U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended November 30, 2005
[ ] Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to
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Commission file number 001-51554
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ASAP SHOW, INC.
---------------
(Exact name of small business issuer as specified in its charter)
NEVADA 20-2934409
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4349 BALDWIN AVE., UNIT A, EL MONTE, CA 91731
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (626)636-2530
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 No X
--- ---
Number of shares outstanding of the issuer's classes of common equity, as of
December 31, 2005:
8,626,480 SHARES OF COMMON STOCK (ONE CLASS)
--------------------------------------------
Transitional Small Business Disclosure Format: Yes No X
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ASAP SHOW, INC.
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheet as of November 30, 2005 (unaudited)...........3
Condensed Statements of Operations for the Six Months Ended
November 30, 2005 and 2004 (unaudited)................................4
Condensed Statements of Operations for the Three Months Ended
November 30, 2005 and 2004 (unaudited)................................5
Condensed Statements of Cash Flows for the Six Months Ended
November 30, 2005 and 2004 (unaudited)................................6
Notes to Condensed Financial Statements (unaudited)............................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION....................................................12
ITEM 3. CONTROLS AND PROCEDURES.........................................17
PART II - OTHER INFORMATION...................................................18
ITEM 1. LEGAL PROCEEDINGS...............................................18
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS......18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............18
ITEM 5. OTHER INFORMATION...............................................18
ITEM 6. EXHIBITS .......................................................18
SIGNATURES....................................................................18
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASAP SHOW, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
Nov. 30,
2005
------------
(Unaudited)
ASSETS
Current assets:
Cash $ 98,945
Accounts receivable, net 53,681
Capital contribution receivable 50,000
Prepaid expenses 47,157
------------
249,783
Total current assets
Other assets 9,800
------------
Total assets $ 259,583
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 358,749
Deferred revenue 18,353
Line-of-credit and interest payable to stockholder 684,811
------------
Total current liabilities 1,061,913
COMMITMENTS AND CONTINGENCIES
Stockholders' deficit:
Common stock, $0.001 par value; 45,000,000 shares authorized;
8,626,480 shares issued and outstanding 8,626
Additional paid-in capital 14,166,375
Accumulated deficit (14,977,331
------------
Total stockholders' deficit (802,330)
------------
Total liabilities and stockholders' deficit $ 259,583
============
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
3
ASAP SHOW, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended
November 30,
--------------------------
2005 2004
----------- -----------
Revenues:
Transaction sales $ 200,756 $ 61,750
Tradeshow revenue 754,575 734,664
Buying trip 239,590 --
----------- -----------
Revenues 1,194,921 796,414
----------- -----------
Operating expenses:
Cost of transaction sales 168,160 38,098
General and administrative 1,032,435 885,507
Payroll and related 305,135 336,611
----------- -----------
Total operating expenses 1,505,730 1,260,216
----------- -----------
Loss from operations (310,809) (463,802
Interest expense, net of interest income 36,506 5,281
----------- -----------
Loss before income taxes (347,315) (469,083)
Income taxes 800 800
----------- -----------
Net loss $ (348,115) $ (469,883)
=========== ===========
Net loss per share available to common stockholders
Basic and diluted $ (0.04) $ (0.06)
=========== ===========
Weighted-average number of common shares outstanding
Basic and diluted 8,626,480 7,472,673
=========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.
4
ASAP SHOW, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
November 30,
--------------------------
2005 2004
----------- -----------
Revenues:
Transaction sales $ 80,037 $ 34,045
Tradeshow 34,460 --
Buying trip 67,758 --
----------- -----------
Revenues 182,255 34,045
----------- -----------
Operating expenses:
Cost of transaction sales 70,244 11,280
General and administrative 198,299 534,469
Payroll and related 128,545 166,705
----------- -----------
Total operating expenses 397,088 712,454
----------- -----------
Loss from operations (214,833) (678,409)
Interest expense, net of interest income 10,112 3,196
----------- -----------
Loss before income taxes (224,945) (681,605)
Income taxes -- 800
----------- -----------
Net loss $ (224,945) $ (682,405)
=========== ===========
Net loss per share available to common stockholders
Basic and diluted $ (0.02) $ (0.09)
=========== ===========
Weighted-average number of common shares outstanding
Basic and diluted 8,626,480 7,472,673
=========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS.
