UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





ANNUAL
REPORT UNDER SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For
the fiscal year ended September 30, 2009





Commission
file number: 0-6428





ASI
Technology Corporation


(Exact
name of registrant as specified in its charter)




Nevada
            88-0105586(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization)
            Identification
      Number)





980
American Pacific Drive, Suite #111


Henderson,
Nevada 89014


(Address
of principal executive offices)





(702)
734-1888


(Registrant’s
Telephone Number, Including Area Code)





Securities
registered pursuant to Section 12(b) of the Exchange Act: None





Securities
registered pursuant to Section 12(g) of the Exchange Act:


Common
Stock, par value $0.02





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes o No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes o No x





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x    No 
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).


o
Yes   o  No  (not
required)





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. x













Indicate
by check mark whether registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company .  See
the definitions of “accelerated filer,” “large accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
Accelerated Filer o   
Accelerated filer o   
Non-accelerated filer o   
Smaller reporting company x


Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o    No
x





The
aggregate market value of the issuer’s Common Stock held by non-affiliates of
the registrant on March 31, 2009 was approximately $2.342,000 based on the
closing price as reported on the NASD’s OTC Electronic Bulletin Board
system.





As of
December 15, 2009 there were 17,093,723 shares of ASI Technology Corporation
Common Stock, par value $.02, outstanding.





























2





TABLE
OF CONTENTS


PagePART
      IITEM
      1.
            Business
            4ITEM
      1A.
            Risk
      Factors
            14ITEM
      1B.
            Unresolved
      Staff Comments
            17ITEM
      2.
            Properties
            18ITEM
      3.
            Legal
      Proceedings
            18ITEM
      4.
            Submission
      of Matters to a Vote of Security Holders
            18Executive
      Officers and Other Key Employees of the RegistrantPART
      IIITEM
      5.
            Market
      for the Registrant’s Common Equity, Related Stockholder Matters
      andIssuer
      Purchases of Equity Securities
            18ITEM
      6.
            Selected
      Financial Information
            19ITEM
      7
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            19ITEM
      7A.
            Quantitative
      and Qualitative Disclosures about Market Risk
            24ITEM
      8.
            Financial
      Statements and Supplementary Data
            24ITEM
      9.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            42ITEM
      9A(T).
            Controls
      and Procedures
            42ITEM
      9B.
            Other
      Information
            43PART
      IIIITEM
      10.
            Directors,
      Executive Officers and Corporate Governance
            43ITEM
      11.
            Executive
      Compensation
            45ITEM
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            48ITEM
      13.
            Certain
      Relationships and Related Transactions and Director
      Independence
            49ITEM
      14.
            Principal
      Accounting Fees and Services
            50PART
      IVITEM
      15.
            Exhibits,
      Financial Statement Schedules
            50SIGNATURES
            53





















3





FORWARD-LOOKING
STATEMENTS





IN
ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 AND THE COMPANY DESIRES TO TAKE ADVANTAGE OF THE “SAFE HARBOR” PROVISIONS
THEREOF. THEREFORE, THE COMPANY IS INCLUDING THIS STATEMENT FOR THE EXPRESS
PURPOSE OF AVAILING ITSELF OF THE PROTECTIONS OF SUCH SAFE HARBOR WITH RESPECT
TO ALL OF SUCH FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS IN
THIS REPORT REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS
AND FINANCIAL PERFORMANCE. EXAMPLES OF FORWARD LOOKING STATEMENTS INCLUDE THE
EXPECTATIONS OF THE COMPANY WITH RESPECT TO ITS STRATEGY. THERE CAN BE NO
ASSURANCES THAT THE COMPANY'S FINANCIAL GOALS WILL BE REALIZED. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES,
INCLUDING THOSE DISCUSSED HEREIN, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM HISTORICAL RESULTS OR THOSE ANTICIPATED. IN THIS REPORT, THE
WORDS “ANTICIPATES,” “ESTIMATES,” “BELIEVES,” “EXPECTS,” “INTENDS,” “FUTURE,”
“GOAL,” “OBJECTIVE” AND SIMILAR EXPRESSIONS GENERALLY IDENTIFY FORWARD-LOOKING
STATEMENTS. READERS ARE CAUTIONED TO CONSIDER THE SPECIFIC RISK FACTORS
DESCRIBED BELOW AND NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE
HEREOF.





In this
report, the terms “ASI,” “the Company,” “we,” “us,” and “our” refer to ASI
Technology Corporation.





Part
I





ITEM
1. BUSINESS.





Introduction


ASI
Technology Corporation (“ASI”) is incorporated under the laws of the State of
Nevada. ASI and our two wholly-owned subsidiaries (the “Company”) is primarily a
specialty “high risk” finance company providing commercial and venture capital
financing. ASI Capital Corporation (“ASI Capital”) was incorporated in December
2006 to conduct real estate loan activities. ASI Land Holdings, Inc. (“ASI
Land”) was incorporated in November 2008 to acquire direct ownership interests
in investment and foreclosed assets. Our limited other activity has been focused
on the development of plasma technology for sterilization and decontamination
that we licensed in January 2003. We have no current plans or commitments
regarding any other operating or development activities, however we have
acquired other technologies in the past and may pursue other investments,
technology, acquisitions or mergers in the future.





We have
two reportable segments, specialty finance and technology
development.





Our
specialty finance activities focused in prior years on making real estate,
corporate and other loans. In 2009 we funded a direct financing equipment lease.
Credit and capital markets have deteriorated on a global basis over the last
three years, triggered initially by credit problems in the United States
subprime residential mortgage sector. In 2008, the “subprime contagion” spread
to virtually every debt market, including our market for real estate loans,
causing dramatic declines in asset values, widespread illiquidity and massive
losses at many financial institutions. This environment adversely affected real
estate values and reduced the volume of real estate activity resulting in
increased delinquencies and defaults. These conditions adversely affected the
value of real estate owned by our borrowers and their ability to refinance or
otherwise repay outstanding notes. The continuation of these conditions during
2009 adversely affected our ability to work out of troubled and impaired
loans.





We made
no new real estate loans during fiscal 2009 and took the following actions
related to real estate notes:






·
            In
      December 2008 we charged off, due to foreclosure actions by unaffiliated
      senior creditors, one loan for $1,000,000 against a full loan loss
      provision provided in fiscal 2008 resulting in no gain or loss in the
      current year. This loan was held by DavCap LLC (“DavCap”), an affiliated
      entity through common ownership by our President, Jerry E. Polis. We
      recognized a gain of $122,613 recovered from DavCap during fiscal 2009
      through consolidation of DavCap as a variable interest entity prior to its
      liquidation in September 2009. (See Conflicts of Interest and
      Related Party Lending Transactions on page
  9).





4


·
              In
      April 2009 we exchanged two impaired notes with an aggregate principal
      amount of $1,268,000, and a net carrying value of zero (due to a full loan
      allowance established in fiscal 2008), for water rights valued at
      $381,000.
 ·
              In
      September 2009 we charged off for one residential and one other note from
      a single party for a gross amount of $62,448 (subject to a prior year loan
      loss allowance of $15,000) due to significant uncertainty in collecting on
      collateral.
 ·
              Subsequent
      to our fiscal year end, in December 2009 we took title to three
      properties, consisting of 6.37 acres of raw land, through deeds in lieu of
      foreclosure. This land was the collateral for our remaining three
      outstanding real estate notes with aggregate principal of $2,747,025 and a
      net value at September 30 2009, after allowance of $535,900 for loan
      losses established in the prior year, of
  $2,211,125.


As a
result of the above actions we have no real estate notes outstanding as of the
date of this report and we have no plans to make additional real estate
loans.





ASI
Capital was granted a Nevada Mortgage Banking license in February 2007. Since we
are no longer making real estate loans, we allowed this license to lapse in
April 2009. ASI Land holds our water rights and the 6.37 acres of raw land
described above.





Due to a
lack of opportunities in real estate or other lending, in August 2009 we funded
a direct financing lease in the amount of $360,000 to an unaffiliated
entity.





Our
investment in technology has focused on our licensed plasma sterilization and
decontamination technology. This patented method uses low voltage to produce
high volumes of atmospheric pressure plasma also known as room temperature or
“cold plasma”. Cold plasma has been demonstrated in government and university
studies to be useful for sterilization and decontamination. This technology is
in the early stage of development and there can be no assurance that commercial
viability will be achieved. Our plan is to develop improved prototype devices to
demonstrate this technology for commercial and government applications and
license the technology to others.





Unless we
sell our investment in land or water rights or obtain additional financing, we
do not anticipate making any substantial new investments during fiscal
2010.





We were
incorporated on January 9, 1931 and have evolved through a number of name
changes and equity reorganizations. We have 31,000,000 shares authorized, $0.02
par value, of which 30,000,000 shares are designated common stock and 1,000,000
shares are designated preferred stock. As of the date of this annual report,
there were 17,093,723 shares of common stock issued and outstanding. There are
no shares of preferred stock issued or outstanding.





Our
principal executive offices are located at 980 American Pacific Drive, Suite
#111, Henderson, Nevada 89014. Our telephone number is (702) 734-1888 and our
Internet Web site is www.asiplasma.com.
The information on our Web site is not part of this annual report.





Specialty
Finance Business





Strategy





We
commenced our specialty finance business in 2005. Our investment objective is to
generate income and cash flow from high-interest financing to commercial and
corporate borrowers or lessees. We also hold assets obtained upon recovery of
prior notes for investment and future sale. Our strategy is to grow our business
from internally generated funds. We may in the future seek additional equity or
debt financing. To date, we have not employed participating investor note
financing or other institutional financing.





Our net
income has depended on net interest income, which is the difference between
interest and fee income from notes and investments, referred to as
interest-bearing assets. During fiscal 2009 we recognized gain related to
recoveries from water right assets received in exchange for a fully-reserved
real estate note and in December 2009 obtained title to 6.37 acres of raw land
in exchange for three real estate notes. The sale or disposal of these assets
may result in future gain or loss and affect our results of
operations.


5





Because
of our willingness to fund higher risk loans and investments, borrowers have
been more willing to pay us an interest rate that is typically five to twelve
points above the rates generally charged by conventional lenders. In 2008 and
2009 the value of our collateral on real estate notes declined subsequent to
origination forcing us to take losses and cease any new real estate
lending.





We have
no commitments for any new investments. We may seek to participate in other
types of notes, loans, real estate investments or other ventures in the future.
We may also participate in capital appreciation through project equity or
revenue participation or through other methods. Capital appreciation with
corporate loans or investments may consist of stock, warrants, other equity or
royalties. We have no commitments for any such loans or
investments.





Operations





Our
corporate and finance offices are located in Henderson, Nevada. We operate as a
direct lender and perform the record keeping, note and lease administration and
servicing functions with regard to our note and lease assets and related
investments.





We have
one full-time employee in our specialty finance business and our two executive
officers provide only part-time services to our company including managing our
specialty finance business. We do not expect that we will need to add additional
personnel or expanded facilities during the next twelve months.





Lending and Investment
Activities





We do not
advertise our specialty finance activities to the public or the commercial
sector. We do not seek participations by others in any loans or investments and
no other party currently has a beneficial interest in any of our investments. We
also do not solicit or accept loan or investment applications.





Our three
outstanding notes at September 30, 2009 were concentrated in Clark County,
Nevada and were exchanged for title to the underlying land collateral in
December 2009.





We rely
primarily on our management’s contacts and referrals from others to identify
prospective borrowers or investments. Management selects the projects and makes
all investment decisions. We have no formal policies for credit, collateral or
investment evaluation, collections or foreclosure or exchanges, timing of
charging off uncollectible loans, or recovery and management makes these
decisions based on experience on a case-by-case basis.





We
evaluate loans and investments for collectability and impairment at least
quarterly through a review of each loan or investment, its payment status, the
perceived value of the collateral, our ability to protect subordinate positions
in the collateral, if applicable, information from borrowers and any other
available information in accordance with appropriate accounting standards
including the guidance of SEC Staff Accounting Bulletin No. 102 – “Selected Loan Loss Allowance
Methodology and Documentation Issues.”





Our note
receivable portfolio consisted of the following types of notes at the dates
indicated:


6


Stated
              
              
              September
      30,Description
              
              Interest
      Rates
              
              
              2009
              
              
              2008Land
      acquisition and development notes:Secured
      by first trust deeds
              
              
              15%-18%
              
              
              $
              2,747,025
              
              
              $
              2,747,025Secured
      by second trust deeds
              
              
              15%
              
              
              
              -
              
              
              
              1,268,000Secured
      by third trust deeds
              
              
              24%
              
              
              
              -
              
              
              
              1,000,000Residential
      real estate second trust deed
              
              
              24%
              
              
              
              -
              
              
              
              54,648Corporate
      notes secured by asset liens
              
              
              18%-24%
              
              
              
              -
              
              
              
              400,000Other
      notes
              
              
              24%
              
              
              
              -
              
              
              
              12,8002,747,025
              
              
              
              5,482,473Unearned
      fees and other
              
              
              
              
              
              
              -
              
              
              
              (2,000
              )Allowance
      for loan losses
              
              
              
              
              
              
              (535,900
              )
              
              
              (2,818,900
              )$
              2,211,125
              
              
              $
              2,661,573





At
September 30, 2009, we considered our three outstanding notes aggregating
$2,747,025 to be impaired and had an allowance for note losses of $535,900 that
was established in the prior year. Subsequent to September 30, 2009 we obtained
title to the underlying three properties through deeds in lieu of foreclosure
recorded in December 2009. We expect to record the net value of the land
received at estimated fair value upon receipt and evaluation of an appraisal and
other fair value information.





In April
2009 we exchanged two impaired notes with an aggregate principal amount of
$1,268,000, and a net carrying value of zero (due to a full loan allowance), for
Nye County, Nevada water rights on 127 acre-feet of water. The water rights are
being held as an investment and are considered to have an indefinite life and,
therefore, not subject to amortization.





The
following table summarizes finance activity related to notes receivable for the
periods presented:





Year
      endedSeptember
      30,2009
              
              
              2008Balance,
      beginning of period
              
              $
              2,661,573
              
              
              $
              5,907,472Originations
              
              
              -
              
              
              
              500,000Deferred
      finance charges, net
              
              
              2,000
              
              
              
              174,753Loan
      loss provision
              
              
              (47,448
              )
              
              
              (2,948,370
              )Principal
      collected
              
              
              (405,000
              )
              
              
              (972,282
              )Balance,
      end of period
              
              $
              2,211,125
              
              
              $
              2,661,573


In
December 2009 we obtained title to the underlying three properties on the
$2,211,125 of remaining notes through deeds in lieu of foreclosure. Accordingly
we have no real estate or other notes outstanding nor any allowance for note
losses as of the date of this report.





Direct Financing
Lease





In August
2009 we funded a direct financing lease in the amount of $360,000 with an
unaffiliated entity that was used to finance electronic equipment with the
following balances at September 30, 2009:





Minimum
      lease payments receivable
              
              $
              720,000Unearned
      finance income
              
              
              (355,241
              )Direct
      finance lease receivable
              
              $
              364,759











7





The lease
provides for monthly installments based on usage with annual adjustments to
achieve minimum lease payments of $72,000 per annum with the possibility of
higher contingent rentals computed on an annual basis. We have certain renewal
options at the end of ten years and also certain equipment resale rights back to
the lessee.





Non-Performing Assets and
Allowance for Loan Losses





We define
non-performing assets as non-accrual notes (generally delinquent for more than
90 days). We classify a loan as impaired when we determine that it is probable
that we will not be able to collect all amounts due according to the contractual
terms of the loan. Impairment is measured based on the present value of expected
future cash flows or our estimate of fair value of the collateral, if the loan
is collateral dependent.





Our
allowance for loan activity is summarized below:





Year
      endedSeptember
      30,2009
              
              
              2008Allowance,
      beginning of period
              
              $
              2,818,900
              
              
              $
              -Provision
              
              
              47,448
              
              
              
              2,948,370Charge-offs
              
              
              (2,330,448
              )
              
              
              (129,470
              )Allowance,
      end of period
              
              $
              535,900
              
              
              $
              2,818,900








During
the year ended September 30, 2008 we had eight impaired notes and we provided a
loan loss reserve of $2,948,370 and wrote off $129,470 of the notes. During the
year ended September 30, 2009 we charged off one loan for $1,000,000 held by
DavCap, an affiliated variable interest entity under common ownership, due to
foreclosure actions by senior creditors. Fiscal 2009 charge-offs also included
$1,268,000, also due to foreclosure actions by senior creditors, related to the
two notes subsequently exchanged for water rights resulting in recovery of
$381,000. The balance of charge-offs consisted of $62,448 for one residential
and one other note from a single party due to significant uncertainty in
collecting on collateral.





In
December 2009 we obtained title to the underlying three properties on remaining
notes through deeds in lieu of foreclosure. Accordingly we have no real estate
or other notes outstanding nor any allowance for note losses as of the date of
this report.





Our
reviews for the need for an allowance for loan losses has been made based on a
specific review of each note pursuant to either Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) 450-10, Contingenciesand ASC
310-10-35-12, Loans that Are
Identified for Evaluation or that Are Individually Considered Impaired.
Impairment occurs when it is deemed probable we will not be able to collect all
amounts due according to the contractual terms of the loan. Impairment is then
measured based on the present value of expected future cash flows or the fair
value of the collateral, if the loan is collateral dependent. Upon measurement
of impairment, we establish an allowance for loan losses and a corresponding
charge to earnings through the provision for loan losses. Write-off of a note
decreases the allowance and changes in estimates of collateral values can
increase or decrease the allowance. Significant judgments are required in
determining impairment, which includes making assumptions regarding the value of
the loan, the value of the real estate or other collateral that secures the loan
and any other applicable provisions, including guarantees, if any.





Recovered
Assets





We hold assets obtained on
recovery or upon exchange of notes as investments. Property obtained byforeclosure, deed in lieu of foreclosure or purchase is initially
recorded at the lower of cost or fair market value at the date of acquisition.
Property obtained upon exchange is accounted for as a sale and recorded at fair
value.





We own
water rights on 127 acre-feet of Water in Nye County, Nevada.  In
December 2009 we obtained title to 6.37 acres of raw land in Clark County,
Nevada. Approximately 4.23 acres is zoned for residential development and 2.14
acres is zoned for commercial development.





Many
merchant builders and commercial developers are not currently in the market for
land parcels in Nevada or are willing to pay only prices significantly reduced
from prior years. We believe there is currently a limited market for water
rights due to limited building activity. We estimate that a holding period of up
to approximately 24 months is likely before recently acquired raw land and water
rights can be liquidated on terms acceptable to us.


