# RTB Digital, Inc.: Form 10-Q for the period ended Sep 30, 2014

- Company: [RTB Digital, Inc.](/companies/rtb.md) (CIK 1419275)
- Form: 10-Q
- Filed: 2014-11-14
- Accepted by EDGAR: Nov 14, 2014, 15:17 ET
- Period: 2014-09-30
- Accession: 0001185185-14-003113
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1419275/000118518514003113/asapexpo10q093014.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1419275/000118518514003113/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2014-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2014-07-01 to 2014-09-30 | $412.5k | us-gaap:Revenues |
| Revenue | 9 months, 2014-01-01 to 2014-09-30 | $1.3m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2014-07-01 to 2014-09-30 | $166.5k | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2014-01-01 to 2014-09-30 | $615.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2014-07-01 to 2014-09-30 | $246.0k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2014-01-01 to 2014-09-30 | $679.6k | us-gaap:GrossProfit |
| Operating income | 3 months, 2014-07-01 to 2014-09-30 | $180.7k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2014-01-01 to 2014-09-30 | $377.3k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2014-07-01 to 2014-09-30 | $7.4k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2014-01-01 to 2014-09-30 | $22.8k | us-gaap:InterestExpense |
| Income tax | 3 months, 2014-07-01 to 2014-09-30 | $42.5k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2014-01-01 to 2014-09-30 | $162.3k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2014-07-01 to 2014-09-30 | $130.9k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2014-01-01 to 2014-09-30 | $192.2k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2014-07-01 to 2014-09-30 | $0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2014-01-01 to 2014-09-30 | $0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2014-07-01 to 2014-09-30 | $0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2014-01-01 to 2014-09-30 | $0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2014-07-01 to 2014-09-30 | 25,421,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2014-01-01 to 2014-09-30 | 25,421,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2014-01-01 to 2014-09-30 | $330.9k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2014-01-01 to 2014-09-30 | $14.8k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2014-09-30 | $66.9k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2014-09-30 | $111.0k | us-gaap:AssetsCurrent |
| Total assets | at 2014-09-30 | $143.1k | us-gaap:Assets |
| Current liabilities | at 2014-09-30 | $467.0k | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2014-09-30 | $13.5k | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2014-09-30 | $4.9k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2014-09-30 | −$776.4k | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 16,482 characters.

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

### OVERVIEW

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

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

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

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

### RESULTS OF OPERATIONS

### Revenues

Since the Company’s primary business is based upon potential transactions in real estate, the Company is subject to variance in revenues due to investors sentiment towards real estate.

We believe our services revenue is typically seasonal. Historically, during normal economic conditions, this seasonality has caused revenue, operating income, net income and cash flows from operating activities to be lower in the first six months of the year and higher in the second half of the year. We believe the concentration of earnings and cash flows in the last six months of the year has historically been due to an industry-wide focus of clients to complete transactions towards the end of the calendar year. However, this seasonality did not occur in 2007 or 2008 during the disruptions facing all global capital markets, and in particular the U.S. commercial real estate markets, and this historical pattern of seasonality may or may not continue.

Substantially all of our revenues are in the form of consulting fees collected from our clients, usually negotiated on a transaction-by-transaction basis. The company’s consulting fees primarily consist of revenue derived from transaction commission received from acquisition advisory. The company earns the consulting fees by sourcing the deal, underwriting financials, coordinating due diligence on all contracts, recommending lenders, hiring third party property management companies, and negotiating franchise agreements. Another revenue source for the company includes asset management fees, which consist of supervision of daily, weekly, and monthly operating results of the hotel, review of capital expenditure requests, communication with lenders, negotiating personal and real property tax assessments, and most importantly, oversight on brand relations.

The Company’s clients include concentration of 3 main clients. Our concentration of clients does provide a risk for revenue growth. The Company has established strong relationships with our clients. Our business and client relationships, and our culture and philosophy are firmly centered on putting the clients’ interests first. We have been building strong reputation in the hospitality industry which is bringing several new potential clients. We expect to have steady revenue stream from our 3 major clients while building new client base for future revenue growth. We believe that our product offerings, asset management services, client diversification, expertise in a property types and national platform have the potential to create a sustainable revenue stream within the U.S. commercial real estate sector.