5
ASAP SHOW, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
November 30,
----------------------
2005 2004
--------- ---------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $(348,115) $(469,883)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Changes in operating assets and liabilities:
Accounts receivable 47,212 358,685
Inventory -- 25,874
Prepaid expenses 17,597 25,759
Other assets 1,568 --
Accounts payable and accrued expenses (62,731) 108,930
Deferred revenues (168,640) 27,980
--------- ---------
Net cash (used in) provided by operating activities (513,109) 77,345
Cash flows from investing activities:
Proceeds from capital contribution receivable 365,000 --
--------- ---------
Net cash provided by investing activities 365,000 --
Cash flows from financing activities:
Repayment of loan payable (100,000) --
Proceeds from borrowings on line-of-credit from stockholder 658,800 229,000
Repayments of borrowings on line-of-credit from stockholder (381,612) (252,000)
--------- ---------
Net cash provided by (used in) financing activities 177,188 (23,000)
--------- ---------
Net increase in cash 29,079 54,345
Cash, beginning of period 69,866 4,451
--------- ---------
Cash, end of period $ 98,945 $ 58,796
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period
Interest 30,294 5,404
Income taxes 800 800
SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS
6
ASAP SHOW, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF REPORTING
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form
10-QSB and Article 10 of Regulation S-B. Accordingly, they do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for fair presentation have been included.
Operating results for the six-month period ended November 30, 2005 are not
necessarily indicative of the results that may be expected for the year ending
May 31, 2006.
ASAP Show, Inc. ("ASAP" or the "Company") was incorporated in December 2004
under the laws of the State of Nevada. As summarized below and described below,
Cyber Merchants Exchange, Inc. ("C-ME"), the Company's former parent, entered
into a Securities Purchase Agreement ("SPA") with KI Equity Partners II, LLC
("KI Equity"), as amended, which resulted in a reorganization of the Company and
C-ME (the "Reorganization"). The Company accounted for the reorganization as a
reverse spin-off; accordingly, the accompanying financial statements include the
historical results of C-ME.
REORGANIZATION
Securities Purchase Agreement
-----------------------------
On November 19, 2004 C-ME entered into the SPA with Keating Reverse Merger Fund,
LLC ("KRM Fund") and Frank Yuan, the then Chairman of the Board and Chief
Executive Officer of C-ME ("Yuan") providing for the investment by KRM Fund of
$425,000 (the "Investment") in C-ME in exchange for 7,000,000 shares of C-ME's
common stock. The SPA was amended and restated effective August 25, 2005 to,
among other things, change the Investment to $415,000, change the number of
shares to be purchased to 7,104,160, and substitute KI Equity for KRM Fund. The
balance of $50,000 which has not been received at November 30, 2005, is included
in the accompanying balance sheet as a capital contribution receivable. Such
amount is to be received on March 30, 2006. The Investment by KI Equity was used
to satisfy $124,397 of certain liabilities assumed by the Company with the
remaining funds of $240,603 being used to provide the Company with working
capital to grow its trade show business. The Reorganization will allow the
shareholders of C-ME to participate in the growth of the trade show business
through the spin-off of the Company, which owns and operates the trade show
business (see below). Following the Reorganization and spin off of the Company,
C-ME is majority owned by KI Equity and will seek a business combination with an
operating company.
Stock Bonus
-----------
C-ME issued 1,027,327 shares to certain key employees and directors effective
May 31, 2005 (the "Stock Bonus"). The Stock Bonus was not subject to shareholder
approval. The individuals receiving the Stock Bonus previously had stock options
in C-ME, which were cancelled as part of the Stock Bonus and Reorganization. In
addition, C-ME terminated all of its stock option plans, and all outstanding
stock options were cancelled. In addition, the employees have not received any
significant pay increases in recent years. Directors of C-ME have never been
paid fees for services on the Board. The intent of the issuance of
7
ASAP SHOW, INC.
the Stock Bonus was to partially compensate these individuals for their
significant contributions to C-ME since employees did not receive any
significant pay increases in recent years and outside directors were never paid
for services on the Board.
ASAP Show, Inc.
---------------
C-ME formed ASAP on December 1, 2004 as a wholly owned subsidiary. The officers
and directors of the Company are the same as the officers and directors of C-ME.
