FILER:

COMPANY DATA:
COMPANY CONFORMED NAME:                  ASI ENTERTAINMENT INC
CENTRAL INDEX KEY:                       0001067873
STANDARD INDUSTRIAL CLASSIFICATION:      [3728
IRS NUMBER:                              522101695
STATE OF INCORPORATION:                  DE
FISCAL YEAR END:                         0630
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		10KSB
			SEC ACT:
			SEC FILE NUMBER:	000-27881
			FILM NUMBER:	740008
</FILING-VALUES>

			BUSINESS ADDRESS:
				STREET 1:		15200 EAST GIRARD AVENUE STE 212
				STREET 2:		STE 3000
				CITY:			AURORA
				STATE:		CO
				ZIP:			80014
				BUSINESS PHONE:	970-881-3573
</BUSINESS-ADDRESS>

				MAIL ADDRESS:
					STREET 1:		79 TAMNI RD
					STREET 2:
					CITY:			RED FEATHER LAKES
					STATE:		CO
					ZIP:			80545
</MAIL-ADDRESS>
</FILER>
</SEC-HEADER>
<SEQUENCE>1
<FILENAME>ksb10-05.txt


CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010630
FILED AS OF DATE:			20011012
FILER:

	COMPANY DATA:
		COMPANY CONFORMED NAME:			ASI ENTERTAINMENT INC
		CENTRAL INDEX KEY:			0001067873
		STANDARD INDUSTRIAL CLASSIFICATION:	AIRCRAFT PART & AUXILIARY EQUIPMENT
                                             NEC [3728]
		IRS NUMBER:				522101695
		STATE OF INCORPORATION:		DE
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:
		SEC FILE NUMBER:	000-27881
		FILM NUMBER:	99766951

	BUSINESS ADDRESS:
		STREET 1:		15200 EAST GIRARD AVENUE
		STREET 2:		STE 3000
		CITY:			AURORA
		STATE:		CO
		ZIP:			80014
		BUSINESS PHONE:	970 881 3573

	MAIL ADDRESS:
		STREET 1:		79 TAMI ROAD
		STREET 2:
		CITY:			RED FEATHER LAKES
		STATE:		CO
		ZIP:			80545



===============================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)

[X]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
        OF 1934

        For the fiscal year ended June 30, 2001

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the transition period from ___________ to ___________

                         Commission file number 0-27881

                             ASI ENTERTAINMENT, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Delaware                                     52-2101695
----------------------------------           ----------------------------------
(State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

                          Ronald J. Chapman, President
                             Suite 2, 1601 Main Road
                       Research, Victoria, 3095 Australia
               ---------------------------------------------------
               (Address of principal executive offices) (zip code)

                                 613 9437 1233
                           --------------------------
                           Issuer's Telephone Number:

   Securities registered under Section 12(g) of the Exchange Act: Common Stock

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the last 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

Check if there is no disclosure of delinquent files in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]

State issuer's revenues for its most recent fiscal year.   $232,588

===============================================================================


<PAGE>


State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days.

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

Class                                           Outstanding at June 30, 2001;

Common Stock, par value $.0001 per share                   6,344,587
                                                -----------------------------
Documents incorporated by reference:        None


<PAGE>


10KSB
<TABLE>

<S>
<C>
PART I........................................................................2

ITEM 1. DESCRIPTION OF BUSINESS...............................................2

ITEM 2. DESCRIPTION OF PROPERTY..............................................11

ITEM 3. LEGAL PROCEEDINGS....................................................11

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................11

PART II. ....................................................................11

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ............11

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............12

ITEM 7. FINANCIAL STATEMENTS.................................................14

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE.....................................................15

PART III.....................................................................15

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
    COMPLIANCE WITH SECTION 16(A)OF THE EXCHANGE ACT.........................15

ITEM 10. EXECUTIVE COMPENSATION.. ...........................................16

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......17

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................18

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K....................................20

EXHIBIT 10.1                                                                 22

</TABLE>


                                      -1-
<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

THE COMPANY

ASI Entertainment Pty. Ltd. was incorporated in Australia in 1993 as a
subsidiary of ASIT Australia until 1996 when it became an independent
corporation through a corporate restructuring. ASI Entertainment, Inc. (the
"Company" was incorporated in the state of Delaware on April 29, 1998. In order
to change its status of incorporation, in July, 1998, ASI Entertainment, Inc.
(Delaware) acquired all the outstanding stock of ASI Entertainment Pty. Ltd.,
in exchange for 5,293,990 shares of its Common Stock. ASI Entertainment Pty.
Ltd. purchased the ASI-9000 Program from ASIT Australia and the Company will
acquire the ACAMS (Aircraft Communication and Mail Server) hardware from ASIT
Australia. The Company subcontracts the production, installation and
maintenance of the ASI-9000 and Data3Mail. ASI Entertainment, Inc. (Delaware)
has three wholly-owned subsidiaries, ASI Entertainment Pty. Ltd., ASI Media
Pty. Ltd. (an Australian corporation), and ASI Technologies, Inc. (a Delaware
corporation). Certain of the officers, directors and shareholders of the
Company are the officers, directors and shareholders of ASIT Australia.

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 main offices of the Company
are located at Suite 2, 1601 Main Road, Research, Victoria, 3095 Australia and
its telephone number is 61-3-9437-1233 and its fax number is 61-3-9437-1299.
The United States offices of the Company are located at 15200 East Girard
Avenue, Suite 3000 Aurora, Colorado 80014.

BUSINESS

1. Overview

During the last decade, a new era in airline passenger entertainment has
evolved.  A personal video screen at each seat is becoming a standard and an
Official Airline Guide survey of 3000 frequent travelers found that 60 per
cent of business travelers used a laptop computer during flights.

With laptop computers now common place, the next wave will be the Internet and
Email.  It is in the area of passenger data communications that ASI has
developed a unique reputation.

ASI has spent a decade developing its expertise and reputation in both
software development and airline industry technologies, as a pioneer of
passenger data communications.  The core of ASI's intellectual property is
software which has evolved over  years of flight-testing and commercial
operation. The hardware platform is also unique as it enabled ASI to pioneer
the passenger data link with major international airlines and was used as the
development platform by INMARSAT, the monopoly satellite service provider for
aircraft.

The opportunity now exists for ASI to capitalize on the airline communications
and entertainment markets with two unique programs designated Data3Mail and
ASI-9000.

                                      -2-
<PAGE>

In August 2001, ASI also acquired the marketing and manufacturing rights of
the SecurEtag package tracking technology.  The rights cover both North and
South America and Europe.

2. Data3Mail

Data3Mail, is based on ASI's existing flight proven software and hardware
Platform. The ACAMS which has been
developed and tested in conjunction with INMARSAT, COMSAT and SITA (the major
providers of satellite communications and ground based infrastructure for the
airline industry).

With the Data3Mail system onboard, passengers can access their email via their
laptop computers without the need for airlines providing wired networks into
each seat to accommodate the system.  The only item required by the passenger
is a Data3Mail smart card, which is inserted into their laptop's PCMCIA slot
to automatically initialize the Data3Mail program.

Data3Mail sends and receives passenger emails via the cockpit satellite data
link rather than the US$10.00 per minute passenger telephone line.  Messages
are prioritized so they cannot interfere with cockpit communications and each
transmission is charged by the kilobit.

Passenger interface with ASI's ACAMS mail server can be by one of two
alternate methods:

    1. A PC data smart card is used as the transport mechanism between the
       passenger's laptop computer and the ACAMS. A passenger prepares
       Email messages to be sent. The PC data card containing the messages
       is then plugged into one of the ACAMS smart card slots which then
       automatically transmits the Email and sends a request to upload the
       passenger's incoming Email.  On completion of the email download,
       the card is delivered back to the passenger.

    2. ASI also has a wireless smart card system under development that will
       allow, the passengers to gains access to the ACAMS (mail server) via a
       wireless network from their seats. With the interface in place, the
       system automatically transmits the email and sends a request to upload
       the passenger's incoming email.

Under either system, the Data3Mail service can accommodate attachments in
various compressed formats.  The passenger's account is billed based on the
amount of data transmitted and is charged direct to their Data3Mail account.


3. ASI-9000

The ASI-9000 program is designed to enhance the image of small to medium sized
airlines, by upgrading their old analogue Video Tape players with a new
generation Digital Video Server, at little or no cost to the airline.  Sponsors
and advertisers underwrite the cost of the program and the surplus revenue is
shared between ASI and the airline.


                                      -3-
<PAGE>


The ASI-9000 program comprises hardware, software and a complete business plan
for airlines providing digital in-flight communications and entertainment.
The ASI ACAMS provides the underlying components of the system.

Tailor-made destination information using digital technology (not relying on
messy tapes) as well as on-line ordering, feature in the ASI-9000 program.
The ability to make reservations and alterations to services like
accommodation, car hire and airline tickets, as well as being able to order
goods while in-flight are unique benefits of the ASI-9000 program for airlines
with a satellite data link.  The destination program is integrated with the
moving map display providing an informative and entertaining flight show.

By incorporating the mail server module, the program allows passengers and
cabin crew to send and receive email or messages via the world wide
aeronautical radio and satellite networks.  Transferring data via this method
allows global coverage, and by utilizing ASI's proprietary software,
communications are fast and cost effective.

Additional revenue can be generated by uploading current news and stock
information through the facilities made available by ASI's unique ACAMS server.

