PART
I
FORWARD-LOOKING
STATEMENTS
Except
for the historical information presented in this document, the matters discussed
in this Form 10-KSB, and specifically in the sections entitled "Description
of
Business" and "Management's Discussion and Analysis or Plan of Operations,"
or
otherwise incorporated by reference into this document contain "forward-looking
statements" (as such term is defined in the Private Securities Litigation
Reform
Act of 1995). These statements can be identified by the use of forward-looking
terminology such as "believes," "plans," "expects," "may," "will," "should,"
or
"anticipates" or the negative thereof or any other variations thereon or
comparable terminology, or by discussions of strategy that involve risks
and
uncertainties. The safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities Act of
1933,
as amended, apply to forward-looking statements made by the Company, as defined
below. These forward-looking statements involve risks and uncertainties,
including those statements incorporated by reference into this Form 10-KSB.
The
actual results that the Company achieves may differ materially from any
forward-looking projections due to such risks and uncertainties. The following
are some of the factors that could cause actual results to differ materially
from those reflected in any forward looking statement made by or on behalf
of
the Company: domestic and foreign government regulations, an early-stage
company
with a limited operating history, unproved profit potential of the business
model, intense competition from many entities, dependent on many foreign
alliances, market acceptance of the services provided, maintaining relationships
with key apparel retailers / buyers, and the ability to create additional
relationships and regulatory factors beyond the Company's control. These
forward-looking statements are based on current expectations, and the Company
assumes no obligation to update this information. Readers are urged to carefully
review and consider the various disclosures made by the Company in this Form
10-KSB and in the Company's other reports filed with the Securities and Exchange
Commission ("SEC") that attempt to advise interested parties of the risks
and
factors that may affect the Company's business.
ITEM
1. DESCRIPTION OF BUSINESS
ASAP
Show, Inc. (the "Company") was incorporated in December 2004 under the laws
of
the State of Nevada. Until August 13, 2007 the Company was engaged exclusively
in operating the business of organizing trade-shows and innovative means
of
financing international trade. On August 13, 2007 the Company
acquired all of the registered capital of Yili Asphalt Co. (“Yili Asphalt”), a
corporation organized under the laws of The People’s Republic of
China. Yili Asphalt is engaged in the business of refining heavy oil
into asphalt, fuel oil and lubricants. In this Report the trade
show and trade services business is identified as “ASAP Show,” and the oil
refining business is identified as “Yili Asphalt.”
I. ASAP
SHOW OPERATIONS
TRADE
SHOWS
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ASAP
GLOBAL SOURCING SHOW - a trade show for U.S. buyers to meet hundreds
of
overseas ready-made garment manufacturers - is held twice a year
in Las
Vegas. Trade show revenue is generated primarily from booth sales.
There
are many other ancillary revenues such as seminar fees, advertisements,
trade show decoration, material rentals, etc. Currently, management
allocates all resources and manpower to develop the tradeshows
mentioned
above.
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ASAP
BUYING TRIP -It was the first buying tour of its kind designed
for United
States and European Union buyers prepared to place production orders,
license their brands, understand China's distribution channels,
find joint
venture possibilities and relocate United States textile plants
to China.
Participation from the United States and European Union included
such
prominent names such as Fruit of the Loom, Warnaco, Salvatore Ferragamo
and Marks & Spencer among others. The Company has arranged 7 buying
trips to China till date and a buying trip to Pakistan and Bangladesh
in
November 2005.
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FASHION
INTERNATIONAL TRADE SHOW (“FITS”) - FITS is the only Licensing Trade show
held in China, committed to launch international fashion, accessory
and
footwear brands into China - the fastest growing consumer market
in the
world. FITS provides the most cost effective way and "first entry"
advantage by finding an experienced partner to act as a Master
Licensee to
overcome the complexity of the Chinese distribution
system.
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INTERNATIONAL
BRAND MANAGEMENT CONSULTANTS CORP (“IBMC”)
ASAP
show will invest 50% of IBMC, a Corporation incorporated in Nevada on June
11,
2007, a new venture to open franchise chain stores in China for its Licensed
International Brands.
EMPLOYEES
As
of May
31, 2007, ASAP Show employed 16 full-time employees classified as follows:
2
full-time executive officers; 1 full-time administrative personnel; 5 full-time
staff stationed in USA, 1 in India, 1 in Hong Kong and 9 in China. The Company
believes that relations with its employees are good.
COMPETITORS
There
are
numerous fashion, apparel, textile and accessories/supplies trade shows in
the
U.S. each year. Some of these shows are well established and have been held
for
years.
The
primary competitors of ASAP are as follows:
1
MAGIC -
MAGIC, the Men's Apparel Guild in California was founded in 1933. Due to
enormous growth, the show relocated from Los Angeles to Las Vegas in 1989.
Today, MAGIC International is the world's largest and most widely recognized
organizer of the fashion industry trade shows. MAGIC encompasses every facet
of
fashion. MAGIC announced its Sourcing Zone and FABRIC@MAGIC show in 2003,
which
is the direct competition of ASAP.
2
Material World at New York Javits Center and Miami Convention Center – Material
World established for fabric and trim show in North America. Even though
Material World is held in different cities and focus on fabrics and trim,
but
they are trying to enter apparel sourcing trade show sector.
3
SOURCES
trade show - Now in its third year, SOURCES has exhibitors that are non-U.S.
based manufacturers of gifts, home and decorative accessories, and handcrafted
products that comes the U.S. to do business with wholesalers, importers,
distributors, catalog and mail order, and direct volume purchasers.
Although
the competitors detailed in the preceding paragraphs may offer similar services
to ASAP, ASAP believe that no other company has its range of services, approach
to serving the industry or such an experienced management team with years
of
experience within the apparel industry. ASAP is focused on providing a complete
merchandise sourcing solution by providing educational seminars, matchmaking
sessions, dedicated country managers and other unique services that interlock
each other and are focused on serving buyers' /exhibitors' international
sourcing and transaction needs.
RISK
FACTORS RELATING TO ASAP SHOW
The
following risk factors include, among other things, cautionary statements
with
respect to certain forward-looking statements, including statements of certain
risks and uncertainties that could cause actual results to vary materially
from
the future results referred to in such forward-looking statements.
WE
ARE SUBJECT TO UNITED STATES GOVERNMENT REGULATIONS WHICH COULD ADVERSELY
AFFECT
THE COMPANY'S BUSINESS.
The
Company's primary source of income is from overseas apparel exporters who
are
willing to exhibit at its trade shows and participate in buying trips. Apparel
imports into the United States are heavily regulated by the United States
government. If the United States government imposes higher tariffs, increases
quotas or imposes limitations on quantities of imports, it will adversely
affect
the Company's business. Fewer foreign apparel exporters will participate
in the
Company's events if they are limited in exporting to the United
States.
WE
ARE SUBJECT TO FOREIGN GOVERNMENT REGULATIONS WHICH COULD ADVERSELY AFFECT
THE
COMPANY'S BUSINESS.
The
Company's primary source of income is from overseas apparel exporters who
are
willing to exhibit at its trade shows and participate in buying trips. Foreign
governments may advise their exporters to sell merchandise to countries other
than the United States to balance their export concentration. Such policies
could adversely affect the Company's trade show exhibitor revenue because
foreign exporters will promote their business by following their own
government's policies and incentives.
THE
WORLD TRADE ORGANIZATION'S BILATERAL AGREEMENTS COULD ADVERSELY AFFECT THE
COMPANY'S BUSINESS.
Apparel
imports are governed by the World Trade Organization's ("WTO") bilateral
agreements between the U. S. and each other country. For example, even though
China is a WTO member, the U. S. can elect, based upon safeguards/market
disruptions, to limit the export quantities to the U. S. Management found
that
because of China's limitations of exports to the U. S., fewer Chinese
manufacturers are willing to exhibit in U. S. trade shows. For example, when
China officially became a member of WTO on January 1, 2005, the Company's
trade
show in Las Vegas in February 2005 had 35 exhibitors from China. The Chinese
exporters believed that their exports to the United States would be free
of
quota limitations. However when the United States imposed the safeguards/market
disruption quotas in early 2005, the number of Chinese exhibitors at the
August
2005 trade show declined to 20. However, attendance for the February 2006
trade
show increased to a number of exhibitors that was consistent with the February
2005 trade show.
The
Company estimates that 30% of its total revenue in 2008 will be from
China.
WE
EXPECT TO DEPEND ON REVENUE FROM UNPROVEN ASAP TRADE SHOWS, AND GLOBAL FINANCIAL
PLATFORM WHICH MAKES OUR REVENUE POTENTIAL UNCERTAIN.
ASAP
expects to depend primarily on revenue from trade shows and GFP. The trade
shows
have generated revenue in the past. Growth in trade shows depends upon venue
availability, continued willingness of manufacturers to pay to exhibit and
buyers’ willingness to attend
There
is
no assurance that venues will be available in Las Vegas or that exhibitors
will
continue to pay fees or that attendees will continue to find it worthwhile
to
attend. Therefore there is no guarantee that the trade shows will continue
to
generate revenue or that revenue will meet management's expectations. The
GFP is
in its development stages. Therefore there is no significant revenue generated
from these services. Currently the Company does not anticipate revenue in
the
near future from the GFP. The Company's primary source of funds will be trade
show revenue and the $1,200,000 line of credit provided by Mr. Yuan and certain
members of his family.
WE
FACE INTENSE COMPETITION FROM MANY ENTITIES.
The
trade
show marketplace is highly competitive. The barrier to entry is not significant.
We have identified and continue to identify numerous companies that are better
funded, have more experience and more significant resources that have entered
or
are planning to enter the trade show business. Should these companies decide
to
enter our specific market, there is no guarantee that we will be able to
compete
with them effectively.
WE
ARE DEPENDENT ON FOREIGN GOVERNMENTS SUBSIDIZING THEIR EXPORTERS' EXHIBITION
FEES.
The
Company heavily relies on foreign alliances with manufacturers and their
governments' willingness to subsidize their exporters’ exhibit fees for the
trade shows. If a foreign government decides to drop the financial support
of
its exporters at the trade shows, this will have an immediate negative on
the
Company's trade show revenue. For example, Macau has been supporting its
exporters at the Company's trade shows. If for any reason, the Macau government
decides to not pay for its exporters to exhibit, it will be very hard for
the
exporters to pay on their own.
WE
ARE DEPENDENT ON MARKET DEMAND FOR AN ACCEPTANCE OF OUR SERVICE WHICH IF
DOES
NOT EXIST WOULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS.
Much
of
ASAP's success is dependent upon aggregating a critical mass of subscribing
overseas manufacturers and trade show attendees and establishing and maintaining
strong relationships with clients. If market demand and acceptance for our
services is not in line with ASAP's expectations, it is likely that ASAP's
revenue will not meet our expectations.
WE
ARE DEPENDENT ON RELATIONSHIPS WITH KEY APPAREL RETAILERS / BUYERS, AND THE
ABILITY TO CREATE MORE SUCH RELATIONSHIPS, THE LOSS OF ANY OF WHICH COULD
HAVE A
NEGATIVE IMPACT ON OUR BUSINESS.