Since the Reorganization, ASAP has focused on operating the trade show business
previously operated by C-ME. The Investment contemplated as part of the
Reorganization was used to pay the liabilities of C-ME that were assumed by ASAP
under the Transfer Agreement. ASAP will continue to operate its trade show twice
a year in Las Vegas, three shows in China, and manage Material World Global
Pavilion in Miami, FL and New York. As part of the Transfer Agreement, ASAP
assumed a revolving $800,000 line of credit from Frank Yuan and his wife (the
"Yuan Line of Credit"). Frank Yuan and his wife consented to the assumption of
the Yuan Line of Credit and released C-ME from any and all liabilities
thereunder. The Yuan Line of Credit has an outstanding balance as of November
30, 2005 of $684,811, including accrued interest of $18,835, bears interest at
8% per annum, and expires in September 2006. With the payment of liabilities
with the Investment, the expected cash flow generated from the trade shows and
the Yuan Line of Credit, ASAP believes it will have sufficient cash resources to
grow its business and meet the liabilities and obligations with respect to its
operations through at least November 30, 2006
As a further condition of the Investment, C-ME and ASAP entered into the
Transfer Agreement effective May 31, 2005 whereby all of the assets of C-ME were
transferred to ASAP and all liabilities, obligations and contracts of C-ME
(known and unknown, fixed or contingent or otherwise) were assumed by ASAP
("Assumed Liabilities"). In exchange C-ME received 8,626,480 shares of ASAP
common stock. ASAP and Frank Yuan have agreed to indemnify and hold C-ME
harmless from any loss, costs or damages incurred by C-ME with respect to the
Assumed Liabilities ("Indemnity Claims"). As a condition of the Investment, C-ME
must have no liabilities, obligations, debts, contracts or agreements of any
kind or nature.
Distribution
------------
On August 25, 2005, C-ME distributed the 8,626,480 shares of ASAP to the U.S.
Stock Transfer Corporation as depository agent for ASAP's shareholders. The ASAP
shares will be held by the depository agent until such time as the Company's
Form 10-SB, originally filed on October 3, 2005, has become effective.
At that time, the certificates representing ASAP shares will be disbursed by the
depository agent to ASAP's shareholders. Following disbursement of the ASAP
shares, ASAP intends to make available information that will allow a broker to
file a Form 15c2-11 to post a quotation and obtain a trading symbol for the
shares of ASAP on the OTC BB. The ASAP shares distributed as part of the
Distribution will be freely tradable, subject to certain restrictions applicable
to insiders and affiliates, once the Form 10-SB has become effective.
The distribution is taxable to the shareholders.
8
ASAP SHOW, INC.
Investment
---------
The closing of the transactions contemplated by the SPA and the Investment
occurred on September 30, 2005. Pursuant to the Investment, C-ME issued
7,104,160 shares of common stock to KI Equity for $415,000. The proceeds of the
Investment were used to satisfy liabilities that were assumed by the Company as
part of the Transfer and other liabilities of C-ME, and the remaining funds of
$290,603 will be used by the Company for working capital purposes, less $50,000
which C-ME will hold in reserve for a period of six months following the closing
of the SPA to satisfy any Indemnity Claims. The $50,000 has been included in the
accompanying balance sheet at November 30, 2005 as a capital contribution
receivable and is to be received in March 2006.
Accounting Treatment
--------------------
The Company will account for the Reorganization as a reverse spinoff in
accordance with the Emerging Issues Task Force Issue ("EITF") No. 02-11,
"ACCOUNTING FOR REVERSE SPINOFFS." In a reverse spinoff, the legal spinnee
(ASAP) is treated as though it were the spinnor for accounting purposes. Reverse
spinoff accounting is appropriate as the treatment of the legal spinnee as the
accounting spinnor results in the most accurate depiction of the substance of
the transaction for shareholders and other users of the financials statements.
Under this treatment, the historical financial statements of the Company will be
the historical financial statements of ASAP. In making its determination, the
Company considered the following indicators, among others:
o the accounting spinnor (legal spinnee, ASAP) is larger than the
accounting spinnee (legal spinnor, C-ME);
o the fair value of the accounting spinnor (legal spinnee) is greater
than that of the accounting spinnee (legal spinnor);
o the accounting spinnor (legal spinnee) retains the senior management
of the formerly combined entity; and
o the accounting spinnor (legal spinnee) retains senior management.
