UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K/A
 (Amendment
No. 2)
 
 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 incorporation
      or organization)
              (I.R.S. Employer
      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 oNo 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 oNo 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 xNo 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). Yes
oNo o(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 oNo 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.
 
 
 
 TABLE
OF CONTENTS
    PagePART IIITEM 8. Financial
      Statements and Supplementary
              5ITEM 9A(T). Controls
      and Procedures
              22PART IVSIGNATURES
              23Exhibit
    Index
              24
  2
 
 EXPLANATORY
NOTE
 
 We filed
our Annual Report on Form 10-K for the year ended September 30, 2009 on December
22, 2009 (the “Original Filing”) and Amendment No. 1 on February 18, 2010 and we
are filing this Amendment No. 2 to the Annual Report on Form 10-K/A for the year
ended September 30, 2009, solely to include the previously filed financial
statements (Item 8) in the same filing as the amended Item 9A(T) Controls and
Procedures along with Exhibits 31.1 and 31.2 for the year ended September 30,
2009. There has been no change to the Item 8 financial statements included
herein from those filed on December 22, 2009 and there has been no change to the
Item 9A(T) information from that included in Amendment No. 1 filed on February
18, 2010.
  In  connection  with
the  filing  of
this  Form  10-K/A  and  pursuant  to
Rules
13a-14(a)  or  15d-14(a)  under  the  Securities  Exchange  Act
of 1934,  we are including with this Form 10-K/A certain currently
dated certifications.
  Other
than as noted above, no other changes have been made to the Original Report.
This Amendment does not reflect events occurring after the filing of the
Original Report or Amendment No. 1. Accordingly, this Amendment should be
read in conjunction with the Original Report, Amendment No. 1 and our other
filings subsequent to the filing of the Original Report.
  3
 ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 Our
consolidated financial statements follow.
  4
 
 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
 
 
 5
 
 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.
 
 
 6
 
 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.
   7
 
 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.
  8
  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.
  9
  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.
   10
 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.
 
 11
 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.
 
 
 12
 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
..
   13
 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.
  14
 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
   15
 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.
   16
 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
                    
                    
                    
                    -
                    %$
                    -
                    
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    -
   17
 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.
 
 18
 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.
   19
 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.
   20
 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
 
 21
  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 at the
reasonable assurance level.
 
 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. Based on this assessment,
management concluded that the Company’s internal control over financial
reporting was effective as of September 30, 2009.
 
 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.
  22
  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 CORPORATIONDate:
      March 15, 2010
                By:
                /s/ JERRY
      E. POLISJerry
      E. PolisPresident
 
 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
              
              Presidentand
      Chairman
              
              March 15,
    2010Jerry E.
    Polis
              
              (principal
      executive officer)/s/ ERIC M. POLIS
              
              Secretary, Treasurer
      and Director
              
              March 15,
    2010Eric M.
    Polis
              
              (principal
      financial and accounting officer)/s/ GERALD L. EHRENS
              
              Director
              
              March 15,
    2010Gerald L.
      Ehrens/s/ RICHARD A. FAIT
              
              Director
              
              March 15,
    2010Richard A.
      Fait
  23
  EXHIBIT
INDEX
 
  Exhibit
      Number
              
              Description of
      Exhibit31.1
              
              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.
  24