4. Securetag

The SecurEtag system integrates radio frequency identification (RFID),
global positioning system (GPS) and cellular technologies (GSM/CDMA) to
facilitate the tracking and location of packages in either mobile or warehouse
environments.  SecurEtag's unique beam steering technology allows multiple low
costs passive tags to be detected in the field, without the need for batteries
or complicated anti-collision protocols, which increase the cost of the tag
and decrease the reading range.

5.  PRODUCTS

5.1  ACAMS
The ACAMS System is supplied in several configurations depending on the
program requirements and consists of the following components:
- - Touch Screen Display
- - Fully self contained 19.5 inch rack Mount
- - Credit card Reader and PCMCIA Slots
- - Interfaces to all major IFE, ACARS and SATCOM vendors
- - Fully customized Microsoft compatible software with touch screen user
  interface

The ACAMS system is fully self-contained and comprises three Line Replaceable
Units 'LRU";
- - Control Display Unit (CDU)
- - A Hard Drive Unit (HDU), or optional wireless access point.
- - An Optional Accessories Unit (OAU)

The ACAMS chassis also includes an uninterruptible power supply.

The ACAMS is small, lightweight and easy to install.  The units are designed
to simply plug into the ACAMS chassis allowing for easy removal and changeover
if required.  As a result, the aircraft experiences no downtime when line
servicing occurs.

                                      -4-
<PAGE>


Passenger and cabin crew services are accessed through a touch screen on the
CDU.  On-screen large button interface, based on Microsoft Windows software,
allows the user effortless access to the features available.  The configurable
ACAMS software is cabin crew tested and requires no special training.

A standard QWERTY keyboard with credit card transaction facilities provides
the finishing touches to a system that has revolutionized airline data
communications.

A Remote Console can be added to the system offering the same features as the
ACAMS unit, also encompassing a touch screen and keyboard with the additional
benefit of positioning the terminal anywhere on the aircraft.  This also
provides the opportunity for passengers to interface with the ACAMS if so
desired.

The ASI-9000 program is run on equipment, which is aviation certified.
Components of the system are currently certified for use on the Boeing
747-400, 757-200, and 737-300, McDonnell Douglas DC-9, and MD 82 and the
Company anticipates that it will be certified for use on the Boeing 767 in the
near future.  The ACAMS system was flight tested and certified on Qantas
Airways.

5.2  Computer Video Interface (CVI)

The system incorporates a Computer Video Interface "CVI" capable of storing
all flights destination and Multimedia promotions.  This unit is capable of
storing digitized audio and video from compressed MPEG & NTSC format.  The
system is fully compatible with all current overhead and in-seat video display
systems on-board aircraft.

The system can be flight programmed to display messages when required during
the flight and has full multi-lingual capability.

5.3  Mail Server

The system incorporates an intelligent mail server database that can
accommodate single or multiple Email transmissions without the need to bundle
communications as proposed by most other systems.  Regardless of whether there
are only one or many emails they are sent automatically.

The ACAMS unit can be equipped for either of ASI's Data3mail systems with
either PC Card reader slots or a wireless transceiver.

The Email system is based on a proprietary software transport medium, a
variation of the POP3/SMTP Email industry standard protocols.

6.  Target Markets

ASI has developed a multi tiered marketing strategy for the Data3mail and
ASI-9000 programs that provide the opportunity to generate revenue in three
target markets within the airline industry.

                                      -5-
<PAGE>


Offering the ASI-9000 program to small to medium sized airlines creates
revenue streams in the supply of relevant equipment, the selling of
advertising space and the commissions received from goods and services ordered
by passengers whilst in flight.

With the latest development of its cost efficient Email service, Data3Mail,
ASI is able to market its services, through strategic alliances, to major
airlines around the world.  These major airlines, as well as some of the
smaller airlines, posses the ability through existing data ports, to allow
ASI to provide Data3Mail simply and cost efficiently.

ASI's competitors in this area, are promoting similar services that will
entail extensive and expensive installations for airlines and high service
costs to the passenger.

Once ASI has established Data3Mail onboard there is the  potential to
provide the ASI-9000 Program to these major airlines, creating an additional
revenue stream for both ASI and the airline.

Major industry service providers such as COMSAT, INMARSAT, SITA and AirTV will
also be able to utilize the connecting bridge created by ASI's
software, allowing them to make more productive use of the bandwidth, which
they provide to the airlines via their satellite networks.

The Securetag program will be set up first on a trial basis with a transport
company to identify and meet the technical and commercial requirements of the
North American market.  Once this initial stage is completed, the company will
be able to move to a commercial implementation program, probably on a state by
state basis.  The target market for the technology will be companies handling
high value and important parcels and are in markets where a premium price can
be charged for the Securetag service.  As the market develops and the cost of
the components decreases, the broader freight market will be more viable for
the Securetag product.

CERTIFICATION PROCESS AND GOVERNMENT REGULATION

The installation and use of cabin management systems requires prior
certification and approval by the 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 sets the
standards that are primarily used 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.

                                      -6-
<PAGE>


Following this step, the system must be installed on an aircraft and
tested, including an in-flight test. The Company has received certification for
the ASI-9000 Program on Air Europa aircraft utilizing the CMA-3200 Multi Media
Computer platform. The ACAMS has been flight tested and installed on Boeing
747-400 and Boeing 767-300 aircraft. The CMA-3200 has been flight tested and
installed on the Boeing 737-300, 757-200 and the McDonnell-Douglas DC-9-30 and
MD-82. A second version of the ACAMS, incorporating Data3Mail, is currently
undergoing certification process to achieve the FAA approval for use on
commercial aircraft. The Company anticipates certification approval for the
ACAMS and is prepared to make whatever modifications are required to obtain
such approval.

The company will need to invest substantial funds to package and certify the
SecurEtag system to meet the requirements of the Federal Communications
Commission ("FCC"). In the interim a development platform can be established
under FCC approval which will facilitate the marketing program.

PRODUCT DEVELOPMENT

Prior to the company acquiring the intellectual property, ASIT Australia had
spent approximately A$5,000,000 developing the ASI program. The company has
subsequently invested a further $1,000,000 in developing the latest product
offering. The technology behind the Company's Programs evolved from a data
link aviation communications system, designated the Airline Communications
and Management System ("ACAMS") developed by ASIT Australia in conjunction with
Qantas Airways and Swissair. The development of the technology was sponsored
by Qantas Airways which required both an interface which would allow the crew
to communicate through the aircraft's satellite and radio communications data
link and an interface between the ACAMS datalink and the aircraft's video
systems. This interface evolved into the ASI-9000 computer video.

ASIT Australia established a relationship with the Canadian Marconi Company
("CMC") which arranged for the ASI-9000 to be tested on Hawaiian Airlines. The
initial test program was carried out on Hawaiian Airlines in conjunction with
CMC and Hollingsead International, Inc., a manufacturer of after market video
systems. ASIT Australia mounted its software on CMC's CMA-3200 multi media
computer equipment which was installed together with Hollingsead's video
equipment on three aircraft operated by Hawaiian Airlines.

The Data3Mail service is the next level of development to the existing flight
proven capabilities of the ACAMS communication link. ASI is actively promoting
the Data3mail service in conjunction with marketing AirTV.

The Securetag technology was developed to address the high rate of loss
through theft in the freight industry.  The license to the Securetag
technology was acquired to expand the operating base of ASI and to develop
further in the area of communications technologies.  Apart from the freight
industry, ASI believes there will be applications for the Securetag technology
in the aviation industry through the tracking of packages and other objects
both in the aircraft environment and the support services environment.

OPERATIONS TO DATE

Hawaiian Airline Project. ASIT Australia equipped three aircraft operated by
Hawaiian Airlines at a cost of $180,000 per aircraft but was unable to equip

                                      -7-
<PAGE>

the remaining ten aircraft originally anticipated to be equipped as ASIT
Australia was unable to finance the purchase and installation price of the
video equipment of $50,000 per aircraft charged by Hollingsead International,
Inc. ASIT Australia had secured 14 advertisers for the video program based on
total air time on all 13 aircraft but was not able to receive any funds from
such advertisers for air time as only three aircraft were equipped with the
equipment. ASIT Australia had intended the Hawaiian Airlines project to be a
test program of its "infotainment" program, to prove its feasibility and to
showcase its potential to advertisers. The Company is not currently involved in
the installation of any of its equipment on Hawaiian Airlines.


Air Europa Project. The Company acquired the CMA-3200 from ASIT Australia for
an aggregate of A$527,980 and installed nine CMA-3200 units on aircraft
operated by Air Europa. From July 1, 1997 to June 30, 2001, the Company
received approximately $81,076 in revenues generated from the equipment on the
Air Europa aircraft. The company obtained several major advertisers on the Air
Europa aircraft systems before the program was suspended, pending
re-installation of the equipment in the airline's replacement 737-800
aircraft. The company has subsequent negotiated the successful completion of
the Air Europa contract with the sale of several systems and a final payment
of US$140,000.

The company is in the process of installing a Data3mail program on Saudi
Arabian airlines as part of an AirTV development program. Under the program
AirTV is paying for the certification and installation of the system. In
addition AirTV is paying ASI a monthly fee to manage the overall
Email/Internet development program. It is expected, that the successful
installation should lead to additional installations on new AirTV customer
airlines.

SALES AND PRICING

The Company sells both the ASI-9000 and Data3Mail programs under Supply and
License Agreements under which ASI supplies equipment at little or no cost to
the airlines, in exchange for a share of the revenue generated from the
equipment and services.  The ASI-9000 marketing is based on selling
advertising on the programs run on the ASI equipment  The Company believes
that the revenue  can be enhanced when the Data3mail communication link is
installed, allowing passengers to purchase goods and services being promoted
via the ACAMS.