REVENUE RECOGNITION
The Securities and Exchange Commission issued Staff Accounting Bulletin 104
("SAB 104"), "Revenue Recognition" which 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 SAB 104.
Net revenues include amounts earned under transaction sales, trade show booth
sales and subscription fees.
Transaction Sales
-----------------
Transaction revenues are recorded in accordance with Emerging Issues Task Force
Issue No. ("EITF") 99-19 "Reporting Revenue Gross as a Principal versus net as
an Agent." The Company recognizes net revenues from product transaction sales
when title to the product passes to the customer, net of factoring fees.
Beginning in fiscal 2005 for all product transactions with its customers, the
Company acts as a
9
ASAP SHOW, INC.
principal, takes title to all products sold upon shipment, and bears inventory
risk for return products that the Company is not able to return to the supplier,
although these risks are mitigated through arrangements with factories, shippers
and suppliers.
The Company recognizes revenue on transaction sales upon shipment when there is
evidence that an arrangement exists, delivery has occurred under the Company's
standard FOB shipping point terms, the sales price is fixed or determinable and
the ability to collect sales proceeds is reasonably assured.
ASAP Trade Show
---------------
The ASAP trade show generates revenue through exhibitor booths sales, corporate
sponsorship, and advertising. Such revenue is typically collected in advance,
deferred and then recognized at the time of the related trade show. The Company
conducts two trade shows per year, currently in February and August in Las
Vegas.
Material World
--------------
The Company shares Material World's foreign exhibitors' net exhibitors fees
income which are derived through Company introduction (we do not share in
losses, if any). Material World's net revenue is recognized in the accounting
period in which the event is conducted. Material World conducts two trade shows
per year, i.e. April in Miami and September in New York.
Buying Trip
-----------
Buying trip generates revenue through the participating buyers ("Buyers") paying
for the Company's assistance during the travel through various foreign countries
in Asia to meet local apparel manufacturers. The Company receives a portion of
exhibition net revenues collected by the oversea government's trade promotion
agencies located in the various cities which were visited by the Buyers (we do
not share any losses, if any). The Buying Trip's revenue is recognized ratably
during the period in which the event is conducted. Management is planning to
conduct buying trips to China in May and Southeast Asia Countries in November
each year.
INDEMNITIES AND GUARANTEES
During the normal course of business, the Company has made certain indemnities
and guarantees under which it may be required to make payments in relation to
certain transactions. These indemnities include certain agreements with the
Company's officers, under which the Company may be required to indemnify such
person for liabilities arising out of their employment relationship. The
duration of these indemnities and guarantees varies and, in certain cases, is
indefinite. The majority of these indemnities and guarantees do not provide for
any limitation of the maximum potential future payments the Company could be
obligated to make. Historically, the Company has not been obligated to make
significant payments for these obligations and no liabilities have been recorded
for these indemnities and guarantees in the accompanying condensed balance
sheets.
BASIC AND DILUTED EARNINGS PER COMMON SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per common share computations:
10
ASAP SHOW, INC.
6 Months Ended 3 Months Ended
11/30/05 11/30/04 11/30/05 11/30/04
----------- ----------- ----------- -----------
Numerator for basic and diluted (loss) income per share:
Net loss (income) $ (348,115) $ 469,883 $ (224,945) $ (682,405)
Denominator for basic and diluted loss (earnings) per share:
Weighted average shares (basic and diluted) 8,626,480 7,472,673 8,626,480 7,472,673
----------- ----------- ----------- -----------
Loss charged to common stockholders per common share:
Basic and diluted $ (0.04 $ (0.06) $ (0.02) $ (0.09)
=========== =========== =========== ===========
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" ("Statement 123(R)") to provide investors and other users of financial
statements with more complete and neutral financial information by requiring
that the compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability instruments issued. Statement 123(R) covers a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. Statement 123(R) replaces SFAS No. 123, and
supersedes APB 25. SFAS No. 123, as originally issued in 1995, established as
preferable a fair-value-based method of accounting for share-based payment
transactions with employees. However, that Statement permitted entities the
option of continuing to apply the guidance in APB 25, as long as the footnotes
to financial statements disclosed what net income would have been had the
preferable fair-value-based method been used. Public entities (other than those
filing as small business issuers) will be required to apply Statement 123(R) as
of the first interim or annual reporting period that begins after June 15, 2005.