Our
business model is retailer/buyer -centric. Successful implementation of it
is
predicated on our ability to create and nurture strong relationships with
retailers/buyers. If we are unable to maintain existing relationships, our
revenue profitably will not meet our expectations. Although ASAP believes
it can
create and maintain the necessary relationships, there is no guarantee that
it
will.
WE
DEPEND ON THE RELIABILITY OF OUR SERVICES.
As
a
member of the service industry, ASAP is dependent upon the reliability of
its
trade show, software and hardware. There is no guarantee that ASAP will be
able
to provide reliable services. Even though the Company's trade show is a unique
sourcing show with niche services such as matchmaking and educational seminars,
there is no guarantee that other trade shows such as MAGIC will not copy
or
follow the Company's unique services. If a competitor starts to copy our
unique
services, which is possible, management believes that it will face more intense
competition than before.
WE
DEPEND UPON KEY MEMBERS OF MANAGEMENT, THE LOSS OF ANY OF WHOM WOULD NEGATIVELY
IMPACT OUR BUSINESS.
The
implementation of our business plan relies on key members of the management
team
and sales, marketing, and finance personnel. There is no guarantee that these
employees will continue to work for ASAP. In addition, there is no guarantee
that ASAP will be able to replace these employees with personnel of similar
caliber should they not be able to work, or decide not to work for
ASAP.
WE
HAVE AN ACCUMULATED DEFICIT OF $15,900,838 AS OF MAY 31, 2007 AND HAVE RECEIVED
AN OPINION FROM OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REGARDING
OUR
ABILITY TO CONTINUE AS A GOING CONCERN, AND WE MAY NEVER ACHIEVE PROFITABILITY
.
We
have
history of operating losses, including a net loss of $586,702 in 2007. As
of May
31, 2007, we had an accumulated deficit of $15,900,838. These losses have
resulted principally from expenses incurred for selling, general and
administrative, payroll and interest. We have not been profitable since
inception and we do not expect to be profitable in the near future. No
assurances can be given as to whether we will ever be profitable.
Our
independent registered public accounting firm has added an explanatory paragraph
to their report of independent registered public accounting firm issued in
connection with the financial statements for the year ended May 31, 2007
relative to the substantial doubt about our ability to continue as a going
concern. Our ability to obtain additional funding will determine our ability
to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
INTELLECTUAL
PROPERTY PROTECTION
ASAP
has
one patent pending that pertains to business processes: Global Financial
Platform. ASAP's GFP eliminates the need for letters of credit by allowing
overseas suppliers to ship merchandise to pre-approved retailers/buyers in
the
United States. ASAP pioneered this process by establishing the first tri-party
agreement with US Factor Company and Foreign Bank. In essence, it is the
first
workable international factoring mechanism. Overseas suppliers, U.S.
retailers/buyers, international banks and US Factor Company are linked to
ASAP's
GFP. Through this arrangement, each of the tri-party participants plays an
integral role. First, US Factor Company guarantees the credit worthiness
of the
U.S. retailers/buyers. Secondly, Foreign Bank provides cash advances up to
80%
and acts as the conduit for foreign suppliers to receive payment. Through
ASAP's
GFP, U.S. retailers/buyers can purchase overseas merchandise, just as they
purchase domestic merchandise, with open terms and without the need to open
letters of credit. Overseas suppliers ship merchandise to pre-approved retailers
without payment risk and receive up to 80% cash advance when they ship the
merchandise.
In
addition, ASAP has trademarked the following trade names: ASAP Global Sourcing
Show(TM), DEPS(TM); FOCASTING(TM); and Internet Sourcing
Network(TM).
II.
YILI ASPHALT OPERATIONS
Yili
Asphalt was organized in 2005 as a limited company under the laws of The
People’s Republic of China. Its offices and manufacturing facilities
are located 10 km from the City of Tongliao, which is a prefecture level
city in
the Inner Mongolia Autonomous Region in northern China. This location
provides the company ready access to customers in the industrial sector of
northeast China.
Since
2005 we have been engaged in developing a state-of-the-art facility for refining
petroleum to produce three categories of end products: asphalt,
diesel fuel and lubricants. The facility that we have developed has
the capacity to produce, each day, 1300 tons of diesel fuel (current market
value - $3680 per ton), 780 tons of asphalt (current market value - $300
per
ton), and 520 tons of lubricants (current market value - $600 per
ton). When we launch our operations, we will immediately be the
largest asphalt producer in Inner Mongolia.
Our
facility is now complete. And we have finally secured all of the
government licenses that we require in order to operate a
refinery. Our plan is to initiate production in September 2007,
although achievement of that plan will depend on our success in securing
working
capital.
Suppliers
The
success of our operations will depend in large part on our success in obtaining
a steady flow of raw petroleum at favourable prices. At the present
time, we anticipate sourcing petroleum from several channels:
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Liaohe
Oil Field. Our facility is located near the Liaohe Oil Field,
the third largest oil field in China. Government seismic
studies have indicated that the Liaohe Oil Field has reserves of
ultra
heavy oil in excess of 100 million tons. Because of the close
relationship with the government of our management, in particular
our
Chairman, who served in the government of Jilin Province for ten
years, we
expect to obtain a high degree of cooperation from the producers
in the
Liaohe Oil Field.
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China
National Offshore Oil Corporation. We have a written commitment
from CNOOC to supply us with 200,000 tons of petroleum at market
price.
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Ministry
of Transportation. China is experiencing a shortage of asphalt,
which is severely hampering its efforts to develop its roadway
system. For this reason, the Ministry of Transportation has
indicated a willingness to assist us in obtaining petroleum supplies
as
needed. This relationship may prove particularly useful
to us, if demand for oil in China continues to push local prices
upwards. The Ministry of Transportation is capable of sourcing
mineral waste oil from Russia, which tends to be priced substantially
below the Chinese market price for heavy
petroleum.
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Facilities
Our
offices and refinery are located on a parcel of industrial land measuring
126,540 m2,
which was leased from the local government for fifty years. The
central portion of our refinery is a 300,000 ton atmospheric and vacuum
distillation unit that was designed for us by China Petroleum Engineering
Design
Co., Ltd. Our storage facilities consist of:
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Six
tanks for storage of raw petroleum. These tanks have a capacity
of 30,000 m3, which
is sufficient petroleum to assure full capacity operations for
30
days.
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Six
asphalt storage tanks. These tanks have a capacity of 12,000
m3,
which
is adequate to permit us to store twenty days worth of production
at 600
tons per day, with the asphalt segregated into four
grades.
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Ten
tanks for storage of petroleum distillate. These tanks have an
aggregate capacity of 14,000 m3,
which is
adequate to permit us to store 35 days of
production.
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At
present we receive our raw materials by truck, from which it is piped into
our
storage tanks to be dehydrated. After refining, the end products are
removed from our facilities by truck. In 2008, however, we expect a
rail line to be built directly to our plant, funded primarily by the government
of the Autonomous Region. That improvement should substantially
reduce our transportation costs and reduce delays in both inbound and outbound
shipments.
Products
The
refining of petroleum to produce asphalt produces two other categories of
products as residue: diesel fuel and lubricating oil. So
our business plan contemplates that we will launch in all three markets at
once. Within those markets, the varieties of end user are
numerous.
Asphalt. Petroleum
asphalt is, in the first instance, moved in one of three
directions. It can be burnt to produce coke, which is the main fuel
source for steelmaking. In the alternative, it can be blended with
anthracite and liquid asphalt, then used as blast furnace refractory material
or
as the primary component of electrolyte aluminium anodes, electric steelmaking
electrodes, heat exchangers, and for other high temperature resistant
uses. Finally, asphalt can be used undiluted for paving roads and
roofs.
In
China,
the recent rapid industrial expansion has produced an urgent need for improved
roadways, which in turn has driven the demand for asphalt beyond the nation’s
production capacity. China now imports a substantial portion of its
asphalt requirements, which significantly increases the cost of
construction.
Diesel
Fuel. Diesel fuel, generally, falls into two
categories: light diesel fuel and heavy diesel fuel. Light
diesel fuel is the diesel oil used by trucks, tractors and diesel
automobiles. Heavy diesel fuel is used in low speed (up to 1,000 RPM)
engines.
The
growth in demand for diesel fuel in China has been a function of increased
industrial production, with concomitant transportation activity. Our
management believes that demand will continue to grow, fuelled by China’s
growing interest in reducing petroleum dependence. We anticipate a
growing trend toward more fuel efficient diesel automobiles, which can help
the
nation to reach its goals of energy independence and an improved
environmental.
Lubricating
Oil. Although a can of common lubricating oil is present in every
home where there is a motor, the lubricating oil that Yili Asphalt will produce
will be specially refined to meet specific machine requirements. For
example, the bearing case in a grinding machine requires a lubricant of a
specific viscosity. Similarly, metal cutting machinery and the
hydraulic systems in industrial equipment each require a lubricant with specific
characteristics. Our plan is to produce the base material for sale to
other refiners, who will then perform the finishing processes to produce
lubricants to suit those specific industrial needs.
RISK
FACTORS RELATING TO YILI ASPHALT
Because
we have not yet commenced our production operations, unexpected factors may
hamper our efforts to implement our business plan.
We
do not
expect to record our first sale before September 2007, and even that depends
on
our success in securing working capital. Our business plan
contemplates that we will engage in a three-pronged marketing operations,
involving production and sales of diesel fuel, asphalt as well as
lubricants. Implementation of that business plan will also entail
complex production operations and an active sales force. Because
these are areas in which we have limited experience, problems may occur with
production or marketing that we have not anticipated, which would interfere
with
our business, and prevent us from achieving profitability.
Our
profits will be limited unless we are able to secure a sufficient supply
of
heavy oil.
We
manufacture our products by refining petroleum. The price of
petroleum on both the Chinese market and the international market is much
higher
today than it was five years ago, and our expectation is that the price will
remain high for the foreseeable future. Particularly in China, which
has experienced unprecedented industrial growth in the past twenty years,
the
demand for petroleum exceeds the supply. Therefore, in order to
achieve efficient operations, it will be necessary for us to develop redundant
sources of heavy oil, as we cannot rely on one or two relationships to provide
the steady flow of oil that we will need. If we are unable to achieve
that redundancy and have interruptions in our petroleum supplies, our
profitability will be limited.
Fluctuations
in oil prices could impede our efforts to achieve
profitability.
The
market price of crude oil fluctuates dramatically, driven by economic, political
and geological factors that are completely outside our control. We do
not intend to engage in hedging against changes in crude oil
prices. As a result, a sudden increase in the cost of our raw
material – i.e. oil – could reduce or eliminate our profit
margin. Although we could respond to the increase by a proportionate
increase in our price list, competitive forces might prevent us from doing
so –
in particular competition from asphalt and diesel fuel producers that are
themselves oil producers and are thus shielded from the full effect of increased
oil prices.
The
capital investments that we plan for the next two years may result in dilution
of the equity of our present shareholders.