8





Market Area, Credit Risk
Concentration and Competition





Our
specialty finance business has been limited to a few notes to a few customers.
Two customers accounted for 48% and 47%, respectively, of interest and fee
income on notes for the year ended September 30, 2009, and three customers
accounted for 52%, 24% and 13%, respectively, of interest and fee income on
notes for the year ended September 30, 2008. For purposes of this disclosure a
single customer includes affiliated entities that are substantially under common
control.





As of
September 30, 2009, our gross amount of notes receivable
of  $2,747,025 was comprised of three notes advanced to entities
controlled by one developer.





We do not
believe competition is a factor affecting our business but may be so in the
future if we substantially increase our investment activity.





Conflicts of Interest and
Related Party Lending Transactions





Our
officers and directors and consulting personnel devote only part-time services
to our Company and have other employment and business interests to which they
devote attention and will continue to do so, resulting in potential conflicts of
interest.





Our
president and other directors and officers, in addition to being part-time and
having other business interests, also invest in real estate and venture loans
through other entities. There is a risk that management may select a loan or
investment that has different returns or risk profile than those not so selected
and funded through other entities. There are no restrictions or guidelines on
how management will determine which loans or investments are appropriate for us
and which are appropriate for other entities in which management may have an
interest. Management has no obligation to provide us with any particular
opportunities.





In
September 2008, we assigned a $1,000,000 undivided interest in a note receivable
and related deed of trust of an unaffiliated borrower to DavCap, an entity
formed at that time for that purpose and 50% owned by our president and
director, Jerry E. Polis, along with the originating mortgage broker as partner.
The purpose of DavCap was to work with the originating mortgage broker to
recover funds from the original borrower or generate gains from certain joint
brokerage or investment activities of the two partners. The original note was
due in July 2008 and upon assignment DavCap became responsible for collection
and recovery. The original $1,000,000 note was terminated in December 2008
through foreclosure by unaffiliated senior lenders and charged off on our
consolidated financial statements against a prior year loan loss provision,
resulting in no consolidated gain or loss in fiscal 2009.





The
assignment was made without recourse or participation. We received in exchange
an unsecured 12% note payable for the principal amount of $1,000,000 due
September 29, 2009. DavCap was not successful in obtaining recovery prior to
foreclosure nor successful in obtaining any significant recovery from any other
DavCap activities. On September 29, 2009 our subsidiary cancelled the unsecured
note as uncollectible resulting in no gain or loss on a consolidated basis.
However we were paid cash of $122,123 during fiscal 2009 related to the
unsecured note primarily from capital contributions made by the owners of
DavCap. This recovery gain was reflected in our consolidated statements of
operations as income from an affiliated variable interest entity (“VIE”), an
entity with variable contractual interests rather than ownership interests that
is subject to consolidation under generally accepted accounting principles.
DavCap made no distributions or payments to its owners or any other party prior
to its liquidation effective September 30, 2009.





Commencing
on September 30, 2008 and at each subsequent reporting period, we accounted for
DavCap as a VIE with ASI as its primary beneficiary, thus requiring
consolidation in our financial statements. The original $1,000,000 note
receivable held by DavCap, was fully provided for in an allowance each period
and was written off as uncollectible in December 2008. The net equity and losses
attributed to the owners of DavCap are reflected as those of the noncontrolling
interest in our consolidated financial statements.





We have
no plans or commitments to purchase or sell any assets to related parties but
may do so on a case by case basis in the future.


9





Regulation





We are
not a real estate investment trust (“REIT”), a mutual fund or an investment
company within the meaning of the Investment Company Act of 1940, and we do not
believe we are subject to any regulation thereunder.





Even
though our real estate lending activities were limited, we believe we were
subject to licensing by the State of Nevada Mortgage Lending Division and
accordingly, we applied for and in February 2007 our Subsidiary was granted a
Nevada Mortgage Banking license that was allowed to lapse in April 2009 due to
cessation of real estate lending operations. Under applicable Nevada law, the
Nevada Mortgage Lending Division has broad discretionary authority over lending
activities, including the authority to conduct periodic regulatory audits of a
lender’s operations. We may also have been subject to the Equal Credit
Opportunity Act of 1974, which prohibits creditors from discriminating against
loan applicants on the basis of race, color, sex, age or marital status, and the
Fair Credit Reporting Act of 1970, which requires lenders to supply applicants
with the name and address of the reporting agency if the applicant is denied
credit.





There can
be no assurance that laws, rules or regulations will not be adopted in the
future that could make compliance much more difficult or expensive, restrict our
ability to make loans or investments, limit or restrict the amount of interest
and other charges earned on loans or investments by us, or otherwise adversely
affect our business or prospects.





Plasma
Sterilization and Decontamination





Effective
January 1, 2003, we entered into an exclusive license agreement with the
inventor of U.S. Patent #6,232,723 granting us worldwide exclusive rights to the
patent and related technology for sterilization, decontamination and industrial
processing for a minimum term of 15 years, subject to certain commercialization
performance requirements after the third year. We believe we meet the
commercialization requirements to maintain the exclusive license. If we do not
meet the commercialization requirements, our license would revert to
non-exclusive. The agreement also provides for future royalty payments to the
licensor based on product sales or sublicense fees. The inventor has been a
consultant to us from time to time on various plasma technologies. The licensed
technology was independently developed by the inventor prior to any of his work
for us.





Plasma
Overview





The
different states of matter generally found on earth are solid, liquid, and gas.
Sir William Crookes, an English physicist, identified a fourth state of matter,
now called plasma, in 1879. Plasma is by far the most common form of matter.
Plasma in the stars and in the tenuous space between them makes up over 99% of
the visible universe and perhaps most of that which is not visible. Plasmas are
created each time a fluorescent light is turned on. Jets of plasma spin and
maneuver orbiting satellites. Important to our technology, plasmas are
conductive assemblies of charged and neutral particles and fields that exhibit
collective effects. Plasmas carry electrical currents and generate magnetic
fields.





Plasma Sterilization and
Decontamination





Atmospheric
pressure plasmas or room temperature, non-thermal plasmas generated at
relatively low energy levels are known as cold plasmas. Cold plasmas have
demonstrated effectiveness in rapid sterilization, decontamination and
industrial processing. When generated, cold plasma is a bluish substance that
resembles a fog like gas.





The
plasma process produces a sterilization effect using lower concentrations of
sterilant but with a higher reactivity than is possible with normal gases. This
activity disappears quickly when power is removed, thereby dissipating the
toxicity of the sterilant rapidly. Cold plasmas allow for rapid decontamination
of clothing, equipment and personal gear in military settings, and for
sterilization of medical equipment, food and packaging in commercial settings.
Present methods of sterilization and decontamination often require hours and may
generate damaging heat or other toxic side effects or require a vacuum; cold
plasma can sanitize often in mere minutes without toxic byproducts and at
atmospheric pressure.


10





Cold
plasmas generated using high power are also employed in industry, in
semiconductor manufacturing and flat screen televisions. Historically, such
plasmas have been generated in vacuum conditions with other gases or chemicals
or with very high power, making them cost, weight and size prohibitive for
broader or portable applications.





The
licensor, Dr. Igor Alexeff, developed, tested and patented a low power plasma
discharge apparatus that operates at atmospheric pressure to generate a plasma
cloud of activated oxygen in air. It produces a cloud of ionized gas at
atmospheric pressure and at low temperatures. The novel technique employs a
resistive barrier discharge by using ceramics to prevent unwanted arcing and
achieve an even, broad, high volume and efficient discharge. The generated cold
plasma cells destroy molecules using highly reactive free oxygen radicals –
atoms or molecules that have unpaired electrons that when paired with bacteria,
rapidly destroy the targeted organism. The cold plasma also contains a large
volume of hydroxyl ions, ozone and atomic oxygen to rapidly oxidize most
unwanted bacteria. We believe cold plasma treatment does not harm the skin or
body and has no effect on fragile plastic or steel instruments or
devices.





The U.S.
Air Force has been a leading sponsor of cold plasma research. The Persian Gulf
War in 1991 accelerated the need for rapid means of sterilization and
decontamination. By disrupting the integrity of cell membranes, cold plasma
offers a rapid, simple and economical means of destroying even the hardiest
bacterial spores in minutes compared to the hours required by alternative
methods. Independent research by others has demonstrated that cold plasma can
rapidly break down complex chemicals found in nerve gas and deadly biological
agents like anthrax.





We tested
our technology under contract for the U.S. Air Force in 2003 targeting a use to
decontaminate forward deployed equipment and facilities. We are expanding our
knowledge of how our cold plasma method kills viruses and bacteria, measuring
its efficacy in controlled studies sponsored by us and others, evaluating
commercial application and developing prototypes for demonstration to
prospective licensees and as a test platform for testing with bacteria and other
agents.





We have
sponsored Dr. Alexeff and students at the University of Tennessee, Knoxville to
test our method of sterilization and decontamination. Dr. Alexeff has also
performed his own continuing research. During the last four years, published and
unpublished scientific reports on these experimental results provided evidence
to us that:





·
            Concentrations
      of E. Coli bacteria can be effectively killed in 4-10 minutes with the
      plasma discharge.


·
            The
      plasma discharge works away from the generating surface indicating the
      possibility of circulating the plasma away from the generating
      source.


·
            The
      plasma discharge is capable of penetrating a sealed standard business
      envelope and kill E. Coli bacteria in a short
  time.


·
            The
      charged particles created in the process have separate biological killing
      properties distinct from the ozone also included in the discharge (ozone,
      is a primary commercial decontamination
method).


·
            The
      discharge is effective in not only rapidly killing bacteria but also
      inactivating resistant spores, a major goal of food
      sterilization.


·
            The
      discharge was effective in a hospital setting to rapidly kill the common
      bacteria responsible for staph
infections.





There are
competing methods to generate cold plasmas including using electron beams,
corona discharges, dielectric barrier discharges, pin array discharges and
others. Often RF (radio frequency) power supplies are employed to create
atmospheric gaseous discharges requiring high power and emitting high electro
magnetic radiation. Our plasma is generated with low non-RF power supplies.
Another important distinguishing feature of our method is the use of ceramic
discharge electrodes that produce an even diffuse discharge in the intended
area, whereas traditional materials often result in a small arc greatly
minimizing the discharge area. Our research supports that cold plasma is an
effective bacteria sterilizer and that our method produces bacteria killing
agents distinct from ozone generated in the process. Our research efforts have
focused on building and testing prototypes with a focus on selecting, sourcing
and evaluating various critical component options.





Our
research activity during fiscal 2009 was focused on building and testing an
improved prototype. We are encouraged by recent results but have not determined
the level of resources to be employed on plasma development in fiscal
2010.  These decisions will be based in part on a continuing
evaluation of projects, progress and achievements with this technology and the
availability of financial resources.


11





Plasma Market Opportunities
and Strategy





Some
known applications of cold plasma that we believe we can target
include:


·
            Combating
      bacteria warfare


·
            Sterilization
      of medical instruments


·
            Rapid
      room temperature sterilization of food, including protection from
      Salmonella bacteria


·
            Destroying
      allergens or decontaminating homes, packages, ships, businesses or other
      environments


·
            Combating
      the spread of staph infections in hospitals and
  clinics





We are
exploring commercial markets focusing primarily on medical, food and package
sterilization. We believe portability and efficiency are key advantages and that
the lack of heat or steam or toxic side effects offers additional advantages
over some existing methods of sterilization and decontamination. We also believe
our methods can be adapted to decontaminate buildings, homes, cruise ships and
other facilities.





We are in
early stages of testing our method and evaluating opportunities. Our goal is to
prove our method in military and commercial applications. Our primary strategy
is to license others to manufacture devices. Our efforts are at an early stage
and we do not have a timetable or an estimate of the cost of developing these
applications and obtaining the necessary approvals for sale or use of any
devices. There can be no assurance we can develop the plasma sterilization and
decontamination technology successfully or that this technology can be
commercialized.





Plasma Sound
Reduction





We
purchased certain sound reduction technology in 2000. We are obligated to pay
royalties on product sales, license revenues and any sale proceeds from the
further sale of the technology for the term of the patent expiring in 2017. We
are not currently developing this technology and have no present plans to do
so.





Competition





Our
current technology investment and development business is limited to one
technology. The market for sterilization and decontamination is highly
competitive, with many companies supplying equipment for food and facility
decontamination and medical sterilization. Steam, chemicals and acids, radiation
and ultraviolet light are just some of the methods employed for sterilization
and decontamination. One example is a plasma system using hydrogen peroxide that
has been used for a number of years by a division of Johnson & Johnson
Medical, Inc. Another example is TSO3, Inc., a Canadian company that obtained
approval for an ozone medical sterilizer. The many companies engaged in these
activities are larger and have substantially greater resources than we do. We
may not be able to compete successfully in this market. The U.S. government is
also sponsoring cold plasma research by universities and others. Others have
developed cold plasma generation methods and systems. It is possible that such
organizations have developed or may develop in the future plasma generation
methods and systems superior to those envisioned by us.





Regulation





Medical
facilities, medical equipment and food processing and distribution are all
highly regulated. It is likely that any equipment developed for sterilization or
decontamination will be subject to existing government regulations and require
advance approval prior to sale or use. This could increase the costs of
development and commercialization and extend the time to market for any devices
developed with our plasma sterilization or decontamination
technology.





Intellectual Property
Rights





Dr.
Alexeff owns one U.S. patent on the plasma sterilization and decontamination
technology we have licensed. We may file additional patents on this technology
as we progress with development. No foreign rights have been applied for to date
and we may therefore be unable to protect any rights outside of the United
States. We purchased and own one U.S. patent on our plasma sound reduction
technology.





Our
policy is to file patent applications to seek protection for novel features of
our technologies. There can be no assurance that any additional patents on our
technology will be granted.


12





We
believe that a strong patent position is important to compete effectively if we
license our plasma technology. The technology industry is characterized by
frequent litigation regarding patent and other intellectual property rights.
Others, including academic institutions and competitors, may hold patents in
competing areas. Although we do not believe any existing patents would inhibit
our ability to license our plasma technology, there can be no assurance that
others will not assert claims in the future. There can be no assurance that such
claims, with or without merit, would not have a material adverse effect on our
financial condition or results of operations.





The
validity of our existing patent, or that licensed by us, has not been
adjudicated by any court. Competitors may bring legal action to challenge the
validity of our existing or future patents or may attempt to circumvent the
protection provided by such patents. There can be no assurance that either of
such activities by competitors would not be successful. The failure to obtain
patent protection or the loss of patent protection on our technologies or the
circumvention of our patents, by competitors could have a material adverse
effect on our ability to compete successfully.





Research
and Development





For the
year ended September 30, 2009 and 2008 we expended $21,111 and $14,902,
respectively, on research and development. Future levels of research and
development expenditures will vary depending on the timing of further technology
development and the availability of funds to carry on additional research and
development on currently owned technologies or in other areas. We currently have
no sources of sponsored research and development.





Management
and Personnel





We have
one full-time employee and our two executive officers provide only part-time
services to our company. Our current executive officers are not compensated for
their services other than for attendance at board and committee meetings, equity
participation and the possibility of future bonuses. We obtain part-time
services of one accountant and part-time secretarial/reception services through
our monthly office and administrative sharing arrangement with related party
Davric Corporation (See Item 13). We employ technical consultants and others on
a contract or project-by-project basis. We have not experienced any work
stoppages and are not a party to a collective bargaining agreement.





Executive
Officers and Other Key Employees of the Registrant





See Item
10 - Directors, Executive Officers and Corporate Governance.

























13








ITEM
1A. RISK FACTORS





Cautionary
Note on Forward Looking Statements


This
report contains a number of forward-looking statements that reflect our current
views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties,
including those discussed below, that could cause actual results to differ
materially from historical results or those anticipated. In this report, the
words “anticipates,” “believes,” “expects,” “intends,” “future,” “goal,”
“objective” and similar expressions identify forward-looking statements. Readers
are cautioned to consider the specific risk factors described below and not to
place undue reliance on the forward-looking statements contained herein, which
speak only as of the date hereof. We undertake no obligation to publicly revise
these forward-looking statements, to reflect events or circumstances that may
arise after the date hereof.





A.
Risks Related to Our
Business and Financial Results





Our
specialty finance business has operated at a loss in the last two fiscal years
and is expected to produce additional losses in the future.  Until we began
investing in new technology in August 1999, we were inactive. Our specialty
finance activities commenced in 2005 and invested in high risk investments.
Primarily as a result of non-payment and defaults on notes receivable we have
reported significant operating losses during the last two fiscal years. We have
ceased making new investments in notes secured by land and it is unlikely that
our other specialty finance investments and holdings, most of which are
non-income producing assets, will produce operating income or positive cash flow
in the future until and unless we are able to convert such assets into income
producing assets. Given the current market and general economic environment, we
believe we will be required to hold our non-income producing assets for a
holding period of up to 24 months prior to sale. Accordingly, we expect to
report operating losses in our specialty finance business during fiscal
2010.





We may
need to obtain additional financing to continue operating our
business.We had
an operating cash flow deficit of $367,594 for fiscal 2009. We believe that cash
and marketable securities presently on hand are not sufficient to meet cash
requirements for the next twelve months. We will need to obtain additional funds
from investment assets or from equity or debt offerings. Should additional funds
not be available from these or other sources, we may be required to curtail or
scale back staffing or operations.





We cannot
assure you that any additional financing will be available on terms favorable to
us, or at all. If adequate funds are not available to us then we may not be able
to continue operations or take advantage of opportunities. If we raise
additional funds through the sale of equity, including common stock, the
percentage ownership of our stockholders will be reduced.





Our
future results of operations depend significantly on economic and real estate
conditions in the Clark County, Nevada and adjacent areas.Our specialty finance
operations depend primarily upon the general economic and real estate conditions
of the Clark County, Nevada area. The local economic and real estate conditions
in the area have a significant impact on the land we now hold for investment and
our water rights. Local economic conditions have shown decline in the last two
fiscal years increasing real estate foreclosures and reducing the volume of real
estate activity and thereby increasing the risks of holding raw land and water
rights as investments. If there is a further downturn in real estate values the
amounts we record for land and other recovered assets may become impaired and
adversely affect on our financial condition or results of operations. A
continued decline in general economic conditions or inflation, recession, acts
of terrorism, outbreak of hostilities or other international or domestic
occurrences, unemployment, changes in securities markets or other factors could
further impact these local economic conditions and, in turn, have a material
adverse effect on our financial condition and results of
operations.