Small business issuers will be required to apply Statement 123(R) as of the
first interim or annual reporting period that begins after December 15, 2005.
The Company is in the process of evaluating whether the adoption of Statement
123(R) will have a significant impact on the Company's overall results of
operations or financial position.
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ASAP SHOW, INC.
NOTE 2 - BUSINESS SEGMENTS
Reportable business segments as of and for the periods ended November 30, 2005
and 2004 are as follows:
-----------------------------------------------------------------------------------------------
6 Months 6 Months 3 Months 3 Months
Ended 11/30/05 Ended 11/30/04 Ended 11/30/05 Ended 11/30/04
--------------------------------------------------------------
Revenues:
Transaction sales $ 200,756 $ 61,750 $ 80,037 $ 34,045
Tradeshow 754,575 734,664 34,460 --
Buying trip 239,590 -- 67,758 --
----------- ----------- ----------- -----------
$ 1,194,921 $ 796,414 $ 182,255 $ 34,045
=========== =========== =========== ===========
Income (loss) from operations:
Transaction sales $ 32,596 $ 23,652 $ 9,793 $ 22,765
Tradeshow (486,807) (440,150) (273,710) (701,174)
Buying trip 143,402 -- 49,084 --
----------- ----------- ----------- -----------
$ (310,809) $ (463,802) $ (214,833) $ (678,409)
=========== =========== =========== ===========
Depreciation and amortization:
Transaction sales $ -- $ -- $ -- $ --
Tradeshow -- -- -- --
Buying trip -- -- -- --
----------- ----------- ----------- -----------
$ -- $ -- $ -- $ --
=========== =========== =========== ===========
Identifiable assets:
Transaction sales $ 1,737
Tradeshow 205,902
Buying trip 51,944
-----------
$ 259,583
===========
Net sales as reflected above, consist of sales to unaffiliated customers only as
there were no significant intersegment sales for the three and six-month periods
ended November 30, 2005 and 2004.
There were no significant concentrations on net segment sales for the three and
six-month periods ended November 30, 2005 and 2004.
Transaction apparel sales are made from goods exported from China into the USA,
while tradeshow revenue relates exclusively to the Company's Las Vegas, Nevada
trade shows.
NOTE 3 - DEBT
LINE OF CREDIT FROM STOCKHOLDER
The Company has a revolving line-of-credit (the "Line") from Frank Yuan, the
Company's Chief Executive Officer and a significant Company stockholder, which
expires on September 1, 2006 and provides for borrowings up to a maximum of
$800,000, as amended. The Line bears an interest rate of 8.0% per annum. The
balance at November 30, 2005 was $684,811, including accrued and unpaid interest
of $18,835 at November 30, 2005. Interest expense incurred under the Line
approximated the following:
Three-Months Six-Months
Ended Ended
-------------- --------------
November 30, 2004 $ 2,500 $ 5,300
============== ==============
November 30, 2005 $ 12,000 $ 21,500
============== ==============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the financial statements and the
related notes thereto included elsewhere in this quarterly report for the period
ended November 30, 2005. This quarterly report contains certain forward-looking
statements and the Company's future operating results could differ materially
from those discussed herein. Certain statements contained in this Report,
including, without limitation, statements containing the words "believes,"
"anticipates," "expects" and the like, constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the
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ASAP SHOW, INC.
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.
STATUS OF OPERATIONS
BACKGROUND
ASAP Show, Inc. (the "Company") is a trade show organizer that is initially
targeting the apparel industry and an international electronic trading,
financing and logistics corporation. The following four interlocking services
make the Company unique: 1) ASAP Global Sourcing Show - a trade show for U.S.
buyers to meet hundreds of garment exhibitors under one roof - held twice a year
in Las Vegas, NV. 2) The Company builds private extranets, or Internet Sourcing
Networks ("ISN"), for its retail partners. The ISN matches and pushes
merchandise to the appropriate buyers computer desktops. 3) The Company's Global
Financial Platform ("GFP": Patent Pending) allows U.S. buyers to purchase
overseas merchandise without the need of issuing a letter of credit. 4)
Logistics warehouse, shipping, and billing services for overseas manufacturers.
