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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2013

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from __________ to __________

                                           

ASIA TRAVEL CORPORATION

(Name of Registrant as Specified in its Charter) 

         
Nevada   000-21909   86-0779928
(State or other jurisdiction of incorporation)   (Commission File Number)   (IRS Employer ID No.)

 

Unit 1202, Level 12, One Peking,

1 Peking Road, Tsim Sha Tsui,

Kowloon, Hong Kong

 (Address of principal executive office)

 

Registrant’s telephone number, including area code: +852 39809369

 

Copy of Communications To:

Bernard & Yam, LLP 

140-75 Ash Avenue, Suite 2D 

Queens, NY 11355 

Tel: 212-219-7783 

Fax: 212-219-3604 

(Name, Address and Telephone Number of Person 

Authorized to Receive Notice and Communications on Behalf of Registrant) 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        

Yes x   No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).            Yes x No o

 

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

       
Large Accelerated Filer o Accelerated Filer o Non-accelerated Filer o Smaller Reporting Company x

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: as of February 10, 2014, there are 177,748,501 shares of common stock issued and outstanding. 

 
 

Part I - FINANCIAL INFORMATION

 

Item 1: Financial Statements

 

ASIA TRAVEL CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

December 31, 2013

 

The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made. These financial statements should be read in conjunction with the accompanying notes, and with the historical financial information of the Company.

 
 

 ASIA TRAVEL CORPORATION

CONSOLIDATED BALANCE SHEETS – Unaudited

 

    December 31,     March 31,  
    2013     2013  
ASSETS                
CURRENT ASSETS                
Cash in bank   $ 16,315     $ 6,337  
Other receivables     9,499       403  
                 
Total Current Assets     25,814       6,740  
                 
Related party receivables     1,299,334       809,901  
                 
TOTAL ASSETS   $ 1,325,148     $ 816,641  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
CURRENT LIABILITIES                
Accrued liabilities   $ 21,341     $ 5,237  
Related party payable     18,715       14,805  
                 
Total Current Liabilities     40,056       20,042  
                 
STOCKHOLDERS’ EQUITY                
Preferred stock; $.001 par value, 10,000,000 shares authorized; 20,000 shares issued and outstanding, respectively     20       20  
                 
Common stock; $.001 par value, 990,000,000 shares authorized; 177,748,501 and 51,960,101 shares issued and outstanding, respectively     177,748       51,960  
Capital in excess of par value     9,496,073       8,992,918  
Retained deficit     (8,388,292 )     (8,248,227 )
Accumulated other comprehensive loss     (457 )     (72 )
                 
Total Stockholders’ Equity     1,285,092       796,599  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 1,325,148     $ 816,641  

  

The accompanying notes are an integral part of these financial statements.

 
 

 ASIA TRAVEL CORPORATION

STATEMENTS OF OPERATIONS – Unaudited

 

    For the three months ended     For the nine months ended  
    December 31,     December 31,     December 31,     December 31,  
    2013     2012     2013     2012  
                         
Revenue   $ 97,418     $ 48,431     $ 209,876     $ 48,431  
Cost of sales     48,928       35,162       99,073       35,162  
Gross margin     48,490       13,269       110,803       13,269  
                                 
EXPENSES                                
General and administrative   $ 63,832     $ 33,004     $ 250,949     $ 239,046  
Total expenses   $ 63,832     $ 33,004     $ 250,949     $ 239,046  
                                 
OPERATING LOSS   $ (15,342 )   $ (19,735 )   $ (140,146 )   $ (225,777 )
                                 
OTHER INCOME AND EXPENSE                                
Interest income   $ 9     $     $ 81     $  
                                 
LOSS BEFORE INCOME TAXES   $ (15,333 )   $ (19,735 )   $ (140,065 )   $ (225 777)  
Provision for income taxes   $     $     $     $  
                                 
NET LOSS   $ (15,333 )   $ (19,735 )   $ (140,065 )   $ (225,777 )
                                 
COMPREHENSIVE LOSS                                
Foreign currency translation loss   $ (69 )   $ (3 )   $ (385 )   $ (3 )
                                 
COMPREHENSIVE LOSS   $ (15,402 )   $ (19,738 )   $ (140,450 )   $ (225,780 )
                                 
LOSS PER SHARE - basic and diluted   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.02 )
                                 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES - basic and diluted (Note 3)     177,748,501       26,700,536       123,316,400       13,770,465  

  

The accompanying notes are an integral part of these financial statements.