Our
business plan contemplates that we will invest at least 30 million RMB ($3.8
million) in working capital and acquisitions during the next twelve months,
and
an undetermined amount in the development of a rail line to our
refinery. We intend to raise a portion of the necessary funds by
selling equity in our company. At present we have no commitment from
any source for those funds. We cannot determine, therefore, the terms
on which we will be able to raise the necessary funds. It is possible
that we will be required to dilute the value of our current shareholders’ equity
in order to obtain the funds. If, however, we are unable to raise the
necessary funds, our growth will be limited, as will our ability to compete
effectively.
A
recession in China could significantly hinder our growth.
The
growing demand for petroleum products in China has been swelled, in large
part,
by the recent dramatic increases in industrial production in
China. The continued growth of our market will depend on continuation
of recent improvements in the Chinese economy. If the Chinese economy
were to contract and investment capital became limited, construction projects
would be delayed or abandoned, and the demand for our asphalt would be
reduced. Many financial commentators expect a recession to occur in
China in the near future. The occurrence of a recession could
significantly hinder our efforts to implement our business plan.
Increased
environmental regulation could diminish our profits.
The
refining of petroleum involves the production of pollutants. In
addition, the transportation of petroleum products entails a risk of spills
that
may result in long-term damage to the environment. At the present
time we estimate that our compliance with applicable government regulations
designed to protect the environment will cost us 1 million RMB (approximately
$125,000) per year. There is increasing concern in China, however,
over the degradation of the environment that has accompanied its recent
industrial growth. It is likely that additional government regulation
will be introduced in order to protect the environment. Compliance
with such new regulations could impose on us substantial costs, which would
reduce our profits.
Our
business and growth will suffer if we are unable to hire and retain key
personnel that are in high demand.
Our
future success depends on our ability to attract and retain highly skilled
petroleum engineers, production supervisors, transportation specialists and
marketing personnel. In general, qualified individuals are in high
demand in China, and there are insufficient experienced personnel to fill
the
demand. In a specialized scientific field, such as ours, the demand
for qualified individuals is even greater. If we are unable to
successfully attract or retain the personnel we need to succeed, we will
be
unable to implement our business plan.
We
may have difficulty establishing adequate management and financial controls
in
China.
The
People’s Republic of China has only recently begun to adopt the management and
financial reporting concepts and practices that investors in the United States
are familiar with. We may have difficulty in hiring and retaining
employees in China who have the experience necessary to implement the kind
of
management and financial controls that are expected of a United States public
company. If we cannot establish such controls, we may experience
difficulty in collecting financial data and preparing financial statements,
books of account and corporate records and instituting business practices
that
meet U.S. standards.
Government
regulation may hinder our ability to function efficiently.
The
national, provincial and local governments in the People’s Republic of China are
highly bureaucratized. The day-to-day operations of our business
require frequent interaction with representatives of the Chinese government
institutions. The effort to obtain the registrations, licenses and
permits necessary to carry out our business activities can be
daunting. Significant delays can result from the need to obtain
governmental approval of our activities. These delays can have an
adverse effect on the profitability of our operations. In addition,
compliance with regulatory requirements applicable to petroleum refining
may
increase the cost of our operations, which would adversely affect our
profitability.
Capital
outflow policies in China may hamper our ability to pay dividends to
shareholders in the United States.
The
People’s Republic of China has adopted currency and capital transfer
regulations. These regulations require that we comply with complex regulations
for the movement of capital. Although Chinese governmental policies were
introduced in 1996 to allow the convertibility of RMB into foreign currency
for
current account items, conversion of RMB into foreign exchange for capital
items, such as foreign direct investment, loans or securities, requires the
approval of the State Administration of Foreign Exchange. We may be unable
to
obtain all of the required conversion approvals for our operations, and Chinese
regulatory authorities may impose greater restrictions on the convertibility
of
the RMB in the future. Because most of our future revenues will be in RMB,
any
inability to obtain the requisite approvals or any future restrictions on
currency exchanges will limit our ability to pay dividends to our
shareholders.
Currency
fluctuations may adversely affect our operating results.
Yili
Asphalt generates revenues and incurs expenses and liabilities in Renminbi,
the
currency of the People’s Republic of China. However, as a subsidiary
of ASAP Show, it will report its financial results in the United States in
U.S.
Dollars. As a result, our financial results will be subject to the
effects of exchange rate fluctuations between these currencies. From
time to time, the government of China may take action to stimulate the Chinese
economy that will have the effect of reducing the value of
Renminbi. In addition, international currency markets may cause
significant adjustments to occur in the value of the Renminbi. Any
such events that result in a devaluation of the Renminbi versus the U.S.
Dollar
will have an adverse effect on our reported results. We have not
entered into agreements or purchased instruments to hedge our exchange rate
risks.
We
have limited business insurance coverage.
The
insurance industry in China is still at an early stage of development. Insurance
companies in China offer limited business insurance products, and do not,
to our
knowledge, offer business liability insurance. As a result, we do not have
any
business liability insurance coverage for our operations. Moreover, while
business disruption insurance is available, we have determined that the risks
of
disruption and cost of the insurance are such that we do not require it at
this
time. Any business disruption, litigation or natural disaster might result
in
substantial costs and diversion of resources.
ITEM
2. DESCRIPTION OF PROPERTY
The
Company’s executive offices in the United States are provided by American Union
Securities, which is party to a services agreement with Yili
Asphalt. American Union Securities does not charge any separate
rental fee for the premises.
The
executive offices and refinery of Yili Asphalt are located on a parcel of
industrial land measuring 126,540 m2, which
is located
10 km from the City of Tongliao, which is a prefecture level city in the
Inner
Mongolia Autonomous Region in northern China The property was leased
from the local government for fifty years.
ASAP
Show
leases its corporate headquarters located at 9643 Jacob Lane, Rosemead,
California 91770. Its telephone number is (626) 297-1800. The lease agreement
is
entered with its CEO Frank Yuan, an arm length transaction, commenced on
July 1,
2007, and is a month to month lease. ASAP currently leases approximately
2,500
square feet at an average monthly rent of approximately $3,500.
The
Company filed a lawsuit against Maureen Storch ("Storch"), Katherine Li ("Li"),
Cherry Wang ("Wang") and Global Nexus, Inc., a California Corporation
("Global"), (collectively the four defendants referred to as "Defendants")
in
the Superior Court of the State of California, County of Los Angeles on February
23, 2006. The claims by the Company against Storch, Li, Wang and Global arose
out of certain activities undertaken by them as consultants or employees
of the
Company. The Company alleges, among other things, that Defendants failed
to
fulfill their contractual obligations and breached their fiduciary duties
to the
Company for a number of reasons, including by breach of contract, interference
with contract, interference with prospective economic advantage, unfair
competition and misappropriation of trade secrets. The Company seeks
compensatory damages and injunctive relief.
Mediation
was conducted per court order on August 15, 2006. As a result, a global
settlement was reached on the same date. In essence, the defendant, Global,
agreed to pay certain dollar amount per booth sold till the settlement total
amount is reached. If Global fails to pay amounts earned by the Company,
Maureen
Storch and Katherine Li will be personally liable for such payment. Pursuant
to
the Settlement Agreement, the entire action (complaint and cross-complaint)
was
dismissed with prejudice on September 25, 2006.
On
March
7, 2006, a complaint was filed against Cyber Merchants Exchange Inc. (“C-Me”) in
a Chapter 7 bankruptcy proceeding in U.S. Bankruptcy Court in the District
of
Delaware in the matter captioned In Re: Factory 2-U Stores, Inc. The complaint
seeks to recover from C-ME $91,572 in alleged preferential transfers made
to
C-ME by the debtor during the ninety-day period prior to the filing of the
debtor's bankruptcy petition. C-ME intends to defend against such preference
claim by asserting that such transfers were made in the ordinary course of
business and such other available defenses.
To
the
extent C-ME incurs any losses, costs or damages with respect to the preference
claim, including attorneys' fees and related costs, the C-ME believes it
may
recover such losses, costs and damages from Frank Yuan and the Company pursuant
to the indemnification provisions under the Transfer Agreement, which C-Me
transferred all of its assets and liabilities to the Company. C-ME has informed
Frank Yuan and the Company that it intends to seek indemnification from them
with respect to the preference claim. Further, C-ME has informed Frank Yuan
and
the Company that the $50,000 reserve originally due to be paid March 28,
2006
under the terms of the Transfer Agreement will be retained by C-ME until
this
preference claim is resolved to satisfy any potential indemnity
claims.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
NONE
PART
II
ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The
Company's common stock began trading on the NASDAQ Over-the-Counter Bulletin
Board ("OTC-BB") May 24, 2006 under the symbol "ASHI". As of August
27, 2007, there has been limited trading volume. See more disclosure
at “subsequent event”.
HOLDERS
OF RECORD
On
August
27, 2007, the Company's issued and outstanding common stock totaled 8,701,480
shares, held by approximately 190 shareholders of record and by indeterminate
number of additional shareholders through nominee or street name accounts
with
brokers.
DIVIDENDS
The
Company has not paid dividends in prior years and has no plans to pay dividends
in the near future. The Company intends to reinvest its earnings on the
continued development and operation of its business. Any payment of dividends
would depend upon the Company's pattern of growth, profitability, financial
condition, and such other factors, as the Board of Directors may deem
relevant.
PENNY
STOCK
The
Company's securities are subject to the Securities and Exchange Commission's
"penny stock" rules. The penny stock rules may affect the ability of owners
of
the Company's shares to sell them. There may be a limited market for penny
stocks due to the regulatory burdens on broker-dealers. The market among
dealers
may not be active. Investments in penny stocks often are unable to sell stock
back to the dealer that sold them the stock. The mark-ups or commissions
charged
by the broker-dealers might be greater than any profit an investor may make.
Because of large spreads that market makers quote, investors may be unable
to
sell the stock immediately back to the dealer at the same price the dealer
sold
the stock to the investor.
The
Company's securities are also subject to the Securities and Exchange Commission
rule that imposes special sales practice requirements upon broker-dealers
that
sell such securities to other than established customers or accredited
investors. For purposes of the rule, the phrase "accredited investor" means,
in
general terms, institutions with assets exceeding $5,000,000 or individuals
having net worth in excess of $1,000,000 or having an annual income that
exceeds
$200,000 (or that, combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of purchasers of the Company's securities to buy or sell
in
any market.
SUBSEQUENT
EVENT
On
August
13, 2007 ASAP Show, Inc. (“ASAP Show”) acquired the outstanding capital stock of
Sino-American Petroleum Group, Inc., a Delaware corporation (“Sino-American
Petroleum”). Sino-American Petroleum is a holding company that owns
all of the registered capital of Tongliao Yili Asphalt Co. (“Yili Asphalt”), a
corporation organized under the laws of The People’s Republic of
China. Yili Asphalt is engaged in the business of refining heavy oil
into asphalt, fuel oil and lubricants. All of Yili Asphalt’s business
is currently in China.
In
connection with the closing of the acquisition (the “Merger”) on August 13,
2007, the following took place:
ASAP
Show
issued to the shareholders of Sino-American Petroleum 200,000 shares of Series
A
Preferred Stock, which will be convertible into 569,348,000 shares of common
stock after the distribution of the ASAP Holdings shares discussed
below.