The Company presently has representatives located in 25 countries throughout
Asia, Africa, and the Middle East to facilitate international transactions.
SERVICES
Asap Global Sourcing Show
-------------------------
The Apparel Sourcing Association Pavilion ("Global Sourcing Show" or "ASAP
Show") is bringing a totally new concept to the trade show industry. The Company
has a unique opportunity to make the ASAP Show successful because of the
Company's global presence and management expertise in the apparel industry. In
addition, there were no trade shows for the producing countries to exhibit in
the U.S.A. to gain container load orders until the ASAP show was launched. Also,
many are reluctant to travel overseas. Therefore, the ASAP Show is well
positioned for buyers and overseas manufacturers.
The ASAP show segment derives revenue principally from the sale of exhibit space
and conference attendance fees generated at its events. In fiscal 2004,
approximately 95% of our trade shows and conferences revenue was from the sale
of exhibit space. Events are generally held on a semi-annual basis in Las Vegas,
Nevada. At many of our trade shows, a portion of exhibit space is reserved and
partial payment is received as much as 90 days in advance. Booth fees that are
collected in advance of the related ASAP show are recorded on our balance sheet
as deferred revenue. Revenue and related direct event expenses are recognized in
the month in which the event is held.
Costs incurred by the ASAP show segment include facility rent, outsourced
services such as registration, booth rental, electrical services, security,
decorator and attendee and exhibitor promotion. All show promotion related
expenses such as advertisements, traveling, staff salaries and related payroll
expenses are treated as monthly period expenses. The deposit for the ASAP show
facility is capitalized and then expensed in the month the event occurs.
Asap China Buying Trip
----------------------
The China Buying Trip is being arranged by the Company to bring 125 U.S. buyers
during fiscal 2006, each with more than $10 million in purchasing power, to four
production centers in China. This event has been overwhelmingly supported by the
U.S Cotton Council, American Apparel and Footwear Association, The CIT Group
("CIT"), Ernst and Young, and many other leading corporations and associations.
The first tour of its
13
ASAP SHOW, INC.
kind was designed for U.S. buyers prepared to place production orders, license
their brands, understand China's distribution channels, find joint ventures
possibilities and relocate U.S. textile plants to China. Participation from the
U.S. side will include such prominent names as Fruit of the Loom, Jockey and
many others. Management is planning to conduct the China Buying Trip in May of
each year and is also planning to conduct buying trips to other countries in
fiscal year 2006.
Material World
--------------
Material World is a textile, fabrics and accessories sourcing show held twice a
year in Miami, Florida and New York. ASAP has entered into an exclusive
agreement with Material World to represent it as its global marketing partner
and will share 50% of the net profits associated with sales of booths by the
Company. ASAP's agreement with Material World is based upon ASAP's global
contacts and network to bring textile and accessories manufacturers to exhibit
at the Miami and New York shows. ASAP will share 50% of the gross profits, which
are generated from ASAP's efforts. The calculation is based on the total booth
receipts less venue rental, booth decorations and commissions paid to overseas
agents. Material World will be responsible for promotion and advertising to
attract attendees/buyers. ASAP is responsible for promotion and advertisements
to attract overseas manufacturers as exhibitors.
Electronic Commerce, a New Wave of International Trade
------------------------------------------------------
The Company has utilized the convenient and powerful Internet to communicate
between buyers and sellers internationally. The ISN was built with the buyer in
mind to make it user friendly to gain global apparel stock lot information. The
Company has successfully represented Fruit of the Loom, Kellwood, Factory 2-U
Stores, Value City, and others to be their buyer's agent. The ASAP Show helps
promote the Company's ISN transaction model to these buyers. In addition, the
Company sometimes acts as a principal to purchase merchandise for presale
orders. The Company also represents some reputable overseas manufacturers with
non-refundable monthly retainer payments as their U.S. sales agents.
Global Financial Platform
-------------------------
The Company developed a patent-pending global financial platform, levied with
CIT - a factoring accounts receivable guarantee service. This process allows
overseas sellers to gain cash advances through their local bank and eliminate
the need for letters of credit to sell international merchandise.
Logistics, Warehouse, Shipping and Invoice Services
---------------------------------------------------
Logistics, warehousing, shipping and billing services are also provided for
overseas manufacturers.
