SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 2054

FORM 10-Q

 

(Mark One)

 

x

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

 

For the quarterly period ended June 30, 2015

 

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                       to

 

Commission file number                                          000-55068

 

HEYU LEISURE HOLIDAYS CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware	46-3601223
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

 

Westwood Business Center

611 South Main Street

Grapevine, Texas 76051

(Address of principal executive offices) (zip code)

 

(+86)592 504 9622

(Registrant's telephone number, including area code)

 

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 preceding 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 ¨

 

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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	Accelerated Filer
Non-accelerated filer	Smaller reporting company  x
(do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes x No ¨

 

Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date.

 

Class	Outstanding at August 19, 2015
Common Stock, par value $0.0001	60,001,000
Documents incorporated by reference:	None

 

 

FINANCIAL STATEMENTS

HEYU LEISURE HOLIDAYS CORPORATION

 

For the quarterly period ended June 30, 2015

 

		Page
FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets as of June 30, 2015 (unaudited) and  December 31, 2014		3
Consolidated Condensed Statements of Operations for the Three and Six Months Ended June 30, 2015 and June 30, 2014 (unaudited)		4
Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2015 and June 30, 2014 (unaudited)		5
Notes to Condensed Consolidated Financial Statements (unaudited)		6

 

 

HEYU LEISURE HOLIDAYS CORPORATION

 

Condensed Consolidated Balance Sheets

 

		June 30,				December 31,
		2015				2014
		(Unaudited)
ASSETS
Current assets
Cash		$	4,802			$	61,654
Account receivable, net			9,198				2,790
Prepayment			2,897				46,611
Inventory			2,062				1,841
Amount due from related parties			57,336				123,812
Total current assets			76,295				236,708
Other assets
Deposit, non-current - related party			22,459				23,951
Prepayment			936				1,967
Property and leasehold improvements, net			366,079				427,119
Intangible asset			5,963				6,353
Total non-current assets			395,437				459,390
Total assets			471,732				696,098
LIABILITIES AND STOCKHOLDERS' (DEFICIT)/ EQUITY
Current liabilities
Account payable			21,621				47,107
Amount due to related parties			880,131				515,980
Other payables and accruals			55,401				-
Tax payable			32,871				29,627
Total liabilities			990,024				592,714
Stockholders' equity (deficit)
Preferred stock, $0.0001 par value, 20,000,000 shares authorized;  none issued and outstanding
Common stock, $0.0001 par value,  100,000,000 shares authorized; 60,001,000 and 60,000,000 shares issued and outstanding as of June 30,2015 and  December 31, 2014, respectively.			6,000				6,000
Additional paid-in capital			5,098,747				5,098,747
Accumulated deficit			(5,635,350	)			(5,012,024	)
Accumulated other comprehensive income			12,311				10,661
Total stockholders' (deficit)/ equity			(518,292	)			103,384
Total liabilities and stockholders' (deficit)/ equity		$	471,732			$	696,098

 

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Condensed Consolidated Statements of Operations
(unaudited)

 

		For the three months ended								For the six months ended
		June, 30 2015				June, 30 2014				June, 30 2015				June, 30 2014
Reveue		$	79,595			$	72,170			$	144,869			$	123,508
Cost of revenue			128,744				110,399				250,071				198,362
Gross Loss			(49,149	)			(38,229	)			(105,202	)			(74,854	)
Operating costs and expenses:
Selling expenses			1,962				8,543				3,223				10,966
Operating expenses			293,679				256,093				514,886				2,028,919
Finance expenses			627				509				15				517
Loss before income taxes			(345,417	)			(303,374	)			(623,326	)			(2,115,256	)
Income tax			-				-				-				-
Net loss			(345,417	)			(303,374	)			(623,326	)			(2,115,256	)
Other comprehensive income
Foreign currency translation adjustments			3,260				8,021				1,650				7,248
Comprehensive income		$	(342,157	)		$	(295,353	)		$	(621,676	)		$	(2,108,008	)
Loss per share-basic and diluted		$	(0.01	)		$	(0.00	)		$	(0.01	)		$	(0.04	)
Weighted average shares-basic and diluted			60,001,000				60,000,000				60,001,000				60,000,000