All
of
the members of the Board of Directors of ASAP Show other than Frank Yuan
resigned.
Frank
Yuan elected Chunshi Li, the Chairman of Yili Asphalt, to serve as a member
of
the Board, and they together elected Chunshi Li to serve as the Chief Executive
Officer and Chief Financial Officer of ASAP Show.
Huakang
Zhou, Xiaojin Wang and Xiao Hu purchased 100,000 shares of Series A Preferred
Stock for $600,000. The 100,000 shares will be convertible into
284,674,000 shares of common stock after the distribution of the ASAP Holdings
shares discussed below. The three purchasers assigned their interest
in most of the Series A Preferred shares to other individuals, none of whom
acquired sufficient shares to be a controlling shareholder of ASAP
Show.
Prior
to
the Merger, ASAP Show assigned all of its pre-Merger business and assets
to ASAP
Holdings, Inc., its wholly-owned subsidiary, and ASAP Holdings assumed
responsibility for all of the liabilities of ASAP Show that existed prior
to the
Merger. At the same time, ASAP Show entered into a management
agreement with Frank Yuan, its previous CEO, and ASAP Holdings. The
management agreement provides that Mr. Yuan will manage ASAP Holdings within
his
discretion, provided that his actions or inactions do not threaten material
injury to ASAP Show. The management agreement further provides that
Mr. Yuan will cause ASAP Holdings to file a registration statement with the
Securities and Exchange Committee that will, when declared effective, permit
ASAP Show to distribute all of the outstanding shares of ASAP Holdings to
the
holders of its common stock. After the registration statement is
declared effective, the Board of Directors of ASAP Show will fix a record
date,
and shareholders of record on that date will receive the shares of ASAP Holdings
in proportion to their ownership of ASAP Show common stock.
RECENT
SALES OF UNREGISTERED SECURITIES
None
ITEM
6. 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 Company's audited financial
statements and the related notes thereto which are included elsewhere in
this
report for the years ended May 31, 2007 and 2006, respectively. Certain
statements contained herein may constitute forward-looking statements, as
discussed at the beginning of Part I of this Report on Form 10-KSB. ASAP
Show’s
actual results could differ materially from the results anticipated in the
forward-looking statements as a result of a variety of factors, including
those
discussed in the Company's filings with the SEC.
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Effective
for the fiscal year ending in 2005, the Company changed its fiscal year end
from
June 30 to May 31. The following table presents comparative information for
the
years ended May 31, 2007 and 2006.
|
|
|
|
|
|
5/31/06
|
|
| |
|
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$ |
1,603,573
|
|
|
$ |
1,993,171
|
|
|
Loss
from operations
|
|
$ |
(490,486 |
) |
|
$ |
(602,120 |
) |
|
Income
taxes
|
|
$ |
800
|
|
|
$ |
800
|
|
|
Net
loss
|
|
$ |
(586,702 |
) |
|
$ |
(684,920 |
) |
|
Loss
per share-basic and diluted
|
|
$ |
(0.07 |
) |
|
$ |
(0.08 |
) |
YEAR
ENDED MAY 31, 2007 COMPARED TO SAME PERIOD ENDED MAY 31,
2006
The
following discussion sets forth information for the year ended May 31, 2007,
compared with the same period ended May 31, 2006. This information has been
derived in part from the audited consolidated financial statements of the
Company contained elsewhere in this Form 10-KSB.
REVENUES
Transaction
Sales
During
the year ended May 31, 2007, the Company had transaction sales of $282,814
compared to $304,414 for the year ended May 31, 2006. Gross profit from
transaction sales for the year ended May 31, 2007 was $31,963, a decrease
of
$9,374 from $41,337 for the year ended May 31, 2006. The gross profit margin
from transaction sales for the year ended May 31, 2006 was 11.3%, compared
to
13.1% for the year ended May 31, 2006. Management put a majority of its
resources and manpower to its trade show development for 2007, which is the
reason why the transaction sales declined for the year ended May 31, 2007,
compared with the year ended May 31, 2006. Even though transaction sales
gross
revenue declined, management will continue this business segment. The Company
does not expect this net revenue percentage to grow, as its main focus is
on
trade show revenue.
Trade
Shows
ASAP
GLOBAL SOURCING SHOW
The
ASAP
Global Sourcing Show segment derives revenue principally from the sale of
exhibit space, sponsorship and conference attendance fees generated at its
events. In 2007, approximately 95% of our trade show 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. Cash is collected
in
advance of an event and is 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.
Trade
show business is seasonal, with revenue typically reaching its highest levels
during the first and third quarters of each fiscal year, largely due to the
timing of the ASAP Global Sourcing shows held in February and August each
year.
In 2007, approximately 58% of our tradeshow revenue was generated during
the
first quarter (August show) and approximately 42% during the third quarter
(February show). Because event revenue is recognized when a particular event
is
held, we also experience fluctuations in quarterly revenue based on the movement
of annual trade show dates from one quarter to another.
ASAP
Global Sourcing Show revenues totaled $1,171,400 in the year ended May 31,
2007,
compared to $1,299,899 for the year ended May 31, 2006, a decrease of $128,499
or 10% compared to the prior period. This decrease was due to a decrease
in
number of exhibitors compared to the prior period. Another reason for decreasing
exhibitors is because of the Men's Apparel Guild in California's ("MAGIC")
establishment of its Sourcing Zone, which is held at the same time as our
shows.
Management believes the competing show will make it difficult to have
significant growth.
FASHION
INTERNATIONAL TRADE SHOW (“FITS”)
FITS
is
the only Licensing Trade show held in China, committed to launch international
fashion, accessory and footwear brands into China - the fastest growing consumer
market in the world. FITS provides the most cost effective way and "first
entry"
advantage by finding an experienced partner to act as a Master Licensee to
overcome the complexity of the Chinese distribution system.
FITS
generates its revenue mostly from booth sales. In the year ended May
31, 2007, FITS revenues totaled $75,696, compared to $0for the year ended
May
31, 2006.
CHINA
BUYING TRIPS
China
Buying Trip revenues decreased by $278,051 from $316,009 for the year ended
May
31, 2006 to $37,958 for the year ended May 31, 2007. This decrease was due
to
the participants’ buyers from U.S. was decreased because it is not a new idea,
and they can go back to China by themselves. Management is planning to conduct
multiple, but small size buying trips to China and Southeast Asia countries
annually.
ECO
SHOW
Eco
show
revenues totaled $35,705 in the year ended May 31, 2007, compared to zero
revenue for the same period last year. Environment concerned green nature
products is the main focus of Eco Trade Show, a division of ASAP Show, which
was
launched its first edition on February 2007
OPERATING
EXPENSES
General
and administrative expenses consist primarily of ASAP Global Sourcing show
production costs, attendee marketing programs, exhibitors' promotion costs,
and
buying trip expenses. General and administrative expenses decreased by $350,815
or 19% from $1,818,751 for the year ended May 31, 2006 to $1,467,936 in the
year
ended May 31, 2007. The decrease in operating expenses is primarily
due to the decrease in ASAP show production expenses, ASAP attendee marketing
expenses, buying trip expenses and professional fees. ASAP show
production expenses decreased by $58,477 to $799,803 for the year ended May
31,
2007, as compared to $858,282 for the year ended May 31, 2006. ASAP
attendee marketing expenses decreased by $86,015 to $78,371 for the year
ended
May 31, 2007, as compared to $164,386 for the year ended May 31,
2006. Buying trip expenses decreased by $107,029 to $17,867 for the
year ended May 31, 2007, as compared to $124,896 for the year ended May 31,
2006. Such decreases in show production expenses, marketing expenses
and buying trip expenses were resulted from the implementation of the Company’s
cost reduction plan and the decrease in related
revenues. Professional fees decreased by $168,119 to $87,295 for the
year ended May 31, 2007, as compared to $255,414 for the year ended May 31,
2006. The decrease in professional fees is primarily related to the additional
legal and accounting fees in connection with the filing of the Company's
Form
10-KSB and related amendments for the year ended May 31, 2006.
Stock
based compensation incurred in fiscal 2007 was due to the Company’s issuing
75,000 shares of common stock to a director as a stock bonus, which was valued
at $8,250 (based on the estimated fair value on the date of grant).
Payroll
and related benefit expense decreased by $138,191 or 27% to $375,271 for
the
year ended May 31, 2007 as compared to $513,463 for the year ended May 31,
2006.
Such a decrease was mainly due to our continued cost cutting efforts and
lowering our headcount.
INTEREST
EXPENSE
Interest
expense increased to $99,676 during the year ended May 31, 2007 from $82,000
for
the year ended May 31, 2006. This increase is related to increase in borrowings
on the line of credit from shareholders.
NET
LOSS
The
net
loss for the year ended May 31, 2007 decreased by $98,218 or 14% to $586,702
from $684,920 for the year ended May 31, 2006. The decrease is mainly due
to
cost savings in operating expenses of approximately $489,007, net of the
decrease in total revenues of $389,598 and the increase in interest expense
of
17,676.
Net
loss
per share decreased from $0.08 per share for the year ended May 31, 2006
to
$0.07 for the year ended May 31, 2007, due to an increase in number of
outstanding shares and decrease in total net loss.
LIQUIDITY
AND CAPITAL RESOURCES
The
Company's working capital deficit increased to a deficit of $749,080 at May
31,
2007 from $377,135 at May 31, 2006, primarily due to the customer deposits
and
the deposit for the convertible preferred stock received in fiscal 2007.
During
the year ended May 31, 2007, the Company had average monthly general and
administrative expenses of approximately $87,000, excluding ASAP show production
costs of approximately $67,000 per month, as compared to $123,000 for year
ended
May 31, 2006. During the next twelve months, ASAP Show will focus on its
trade
show business model to generate additional revenue. With the net revenue
from
its trade show, control and reduce G & A expenses, and issue
preferred stocks to manage its cash flow, and continuing support from its
major
shareholders to provide a revolving line-of-credit, management believes ASAP
Show will have enough net working capital to sustain its business for another
12
months.
The
Company has a revolving line-of-credit (the "Line") from Frank Yuan, the
Company's CEO and a significant shareholder, and certain members of his family,
which expires on August 1, 2008, and provides for borrowings up to a maximum
total of $1,300,000, as amended. The Line carries an interest rate of 10.0%
per
annum. The total balance as of May 31, 2007 was $1,028,307, and the accrued
and
unpaid interest was $12,185. In connection with the Merger on August
13, 2007, Mr. Yuan released the Company from liability for the debt, although
ASAP Show remains liable to Mr. Yuan.
The
forecast of the period of time through which ASAP Shows financial resources
will
be adequate to support its operations is a forward-looking statement that
involves risks and uncertainties. ASAP Show’s actual funding requirements may
differ materially as a result of a number of factors, including unknown expenses
associated with the cost of continuing to implement ASAP Show’s international
electronic trading business and ASAP Show expansion.
ASAP
Show
has no commitments to make capital expenditures for the fiscal year ending
May
31, 2008.