 
 

ASIA TRAVEL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) – Unaudited

 

                            Capital in           Accumulated other        
    Preferred stock     Common stock     excess of par     Retained     comprehensive        
    Shares     Amount     Shares     Amount     value     deficit     income (loss)     Total  
Balance at March 31, 2012     20,000     $ 20       7,270,101     $ 7,270     $ 8,590,708     $ (8,007,440 )   $     $ 590,558  
                                                                 
Net loss                                   (240,787 )           (240,787 )
Sale of common stock                 44,690,000       44,690       402,210                   446,900  
Foreign currency translation adjustment                                         (72 )     (72 )
                                                                 
Balance at March 31, 2013     20,000     $ 20       51,960,101     $ 51,960     $ 8,992,918     $ (8,248,227 )   $ (72 )   $ 796,599  
                                                                 
Net loss                                   (140,065 )           (140,065 )
Sale of common stock                 125,788,400       125,788       503,155                   628,943  
Foreign currency translation adjustment                                         (385 )     (385 )
                                                                 
Balance at December 31, 2013     20,000     $ 20       177,748,501     $ 177,748     $ 9,496,073     $ (8,388,292 )   $ (457 )   $ 1,285,092  

  

The accompanying notes are an integral part of these financial statements.

 
 

ASIA TRAVEL CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS – Unaudited

 

    For the nine months ended  
    December 31,     December 31,  
    2013     2012  
CASH FLOWS FROM OPERATING ACTIVITIES                
     Net (loss)   $ (140,065 )   $ (225,777 )
     Adjustments to reconcile net (loss) to net cash used by operating activities                
     Changes in assets and liabilities                
           Increase in other receivables     (8,967 )      
           Decrease in prepaid expenses           22,000  
           Increase in accrued liabilities     15,763       36,033  
                 
           Net cash (used) by operating activities     (133,269 )     (167,744 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
     Advance to related parties     (489,433 )     (809,901 )
                 
          Net cash (used) by investing activities     (489,433 )     (809,901 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
     Loan from related party     3,489        
     Payments to related party           (12,442 )
     Proceeds from sale of common stock     628,943       446,900  
                 
          Net cash provided by financing activities     632,432       434,458  
                 
NET INCREASE (DECREASE) IN CASH     9,730       (543,187 )
                 
EFFECT OF EXCHANGE RATE ON CASH     248       (3 )
                 
CASH - BEGINNING OF PERIOD     6,337       581,000  
CASH - END OF PERIOD   $ 16,315     $ 37,810  
                 
SUPPLEMENTAL INFORMATION                
     Interest paid during the period   $     $  
                 
     Income taxes paid during the period   $     $  

  

The accompanying notes are an integral part of these financial statements.

 
 

ASIA TRAVEL CORPORATION

NOTE TO CONSOLIDATED FINANCIAL STATEMENT Unaudited

 

Note 1: Basis of Presentation and Summary of Significant Accounting Policies

 

The interim condensed consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim condensed consolidated financial statements be read in conjunction with the Form 10-K Annual Report filed by the Company on July 12, 2013. The Company follows the same accounting policies in the preparation of interim reports.

 

Organization 

 

Asia Travel Corporation (formerly Realgold International, Inc.)  (the “Company” or “Asia Travel”) was incorporated under the laws of the State of Arizona on November 14, 1994. On November 22, 1996, the Company reincorporated under the laws of the State of Nevada and effected a forward split of its common stock on a basis of approximately 242 shares of the Nevada corporation for each share of the Arizona corporation. The Company ceased to actively pursue its business operations relating to the publishing of interactive media software in July, 1999.  On May 23, 2013, the Company filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada changing its name from Realgold International, Inc. to Asia Travel Corporation. During December 2011, the Company established a subsidiary in Hong Kong, Asia Travel (Hong Kong) Limited (formerly Realgold Venture Pte Limited) (“Asia Travel (Hong Kong)”).