 

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Condensed Consolidated Statement of Cash Flows

(Unaudited)

 

		For the six months ended June 30, 2015				For the six months ended June 30, 2014
Operating activities
Net loss		$	(623,326	)		$	(2,115,256	)
Adjustment to reconcile net loss to net cash (used in) operating activities:
Depreciation and amortization			71,271				39,771
Changes in operating assets and liabilities:
Account receivable			(6,373	)			(17,256	)
Inventory			(209	)			1,406
Prepaid expense and prepaid rent			44,919				46,100
Account payable			(20,372	)			8,129
Other payables			41,432				1,120
Net cash (used in) operating activities			(492,658	)			(2,035,986	)
Investing activities:
Purchase of leasehold improvement			-				(1,693	)
Purchase of property and equipment			(7,376	)			(47,792	)
Amount due from a related party			46,543				(64,186	)
Purchase of Wujiaer hotel, net of cash acquired			-				(557,233	)
Net cash provided by (used in) investing activities			39,167				(670,904	)
Financing activities
Amount due to a related party			396,521				(114,678	)
Proceeds from issuance of common stock			-				100
Redemption of common stock			-				(2,000	)
Shareholder contribution			-				2,696,004
Net cash flows provided by financing activities			396,521				2,579,426
Effect of exchange rate changes on cash and cash equivalent			118				8,689
Net decrease in cash			(56,852	)			(118,775	)
Cash at the beginning of the year			61,654				454,723
Cash at the end of the year			4,802				335,948

 

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

NOTE 1

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

NATURE OF OPERATIONS

 

Heyu Leisure Holidays Corporation ("Heyu Leisure" or "the Company") was incorporated on July 9, 2013 under the laws of the state of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company will attempt to locate and negotiate with a business entity for the combination of that target company with Heyu Leisure Holidays Corporation. The combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. In most instances the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. The Company has been formed to provide a method for a foreign or domestic private company to become a reporting company with a class of securities registered under the Securities Exchange Act of 1934.

 

On February 9, 2015, Heyu Leisure Holiday Corp. (“Heyu Leisure” or the “Company” or the “Registrant”) merged with Heyu Capital Ltd (“Heyu Capital”), a corporation existing under the laws of Hong Kong (Special Administrative Region of the PRC). Pursuant to the merger, the Registrant acquired all of the outstanding common shares of Heyu Capital through the issuance of common shares of the Registrant to the shareholders of Heyu Capital.

 

As a result of the Merger and pursuant to the Resolution, Heyu Capital has become a wholly-owned subsidiary of the Registrant and the Registrant issued shares of its common stock to shareholders of Heyu Capital at a rate of 1,000 shares of the Registrant’s common stock for all Heyu Capital common share. Immediately prior to the Merger, the Registrant had 60,000,000 shares of common stock outstanding.

 

Following the Merger, the Registrant has 60,001,000 shares of common stock outstanding after the share exchange and the issuance of 1,000 common shares to the shareholder of Heyu Capital.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

The transaction has been accounted for as a business combination under a method similar to the pooling-of-interest method ("Pooling-of-Interest") as the Registrant and Heyu Capital are both under common control with by our majority shareholder In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, We evaluate each investment in a business to determine if we should account for the investment as a cost-basis investment, an equity investment, a business combination or a common control transaction. An investment in which we do not have a controlling interest and which we are not the primary beneficiary but where we have the ability to exert significant influence is accounted for under the equity method of accounting. For those investments that we account for in accordance ASC 805, Business Combinations, we record the assets acquired and liabilities assumed at our estimate of their fair values on the date of the business combination. Our assessment of the estimated fair value of each of these can have a material effect on our reported results as intangible assets are amortized over various lives. Furthermore, a change in the estimated fair value of an asset or liability often has a direct impact on the amount to recognize as goodwill, which is not amortized. Often determining the fair value of these assets and liabilities assumed requires an assessment of the expected use of the asset, the expected cost to extinguish a liability or our expectations related to the timing and the successful completion of the integration of the business. Such estimates are inherently difficult and subjective and can have a material impact on our financial statements.