ASI will generate revenue from Data3Mail programs by charging passengers per
kilobit of data transmitted over the air-to-ground link.

The Company purchases from ASIT Australia either the CMA-3200 hardware at
$25,000 per unit or the ACAMS hardware at $30,000 per unit. The Company
subcontracts for the production of the ACAMS integration technology. The cost
to the Company for installation of the ASI-9000 excluding the hardware is
approximately $5,000 per aircraft for installation of units like those
installed on the Air Europa aircraft and up to $10,000 for units in which the
communications link is provided.

While the Company is still formulating the marketing plan for Securetag, it
expects to be able to generate revenue either from the sale of RFID tags,
through the management of a loss prevention or detection programs, or from a
combination of both.
                                      -8-
<PAGE>

OPERATIONS AND SUPPLIERS

The Company has two offices: an office in Melbourne, Australia and one in
Denver, Colorado. The Company's core component of the ASI-9000 and Data3Mail,
the ACAMS Cabin Terminal, has been manufactured to date by ASIT Australia and
Philips Defence Systems Group. In future the Company anticipates that it will
outsource the production of its equipment or will modify equipment from a
suitable aviation certified manufacturer.  The PC smart cards used for the
Data3Mail programs will be outsourced and manufactured to meet the
certification requirements of ASI.

The Company has out-sourced all of its operations to companies and individuals
specializing in either the manufacture and installation of avionics or the
procurement of advertisement sponsors (for ASI-9000).  The Company will
contract with an installation company to install its equipment on the customer
airline.  Once installed, the Company out-sources all of the engineering and
technical support services to ASIT Australia and other suitably certified
organizations.

Similarly, the Company will outsource the manufacture and supply of all
equipment and components required for the Securetag program.

MARKETING

After considering the competitive environment of the airline entertainment
industry, the Company has decided on a marketing strategy to provide the ASI-
9000 program at little or no cost to a customer airline in consideration for
the Company receiving sole and exclusive rights over the revenue stream
created from the sale of air time to advertisers including destination specific
tourist operators, local, national and foreign corporate advertisers and from
other services provided by the equipment.  A similar marketing strategy will be
adopted for the Data3Mail program.

The Company researches the market and targets selected airlines based on a
commercial and technical evaluation. The Company has formed relationships with
other avionics manufacturers who sell complimentary products to the Company's.
The Company anticipates these strategic partners will introduce the Company
to airlines as such target airlines look for ways to enhance the products and
services they purchase from the alliance partner.

CUSTOMERS

The company currently provides services to AirTV Limited,  a company which is
developing a global satellite television system that interfaces with existing
in-flight entertainment systems on board aircraft to provide direct television
programming and internet delivery services.  The Company is providing AirTV
with technical marketing services and onboard system integration and airline
program management for an Email/Internet service to be offered tO AirTV's
customer airlines.


The company has negotiated the successful completion of the Air Europa
contract with the sale of several systems and a final payment of US$140,000.



                                      -9-
<PAGE>

COMPETITION

With the ASI-9000 program, the Company competes for both advertising space and
provision of equipment to airlines. The Company believes that it operates in a
market niche where there are no other companies providing both the same
product with a similar price structure. The Company believes, however, that
the market for technologically advanced in-flight entertainment and
communications systems is emerging and that competition to provide such
services to the airlines will be intense. The Company is aware of several
other companies that provide systems that compete with the ASI-9000 Program,
some of which have been installed on aircraft.  Most of these competitors have
substantially greater financial and other resources than the Company and,
accordingly, may have a significant competitive advantage over the Company.
The Company's principal competitors include Hughes Avicom International, Inc.
and Sony Trans Com (both acquired by Rockwell Collins), Matsushita Avionics
Systems Corporation and Thompson-CSF Sextant.  The Company is also aware of
several other companies that are developing in-flight entertainment systems or
seeking joint ventures in the field.

The Company believes that it will be able to compete with other companies
based on the company's marketing plan that requires only nominal capital
expenditures from the airline.  The Company also believes that it will be able
to compete by targeting specific airlines that will be attracted to this
structure which allows the airline to provide more customer service at little
cost to the airline. The Company believes that although most of the Company's
competitors are producing more technologically advanced entertainment systems,
those competing services are offered at a far greater expense to the airlines
both in the cost of the entertainment system itself and in the operating cost
due to the extra weight of these in-flight systems.

For Data3Mail, airlines and their passengers have identified Email as a service
which is becoming increasingly desirable.  As a result, a number of companies
are offering internet portal services, most still in the development stage.
In comparison to most, ASI's Data3Mail utilizes the satellite data link which
is cheaper and faster than alternate products using the airborne telephone
connection (not ideally designed for data communication links).  Given the
potential size of the market for Email access in commercial passenger
aircraft, ASI expects there will be continued competition for ASI's products.
Over the past couple of years, a number of companies have emerged, offering a
range of hardware, software and Email infrastructure products and services
that may compete with the products and services offered by ASI.

The main competition for the Securetag technology will come from bar-coding
technologies as well as new developments in RFID technologies.  The increasing
rate of theft and the demand of freight customers to know the status of goods
they have shipped will increase demand for technology similar to and that
would compete with the Securetag technology.  Another competitive factor to
determine the success of Securetag will be the time it takes ASI to develop a
market for the product and the alternate products that are developed in that
time.

There is no assurance that the Company's competitors will not offer services
similar to the Company's with a similar business plan. Nor is there an
assurance that passengers and airlines will not demand more technologically
advanced communication and entertainment products or that the Company will be

                                      -10-
<PAGE>

able to compete with other more established sources for advertising.
Similarly, there can be no assurances that other tagging technologies will be
developed that will compete with the Securetag technology.

EMPLOYEES

The Company is managed by Ronald Chapman in his capacity as President and
Chief Executive Officer and Philip Shiels in his capacity as Executive
Director and Chief Financial Officer. The Company currently has no employees,
but engages sub-contractors when additional resources are required.

INDUSTRY OVERVIEW

The impact of the latest events in the USA will obviously have a dramatic
effect on the airline industry.  If new aircraft deliveries are reduced and
passenger load factors decreased, it may see the airline industry look to
upgrading existing aircraft rather than buying new aircraft. While both Boeing
and Airbus are revising delivery forecasts the real impact will only be
determined after the airline industry has adjusted to this new environment. At
this stage the company's target market has seen minimal change and following
the recent World Airline Entertainment Associations annual conference held in
Brisbane, Australia, Sept. 11-14  (www.waea.org) interest in Data3mail has
remained high.

In regard to SecurEtag, security and tracking of packages was already starting
to become a higher priority in the transport industry. With the latest events
we may see increased security requirements which can only be addressed by RFID
tracking technology.


ITEM 2. DESCRIPTION OF PROPERTY.

The Company does not own any property other than its inventory of equipment. The
Company maintains its headquarters at the offices of Chapman International Pty.
Ltd. at which location it also stores its in-flight computer equipment. The
Company does not have any written lease with Chapman International which has
indicated that the Company may use such space as long as it requires.

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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER 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 10,525,934 shares of Common Stock issued
and outstanding and no shares of Preferred Stock outstanding.

                                      -11-
<PAGE>


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.
Quarter Ended                                    Common Stock
                                               High         Low
March 31, 2000                                $1.25        $1.25
June 30, 2000                                 $1.00        $1.81
September 30,2000                             $1.50        $0.63
December 31, 2000                             $0.63        $0.28
March 31, 2001                                $0.53        $0.50
June 30, 2001                                 $0.51        $0.51

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.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

OVERVIEW

The Company is a development stage company formed to offer to commercial
airlines its ASI-9000 and Data3Mail Programs which provide passenger and crew
communications, passenger information and entertainment, and value-added
services tailored to its respective airline customers' requests.  It has
recently secured the rights to the Securetag technology to expand its
operating base in communications technologies.

The Company has a very low cost structure as it has no employees other than
its two officers which are paid a monthly retainer and does not maintain any
manufacturing or production operations.  The Company pays commissions to media
sales representatives only from revenues received from the contracts which
they place.  Because of such low cost structure, the Company anticipates that
the proceeds from earlier stock subscriptions, revenues from any exercise of
the Options, anticipated revenues from operations, and proceeds available from
its suppliers will be sufficient to meet the Company's contemplated operating
and capital requirements for approximately 12 months.

RESULTS AND PLAN OF OPERATIONS

The Company has incurred losses from operations. The Company had accumulated
losses from inception to June 30, 2001 of $2,091,119. Major components of the
loss includes depreciation and amortisation charges, offering costs,
consulting and management fees and foreign currency translation losses. The
Company may be required to make significant additional expenditures in
connection with the development of the ASI-9000, Data3Mail and Securetag
programs and their marketing. The Company's ability to continue its operations
is dependent upon its receiving funds through its anticipated sources of
financing including exercise of Options, revenues from operations, and
proceeds available from its suppliers. However, the Company may be required to
raise additional capital through debt or equity financing.

                                      -12-
<PAGE>
The Company intends to use future revenues, if any, for the purchase of
equipment for its ASI-9000, Data3mail and Securetag programs  and for capital
expenditures and working capital for its proposed operations, and certain
fees, costs and expenses associated with this offering.

YEAR ENDED JUNE 30, 2001 COMPARED TO YEAR ENDED JUNE 30, 2000

The Company received revenue of $232,588 for the year ending June 30, 2001,
compared to no revenue for the year ended June 30, 2000.

