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ASAE > SEC Filings for ASAE > Form 10-Q on 14-Aug-2014All Recent SEC Filings

Show all filings for ASAP EXPO, INC.

Form 10-Q for ASAP EXPO, INC.


14-Aug-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the audited financial statements and the related notes thereto included elsewhere in this annual report for the period ended December 31, 2013. This annual report contains certain forward-looking statements and the Company's future operating results could differ materially from those discussed herein. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.

OVERVIEW

ASAP Expo ("ASAP" or "The Company" or "Our" or "We") mission is to be the bridge between China and the Western world. ASAP is a holding company that assists Chinese institutional and high net worth individuals with acquisition advisory and asset management of U.S. hotels.

Our investors include AVIC International USA, Junson Capital, Urban Commons, Sky Harbor Management, Shenzhen New World, American Curvet, and USA Heritage.

From August 2010 until now, our group has provided consulting services regarding purchasing 20 hotels primarily in California, Georgia and Michigan. Hotel brands include Marriott, Hilton, Westin, Doubletree by Hilton, Four Points by Sheraton, and Holiday Inn. We are one of the most active hotel buyers in the market.

ASAP believes we will continue this growth for the next couple of years, taking advantage of current below replacement cost assets with reasonable cap rates and value-add opportunities in the current U.S. hotel market.

RESULTS OF OPERATIONS

Revenues

The Company earned consulting fee for providing advisory services in real estate acquisition deals. During the three and six months ended June 30, 2014, the Company earned consulting fee of $269,500 and $881,500, respectively, as compared to consulting fee of $65,500 and $607,962 for the same periods last year. The increase in consulting fee is mainly because the Company closed more hotel acquisition deals in the quarter and six months ended June 30, 2014. The Company occasionally acts as merchandise purchasing agent and earns commission, during the six months ended June 30, 2014, commission income was $625 as compared to $967 for the same period last year.

Cost of Sales

For the three and six months ended June 30, 2014 and 2013, the Company incurred consulting expense of $157,500 and $448,500, respectively for providing advisory services in real estate acquisition deals as compared to $43,500 and $223,800 incurred in the same periods last year. The higher consulting expense in 2014 was mainly due to the closing of more hotel acquisition deals in the first quarter and the first six months of 2014.

Operating Expenses

General and administrative ("G&A") expenses consist primarily of administrative personnel costs, facilities expenses, and professional fee expenses.

For the three months ended June 30, 2014, general and administrative expenses increased by $21,992 or 75.6% to $51,076 as compared to $29,084 for the same period last year. For the six months ended June 30, 2014, general and administrative expenses increased by $194,624 or 459.0% to $237,029 as compared to $42,405 for the same period last year The increase was primarily due to higher personnel costs as the Company hired new employees and put certain officer on payroll starting in September 2013.

Interest Expense

Interest expense decreased to $8,609 during the three months ended June 30, 2014 from $19,323 for the same period last year, and decreased to $15,470 in the six months ended June 30, 2014 from $42,278 for the same period last year. This decrease was due to the lower average convertible note balances. The conversion of $200,000 convertible note into common stocks in July 2013 also contributed to the decrease in average convertible note balances.


Table of Contents

Net Income

The Company recorded a net loss of $16,087 for the three months ended June 30, 2014 as compared to a net loss of $25,440 for the same period last year. The decrease in net loss was mainly due to the higher gross profit, lower interest expense, offset by higher G&A expenses, and income tax provision.

The Company had a net income of $61,273 for the six months ended June 30, 2014 as compared to a net income of $300,446 for the same period last year. The decrease in net income was mainly due to the higher G&A expenses, higher income tax provision as a result of no more net operating loss carryforward and including prior year under-accrued income tax in current period, offset by higher gross profit and lower interest expense.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital deficit was $344,325 at June 30, 2014, as compared to a working capital deficit of $296,543 at December 31, 2013. During the next twelve months, ASAP Expo will focus on its real estate transactions to generate additional revenue. With the net revenue from its services, and continuing support from its major shareholders to provide a convertible note, management believes ASAP Expo will have enough net working capital to sustain its business for another 12 months.

The Company has a convertible note (the "Yuan Note") from Frank Yuan and his family, which is due on demand, and provides for borrowings up to a maximum total of $1,800,000. The Yuan Note carries an interest rate of 6.0% per annum and is convertible into the Company's equity securities at a conversion price of $0.04 given a written notice of the contemplated conversion describing in reasonable detail the material terms of such equity securities and of the issue is provided. The total balance as of June 30, 2014 was $582,173, and the accrued interest was $257,352.

The forecast of the period of time through which ASAP Expo's financial resources will be adequate to support its operations is a forward-looking statement that involves risks and uncertainties. ASAP Expo's actual funding requirements may differ materially as a result of a number of factors, including unknown expenses associated with the cost of providing real estate advisory, investment banking, and management consulting services.

The Company has no commitments to make capital expenditures for the fiscal year ending December 31, 2014.

Over the next two to five years, The Company plans to utilize a combination of internally generated funds from operations and potential debt and equity financing to fund its long-term growth.

The Report of the Company's Independent Registered Public Accounting Firm on our December 31, 2013 financial statements includes an explanatory paragraph stating that the Company has suffered recurring losses from operations and has an accumulated stockholders' deficit, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

At the present time, The Company has received no commitments for the funds required for its planned capital investments. Obtaining those funds, if the Company can do so, will require that it issues substantial amounts of equity securities or incur significant debts. The Company believes that the expected return on those investments will justify the cost. However, the Company's plan, if accomplished, will significantly increase the risks to its liquidity.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in the our financial statements and the accompanying notes. The amounts of assets and liabilities reported on our balance sheet and the amounts of revenues and expenses reported for each of our fiscal periods are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition, stock based compensation and the valuation of deferred taxes. Actual results could differ from these estimates. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of the financial statements:

Revenue Recognition

Accounting Standards Codification ("ASC") 605, "Revenue Recognition" outlines the basic criteria that must be met to recognize revenue and provide guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with Securities and Exchange Commission. Management believes the Company's revenue recognition policies conform to ASC 605.


Table of Contents

Revenues are mainly consulting fees. The Consulting fees are recognized when earned. Consulting fees subject to refund are recorded as deferred revenue until the project is completed and the fees are no longer refundable.

Income Taxes

The Company accounts for income taxes under ASC 740, "Income Taxes." Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management provides a valuation allowance for significant deferred tax assets when it is more likely than not that such asset will not be recovered.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

As of the date this quarterly report is filed, there are no recently issued accounting pronouncements which adoption would have a material impact on the Company's financial statements.

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