets and Liabilities
Measured at Fair Value on a Recurring Basis
The table
below presents the recorded amount of assets and liabilities measured at fair
values on a recurring basis as of December 31, 2009:
Significant
|
||||||||||||||||
Other
|
Significant
|
|||||||||||||||
Carrying
|
Quoted
|
Observaable
|
Unobservable
|
|||||||||||||
Value
|
Prices
|
Inputs
|
Inputs
|
|||||||||||||
(Fair
Value)
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash
and equivalents:
|
||||||||||||||||
Money
market funds
|
$ | 21,011 | $ | 21,011 | ||||||||||||
Marketable
securities
|
38,208 | 38,208 |
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets
measured at fair value on a nonrecurring basis as of December 31, 2009 are
included in the table below:
Significant
|
||||||||||||||||
Other
|
Significant
|
|||||||||||||||
Carrying
|
Quoted
|
Observaable
|
Unobservable
|
|||||||||||||
Value
|
Prices
|
Inputs
|
Inputs
|
|||||||||||||
(Fair
Value)
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||||||||
Assets:
|
||||||||||||||||
Real
estate owned
|
$ | 2,245,000 | $ | 2,245,000 | ||||||||||||
Water
rights
|
381,000 | 381,000 |
The Company measures the foregoing assets at estimated fair value on a nonrecurring basis from time to time in accordance with U.S. generally accepted accounting principles. Likewise the Company periodically evaluates the facts and assumptions used to determine the fair value of its facility exit liability.
10.
Other Concentrations, Risks and Uncertainties
The
United States is experiencing a widespread recession accompanied by a decline in
residential and other real estate values, sales, construction, mortgage and
other lending activity, together with a reduction in general credit availability
and instability in the commercial and investment banking systems, and is engaged
in war, all of which are likely to have far-reaching effects on economic
activity in the country for an indeterminate period. The near- and long-term
impact of these factors on the southern Nevada economy and the Company's
operations, investments and cash flows cannot be predicted at this time but may
be substantial.
From
time-to-time, the Company carries cash and securities balances on deposit with
financial institutions that are in excess of insured limits, and the risk of
losses related to such concentrations may be increasing as a result of recent
economic developments discussed in the foregoing paragraph. The extent of any
loss to be sustained as a result of uninsured deposits in the event of a future
failure of a bank or other financial institution, if any, however, is not
subject to estimation at this time.
10
10.
Other Concentrations, Risks and Uncertainties (continued)
In
addition to or in connection with the foregoing matters, the
Company’s business strategy was significantly hampered in the last two fiscal
years due to the number of impaired and non-performing loans resulting from the
decline in collateral values. It reported a net loss of $93,339 for the three
months ended December 31, 2009, compared to a net loss of $121,261 for the
comparable three months of the year prior. The Company also incurred significant
losses during the last two fiscal years and as a result it has limited funds and
liquidity with which to operate. The Company has reduced its operating costs
this fiscal year but its operating plans will likely require additional funds.
Additional funds may be obtained from sale or leverage of recovered or other
assets or in the form of debt or equity financings. During the balance of fiscal
2010, the Company may elect to incur additional costs to develop its plasma or
other technologies. The Company may also seek or pursue other business
opportunities. However, there can be no assurance that sufficient additional
funds will be available to enable the Company to continue as a going concern.
Although normal asset impairment adjustments have been made in accordance with
generally accepted accounting principles, the accompanying consolidated
financial statements do not include any adjustments that would be necessary
should the Company be unable to continue as a going concern and, therefore, be
required to liquidate its assets and discharge its liabilities in other than the
normal course of business and at amounts different from those reflected in the
accompanying financial statements.
11.
Segment Reporting
The
Company has two reportable segments, specialty finance and technology
development. The Company does not allocate certain general and administrative
costs between segments.