Net losses decreased from $484,349 in the twelve month period ending June 30,
2000, to $254,373 for the twelve month period ending June 30, 2001, as a
result of revenue generated and a small decrease of expenses. Expenses
decreased from $484,349 for the twelve month period ending June 30, 2000 to
$465,843 for the twelve month period ending June 30, 2001.

The Company had a foreign currency translation loss of $171,769 for the twelve
month period ending June 30, 2001, compared to a foreign currency translation
loss of $120,909 for the twelve month period ending June 30, 2000. As a result,
the Company recorded a comprehensive loss of $426,142 for the twelve months
ended June 30, 2001, compared to a comprehensive loss of $605,258 for the
twelve months ended June 30, 2000.

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 has received revenue totaling $232,588
from its arrangements with Air Europa and AirTV during the fiscal year ended
June 30, 2001.

The Company's cash and cash equivalents increased from $48,718 at June 30,
2000 to $231,706 at June 30, 2001 primarily as a result of loans from related
parties and subscriptions received for the Company's securities.

The Company had a net loss of $254,373 from operating activities for the
period July 1, 2000 to June 30, 2001, primarily consisting of compensation to
officers, consulting and professional fees, depreciation and amortization. The
net loss from operating activities for such period was less than the net loss
from operating activities for the period July 1, 1999 to June 30, 2000
primarily as a result of revenue from AirTV and equipment sales and an overall
decline of expenses. . The Company's revenue for the twelve months ending June
30, 2001 was $232,588, compared to nil in the twelve month period to June
30,2000.

The cash flow of the Company from financing activities for the twelve months
ending June 30, 1999 was from the receipt subscriptions for capital and loans
from related parties.

The Company's marketing plan anticipates that the Company will install and
maintain the ASI-9000 and Data3Mail programs on commercial airlines with
little or no cost to the airline. The Company will receive revenues data
communications and from the sale of advertising space available on the video
and audio programs as well as other forms as developed. This marketing plan
requires significant initial capital from the Company for the production,
acquisition, installation and maintenance of the ASI-9000 and Data3Mail


                                      -13-
<PAGE>
programs possibly before any revenues are received. Additional funding will
also be required for the certification of the SecurEtag system. The Company
may not have sufficient funds to purchase or install the equipment in which
case the Company 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 may also attempt to negotiate with vendors or
customer airlines revenue sharing arrangements by which the Company will share
the advertising revenue if the vendor or customer airline provide capital for
the equipment.

The Company has no commitments for capital expenditures 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. On July 1, 1998,
the Company acquired 100% of ASI Entertainment Pty Ltd., ("ASIE") an Australian
corporation. ASIE has accumulated losses of approximately $915,000 at June
30, 2001 and will be required to make significant expenditures in connection
with continuing engineering and marketing efforts along with general and
administrative expenses. 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 subsequent to the acquisition, 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. The Company may also attempt to negotiate
with vendors or customers, revenue sharing arrangements by which the Company
will share the revenue if the vendor or customers provides capital for the
equipment. Management believes that actions presently being taken to obtain
additional funding provide the opportunity for the Company to continue as a
going concern.

ITEM 7. FINANCIAL STATEMENTS.













                                      -14-
<PAGE>






ASI ENTERTAINMENT, INC.

CONSOLIDATED
FINANCIAL STATEMENTS

June 30, 2000 & 2001




























<PAGE>


                          ASI ENTERTAINMENT, INC.
                     Consolidated Financial Statements



                            TABLE OF CONTENTS


                                                              Page

INDEPENDENT AUDITOR'S REPORT ON
    THE CONSOLIDATED FINANCIAL STATEMENTS                      F-1


CONSOLIDATED FINANCIAL STATEMENTS

     Consolidated balance sheet                                F-2
     Consolidated statement of operations                      F-3
     Consolidated statement of stockholders' equity            F-4
     Consolidated statement of cash flows                      F-5
     Notes to consolidated financial statements                F-7


































<PAGE>


                         Ronald R. Chadwick, P.C.
                        Certified Public Accountant
                           2851 South Parker Road
                                Suite 720
                         Aurora, Colorado  80014
                           Phone (303)306-1967
                            Fax (303)306-1944

                      INDEPENDENT AUDITOR'S REPORT

Board of Directors
ASI Entertainment, Inc.
Melbourne, Australia

I have audited the accompanying consolidated balance sheet of ASI
Entertainment, Inc. as of June 30, 2001 and the related consolidated
statements of operations, stockholders' equity and cash flows for the
years ended June 30, 2000 and 2001. 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 audit.

I conducted my audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a reasonable basis for my
opinion.

In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ASI
Entertainment, Inc. as of June 30, 2001 and the results of its operations
and its cash flows for the years ended June 30, 2000 and 2001 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 7 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 also
described in Note 7. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Aurora, Colorado                              /S/Ronald R. Chadwick, P.C.
September 20, 2001                             RONALD R. CHADWICK, P.C.


                                  F-1
<PAGE>

                           ASI ENTERTAINMENT, INC.
                         CONSOLIDATED BALANCE SHEET
                                June 30, 2001

                                  ASSETS

Current assets
      Cash                                                    $   231,706
      Accounts receivable                                          46,021
      Other                                                           498
                                                               ----------
             Total current assets                                 278,225
                                                               ----------

      Property and equipment, net                                 821,768
      Investment in media rights, net                              65,189
                                                               ----------
                                                                  886,957
                                                               ----------

Total Assets                                                  $ 1,165,182
                                                               ==========

                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
      Accounts payable and accrued expenses                        37,161
      Due to related parties                                      174,393
      Stock subscription payable                                  125,000
                                                               ----------
          Total current liabilities                               336,554
                                                               ----------

Total Liabilities                                                 336,554
                                                               ----------

Stockholders' Equity
      Preferred stock, $.0001 par value;
        20,000,000 shares authorized; none issued and outstanding     -
      Common stock, $.0001 par value;
          100,000,000 shares authorized;
          6,344,587 issued and 6,294,587 outstanding                  634
      Additional paid in capital                                3,592,588
      Additional paid in capital - discount on shares            (745,470)
      Treasury stock - par value (50,000 shares)                       (5)
      Accumulated deficit                                      (1,548,116)
      Accumulated other comprehensive loss                       (471,003)
                                                               ----------
Total Stockholders' Equity                                        828,628
                                                               ----------

Total Liabilities and Stockholders' Equity                    $ 1,165,182
                                                               ==========





The accompanying notes are an integral part of the consolidated financial
                               statements.


                                        F-2
<PAGE>

                             ASI ENTERTAINMENT, INC.
                       CONSOLIDATED STATEMENT OF OPERATIONS
                    For The Years Ended June 30, 2000 and 2001


                                                       2000              2001
                                                  ----------        ----------

Sales, net                                                 -       $   232,588
Cost of  sales                                             -           (21,118)
                                                  ----------        ----------
Gross margin                                               -           211,470

Selling, general and administrative expenses         482,498           465,843
                                                  ----------        ----------
Loss from operations                                (482,498)         (254,373)

Other income (expense)
     Interest income
     Interest expense                                 (1,851)                -
                                                  ----------        ----------
Income (loss) before provision for income taxes     (484,349)         (254,373)

Provision for income tax                                   -                 -
                                                  ----------        ----------
Net income (loss)                                $  (484,349)      $  (254,373)

Other comprehensive income (loss)
Foreign currency translation gains (losses)         (120,909)         (171,769)
                                                  ----------        ----------
Comprehensive loss                               $  (605,258)      $  (426,142)
                                                  ==========        ==========
Net income (loss) per share
(Basic and fully diluted)                      $       (0.08)    $       (0.04)
                                                  ==========        ==========
Weighted average number of
common shares outstanding                          5,924,420         6,244,587
                                                  ==========        ==========














    The accompanying notes are an integral part of the consolidated financial
                             statements.

                                  F-3
<PAGE>

                                           ASI ENTERTAINMENT, INC.
                               CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 For The Years Ended June 30, 2000 and 2001
<TABLE>
<CAPTION>
                                                              Paid in                           Accum.
                                Common Stock                  Capital                           Other       Subscrip-    Stock-
                                                  Paid in    Discount   Treasury    Accum.      Compre.      tions      holders'
                               Shares   Amount    Capital    On shares    Stock     Deficit   Income/loss  Receivable    Equity
                              --------  ------  ----------  ----------  --------  ----------  -----------  ----------  ----------
<S>                           <C>       <C>     <C>         <C>         <C>       <C>         <C>          <C>         <C>
Balances at June 30, 1999    5,754,337  $  576  $3,073,641  $ (745,470) $      - $  (809,394) $  (178,325) $  (16,850) $1,324,178

Receipt of subscriptions rec.                                                                                  16,850      16,850

Issuance of stock for services 110,000      11      64,989                                                                 65,000

Sales of common stock          377,750      37     377,713                                                                377,750

Foreign currency
 translation gain (loss)                                                                         (120,909)               (120,909)

Net gain (loss) for the year
    ended June 30, 2000                                                             (484,349)                            (484,349)
                              --------  ------  ----------  ----------  --------  ----------  -----------  ----------  ----------

Balances at June 30, 2000    6,242,087  $  624  $3,516,343  $ (745,470) $      - $(1,293,743) $  (299,234) $        -  $1,178,520

Exercise of stock options        2,500               1,250                                                                  1,250

Issuance of stock for services 100,000      10      99,990                                                                100,000

Acquisition of shares
    into treasury                                  (24,995)                   (5)                                         (25,000)

Foreign currency
    translation gain (loss)                                                                      (171,769)               (171,769)

Net gain (loss) for the year
    ended June 30, 2001                                                             (254,373)                            (254,373)
                             ---------  ------  ----------  ----------  --------  ----------  -----------  ----------  ----------


Balances at June 30, 2001    6,344,587  $  634  $3,592,588  $ (745,470) $     (5)$(1,548,116) $  (471,003) $        -  $  828,628
                             =========  ======  ==========  ==========  ========  ==========  ===========  ==========  ==========


                    The accompanying notes are an integral part of the consolidated financial statements.