During the three and nine months ended September 30, 2014, the Company earned consulting fee of $365,032 and $1,246,532, respectively, as compared to consulting fee of $840,000 and $1,447,962 for the same periods last year. The decrease in consulting fee is mainly because the Company closed hotel acquisition deals at lower fees in the quarter and nine months ended September 30, 2014. During the three and nine months ended September 30, 2014, the Company earned commission income of $47,500 and $48,125, respectively, as compared to commission income of $0 and $967 for the same periods last year. The increase in commission income is mainly due to a real estate deal closed in July 2014. During the three and nine months ended September 30, 2014, the Company earned management fee of $0 as compared to management fee of $15,000 for the same periods last year from providing hotel management service.

### Cost of Sales

In the course of providing real estate advisory services and asset management services, the Company pays consulting fees for finding properties and other services that facilitate the closing of deals.

Cost of sales consisting mainly consulting expense, is primarily the result of the commissions and other incentive compensation incurred directly related to acquisition advisory services. Therefore, the fluctuation in revenue will directly impact the cost of sales.

For the three and nine months ended September 30, 2014 and 2013, the Company incurred consulting expense of $166,525 and $615,025, respectively for providing advisory services in real estate acquisition deals as compared to $406,000 and $629,800 incurred in the same periods last year. The lower consulting expense in 2014 was mainly due to the lower consulting fees charged to the clients..

### Operating Expenses

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

For the three months ended September 30, 2014, general and administrative expenses increased by $19,585 or 42.9% to $65,271 as compared to $45,686 for the same period last year. The increase in the third quarter of 2014 was mainly due to higher ad and promotion expense, higher office expense resulting from moving office and higher professional fees. For the nine months ended September 30, 2014, general and administrative expenses increased by $214,209 or 243% to $302,300 as compared to $88,091 for the same period last year. The increase in the first nine months of 2014 was primarily due to higher personnel costs as the Company hired new employees and put certain officer on payroll starting in September 2013.

### Interest Expense

Interest expense decreased to $7,376 during the three months ended September 30, 2014 from $16,875 for the same period last year, and decreased to $22,846 in the nine months ended September 30, 2014 from $59,153 for the same period last year. This decrease was due to the lower average convertible note balances. The conversion of $200,000 convertible note into common stocks in July 2013 also contributed to the decrease in average convertible note balances.

### Net Income

The Company recorded a net income of $130,883 for the three months ended September 30, 2014 as compared to a net income of $340,818 for the same period last year. The decrease in net income was mainly due to the lower gross profit, higher G&A expenses, offset by lower interest expense and income tax provision.

The Company had a net income of $192,156 for the nine months ended September 30, 2014 as compared to a net income of $641,264 for the same period last year. The decrease in net income was mainly due to lower gross profit, higher G&A expenses, higher income tax provision as a result of no more net operating loss carryforward and including prior year under-accrued income tax in current period, offset by lower interest expense.

### LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital deficit was $356,059 at September 30, 2014, as compared to a working capital deficit of $296,543 at December 31, 2013. During the next twelve months, ASAP Expo will focus on its real estate transactions to generate additional revenue. With the net revenue from its services, and continuing support from its major shareholders to provide a convertible note, management believes ASAP Expo will have enough net working capital to sustain its business for another 12 months.

The Company has a convertible note (the "Yuan Note") from Frank Yuan and his family, which is due on demand, and provides for borrowings up to a maximum total of $1,800,000. The Yuan Note carries an interest rate of 6.0% per annum and is convertible into the Company's equity securities at a conversion price of $0.04 given a written notice of the contemplated conversion describing in reasonable detail the material terms of such equity securities and of the issue is provided. The total balance as of September 30, 2014 was $439,025, and the accrued interest was $264,728.

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

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

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

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

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

### CRITICAL ACCOUNTING POLICIES

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

### Revenue Recognition

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

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

### Income Taxes

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

### RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers **(ASU2014-09),** which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of **ASU2014-09** is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. **ASU2014-09** defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting **ASU2014-09** recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (ASU 2014-15). The guidance in ASU 2014-15 sets forth management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management's plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements

## Market risk

As filed, 3,621 characters.

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls and procedures include components of our internal control over financial reporting and, as such, are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Management’s assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met (see the section below in this Item 3 entitled *Limitations on the Effectiveness of Internal Controls).*

### Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) that occurred during the period covered by this Report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls 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, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Filed Nov 14, 2014.
Source: SEC EDGAR, the filing index for accession 0001185185-14-003113. Last ingested by Listed: Nov 4, 2026, 18:58 ET. No prices; not investment advice.