We may
incur additional impairment or other losses related to our specialty finance
assets.In
prior periods we recorded an allowance for loan losses on impaired notes
receivable. We obtained title to underlying raw land for our remaining three
real estate notes in December 2009 and hold water rights and an investment in a
direct financing lease arrangement. We review the need for impairment losses
related to our investments based on management’s evaluation and estimate of the
fair value of each asset based on payment history when applicable and present
economic, political and regulatory conditions. The determination of need for any
future impairment losses inherently involves a high degree of subjectivity and
requires management to make significant estimates. The net value of investments
assets recorded in our consolidated finance statements may differ from the
amount ultimately recovered from sale or other disposition thereby affecting our
future operating results.


14





We have
incurred losses on an unoccupied specialty finance leased space and may incur
additional losses for the term of the lease. Effective in June 2007, we
subleased and occupied approximately 3,750 square feet of office space intended
for use in our specialty finance lending operations. The current monthly payment
of $8,429 is subject to future cost of living and operating expense adjustments,
through March 2012. This facility was intended to support future real estate
lending activities but we have no plans to use the facilities that are
unoccupied. We obtained a 50% monthly lease payment concession for the six-month
period ending in December 2009. There can be no assurance of future lease
concessions or that our attempts to sublet the space will be successful during
any portion of the remaining term of the lease.





We
recorded a $108,000 expense for facility exit costs related to this lease in
July 2009 and an impairment loss of $130,791 to write-off the balance of related
leasehold improvements. The amount of the facility exit cost and liability may
require future adjustment depending on actual sublease or concession results and
other factors and the negative cash flow and possible additional losses related
to this lease may adversely affect our future operating results.





Our
direct financing lease is with one party and any impairment of this investment
could adversely affect future operating results.  Our finance
lease receivable is from a direct financing lease with one party on multiple
pieces of electronic equipment. Nonpayment by this party for any reason could
impair our investment and adversely affect our financial condition and results
of operations.





Our
business requires reinvestment of proceeds to be successful. It is
necessary for us to continue to reinvest proceeds from investment payoffs and
recoveries and convert non-income producing investments into income producing
assets or obtain appreciation gains to offset holding costs for non-income
producing assets. The ability to continue to successfully originate profitable
investments depends on a variety of factors outside our control including
interest rates, economic and political conditions, regulations, changes in real
estate or other asset values and competition. Our future operating results may
suffer if we are unable to reinvest proceeds at comparable rates or returns
adversely affecting our results of operations.





Our
technology is in an early stage of development and may not be
successful.  Our plasma
technology is still in the early stage of development. In order to attract
commercial interest, we believe we must develop additional prototypes and
complete additional testing in order to demonstrate commercial viability. Our
objective is to sell or license our technology to companies that then must
incorporate our technologies into products (we do not presently intend to
manufacture products ourselves). Even if more prototypes can be developed and
tested successfully, we cannot provide any assurance that commercially viable
technology or products incorporating our technology can be completed, developed,
manufactured or sold due to the inherent risks of technology development,
limitations on financing, competition, obsolescence, loss of key personnel and
other factors. We cannot assure that there will be future revenues. The
development of new technology is subject to significant delays and cost overruns
from unforeseen technical hurdles and other factors. In addition, as discussed
below, we rely on outside consultants to provide us with the necessary expertise
to develop our technology rather than an in-house staff of technology
developers, thereby possibly increasing the costs and risks of technology
development.





If we
fail to establish and maintain personnel and strategic relationships, our
ability to develop our technology will suffer.  We currently rely
on management for the operation of our specialty finance business and
consultants for the development of our plasma sterilization and decontamination
technology. Although we believe that there are other personnel or consultants
capable of working and managing our specialty finance business or consult
regarding our technology, the loss or unavailability of any individual could
result in delays or added costs, impede development or adversely affect our
results of operations.





We also
believe that our success will depend, in part, on our ability to establish
additional personnel or strategic relationships to develop, produce and market
our technology.  Our success will also depend on our ability to
develop and maintain strategic development and marketing relationships with
producers, distributors, end-users and manufacturers or entities engaged in
supplying or servicing targeted markets. If we are unable to develop such
relationships, our chances for future success will be substantially
diminished.





Our
officers, directors and consulting personnel devote only part-time to our
business resulting in possible conflicts.  Our officers,
directors and consulting personnel devote only part-time services to our company
and have other employment and business interests to which they devote attention
and will continue to do so, resulting in potential conflicts of interest. There
can be no assurance these conflicts or the unavailability of full-time
management will not adversely impact our operations and chances for
success.


15





Our
management may face conflicts of interest relating to other investments in real
estate assets or other assets. Our president and other directors and
officers, in addition to being part-time and having other business interests,
also invest in real estate assets through other entities. There is a risk that
management may select a real estate asset or other investment that has different
returns or risk profile than assets not so selected or funded through other
entities. There are no restrictions or guidelines on how management will
determine which assets are appropriate for us and which are appropriate for
other entities in which management may have an interest. Management has no
obligation to provide us with any particular opportunities.





B.
Risks Related to
Industries and Regulations Affecting our Business





The
specialty finance industry is highly regulated requiring licensing in multiple
jurisdictions for most types of loans; we may be subject to regulations and
costs that adversely impact or restrict our business.Most finance
activities wherein an active business is conducted require some form of
registration and licensing. If we make further real estate loans in the future,
we believe we may be subject to licensing by the State of Nevada Mortgage
Lending Division and required to reinstate or obtain a new Nevada Mortgage
Banking license. Under applicable Nevada law, the Nevada Mortgage Lending
Division has broad discretionary authority over lending activities, including
the authority to conduct periodic regulatory audits of a lender’s operations. We
may also become subject to federal lending rules and regulations.





If it
were determined we don’t have the proper licensing for any lending or investment
activity or are in violation of any regulations of any jurisdiction we could
incur costs or restrictions that adversely affect our operations and
business.





Our
technology markets are highly regulated and we may be subject to environmental
regulations.The
sterilization of medical devices and food, and the decontamination of items are
highly regulated and controlled in most major markets throughout the world.
Sterilization and decontamination devices, including our proposed products, must
be manufactured and tested to meet strict standards and often must be certified
for use. These factors increase the time and risk of introducing new technology
and products. We may not be able to obtain timely regulatory approvals for
future products. The failure to obtain any necessary approvals would adversely
impact our business.





Federal, state and local regulations
impose various controls on the storage, handling, discharge and disposal of
certain substances that may be used in anticipated plasma sterilizer
manufacturing processes or used as ingredients in decontamination or
sterilization equipment. We intend to conform and expect any contractors or
licensees to conform to governmental regulations applicable to operations and
facilities, including those related to environmental, land use, public utility
utilization and fire code matters. There can be no assurance that such
governmental regulations will not impose the need for additional capital
equipment or other process requirements or restrict our ability to continue or
expand our operations.





Competition
and obsolescence could preclude us from realizing revenues.  The markets for
our plasma technologies are extremely competitive. Many companies already
produce sterilization and decontamination equipment competitive to the products
or systems we intend to develop. These companies are larger and have
substantially greater resources than we do. We may not be able to compete
successfully in any of these markets. In addition, these companies expend
significant funds on research and development. They or others may have developed
or may succeed in developing technology and products that are more effective
than those proposed by us. There can be no assurance that we will be able to
compete successfully with such competitors or that additional competition will
not have a material adverse effect on our business.





Failure
to maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002may
result in financial statements that areincomplete
or subject to restatement. Section
404 of the Sarbanes Oxley Act of 2002 requires significant procedures and review
processes of our system of internal controls. Section 404 requires that we
evaluate and report on our system of internal control over financial reporting
in this Annual Report on Form 10-K. In addition, our independent registered
public accounting firm will be required to report on our internal controls over
financial reporting for the year ending September 30, 2010. The additional costs
associated with this process may be significant.


16





Effective
internal controls are necessary for us to provide reliable financial reports. If
we fail to maintain effective internal control over financial reporting
investors could lose confidence in our financial reports, and our stock price
might be adversely affected. In addition, remedying this or any future material
weaknesses that we or our independent registered public accounting firm might
identify, could require us to incur significant costs and expend significant
time and management resources on restatements and other activities. We cannot
assure you that any of the measures we might implement to remedy any such
deficiencies would effectively mitigate or remedy such
deficiencies.





C.
Risks Related to Our
Intellectual Property





Ourplasma
sterilization and decontamination technology is owned by us pursuant to an
exclusive license; the loss of which could adversely impact our
operations. Our plasma sterilization and decontamination technology is
owned pursuant to a license agreement providing us exclusive rights to the
technology through 2018 subject to certain exclusivity termination rights of the
licensor after January 1, 2006. Should the licensor notify us of intended
termination of exclusivity, we would have 90 days to provide reasonably
satisfactory evidence that we have attempted to sell licensed products as
defined in the agreement. Should we not prevail, then we could lose exclusivity
and our license could become nonexclusive which may reduce the value of this
technology to us and affect future operations should commercialization be
successful and we face direct competition from other licensees, if
any.





Our
ability to protect our intellectual property and technology is
uncertain.  Our success
depends, and will continue to depend, on our ability to maintain patent
protection for our technology and to preserve our trade secrets and to operate
without infringing the property rights of third parties. We cannot guarantee
that existing patents will be of sufficient scope or strength to give us
competitive advantages or that any patents that may be issued to us will not be
challenged or invalidated. We have not performed any analysis of patents of
others that may limit our ability to do business. We are aware of other parties
that are currently conducting research in the area of plasma sterilization and
decontamination. We cannot guarantee that our technologies or products do not
and will not infringe the patents or proprietary rights of third
parties.





Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
technology or proposed products or to obtain and use information that we
consider proprietary. The available means of protecting our proprietary rights
may not be adequate and our competitors may independently develop similar
technology, duplicate our products or design around patents issued to us or our
other intellectual property.  We cannot guarantee our intellectual
property will provide us meaningful protection or any commercial
advantage.





D.
Risks of Ownership of
Our Common Stock





We may
issue additional shares of authorized common stock and future preferred
stock.Our
Articles of Incorporation authorize up to 31,000,000 shares of stock, par value
of $0.02 per share, of which 30,000,000 shares are designated common stock and
1,000,000 shares are designated preferred stock. The Board of Directors has the
power without prior stockholder approval to issue additional shares of
previously authorized and unissued common stock and one or more series of
preferred stock with such rates of dividends, redemption provisions, liquidation
preferences, voting rights, conversion privileges and any other characteristics
as the Board may deem necessary. This power would include the right to issue
preferred stock with rights to receive dividends, liquidating distributions and
other benefits that may be superior to the rights of holders of common stock. If
any subsequent issuance of preferred stock is approved, such preferred stock
could adversely affect the holders of outstanding common stock. In addition, the
authority to issue additional shares of common stock and preferred stock could
discourage, delay or prevent a takeover of us and could have a depressive effect
on the market price for our securities.





There is
a very limited public market for our common stock.There is a very
limited public market for our common stock as trading has been sporadic and of
low volume. There is no assurance that there will be any market liquidity or
that we can maintain a trading market in the future.





ITEM
1B. UNRESOLVED STAFF COMMENTS





Not
applicable.


17


ITEM
2. PROPERTIES





Our
principal executive offices are located at 980 American Pacific Drive, Suite
#111, Henderson, Nevada 89014, which is the principal business office of our
President, Jerry E. Polis, who has other business operations at this location.
We share approximately 2,600 square feet with other businesses affiliated with
Mr. Polis. We pay a company affiliated with Mr. Jerry Polis, our President and a
director, a month-to-month fee for office rent and accounting and administrative
services. Since July 2002 the rate has been an aggregate of $1,000 per month. We
believe these terms are no less favorable than what could be obtained from
outside providers.





Effective
in June 2007, ASI Capital subleased and occupied approximately 3,750 square feet
of office space at 9121 W. Russell Rd., Suite 110, Las Vegas, Nevada within
space leased by our president and an unrelated individual. The rate paid
pursuant to the sublease is the same monthly rate for the same term as charged
under the original lease by the unrelated primary landlord. We received a gross
cash leasehold improvement incentive as a pass-through from the primary landlord
of $136,224 of which $32,800 related to space not subleased or improved by the
Subsidiary. The $32,800 excess was repaid in May 2008. The current monthly
payment of $8,429 is subject to future cost of living and operating expense
adjustments, through March 2012.





Due to
local real estate conditions, some landlords are providing certain concessions
to lessees. ASI Capital obtained a 50% monthly lease payment concession for the
six-month period ending in December 2009. This facility was intended to support
future real estate lending activities but given the economic downturn and due to
the losses we suffered in real estate lending activities in fiscal 2008 and 2009
we elected to apply working capital late in fiscal 2009 to originate a direct
financing equipment lease. We do not intend to expand our real estate lending
and have no plans to use the ASI Capital facilities that are unoccupied. There
can be no assurance of future lease concessions or that our attempts to sublet
the space will be successful during any portion of the remaining term of the
lease.





We
recorded a $108,000 expense for the facility exit cost related to this lease in
July 2009 and an impairment loss of $130,791 to write-off the balance of related
leasehold improvements. The amount of the facility exit cost and liability may
require future adjustment depending on actual sublease or concession results and
other factors.





ITEM
3. LEGAL PROCEEDINGS





We are
not involved in any threatened or pending legal proceedings.





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





No matter
was submitted to a vote of security holders during the last quarter of the
fiscal period covered by this report.





PART
II





ITEM 5.MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES





Market
Information





On April
4, 2002, our shares of common stock commenced quotation on the OTC Electronic
Bulletin Board (OTCBB) under the symbol ASIT. Prior to that date there had been
no public trading market for our securities since 1982. The market for our
common stock has been sporadic and very limited.





The
following table sets forth the high and low bid quotations for our common stock
for the years ended September 30, 2009 and 2008:





18








Bid
      QuotationsHigh
            LowYear
      Ended September 30, 2009First
      Quarter
            $0.45
            $0.20Second
      Quarter
            $0.30
            $0.20Third
      Quarter
            $0.25
            $0.20Fourth
      Quarter
            $0.25
            $0.20Year
      Ended September 30, 2008First
      Quarter
            $0.45
            $0.35Second
      Quarter
            $0.45
            $0.35Third
      Quarter
            $0.60
            $0.40Fourth
      Quarter
            $0.60
            $0.45





These
quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not represent actual transactions.





We had
1,070 holders of record of our 17,114,723 shares of common stock issued at
September 30, 2009, which we believe approximates the number of beneficial
owners. We have never paid a cash dividend on our common stock and do not expect
to pay cash dividends in the foreseeable future. At September 30, 2009, we had
an accumulated deficit of approximately $6.7 million and until this deficit is
eliminated, we will be prohibited from paying dividends except out of net
profits. We have not paid a cash dividend and do not anticipate payment of
dividends in the foreseeable future.





Recent
Sales of Unregistered Securities





No
securities were sold within the past three years that were not registered under
the Securities Act that were not previously reported in prior quarterly, annual
or 8-K filings.





Issuer
Purchases of Equity Securities





None.





ITEM
6. SELECTED FINANCIAL DATA





Not
applicable.





ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS





Except
for the historical information, the following discussion contains
forward-looking statements that are subject to risks and uncertainties. Actual
results may differ substantially from those referred to herein due to a number
of factors, including but not limited to risks described in the section entitled
Risk Factors and elsewhere in this Annual Report.





Overview





We are a
specialty finance company providing commercial and venture capital financing.
Our limited other activity has been focused on the development of plasma
technology for sterilization and decontamination.





The
objective of our specialty finance activities is to generate current income,
capital appreciation and cash flow. Our specialty finance activities focused in
prior years on making real estate, corporate and other loans and in 2009 on
funding a direct financing equipment lease. During fiscal 2009 we made no new
real estate loans and have no current plans to make additional real estate
loans.


19





The
mortgage banking environment has been experiencing considerable strain from
rising delinquencies and defaults. The current environment has been and is
affecting real estate values and reducing the volume of real estate activities.
Merchant builders and commercial developers are the typical purchasers of raw
land zoned like that collateralizing our notes receivable at September 30, 2009.
Many merchant builders and commercial developers are not currently in the market
for such land parcels or are willing to pay only prices significantly reduced
from prior years.  Sellers have not been willing to accept significantly
reduced prices, and management expects this trend to continue until there is a
balance in the supply and demand for single-family new and resale
homes.   We believe this imbalance to be a temporary condition that
will continue for approximately another 18 to 24 months. Accordingly our raw
land investment obtained in December 2009 pursuant to deeds in lieu of
foreclosure and our investment in water rights obtained in exchange for other
notes may require a holding period of 24 months or more before such investment
assets can be liquidated on terms acceptable to us.





As a
consequence of recent economic conditions and uncertainties, the collateral
values for our notes continued to decline during fiscal 2009 and all our notes
became impaired requiring foreclosure and other actions including:





·
            In
      December 2008 we charged off, due to foreclosure actions by unaffiliated
      senior creditors, one loan for $1,000,000 against a full loan loss
      provision provided in fiscal 2008 resulting in no gain or loss in the
      current year. This loan was held by DavCap LLC (“DavCap”), an affiliated
      entity through common ownership by our President, Jerry E. Polis. We
      recognized a gain of $122,613 recovered from DavCap during fiscal 2009
      through consolidation of DavCap as a variable interest entity prior to its
      liquidation in September 2009.


·
            In
      April 2009 we exchanged two impaired notes with an aggregate principal
      amount of $1,268,000, and a net carrying value of zero (due to a full loan
      allowance established in fiscal 2008), for water rights valued at
      $381,000.


·
            In
      September 2009 we charged off for one residential and one other note from
      a single party for a gross amount of $62,448 (subject to a prior year loan
      loss allowance of $15,000) due to significant uncertainty in collecting on
      collateral.


·
            Subsequent
      to our fiscal year end, in December 2009 we obtained title to three
      properties, consisting of 6.37 acres of raw land, through deeds in lieu of
      foreclosure. This land was the collateral for our remaining three
      outstanding real estate notes with aggregate principal of $2,747,025 and a
      net value at September 30 2009, after allowance of $535,900 for loan
      losses established in the prior year, of
  $2,211,125.





As a
result of substantially all our loans being impaired during fiscal 2009 we
recognized only $66,162 of interest and fees on notes for the year ended
September 30, 2009 compared to $810,992 for the year prior. We reported a net
loss of $213,115 for the year ended September 30, 2009, compared to net loss of
$2,716,037 for the comparable year prior. We recorded loan losses of $2,948,370
in the year prior and $67,598 during fiscal 2009 as the deterioration in credit
markets and land values experienced in 2008 failed to improve in 2009. We
currently have no real estate notes outstanding and have no plans to make
additional real estate note investments.