Specialty
|
Technology
|
|
||||||||||||||
Finance
|
Development
|
Unallocated
|
Total
|
|||||||||||||
As of and for the
three months ended December 31, 2009
|
||||||||||||||||
Interest,
fee and investment income
|
$ | 14,335 |
|
|
$ | 14,335 | ||||||||||
Research
and development
|
$ | (4,358 | ) |
|
(4,358 | ) | ||||||||||
Collection,
general and administrative
|
(49,382 | ) | $ | (53,934 | ) | (103,316 | ) | |||||||||
Segment
loss, pre tax
|
$ | (35,047 | ) | $ | (4,358 | ) | $ | (53,934 | ) | $ | (93,339 | ) | ||||
Assets
|
$ | 3,081,137 | $ | 3,081,137 | ||||||||||||
As of and for the
three months ended December 31, 2008
|
||||||||||||||||
Interest,
fee and investment income
|
$ | 47,476 | $ | 47,476 | ||||||||||||
Research
and development
|
- | $ | (9,515 | ) | (9,515 | ) | ||||||||||
Collection,
general and administrative
|
(86,638 | ) | $ | (72,584 | ) | (159,222 | ) | |||||||||
Segment
loss, pre tax
|
$ | (39,162 | ) | $ | (9,515 | ) | $ | (72,584 | ) | $ | (121,261 | ) | ||||
Assets
|
$ | 3,255,522 | $ | 3,255,522 |
11
Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Overview
We are a
specialty finance company providing commercial and venture capital financing and
holding investments in real estate assets. Our limited other activity has been
focused on the development of plasma technology for sterilization and
decontamination.
The
objective of our specialty finance activities is to generate current income,
capital appreciation and cash flow. Our specialty finance activities focused in
prior years on making real estate, corporate and other loans and in 2009 we
funded a direct financing equipment lease. During fiscal 2009 we made no new
real estate loans and have no current plans to make additional real estate
loans.
During
the quarter ended December 31, 2009 our net amount of impaired notes receivable
of $2,211,125, consisting of three notes from one developer, were exchanged for
three real estate properties through deeds in lieu of foreclosure. These
properties and water rights acquired in 2009 are currently held for investment
with no immediate plans to sell, or develop, however we are evaluating various
options with respect to these assets.
Overall
Performance
Our
business strategy was significantly hampered in the last two fiscal years due to
the number of impaired and non-performing loans resulting from the decline in
collateral values. We reported a net loss of $93,339 for the three months ended
December 31, 2009, compared to a net loss of $121,261 for the comparable three
months of the year prior. We also incurred significant losses during the last
two fiscal years and as a result we have limited funds and liquidity with which
to operate. We have reduced our operating costs this fiscal year but our
operating plans will likely require additional funds. Additional funds may be
obtained from sale or leverage of recovered or other assets or in the form of
debt or equity financings. There can be no assurance that any additional funds
will be available. The accompanying consolidated financial statements do not
include any adjustments that would be necessary should we be unable to continue
as a going concern and, therefore, be required to liquidate our assets and
discharge our liabilities in other than the normal course of business and at
amounts different from those reflected in the accompanying financial
statements.
During
the balance of fiscal 2010, we may elect to incur additional costs to develop
our plasma or other technologies. We may also seek or pursue other business
opportunities.
Our
financial statements require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time and due to inflation. The impact of
inflation is generally to increase the value of our investment assets however
the current market environment is adversely affecting asset values.
Critical
Accounting Policies and Estimates
The
methods, estimates and judgments we use in applying our accounting policies, in
conformity with generally accepted accounting principles in the United States,
have a material impact on the carrying value of certain assets and liabilities,
and a significant impact on the results we report in our financial statements.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. The estimates affect
the carrying values of assets and liabilities. Actual results may differ from
these estimates under different assumptions or conditions. More information on
our most critical accounting policies and estimates is described in our Annual
Report on Form 10-K for the year ended September 30, 2009. The following is
additional information on our critical accounting policies and estimates
involving significant management valuation judgments affecting fiscal 2010
results.
Real estate owned – Real
estate owned includes properties acquired through deed in lieu of foreclosure.
These properties were recorded at the lower of cost or estimated fair value with
gain or loss recorded as recovery or additional loan loss. To assist management
in estimating the fair value of these properties based on Level 3 inputs of ASC
820, Fair Value Measurements
and Disclosure, we obtained an opinion of value from a licensed real
estate appraiser. Subject to periodic impairment considerations, our policy is
to capitalize costs relating to any improvements of properties. Holding costs
are charged to expense as incurred.
12
Real
estate owned will be classified as held for sale when management has determined
that it has met the appropriate criteria in ASC 360-10-45. Real estate assets
that are expected to be disposed of are valued on an individual asset basis at
their carrying amounts, after any impairment adjustments necessary, less
estimated costs to sell.