 

The operating entity- Wujiaer Hotel Co., Ltd (“Wujiaer”) has been acquired via Xiamen Heyu Hotel Management Co (“Xiamen Heyu”) on January 25, 2014. As a result of the acquisition, Xiamen Heyu has become its immediate holding company, Heyu Capital becomes its intermediate holding company and the Registrant has become an ultimate holding company of Wujiaer.

 

ORGANIZATIONAL STRUCTURE

 

The following diagram illustrates our corporate and ownership structure, the place of formation and the ownership interests of our subsidiaries as of June 30, 2015 after the acquisition.

 

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying unaudited financial statements include all adjustments, composed of normal recurring adjustments, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the period ended December 31, 2014 as filed with the SEC.

 

BASIS OF CONSOLIDATION

 

The consolidated financial statements include the financial statements of our company and its subsidiaries. All significant transactions and balances between our company and its subsidiaries have been eliminated upon consolidation.

 

A subsidiary is an entity in which our company, directly or indirectly, controls more than one half of the voting power, has the power to appoint or remove the majority of the members of the board of directors, and has the power to cast a majority of votes at meetings of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.

 

ASC 810 “Consolidation”, which provides guidance on the identification of and financial reporting for entities over which control is achieved through means other than voting interests, requires certain variable interest entities to be consolidated by the primary beneficiary of the entity.

 

The Group evaluate our business relationships such as those with franchisees to identify potential variable interest entities. Generally, these businesses qualify for the business scope exception under the consolidation guidance. Therefore, we have concluded that consolidation of any such entities is not appropriate for the periods.

 

BUSINESS COMBINATIONS

 

U.S. GAAP requires that business combinations be accounted for under the acquisition purchase method. From January 1, 2009, the Group adopted ASC 805 “Business Combinations”. Following this adoption, the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total of cost of acquisition, the fair value of the non-controlling interests and the acquisition date fair value of any previously held equity interest in the acquired over (ii) the fair value of the identifiable net assets of the acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the entity acquired, the difference is recognized directly in the statements of operations. 

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed are based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections and the assumptions and estimates used to determine the cash inflows and outflows. Management determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Terminal values are based on the expected life of assets and forecasted life cycle and forecasted cash flows over that period. Although the Group believe that the assumptions applied in the determinations that the Group have made are reasonable based on information available at the date of acquisition, actual results may differ from the forecasted amounts and the difference could be material.

 

USE OF ESTIMATES

 

The preparation of condensed unaudited consolidated financial statements in conformity with 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. Actual results could differ from those estimates.

 

REVENUE RECOGNITION

 

Revenue from leased hotel is derived from hotel operations, mainly including the rental of rooms, food and beverages sales from leased hotels. Revenue is recognised when rooms are occupied and food and beverage are sold. Persuasive evidence of an arrangement, fixed price, and service delivered and collection reasonably assured.

 

ACCOUNT RECEIVABLE, NET

 

Accounts receivables mainly consist of amounts due from corporate customers, travel agents, hotel guests and credit card receivables, which are recognized and carried at the original invoice amount less an allowance for doubtful accounts. The Group establishes an allowance for doubtful accounts primarily based on the age of the receivables and factors surrounding the credit risk of specific customers.

 

INVENTORIES

 

Inventories mainly consist of food and beverages, small appliances, bedding and daily consumables. Small appliances, bedding and daily consumables replacement are expensed when used.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

PROPERTY AND LEASEHOLD IMPROVEMENTS, NET

 

Property and leasehold improvements, net are stated at cost less accumulated depreciation and amortization. The renovations, betterments and related expenses incurred during the construction are capitalized. Depreciation and amortization of property and equipment is provided using the straight line method over their expected useful lives. The expected useful lives are as follows:

 

Leasehold improvements	5-10 years
Furniture, fixtures and equipment	3-5 years

 

Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use. The useful live for leasehold improvement is shorter of the term of the lease or the estimated useful lives of the assets.