                                                           F-4
</TABLE>
<PAGE>


                             ASI ENTERTAINMENT, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                   For The Years Ended June 30, 2000 and 2001



                                                       2000              2001
                                                  ----------        ----------


Cash Flows From Operating Activities:
     Net income (loss)                            $ (484,349)       $ (254,373)

     Adjustments to reconcile net income to
     net cash provided by (used for)
     operating activities:
          Depreciation                                66,921            57,419
          Amortization                                63,375            53,913
          Compensatory stock issuances                40,000           100,000
          Trade accounts receivable                                    (46,021)
          Other receivables                          (18,975)           18,478
          Accounts payable and accrued expenses       20,717            16,283
                                                  ----------        ----------
               Net cash provided by (used for)
               operating activities                 (312,311)          (54,301)
                                                  ----------        ----------

Cash Flows From Investing Activities:
      Purchase of fixed assets                        (3,402)
                                                  ----------        ----------

               Net cash provided by (used for)
               investing activities                   (3,402)               -
                                                  ----------        ----------




                              (Continued On Following Page)











  The accompanying notes are an integral part of the consolidated financial
                                 statements.

                                      F-5
<PAGE>

                             ASI ENTERTAINMENT, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                   For The Years Ended June 30, 2000 and 2001

                       (Continued From Previous Page)

                                                       2000              2001
                                                  ----------        ----------


Cash Flows From Financing Activities:
     Receipts from notes payable
     Payments on notes payable                      (32,956)
     Due to related parties                          (7,176)           120,277
     Exercise of stock options                                           1,250
     Common stock subscription payable              394,600            125,000
                                                 ----------         ----------

               Net cash provided by (used for)
               financing activities                 354,468            246,527
                                                 ----------         ----------

Effect of exchange rate changes on cash               8,863             (9,238)

Net Increase (Decrease) In Cash                      47,618            182,988
Cash At The Beginning Of The Period                   1,100             48,718
                                                 ----------         ----------

Cash At The End Of The Period                  $     48,718        $   231,706
                                                 ==========         ==========

Supplemental Disclosure
Cash paid for interest expense in 2000: $1,851

















  The accompanying notes are an integral part of the consolidated financial
                               statements.

                                      F-6
<PAGE>

                         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. On July 1, 1998 ASI acquired 100% of the issued
and outstanding stock of ASI Entertainment Pty., Ltd. ("ASIE") in a
transaction accounted for as a recapitalization of ASI Entertainment Pty.
Ltd., with ASI Entertainment Pty., Ltd. considered the predecessor pursuant to
the acquisition. ASIE provides in-flight video and audio entertainment and
data communications to the commercial airline industry and sells advertising
time on its ASI-9000 Programs installed on commercial aircraft. The Company's
wholly owned subsidiary, ASI Technologies, Inc. is an inactive corporation,
incorporated on April 1, 1998 under the laws of Delaware. ASIE's wholly owned
subsidiary, ASI Media Pty., Ltd. ("ASI Media") is an inactive corporation
whose sole purpose is to act as trustee to the ASI Media Unit Trust (the "Unit
Trust"). ASI Entertainment, Inc. and its subsidiaries are hereinafter referred
to as the "Company".

Principles of consolidation

The accompanying consolidated financial statements include the accounts of ASI
Entertainment, Inc. and its wholly owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation.

Basis of Presentation

The financial statements are prepared in accordance with Generally Accepted
Accounting Principles in the United States of America. The basis of accounting
differs from that used in the Australian statutory financial statements of
ASIE. Adjustments are made to translate the statutory financial statements of
ASIE to United States Generally Accepted Accounting Principles. The financial
statements are expressed in United States dollars. The functional currency of
ASIE is the Australian dollar.

Use of estimates

The preparation of financial statements in conformity with 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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.




F-7
<PAGE>

                             ASI ENTERTAINMENT, INC.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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, 2001 and 2000 the Company had net operating loss carryforwards of
approximately $1,160,000 and $1,200,000 which expire under Austalian tax law
at various dates through the year 2007, in addition to net operating loss
carryforwards of approximately $385,000 and $85,000 for U.S. tax purposes at
June 20, 2001 and 2000 which begin to expire in 2019. The deferred tax asset
created by the Australian and U.S. net operating losses has been offset by a
100% valuation allowance.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity
of three months or less as cash equivalents.

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. Warrants,
stock options, and common stock issuable upon conversion of the Company's
preferred stock are not included in the computation if the effect of such
inclusion would be anti-dilutive and would increase the earnings or decrease
loss per share.

Property and equipment

Property and equipment are recorded at cost and depreciated under accelerated
methods over an estimated life of five years.



                                    F-8
<PAGE>

                             ASI ENTERTAINMENT, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 1.  ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):

Investment in media rights

The investment in media rights is recorded at cost and amortized based on the
straight line method over five years.

Foreign currency translation

The functional currency of ASIE is the Australian dollar. Financial statements
for these entities are translated into United States dollars at year end
exchange rates as to assets and liabilities and weighted average exchange
rates as to revenues and expenses. Capital accounts are translated at their
historical exchange rates when capital transactions occurred.

Revenue recognition

Revenue is recognized on an accrual basis as earned under contract terms.

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. The foreign currency translation
gains (losses) resulting from the translation of the financial statements of
ASIE, expressed in Australian dollars, to United States dollars are reported
as Other Comprehensive Income (Loss) in the Statement of Operations and as
Accumulated Other Comprehensive Income (Loss) in Stockholders' Equity.

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.

Products and services, geographic areas and major customers

Company sales are derived from the sale of in-flight video and audio
entertainment and data communications to the commercial airline industry and
advertising time on its

                                   F-9
<PAGE>

                             ASI ENTERTAINMENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 1.  ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):

ASI-9000 Programs, are to external customers, and currently originate in and
through the Company's Australian subsidiary ASI Entertainment Pty., Ltd. to
non-domestic customers. The Company had two major customers accounting for
100% of its sales. The Company's long term assets are held through ASI
Entertainment Pty., Ltd. in Australia.

Recent Accounting Pronouncements

Effective January 1, 1999 the Company has adopted Staff Accounting Bulletin
("SAB") 101, "Revenue Recognition in Financial Statements", issued by the
staff of the Securities and Exchange Commission, which provides the Staff's
views on applying generally accepted accounting principles to selected revenue
recognition issues. The adoption by the Company of SAB 101 is not expected to
have a material impact on the Company's financial statements.

Effective April 1, 2001, with an earlier effective date applying to certain
provisions, the Company has adopted Statement of Financial Accounting
Standards ("SFAS") No.140 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities", issued by the Financial Accounting
Standards Board ("FASB"),  which provides guidance for determining whether a
transfer of financial assets should be accounted for as a sale or a secured
borrowing, and whether or not a liability has been extinguished. The adoption
by the Company of SFAS 140 is not expected to have a material impact on the
Company's financial statements.


NOTE 2. RELATED PARTY TRANSACTIONS

As of June 30, 2001 the Company owed officers, directors, and related parties
$174,393 for expenses incurred on behalf of the Company.

The Company during 2001 and 2000 paid $2,266 and $23,608 respectively to a
company affiliated through common stockholders and directors for office
expenses, rent and utilities.

The Company has established an agreement with ASI Technologies Pty., Ltd.,
("ASIT"), a company related by stock ownership, giving the Company the sole
right to purchase certain hardware and technical support used in its business
operations.



F-10
<PAGE>

                             ASI ENTERTAINMENT, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 3.  PROPERTY AND EQUIPMENT

On December 16, 1996, the Company purchased from ASI Technologies Pty., Ltd.
("ASIT"), a related party, but not a shareholder at that time, nine CMA-3200
Hardware Platforms (developed and produced by a third party), a component of
the ASI-9000 Program, for a price of $418,424 ($315,204 as translated at June
30, 2000) through the issuance issuance of 659,975 shares of common stock of
the Company. On September 30, 1997, the Company purchased Airline Cabin
Management and Communication Systems ("ACAMS"), which are the next generation
hardware platforms developed by ASIT, and other equipment from ASIT for a
price of $1,081,650 ($895,500 as translated at June 30, 2000) through the
issuance of 1,875,000 shares of common stock and 1,875,000 common stock
purchase options. The price of both purchases represents ASIT's original cost
in such systems.

The following is a summary of property and equipment at June 30, 2001:

CMA-3200, ACAMS and other                         $ 1,038,411
Less: Accumulated depreciation                      ( 216,643)
                                                   ----------
                                                  $   821,768
                                                   ----------


The CMA-3200 equipment is depreciated over five years using the straight line
method. Depreciation expense for the years ended June 30, 2001 and 2000 was
$57,419 and $66,921 respectively. As of June 30, 2001 the ACAMS equipment had
not yet been placed in service or depreciated.

NOTE 4.  INVESTMENT IN MEDIA RIGHTS

The Company through various transactions has acquired the rights to market,
sell and receive revenues from the sale of  advertising and sponsorship
related to the installation of its systems on commercial aircraft. The Company
recorded the cost of these media rights at $373,350 ($255,300 as translated at
June 30, 2001). The investment in media rights is amortized over a period of 5
years using the straight line method. Accumulated amortization at June 30,
2001 was $190,111. Amortization expense for the years ended June 30, 2001 and
2000 was $53,913 and $63,375.