REVENUE MODEL
The ASAP Show
Currently, the ASAP Show charges $58 per square foot to exhibitors. The cost per
square foot is considered costly in the U.S. trade show industry. The reason
ASAP exhibitors are willing to pay this high price is because the Company's
management partners with overseas governments to subsidize up to 50%-100% of the
exhibition costs. The Company's management expertise in the apparel industry,
unique marketing concepts, services, educational seminars and relationships with
the foreign trade promotion bureaus and associations set the Company apart from
competitors.
E-commerce Transactions
The Company charges a minimum of 5%-10% commission when representing U.S. buyers
who wish to utilize the Company as their buying agent to source their goods
overseas. The Company can also act as the principal to
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ASAP SHOW, INC.
purchase the pre-sold merchandise with a minimum profit margin of 20%. There is
high demand for the Company's sourcing abilities by the U.S. apparel buyers and
the Company is in the process of selecting the U.S. apparel buyers it wants to
represent.
Global Financial Platform
The Company developed a patent-pending global financial platform, levied with
CIT - a factoring accounts receivable guarantee service. This process allows
overseas sellers to gain cash advances through their local bank and eliminate
the need for letters of credit to sell international merchandise.
CIT charges 1.5% of the invoice value as its non-recourse factoring fee while
the Company charges 0.5%. The overseas bank charges interest for their cash
advances made to the seller. The potential of eliminating the letter of credit
to purchase overseas merchandise business represents billions of dollars per
year. There were no transactions with for the six months ended November 30,
2005.
Logistics, Warehousing, Shipping and Billing
The Company charges standard public warehouse charges for freight in and out,
warehouse storage, shipping and billing charges for its exhibitors and overseas
manufacturers.
RESULTS OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 2005 AND 2004
Revenue
-------
Revenues from transaction sales for the six months ended November 30, 2005 were
$200,756, an increase of $139,006 or 225% compared to $61,750 for the same
period last year. The reason for such a significant increase on transaction
sales is because the Company received more orders during the period. The
Company, however, does not anticipate that transactions sales will remain a
significant percentage of the Company's overall business in future periods,
because the Company allocates most of its resources and efforts to ASAP Show
production and promotion.
The gross tradeshow revenue for the six months ended November 30, 2005 was
$754,575, an increase of $19,911 or 3% compared to $734,664 for the same period
last year. This increase was due to an increase in number of exhibitors for the
ASAP Show in August 2005 compared to the same show in August 2004. Because of
the Men's Apparel Guild in California's ("MAGIC") Sourcing Zone which is held at
the same time, management believes the competing show will make it difficult to
have significant growth for the ASAP show in the future.
Gross revenues from the buying trip for the six months ended November 30, 2005
were $239,590. The first trip was to China in June 2005 and a second trip was to
Pakistan and Bangladesh in November 2005.
Operating Expenses
------------------
Operating expenses increased by $245,514, or 19%, to $1,505,730 for the six
months ended November 30, 2005, as compared to $1,260,216 for the same period
last year. The increase in operating expenses is primarily due to the increase
in professional fees and a slight increase in rent. Professional fees increased
by $107,878 to $185,550 for the six months ended November 30, 2005, as compared
to $77,672 for the
15
ASAP SHOW, INC.
same period last year. The increase in professional fees is primarily related to
increased legal and accounting fees in connection with the filing of the
Company's Form 10-SB and related amendments. Rent slightly increased by $6,860
to $30,380 for the six months ended November 30, 2005 as compared to $23,520 for
the same period last year.
Net Loss (Income)
-----------------
The Company recorded a net loss of $348,115 for the six months ended November
30, 2005, an improvement of $121,768 as compared to a net loss of $469,883 for
the same period last year. Such an improvement is mainly due to the revenues
generated from buying trips and transaction sales of $440,346, net of increases
in operating expenses of $245,514.
THREE MONTHS ENDED NOVEMBER 30, 2005 AND 2004
Revenue
-------
Gross revenue from transaction sales for the three months ended November 30,
2005 were $80,037, an increase of $45,992 or 135% compared to $34,045 for the
same period last year. The reason for such a significant increase on transaction
sales is because the Company received more orders during the period. The
Company, however, does not anticipate that transactions sales will remain a
significant percentage of the Company's overall business in future periods,
because the Company allocates most of its resources and efforts to ASAP Show
production and promotion.