Over
the
next two to five years, ASAP Show 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 May
31, 2007 financial statements includes an explanatory paragraph stating that
the
Company has suffered recurring losses from operations and has a net capital
deficiency, which raises substantial doubt about its ability to continue
as a
going concern. The financial statements do no include any adjustments that
might
result from the outcome of this uncertainty.
The
Company’s acquisition of Yili Asphalt on August 13, 2007 has created a need for
capital. In addition to Yili Asphalt’s need for working capital to
initiate production, its business plan calls for substantial capital investment
over the next twelve months. The primary purposes for which we
anticipate a need for capital are:
|
·
|
Additional
Working Capital for Growth. We believe there is a high demand
for our products in Inner Mongolia and the neighboring
provinces. If we are correct, then demand could enable us to
quickly expand our operations to full capacity. Growth at that
rapid rate would require a commitment of many millions of Dollars
for
working capital. Our management will have to assess the value
of the market opportunities that present themselves, and weight
them
against the cost of such capital as may be made available to
us.
|
|
·
|
Construction
of Dedicated Rail Line. The government of Inner Mongolia has
committed to construct a rail line that will have a siding at our
refinery. Construction is scheduled in 2008. The
benefit to us in terms of reduced transportation costs would be
substantial. The government’s proposal, however, contemplates
that Yili Asphalt will make a substantial capital contribution
toward the
construction project. The amount of the contribution has not
been determined.
|
|
·
|
Acquisition
of Refinery. Chunshi Li, our Chairman, has committed to
purchase Mongolia Kailu Yili Asphalt Co., Ltd., an asphalt company
with a
production capacity of 100,000 tons. He intends to assign his
rights in Mongolia Kailu to Yili Asphalt if we are able to fund
the
cost. The purchase price will be 20 million RMB (approximately
$2.5 million). In addition, Mongolia Kailu is currently
unproductive due to deterioration of its facilities. In order
to bring it back online, we will have to fund the construction
of a
waterproof coiled material production line at its plant, which
will entail
an investment of several million more
Renminbi.
|
At
the
present time, we have received no commitments for the funds required for
our
planned capital investments. Obtaining those funds, if we can do so,
will require that we issue substantial amounts of equity securities or incur
significant debts. We believe that the expected return on those
investments will justify the cost. However, our plan, if
accomplished, will significantly increase the risks to our
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
In
December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin 101 ("SAB 101"), "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 the SEC. SAB 101 has been amended
and replaced by SAB 104. Management believes the Company's revenue recognition
policies conform to SAB 104.
Net
revenues include amounts earned under transaction sales, trade shows, buying
trips, Material World 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. For all product
transactions with its customers in 2005 and 2006, the Company acted as a
principal, took title to all products sold upon shipment, and bore inventory
risk for return products that the Company was not able to return to the
supplier, although these risks are mitigated through arrangements with
factories, shippers and suppliers.
Trade
Shows
Trade
shows generate 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 organizes
two
trade shows per year in February and August in Las Vegas.
Buying
Trips
Buying
trips generate 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). 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 to Southeast Asia countries in November
each year.
DEFERRED
TAX ASSET VALUATION
The
Company accounts for income taxes under Statement of Financial Accounting
Standard ("SFAS") No. 109, "ACCOUNTING FOR INCOME Taxes." Under SFAS No.
109,
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 assets will not be recovered.
NEW
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 transaction be
recognized in financial statements. The 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
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 No. 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. We will be required to apply Statement
123(R)
as of the first interim period for the fiscal year ending May 31, 2007. The
Company currently has no stock options outstanding and is in the process
of
evaluating whether the adoption of SFAS 123(R) will have a significant impact
on
the Company's overall results of operations or financial position.
The
Company continues to assess the effects of recently issued accounting standards.
The impact of all recently adopted and issued accounting standards has been
disclosed in the footnotes to the Company's audited financial statements,
note
1.
The
Company's audited Financial Statements are set forth beginning on page F-1
in
this Form 10-KSB
ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
Under
the
supervision and with the participation of our management, including our Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), we evaluated
the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act
as of
a date (the "Evaluation Date") within 90 days prior to filing the Company's
May
31, 2007 Form 10-KSB. Based upon that evaluation, our CEO and CFO concluded
that, as of May 31, 2007, our disclosure controls and procedures were effective
in timely alerting management to the material information relating to us
required to be included in our periodic filings with the SEC. Based on his
most
recent evaluation as of the Evaluation Date, our CEO and CFO has also concluded
that there are no significant deficiencies in the design or operation of
internal controls over financial reporting, at the reasonable assurance level,
which are reasonably likely to adversely affect our ability to record, process,
summarize and report financial information, and such officer has identified
no
material weaknesses in our internal controls over financial
reporting.
Changes
in Controls and Procedures
There
were no significant changes made in our internal controls over financial
reporting during the most recently completed fiscal quarter that have materially
affected or are reasonably likely to materially affect these controls. Thus,
no
corrective actions with regard to significant deficiencies or material
weaknesses were necessary.
Limitations
On the Effectiveness of Internal Control
Our
management, including the CEO, does not expect that our disclosure controls
and
procedures or our internal control over financial reporting will necessarily
prevent all fraud and material errors. 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 on all internal 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, and/or by management override of the control. The design
of any
system of internal control is also 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, controls may become inadequate because of changes
in
circumstances, and/or the degree of compliance with the policies and procedures
may deteriorate. Because of the inherent limitations in a cost effective
internal control system, financial reporting misstatements due to error or
fraud
may occur and not be detected on a timely basis.
None.
PART
III
ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT
The
following are the directors and executive officers of the Company as
of September 5, 2007.
|
NAME
|
|
AGE
|
|
POSITIONS
HELD WITH COMPANY
|
| |
|
|
|
|
|
Chunshi
Li
|
|
51
|
|
Chairman
and Chief Executive Officer since 2007
|
|
Frank
S. Yuan
|
|
58
|
|
Director
since 2005
|
There
are
no family relationships among any of the directors and executive
officers.
The
following sets forth certain biographical information concerning each director
and executive officer:
CHUNSHI
LI. Chunshi Li has over thirteen years experience in the petroleum products
industry. Since 2005 he has served as Chairman of the Board of Yili
Asphalt, a company that he founded. From 1994 to 2005 Mr. Li was
employed be other petroleum refiners and distributors. From 1984 to
1994 Mr. Li was employed in the Provincial Government of Jilin Province as
a
member of the Political Consultative Conference.
FRANK
S.
YUAN. Combining decades of experience in the apparel, banking, real estate,
insurance and computer industries, Frank Yuan has developed and started multiple
new ventures in his 30 plus years as an immigrant in the United States. Before
the Company, Mr. Yuan founded multi-million dollars of business in men's
apparel
private label & wholesale company, a "Knights of Round Table" sportswear
line, a "Uniform Code" sweater line, and men's clothing retail store chain.
Mr.
Yuan also founded UNI-Fortune, a real-estate development company, and co-founded
United National Bank, Evertrust Bank, Western Cities Title Insurance Company
and
Serv-American National Title Insurance. Mr. Yuan received a B.A. degree in
economics from Fu-Jen Catholic University in Taiwan and a M.B.A. degree from
Utah State University. Mr. Yuan was a director & CEO of C-ME since 1996 and
ASAP Show since 2005.
COMMITTEES
The
Board
of Directors does not have an audit committee or a compensation committee,
due
to the small size of the Board. The Board of Directors also does not
have an audit committee financial expert, due to the recent change in management
of the Company.
CODE
OF ETHICS
The
Company did not have formal written values and ethical standards, due to
the
small number of members of management.
ITEM
10.
EXECUTIVE COMPENSATION
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
The
following table sets forth the compensation we have paid to each executive
officer and all executive officers as a group, for the fiscal years ended
May
31, 2007 and 2006, annual compensation, including salary and bonuses paid
by the
Company to the Chief Executive Officer. No other executive officers received
more than $100,000 during the fiscal years-ended May 31, 2007 and 2006. The
Company does not currently have a long-term compensation plan and does not
grant
any long-term compensation to its executive officers or employees.
The
table
does not reflect certain personal benefits, which in the aggregate are less
than
ten percent of the named executive officer's salary and bonus. No other
compensation was granted for the periods ended May 31, 2007 and
2006.
SUMMARY
COMPENSATION TABLE
| |
|
|
|
|
|
|
|
|
|
|
|
|
Long
Term Compensation
|
| |
|
|
|
Annual
Compensation
|
|
|
Awards
|
|
Payouts
|
|
Name
and Principal
Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Other
Annual Compensation
|
|
|
Restricted
Stock Award(s)
|
|
Securities
Underlying Options/SARs (#)
|
|
LTIP
Payouts ($)
|
|
|
All
Other Compensation
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yuan,
Frank
|
|
2007
|
|
$ |
150,000
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
-
|
|
N/A
|
|
$ |
-
|
|
|
$ |
-
|
|
(CEO)
|
|
2006
|
|
$ |
150,000
|
|
|
$ |
-
|
|
|
$ |
-
|
|
|
$ |
-
|
|
N/A
|
|
$ |
-
|
|
|
$ |
-
|
COMPENSATION
OF DIRECTORS
All
outside directors are reimbursed for any reasonable expenses incurred in
the
course of fulfilling their duties as directors of the Company and do not
receive
any payroll.
There
are
8,626,480 shares of ASAP Show common stock issued and outstanding. In
addition, there are 300,000 shares of Series A Convertible Preferred Stock
issued and outstanding, which can be converted into 854,022,000 common
shares. Therefore, the total outstanding common stock on a
fully-diluted basis is 862,648,480 shares. The holders of the Series
A Preferred Stock have voting power equivalent to the common shares into
which
the Series A shares are convertible.
The
following table sets forth information known to us with respect to the
beneficial ownership of our common stock (assuming conversion of the Series
A
Convertible Preferred Stock) by the following:
|
·
|
each
shareholder who beneficially owns more than 5% of our common stock
(on a
fully-diluted basis);
|
|
·
|
Chunshi
Li, our Chief Executive Officer
|
|
·
|
each
of the members of the Board of Directors;
and
|
|
·
|
all
of our officers and directors as a
group.
|
|
Name of
Beneficial
Owner
|
Amount
and Nature
of
Beneficial
Ownership(1)
|
Percentage
of
Class
|
|
Chunshi
Li
|
186,504,601
|
21.6%
|
|
Frank
Yuan
|
2,901,311
|
0.3%
|
| |
|
|
|
All
officers and directors
as
a group (2 persons)
|
189,405,912
|
22.0%
|
________________________________
(1) Except
as otherwise noted, all shares are owned of record and
beneficially.