NOTE 5.  ACQUISITIONS

On July 1, 1998, the Company acquired all of the issued and outstanding common
stock and stock options of ASIE in exchange for common stock and common stock
options of the Company. Under the terms of the agreement, ASIE's outstanding
shares and options were exchanged at a ratio of one share and one option of the

                                     F-11
<PAGE>

                             ASI ENTERTAINMENT, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 5.  ACQUISITIONS (Continued):

Company for every eight shares and eight options of ASIE. As a result of the
exchange, ASIE and its wholly owned inactive subsidiary, ASI Media became
wholly owned subsidiaries of the Company, and the shareholders of ASIE
received 5,293,990 shares and became shareholders of 92.7% of the Company.
Generally accepted accounting principles require that the Company whose
shareholders retain a majority interest in a combined business be treated as
the acquiror for accounting purposes. As a result, the merger was treated as
an acquisition of the Company by ASIE, and a recapitalization of ASIE.
Accordingly, the Company's balance sheet consists of ASIE's net assets and the
Company's net assets at historical cost, and the statement of operations
includes ASIE's operations for the period presented and the operations of the
Company from the date of acquisition. As a result of the acquisition, the
Company obtained 417,189 shares previously issued to the prior shareholders of
ASI Entertainment, Inc., resulting in a total of 5,711,179 shares issued and
outstanding subsequent to the acquisition.


NOTE 6.  STOCKHOLDERS' EQUITY

Common stock

The Company as of June 30, 2001 had 100,000,000 shares of authorized  common
stock, $.0001 par value, with 6,344,587 shares issued, 6,294,587 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, 2001 had 20,000,000 shares of authorized preferred
stock, $.0001 par value, with no shares issued and outstanding.

Stock options

At June 30, 2001, the Company had stock options outstanding as described below.

Non-employee stock options

The Company accounts for non-employee stock options under SFAS 123, whereby
options 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.


                                      F-12
<PAGE>

                             ASI ENTERTAINMENT, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 6.  STOCKHOLDERS' EQUITY (Continued):

In July, 1998 the Company issued 43,158 stock options, allowing the holder to
purchase one share of common stock per option, exercisable immediately at
$0.50 per share to a consulting company as compensation for services, and
issued 4,384,015 options, allowing the holder to purchase one share of common
stock per option, exercisable immediately at $0.50 per share to option holders
in ASIE in exchange for their outstanding options in ASIE. These options,
totaling 4,427,173 at the beginning of the year, with an extended option term
ending June 30, 2003, allow the holder to exercise no more than one-third of
the options in any one year, with options of the allowable one-third which are
not exercised lapsing. During the year ended June 30, 2001, 2,500 options were
exercised and 1,473,224 lapsed. During the year ending June 30, 2002,
1,475,724 options are exercisable and will lapse if not exercised, and for the
year ending June 30, 2003 a similar number of options are exercisable and will
lapse if not exercised. As of June 30, 2001, 3,051,449 of these options
remained outstanding.

In March, 2000, the Company granted 100,000 stock options, allowing the holder
to purchase one share of common stock per option, exercisable immediately at
$0.50 per share with the option term running through August 14, 2002, to an
individual for consulting services. In July, 2000 the Company cancelled 50,000
of these options. As of June 30, 2001, 50,000 of these options remained
outstanding.

The Company incurred and has accrued no material compensation expense under
any of its non-employee stock options.

Employee 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. Had compensation cost for the
Company's employee stock option awards and incentive stock option plan been
determined based on the fair value at the grant dates for awards under the
stock option










                                      F-13
<PAGE>

                             ASI ENTERTAINMENT, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 6.  STOCKHOLDERS' EQUITY (Continued):

grants and incentive stock option plan consistent with the method of FASB
Statement 123, the Company's net income and earnings per share would not have
changed as indicated in the pro forma amounts below:

                                                       2001              2000
                                                  ----------        ----------

Net income (loss)            As reported        $(   254,373)     $(   484,349)
                             Pro forma          $(   254,373)     $(   484,349)

Basic and fully diluted      As reported               $(.08)            $(.04)
    earnings per share       Pro forma                 $(.08)            $(.04)


In July, 1998, the Company issued 500,000 options, allowing the holder to
purchase one share of common stock per option, exercisable immediately at $.50
per share to certain officers and directors of the Company in exchange for
their outstanding options in ASIE. These options, with an option term ending
June 30, 2003, allow the holder to exercise no more than one-third of the
options in any one year, with options of the allowable one-third which are not
exercised lapsing. During the year ended June 30, 2001, no options were
exercised and 166,667 lapsed. During the year ending June 30, 2002, 166,667
options are exercisable and will lapse if not exercised, and for the year
ending June 30, 2003, 166,666 options are exercisable and will lapse if not
exercised. As of June 30, 2001, 333,333 of these options remained outstanding.


















                                     F-14
<PAGE>

                             ASI ENTERTAINMENT, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 6.  STOCKHOLDERS' EQUITY (Continued)

A summary of the status of the Company's employee stock options as of June 30,
2001 is presented below:


                                             Weighted Ave.
Options                             Shares   Exercise Price
-------                             ------   --------------

Outstanding at
      beginning of period          500,000        $ 0.50
Granted                                  -             -
Exercised                                -             -
Forfeited                          166,667
                                   -------  ------------
Outstanding at
      end of period                333,333        $ 0.50
Options exercisable
     at period end                 166,667
Weighted average fair
     value of options
     granted during the
     the period                                 $      -


The following table summarizes information about employee stock options
outstanding at June 30, 2001.

                     Options Outstanding                  Options Exercisable
            ---------------------------------------   -------------------------

                            Weighted
                             Ave.        Weighted
Range of       Number       Remaining      Ave.      Number
Exercise    Outstanding    Contractual   Exercise   Exercisable  Weighted Ave.
Price       at 6/30/01       Life         Price    at 6/30/01   Exercise Price
-----       ----------       ----         -----    ----------   --------------
$ 0.50       333,333        2 Years      $ 0.50      166,667         $ 0.50








                                  F-15
<PAGE>

                             ASI ENTERTAINMENT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued


NOTE 7.  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 continuing engineering, installation, maintenance and
marketing efforts along with general administrative expenses. 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. In addition, the Company may also attempt to negotiate
revenue sharing arrangements with vendors or customer airlines whereby the
Company will share its advertising revenues in exchange for capital to cover
equipment or installation costs. The Company also expects additional contracts
with airlines to install its equipment in the near future. Management believes
that actions presently being taken to obtain additional funding provide the
opportunity for the Company to continue as a going concern.

























F-16
<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The officers and directors of the Company are as follows:

Name:                                  Title:
-----                                  ------

Ronald J. Chapman                      President  and Director

Graham O. Chappell                     Director

Philip A. Shiels                       Executive Director and Chief Financial
                                          Officer and Director

Richard W. Mason                       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 five 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:

RONALD J. CHAPMAN, 49, 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., ASI Australia, ASI Entertainment Pty. Ltd., and ASI
Media Pty. Ltd. ASI Entertainment Pty. Ltd. and ASI Media Pty. Ltd. are
Subsidiaries of the Company. Since inception, Mr Chapman has overseen the
product development and coordinated the marketing for ASIT Australia. Mr.
Chapman is also managing director and the beneficial owner of 75% of Chapman
International Pty Ltd., a shareholder of the Company.

GRAHAM O. CHAPPELL, 56, has been a director of the Company since its inception
and a director of ASIT Australia since 1987. 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 aviation trading and aerospace, technology and
defence industries consultancy company. Chappell Salikin has served as a
consultant to ASIT Australia, ASI Holdings Pty. Ltd. and ASI Entertainment Pty.
Ltd. 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, 49, 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


                                      -15-
<PAGE>


services. Shiels & Co. has served as a consultant to ASIT Australia, ASI
Holdings Pty. Ltd. and ASI Entertainment Pty. Ltd. since 1994. Mr Shiels has
served as the 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. Mr. Shiels has been an Associate Member of
the Institute of Chartered Accountants in Australia since 1978.

RICHARD W. MASON, 68, has been a director of the Company since June, 1998. From
1989 through 1997, Mr. Mason served as president of Global Aviation Associates,
Inc. From June, 1997 to the present, Mr. Mason served as chairman of the Board
of Directors of Global Aviation Company, Aurora, Colorado. Prior to forming
Global Aviation, Mr. Mason held the position of Vice President of Combs Gates,
Inc. (a subsidiary of Gates Learjet, Denver Colorado), a company with which he
was associated twenty years. From 1995 to present, Mr. Mason has served as vice
president of Lasting Treasures Publishing Company, Houston, Texas, a music
publishing company.

ITEM 10. 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 President of the Company
during 2001. No officer of the Company received a salary and bonus in excess of
$100,000 for services rendered during the fiscal year ended June 30, 2001:

SUMMARY COMPENSATION TABLE

NAME AND PRINCIPAL           FISCAL    ANNUAL      COMPENSATION        OTHER
POSITION                     YEAR      SALARY      BONUS/AWARDS    COMPENSATION
                                                                      ALL OTHER


Ronald Chapman,
President                     2001       0              0          A$72,000(1)

Philip Shiels,
Chief Financial Officer       2001       0              0          A$60,000(1)

Richard Mason,
Director                      2001       0              0          US$6,500(2)



(1) The Company was invoiced A$300,000 by Chapman International Pty. Ltd. for
    management services rendered by Messrs. Chapman and Shiels. The fee was in
    turn allocated to Messrs. Chapman and Shiels for services rendered to the
    Company for the fiscal year ended June 30, 2001 on the basis set out above.
(2) Mr Mason has received advances from the Company which will be offset
    against future directors fees.