Our
financial statements require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time and due to inflation. The impact of
inflation is generally to increase the value of underlying collateral for loans.
Unlike typical industrial companies, nearly all our assets and liabilities are
monetary in nature. As a result, interest rates have over time a more direct
impact on our financial performance than the effects of inflation may generally
have on the typical industrial company.





Critical
Accounting Policies and Estimates




We have
identified the policies below as critical to our business operations and the
understandings of our results of operations. Our accounting policies are more
fully described in our financial statements located in Item 7 of Part II,
“Financial Statements.” The impact and any associated risks related to these
policies on our business operations is discussed throughout “Management’s
Discussion and Analysis or Plan of Operation” when such policies affect our
reported and expected financial results.




The
methods, estimates and judgments we use in applying our accounting policies, in
conformity with generally accepted accounting principles in the United States,
have a significant impact on the results we report in our financial statements.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. The estimates affect
the carrying values of assets and liabilities. Actual results may differ from
these estimates under different assumptions or conditions. We believe that the
following discussion addresses our most critical accounting policies, which are
those that are most important to the portrayal of our financial condition and
results of operations and require our most difficult, subjective, and complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.




20


Notes receivable and revenue
recognition– We have no formal policies for credit and collateral
evaluation, collections or foreclosure, timing of charging off uncollectible
loans, and recovery and management makes these decisions based on experience on
a case-by-case basis. Notes receivable are stated as the unpaid principal
balance net of any deferred fees and any allowance for loan losses. Notes
delinquent more than 90 days are considered non-performing (in non-accrual
status) and collections on such notes, if any, are recorded as collection of
note principal, and no interest income receivable is recorded. We review the
need for an allowance for loan losses based on a specific review of each note
pursuant to either ASC 450-10, Contingenciesand ASC
310-10-35-12, Loans that
Are Identified for
Evaluation or that Are Individually Considered Impaired. Impairment
occurs when it is deemed probable we will not be able to collect all amounts due
according to the contractual terms of the loan. Impairment is then measured
based on the present value of expected future cash flows or the fair value of
the collateral, if the loan is collateral dependent. Upon measurement of
impairment, we establish an allowance for loan losses and a corresponding charge
to earnings (loan losses). Write-off of a loan decreases the allowance and
changes in estimates of collateral values can increase or decrease the
allowance. Any future recoveries are recorded as income. Significant judgments
are required in determining impairment, which includes making assumptions
regarding the value of the loan, the current estimated value of the real estate
or other collateral that secures the loans, our ability to protect inferior
collateral positions, if any, and any other applicable provisions, including
guarantees, if any.





Interest
income is recorded on an accrual basis only to the extent that such amounts are
expected to be collected. Note origination fees received from borrowers are
deferred and amortized to income over the established life of the related note
under a method that approximates the effective interest rate method. Should a
note receivable become past due or if we otherwise do not expect the debtor to
be able to service its debt, we will cease recognizing interest income until and
unless paid or consider taking action to foreclose on the collateral. Note
origination fees, points and prepaid interest from borrowers are deferred and
amortized to interest income over the estimated average life of the notes under
a method that approximates the effective interest rate method. Direct loan
origination fees and costs have been immaterial to date.





Finance lease receivable and revenue
recognition– Finance lease receivable consists of one lease for multiple
pieces of electronic equipment. The lease is accounted for as a direct financing
lease, where total lease payments, plus any residual value, less the cost of the
leased equipment is recorded as unearned finance income. Interest income is
earned on the finance receivable over the lease term using the interest method.
Origination costs are immaterial. As required, each reporting period we evaluate
the finance lease for impairment and consider any need for an allowance for
credit losses.





Other
investments–
Property obtained byforeclosure, deed in lieu of foreclosure or purchase
is initially recorded at the lower of cost or fair market value at the date of
acquisition. Property obtained upon exchange is accounted for as a sale and
recorded at fair value. Impairment changes are recognized when the fair value of
an investment falls below its carrying value.





Income taxes - A valuation
allowance related to deferred tax assets is recorded when it is more likely than
not that some portion or all of the deferred tax assets will not be realized. We
evaluate the realizability of the deferred tax assets and assess the need for
valuation allowance quarterly.





Comparison
of Financial Condition at September 30, 2009 and September 30, 2008





Assets


Total
assets were approximately $3.1 million at September 30, 2009 and $3.2 million at
September 30, 2008. Our net note portfolio ($2,211,125 at September 30, 2009)
decreased $405,000 from collections and another $47,448 as a result of our note
loss provision. See “Liquidity and Capital Resources.”





At
September 30, 2009, we had three notes outstanding with aggregate stated
principal of $2,747,025 compared to nine notes with aggregate stated principal
of $5,482,473 at September 30, 2008. We had an allowance for note losses of
$535,900 and $2,818,900 at September 30, 2009 and 2008,
respectively.


21





Liabilities


Total
liabilities increased approximately $71,122 from September 30, 2008 to September
30, 2009. The increase was primarily due to a facility exit liability being
recorded for $108,000 in the last quarter of fiscal 2009.





Equity


Stockholders’
equity decreased  $179,028 from September 30, 2008 to September 30,
2009 primarily as a result of the net loss of $213,115.





Comparison
of Operating Results –Fiscal 2009 vs. Fiscal 2008





We
reported a net loss of $213,115 for fiscal 2009 primarily as a result of the
operation of our specialty finance business. This compared to a net loss of
$2,716,037 for fiscal 2008. We recorded a loan loss provision in fiscal 2008 of
$2,948,370 due to note impairment caused primarily by declines in collateral
values. During fiscal 2009 we worked through foreclosure and related actions
related to our note portfolio and incurred an additional loan loss provision of
$67,598.





Revenues. Interest
and fee income from notes was $66,162 for the year ended September 30, 2009,
compared to $810,992 for the comparable period in 2008. During 2009 all our real
estate loans became impaired and no longer generated interest income, and we
were forced to take recovery actions related to each note.





During
fiscal 2009, we exchanged two notes previously fully reserved for water rights
resulting in a gain on recovery of $381,000. In December 2009 we obtained title
to 6.37 acres of land pursuant to deeds in lieu of foreclosure and while we have
not yet determined the fair value to be assigned to the land obtained on
recovery, we believe the value is at least equal to the net value of the three
notes at September 30, 2009 of $2,211,125.





Other
investment income for the year ended September 30, 2009, was $20,104 compared to
$11,440 for the prior year and consisted primarily of earnings from cash
balances and other investments.





Interest Expense.
Interest expense was $98,664 for the year ended September 30, 2008. The 2008
total included interest on shareholder notes, interest on our $1,000,000 of 7%
subordinated notes and $37,099 for non-cash interest from the amortization of
the value of warrants issued in 2005 in connection with the subordinated notes.
We incurred no comparable interest expense in 2009 as all such notes had been
retired in the prior year.





Loan Losses. During
fiscal 2009 we provided for loan losses of $47,448 and wrote off notes for
$2,330,448. During fiscal 2008, we provided for loan losses of $2,948,370 and
wrote off notes for $129,470. We have had limited loan diversification, and any
provision or change in estimate regarding the collateral for a single note has
had a material impact on our note loss provision and on our financial position
and our results of operations.





Research and
Development. We expended $21,111 on research and development costs during
the year ended September 30, 2009 compared to $14,902, during the year ended
September 30, 2008. The fiscal 2009 costs consisted primarily of outside
consulting and grant costs and the fiscal 2008 costs consisted primarily of
grant research costs related to our technology. Research and development costs
vary depending on timing of elective development efforts and availability of
funds.





Collection, General and
Administrative. Collection, general and administrative costs were
$714,278 for the year ended September 30, 2009 compared to $476,533 for year
prior. Fiscal 2009 costs included $561,202 related to our specialty finance
subsidiary and $153,076 of corporate expenses not allocated to the finance
segment. Fiscal 2008 expenses included $317,204 related to our specialty finance
subsidiary operations and $159,329 of unallocated corporate expenses. The
$243,998 increase in specialty finance costs resulted primarily from a $108,000
facility exit expense and $130,791 leasehold improvement impairment cost related
to a leased facility for which we have no longer any intention to
utilize.





We
incurred $19,417 and $9,707 of non-cash stock-based compensation expense during
the years ended September 30, 2009 and 2008, respectively, related to options
granted to officers, directors and consultants. We incurred $24,000 for non-cash
contributed services of our executive officers during each
year.


22





Income Taxes – Due to
a history of recent losses we have provided a 100% valuation allowance for
deferred tax assets (primarily tax loss carryforwards) and accordingly, there
was no tax provision for either year.





Liquidity
and Capital Resources





A number
of factors adversely effected our liquidity in fiscal 2009. The disruptions in
the capital and credit markets and the resulting credit deterioration and
resulting losses we experienced in our note portfolio, limit our ability to
finance future operations. Our investments in non-income producing assets
including water rights and raw land increase the uncertainty regarding the
timing and amount of future cash flows in fiscal 2010 and beyond.





During
fiscal 2009, we originated no new notes and collected $405,000. In fiscal 2008
we originated $500,000 of notes and collected $972,282.





During
fiscal 2009 we obtained $121,613 as a result of an investment by noncontrolling
interest in an affiliated VIE and used $14,444 to purchase treasury stock.
During fiscal 2008, we obtained $45,000 from warrant exercise and paid $430,714
to retire subordinated notes with $569,286 retired through the non-cash
application of warrant exercise. We also repaid $150,000 of shareholder
notes.





Our
principal source of liquidity at September 30, 2009, consisted of cash and
equivalents of $115,746 and marketable securities of $36,975. Our net notes
receivable aggregating $2,211,125 was exchanged in December 2009 for title to
raw land and is not expected to be a source of liquidity during the next twelve
months. We have no other unused sources of liquidity at this time.





We have
no debt other than trade payables and accruals. Our direct financing lease is
expected to produce monthly receipts of approximately $6,000 supplemented by
other investment income to be received on cash and equivalents and any
marketable securities. Nonpayment of the direct financing lease would have an
adverse impact on our operations, liquidity and cash flow.





In our
auditor report dated December 22, 2009 our Company’s independent auditor
expressed substantial doubt as to our ability to operate as a going concern.
Based on our current sources of liquidity and expectations of future operations
and business conditions, we expect that we will require approximately $175,000
to meet our cash requirements for the next twelve months. Actual results could
differ significantly from our plans. We may be able to reduce our monthly
operating costs as a result of reduced activity and we may be able to obtain
additional funds from our investment assets. However, to meet our working
capital and cash outflow obligations, we believe we will require equity or debt
financing in the next twelve months. Should additional funds not be available,
we may be required to curtail or scale back staffing or operations. Failure to
obtain sufficient capital could have a material adverse affect on our
Company.





In the
future, if our operations increase or we elect to expend additional resources on
our plasma technology, we may require additional funds.





Recent
Accounting Pronouncements





There
have been no recent accounting pronouncements or changes in accounting
pronouncements during the year ended September 30, 2009 that are of
significance, or potential significance to us.





23








ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
applicable.





ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





Our
consolidated financial statements follow.









24


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 Board of
Directors
 ASI
Technology Corporation
 Las
Vegas, Nevada
 
 We have
audited the accompanying consolidated balance sheets of ASI Technology
Corporation and subsidiaries (the “Company”) as of September 30, 2009 and 2008,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years ended September 30, 2009 and 2008.
 These financial statements are the responsibility of the Company's
management.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting.  Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting.  Accordingly, we express no such opinion.
 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.  We believe that our audits provide a reasonable basis for
our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of ASI Technology Corporation
and subsidiaries as of September 30, 2009 and 2008, and the consolidated results
of its operations and its cash flows for the years ended September 30, 2009 and
2008, in accordance with accounting principles generally accepted in the United
States.
 
 As
discussed in Notes 1, 3, 4 and 12 to the consolidated financial statements,
ultimate realization of the Company’s investments in notes receivable and its
future operations and cash flows are particularly dependent upon the continued
financial health of a relatively few borrowers and underlying loan collateral,
primarily interests in real estate, which are subject to rapidly changing
economic conditions and related uncertainties.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has had losses from continuing
operations for the last two years, and management believes the company may be
unable to cover the Company’s future operating expenses. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 
 /s/
PIERCY BOWLER TAYLOR & KERN
 Certified
Public Accountants
 
 
 Las
Vegas, Nevada
 December
22, 2009
 
 
 25
 
 ASI
      TECHNOLOGY CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSSeptember
      30,2009
                
                
                2008ASSETSCash  and
      equivalents
                
                $
                115,746
                
                
                $
                256,171Marketable
      securities
                
                
                36,975
                
                
                
                103,861Notes
      receivable, net of allowance
                
                
                2,211,125
                
                
                
                2,661,573Finance
      lease receivable
                
                
                364,759
                
                
                
                -Interest
      receivable
                
                
                -
                
                
                
                16,764Other
      investments
                
                
                381,000
                
                
                
                -Property
      and equipment, net
                
                
                10,084
                
                
                
                181,459Prepaid
      expenses
                
                
                21,027
                
                
                
                29,794$
                3,140,716
                
                
                $
                3,249,622LIABILITIES
      AND STOCKHOLDERS' EQUITYLiabilitiesAccounts
      payable
                
                $
                3,173
                
                
                $
                14,020Facility
      exit liability
                
                
                156,862
                
                
                
                -Deferred
      rent
                
                
                -
                
                
                
                74,893160,035
                
                
                
                88,913Noncontrolling
      interest in affiliated variable interest entity
                
                
                -
                
                
                
                1,000Stockholders'
      equityPreferred
      stock, 1,000,000 shares authorized,none issued or
      outstandingCommon
      stock, $.02 par value; 30,000,000 shares authorized,17,114,723 and
      17,136,723 shares issued
                
                
                342,302
                
                
                
                342,742Additional
      paid-in capital
                
                
                9,321,703
                
                
                
                9,287,746Treasury
      stock, 21,000  and 11,000 common shares
                
                
                (9,538
                )
                
                
                (4,994
                )Deficit
                
                
                (6,673,261
                )
                
                
                (6,460,146
                )Accumulated
      other comprehensive loss
                
                
                (525
                )
                
                
                (5,639
                )2,980,681
                
                
                
                3,159,709$
                3,140,716
                
                
                $
                3,249,622See
      notes to consolidated financial statements.
 
 
 26
 
 ASI
      TECHNOLOGY CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONSYear
      Ended September 30,2009
                
                
                2008Revenues:Interest
      and fees
                
                $
                66,162
                
                
                $
                810,992Recoveries
                
                
                381,000
                
                
                
                -Other
      investment income
                
                
                20,104
                
                
                
                11,440467,266
                
                
                
                822,432Expenses:Interest
                
                
                7
                
                
                
                98,664Loan
      losses
                
                
                67,598
                
                
                
                2,948,370Research
      and development
                
                
                21,111
                
                
                
                14,902Collection,
      general and administrative
                
                
                714,278
                
                
                
                476,533802,994
                
                
                
                3,538,469Loss
      before noncontrolling interest
                
                
                (335,728
                )
                
                
                (2,716,037
                )Noncontrolling
      interest in losses of affiliated variable interest entity
                
                
                122,613
                
                
                
                -Net
      loss
                
                $
                (213,115
                )
                
                $
                (2,716,037
                )Loss
      per share (basic)
                
                $
                (0.01
                )
                
                $
                (0.17
                )Weighted
      average number of commonshares outstanding
                
                
                17,099,970
                
                
                
                16,106,812See
      notes to consolidated financial statements.
   27
 
 ASI
      TECHNOLOGY CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF COMPREHENSIVE LOSS AND STOCKHOLDERS' EQUITYFor
      the Years Ended September 30, 2009 and 2008
                
                
                
                
                
                
                
                
                AccumulatedOtherComprehensive
                
                
                
                
                
                
                
                
                Additional
                
                
                Treasury
                
                
                
                
                
                ComprehensiveIncome
                
                
                Common
      Stock
                
                
                Paid-In
                
                
                Shares
                
                
                
                
                
                Income(Loss)
                
                
                Shares
      Issued
                
                
                Dollars
                
                
                Capital
                
                
                (at
      cost)
                
                
                Deficit
                
                
                (Loss)
                
                
                TotalBalances,
      October 1, 2007
                
                
                
                15,908,552
                
                
                $
                318,171
                
                
                $
                8,664,532
                
                
                $
                (442
                )
                
                $
                (3,744,109
                )
                
                $
                (1,497
                )
                
                $
                5,236,655Contributed
      services
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                24,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                24,000Purchase  and
      retirement of 400 commonshares for treasury
                
                
                
                
                
                (400
                )
                
                
                -
                
                
                
                (208
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (208
                )Purchase
      of 10,000 common shares for treasury
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (4,552
                )
                
                
                -
                
                
                
                -
                
                
                
                (4,552
                )Stock-based
      compensation
                
                
                
                -
                
                
                
                -
                
                
                
                9,707
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                9,707Stock
      issued at $0.50 per share on exerciseof warrants for
      cash
                
                
                
                
                
                90,000
                
                
                
                1,800
                
                
                
                43,200
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                45,000Stock
      issued at $0.50 per share on exerciseof warrants applied to retire
      principal of 7% subordinated notes
                
                
                
                
                
                1,138,571
                
                
                
                22,771
                
                
                
                546,515
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                569,286Comprehensive
      loss:Net
      loss
                
                $
                (2,716,037
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (2,716,037
                )
                
                
                -
                
                
                
                (2,716,037
                )Unrealized
      loss on marketablesecurities
                
                
                (4,142
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (4,142
                )
                
                
                (4,142
                )Total
      comprehensive loss for the period
                
                $
                (2,720,179
                )Balances,
      September 30, 2008
                
                
                
                17,136,723
                
                
                $
                342,742
                
                
                $
                9,287,746
                
                
                $
                (4,994
                )
                
                $
                (6,460,146
                )
                
                $
                (5,639
                )
                
                $
                3,159,709Contributed
      services
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                24,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                24,000Purchase  and
      retirement of 22,000 commonshares for treasury
                
                
                
                
                
                
                (22,000
                )
                
                
                (440
                )
                
                
                (9,460
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (9,900
                )Purchase  of
      10,000 common sharesfor treasury
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (4,544
                )
                
                
                -
                
                
                
                -
                
                
                
                (4,544
                )Stock-based
      compensation
                
                
                
                -
                
                
                
                -
                
                
                
                19,417
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                19,417Comprehensive
      loss:Net
      loss
                
                $
                (213,115
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (213,115
                )
                
                
                -
                
                
                
                (213,115
                )Unrealized
      gain on marketablesecurities
                
                
                5,114
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                5,114
                
                
                
                5,114Total
      comprehensive loss for the period
                
                $
                (208,001
                )Balances,
      September 30, 2009
                
                
                