The
Company has a revolving line of credit totaling $1.3 million with Frank Yuan
and
certain members of his family. The line of credit bears interest at 10% per
annum and expires on August 1, 20087, as amended. During fiscal 2007 and
2006,
the Company incurred interest expense totaling $99,676 and $82,000 in connection
with the Line. At May 31, 2007, the balance of the Line was $1,028,307, and
the
accrued and unpaid interest was $12,185.
|
EXHIBIT
NUMBER
|
|
DESCRIPTION
|
| |
|
|
|
3.1*
|
|
Articles
of Incorporation
|
|
3.1a**
|
|
Certificate
of Designation of Series A Preferred Stock
|
|
3.2*
|
|
Bylaws
|
|
10.1**
|
|
Share
Purchase and Merger Agreement dated as of May 24, 2007 among
ASAP Show,
Inc., CRI Acquisition Corp., and Sino-American Petroleum Group,
Inc.
|
|
10.2**
|
|
Assignment
and Assumption Agreement dated as of August 13, 2007 among ASAP
Show,
Inc., ASAP Holdings, Inc. and Frank Yuan.
|
|
10.3*
|
|
Promissory
Note from the Company to Frank Yuan
|
|
10.4***
|
|
Promissory
Note from the Company to Vicky Yuan, Frank Yuan and Jerome
Yuan
|
|
31
|
|
Rule
13a-14(a) Certification of Chief Executive Officer and Chief
Financial
Officer
|
|
32
|
|
Section
1350 Certification of Chief Executive Officer and Chief
Financial Officer
|
| * |
Filed
as an exhibit to the Company's Form 10-SB, as amended, and incorporated
herein by reference. |
|
**
|
Filed
as an exhibit to the Company’s Current Report on Form 8-K filed on August
13, 2007 and incorporated herein by
reference.
|
|
***
|
Filed
as an exhibit to the Company’s Form 10-KSB for the year ended May 31,
2006, filed on September 13, 2006 and incorporated herein by
reference.
|
The
following table sets forth the fees paid by the Company for professional
services rendered for the audits of the annual financial statements and fees
billed for other services rendered by its principal accountants:
|
Type
of Services Rendered
|
|
2007
|
|
|
2006
|
| |
|
|
|
|
|
|
Audit
Fees
|
|
$ |
12,000
|
|
|
$ |
38,000
|
|
Audit-Related
Fees
|
|
$ |
3,000
|
|
|
$ |
10,900
|
|
Tax
Fees
|
|
$ |
0
|
|
|
$ |
0
|
|
All
Other Fees
|
|
$ |
0
|
|
|
$ |
0
|
Audit
related services include fees incurred during the period ended May 31,
2007 and
2006 related to the Company's distribution of the ASAP
shares.
Pre-approval
Policies and Procedures
The
Audit
Committee has sole authority to approve any audit and significant non-audit
services to be performed by its independent accountants. Such approval is
required prior to the related services being performed.
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.
| |
ASAP
SHOW, INC.
|
|
| |
|
|
|
|
Date:
September
7, 2007
|
By:
|
/s/ Chunshi
Li
|
|
| |
|
Chunshi
Li |
|
| |
|
Chief
Executive Officer and
Chief Financial
Officer |
|
| |
|
|
|
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.
|
By:
|
/s/
Chunshi Li
|
Date:
September 7, 2007
|
| |
Chunshi
Li
|
|
| |
Chief
Executive Officer, Chief Financial Officer and Director
|
|
| |
|
|
|
By:
|
/s/
Frank S. Yuan
|
Date:
September 7, 2007
|
| |
Frank
S. Yuan
|
|
| |
Director
|
|
ASAP
SHOW, INC.
| |
|
|
|
F-1
|
| |
|
|
|
F-2
|
| |
|
|
Financial
Statements
|
|
| |
|
|
|
F-3
|
| |
|
|
|
F-4
|
| |
|
|
|
F-5
|
| |
|
|
|
F-6
|
| |
|
|
|
F-7
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
TO
THE BOARD OF DIRECTORS
ASAP
SHOW, INC.
We
have
audited the accompanying balance sheet of ASAP Show, Inc. for the year ended
May
31, 2007 and the related statements of operations, shareholders' equity,
and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
financial statements for the year ended May 31, 2006 were audited by other
auditors whose report, dated August 22, 2006, expressed an unqualified opinion
with a going concern explanation.
We
conducted our audit in accordance with auditing standards of the Public Company
Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well
as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of ASAP Show, Inc. as of May 31,
2007
and the results of its operations and its cash flows for the year then ended
in
conformity with generally accepted accounting principles.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency, which raises substantial doubt about its
ability to continue as a going concern. Management’s plans regarding
those matters also are described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
|
/s/
Sutton Robinson Freeman & Co., P. C.
Tulsa,
OK
August
25, 2007
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
TO
THE BOARD OF DIRECTORS
ASAP
SHOW, INC.
We
have
audited the accompanying statements of operations, shareholders' deficit,
and
cash flows of ASAP Show, Inc. (the "Company") for the year ended May 31,
2006.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based
on our audit.
We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit 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 audit 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 audit provides
a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the results of the Company’s operations and its cash flows
for the year ended May 31, 2006 in conformity with accounting principles
generally accepted in the United States of America.
/s/
KMJ Corbin & Company LLP
(formerly
Corbin & Company, LLP)
Irvine,
CA
August
22, 2006
BALANCE
SHEET
MAY
31, 2007
|
ASSETS
|
|
|
Current
assets:
|
|
|
|
|
Cash
|
|
$ |
54,717
|
|
|
Other
receivable
|
|
|
1,254
|
|
|
Due
from affiliated company
|
|
|
37,174
|
|
| |
|
|
|
|
|
Total
current assets
|
|
|
93,145
|
|
|
Other
assets
|
|
|
9,800
|
|
| |
|
|
|
|
|
Total
assets
|
|
$ |
102,945
|
|
| |
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
286,367
|
|
|
Deferred
revenue
|
|
|
67,184
|
|
|
Customer
deposits
|
|
|
88,675
|
|
|
Issuable
convertible preferred
|
|
|
400,000
|
|
| |
|
|
|
|
|
Total
current liabilities
|
|
|
842,226
|
|
| |
|
|
|
|
|
Line
of credit, shareholders
|
|
|
1,028,307
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
Shareholders'
deficit:
|
|
|
|
|
|
Common
stock, $0.001 par value; 45,000,000 shares
|
|
|
|
|
|
authorized;
8,701,480 shares issued and outstanding
|
|
|
8,701
|
|
|
Capital
contribution receivable
|
|
|
(50,000 |
) |
|
Additional
paid-in capital
|
|
|
14,174,549
|
|
|
Accumulated
deficit
|
|
|
(15,900,838 |
) |
| |
|
|
|
|
|
Total
shareholders' deficit
|
|
|
(1,767,588 |
) |
| |
|
|
|
|
|
Total
liabilities and shareholders' deficit
|
|
$ |
102,945
|
|
The
accompanying notes are an integral part of these financial
statements.
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED MAY 31, 2007 AND MAY 31, 2006
| |
|
2007
|
|
|
2006
|
|
| |
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Transaction
apparel sales
|
|
$ |
282,814
|
|
|
$ |
304,414
|
|
|
Tradeshow
revenue
|
|
|
1,282,801
|
|
|
|
1,372,748
|
|
|
Buying
trip
|
|
|
37,958
|
|
|
|
316,009
|
|
|
Total
revenues
|
|
|
1,603,573
|
|
|
|
1,993,171
|
|
| |
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Cost
of transaction sales
|
|
|
250,852
|
|
|
|
263,077
|
|
|
General
and administrative
|
|
|
1,459,686
|
|
|
|
1,818,751
|
|
|
Payroll
and related benefits
|
|
|
375,271
|
|
|
|
513,463
|
|
|
Stock-based
compensation
|
|
|
8,250
|
|
|
|
-
|
|
|
Total
operating expenses
|
|
|
2,094,059
|
|
|
|
2,595,291
|
|
| |
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(490,486 |
) |
|
|
(602,120 |
) |
| |
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
4,260 |
|
|
|
-- |
|
|
Interest
expense
|
|
|
(99,676 |
) |
|
|
(82,000 |
) |
|
Total
other income (expense)
|
|
|
(95,416 |
) |
|
|
(82,000 |
) |
| |
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(585,902 |
) |
|
|
(684,120 |
) |
| |
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
800
|
|
|
|
800
|
|
| |
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(586,702 |
) |
|
$ |
(684,920 |
) |
| |
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss available to common
|
|
|
|
|
|
|
|
|
|
shareholders
per share
|
|
$ |
(0.07 |
) |
|
$ |
(0.08 |
) |
| |
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares
|
|
|
|
|
|
|
|
|
|
outstanding,
basic and diluted
|
|
|
8,674,151
|
|
|
|
8,626,480
|
|
| |
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
STATEMENTS
OF SHAREHOLDERS' DEFICIT
FOR
THE YEARS ENDED MAY 31, 2007 AND MAY 31, 2006
| |
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Shares
|
|
|
Amount
|
|
|
Capital
Contribution Receivable
|
|
|
Additional
Paid-In Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Shareholders' Deficit
|
|
|
Balance,
May 31, 2005
|
|
|
8,626,480
|
|
|
$ |
8,626
|
|
|
$ |
--
|
|
|
$ |
13,751,375
|
|
|
$ |
(14,629,216 |
) |
|
$ |
(869,215 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
contribution from
reverse spin-off reorganization
|
|
|
--
|
|
|
|
--
|
|
|
|
(50,000 |
) |
|
|
415,000
|
|
|
|
--
|
|
|
|
365,000
|
|
|
Net
loss
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(684,920 |
) |
|
|
(684,920 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
May 31, 2006
|
|
|
8,626,480
|
|
|
$ |
8,626
|
|
|
$ |
(50,000 |
) |
|
$ |
14,166,375
|
|
|
$ |
(15,314,136 |
) |
|
$ |
(1,189,135 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock as Compensation
|
|
|
75,000
|
|
|
|
75
|
|
|
|
--
|
|
|
|
8,174
|
|
|
|
--
|
|
|
|
8,249
|
|
|
Net
loss
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(586,702 |
) |
|
|
(586,702 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
May 31, 2007
|
|
|
8,701,480
|
|
|
$ |
8,701
|
|
|
$ |
(50,000 |
) |
|
$ |
14,174,549
|
|
|
$ |
(15,900,838 |
) |
|
$ |
(1,767,588 |
) |
The
accompanying notes are an integral part of these financial
statements.