The gross tradeshow revenue for the three months ended November 30, 2005 was
$34,460, an increase of $34,460 or 100% compared to $0 for the same period last
year. The gross trade show revenue of $34,460 for this quarter was the profit
sharing revenues from the sales of Material World show booths. This revenue
stream was new in 2005.
Gross revenues from the buying trip for the three months ended November 30, 2005
were $67,758. This was the debut of the buying trip to Pakistan and Bangladesh
in November 2005.
Operating Expenses
------------------
Operating expenses decreased by $315,366, or 44%, to $397,088 for the three
months ended November 30, 2005, as compared to $712,454 for the same period last
year. The decrease in operating expenses is primarily due to the decrease in
payroll and ASAP Show expenses. Payroll decreased by $38,160 to $128,545 for the
three months ended November 30, 2005, as compared to $166,705 for the same
period last year. The ASAP Show and its marketing expenses increased by $353,741
to $33,663 for the three months ended November 30, 2005 as compared to $387,404
for the same period last year. In addition, the debut of the buying trip cost
the Company $77,514.
Net Loss (Income)
-----------------
The Company recorded a net loss of $224,945 for the three months ended November
30, 2005, an improvement of $457,460 from loss; as compared to a net loss of
$682,405 for the same period last year. Such an improvement from loss is mainly
due to the reduction of operating expenses of $315,366, net of the reduction of
net revenues from transaction sales, tradeshow revenue and buying trip as a
whole.
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ASAP SHOW, INC.
LIQUIDITY AND CAPITAL RESOURCES
Excluding the line-of-credit from the shareholder, the Company had a deficit in
working capital of approximately $127,000 as of November 30, 2005, primarily due
to the liabilities assumed from C-Me under the Transfer Agreement. During this
period, the Company had average monthly expenses of approximately $110,000
(excluding ASAP Show production expenses, buying trip expenses and additional
professional fees incurred due to reverse spin-off of the Company). Management
anticipates maintaining its monthly expenses in the range of $110,000 to
$120,000 in the foreseeable future. The Company will focus its efforts on the
semi-annual ASAP show in Las Vegas and Material World Global Pavilion ("Material
World") show, to generate more revenue, in addition to the revenues generated
from buying trips. At November 30, 2005, the Company has current assets of
approximately $250,000. With the net revenue from the ASAP shows, Buying Trips,
Material World and continuing support from its major shareholder to provide a
revolving line-of-credit, management believes the Company will have enough net
working capital to sustain its business through November 2006 and beyond.
The Company has a revolving line-of-credit (the "Line") from Frank Yuan, the
Company's CEO and a significant shareholder, which expires on September 1, 2006
and provides for borrowings up to a maximum of $800,000, as amended. The Line
carries an interest rate of 8.0% per annum. The balance as of November 30, 2005
was $684,811, including $18,835 of accrued interest.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. The Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO"), of the effectiveness of the Company's disclosure
controls and procedures. Based upon that evaluation, the CEO and CFO concluded
that as of November 30, 2005 our disclosure controls and procedures were
effective in timely alerting them to the material information relating to the
Company required to be included in the Company's periodic filings with the SEC,
subject to the various limitations on effectiveness set forth below under the
heading, "LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS," such that the
information relating to the Company, required to be disclosed in SEC reports (i)
is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms, and (ii) is accumulated and communicated to
the Company's management, including our CEO and CFO, as appropriate to allow
timely decisions regarding required disclosure." (b) Changes in internal control
over financial reporting. There has been no change in the Company's internal
control over financial reporting that occurred during the fiscal quarter ended
November 30, 2005 that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS
The Company's management, including the CEO and CFO, does not expect that our
disclosure controls and procedures or our internal control over financial
reporting will necessarily prevent all fraud and material error. An internal
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the internal control. The design
17
ASAP SHOW, INC.
of any system of controls also is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions. Over time, control may become inadequate because of changes in
conditions, and/or the degree of compliance with the policies or procedures may
deteriorate.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ASAP SHOW, INC.
(Registrant)
Date: 01/17/2006 /s/ Frank S. Yuan
--------------------------------------------------------
Frank S. Yuan, Chairman, Chief Executive Officer
18