 

IMPAIRMENT OF LONG-LIVED ASSETS

 

The Group evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When these events occur, the Group measures impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss equal to the difference between the carrying amount and fair value of these assets.

 

BUSINESS TAX AND RELATED TAXES

 

The Group is subject to business tax, education surtax and urban maintenance and construction tax on the services provided in the PRC. Such taxes are primarily levied based on revenue at applicable rates and are recorded as a reduction of revenue.

 

INCOME TAX

 

The Group has implemented certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertain tax positions, as defined. ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. The Group adopted the provisions of ASC 740 and have analyzed filing positions in each PRC jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. The Group has identified the PRC as our “major” tax jurisdiction. Generally, the Group remains subject to PRC examination of our income tax returns annually.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

The Group believes that our income tax positions and deductions will be sustained by an audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, the Group did not record a cumulative effect adjustment, related to the adoption of ASC 740. Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes.

 

LEASE

 

A lease of which substantially all the benefits and risks incidental to ownership remain with the lessor is classified as an operating lease. The Group is currently classified it as operating lease.

 

CONCENTRATION OF RISK

 

Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash and accounts receivable. The Group places its cash with high quality banking institutions. The Group didn’t have cash balances in excess of the Federal Deposit Insurance Corporation limit as of June 30, 2015 and December 31, 2014 respectively. And the Group periodically evaluates the creditworthiness of the existing customers in determining an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.

 

FAIR VALUE

 

The Group follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group has the ability to access at the measurement date.

 

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

Level 3 inputs are unobservable inputs for the asset or liability.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

The Group monitors the market conditions and evaluates the fair value hierarchy levels at least quarterly. For any transfers in and out of the levels of the fair value hierarchy, the Group elects to disclose the fair value measurement at the beginning of the reporting period during which the transfer occurred.

 

FOREGIN CURRENCY TRANSLATION

 

The functional and reporting currency of the Company is the United States dollar ("U.S. dollar"). The financial records of the Company located in the Hong Kong and PRC are maintained in their local currency, the Renminbi ("RMB") and Hong Kong Dollar (“HKD”), which are the functional currency of these entities.

 

Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. Revenues, expenses, gains and losses are translated using the average rate for the year. Retained earnings and equity are translated using the historical rate. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income.

 

COMPREHENSIVE LOSS

 

Comprehensive loss is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive Income requires that all items are required to be recognized under current accounting standards as components of comprehensive loss are reported in a financial statement that is displayed with the same prominence as other financial statements. For the periods presented, the Group’s comprehensive loss includes net loss and foreign currency translation adjustments and is presented in the statements of operations and comprehensive loss.

 

CONCENTRATION OF RISK

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of June 30, 2015 and December 31, 2014 respectively.

 

ACQUISITION OF BUSINESS

 

Acquisition of interest in Heyu Capital Limited

 

Pursuant to a Sale and Purchase Agreement dated February 9, 2015 between the Company and Ang Ban Siong, the Company issued shares of its common stock to shareholder of Heyu Capital at a rate of 1,000 shares of the Company’s common stock for 100% of the equity of Heyu Capital Limited.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

The transaction has been accounted for as a business combination under a method similar to the pooling-of-interest method ("Pooling-of-Interest") as the Registrant and Heyu Capital are both under common control with by our majority shareholder In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, We evaluate each investment in a business to determine if we should account for the investment as a cost-basis investment, an equity investment, a business combination or a common control transaction. An investment in which we do not have a controlling interest and which we are not the primary beneficiary but where we have the ability to exert significant influence is accounted for under the equity method of accounting. For those investments that we account for in accordance ASC 805, Business Combinations, we record the assets acquired and liabilities assumed at our estimate of their fair values on the date of the business combination. Our assessment of the estimated fair value of each of these can have a material effect on our reported results as intangible assets are amortized over various lives. Furthermore, a change in the estimated fair value of an asset or liability often has a direct impact on the amount to recognize as goodwill, which is not amortized. Often determining the fair value of these assets and liabilities assumed requires an assessment of the expected use of the asset, the expected cost to extinguish a liability or our expectations related to the timing and the successful completion of the integration of the business. Such estimates are inherently difficult and subjective and can have a material impact on our financial statements.