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED MAY 31, 2007 AND MAY 31, 2006
| |
|
2007
|
|
|
2006
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(586,702 |
) |
|
$ |
(684,920 |
) |
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Estimated
fair value of common stock issued as compensation
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
25,160
|
|
|
|
75,733
|
|
|
Prepaid
expenses
|
|
|
2,658
|
|
|
|
62,096
|
|
|
Other
receivable
|
|
|
(1,254 |
) |
|
|
--
|
|
|
Other
assets
|
|
|
-- |
|
|
|
1,568 |
|
|
Accounts
payable and accrued expenses
|
|
|
(68,244 |
) |
|
|
(79,493 |
) |
|
Deferred
revenue
|
|
|
(54,251 |
) |
|
|
(65,558 |
) |
|
Customer
deposits
|
|
|
88,675
|
|
|
|
--
|
|
| |
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(585,708 |
) |
|
|
(690,574 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Payments
for affiliated company
|
|
|
(37,174 |
) |
|
|
--
|
|
| |
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(37,174 |
) |
|
|
--
|
|
| |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from capital contribution
|
|
|
--
|
|
|
|
365,000
|
|
|
Repayment
of loan payable
|
|
|
-- |
|
|
|
(100,000 |
) |
|
Advances
from line of credit, shareholders
|
|
|
1,476,636
|
|
|
|
958,800
|
|
|
Repayments
on line of credit, shareholders
|
|
|
(1,270,129 |
) |
|
|
(532,000 |
) |
|
Proceeds
from issuable convertible preferred stock
|
|
|
400,000
|
|
|
|
--
|
|
| |
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
606,507
|
|
|
|
691,800
|
|
| |
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
(16,375 |
) |
|
|
1,226
|
|
|
Cash,
beginning of period
|
|
|
71,092
|
|
|
|
69,866
|
|
| |
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$ |
54,717
|
|
|
$ |
71,092
|
|
| |
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
104,129
|
|
|
$ |
77,948
|
|
| |
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$ |
800
|
|
|
$ |
800
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
Capital
contribution receivable
|
|
$ |
--
|
|
|
$ |
50,000
|
|
The
accompanying notes are an integral part of these financial
statements.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2007 AND 2006
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
ASAP
Show, Inc. ("ASAP" or the "Company") was incorporated in December 2004 under
the
laws of the State of Nevada.
ASAP's
value to global suppliers and buyers in the manufacturing, wholesaling and
retailing clothing business lies in its capabilities as an intermediary for
the
industry. The Company believes it has built a foundation to meet today's
ever-changing international trading landscape.
The
Apparel Sourcing Association Pavilion Trade Show ("ASAP Show") is the core
business of the Company. ASAP Show is a global apparel and textile sourcing
show
that brings leading manufacturers from around the world to one venue to meet,
greet and sell to buyers. The ASAP Show is held twice a year in Las Vegas,
Nevada.
Effective
for fiscal 2005, the Company changed its fiscal year end from June 30 to
May 31.
The following table presents information for the year ended May 31, 2007
and May
31, 2006:
| |
|
5/31/07
|
|
|
5/31/06
|
|
| |
|
|
|
|
|
|
|
Revenues,
net
|
|
$ |
1,603,573
|
|
|
$ |
1,993,171
|
|
|
Loss
from operations
|
|
$ |
(490,486 |
) |
|
$ |
(602,120 |
) |
|
Income
taxes
|
|
$ |
800
|
|
|
$ |
800
|
|
|
Net
loss
|
|
$ |
(586,702 |
) |
|
$ |
(684,920 |
) |
|
Loss
per share-basic and diluted
|
|
$ |
(0.07 |
) |
|
$ |
(0.08 |
) |
GOING
CONCERN
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has incurred significant losses
since inception. The Company's losses are continuing and are expected to
continue until such time as the Company is able to sufficiently expand its
existing operations.
At
May
31, 2007, the Company has an accumulated deficit of approximately $15,900,838,
negative working capital of approximately $749,080 and a lack of profitable
operating history. The Company hopes to increase revenues from its trade
shows
and buying trips. In the absence of significant increases in revenues, the
Company intends to fund operations through additional debt and equity financing
arrangements. The successful outcome of future activities cannot be determined
at this time and there are no assurances that if achieved, the Company will
have
sufficient funds to execute its intended business plan or generate positive
operating results.
The
Company's success is dependent upon numerous items, certain of which are
the
successful growth of revenues from its products and services and its ability
to
obtain new customers/exhibitors in order to achieve levels of revenues adequate
to support the Company's current and future cost structure, for which there
is
no assurance. Unanticipated problems, expenses, and delays are frequently
encountered in establishing and maintaining profitable operations. These
include, but are not limited to, competition, the need to develop customer
support capabilities and market expertise, technical difficulties, market
acceptance and sales and marketing. The failure of the Company to meet any
of
these conditions could have a materially adverse effect on the Company and
may
force the Company to reduce or curtail operations. No assurance can be given
that the Company can achieve or maintain profitable operations.
The
Company believes it will have adequate cash to sustain operations until it
achieves sustained profitability. However, until the Company has a history
of
maintaining revenue levels sufficient to support its operations and repay
its
working capital deficit, the Company may require additional financing. Sources
of financing could include capital infusions, additional equity financing
or
debt offerings. There can be no assurance that funding will be available
on
acceptable terms, if at all, or that such funds, if raised, would enable
the
Company to achieve or sustain profitable operations.
These
factors, among others, raise substantial doubt about the Company's ability
to
continue as a going concern. The accompanying financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the classification of liabilities
that might result from the outcome of these uncertainties.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates and assumptions that affect the reported amounts of assets
and
liabilities and disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Among the more significant estimates included
in
these financial statements are the estimated allowance for doubtful accounts,
valuation of stock based compensation and the valuation allowance for deferred
income tax assets. Actual results could differ from those
estimates.
RISKS
AND UNCERTAINTIES
The
Company operates in a highly competitive trade show environment that is subject
to government regulation and rapid change. The Company's operations are subject
to significant risk and uncertainties including financial, operational and
other
risks associated with the business, including the potential risk of business
failure.
CURRENT
VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
Certain
financial instruments, principally accounts receivable, potentially subject
the
Company to credit risks. The Company performs ongoing credit evaluations
of its
customers but does not require collateral. The Company maintains an allowance
for doubtful receivables and sales returns based upon factors surrounding
the
credit risk of specific customers, historical trends and the Company's estimate
of future product returns. As of the balance sheet date, no allowance is
required nor provided against these receivables, which are deemed to be
collectible in the normal course of business. Although the Company expects
to
collect amounts due, actual collections may differ from the estimated
amounts.
There
were no significant sales concentrations for fiscal 2007 or 2006 nor accounts
receivable concentrations at May 31, 2007.
PROPERTY
AND EQUIPMENT
Property
and equipment are stated at cost. Depreciation of property and equipment
was
calculated on the straight-line method over the estimated useful lives of
the
assets, generally three to five years. Leasehold improvements were amortized
over the shorter of the amortized useful lives or the lease term.
Maintenance,
repairs and minor renewals are charged directly to expense as incurred.
Additions and betterments to property and equipment are capitalized. When
assets
are disposed of, the related cost and accumulated depreciation thereon are
removed from the accounts and any resulting gain or loss is included in the
statement of operations.
Property
and equipment are fully depreciated at May 31, 2007.
REVENUE
RECOGNITION
In
December 1999, the SEC issued Staff Accounting Bulletin 101 ("SAB 101"),
"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 the SEC. SAB 101 has been amended and replaced by SAB 104. Management
believes the Company's revenue recognition policies conform to SAB
104.
Revenues
include amounts earned under transaction sales, trade shows, and Buying
Trips.
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 revenues from product transaction sales when title
to the
product passes to the customer. For all product transactions with its customers,
the Company acts as a 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.
Trade
Shows
Trade
Shows generate 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 organizes
two
trade shows per year in February and August in Las Vegas.
Buying
Trips
Buying
Trips generate 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 overseas government's trade promotion
agencies located in the various cities which were visited by the Buyers (i.e.
the Company does 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 to Southeast Asia
countries in November each year.
Income
Taxes
The
Company accounts for income taxes under Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under SFAS No.
109,
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. A valuation allowance
is
provided for significant deferred tax assets when it is more likely than
not
those assets will not be recovered.
Loss
Per Share
Under
SFAS No. 128, "Earnings per Share," basic loss per share is computed by dividing
net loss available to common shareholders by the weighted-average number
of
common shares assumed to be outstanding during the period of computation.
Diluted earnings per share is computed similar to basic loss per share except
that the denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common shares had
been
issued and if the additional common shares were dilutive. Because the Company
has incurred net losses, basic and diluted loss per share are the same as
additional potential common shares would be anti-dilutive.
Fair
Value
SFAS
No.
107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments when it
is
practicable to estimate that value. The carrying amounts of the Company's cash,
accounts receivable, accounts payable, accrued expenses, deferred revenues
and
line of credit, shareholders approximate their fair values due to the short-term
maturities of those financial instruments.
Advertising
The
Company expenses the cost of advertising when incurred as general and
administrative expenses. Advertising expenses were approximately $93,000
and
$178,000 for fiscal 2007 and 2006, respectively. Advertising costs consist
primarily of costs associated with the promotion of ASAP Global Sourcing
Show
awareness.
Segments
of an Enterprise and Related Information
SFAS
No.
131, "Disclosures about Segments of an Enterprise and Related Information"
dictates the way public companies report information about segments of their
business in their annual financial statements and requires them to report
selected segment information in their quarterly reports issued to shareholders.
It also requires entity-wide disclosures about the products and services
an
entity provides, the material countries in which it holds assets and reports
revenues and its major customers (see Note 8).
Recent
Accounting Pronouncements
As
of May
31, 2007, the Company has not issued any share-based payments to its
employees.
In
December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123(R)"), which is
a revision of SFAS No. 123. SFAS No. 123(R) supersedes Accounting Principles
Board ("APB") No. 25 and amends SFAS No. 95, "Statement of Cash Flows." SFAS
No.
123(R) requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement based on
their
fair values. Pro forma disclosure is no longer an alternative. The provisions
of
this statement are effective for the Company as of June 1, 2006.
SFAS
No.
123(R) requires companies to recognize in the statement of operations the
grant-date fair value of stock options and other equity-based compensation
issued to employees. SFAS No. 123(R) also establishes accounting requirements
for measuring, recognizing and reporting share-based compensation, including
income tax considerations. The Company will adopt SFAS No. 123(R) using the
modified prospective application in June 2006. Under the modified prospective
application, the cost of new awards and awards modified, repurchased or
cancelled after the required effective date and the portion of awards for
which
the requisite service has not been rendered (unvested awards) that are
outstanding as of the required effective date will be recognized as the
requisite service is rendered on or after the required effective date. The
compensation cost for that portion of awards shall be based on the grant-date
fair value of those awards as calculated for either recognition or pro forma
disclosures under SFAS No. 123.
The
adoption of SFAS No. 123(R)'s fair value method will have a negative impact
on
the Company's results of operations if the Company grants share-based payments
to its employees in the future, although it will have no impact on its overall
financial position. The impact of adopting SFAS No. 123(R) cannot be predicted
at this time because it will depend on levels of share-based payments granted
in
the future. SFAS No. 123(R) also requires the benefits of tax deductions
in
excess of recognized compensation cost to be reported as a financing cash
flow,
rather than as an operating cash flow as required under current accounting
literature. The requirement will reduce net operating cash flows and increase
net financing cash flows in periods of adoption.
In
March
2006, the Financial Accounting Standards Board issued Statement of Accounting
Standards No. 156, Accounting for Servicing of Financial Assets
(SFAS 156), which amends SFAS 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. SFAS 156 permits, but does not require, an
entity to choose either the amortization method or the fair value measurement
method for measuring each class of separately recognized servicing assets
and
servicing liabilities. The provisions of SFAS No. 156 are
effective for fiscal years beginning after September 15, 2006. The Company
does not expect the adoption of SFAS156 to have a material
effect on its financial statements and related disclosures.