                17,114,723
                
                
                $
                342,302
                
                
                $
                9,321,703
                
                
                $
                (9,538
                )
                
                $
                (6,673,261
                )
                
                $
                (525
                )
                
                $
                2,980,681See
      notes to consolidated financial statements.
  28
  ASI
      TECHNOLOGY CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSYear
      Ended September 30,2009
                
                
                2008Operating
      activitiesNet
      loss
                
                $
                (213,115
                )
                
                $
                (2,716,037
                )Adjustments
      to reconcile net loss to net cashprovided by (used in) operating
      activities:Depreciation
      and amortization of property and equipment
                
                
                40,584
                
                
                
                53,015Amortization
      of loan fees, prepaid interest and unearned income
                
                
                (9,759
                )
                
                
                (194,253
                )Noncontrolling
      interest in losses of affiliated variable interest entity
                
                
                (122,613
                )
                
                
                -Allowance
      for loan losses
                
                
                67,598
                
                
                
                2,948,370Amortization
      of deferred rent and facility exit liability
                
                
                (26,031
                )
                
                
                (21,398
                )Accrued
      facility exit liability
                
                
                108,000
                
                
                
                -Impairment
      adjustment, leasehold improvements
                
                
                130,791
                
                
                
                -Contributed
      services
                
                
                24,000
                
                
                
                24,000Stock-based
      compensation
                
                
                19,417
                
                
                
                9,707Noncash
      interest expense
                
                
                -
                
                
                
                19,081Recoveries
                
                
                (381,000
                )
                
                
                -Decrease
      (increase) in interest receivable
                
                
                (3,386
                )
                
                
                32,121Decrease
      (increase) in prepaid expenses
                
                
                8,767
                
                
                
                (4,935
                )Decrease
      in accounts payable and accruals
                
                
                (10,847
                )
                
                
                (28,490
                )Net
      cash provided by (used in) operating activities
                
                
                (367,594
                )
                
                
                121,181Investing
      activitiesPurchase
      of marketable securities
                
                
                -
                
                
                
                (75,000
                )Sale
      of marketable securities
                
                
                75,000
                
                
                
                -Purchase
      of property and equipment
                
                
                -
                
                
                
                (2,629
                )Proceeds
      from sale of equipment
                
                
                -
                
                
                
                500Direct
      finance lease originated
                
                
                (360,000
                )
                
                
                -Loans
      originated
                
                
                -
                
                
                
                (500,000
                )Collections
      from borrowers
                
                
                405,000
                
                
                
                972,282Net
      cash provided by investing activities
                
                
                120,000
                
                
                
                395,153Financing
      activitiesProceeds
      from exercise of warrants
                
                
                -
                
                
                
                45,000Repayment
      of subordinated notes
                
                
                -
                
                
                
                (430,714
                )Repayments
      of shareholder notes
                
                
                -
                
                
                
                (150,000
                )Investment
      by noncontrolling interest in affiliated variable interest
      entity
                
                
                121,613
                
                
                
                -Purchase
      of treasury shares
                
                
                (14,444
                )
                
                
                (4,760
                )Net
      cash provided by (used in) financing activities
                
                
                107,169
                
                
                
                (540,474
                )Net
      decrease in cash and equivalents
                
                
                (140,425
                )
                
                
                (24,140
                )Cash
      and equivalents, beginning of period
                
                
                256,171
                
                
                
                280,311Cash
      and equivalents, end of period
                
                $
                115,746
                
                
                $
                256,171Supplemental
      cash flow informationCash
      paid during the period for interest
                
                $
                7
                
                
                $
                79,582Non-cash
      financing and investing activities:Note
      origination fee received in investment securities
                
                $
                3,000
                
                
                $
                19,500Note
      exchanged for note from related party
                
                $
                -
                
                
                $
                1,000,000Subordinated
      note balances applied to exercise warrants
                
                $
                -
                
                
                $
                569,286See
      notes to consolidated financial statements.
  29
  ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
  Note
      1.
              Nature
      of Operations and Basis of
Presentation
  These
consolidated financial statements include the accounts of ASI Technology
Corporation (“ASI”) and all of its subsidiaries (collectively, the Company),
including its two wholly-owned subsidiaries, which are ASI Capital Corporation
(“ASI Capital”), primarily a specialty “high risk” finance company and ASI Land
Holdings, Inc. (“ASI Land”) incorporated in November 2008 to hold investment or
foreclosed assets, and DavCap LLC, a commonly owned affiliate from inception in
September 2008 to its liquidation in September 2009, which under Financial
Accounting Standards Board’s (FASB) Accounting Standards Codification (“ASC”)
810-10-15-14 was deemed to be a variable interest entity (“VIE”). The
consolidated financial statements include the accounts of the subsidiaries,
(including the VIE through the date of liquidation) after elimination of
intercompany transactions and balances. As substantially all of the Company’s
assets are finance or investment related, the accompanying consolidated balance
sheet is presented on an unclassified basis as is customary in the finance
industry.
  The
Company’s specialty lending activities include commercial and venture capital
loans and a direct financing lease. As of September 30, 2009, the Company's
gross amount of notes receivable of $2,747,025 were comprised of three notes
from one developer. Recent economic conditions and uncertainties have adversely
affected collateral values for the Company’s notes receivable, and at September
30, 2009, the Company’s management considered all three notes to be impaired and
made a loss provision of $535,900 against such notes. If the counterparty to the
notes fails to perform, the maximum amount of loss that the Company would incur
is the net carrying amount of each note as detailed in Note 3. Subsequent to
September 30, 2009, the Company took title to the underlying three properties
through deeds in lieu of foreclosure.
  In August
2009, the Company invested $360,000 in a direct financing lease. The Company’s
limited other activity has been focused on plasma technology for sterilization
and decontamination.
  The
Company’s consolidated financial statements have been prepared on the basis that
it will be able to continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business for the foreseeable future. However, the Company has incurred losses
in each of the last two years primarily as a result of note losses and has
limited funds and liquidity with which to operate. While management expects that
the Company may be able to reduce some operating costs due to reduced specialty
finance activity, its operating plans will likely require additional funds.
Additional funds may be obtained from sale or leverage of recovered assets or in
the form of debt or equity financings. There can be no assurance that any
additional funds will be available. The accompanying consolidated financial
statements do not include any adjustments that would be necessary should the
Company be unable to continue as a going concern and, therefore, be required to
liquidate its assets and discharge its liabilities in other than the normal
course of business and at amounts different from those reflected in the
accompanying financial statements.
  Management
evaluated subsequent events in accordance with ASC 855-10 through the date of
issuance of these consolidated financial statements and the filing of this
report with the Securities Exchange Commission, December 22, 2009.
 
 Note
      2.
              Summary
      of Significant Accounting Policies
 
 Use of estimates - Timely
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect reported
amounts, some of which may require revision in future periods.
 
 Cash equivalents - The Company
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
 
 Marketable securities - Marketable securities, all of which are classified as
available-for-sale, are stated at fair market value based on market quotes,
which are Level 1 inputs, as defined in ASC 820,Fair Value Measurements and
Disclosures. Unrealized gains and losses,
net of deferred taxes, are recorded as a component of other comprehensive
income.
   30
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 Note
      2.
              Summary
      of Significant Accounting Policies
(continued)
 
 Notes receivable and revenue
recognition–The Company has no
formal policies for credit and collateral evaluation, collections or
foreclosure, timing of charging off uncollectible loans, and recovery and
management makes these decisions based on experience on a case-by-case basis.
Notes receivable (Note 3) arestated as the
unpaid principal balance net of any deferred fees and any allowance for loan
losses. Notes delinquent more than 90 days are considered nonperforming (in
non-accrual status), and collections on such notes, if any, are recorded as
collection of principal, and no interest income receivable is recorded.
Management reviews the need for an allowance for loan losses based on a specific
review of each note pursuant to either ASC 450-10 and ASC 310-10-35-12.
Impairment occurs when it is deemed probable the Company will not be able to
collect all amounts due according to the contractual terms of the loan.
Impairment is then measured based on the present value of expected future cash
flows or the fair value of the collateral, if the loan is collateral dependent.
Upon measurement of impairment, the Company will establish an allowance for loan
losses and a corresponding charge to earnings (loan losses). Write-off of a loan
decreases the allowance and changes in estimates of collateral values can
increase or decrease the allowance. Any future recoveries are recorded as
income. Significant judgments are required in determining impairment, which
includes making assumptions regarding the value of the loan, the current
estimated value of the real estate or other collateral that secures the loans,
the Company’s ability to protect inferior collateral positions, if any, and any
other applicable provisions, including guarantees, if any.
 
 Interest
income is recorded on an accrual basis only to the extent that such amounts are
expected to be collected. Note origination fees received from borrowers are
deferred and amortized to income over the established life of the related note
under a method that approximates the effective interest rate method. Should a
note receivable become past due or if the Company otherwise does not expect the
debtor to be able to service its debt, management will cease recognizing
interest income until and unless paid or consider taking action to foreclose on
the collateral.
 
 Note
origination fees, points and prepaid interest from borrowers are deferred and
amortized to interest income over the estimated average life of the notes under
a method that approximates the effective interest rate method. Direct loan
origination fees and costs have been immaterial to date.
 
 Finance lease receivable and revenue
recognition – Finance lease receivable (Note 4) consists of one lease for
multiple pieces of electronic equipment. The lease is accounted for as a direct
financing lease, where total lease payments, plus any residual value, less the
cost of the leased equipment is recorded as unearned finance income. Interest
income is earned on the finance receivable over the lease term using the
interest method. Origination costs are immaterial. As required, each reporting
period, management evaluates the finance lease for impairment and considers any
need for an allowance for credit losses.
 
 Fair value measurements – On
October 1, 2008, the Company adopted ASC
820 for all financial assets carried at fair value under other GAAP
requirements (Note 11), which had no impact on the Company’s consolidated
balance sheet, results of operation or cash flows. The Company has elected not
to adopt the option available under ASC 825-10-10 to measure any of its other
eligible financial instruments or other items at fair value. Accordingly, the
Company continues to measure all of its assets and liabilities on the historical
cost basis of accounting except as required under generally accepted accounting
principles and disclosed herein.
 
 In April
2009, the FASB issued ASC 820-10-65-4, which was applied as of September 30,
2009, in measuring the fair value of water rights described in Notes 3 and 11
and had no significant effect on the consolidated financial
statements.
 
 The
Company's notes receivable have been adjusted to estimated fair values based on
Level 3 inputs as a result of impairment (Note 3). The fair value of the
Company’s other financial instruments, which include cash and cash equivalents,
marketable securities, receivables and accounts payable, are based on
assumptions concerning the amount and timing of estimated future cash flows and
assumed discount rates reflecting varying degrees of perceived risk, which are Level 1
inputs, as defined in ASC 820. The carrying value of these financial
instruments approximated their fair value at September 30, 2009 and 2008,
respectively, due to the short-term nature of the instruments.
 
 31
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 Note
      2.
              Summary
      of Significant Accounting Policies
(continued)
 
 Segment reporting – The
Company’s operations are organized into two reportable segments based upon their
distinct operating characteristics (Note 14). The specialty finance segment
includes all lending activities and the technology development segment includes
all technology research and development activities. The Company allocates
identified collection, general and administrative costs between the segments.
All assets currently held are considered as employed in specialty
finance.
 
 Property and equipment –
Property and equipment (Note 5) is stated at cost and depreciated over the
estimated useful lives of three to five years using the straight-line
method.
 
 Research and development costs –Research and development costs, including patent costs related to
acquired, licensed and developed technology, are expensed as incurred because
the technology has not yet reached technological feasibility and requires
further development, refinement and testing.
 
 Employee stock options –The Company has one stock plan, the 2000 Equity Incentive Plan, as
amended (the “Plan”) and is authorized to grant incentive and nonstatutory stock
options to acquire up to 950,000 shares of the Company’s common stock to
employees and consultants. The following table sets forth the weighted-average
key assumptions and fair value results for stock options granted during the
years ended September 30, 2009 and 2008 to employees and consultants using the
Black-Scholes option pricing model (annualized percentages):
 
 Year Ended September 30,2009
                
                2008Volatility
                
                
                135
                %
                
                
                149
                %Risk-free
      interest rate
                
                
                1.6
                %
                
                
                2.2
                %Forfeiture
      rate
                
                
                0.0
                %
                
                
                0.0
                %Dividend
      yield
                
                
                0.0
                %
                
                
                0.0
                %Expected
      life in years
                
                
                3.6
                
                
                
                3.5Weighted-average
      fair value of options granted
                
                
                $0.16
                
                
                
                $0.29
 The
dividend yield of zero is based on the fact that management has no present
intention to pay dividends. Expected volatility is based on the historical
volatility of the common stock over the period commensurate with the expected
life of the options. The Company has a small number or option grants and limited
exercise history and accordingly has for all new option grants in fiscal 2009
and 2008 applied the simplified method prescribed by SEC Staff Accounting
Bulletin 110, Share-Based
Payment: Certain Assumptions Used in Valuation Methods - Expected Term to
estimate expected life (computed as vesting term plus contractual term divided
by two).  The expected forfeiture rate was nil for each period based
on management’s estimates considering vesting term and the limited number of
specific recipients of option grants.
 
 Loss per common share -Basic loss per share is
calculated by dividing net loss by the weighted average number of shares of the
Company’s common stock outstanding during the period. Outstanding shares consist
of issued shares less treasury stock. Outstanding stock options and warrants
were excluded from the diluted computation, as their effect would be
anti-dilutive. The Company has no dilutive securities other than stock
options.
 
 Income taxes - The Company
recognizes interest and penalties related to income taxes as part of the
provision for income taxes. As of September 30, 2009 and 2008, the Company had
not recorded any provisions for accrued interest and penalties related to
uncertain tax positions.
 
 Comprehensive loss-
Comprehensive loss includes all changes in stockholders' equity during a period,
except those relating to investments by and distributions to stockholders. The
Company’s comprehensive loss consists of net loss and unrealized gains and
losses on investments available-for-sale. Accumulated other comprehensive loss
is displayed as a separate component of stockholders' equity.
 
 
 32
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 Note
      2.
              Summary
      of Significant Accounting Policies
(continued)
 
 Reclassifications – A $53,495
liability for deferred rent was reclassified and included in the facility exit
liability (Note 6) at September 30, 2009. Certain other minor reclassifications
to previously reported amounts have been made for consistency with the current
period presentation. These reclassifications had no effect on net income or
loss.
 
 Note
      3.
              Notes
      Receivable
 
 The
Company’s note receivable portfolio consisted of the following types of
loans:
 
 Range
      ofStated
                
                
                September
      30,Description
                
                Interest
      Rates
                
                
                2009
                
                
                2008Land
      acquisition and development notes:Secured
      by first trust deeds
                
                
                15%-18%
                
                
                $
                2,747,025
                
                
                $
                2,747,025Secured
      by second trust deeds
                
                
                15%
                
                
                
                -
                
                
                
                1,268,000Secured
      by third trust deeds
                
                
                24%
                
                
                
                -
                
                
                
                1,000,000Residential
      real estate second trust deed
                
                
                24%
                
                
                
                -
                
                
                
                54,648Corporate
      notes secured by asset liens
                
                
                18%-24%
                
                
                
                -
                
                
                
                400,000Other
      notes
                
                
                24%
                
                
                
                -
                
                
                
                12,8002,747,025
                
                
                
                5,482,473Unearned
      fees and other
                
                
                
                
                
                
                -
                
                
                
                (2,000
                )Allowance
      for loan losses
                
                
                
                
                
                
                (535,900
                )
                
                
                (2,818,900
                )$
                2,211,125
                
                
                $
                2,661,573
 At
September 30, 2009, the Company considered its three outstanding notes
aggregating $2,747,025 to be impaired and provided the allowance for losses
reducing the net carrying value to their estimated fair value based on Level 3
inputs. Subsequent to September 30, 2009, the Company took title to the
underlying three properties through deeds in lieu of foreclosure. The Company
expects to record the net value of the land received at estimated fair value
upon receipt of an appraisal also based on Level 3 inputs.
 
 In April
2009, the Company exchanged two impaired notes with an aggregate principal
amount of $1,268,000, and a net carrying value of zero (due to a full loan
allowance), for Nye County, Nevada water rights on 127 acre-feet of water. In
accordance with ASC 860-10,the Company accounted for the exchange as a sale and recorded the
estimated fair value of the water rights based on Level 3 inputs at $381,000 and
a gain of the same amount. The water rights are held as an investment and
considered to have an indefinite life and, therefore, not subject to
amortization.
 
 During
the year ended September 30, 2009, the Company initially recognized $4,753 of
interest income on nonperforming notes receivable later determined to be
impaired and wrote-off $20,150 of related interest receivable accrued to date
..
   33
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 
 Note
      3.
                  Notes
      Receivable (continued)
 
 Allowance
for loan loss activity is summarized below:
 
 Year
      endedSeptember
      30,2009
                
                
                2008Allowance,
      beginning of period
                
                $
                2,818,900
                
                
                $
                -Provision
                
                
                47,448
                
                
                
                2,948,370Charge-offs
                
                
                (2,330,448
                )
                
                
                (129,470
                )Allowance,
      end of period
                
                $
                535,900
                
                
                $
                2,818,900
 
 One loan
for $1,000,000 held by DavCap, an affiliated variable interest entity under
common ownership was charged off in December 2008 due to foreclosure actions by
senior creditors (see Note 9). Charge-offs also include $1,268,000, also due to
foreclosure actions by senior creditors, related to the two notes subsequently
exchanged for water rights resulting in recovery of $381,000. The balance of
charge-offs consisted of $62,448 for one residential and one other note from a
single party due to significant uncertainty in collecting on
collateral.
 
 Two
customers accounted for 48% and 47%, respectively, of interest and fee income on
notes for the year ended September 30, 2009, and three customers accounted for
52%, 24% and 13%, respectively, of interest and fee income on notes for the year
ended September 30, 2008. For purposes of this disclosure a single customer
includes affiliated entities that are substantially under common
control.
 