Comparison
of Operating Results for the Three Months Ended December 31, 2009 and
2008
Revenues. We
recognized direct lease financing income of $14,178 for the three months ended
December 31, 2009, compared to $46,303 of interest and fees on real estate notes
for the same period of the prior year. The reduction in interest and fee income
was the result of the reduced balance of the direct financing lease compared to
interest paying notes in the prior year’s first quarter. At December 31, 2009 no
real estate notes were outstanding and our only current source of interest and
fee income is from our direct financing lease.
Expenses. Collection,
general and administrative costs were $103,316 for the three months ended
December 31, 2009 and was net of $8,645 of collection recoveries including
$7,089 recognized upon the exchange of three impaired notes receivable for three
real estate properties through deeds in lieu of foreclosure. This compared to
the $159,222 for the same three months of fiscal 2009. Occupancy and leasehold
amortization costs decreased by approximately $28,500 due to recording an exit
liability and leasehold impairment charge of $238,791 in July 2009. Professional
fees were $14,000 less in the most recent quarter compared to the prior year’s
first quarter due to prior year costs associated with evaluating impaired notes.
We reduced our staffing costs by approximately $30,000 per quarter effective
January 1, 2010. Although we may incur some increased outside consultancy costs
as a consequence, we expect collection, general and administrative costs for the
balance of the current year to continue to be less than comparable periods for
the prior year.
We
continue to build and test plasma sterilizer and decontamination prototypes and
expended $4,358 in research and development costs in the most recent quarter
compared to $9,515 for the prior year’s first quarter. Research and development
costs vary depending on timing of elective development efforts and availability
of funds.
Other. For the three
months ended December 31, 2008 we recognized $30,000 as a minority interest in
the loss of a variable interest entity (“VIE”) that reduced our consolidated net
loss. The respective VIE was liquidated in September 2009 and accordingly there
was no corresponding minority interest amount in the most recent
period.
Liquidity
and Capital Resources
A number
of factors adversely affected our liquidity in fiscal 2009. The disruptions in
the capital and credit markets and the resulting credit deterioration and
resulting losses we experienced in our note portfolio, now limit our ability to
finance future operations. Our investments in non-income producing assets
including water rights and raw land increase the uncertainty regarding the
timing and amount of future cash flows in fiscal 2010 and beyond.
The
United States is experiencing a widespread recession accompanied by a decline in
residential and other real estate values, sales, construction, mortgage and
other lending activity, together with a reduction in general credit availability
and instability in the commercial and investment banking systems, and is engaged
in war, all of which are likely to have far-reaching effects on economic
activity in the country for an indeterminate period. The near- and long-term
impact of these factors on the southern Nevada economy and our operations,
investments and cash flows cannot be predicted at this time but may be
substantial.
The real
estate investment environment has been experiencing considerable strain from
rising foreclosures, delinquencies and liquidity pressures. The current
environment has adversely affected real estate values and the volume of real
estate activities. Merchant builders are the typical purchasers of raw land
zoned and likely intended for residential development near existing
infrastructure and associated commercial and other supporting parcels under
development like those we currently hold as an investment. Many merchant
builders are not currently in the market for such land parcels or are willing to
pay only prices significantly reduced from prior years. Sellers have not
been willing to accept significantly reduced prices, and management expects this
trend to continue until there is a balance in the supply and demand for
single-family new and resale homes and need for related commercial properties.
We believe this imbalance to be a temporary condition that will continue for
approximately another 12 to 18 months. We estimate that a holding period of up
to 36 months is possible before our investment land may be liquidated on terms
acceptable to us. However we may be required to liquidate such investments in
advance and at less attractive terms in order to meet our capital needs or to
take advantage of other opportunities.
13
At
December 31, 2009, we had cash and equivalents of $26,985 compared to $115,746
at September 30, 2009. Net cash used by operating activities was $73,795 during
the first three months of fiscal 2010, compared to $87,244 used by operating
activities for the first three months of the prior year. The current period net
cash used by operating activities resulted primarily from the net loss of
$93,339 reduced by $12,778 of non-cash expenses and a $29,484 increase in
accounts payable. While we expect our operating expenses to reduce for the
balance of the year, we expect continued cash operating deficits.
For the
three months ended December 31, 2009, we collected $13,593 from our investment
in a direct financing lease and incurred $26,786 of costs related to foreclosed
real estate. We had no financing activities for the most recent
quarter.