 

On November 22, 2012, Asia Travel (Hong Kong) entered into a Lease Management Agreement (“Lease Management Agreement”) with Zhuhai Tengfei Investment Co., Ltd. (“Tengfei Investment”), a limited liability company formed under the laws of the People’s Republic of China (“China” or “PRC”). Under the Lease Management Agreement, Tengfei Investment leased the managerial and operating rights of Zhuhai Tengda International Travel Agency Co., Ltd. (“Tengda Travel”), a wholly owned subsidiary of Tengfei Investment, to Asia Travel (Hong Kong). Based on the agreement, Asia Travel (Hong Kong) obtained 20 years of business operation rights from Tengda Travel from November 2012 to November 2032 for a consideration of US$16,048 (RMB100,000) per year.

 

On November 25, 2012, Asia Travel (Hong Kong) entered into an Ownership Transfer Agreement (“Ownership Transfer Agreement”) with Tengfei Investment. Under the Ownership Transfer Agreement, Tengfei Investment transfers to Asia Travel (Hong Kong) 100% of the ownership of Zhuhai Tengda Business Hotel Co., Ltd. (“Tengda Hotel”) for a total transfer price of RMB 400,000 Yuan (approximately $65,000).

 

On November 29, 2012, the Bureau of Science and Technology Industry Trade and Information of Zhuhai City approved the ownership transfer of Tengda Hotel to Asia Travel (Hong Kong). On March 26, 2013, Guangdong Province Department of Foreign Trade and Economic Cooperation approved the transfer of ownership.

 

Tengda Hotel and Tengda Travel are wholly owned subsidiaries of Tengfei Investment. They are considered as entities under common control. Accordingly, the financial statements for Tengda Hotel and Tengda Travel have been combined for all periods presented, similar to a pooling-of-interests.

 

Tengda Travel is a limited liability company formed under the laws of the People’s Republic of China on December 23, 2011. As of March 31, 2013, Tengda Travel had registered capital of RMB 300,000, or approximately $48,328 based on the exchange rate as of March 31, 2013. Tengda Travel’s principal activity is to provide packaged tours, air ticketing, reservation of hotel rooms and golf courses and organize corporate conferences, exhibitions and show events for its customers.

 
 

Tengda Hotel, formerly named Zhuhai Meihua Hotel Co., Ltd., is a limited liability company formed under the laws of the People’s Republic of China on January 16, 2006. Tengda Hotel had registered capital of RMB 500,000, or approximately $80,546 based on the exchange rate as of March 31, 2013. Tengda Hotel is a three-star hotel with 59 guest rooms, including 24 Standard Rooms, 24 Deluxe Rooms, 10 Business Rooms and 1 Luxury Suite, with many other amenities including fitness club, gym, business center, gift shop, meeting room , ballroom, game room, and a large parking lot.

 

Upon the completion of the said ownership transfer, Tengda Hotel becomes the wholly owned subsidiary of Asia Travel (Hong Kong).

 

On May 23, 2012, the Board of Directors of the Company adopted an Amendment to the Articles of Incorporation to increase authorized stock from 10,000,000 preferred shares and 99,000,000 common shares to 10,000,000 preferred shares and 990,000,000 common shares.

 

Foreign currency translation

 

The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the consolidated financial statements were as follows:

 

    2013     2012  
Nine months ended RMB : USD exchange rate     6.0540       6.2313  
Nine-months-average RMB : USD exchange rate     6.1339       6.2517  

 

Income (loss) per common share

 

Basic and diluted net loss per common share is computed using the net loss applicable to common shareholders and the weighted average number of shares of common stock outstanding. Diluted net loss per common share does not differ from basic net loss per common share since potential shares of common stock from conversion of preferred stocks are anti-dilutive for all periods presented. The fully diluted shares would be 143,316,400 and 46,700,536 for the nine months ended December 31, 2013 and December 31, 2012, respectively.

 

Recently issued accounting pronouncements

 

The Company has reviewed recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operations, financial position or cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its financial statements.

 

Note 2: Income Taxes

 

The Company was incorporated in the United States and has operations in three tax jurisdictions - the United States, the Hong Kong Special Administrative Region (“HK SAR”), and mainland China.