 The
following table summarizes finance activity related to notes receivable for the
periods presented:
 
 Year
      endedSeptember
      30,2009
                
                
                2008Balance,
      beginning of period
                
                $
                2,661,573
                
                
                $
                5,907,472Originations
                
                
                -
                
                
                
                500,000Deferred
      finance charges, net
                
                
                2,000
                
                
                
                174,753Loan
      loss provision
                
                
                (47,448
                )
                
                
                (2,948,370
                )Principal
      collected
                
                
                (405,000
                )
                
                
                (972,282
                )Balance,
      end of period
                
                $
                2,211,125
                
                
                $
                2,661,573
 
 Note
      4.
              Finance
      Lease Receivable
 
 In August
2009, the Company funded a direct financing lease in the amount of $360,000 used
to finance electronic equipment with the following balances at September 30,
2009:
 
 Minimum
      lease payments receivable
                
                $
                720,000Unearned
      finance income
                
                
                (355,241
                )Direct
      finance lease receivable
                
                $
                364,759
  The
residual value for the lease was estimated at zero by management at the end of
the ten-year lease term. The lease provides for monthly installments based on
usage with annual adjustments to achieve minimum lease payments of $72,000 per
annum with the possibility of higher contingent rentals computed on an annual
basis. The Company has certain renewal options at the end of ten years and also
certain equipment resale rights back to the lessee.
  34
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 Note
      5.
              Property
      and Equipment
 
 Property
and equipment are as follows:
 
 September
      30,2009
                
                
                2008Leasehold
      improvements
                
                $
                -
                
                
                $
                229,955Furniture
      and equipment
                
                
                20,877
                
                
                
                20,87720,877
                
                
                
                250,832Less
      accumulated depreciation and amortization
                
                
                10,793
                
                
                
                69,373Property
      and equipment, net
                
                $
                10,084
                
                
                $
                181,459
 
 Note
      6.
              Facility
      Exit Liability and Costs
 
 In fiscal
2009 the Company expensed $108,000 as facility exit costs related to an
operating office lease and $130,791 to write-off the impaired balance of related
leasehold improvements. The facility was intended to support future real estate
lending activities but given the economic downturn (Note 12) and the losses
suffered in real estate lending activities in fiscal 2008 and 2009 the Company
elected to apply working capital late in fiscal 2009 to originate a direct
financing equipment lease. The Company does not intend to expand its real estate
lending and has no plans to use the facilities that are unoccupied. While the
landlord granted a 50% rent concession for the six months ending December 2009
there can be no assurance of future concessions or that management’s attempts to
sublet the space will be successful during any portion of the remaining term of
the lease.
 
 The
Company determined the fair value of the facility exit liability based on the
remaining lease rentals reduced by estimated sub-lease rentals or landlord
concessions and inclusive of the outstanding deferred rent obligation. A
deferred rent obligation of $103,424 was recorded in June 2007 from a net cash
leasehold improvement incentive and is being amortized over the term of the
sublease. The Company amortized $21,398 of deferred rent as a reduction of rent
expense for each of the years ended September 30, 2009 and 2008.
 
 The
following table summarizes activity for the period from initial measurement
(July 2009) to September 30, 2009:
 
 Accrued
      facility exit liability recorded in fiscal 2009 (1)
                
                $
                166,845Accretion
      expense
                
                
                2,661Cash
      paid, net
                
                
                (12,644
                )Accrual
      balance at September 30, 2009
                
                $
                156,862
 (1)
              Includes
      $108,000 measured in connection with the operating office lease and the
      $58,845 balance of deferred rent. Excludes $130,791 related to the
      impaired write-off of related leasehold
  improvements.
 
 All
facility exit costs and leasehold improvement write-off costs and related
accretion expense are included in collection, general and administrative
expenses in the accompanying statement of operations.
 
 The
following table summarizes the Company’s minimum lease commitments under the
lease without any discount for possible future concessions or
subleases:
 
 Year
      ending September 30:2010
              $90,2802011
              106,5262012
              54,179
   35
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 Note
      7.
              Subordinated
      Notes Payable and Related Warrants
 
 In July
2008, the Company retired $1,000,000 of outstanding Subordinated Notes for cash
of $430,714 with the balance applied by holders to exercise warrants to purchase
1,138,571 shares of the Company’s common stock. Of the $430,714 four directors
were paid $178,214 to retire the principal of Subordinated Notes held by them,
and they applied $331,786 to the exercise of warrants to purchase 663,571 shares
of the Company’s common stock. Additional warrants for 90,000 shares of common
stock were also exercised by an officer/director for cash proceeds of $45,000,
and warrants on 200,000 shares expired unexercised.
 
 Note
      8.
              Stockholders’
      Equity
 
 Common
Stock
 During
the years ended September 30, 2009 and 2008, officers contributed part-time
services to the Company without compensation. These services, valued at $24,000
each year, have been expensed and treated as capital contributions.
 
 Stock Option
Plan
 Under the
2000 Equity Incentive Plan, as amended (the "Plan") the Company is authorized to
grant incentive and nonstatutory stock options to acquire up to 950,000 shares
of the Company's common stock to employees and consultants. The term of the Plan
is ten years and the term of options granted may not exceed ten years from the
date of grant. Options may be granted at a price no less than 100% of the fair
market value on the grant date. At September 30, 2009, there were options
outstanding for 415,000 common shares (327,500 vested) exercisable at prices
ranging from $0.25 to $0.45 per share through 2014.
 
 The
Company’s employee stock options have various restrictions that reduce option
value, including restrictions on transfer, among others, and may be exercised
prior to their contractual maturity. The Company plans to issue shares on each
option exercise and has no plans to repurchase option shares. The Company
recorded $19,417 and $9,707 of stock compensation expense in its consolidated
statement of operations for the years ended September 30, 2009 and 2008,
respectively. As of September 30, 2009, total estimated compensation cost of
options granted but not yet vested was $15,266 and is expected to be recognized
over 1 year.
  The
following table summarizes option activity for the years ended September 30,
2009 and 2008:
 2009
                
                
                2008Shares
                
                
                Weighted-
                  Average
                  Exercise
                  Price
                
                
                Aggregate
                  Intrinsic
                  Value
                
                
                Shares
                
                
                Weighted-
                  Average
                  Exercise
                  Price
                
                
                Aggregate
                  Intrinsic
                  ValueOutstanding
      at beginning of year
                
                
                335,000
                
                
                $
                0.42
                
                
                
                
                
                
                285,000
                
                
                $
                0.41Granted
                
                
                100,000
                
                
                
                0.255
                
                
                $
                -
                
                
                
                100,000
                
                
                
                0.45
                
                
                $
                -Exercised
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                -Cancelled
                
                
                (20,000
                )
                
                
                0.375
                
                
                $
                -
                
                
                
                (50,000
                )
                
                
                0.45
                
                
                $
                -Outstanding
      at end of year *
                
                
                415,000
                
                
                
                0.38
                
                
                $
                -
                
                
                
                335,000
                
                
                
                0.42
                
                
                $
                11,000Options
      exercisable at year-end
                
                
                327,500
                
                
                
                0.41
                
                
                $
                -
                
                
                
                260,000
                
                
                
                0.41
                
                
                $
                11,000
 
 *
              Options
      outstanding at September 30, 2009 are exercisable at prices ranging from
      $0.25 to $0.45 and expire over the period from 2009 to
    2014.
 
 At
September 30, 2009, the weighted average life of options outstanding was 2.6
years, and 535,000 shares were available for option grants under the Plan.
Intrinsic value is computed based on closing bid prices.
   36
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 Note 9.
              Related Party
  Transactions
 
 The
Company pays a company owned by its President and Board Chairman an aggregate of
$1,000 per month for office rent, bookkeeping and administrative services.
Accordingly, such payments aggregated $12,000 for each of the years ended
September 30, 2009 and 2008.
 
 During
the year ended September 30, 2008, the Company incurred interest expense of
$29,750 related to subordinated notes payable held by officers and
directors.
 
 Effective
in June 2007, the Subsidiary subleased and occupied approximately 3,750 square
feet of office space within space leased personally by the Company’s President
and an unrelated individual. The rate paid pursuant to the sublease agreement is
the same rate as charged to the Company by the unrelated primary landlord. The
current monthly payment of $8,429 (reduced by a landlord concession of 50% for
the months of July through December 2009) is subject to future cost of living
and operating expense adjustments, through March 2012. In July 2009 the Company
classified this lease as a facility exit liability. See Note 6.
 
 In
September 2008, ASI assigned a $1,000,000 undivided interest in a note
receivable and related deed of trust of an unaffiliated borrower to DavCap, LLC
(“DavCap”), an entity formed at that time for that purpose and 50% owned by the
Company’s president and director along with the originating mortgage broker as
partner. The original note was due in July 2008 and upon assignment DavCap
became responsible for collection and recovery. The original note was terminated
in December 2008 through foreclosure by unaffiliated senior
lenders.
 
 The
assignment was made without recourse or participation. The Company received in
exchange an unsecured 12% note payable for the principal amount of $1,000,000
due September 29, 2009. DavCap was not successful in obtaining recovery prior to
foreclosure nor successful in obtaining any significant recovery from any other
DavCap activities. On September 29, 2009 the Company’s subsidiary cancelled the
unsecured note as uncollectible resulting in no gain or loss on a consolidated
basis. However the Company’s subsidiary was paid cash of $122,123 during fiscal
2009 related to the unsecured note primarily from capital contributions made by
the owners of DavCap. This recovery gain is reflected in the Company’s
statements of operations as income from an affiliated variable interest entity
(“VIE”). DavCap made no distributions or payments to its owners or any other
party prior to its liquidation effective September 30, 2009.
 
 The
Company, commencing on September 30, 2008 and at each subsequent reporting
period, consolidated DavCap as a VIE with ASI as its primary beneficiary, thus
requiring it to be consolidated in the accompanying financial statements. The
original $1,000,000 note receivable held by DavCap, was fully provided for in an
allowance each period and was written off as uncollectible in December 2008. The
net equity and losses attributed to the owners of DavCap are reflected as those
of the noncontrolling interest in the accompanying financial
statements.
 
 See Notes
3 and 7 for additional related party disclosures.
 
 Note 10.
              Income
Taxes
 
 The
income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income for the years ended
September 30, 2009 and 2008 as follows:
 
 
 2009
              
              
              %
              
              2008
              
              
              %Computed
      "expected" tax provision (benefit)
              
              $
              (114,000
              )
              
              
              (34
              %)
              
              $
              (922,000
              )
              
              
              (34
              %)Increase
      (decrease) in income taxesresulting from:Increase
      (decrease) in valuation allowance
              
              
              393,000
              
              
              
              117
              %
              
              
              575,000
              
              
              
              21
              %Loan
      held by variable interest entity
              
              
              (298,000
              )
              
              
              (89
              %)
              
              
              340,000
              
              
              
              13
              %Nondeductible
      compensation and other
              
              
              19,000
              
              
              
              6
              %
              
              
              7,000
              
              
              
              -
              %$
              -
              
              
              
              -
              
              
              $
              -
              
              
              
              -






37


ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements


Note 10.
              Income Taxes(continued)
 
 The types
of temporary differences between the tax basis of assets and liabilities and
their approximate tax effects that give rise to such net deferred tax assets are
as follows:
 
 September
      30,2009
                
                
                2008Deferred
      income tax assets:Federal
      net operating loss carryforwards
                
                $
                810,000
                
                
                $
                27,000Federal
      capital loss carryforwards
                
                
                182,000
                
                
                
                188,000Note
      loss allowance
                
                
                182,000
                
                
                
                618,000Stock
      compensation
                
                
                12,000
                
                
                
                15,000Other
                
                
                57,000
                
                
                
                25,0001,243,000
                
                
                
                873,000Deferred
      income tax liabilities:Depreciation
      and amortization
                
                
                -
                
                
                
                (23,000
                )1,243,000
                
                
                
                850,000Valuation
      allowance
                
                
                (1,243,000
                )
                
                
                (850,000
                )Net
      deferred income taxes
                
                $
                -
                
                
                $
                -
 
 A
valuation allowance has been provided for those deferred tax assets that
management believes are not likely to be realized. Realization is dependent upon
future earnings during the period loss carryforwards are expected to be
available. Management believes it is more likely than not that its net deferred
tax assets will not be realized due to substantial economic uncertainties (Note
12). A valuation allowance is also maintained against a deferred tax asset
related to capital loss carryforwards due to improbability of the occurrence of
future capital gains necessary to realize the loss carryforward.
 
 The
Company has net operating and capital loss carryforwards available to reduce
future tax income, if any, of approximately $2,382,000 and $534,000
respectively, as of September 30, 2009, that expire between December 31, 2021,
and September 30, 2026. Since the Company has an unrecognized net operating loss
carryforward as of September 30, 2009 and 2008, no excess tax benefit for the
tax deductions related to stock-based awards was recognized for the years ended
September 30, 2009 or 2008. No options were exercised during the years ended
September 30, 2009 or 2008.
 
 The tax
years 2004 through 2008 remain open under the statue of limitations to
examination by the major tax jurisdictions to which we are subject. However, due
to net operating loss carryforwards (NOL) from prior periods, the Internal
Revenue Service (IRS) could potentially review the losses related to
NOL-generating years back to 2001.
 
 In the
previously issued financial statements the note loss allowance and the valuation
allowance at September 30, 2008 were both overstated by $340,000 with no net
effect.
 
 38
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 Note 
      11.
              Fair
      Value Measurements
 
 ASC  820,
Fair Value Measurements and
Disclosures defines fair value, establishes a framework for measuring
fair value, establishes a three-level valuation hierarchy for disclosure of fair
value measurement and enhances disclosure requirements for fair value
measurements. The valuation hierarchy is based upon the transparency of inputs
to the valuation of an asset or liability as of the measurement date. The three
levels are defined in terms of those inputs as follow:
 
 Level
      1 -
              Quoted
      prices (unadjusted) in active markets for identical assets or
      liabilities;
 Level
      2  -
              Significant
      inputs other than quoted prices included within Level 1 that are either
      directly or indirectly observable;
 Level
      3 -
              Significant
      unobservable inputs in which little or no market activity exists,
      therefore requiring an entity to develop its own assumptions about the
      assumptions that market participants would use in
  pricing.
 
 Assets and Liabilities
Measured at Fair Value on a Recurring Basis
 The table
below presents the recorded amount of assets and liabilities measured at fair
values on a recurring basis as of September 30, 2009:
 
 SignificantOther
                SignificantCarrying
                
                
                Quoted
                
                Observaable
                UnobservableValue
                
                
                Prices
                
                Inputs
                Inputs(Fair
      Value)
                
                
                (Level
      1)
                
                (Level
      2)
                (Level
      3)Assets:Cash
      and cash equivalents:Money
      market funds
                
                $
                90,045
                
                
                $
                90,045Marketable
      securities
                
                
                36,975
                
                
                
                36,975
 
 Assets and Liabilities
Measured at Fair Value on a Nonrecurring Basis
 Assets
measured at fair value on a nonrecurring basis as of September 30, 2009 are
included in the table below:
  SignificantOther
                
                SignificantCarrying
                
                Quoted
                Observaable
                
                UnobservableValue
                
                Prices
                Inputs
                
                Inputs(Fair
      Value)
                
                (Level
      1)
                (Level
      2)
                
                (Level
      3)Assets:Impaired
      loans
                
                $
                2,211,125
                
                
                
                
                $
                2,211,125Water
      rights
                
                
                381,000
                
                
                
                
                
                381,000Leasehold
      improvements
                
                
                -
                
                
                
                
                
                -Liabilities:Facility
      exit liability
                
                
                156,862
                
                
                
                
                
                156,862
 
 The Company may be required from time
to time, to measure certain impaired assets at fair value on a nonrecurring
basis in accordance with U.S.
generally accepted accounting principles.
 
 The
Company does not record loans at fair value on a recurring basis, however, from
time to time, a loan is considered impaired and an allowance for loan loss is
determined. Once a loan is identified as individually impaired it is measured in
accordance with ASC
310-10-35-12,Loans
that Are Identified for Evaluation or that Are Individually Considered
Impaired. See
Note 3 for information on valuing impaired loans.
   39
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 Note 
      11.
                    Fair
      Value Measurements
(continued)
 
 In April
2009 in accordance with the provisions of ASC 860-10, Transfers and Servicingthe
Company valued intangible water rights received in exchange for impaired notes
with a carrying value of zero resulting in a non-cash gain of $381,000. The fair
value of the water rights was considered nonrecurring Level 3 due to there being
a significant decrease in the volume and level of activity of transactions for
similar water rights that required analysis of limited historical transactions
and market data to determine the fair value of the water rights.
 
 In July
2009 in accordance with ASC 420, Exit or Disposal Cost
Obligations the Company valued a facility exit liability for an operating
lease and determined that leaseholder improvements with a depreciated cost of
$130,791 had a fair value of nil. The fair value of the lease exit liability was
considered nonrecurring Level 3 and required management to make assumptions
based on their local knowledge and inquiry regarding estimated sublease and
concession amounts and a discount rate (credit-adjusted risk-free
rate).
 
 Note
      12.
              Concentrations
 
 Our notes
receivable are concentrated with one developer and our lease finance receivable
is with one lessee and accordingly we are subject to the credit risk of these
individual customers and their ability to meet their contractual obligations.
Subsequent to September 30, 2009 the Company took title to the three properties
underlying outstanding notes receivable through deeds in lieu of
foreclosure.
 
 The
United States is experiencing a widespread decline in residential and other real
estate sales, construction, mortgage and other lending activity, together with a
reduction in general credit availability and instability in the commercial and
investment banking systems, and is engaged in war, all of which are likely to
have far-reaching effects on economic activity in the country for an
indeterminate period. The near- and long-term impact of these factors on the
southern Nevada economy and the Company's operations cannot be predicted at this
time but may continue to be substantial. Accordingly the Company has no present
plans to originate any new real estate loans at this time.
 
 From
time-to-time, the Company may carry cash and securities balances on deposit with
financial institutions that are in excess of federally insured limits. The
extent of a future loss to be sustained as a result of uninsured deposits in the
event of a future failure of a bank or other financial institution, if any,
however, is not subject to estimation at this time.
 
 Note
      13.
              Commitments
 
 Operating
Lease
 See Note
6.
 