Our
principal source of liquidity at December 31, 2009, consisted of cash and
equivalents of $26,985 and marketable securities of $38,208. We have no other
unused sources of liquidity at this time other than our investments including
our direct financing lease, real estate and water rights. There is no assurance
these assets can be utilized as a near-term source of liquidity.
We have
no debt other than trade payables and accruals. Our direct financing lease is
expected to produce monthly receipts of approximately $6,000. Nonpayment of the
direct financing lease would have an adverse impact on our operations and cash
flow.
In their
report dated December 22, 2009, on our financial statements as of and for the
year ended September 30, 2009, our independent auditors’ expressed substantial
doubt as to our ability to operate as a going concern.
Based on
our current sources of liquidity and expectations of future operations and
business conditions, we expect that we will require approximately $200,000 to
meet our cash requirements for the next twelve months. Actual results could
differ significantly from our plans. We may be able to further reduce our
monthly operating costs and we may be able to obtain additional funds from our
investment assets. However, to meet our working capital and cash outflow
obligations, unless we obtain funds from our investment assets we believe we
will require equity or debt financing in the next twelve months. Should
additional funds not be available, we may be required to curtail or scale back
staffing or operations. Failure to obtain sufficient capital could have a
material adverse affect on our Company.
In the
future, if our operations increase or we elect to expend additional resources on
our plasma technology, we may require additional funds.
Recent
Accounting Pronouncements
There
have been no recent accounting pronouncements or changes in accounting
pronouncements during the quarter ended December 31, 2009, that we believe are
of potential significance to our financial statements.
Forward-Looking
Statements and Business Risks
This Form
10-Q includes "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. The words "anticipate," "believe," "expect,"
"plan," "intend," "project," "forecasts," "could" and similar expressions are
intended to identify forward-looking statements. All statements other than
statements of historical facts included in this Form 10-Q regarding our
financial position, business strategy, budgets and plans and objectives of
management for future operations are forward-looking statements. Although we
believe that the expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that actual results may not differ
materially from those in the forward-looking statements herein, which speak only
as of the date hereof. We undertake no obligation to publicly revise
forward-looking statements to reflect events or circumstances that may arise
after the date hereof.
Readers
are cautioned to consider the specific business risk factors related to our
operations, technologies and markets described in our annual report on Form 10-K
for the year ended September 30, 2009. There have been no material changes in
the risk factors previously disclosed in such Form 10-K.
14
Item
4. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures.
In
accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the
"Exchange Act"), an evaluation was carried out by the Company's Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as defined in
Rule 13a-14(c) and 15d-14(c) under the Exchange Act) as of the end of the period
covered by this report.
To ensure
the effectiveness of our disclosure controls in the future we continue to train
our internal financial personnel on industry specific accounting requirements
including the loan loss methodology of SEC Staff Accounting Bulletin No. 102 –
“Selected Loan Loss Allowance Methodology and Documentation Issues” as well as
the impact of both new and industry specific accounting pronouncements on major
transactions.
In
designing and evaluating our disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily is required to apply its judgment in
evaluating the relationship between the benefit of desired controls and
procedures and the cost of implementing new controls and
procedures.
Our Chief
Executive Officer and Chief Financial Officer have concluded that the disclosure
controls and procedures were effective as of the end of the period covered by
this report, to ensure that material information relating to the Company was
made known to them particularly during the period for which this quarterly
report on Form 10-Q was being prepared.
(b) Changes in internal controls over financial reporting.
Other
than described above there were no changes in our internal controls over
financial reporting that could significantly affect internal controls over
financial reporting during the quarter ended December 31, 2009.
PART
II. OTHER INFORMATION
Item
1. Legal Proceedings
We are
not party to any pending material legal proceedings.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item
3. Defaults Upon Senior Securities
None
Item
4. Submission of Matters to a Vote of Security Holders
None
Item
5. Other Information
None
Item
6. Exhibits
Exhibits -
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350.
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350.
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350.
|
15
SIGNATURES
Pursuant
to the requirements 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 Technology Corporation | |||
Date:
February 12, 2010
|
By:
|
/s/ ERIC M. POLIS | |
Eric M. Polis | |||
Secretary and Treasurer | |||
(Principal
Financial and Accounting Officer and duly authorized
to sign on behalf of the Registrant)
|
16