 

USA

 

The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate. As the Company had no income generated in the United States, there was no tax expense or tax liability.

 

Hong Kong

 

Asia Travel (Hong Kong) was incorporated in Hong Kong and is subject to Hong Kong income taxes. As Asia Travel (Hong Kong) had no income generated in Hong Kong, there was no tax expense or tax liability.

 

China

 

Tengda Hotel and Tengda Travel, which were incorporated in the PRC, are governed by the income tax law of the PRC and are subject to PRC enterprise income tax (“EIT”).

 
 

Income tax expenses (benefit) consist of the following:

  

   

For the nine Months Ended
December 31

 
    2013     2012  
Current   $     $  
Deferred            
Total   $     $  

 

The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of FASB ASC 740. The Company has recorded no deferred tax assets or liabilities as of December 31, 2013, and March 31, 2013. The amount of and ultimate realization of the benefits from the operating loss carry forwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company and other future events, the effects of which cannot be determined at this time. Because of the uncertainty surrounding the realization of the loss carry forwards, the Company has established a valuation allowance equal to the tax effect of the loss carry forwards and, therefore, no deferred tax asset has been recognized for the loss carry forwards.

 

The Company has no tax positions at December 31, 2013 and December 31, 2012 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.  The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.  During the nine months ended December 31, 2013 and 2012, the Company recognized no interest and penalties.  The Company had no accruals for interest and penalties at December 31, 2013 and December 31, 2012. Income tax periods 2010, 2011, and 2012 are open for examination by taxing authorities.

 

Note 3: Capital Stock

 

Preferred stock

 

The Company has 10,000,000 shares of authorized preferred stock at $0.001 par value. As of December 31, 2013 and March 31, 2013, the Company has 20,000 and 20,000 shares of preferred stock issued and outstanding, respectively.  

 

On February 2012 our CEO purchased Series A Preferred Stock for a total price of $20,000. One share of Series A Preferred Stock may be converted into 1,000 shares of common stock. The 20,000 shares of Series A Preferred Stock that our CEO, Tan Lung Lai, purchased from the Company may be converted into 20,000,000 shares of common stock. The holder of each one share of Series A Preferred Stock is entitled to 1,000 votes. There is no dividend rate for this class of preferred stock.

 

Common stock

 

In February 2012, the Company issued 6,000,000 shares of common stock to a group of 64 non-US individuals for a total price of $ 600,000 ($ 0.10 per share).

 

On November 21, 2012, the Company entered into a Regulation S Stock Purchase Agreement with a group of 35 non-US individual purchasers (“Purchasers”). Under the Agreement, the Company issued a total of Forty-Four Million Six Hundred Ninety Thousand (44,690,000) shares of common stock to Purchasers for a total price of $ 446,900 ($ 0.01 per share).

 

On July 22, 2013, the Company entered into a Regulation S Stock Purchase Agreement (“Agreement”) with a group of 34 non-US individual purchasers (“Purchasers”). Under the Agreement, the Company will issue a total of 125,788,400 shares of common stock to Purchasers for a total price of $628,943 ($0.005 per share). The issuance of the 125,788,400 shares is pursuant to the exemption provided by Regulation S. None of the Purchasers is a US person and the transactions underlying the Agreement are carried out outside US.  Accordingly, July 29, 2013, 125,788,400 shares of common stock have been issued.

 
 

Note 4: Pro Forma Statement

 

On November 22, 2012, Asia Travel’s wholly owned subsidiary Asia Travel (Hong Kong) entered into a Lease Management Agreement (“Lease Management Agreement”) with Tengfei Investment. Under the Lease Management Agreement, Tengfei Investment leased the managerial and operating rights of Tengda Travel, a wholly owned subsidiary of Tengfei Investment, to Asia Travel (Hong Kong).

 

On November 25, 2012, Asia Travel (Hong Kong) entered into an Ownership Transfer Agreement (“Ownership Transfer Agreement’) with Tengfei Investment. Under the Ownership Transfer Agreement, Tengfei Investment transfers to Asia Travel (Hong Kong) 100% of the ownership of Tengda Hotel for a total transfer price of RMB 400,000 Yuan (approximately $64,000).