 Technology
 Prior to
2007, the Company entered into a license agreement with a minimum term of 15
years subject to certain commercialization performance requirements after the
third year that management believes the Company has satisfied. This agreement
granted the Company worldwide exclusive rights to one patent and related
technology for a certain plasma sterilization and decontamination
method.
  The
agreement provides for future royalty payments to the licensor based on product
sales or sublicense fees with no minimum royalties.
  Prior to
2007, the Company also acquired sound reduction technology for jet engines. The
Company is obligated to pay certain royalties on product revenues or license
revenues, if any, to be received by the Company and a fee on sale proceeds due
in the event of any further sale of the technology.  There are no minimum
royalties. The Company is not presently developing this technology.
   40
 ASI
TECHNOLOGY CORPORATION AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 Note
14.                 Segment
Reporting
 
 The
Company has two reportable segments, specialty finance and technology
development. The Company allocates collection, general and administrative costs
between segments.
  Specialty
                
                
                TechnologyFinance
                
                
                Development
                
                
                Unallocated
                
                
                TotalAs of and for the year
      ended September 30, 2009Interest,
      fee, recovery and investment income
                
                $
                467,266
                
                
                
                
                
                
                
                
                $
                467,266Interest
      expense
                
                
                (7
                )
                
                
                
                
                
                
                
                
                (7
                )Loan
      losses
                
                
                (67,598
                )
                
                
                
                
                
                
                
                
                (67,598
                )Research
      and development
                
                
                
                
                
                $
                (21,111
                )
                
                
                
                
                
                (21,111
                )Collection,
      general and administrative
                
                
                (561,202
                )
                
                
                
                
                
                $
                (153,076
                )
                
                
                (714,278
                )Segment
      loss, pre tax
                
                $
                (161,541
                )
                
                $
                (21,111
                )
                
                $
                (153,076
                )
                
                $
                (335,728
                )Assets
                
                $
                3,140,716
                
                
                
                
                
                
                
                
                
                
                $
                3,140,716As of and for the year
      ended September 30, 2008Interest,
      fee, recovery and investment income
                
                $
                822,432
                
                
                
                
                
                
                
                
                
                
                $
                822,432Interest
      expense
                
                
                (98,664
                )
                
                
                
                
                
                
                
                
                
                
                (98,664
                )Loan
      losses
                
                
                (2,948,370
                )
                
                
                
                
                
                
                
                
                
                
                (2,948,370
                )Research
      and development
                
                
                -
                
                
                $
                (14,902
                )
                
                
                
                
                
                
                (14,902
                )Collection,
      general and administrative
                
                
                (317,204
                )
                
                
                
                
                
                $
                (159,329
                )
                
                
                (476,533
                )Segment
      loss, pre tax
                
                $
                (2,541,806
                )
                
                $
                (14,902
                )
                
                $
                (159,329
                )
                
                $
                (2,716,037
                )Assets
                
                $
                3,249,622
                
                
                
                
                
                
                
                
                
                
                $
                3,249,622
 
 41


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





None





ITEM
9A(T). CONTROLS & PROCEDURES





Attached
as exhibits to this Form 10-K are certifications of our Chief Executive Officer
and Chief Financial Officer that are required in accordance with Rule 13a-14 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This
“Controls and Procedures” section includes information concerning the controls
and controls evaluation referred to in the certifications.





Evaluation
of Disclosure Controls and Procedures


We
maintain disclosure controls (as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934 as amended (the “Exchange Act”)) and procedures that are
designed to ensure that information required to be disclosed in our Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. Management necessarily applied its judgment in assessing
the costs and benefits of such controls and procedures, which, by their nature,
can provide only reasonable assurance regarding management’s control
objectives.





At the
conclusion of the period ended September 30, 2009, we carried out an evaluation,
under the supervision and with the participation of our management, including
the Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and procedures. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures, as defined in Rule
13a-15(e) of the Exchange Act, were effective at September 30,
2009.





Management’s
Report on Internal Control Over Financial Reporting


Management
is responsible for establishing and maintaining adequate internal control over
financial reporting for our company. We maintain internal control over financial
reporting designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles in the
United States of America. Internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of ASI; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with authorizations of management and directors of ASI;
and (iii) provide reasonable assurance regarding prevention and timely detection
of unauthorized acquisition, use, or disposition of ASI’s assets that could have
a material effect on the financial statements.





Management
conducted an assessment of the effectiveness of our internal control over
financial reporting as of September 30, 2009 using criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). This assessment included
evaluation of elements such as the design and operating effectiveness of key
financial reporting controls, process documentation, accounting policies, and
our overall control environment. Management’s assessment is supported by testing
and monitoring performed by certain of our finance and accounting personnel of
the operational effectiveness of our internal control.





This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our independent
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management’s report in
this annual report.





Changes
In Internal Control Over Financial Reporting


No change
in our internal controls over financial reporting occurred during our last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.


42








ITEM
9B. OTHER INFORMATION





None.





PART
III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





Directors and
Officers





The
following table sets forth information with respect to each director and
executive officer of ASI as of October 31, 2008:





Name
            Age
            PositionJerry
      E. Polis
            77
            President
      and Director since 1973Eric
      M. Polis
            39
            Secretary,
      Treasurer and Director since August 2000Gerald
      L. Ehrens
            70
            Director
      since September 2005Richard
      A. Fait
            71
            Director
      since January 2006





There is
no arrangement between any of the directors or executive officers and any other
person or persons, pursuant to which he was or is to be selected as a director
or executive officer. Jerry E. Polis is the father of Eric M. Polis. There is no
other blood relationship between or among the directors or executive
officers.





Each
director serves until the next annual meeting or until their successor is
elected or appointed.





Jerry E. Polis has been
President and a director since 1973. Since 1963 he has been self-employed
primarily in real estate investment, from 1964 to 2002 he owned and operated
Polis Realty and since 1973 has been President and Director of Davric
Corporation, a private investment company. From 1968 to the sale of his
ownership in January 1997, he was active as a co-owner of the Taco Bell
franchises for the State of Nevada (operated under privately owned Las Cal
Corporation). In 1994, he co-founded Commercial Bank of Nevada, an unlisted
publicly owned bank located in Las Vegas, Nevada, which was sold through a
merger to a NYSE bank group in June 1998. He was a director of Commercial Bank
from 1994 and Chairman from May 1996 until its sale. He also served as a
director of SouthwestUSA Bank and its parent SouthwestUSA Corporation from March
2004 to February 2006. Mr. Polis graduated from Penn State University with a
B.A. Degree in Commerce in 1953.





Eric M. Polis has been
Secretary and Treasurer of the Company since July 2000. From 1993 to 2002 he was
a licensed real estate agent with Polis Realty with property management and
leasing responsibilities. He has been employed as an asset manager for privately
held Davric Corporation since 1997. Mr. Polis is also a private investor and
serves on the board of several Las Vegas non-profit organizations. In October
2008 he was appointed as a director of publicly traded e.Digital Corporation. He
obtained a B.S. in Business Administration from the University of Arizona in
1993.





Gerald L. Ehrens has been a
self-employed private investor since 1994. From 1992 to 1994 he was Chief
Operating Officer of Inamed Corp., a Nasdaq medical device company. Previously
he held senior executive positions at E.I. Dupont and Union Carbide with his
last position at Union Carbide in 1992 being Vice President of New Business
Development. In 1996, he was appointed as a director of unlisted publicly owned
Commercial Bank of Nevada and served until its sale through merger to a NYSE
bank group in June 1998. He also served as a director of SouthwestUSA Bank and
its parent SouthwestUSA Corporation from June 2003 to February 2006. Mr. Ehrens
received a BS in Chemical Engineering from Princeton University in 1961 and a MS
in Industrial Administration from George Washington University in
1965.





Richard A. Faithas been a
self-employed investor since 2001. From 1966 to January 2001 he served as
President of the Peoples Bank of Aberdeen, South Dakota and Chairman and
President of its holding company, Investment Corporation of America. From the
mid-1960's to 2001 he was an owner, officer and director of ten community banks
in the Midwest. From 1972 to 2000 he was a practicing certified public
accountant in South Dakota and Minnesota. Mr. Fait received a degree in
Accounting from Nettleton College in 1958.


43





Conflicts of
Interest





Certain
conflicts of interest now exist and will continue to exist between us and
certain of our officers, directors and consultants due to the fact that they
have other employment or business interests to which they devote some attention
and they are expected to continue to do so. We have not established policies or
procedures for the resolution of current or potential conflicts of interest
between us and management, consultants or affiliated entities. There can be no
assurance that members of management will resolve all conflicts of interest in
our favor. Our officers and directors are accountable to us as fiduciaries and
are required to adhere to our Code of Ethics for Senior Officers, which means
that they are legally obligated to exercise good faith and integrity in handling
our affairs. Failure by them to conduct our business in our best interests may
result in liability to them.





Our
president and certain other directors and officers, in addition to being
part-time and having other business interests, also invest in real estate loans
through other entities. There is a risk that management may select a real estate
loan that has different returns or risk profile than loans not so selected and
funded through other entities. There are no restrictions or guidelines on how
management will determine which loans are appropriate for us and which are
appropriate for other entities in which management may have an interest.
Management has no obligation to provide us with any particular
opportunities.





It is
conceivable then that our areas of interest could overlap or conflict with other
business interests of our management, shareholders or our consultants. Any such
conflicts, should they arise, will be addressed at the appropriate
time.





Code of
Ethics





We have
adopted a code of ethics that applies to our principal executive officer,
principal financial officer and principal accounting officer or persons
performing similar functions (as well as its other employees and directors). A
copy of the Code Ethics for Senior Officers is posted on our Internet site at
www.asiplasma.com. In addition, a copy will be provided without charge to any
person upon request. Requests for copies of our Code of Ethics for Senior
Officers should be sent by mail to Corporate Secretary at ASI Technology
Corporation, 980 American Pacific Drive, Suite #111, Henderson, Nevada 89014.
Requests may also be made by calling the Company at (702) 734-1888. In the event
we make any amendments to, or grant any waivers of, a provision of the Code
Ethics for Senior Officers that applies to the principal executive officer,
principal financial officer, or principal accounting officer that requires
disclosure under applicable SEC rules, we intend to disclose such amendment or
waiver and the reasons therefore on a Form 8-K or on our next periodic
report.





Section 16(a) Beneficial
Ownership Reporting Compliance





Section
16(a) of the Securities Exchange Act of 1934 (the “Act”) requires the Company’s
officers, directors and persons who own more than 10% of a class of the
Company’s securities registered under Section 12(g) of the Act to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (“SEC”).  Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.




Based
solely on a review of copies of such reports furnished to the Company and
written representations that no other reports were required during the year
ended September 30, 2009, the Company believes that all persons subject to the
reporting requirements pursuant to Section 16(a) filed the required reports on a
timely basis with the SEC.




Committees





The
Company has no formal or separate nominating or compensation committee with the
board of directors as a whole serving in such capacities due to the size of the
Company. On September 17, 2007, the Board of Directors established an Audit
Committee consisting of two members, Richard A. Fait and Gerald L. Ehrens. The
Board determined that Mr. Fait and Mr. Ehrens are “independent directors” as
that term is defined in NASDAQ National Stock Market rules and Rule 10A-3 of the
Securities Exchange Act of 1934 and that Mr. Fait is an “audit committee
financial expert” as that term is defined in Item 407 of Regulation S-B
promulgated by the SEC. Mr. Fait was appointed as the chair of the Audit
Committee. The Board also adopted an audit committee charter.




44


We have
not adopted any procedures by which security holders may recommend nominees to
our Board of Directors and accordingly there have been no material changes to
this policy.




ITEM
11. EXECUTIVE COMPENSATION





Overview





We have a
limited number of employees and currently only two executive
officers.





The Board
of Directors has not established a base salary for our current two executive
officers (Jerry E. Polis, our PEO (Principal Executive Officer) and Eric M.
Polis, our PFO (Principal Financial Officer)) who only provide part-time
services to our company. Other than a $2,500 cash bonus paid to Eric M. Polis in
December 2008 our two executive officers received no cash compensation for their
services as executive officers.  There were no cash bonuses paid or
accrued during the year pursuant to our Executive Bonus Plan (“Bonus
Plan”).





Our two
executive officers received compensation during fiscal 2009 for attendance at
Board of Director and Loan Committee meetings. The rate paid during fiscal 2009
was $200 per meeting ($400 per meeting for the Chairman) for directors (employee
and non-employee) and $100 for each audit committee meeting and $50 for each
loan committee meeting.





Our
long-term incentive program consists of the Bonus Plan and a stock option plan
pursuant to which the PEO and other executive officers (as well as other
employees and consultants) are periodically granted stock options at the then
fair market value (or higher prices) of our common stock and are eligible for
bonus participation. Options are granted pursuant to the 2000 Equity Incentive
Plan and are designed to provide such persons with compensation based on overall
company performance as reflected in the stock price and to help align employees’
and shareholders’ interests.





Under the
2000 Equity Incentive Plan, we are authorized to grant incentive and
nonstatutory stock options to acquire up to 950,000 shares of the Company's
common stock to employees and consultants. The term of the Plan is ten years and
the term of options granted may not exceed ten years from the date of grant.
Options may be granted at a price no less than 100% of the fair market value on
the grant date. Stock options are typically granted periodically to a group of
existing employees, consultants and executive officers.





On March
13, 2007, the Board of Directors (“Board”) approved an Executive Bonus Plan. The
Bonus Plan is designed to align the interests of our executive officers and
eligible employees with the interests of stockholders by linking bonus amounts
directly to Company performance. Executive officers and eligible employees (so
designated from time to time by the Board) (the “Participants”) are eligible to
receive cash bonuses under the Plan based on the Company’s consolidated net
income before tax plus any depreciation, amortization and non-cash interest or
non-cash derivative expenses (“Adjusted Pre-Tax Income”). The bonus pool
available for all executive officers and key employees shall be equal to 10% of
Adjusted Pre-Tax Income of $500,000 to a maximum $5,000,000 for each fiscal year
commencing with fiscal 2007 until the Plan is terminated or amended by the
Board. No bonus pool shall be allocated if Adjusted Pre-Tax Income is less than
$500,000 in a fiscal year.





To be
eligible for participation in the Plan’s bonus pool Participants must be
employed at fiscal year end. The Board has discretion to allocate the bonus pool
among Participants and may designate in advance for individual Participants the
minimum portion of the bonus pool that may be allocated to them based on their
performance in such fiscal year(s). Actual bonus payments, if any, will
therefore vary based on the Company’s financial performance and individual
Participant bonuses will vary on allocation of the bonus pool among Participants
each year. In addition the Board has the discretion to award cash bonuses
outside the Plan or otherwise increase, reduce or eliminate cash bonuses that
would otherwise be payable under the Plan in its sole discretion. Even if the
financial performance is not achieved, the Board may award certain Participants
cash performance bonuses outside the Plan and may award other performance-based
compensation based on fees generated from brokered loans or as the result of
other fees.





Our Board
of Directors serves as the compensation committee and has not adopted a formal
charter. The Board currently performs the following functions regarding
compensation for the named executive officers (“ NEOs”):


·
            Sets
      Board of Director and committee compensation to which NEOs are
      eligible.


·
            Evaluates
      NEO performance in light of goals and determines equity
      awards.


·
            Annually
      reviews the status of the Bonus Plan and any NEO special
      benefits.


45





In the
future the Board of Directors in their role as compensation committee
may:


·
            Establish
      base salaries to existing or future executive
  officers.


·
            Authorize
      bonus participation within or outside the Bonus Plan or modify the plan or
      plan parameters.


·
            Establish
      employee benefits.





PEO Compensation. During
fiscal 2009, no base salary was paid or accrued to our PEO, Jerry E. Polis. The
Board believes this is a level below the range of base salaries for Principal
Executive Officers at similarly situated companies, even for part-time services.
The non-payment of salaries reflects an effort to contain costs during the
development and growth of our business. The Board believes Mr. Jerry E. Polis
has long-term stock incentives through his significant personal stock ownership,
equity incentives and eligibility to participate in the Bonus Plan. Mr. Polis is
an employee at will.





Summary Compensation
Table





The
following table shows for the fiscal years ended September 30 certain
compensation information for our PEO,  and PFO (each a “Named
Executive Officer” and collectively, the “Named Executive Officers”). We had no
other reportable executive officers for fiscal 2009 and 2008. Certain columns
have been omitted as they were not applicable for the Named Executive Officers
for the period presented.




Option
              
              
              All
      OtherSalary
      (1)
              
              
              Bonus(1)
              
              
              Awards
      (2)
              
              
              Compensation
      (3)
              
              
              TotalName
      and Principal Position
              Year
              
              ($)
              
              
              ($)
              
              
              ($)
              
              
              ($)
              
              
              ($)Jerry
      E. Polis, President and Chairman (PEO)
              2009
              
              $
              -
              
              
              $
              -
              
              
              $
              3,858
              
              
              $
              1,600
              
              
              $
              5,4582008
              
              $
              -
              
              
              $
              -
              
              
              $
              1,941
              
              
              $
              850
              
              
              $
              2,791Eric
      M. Polis,  Director, Secretary and Treasurer
    (PFO)
              2009
              
              $
              -
              
              
              $
              2,500
              
              
              $
              3,872
              
              
              $
              800
              
              
              $
              7,1722008
              
              $
              -
              
              
              $
              2,500
              
              
              $
              1,941
              
              
              $
              450
              
              
              $
              4,891






(1)
            Represents
      actual cash compensation.


(2)
            Represents
      the amount of compensation cost recognized by us in fiscal 2009 and 2008
      related to stock option awards vested during fiscal 2009 and 2008, as
      described in ASC 718, Share-Based Payment.
      For a discussion of valuation assumptions, see Note 1 to our 2009
      Consolidated Financial Statements included in this Annual
      Report.


(3)
            Represents
      director and loan committee fees paid for attendance at
      meetings.





Outstanding Equity Awards At
Year End





The
following table shows the number of shares covered by exercisable and
unexercisable options held by the Named Executive Officers on September 30,
2009. There were no other outstanding equity awards as of September 30,
2009.




46




EquityIncentivePlan
      Awards:Number
      of
                Number
      of
                
                Number
      ofSecurities
                Securities
                
                SecuritiesUnderlying
                Underlying
                
                UnderlyingUnexercised
                Unexercised
                
                Unexercised
                OptionOptions
                Options
                
                Unearned
                Exercise
                Option(#)
                (#)
                
                Options
                Price
                ExpirationName
                Exercisable
                Unexercisable
                
                (#)
                ($)
                DateJerry
      E. Polis
                10,000
                -
                (1)
                -
                $0.35
                12/6/200910,000
                -
                (1)
                -
                $0.40
                1/8/201120,000
                -
                (1)
                -
                $0.45
                12/11/201117,500
                2,500
                (2)
                -
                $0.45
                1/15/20135,000
                15,000
                (3)
                
                $0.275
                2/8/2014Eric
      M. Polis
                10,000
                -
                (1)
                -
                $0.35
                12/6/200910,000
                -
                (1)
                -
                $0.40
                1/8/201120,000
                -
                (1)
                -
                $0.45
                12/11/201117,500
                2,500
                (2)
                -
                $0.45
                1/15/20135,000
                15,000
                (3)
                
                $0.25
                2/8/2014


(1)
            These
      options were fully vested at September 30,
2009.


(2)
            The
      final 2,500 shares vested and became exercisable on October 28,
      2009.