In
June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes
– an interpretation of FASB Statement No. 109 (FIN 48). This
interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. FIN 48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected
to be
taken in a tax return. It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The Company does not expect the adoption of
FIN 48 to have a material effect on its financial statements and related
disclosures.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements” (SFAS 157). This statement defines fair value, establishes a
framework for measuring fair value in GAAP, and expands disclosures about
fair
value measurements. SFAS 157 is effective for financial statements issued
for
fiscal years beginning after November 15, 2007. The Company is currently
evaluating the impact of adopting SFAS 157 on our financial condition and
results of operations.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans– an amendment of
FASB Statements No. 87, 88, 106 and 132(R)” (SFAS No. 158”). SFAS No. 158
requires an employer that sponsors one or more single-employer defined benefit
plans to (a) recognize the over-funded or under-funded status of a benefit
plan
in its statement of financial position, (b) recognize as a component of other
comprehensive income, net of tax, the gains or losses and prior service costs
or
credits that arise during the period but are not recognized as components
of net
periodic benefit cost pursuant to SFAS No. 87, “Employers’ Accounting for
Pensions”, or SFAS No. 106, “Employers’ Accounting for Postretirement Benefits
Other Than Pensions”, (c) measure defined benefit plan assets and obligations as
of the date of the employer’s fiscal year-end, and (d) disclose in the notes to
financial statements additional information about certain effects on net
periodic benefit cost for the next fiscal year that arise from delayed
recognition of the gains or losses, prior service costs or credits, and
transition asset or obligation. The Company is currently assessing the
impact of adopting SFAS 158 on our financial statements.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the American Institute of Certified Public Accountants,
and
the Securities and Exchange Commission did not or are not believed by Management
to have a material impact on the Company's present or future financial
statements.
NOTE
2 – DUE FROM AFFILIATED COMPANY
The
Company paid some expenses for an affiliated company, IBMC in which the Company
is one of the major shareholders and the Company’s significant shareholder,
Frank Yuan is also a major shareholder. There is no written note for
the working capitals loaned to IBMC.
NOTE
3 – ISSUABLE CONVERTIBLE PREFERRED STOCK
As
of May
31, 2007, The Company has received a deposit of $400,000 as part of $600,000
total purchase price for 100,000 shares of convertible preferred
stock.
On
August
13, 2007 ASAP Show, Inc. (“ASAP Show”) acquired the outstanding capital stock of
Sino-American Petroleum Group, Inc., a Delaware corporation (“Sino-American
Petroleum”). In connection with the closing of the acquisition (the
“Merger”) on August 13, 2007, ASAP Show issued to the shareholders of
Sino-American Petroleum 200,000 shares of Series A Preferred Stock, which
will
be convertible into 569,348,000 shares of common stock and Huakang Zhou,
Xiaojin
Wang and Xiao Hu purchased 100,000 shares of Series A Preferred Stock for
$600,000. The 100,000 shares will be convertible into 284,674,000
shares of common stock. The three purchasers assigned their interest
in most of the Series A Preferred shares to other individuals, none of whom
acquired sufficient shares to be a controlling shareholder of ASAP Show.
NOTE
4 - LINE-OF-CREDIT FROM SHAREHOLDER AND LOAN PAYABLE
The
Company has an unsecured revolving line-of-credit (the "Line") from Frank
Yuan,
the Company's Chief Executive Officer, and certain family members which expires
on August 1, 2008 and provides for borrowings up to a maximum of $1,300,000,
as
amended. The Line carries an interest rate of 10.0% per annum. The balance
as of
May 31, 2007 was $1,028,307, and the accrued and unpaid interest was
$12,185.
During
fiscal 2007 and 2006, the Company incurred interest totaling $99,676 and
$82,000
in connection with the Line.
NOTE
5 - INCOME TAXES
Income
tax expense for the year ended May 31, 2007 and May 31, 2006 differed from
the
amounts computed by applying the U.S. Federal income tax rate of 34 percent
to
the loss before income taxes as a result of the following:
| |
|
2007
|
|
|
2006
|
|
| |
|
|
|
|
|
|
|
Computed
"expected" tax benefit
|
|
$ |
(199,200 |
) |
|
$ |
(233,000 |
) |
|
Adjustment
in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
Change
in valuation allowance
|
|
|
211,400
|
|
|
|
326,000
|
|
|
Deferred
revenue
|
|
|
22,800
|
|
|
|
(22,000 |
) |
|
State
and local income taxes, net of
|
|
|
|
|
|
|
|
|
|
federal
effect
|
|
|
(34,200 |
) |
|
|
(40,000 |
) |
|
Tax
attributes of C-ME not
|
|
|
|
|
|
|
|
|
|
retained
by the Company
|
|
|
-
|
|
|
|
-
|
|
|
Other
|
|
|
-
|
|
|
|
(30,200 |
) |
| |
|
|
|
|
|
|
|
|
| |
|
$ |
800
|
|
|
$ |
800
|
|
| |
|
|
|
|
|
|
|
|
The
tax
effects of temporary differences that give rise to significant portions of
the
deferred tax assets at May 31, 2007 are presented below:
|
Deferred
tax assets:
|
|
|
|
|
Net
operating loss carry forwards
|
|
$ |
233,400
|
|
|
Other
|
|
|
(22,000 |
) |
| |
|
|
211,400
|
|
| |
|
|
|
|
|
Less
valuation allowance
|
|
|
(211,400 |
) |
|
Net
deferred tax assets
|
|
$ |
--
|
|
As
of May
31, 2007, the Company had Federal and state net tax operating loss carry
forwards of approximately $1,270,700 available to offset future taxable income,
respectively. The carry forwards expire in varying amounts through
2027.
NOTE
6 - SHAREHOLDERS' DEFICIT
Options
and Warrants
The
Company does not have a stock option plan or any options or warrants issued
and
outstanding as of May 31, 2007.
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Operating
Lease
The
Company leases office space under a non-cancelable operating lease
agreement. The lease provides for monthly lease payments
approximating $4,990 and expires on June 30, 2007. Future minimum lease payments
under non-cancelable operating leases as of May 31, 2007 approximate the
following:
|
Year
Ending May 31,
|
|
|
2008
|
$5,000
|
Starting
July 1, 2007, the Company will lease office space under month to month lease
agreement with its CEO Frank Yuan, an arms length transaction. The lease
provides for monthly lease payments.
Rent
expense for the year ended May 31, 2007 and May 31, 2006 was approximately
$62,000 and $60,000, respectively.
Litigation
The
Company filed a lawsuit against Maureen Storch ("Storch"), Katherine Li ("Li"),
Cherry Wang ("Wang") and Global Nexus, Inc., a California Corporation
("Global"), (collectively the four defendants referred to as "Defendants")
in
the Superior Court of the State of California, County of Los Angeles on February
23, 2006. The claims by the Company against Storch, Li, Wang and Global arose
out of certain activities undertaken by them as consultants or employees
of the
Company. The Company alleges, among other things, that Defendants failed
to
fulfill their contractual obligations and breached their fiduciary duties
to the
Company for a number of reasons, including by breach of contract, interference
with contract, interference with prospective economic advantage, unfair
competition and misappropriation of trade secrets. The Company seeks
compensatory damages and injunctive relief.
Mediation
was conducted per court order on August 15, 2006. As a result, a global
settlement was reached on the same date. In essence, the defendant, Global,
agreed to pay certain dollar amount per booth sold until the settlement total
amount is reached. If Global fails to pay amounts earned by the Company,
Maureen
Storch and Katherine Li will be personally liable for such payment. Pursuant
to
the Settlement Agreement, the entire action (complaint and cross-complaint)
was
dismissed with prejudice on September 25, 2006.
On
March
7, 2006, a complaint was filed against Cyber Merchants Exchange Inc. (“C-Me”) in
a Chapter 7 bankruptcy proceeding in U.S. Bankruptcy Court in the District
of
Delaware in the matter captioned In Re: Factory 2-U Stores, Inc. The complaint
seeks to recover from C-ME $91,572 in alleged preferential transfers made
to
C-ME by the debtor during the ninety-day period prior to the filing of the
debtor's bankruptcy petition. C-ME intends to defend against such preference
claim by asserting that such transfers were made in the ordinary course of
business and such other available defenses.
To
the
extent C-ME incurs any losses, costs or damages with respect to the preference
claim, including attorneys' fees and related costs, the C-ME believes it
may
recover such losses, costs and damages from Frank Yuan and the Company pursuant
to the indemnification provisions under the Transfer Agreement, which C-Me
transferred all of its assets and liabilities to the Company. C-ME has informed
Frank Yuan and the Company that it intends to seek indemnification from them
with respect to the preference claim. Further, C-ME has informed Frank Yuan
and
the Company that the $50,000 reserve originally due to be paid March 28,
2006
under the terms of the Transfer Agreement will be retained by C-ME until
this
preference claim is resolved to satisfy any potential indemnity
claims.
NOTE
8 - BUSINESS SEGMENTS
Reportable
business segments as of and for the year ended May 31, 2007 and May 31, 2006
were as follows:
| |
|
2007
|
|
|
2006
|
|
| |
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Transaction
sales
|
|
$ |
282,814
|
|
|
$ |
304,414
|
|
|
Trade
shows
|
|
|
1,282,801
|
|
|
|
1,372,748
|
|
|
Buying
trips
|
|
|
37,958
|
|
|
|
316,009
|
|
| |
|
|
|
|
|
|
|
|
| |
|
$ |
1,603,573
|
|
|
$ |
1,993,171
|
|
| |
|
|
|
|
|
|
|
|
|
Income
(loss) from operations:
|
|
|
|
|
|
|
|
|
|
Transaction
sales
|
|
$ |
31,963
|
|
|
$ |
41,337
|
|
|
Trade
shows
|
|
|
(542,539 |
) |
|
|
(640,173 |
) |
|
Buying
trips
|
|
|
20,090
|
|
|
|
191,113
|
|
|
Corporate
|
|
|
--
|
|
|
|
(194,397 |
) |
| |
|
|
|
|
|
|
|
|
| |
|
$ |
(490,486 |
) |
|
$ |
(602,120 |
) |
| |
|
|
|
|
|
|
|
|
|
Identifiable
assets:
|
|
|
|
|
|
|
|
|
|
Transaction
sales
|
|
$ |
--
|
|
|
$ |
--
|
|
|
Trade
shows
|
|
|
102,945
|
|
|
|
98,230
|
|
|
Buying
trips
|
|
|
--
|
|
|
|
10,480
|
|
| |
|
|
|
|
|
|
|
|
| |
|
$ |
102,945
|
|
|
$ |
108,710
|
|
Net
sales
as reflected above consist of sales to unaffiliated customers only as there
were
no significant intersegment sales during the years ended May 31, 2007 and
May
31, 2006. There were no significant capital expenditures during fiscal 2007
or
2006.
There
was
no significant concentration on net segment sales for the year ended May
31,
2007 and May 31, 2006.
Trade
Show revenue relates to the Company's Las Vegas, Nevada, and China
show.