 

Pro Forma Financial Information

 

The unaudited pro forma financial information presented below summarizes the consolidated operating results of the Company and Tengda Hotel and Tengda Travel for the nine months ended December 31, 2012, as if the acquisition had occurred on April 1, 2012.

 

The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition taken place on April 1, 2012. The unaudited pro forma consolidated statements of operations combine the historical results of the Company and the historical results of the acquired entity for the periods described above.

 

Asia Travel Corporation

Unaudited Pro Forma Statement of Operations and Comprehensive Income

For the nine months ended December 31, 2012

          Historical              
          Combined              
          Tengda Hotel and           Combined  
    Asia Travel     Tengda Travel     Adjustments     Pro Forma  
                         
Revenue   $ 48,431     $ 145,190             $ 193,621  
                                 
Net loss   $ (225,777 )   $ (21,836 )     (12,000 )   $ (259,613 )
                                 
Loss per share - basic and diluted           $ (0.02 )           $ (0.02 )
                                 
Weighted average number of common shares             13,770,465               13,770,465  

 

Note: The currency exchange rate is based on the average exchange rate of the related period.

   
(1) The historical operating results of the Company were based on the Company’s financial statements for the nine months ended December 31, 2012.
   
(2) The historical information of Tengda Hotel and Tengda Travel were derived from the books and the records of Tengda Hotel and Tengda Travel for the nine months ended December 31, 2012.
   
(3) Pro forma adjustment was based on the assumption that there are lease expense USD4,000 per quarter.

 

Note 5: Related Party Receivables

 

Section 13(k) of the Exchange Act provides that it is unlawful for a company such as ours, which has a class of securities registered under Section 12(g) of the Exchange Act, to directly or indirectly, including through any subsidiary, extend or maintain credit in the form of a personal loan to or for any director or executive officer of the company. Issuers violating Section 13(k) of the Exchange Act may be subject to civil sanctions, including injunctive remedies and monetary penalties, as well as criminal sanctions. The imposition of any of such sanctions on the Company may have a material adverse effect on our business, financial position, results of operations or cash flows.

 
 

As of December 31, 2013, the indebtedness of the Company to its shareholders and related entities with common owners and directors was as follows:

 

During the periods presented, the Company has receivables due from its shareholders. The loans are unsecured and bear no interest. These loans have no fixed payment terms.

 

The loan to Tengfei Investment was to assist Tengfei Investment to purchase of a hotel building, the $778,843 was used as a down payment during 2012. For the period ended September 30, 2013, additional funding of $489,433 was made to complete improvements of the acquired building. We have agreement with Tengfei Investment shareholder to acquire the Tengfei Investment after successfully obtaining mortgage loan.  We are in the process to complete the agreement with Tengfei Investment. Upon completion of mortgage financing, the loan receivable will be transferred as the purchase price and we will assume the mortgage loan.

 

Note 6: Operating Risk

 

Foreign currency risk

 

Most of the transactions of the Company were settled in Renminbi. In the opinion of the management, the Company does not have significant foreign currency risk exposure.

 

Company’s operations are substantially in foreign countries

 

Substantially all of the Company’s operations are processed in China. The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in China. Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.

 

Note 7: Operating Lease

 

The Company’s commitments as of December 31, 2013 did not materially change from the amounts set forth in the Company’s 2012 Annual Report on Form 10-K.

 

Total rental expense on the operating lease amounted to $78,253for nine months ended December 31, 2013.

 

Note 8: Segments Reporting

 

The Company operates in two segments: travel agency (which provides packaged tours, air ticketing, reservation of hotel rooms and golf courses and organize corporate conferences, exhibitions and show events for its customers and travel agency) and hotel services.

 

We allocate resources to and assess the performance of the reportable segment using information about revenues and operating income (loss).  We do not evaluate operating segment using discrete assets information. We do not allocate gains and losses from interest and other income, or taxes to operating segments. The Corporate and other category includes expense and charges such as corporate costs, finance and legal and stock based compensation expenses.

 
 

There were no inter-segment sales for the nine months ended December 31, 2013 and 2012.