(3)
            These
      options vest at the rate of 2,500 every three months subject to continued
      service and other conditions of each option
  grant.





There
were no options exercised by the Named Executive Officers during fiscal 2009.
There are no pension benefits for any Named Executive Officer. No named
executive officer has any employment agreement, termination of employment or
change in control arrangement.





Director
Compensation





Our
directors are reimbursed for reasonable out-of-pocket expenses incurred in
attending meetings of the board of directors and committee meetings. Members of
the board of directors receive equity compensation grants as consideration for
board and committee service from time to time. There is no established policy as
to frequency or amount of equity compensation grants for non directors. The
following meeting payment rates were in effect for fiscal 2009: $200 for each
director meeting ($400 for the Chairman, an executive officer) and $100 for each
audit committee meeting (Mssrs. Fait and Ehrens are the members) and $50 for the
loan committee of the Subsidiary (current members are executive officers Jerry
E. Polis and Eric M. Polis). Meeting fees apply to both employee and
non-employee directors.





During
fiscal 2009 the Board of Directors held four meetings and the Audit Committee
held five meetings.





The
following table sets forth the compensation paid to our non-employee directors
in 2009. Employee director compensation is described above.


47






FeesEarnedor
      Paid
              
              
              Option
              
              
              All
      Otherin
      Cash
              
              
              Awards
      (1) (2)
              
              
              Compensation
              
              
              TotalName
              
              ($)
              
              
              ($)
              
              
              ($)
              
              
              ($)Gerald
      L. Ehrens
              
              $1,300
              
              
              $1,936
              
              
              -
              
              
              $3,236Richard
      A. Fait
              
              $1,300
              
              
              $1,936
              
              
              -
              
              
              $3,236





(1)
            Represents
      the amount of compensation cost recognized by us in fiscal 2009 related to
      stock option awards on 20,000 shares granted in fiscal 2008 and 2009 and
      partially vested for each listed non-employee director as described in ASC
      718, Share-Based
      Payment. For a discussion of valuation assumptions, see Note 1 to
      our 2009 Consolidated Financial Statements included in this Annual
      Report.


(2)
            The
      following are the aggregate number of option awards outstanding for each
      of our non-employee directors at September 30, 2009 – Ehrens: 50,000 and
      Fait: 40,000.





ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS





Common Stock
Ownership





The
following table sets forth, as of December 15, 2009, the Common Stock ownership
of each of our directors and officers, all of our executive officers and
directors as a group, and each person known by us to be a beneficial owner of 5%
or more of our outstanding shares of Common Stock. Except as otherwise noted,
each person listed below is the sole beneficial owner of the shares and has sole
investment and voting power as to such shares.








Name
      and Address
            Amount
      & Natureof
      Beneficial
            of
      Beneficial
            PercentOwner
            Ownership
            of ClassJerry
      E. Polis
            7,358,112
      (1)
            42.9%President
      and Director980
      American Pacific Drive, #111Henderson,
      Nevada 89014Eric
      M. Polis
            486,000
      (2)
            2.8%Secretary,
      Treasurer and Director980
      American Pacific Drive, #111Henderson,
      Nevada 89014Gerald
      L. Ehrens
            195,000
      (3)
            1.1%Director980
      American Pacific Drive, #111Henderson,
      Nevada 89014Richard
      A. Fait
            135,000
      (4)
            0.8%Director980
      American Pacific Drive, #111Henderson,
      Nevada 89014All
      directors and officers as a group
            8,074,112
      (5)
            46.7%(4
      persons)


____________________________


48





(1)
            Includes
      3,630,927 shares held by the Polis Family Trust, 100,000 shares held by
      Polis Family LLC and 3,436,888 shares held by Davric Corporation, a
      company controlled by Jerry E. Polis. Mr. Jerry E. Polis shares investment
      and voting power over the shares held by Polis Family LLC with Eric M.
      Polis and other family members. Also includes options exercisable within
      60 days on 60,000 shares of common
stock.


(2)
            Includes
      326,000 shares held by family trust and 100,000 shares held by the Polis
      Family LLC. Mr. Eric M. Polis shares investment and voting power over the
      shares held by Polis Family LLC with Jerry E. Polis and other family
      members. Also includes options exercisable within 60 days on 60,000 shares
      of common stock.


(3)
            Consists
      of 150,000 shares held by family limited partnership. Also includes
      options exercisable within 60 days on 45,000 shares of common
      stock.


(4)
            Consists
      of 100,000 shares held by family trust. Also includes currently
      exercisable options on 35,000 shares of common
  stock.


(5)
            Includes
      options exercisable within 60 days on 200,000 shares of common
      stock.





Equity
Compensation Plan Information





At
September 30, 2009, we had one equity incentive plan under which equity
securities are or have been authorized for issuance to our employees,
consultants or directors: the 2000 Equity Incentive Plan approved by our
stockholders. The following table gives information as of September 30,
2009:





Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            
            
            Weighted-average
      exercise price of outstanding options, warrants and rights
            
            
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))Plan Category
            
            (a)
            
            
            (b)
            
            
            (c)Equity
      compensation plans approved by security holders
            
            
            415,000
            
            
            $0.38
            
            
            
            535,000Equity
      compensation plans not approved by security holders
            
            
            --
            
            
            --
            
            
            
            --Total
            
            
            415,000
            
            
            $0.38
            
            
            
            535,000





Other
than the 2000 Equity Incentive Plan, we do not have any stock appreciation
rights plans in effect, outstanding warrants or rights and have no long-term
incentive plans, as those terms are defined in Securities and Exchange
Commission regulations.





ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE.





We
currently share office space with Davric Corporation ("Davric"), an entity
controlled by our President and Chairman Jerry E. Polis. We are paying Davric
Corporation $1,000 per month for use of this space and associated administrative
costs. We paid $12,000 for each of the years ended September 30, 2009 and 2008
for such costs.





In
September 2008, ASI assigned our $1,000,000 undivided interest in a note
receivable and related deed of trust of an unaffiliated borrower to DavCap, LLC
(ÒDavCapÓ), an entity formed at that time for that purpose and 50% owned by our
president and director, Jerry E. Polis,
along with the originating mortgage broker as partner. The purpose of DavCap was
to work with the originating mortgage broker to recover funds from the original
borrower or generate gains from certain joint brokerage or investment activities
of the two partners.The original note was due in July 2008 and upon
assignment DavCap became responsible for collection and recovery. The original
note was terminated in December 2008 through foreclosure by unaffiliated senior
lenders and written off as uncollectible against the previous year’s full loss
allowance on our consolidated financial statements.





49


The note
assignment was made without recourse or participation. We received in exchange
an unsecured 12% note payable for the principal amount of $1,000,000 due
September 29, 2009. DavCap was not successful in obtaining recovery prior to
foreclosure nor successful in obtaining any significant recovery from any other
DavCap activities. On September 29, 2009 our subsidiary (ASI Capital) cancelled
the unsecured note as uncollectible resulting in no gain or loss on a
consolidated basis. However our subsidiary was paid cash of $122,123 during
fiscal 2009 related to the unsecured note primarily from capital contributions
made by the owners of DavCap. This recovery gain is reflected in our statements
of operations as income from an affiliated variable interest entity (ÒVIEÓ).
DavCap made no distributions or payments to its owners or any other party prior
to its liquidation effective September 30, 2009.





At
September 30, 2008, we had a note receivable from e.Digital Corporation
(“e.Digital”) in the amount of $400,000. This note plus interest was repaid to
us in cash in March 2009. On October 10, 2008 Mr. Eric Polis was appointed as a
director of e.Digital. Since Mr. Jerry E. Polis and Mr. Eric Polis own
collectively less than 10% of the ownership of e.Digital they are not considered
to have a reportable indirect material interest.





Effective
in June 2007, our Subsidiary subleased and occupied approximately 3,750 square
feet of office space at 9121 W. Russell Rd., Suite 110, Las Vegas, Nevada within
space leased by our President, Jerry E. Polis, and an unrelated individual. The
rate paid pursuant to the sublease is a pass-through of the same monthly rate as
charged by the unrelated primary landlord. The current monthly payment of $8,429
is subject to future cost of living and operating expense adjustments, through
March 2012. We received a 50% lease concession from the primary landlord for the
six months ending December 2009. Aggregate lease expense paid to the primary
landlord, net of deferred rent amortization, was $60,768 and $74,862 for the
year ended September 30, 2009 and 2008, respectively.





We
recorded $24,000 in 2009 and 2008 as contributed services for officers including
Jerry E. Polis. No common stock or other value is due for these contributed
services.





Director
Independence





Our
common stock is quoted on the OTC Bulletin Board inter-dealer quotation system,
which does not have director independence requirements. Our Board of Directors
is comprised of four individuals, two of whom (Messrs. Ehrens and Fait) we have
determined are independent under NASDAQ National Stock Market rules. We consider
Mr. Jerry E. Polis as our PEO (principal executive officer).





ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES.





The Audit
Committee pre-approved all audit, audit-related and non-audit services performed
by our independent registered public accounting firm and subsequently reviewed
the actual fees and expenses paid to Piercy Bowler Taylor & Kern. The Audit
Committee has determined that the fees paid to Piercy Bowler Taylor &
Kern for non-audit services are compatible with maintaining Piercy Bowler
Taylor & Kern’s independence as our independent registered public
accounting firm.





AUDIT
FEES. The aggregate fees billed by Piercy Bowler Taylor & Kern to the date
of this report for professional services for the audit of the financial
statements of the Company and the reviews of the financial statements included
in the Company's quarterly reports for 2009 and 2008 were $58,348 and $73,238
including expenses, respectively.





AUDIT-RELATED
FEES. There were no other fees billed by the Company’s principal accountants
during the fiscal years ended September 30, 2009 or 2008 for assurance and
related services that were reasonably related to the performance of the audit or
review of the Company’s financial statements and not reported under “Audit Fees”
above.





TAX FEES.
There were no fees billed by the Company’s principal accountant during the last
two fiscal periods for professional services rendered for tax compliance, tax
advice and tax planning.





ALL OTHER
FEES FOR PRODUCTS AND SERVICES. There were no other fees billed or billable by
the Company’s principal accountants during the fiscal years ended September 30,
2009 or 2008 for professional services rendered for other products or
services.





PART
IV





ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES





The
following documents are filed as part of this Annual Report on Form
10-K:


50











ExhibitNumber
            Description of Exhibit3.1
            Restated
      Articles of Incorporation of ASI Technology Corporation as filed with the
      Secretary of State of Nevada on September 1, 2000. Incorporated by
      reference to Exhibit 3.1 on Form 10-KSB for the year ended December 31,
      2000, dated March 23, 2001.3.1.1
            Amendment
      to the Restated Articles of Incorporation of ASI Technology Corporation as
      filed with the Secretary of State of Nevada on May 3, 2006. Incorporated
      by reference to Exhibit 3.1.1 on Form 10-QSB/A dated November 2,
      2006.3.2
            Bylaws
      of the Company. Incorporated by reference to Exhibit 3.2 on Form 10-KSB
      for the year ended December 31, 2000, dated March 23,
  2001.4.1
            Form
      of Certificate evidencing common stock of the Company. Incorporated by
      reference to Exhibit 4.1 on Form 10-KSB for the year ended December 31,
      2000, dated March 23, 2001.4.2
            Form
      of Securities Purchase Agreement between the Company and private placees.
      Incorporated by reference to Exhibit 10.6 on Form 8-K dated August 31,
      2005.4.3
            Form
      of 7% Subordinated Promissory Note issued by the Company to noteholders.
      Incorporated by reference to Exhibit 10.7 on Form 8-K dated August 31,
      2005.4.4
            Form
      of Stock Purchase Warrant for Common Stock Exercisable at $0.50 per share
      until July 31, 2008. Incorporated by reference to Exhibit 10.8 on Form 8-K
      dated August 31, 2005.4.5
            Form
      of Securities Purchase Agreement dated January 26, 2007 (each individual
      agreement differs as to investor, amount and shares purchased).
      Incorporated by reference to Exhibit 99.1 on Form 8-K dated January 29,
      2007.10.1
            2000
      Equity Incentive Plan ratified by the shareholders on August 1, 2000.
      Incorporated by reference to Exhibit 10.1 on Form 10-KSB for the year
      ended December 31, 2000, dated March 23, 2001.10.1.1
            Standard
      form of stock option agreement under the 2000 Equity Incentive Plan.
      Incorporated by reference to Exhibit 10.1.1 on Form 10-KSB for the year
      ended December 31, 2000, dated March 23, 2001.10.2
            Purchase
      Agreement dated August 20, 1999 between the Company and Patriot Scientific
      Corporation. Incorporated by reference to Exhibit 10.2 on Form 10-KSB for
      the year ended December 31, 2000, dated March 23, 2001.10.3
            Purchase
      Agreement dated December 29, 2000 between the Company and American
      Technology Corporation. Incorporated by reference to Exhibit 10.3 on Form
      10-KSB for the year ended December 31, 2000, dated March 23,
      2001.10.4
            Patent
      License Agreement effective January 1, 2003 between the Company and Igor
      Alexeff. Portions of this exhibit (indicated by asterisks) have been
      omitted pursuant to a request for confidential treatment pursuant to Rule
      24b-2 of the Securities Exchange Act of 1934. Incorporated by reference to
      Exhibit 10.4 on Form 8-K dated February 11, 2003.10.5
            Technology
      Purchase Agreement dated March 19, 2003 between the Company and Markland
      Technologies, Inc. Incorporated by reference to the Exhibit 2.1 on Form
      8-K dated March 25, 2003.10.6
            Promissory
      Note between the Company and Concordia Homes for $755,000 dated August 10,
      2005. Incorporated by reference to Exhibit 99.1 on Form 8-K dated August
      16, 2005.10.7
            Promissory
      Note between the Company and Concordia Land, LLC dated October 12, 2005.
      Incorporated by reference to Exhibit 99.1 on Form 8-K dated October 14,
      2005.10.7.1
            Promissory
      Note Extension between the Company and Concordia Land, LLC dated October
      12, 2006. Incorporated by reference to Exhibit 10.7.1 to Form 10-KSB dated
      December 19, 2006.10.7.2
            Payment
      Guarantee by Concordia Homes of Nevada, Inc. to the Company dated as of
      October 12, 2005. Incorporated by reference to Exhibit 10.7.2 to Form
      10-KSB dated December 19, 2006.10.8
            Promissory
      Note between the Company and Aviano, LLC dated April 25, 2006.
      Incorporated by reference to Exhibit 99.1 on Form 8-K dated May 1,
      2006.10.8.1
            Payment
      Guarantee by Concordia Homes of Nevada, Inc. to the Company dated as of
      April 25, 2006. Incorporated by reference to Exhibit 10.8.1 to Form 10-KSB
      dated December 19, 2006.


51





10.9
            Promissory
      Note payable to Davric Corporation dated October 31, 2006. Incorporated by
      reference to Exhibit 99.1 on Form 8-K dated November 3,
    2006.10.10
            Promissory
      Note payable to Sunrise Management, Inc. Profit Sharing Plan dated March
      23, 2007. Incorporated by reference to Exhibit 99.2 on Form 8-K dated
      March 29, 2007.10.11
            Purchase
      Agreement By and Between Davric Corporation and ASI Capital Corporation
      dated effective March 28, 2007. Incorporated by reference to Exhibit 99.3
      on Form 8-K dated March 29, 2007.10.11.1
            Note
      Endorsement to ASI Capital Corporation by Davric Corporation dated March
      27, 2007. Incorporated by reference to Exhibit 99.4 on Form 8-K dated
      March 29, 2007.10.11.2
            Assignment
      of Deed of Trust to ASI Capital Corporation by Davric Corporation dated
      March 27, 2007. Incorporated by reference to Exhibit 99.5 on Form 8-K
      dated March 29, 2007.10.12
            Purchase
      Agreements By and Between ASI Capital Corporation and Davric Corporation
      and related Note Endorsements dated effective September 21, 2007.
      Incorporated by reference to Exhibit 99.1 on Form 8-K dated September 21,
      2007.10.13
            Audit
      Committee Charter adopted September 17, 2007. Incorporated by reference to
      Exhibit 99.2 on Form 8-K dated September 21, 2007.10.14
            Sublease
      dated as of October 11, 2007 between ASI Capital Corporation and Joseph L.
      Lamarca and Jerry E. Polis. Incorporated by reference to Exhibit 99.1 on
      Form 8-K dated November 9, 2007.10.15
            Promissory
      Note payable by DAVCAP, LLC to ASI Capital Corporation dated September 29,
      2008. Incorporated by reference to Exhibit 99.1 on Form 8-K dated October
      3, 2008.10.16
            Assignment
      of Note Secured by Deed of Trust to DAVCAP, LLC by ASI Capital Corporation
      dated September 29, 2008. Incorporated by reference to Exhibit 99.2 on
      Form 8-K dated October 3, 2008.10.17
            Termination
      Agreement between ASI Capital Corporation and DAVCAP, LLC dated September
      29, 2009. Incorporated by reference to Exhibit 99.3 on Form 8-K dated
      October 2, 2009.10.18
            Transfer
      Agreement between ASI Capital Corporation and unrelated entities and
      persons (associated with three notes in default) dated December 4, 2009.
      Incorporated by reference to Exhibit 99.1 on Form 9-K dated December 10,
      2009.10.19
            Intercreditor
      Agreement between ASI Capital Corporation, Davric Corporation and
      unrelated entities and persons dated December 4, 2009. Incorporated by
      reference to Exhibit 99.2 on Form 9-K dated December 10,
    2009.21*
            Subsidiaries
      of the Registrant31.1*
            Certification
      of Principal Executive Officer, Pursuant to Exchange Act Rule 13a-14(a),
      as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2*
            Certification
      of Principal Financial Officer, Pursuant to Exchange Act Rule 13a-14(a),
      as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1*
            Certification
      of Principal Executive Officer and Principal Financial Officer, Pursuant
      to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.





*
            
            Filed
      herewith.





52








SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





ASI
      TECHNOLOGY CORPORATIONBy: /s/ JERRY E.
      POLISJerry
      E. PolisPresident





Date:
December 22, 2009





In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





Name
            Position
            Date/s/
      JERRY E. POLIS
            President
      and Chairman (principal executive officer)
            December
      22, 2009Jerry
      E. Polis/s/
      ERIC M. POLIS
            Secretary,
      Treasurer and Director (principal financial and accounting
      officer)
            December
      22, 2009Eric
      M. Polis/s/
      GERALD L. EHRENS
            Director
            December
      22, 2009Gerald
      L. Ehrens/s/
      RICHARD A. FAIT
            Director
            December
      22, 2009Richard
      A. Fait




























53