 

The operating entity- Wujiaer Hotel Co., Ltd (“Wujiaer”) has been acquired via Xiamen Heyu Hotel Management Co (“Xiamen Heyu”) on January 25, 2014. As a result of the acquisition, Xiamen Heyu has become its immediate holding company, Heyu Capital becomes its intermediate holding company and the Registrant has become an ultimate holding company of Wujiaer.

 

Acquisition of interest in Wujiaer Hotel Co Ltd through Xiamen Heyu Hotel Management Co Ltd

 

Pursuant to a Sale and Purchase Agreement dated January 25, 2014 between the Xiamen Heyu Hotel Management Co Ltd and Lv Dun Zhi, the Company acquired 100% of the equity interests in Wujiaer Hotel Co Ltd with the total purchase price of $622,379 in cash. The fair value of the acquired entity was of $ 622,379.

 

The transaction was considered as a business acquisition and accordingly the acquisition method of accounting has been applied. The acquired net assets were recorded at their estimated fair values on the acquisition date. The acquired goodwill is not deductible for tax purposes.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

The purchase price was allocated as follows:

 

Cash acquired		$	21,346
Other current assets			65,922
Property and equipment			449,817
Other Non-current assets			41,815
Intangible assets			7,251
Current liabilities			(206,560	)
Tax liabilities			(21,303	)
Goodwill			264,091
Total			622,379
Represented by:
Cash Consideration		$	622,379

 

The following unaudited pro forma information summarizes the results of operations for the twelve months ended December 31, 2014 of the Group as if the acquisition had occurred on January 1, 2014. The following pro forma financial information is not necessarily indicative of the results that would have occurred had the acquisition been completed at the beginning of the period indicated, nor is it indicative of future operating results:

 

		For the twelve Months
		ended December, 31
		2014
		(unaudited)
Pro forma revenues		$	(326,942	)
Pro forma net loss		$	(3,069,912	)

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

NOTE 2- PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consist of the following:

 

		As of June 30, 2015				As of December 31, 2014
Cost:
Leasehold improvement		$	502,265			$	499,225
Furniture, fixtures and equipment			151,998				143,727
			654,263				642,952
Less: Accumulated depreciation			(288,184	)			(215,833	)
		$	366,079			$	427,119

 

Depreciation expense was $39,771 and $71,271 for the period ended June 30, 2014 and June 30, 2015, respectively.

 

NOTE 3 -DEPOSIT, NON-CURRENT - RELATED PARTY

 

		As of June 30, 2015				As of December 31, 2014
Deposit for lease of the hotel building		$	22,459			$	23,951

  

The deposit is made to shareholder for the lease of the hotel building. The deposit is refundable upon the lease expiring on September 30, 2025.

 

The long term deposits are not within the scope of the accounting guidance regarding interests on receivables and payables, because they are intended to provide security for the counterparty to the office rental agreements. Therefore, the deposits are recorded at costs.

 

NOTE 4-INCOME TAX PAYABLE

 

United States

Heyu Leisure Holidays Corporation is incorporated in United States, and is subject to corporate income tax rate of 34%. As of June 30, 2015, the company has net operating losses of approximately $81,473 that begin expiring in 2031. The potential benefit of the company’s net operating losses has not been recognised in these financial statements because the company cannot be assured it is more likely-than-not it will utilize the net operating losses carried forward.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

Hong Kong

Heyu Capital Limited is subject to Hong Kong profit tax at a rate of 16.5% in 2013 and 2014. No Hong Kong profit tax has been provided as the Group has not had assessable profit that was earned in or derived from Hong Kong during the period presented. As of June 30, 2015, HK entity has net operating losses of approximately $4,447,291. Valuation allowance has been fully provided since it is more likely-than-not it will not utilize the net operating losses carried forward as it does not expect to generate sufficient taxable income in future or the amount involved is not significant.