                                      -16-
<PAGE>

ITEM 11. 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 (3)                    4,318,507              37.0%
President and director
160 Silvan Road,
Wattle Glen
Victoria, 3096, Australia

Graham O. Chappell (4)                   1,248,077              11.4%
Director
5 Marine Parade, Suite 2
St. Kilda,
Victoria, 3148, Australia

Philip A. Shiels (5)                       918,689               8.6%
Chief Financial Officer and director
39 Alta Street
Canterbury, Victoria, 3126,
Australia

Richard W. Mason                            50,000               0.5%
Director
79 Tami Road
Red Feather Lakes, Colorado 80013

Chapman International Pty. Ltd. (6)        783,333               7.2%
160 Silvan Road
Wattle Glen, Victoria, 3096,
Australia

Research No. 1 Trust (7)                 3,060,255              27.2%
4th Floor
136 Broadway, Newmarket
Auckland 1 New Zealand

Wardour Consultants Ltd. (8)             1,312,500              11.9%
Nine Queens Road
Suite 605-6
Central, Hong Kong

Research No. 2 Trust (9)                   918,689               8.6%
4th Floor
136 Broadway, Newmarket
Auckland 1 New Zealand

Glasser Limited. (10)                     801,056               7.6%
Suite 803  Luk Yu Building
24 - 26 Stanley St.,
Central Hong Kong
Hong Kong


                                      -17-
<PAGE>

All the officers and directors
as a group (4 persons)                   8,268,615              67.4%


(1)  Assumes 10,525,934 shares of Common Stock outstanding and assumes exercise
     of options held by named security holder.
(2)  Assumes sale of all the Securities offered by the Selling Securityholders.
(3)  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 which owns
     266,575 Shares and Mr. Chapman is the majority shareholder thereof and may
     be deemed to be the beneficial owner of such Shares. Mr. Chapman holds the
     power of attorney for the trustee of the Research No. 1 Trust which holds
     2,326,922 Shares. The listed share holdings also include the Options to
     purchase 333,333 Option Shares held by Chapman International Pty. Ltd.,
     Options to purchase 83,337 Option Shares held directly by Mr. Chapman, and
     Options to purchase 733,333 Options Shares held by the Research No. 1
     Trust.
(4)  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 and
     416,671 Option Shares held by it. 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. Chappell Salikin
     Weil Associates Pty. Ltd. is 20% shareholder of ASI Holdings Pty. Ltd.
     which holds 61.5% of ASIT Australia. Mr. Chappell is not deemed to be a
     beneficial holder thereof.
(5)  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 752,022 Shares and
     166,667 Options. Mr. Shiels is a 25% shareholder of Chapman International
     Pty. Ltd. which owns 55% of ASI Holdings Pty. Ltd. which, in turn, holds
     61.5% of ASIT Australia. Mr. Shiels is not deemed to be a beneficial owner
     thereof.
(6)  Includes 450,000 Shares and 333,333 Options. Ronald J. Chapman, President
     and a director of the Company is the managing director (president) and
     majority shareholder of Chapman International Pty. Ltd., and Philip A.
     Shiels, Chief Financial Officer and a director of the Company, is a 25%
     shareholder of Chapman International Pty. Ltd.
(7)  Includes  2,326,922 Shares and 733,333 Options. Ronald J. Chapman,
     President and a director of the Company, holds the power of attorney for
     the trustee of the Research No. 1 Trust which holds 2,326,922 Shares.
(8)  Includes 812,500 Shares and 500,000 Options. Lim Tjoei Hoat is the
     beneficial owner of Wardour Consultants, an unrelated independent entity.
(9)  Includes 752,022 Shares and 166,667 Options. Philip A. Shiels, Chief
     Financial Officer and a director of the Company, is the trustee and
     beneficial shareholder of the 752,022 Shares and 166,667 Options owned by
     Research No. 2 Trust.
(10) Ronald Charles Banks is the beneficial owner of Glasser Limited, an
     unrelated independent entity which holds 801,056 shares.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company has purchased the intellectual property of the ASI-9000 from ASI
Australia and has contracted to purchase the ACAMS, when available, from ASIT
Australia. ASIT Australia provides maintenance and servicing of the ACAMS
equipment and the ASI-9000 technology. Ronald J. Chapman, President and a

                                      -18-
<PAGE>

director of the Company, controls Chapman International Pty. Ltd. which owns
55% of ASI Holdings Pty. Ltd. ASIT Australia which, in turn, owns 61.5% of ASI
Australia. Philip A. Shiels, Chief Financial Officer and a director of the
Company, is a 25% shareholder of Chapman International Pty. Ltd. Graham O.
Chappell, a director of the Company, is the managing director (president) and
Sole shareholder of Chappell Salikin Weil Associates Pty. Ltd. which is a 20%
shareholder of ASI Holdings Pty. Ltd. and 25% shareholder in ASIT Australia.

Ronald Chapman, Graham Chappell, and Philip Shiels are directors of the Company
and directors of the Company's subsidiaries ASI Entertainment Pty. Ltd. ("ASIE
Australia") and ASI Media Pty. Ltd. Ronald Chapman and Graham Chappell are the
directors and officers of ASIT Australia.

Chapman International Pty. Ltd. will likely provide management services to the
Company. Ronald J. Chapman, President and a director of the Company, is the
beneficial owner of 75% of Chapman International Pty. Ltd. and Philip A.
Shiels, a director of the Company, is the owner of the remaining 25%.

By an agreement of January 9, 1996, ASI Entertainment Pty. Ltd. (prior to
becoming a subsidiary of the Company) purchased from ASI Technologies Pty. Ltd.
("ASIT Australia") for the purchase price of $894,450, among other items, 40
outstanding shares of ASI Media Pty. Ltd., the intellectual property of the
ASI-9000 Program, and all rights contained in the exclusive Reseller Agreement
for the ACAMS Cabin Management and Communications System. The purchase price
was paid by the issuance of 1,500,000 shares of ASI Entertainment, Inc. common
stock. The exclusive Reseller Agreement provides, among other matters, that ASI
Entertainment Pty. Ltd. shall have the sole and exclusive right on a world wide
basis to purchase ACAMS terminals from ASI Australia for use in the ASI-9000 at
$30,000 each, or such lesser price as mutually agreed from time to time, and
that ASI Australia shall provide all necessary technical support services,
including training, to ASI Entertainment Pty Ltd. or its customers in regard to
such terminals. The Reseller Agreement has a term of 5 years from the date of
execution (January 9, 1996) with an automatic 5 year renewal at the option of
ASI Entertainment Pty. Ltd.

By an agreement of December 16, 1996, ASI Entertainment Pty. Ltd. (prior to
becoming a subsidiary of the Company) purchased from ASIT Australia for the
purchase price of $418,358, the hardware and equipment, including aircraft
certification on the Boeing 737 and Boeing 757, relating to the Passenger Video
Systems which had been installed on certain aircraft operated by Air Europa
including 9 moving map displays (the CMA 3200), 9 cabin control units, 9
installation kits and 8 Sony 8.6" monitors. The purchase price was paid by the
issuance of 659,975 shares of ASI Entertainment, Inc. common stock.

On September 30, 1997, ASI Entertainment Pty. Ltd. (prior to becoming a
subsidiary of the Company) and ASIT Australia executed an agreement where ASI
Entertainment Pty. Ltd. purchased certain communications systems and stocks,
including but not limited to, 36 ACAMS I systems, two ACAMS prototype systems,
and 2 VI-4000 Satellite News Units, in exchange for a purchase price of
$1,081,650 payable by the issuance of 1,875,000 shares of common stock of ASI
Entertainment, Inc. and options to acquire 1,875,000 shares of ASI
Entertainment, Inc. common stock for $0.50 per share. These shares were
subsequently assigned by ASIT Australia to certain debtors in payment of
outstanding liabilities owed by ASIT Australia.

On October 9, 1997, ASI Entertainment Pty. Ltd. (prior to becoming a subsidiary
of the Company) and ASI Media Pty. Ltd. executed an agreement where ASI
Entertainment Pty. Ltd. acquired for a purchase price of $328,945 all of ASIM's
right, title and interest to the Media Agreement and the Media Agreement was
canceled and voided. The purchase price was paid by distribution of 375,000

                                      -19-
<PAGE>

shares to all the beneficiaries of the ASIM Trust except ASI Entertainment Pty.
Ltd. As a result, 375,000 shares of ASI Entertainment, Inc. were issued to
Vision, Inc. and Australian Authorised Investments, Ltd. as the beneficiaries
of the ASIM Trust.

By an agreement dated August 16, 2001 (refer Item 13.), the Company purchased
the marketing and manufacturing rights to the Securetag technology from the
Research Trust No. 1.  Mr Ron Chapman, the President and a director of the
Company, holds a power of attorney for the trustee of the Research No. 1
Trust. The terms of agreement provide that the purchase is to be satisfied by
the issue of 6,000,000 shares of the Company's common stock.

The Company has in the past and plans to continue in the future to purchase
products and services from ASIT Australia.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Agreement dated August 16, 2001 between the Company and the Research No. 1
Trust is included as EXHIBIT 10.1.