 

    Nine months ended   Net     Operating  
    December 31   sales     income (loss)  
Hotel Services   2013     84,686       7  
    2012     11,250       (155 )
                     
Travel Agency   2013     125,190       879  
    2012     37,181       (1,041 )
                     
Corporate   2013     —         (140,951 )
    2012     —         (224,581 )
                     
Total   2013     209,876       (140,065 )
    2012     48,431       (225,777 )

 

Note 9: Subsequent Event

 

The Company has evaluated subsequent events through the date the financial statements were available to be issued. No significant events occurred subsequent to the balance sheet date that would have a material impact on the consolidated financial statements.

 
 

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Special Note Regarding Forward-Looking Statements

 

This periodic report contains certain forward-looking statements with respect to the Plan of Operation provided below, including information regarding the Company’s financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities, and the plans and objectives of management. The statements made as part of the Plan of Operation that are not historical facts are hereby identified as “forward-looking statements.”

 

Management’s Discussion and Analysis or Plan of Operation

 

Overview

 

Asia Travel Corporation (formerly Realgold International, Inc.)  (the “Company” or “Asia Travel”)  was incorporated under the laws of the State of Arizona on November 14, 1994. On November 22, 1996, the Company reincorporated under the laws of the State of Nevada and effected a forward split of its common stock on a basis of approximately 242 shares of the Nevada corporation for each share of the Arizona corporation. The Company ceased to actively pursue its business operations relating to the publishing of interactive media software in July, 1999. On May 23, 2013, the Company filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada changing its name from Realgold International Inc. to Asia Travel Corporation.  During December 2011, the Company established a subsidiary in Hong Kong, Asia Travel (Hong Kong) Limited (formerly Realgold Venture Pte Limited) (“Asia Travel (Hong Kong)”).

 

On November 22, 2012, Asia Travel (Hong Kong) entered into a Lease Management Agreement (“Lease Management Agreement”) with Zhuhai Tengfei Investment Co., Ltd. (“Tengfei Investment”), a limited liability company formed under the laws of the People’s Republic of China (“China” or “PRC”). Under the Lease Management Agreement, Tengfei Investment leased the managerial and operating rights of Zhuhai Tengda International Travel Agency Co., Ltd. (“Tengda Travel”), a wholly owned subsidiary of Tengfei Investment, to Asia Travel (Hong Kong). The major terms of the Lease Management Agreement are:

 

(1) The term of the Lease Management Agreement is 20 years (November 2012 to November 2032).

 

(2) The total lease fee is RMB 2,000,000 Yuan (approximately $326,739) (RMB 100,000 Yuan per year).

 

(3) Asia Travel (Hong Kong) is responsible for all the daily operations and management of Tengda Travel.

 

(4) Asia Travel (Hong Kong) is entitled to all the revenues of Tengda Travel.

 

(5) Asia Travel (Hong Kong) is responsible for all the expenses and costs of Tengda Travel.

 

On November 25, 2012, Asia Travel (Hong Kong) entered into an Ownership Transfer Agreement (“Ownership Transfer Agreement’) with Tengfei Investment. Under the Ownership Transfer Agreement, Tengfei Investment transfers to Asia Travel (Hong Kong) 100% of the ownership of Zhuhai Tengda Business Hotel Co., Ltd. (“Tengda Hotel”) for a total transfer price of RMB 400,000 Yuan (approximately $65,348).

 

On November 29, 2012, the Bureau of Science and Technology Industry Trade and Information of Zhuhai City approved the ownership transfer of Tengda Hotel to Asia Travel (Hong Kong). On March 26, 2013, Guangdong Province Department of Foreign Trade and Economic Cooperation approved the transfer of ownership.

 

Upon the completion of the said ownership transfer, Tengda Hotel became the wholly owned subsidiary of Asia Travel (Hong Kong).

 

Tengda Travel is a travel agency located in Zhuhai, Guangdong Province, China. Through Tengda Travel, we provide packaged tour, air ticketing, reservation of hotel rooms and golf courses and organize corporate conferences, exhibitions and show events for our customers. Tengda Hotel operates a hotel (Tengda Business Hotel) in Zhuhai, Guangdong Province, China. Tengda Business Hotel was opened in late 2006. Tengda Hotel is a three-star hotel with 59 guest rooms, including 24 Standard Rooms, 24 Deluxe Rooms, 10 Business Rooms and 1 Luxury Suite, with many other amenities including fitness club, gym, business center, gift shop, meeting room , ballroom, game room, and a large parking lot.

 
 

In the nine months ended December 31, 2013, revenue from our Tengda Travel and Tengda Hotel represented 40.4% and 59.6% of our revenue, respectively. We do not have any operations other than acting as a holding entity during the nine months ended December 31, 2013.

 

Results of Operations and Business Outlook

 

Net sales for the three and nine ended December 31, 2013 were $97,418 and $209,876, respectively. Among this amount, $39,032 was generated from the Tengda Travel and $58,386 was generated from Tengda Hotel for the three months ended December 31, 2013; $84,686 was generated from the Tengda Travel and $125,190 was generated from Tengda Hotel for the nine months ended December 31, 2013.

 

Gross profit was $48,490 and $110,803 for three and nine months ended December 31, 2013, respectively. Gross profit margin in percentage for the three and nine months ended December 31, 2013 was 49.8% and 52.8%, respectively. Significant portions of our operating costs are from Tengda Travel, which are fixed costs.

 

Our operating expenses increased by $30,828 to $63,832 for the three months ended December 31, 2013 and increased by $11,903 to $250,949 for the nine months ended December 31, 2013. The increase in operating expenses in the nine months ended December 31, 2013 is mainly due to the consolidation of the financial results with Tengda Travel and Tengda Hotel after November 2012. Our operating expenses consist of general and administrative and selling expenses.

 

Net loss decreased by $4,402 to $15,333 for the three months ended December 31, 2013 from $19,735 for the corresponding period in 2012 and decreased by $85,712 to $140,065 for the nine months ended December 31 2013 from $225,777 for the corresponding period in 2012. Among this amount, net income of $521 was generated from the Tengda Travel and net loss of $3,553 from Tengda Hotel for the three months ended December 31, 2013, and Corporate loss of $20,137. For the nine months ended December 31,2013, net profit of $879 was generated from the Tengda Travel and net profit of $7 from Tengda Hotel, and Corporate loss of $140,951. The decrease in net loss is mainly due to an increase in revenue generated .

 

LIQUIDITY AND CAPITAL RESOURCES 

 

We financed our operations and expansion from cash flow from operations and contribution from our shareholders. The table below sets forth certain items on our balance sheet reflecting the changes to our financial condition as of December 31, 2013 from our financial condition as of March 31, 2013.

 

    As of December 31     As of March 31        
    2013     2013     Change  
Cash and cash equivalents   $ 16,315     $ 6,337       157.46 %
Other current assets     9,499       403       2,257.07 %
Related party receivable     1,299,334       809,901       60.43 %
Accrued expenses and other payables     21,341       5,237       307.50 %
Shareholders payable     18,715       14,805       26.41 %

 

Cash and cash equivalents was $16,315 as of December 31, 2013, an increase of 157.46% from $6,337 as of March 31, 2013. The increase was primarily due to the proceeds of $628,943 from investors for stock purchase, offsetting by advance to related party loan.

 

Management anticipates that the Company will incur more costs including legal and accounting fees to locate and complete a merger or acquisition. Management intends to provide loans or sell equity to cover the cost for the foreseeable future.

 

Critical Accounting Policies and Estimates

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted

 
 

accounting principles (“U.S. GAAP”). Our significant accounting policies are discussed in Note 2 “Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in our 2012 Annual Report on Form 10-K for the year ended March 31, 2013, as filed with the U.S. Securities and Exchange Commission (“SEC”) on July 12, 2013.  During the nine months ended December 31, 2013 the Company did not change any of its critical accounting policies or estimates.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 3: Quantitative and Qualitative Disclosures About Market Risk.

 

N/A-Smaller Reporting Company 

 
 

Item 4: Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, consisting of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. We believe our controls do provide reasonable assurances.

 

We may have inadvertently violated Section 402 of the Sarbanes-Oxley and Section 13(k) of the Exchange Act and may be subject to sanctions for such violations.