                                      -20-
<PAGE>


                                   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/ Ronald J. Chapman
                                           ------------------------------------
                                               Ronald J. Chapman, President

                                     By:  /s/ Philip A. Shiels
                                           ------------------------------------
                                                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/ Ronald J. Chapman                     Director                  10/12/01
- - --------------------------------
      Ronald J. Chapman


/s/ Graham O. Chappell                    Director                  10/12/01
- - --------------------------------
     Graham O. Chappell


/s/ Philip A. Shiels                      Director                  10/12/01
- - --------------------------------
     Philip A.  Shiels


                                          Director                  10/12/01
- - --------------------------------
     Richard Mason
















                                      -21-
<PAGE>


EXHIBIT 10.1

THIS AGREEMENT is made on the .................. day of August 2001

BETWEEN:

ASI ENTERTAINMENT, INC. of 15200 East Girard Avenue, Suite 3000, Aurora,
Colorado, 80014, United States of America, or nominee ("ASI")

AND

RESEARCH No. 1 TRUST of 4th Floor, 136 Broadway, Newmarket. Auckland 1, New
Zealand ("R1")

RECITALS:

A.  ASI operates a niche business within the airline in-flight entertainment
    and communications industry and is listed on the NASD OTC Bulletin Board
    in the United States of America.

B.  R1 is the sole owner of the intellectual property of the "Securetag" RFID
    tracking system as set out in Schedule1 hereto.  Applications of the
    tracking system include, but are not limited to, tracking the collection
    and delivery of parcels, and tracking parcels and other items in a
    warehouse or transportation environment.

C.  ASI wishes to acquire, and R1 wishes to license, the marketing and
    manufacturing rights to the Securetag intellectual property ("IP"), in the
    Territories as set out in Schedule 2 hereto (the "Territories").

D.  The Parties now enter into this Agreement to record the terms of granting
    the marketing and manufacturing rights to the IP and other matters.


NOW, THEREFORE, in consideration of the mutual promises, covenants and
representations contained herein, ASI and R1 AGREE AS FOLLOWS:

ARTICLE I

  1.  R1 hereby grants ASI the right to acquire the North and South American
      and European marketing and manufacturing rights for the IP
      (the "Rights") as set out herein:

  2.  The agreed price will be Three Million US dollars (US$3,000,000).

  3.  The purchase price is to be satisfied by the issue of Six Million
      (6,000,000) new shares of common stock of ASI at an issue price of
      US$0.50 per share (the "Shares").

  4.  The completion of this Agreement is subject to ASI delivering the Shares
      as directed by R1 to R1 and/or its nominees, within 30 days of the
      signing of this Agreement.


                                      -22-
<PAGE>

ARTICLE II
REPRESENTATIONS AND WARRANTIES CONCERNING R1:

R1 hereby represents and warrants to ASI that:

2.1  Intellectual Property: R1 is the legal owner of the IP as described in
Schedule 1 and it has not given rights to the IP, or marketing or other
rights, to any other party in relation to the Territories.

2.2  of the transactions contemplated herein (to the extent necessary), and
R1 has full power and authority to execute, deliver and perform the matters
affecting R1 under this Agreement, and this Agreement is executed by a duly
authorized representative of R1 and is a legal, valid and binding obligation
of R1 and is enforceable in accordance with its terms and conditions.

2.3  Ability to Carry Out Obligations:  The execution and delivery of this
Agreement by R1 and the performance by R1 of its obligations hereunder in the
time and manner contemplated will not cause, constitute or conflict with or
result in any of the following:  (a) a breach or violation of any provision
of, or constitute a default under any license, indenture, mortgage instrument,
article of incorporation, by-law, other agreement or instrument to which R1 is
a party, or by which it may be bound, nor will any consents or authorizations
of any party other than those hereto be required, (b) any event that would
permit any party to any agreement or instrument, to terminate it or to
accelerate the maturity of any indebtedness or other obligation of R1, or, (c)
an event that would result in the creation or imposition of any lien, charge
or encumbrance on any asset of R1.

2.4  Full Disclosures:  None of the representations and warranties made by R1
herein or in any Schedule, certificate or memorandum furnished or to be
furnished by R1, contains or will contain any untrue statement of material
fact or omit any material fact the omission of which would be misleading.

2.5  Material Contracts:  R1 has no material contracts to which it is, a
party or, by which it is bound, other than those known to the Directors of
ASI.  R1 has no material contracts to which it is a party or by which it is
bound which would affect the IP or R1's business and/or financial condition in
a materially negative manner.

ARTICLE III

3.1  Completion of this Agreement shall be conditional upon:

  (a)  ASI receiving all such approvals for the transactions referred to in
this Agreement as shall be necessary from the Securities & Exchange Commission
of the United States and such other regulatory approvals as may prove
necessary by not later than the Effective Date;

  (b)  if required by the Articles of Incorporation and By-Laws of ASI, the
shareholders of ASI approving the transactions referred to in this Agreement
prior to the Effective Date.



                                      -23-
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ARTICLE IV

CONDITIONS PRECEDENT TO ASI'S PERFORMANCE:

4.1  Conditions:  ASI's obligations hereunder shall be subject to the
satisfaction at the Effective Date and all other relevant dates, of all the
conditions set forth in this Article IV.  ASI may waive any or all of these
conditions in whole or in part provided, however, that no such waiver of a
condition of or any of ASI's other rights or remedies, at law or in equity,
shall be made if R1 shall be in default of any of its respective
representations, warranties or covenants under this Agreement.

4.2  Accuracy of Representations:  Except as otherwise permitted by this
Agreement, all representations and warranties by R1 in this Agreement or in
any written statement that shall be delivered to ASI by R1 under this
Agreement shall be true and accurate on and as of all the relevant dates as
though made at that time.

4.3  Performances:  R1 shall have performed, satisfied and complied with all
covenants, agreements and conditions required by this Agreement to be
performed or complied with by it on or before the relevant dates.

4.4  Absence of Litigation:  No action, suit, or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or its consummation, shall have been instituted
or threatened against R1 on or before the relevant dates.  No action, suit, or
proceeding before any court or any governmental body or authority that could
jeopardize or put at risk of loss, the IP and/or current assets of R1, shall
have been instituted or threatened against R1 on or before the relevant dates
(as the case may be).  R1 shall resolve in its favor, any dispute, action or
threat of legal action, from any court or any governmental body, prior to the
relevant dates, in the event such action or threat of action should currently
exist.  Any dispute in which R1 has a part, any action, suit, or proceeding by
any person, entity, court or governmental body or authority against R1 left
unresolved on the relevant dates, shall immediately render this Agreement, on
that date, forever null and void, if ASI notifies R1 in writing to that effect.

ARTICLE V

MISCELLANEOUS

5.1  Captions and Headings.  The article and paragraph headings throughout
this Agreement are for convenience and reference only and shall not define,
limit or add to the meaning of any provision of this Agreement.

5.2  No Oral Change.  This Agreement and any provision hereof may not be
waived, changed, modified, or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver,
change, modification or discharge is sought.

5.3  Non-Waiver.  The failure of any party to insist in any one or more cases
upon the performance of any of the provisions, covenants or conditions of this
Agreement or to exercise any right herein contained shall not be construed as
a waiver or relinquishment in the future of any such provisions, covenants or
conditions.  No waiver by any party of one breach by another party shall be
construed as a waiver with respect to any other subsequent breach.


                                      -24-
<PAGE>


5.4  Time of Essence.  Time is of the essence of this Agreement and of each
and every provision hereof.

5.5  Choice of Law.  This Agreement and its application shall be governed by
the laws of the State of Colorado and construed solely by the appropriate
courts of the State of Colorado.

5.6  Counterparts.  This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Facsimile transmission
and execution of such document shall be binding as though a hard copy.  Hard
copies of documents if not initially executed, shall follow for execution by
the same designated Authorized Signatures.

5.7  Notices.  All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to
be given, or on the tenth day after mailing; if mailed to the party to whom
notice is being given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:

    ASI Entertainment, Inc. at 15200 East Girard Avenue, Suite 3000, Aurora,
    Colorado, 80014, United States of America;

    The Trustee of the RESEARCH No. 1 TRUST of 4th Floor, 136 Broadway,
    Newmarket, Auckland 1, New Zealand


5.8  Binding Effect. This Agreement shall enure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.

5.9  Mutual Consideration.  The parties hereto shall co-operate with each
other to achieve the purpose of this Agreement and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transaction described herein for the
best interests of all the parties hereto.

5.10  Announcements.  The parties will consult and co-operate with each other
as to the timing and content of any public announcements regarding this
Agreement.

5.11	Survival of Representations and Warranties.  The representations,
warranties, covenants and agreements of the parties set forth in this
Agreement or in any instrument, certificate, opinion or other writing
providing for in it, shall survive the relevant dates.


                                      -25-
<PAGE>


5.12  Entire Agreement.  This Agreement supersedes any and all prior
agreements and understandings, if any, between the parties hereto, and
expresses the entire agreement between the parties hereto, and cannot be
modified by any oral promise or statement by whomsoever made.


IN WITNESS WHEREOF, the Parties hereto have fully executed this Agreement,
having affixed their respective and witnessed Authorized Signatures.

EXECUTION BY AUTHORIZED REPRESENTATIVES OF THE PARTIES:





SIGNED by ..................................
an authorized representative of
ASI ENTERTAINMENT, INC.



SIGNED by ..................................

an authorized representative of THE RESEARCH
No. 1 TRUST


SCHEDULE 1 - Description of Intellectual Property

The "Securetag" RFID tracking system whose applications include, but are not
limited to, tracking the collection and delivery of parcels, and tracking
parcels and other items in a warehouse or transportation environment.





SCHEDULE 2 - Territories

North America refers to the United States of America and Canada.

South America

Europe refers to countries that are members of the European Community.








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