 

Section 13(k) of the Exchange Act provides that it is unlawful for a company such as ours, which has a class of securities registered under Section 12(g) of the Exchange Act, to directly or indirectly, including through any subsidiary, extend or maintain credit in the form of a personal loan to or for any director or executive officer of the company. Issuers violating Section 13(k) of the Exchange Act may be subject to civil sanctions, including injunctive remedies and monetary penalties, as well as criminal sanctions. The imposition of any of such sanctions on the Company may have a material adverse effect on our business, financial position, results of operations or cash flows.

 

On November 25, 2012, Asia Travel (Hong Kong) entered into an Ownership Transfer Agreement with Tengfei Investment. Under the Ownership Transfer Agreement, Tengfei Investment transfers to Asia Travel (Hong Kong) 100% of the ownership of Zhuhai Tengda Business Hotel Co., Ltd. (“Tengda Hotel”) for a total transfer price of RMB 400,000 Yuan (approximately $65,348). The director of the Company loaned RMB 400,000 Yuan to Asia Travel (Hong Kong) for the purpose of the purchase. This loan was offset by the receivables from this director.  The loans are unsecured and bear no interest. These loans have no fixed payment terms.

 

As of December 31, 2013, the indebtedness of the Company to its shareholders and related entities with common owners and directors was as follows:

 

During the periods presented, the Company has receivables due from its shareholders. The loans are unsecured and bear no interest. These loans have no fixed payment terms.

 

The loan to Tengfei Investment was to assist Tengfei Investment to purchase a hotel building, the $778,843 was used as a down payment during 2012. For the period ended September 30, 2013, additional funding of $489,433 was made to complete improvements of the acquired building. We have agreement with Tengfei Investment shareholder to acquire the Tengfei Investment after successfully obtaining mortgage loan. We are in the process to complete the agreement with Tengfei Investment. Upon completion of mortgage financing, the loan receivable will be transferred as the purchase price and we will assume the mortgage loan.

 

The existence of indebtedness of the Company’s Director to the Company at the time we acquired Tengda Hotel and the continuation of such indebtedness thereafter may constitute a violation of Section 13(k) of the Exchange Act and Section 402(a) of Sarbanes-Oxley.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of

 
 

financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

 

Changes in internal control over financial reporting

 

There have been no changes in internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1: Legal Proceedings

 

None

 

ITEM 1A: Risk Factors

 

N/A-Smaller Reporting Company 

 
 

ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds

 

On July 22, 2013, the Company entered into a Regulation S Stock Purchase Agreement (“Agreement”) with a group of 34 non-US individual purchasers (“Purchasers”). Under the Agreement, the Company will issue a total of 125,788,400 shares of common stock to Purchasers for a total price of $628,943 ($0.005 per share). The issuance of the 125,788,400 shares is pursuant to the exemption provided by Regulation S. None of the Purchasers is a US person and the transactions underlying the Agreement are carried out outside US.  

 

Use of Proceeds of Registered Securities

 

None; not applicable.

 

Purchases of Equity Securities by Us and Affiliated Purchasers

 

During the nine months ended December 31, 2013 we have not purchased any equity securities.

 

ITEM 3: Defaults Upon Senior Securities

 

We are not aware of any defaults upon senior securities.

 

ITEM 4: Mine Safety Disclosures

 

None

 

ITEM 5: Other Information

 

None

 

ITEM 6: Exhibits

 

a) Index of Exhibits:

 

Exhibit Table #   Title of Document Location
     
3 (i)   Articles of Incorporation Incorporated by reference*
     
3 (ii)   Bylaws Incorporated by reference*
     
4   Specimen Stock Certificate Incorporated by reference*
     
31   Rule 13a-14(a)/15d-14a(a) Certification – CEO & CFO This filing
     
32   Section 1350 Certification – CEO & CFO This filing
     
101   INS XBRL Instance
     
101   XSD XBRL Schema
     
101   CAL XBRL Calculation
     
101   DEF XBRL Definition
     
101   LAB XBRL Label
     
101   PRE XBRL Presentation

 

* Incorporated by reference from the Company’s registration statement on Form 10-SB filed with the Commission, SEC File No. 000-21909.
 
 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Asia Travel Corporation

(Registrant)

 

Dated: February 10, 2014

 

By:  /s/ Tan Lung Lai
  Tan Lung Lai
  Chief Executive Officer
Chief Financial Officer