 

China

Under the Law of People’s Republic of China on Enterprise Income Tax (“EIT Law”), which was effective from January 1, 2008, domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. As of June 30, 2015, the PRC entities have net operating losses of approximately $888,464 that begin expiring in 2018. The potential benefit of the company’s net operating losses has not been recognized in these financial statements because it is more likely-than-not it will not utilize the net operating losses carried forward as it does not expect to generate sufficient taxable income in future or the amount involved is not significant

 

		June 30, 2015				December 31, 2014
Deferred Tax Assets and Liabilities:
Net operating loss carry forwards		$	983,870			$	829,153
Valuation allowance			(983,870	)			(829,153	)
Net deferred tax assets		$	-			$	-

 

The Taxes payable was $29,627 and $32,871 as of December 31, 2014 and June 30, 2015:

 

		As at June 30, 2015				As at December 31, 2014
Business tax payable		$	21,621			$	19,126
Urban Construction tax payable			1,513				1,338
Others			9,737				9,163
		$	32,871			$	29,627

 

NOTE 5- COMMITTMENT

 

Operating lease commitment

 

The Group has entered into lease agreement for a leased hotel which it operates. Such lease is classified as operating lease.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

Future minimum lease payments under non-cancellable lease agreement as follow:

 

Year:
2016		$	271,812
2017			291,701
2018			291,701
2019			299,003
2020 and after			1,941,332
		$	3,095,577

 

Under the lease arrangements, the Group pay rent on a quarterly basis.

 

NOTE 6-LOSS PER COMMON SHARE

 

Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. As of June 30, 2015 and December 31, 2014, there are no outstanding dilutive securities.

 

NOTE 7 - GOING CONCERN

 

The Group has sustained operating losses of $5,635,350 since inception. The Group’s continuation as a going concern is dependent on management’s ability to develop profitable operations, and / or obtain additional financing from its stockholders and / or other third parties.

 

The accompanying financial statements have been prepared assuming that the Group will continue as a going concern; however, the above conditions raise substantial doubt about the Group’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Group be unable to continue as a going concern.

 

If management projections are not met, the Group may have to reduce its operating expenses and to seek additional funding through debt and/or equity offerings.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

  

NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS

 

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company adopted ASU 2014-10 during the quarter ended June 30, 2014, thereby no longer presenting or disclosing any information required by Topic 915.

 

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), which requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year of the date the financial statements are issued and to provide related disclosures, if required. ASU 2014-15 is effective for the Company for our fiscal year ending October 31, 2017. Early adoption is permitted. The company adopted this pronouncement which did not have a significant impact on its consolidated financial statements.

 

In February 2015, the FASB issued Accounting Standards Update No. 2015-02 (ASU 2015-02) "Consolidation (Topic 810): Amendments to the Consolidation Analysis." ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We are currently in the process of evaluating the impact of the adoption of ASU 2015-02 on our consolidated financial statements.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States 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.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

  

NOTE 10 STOCKHOLDER'S EQUITY

 

The Company is authorized to issue 100,000,000 shares of common stock and 20,000,000 shares of preferred stock.

 

In July, 2013, the Company issued 20,000,000 common shares to two directors and officers for an aggregated amount of $2,000 in cash.

 

On January 13, 2014, the following events occurred which resulted in a change of control of the Company:

 

The Company redeemed an aggregate of 20,000,000 of the then 20,000,000 shares of outstanding stock at a redemption price of $.0001 per share for an aggregate redemption price of $2,000.

 

James Cassidy and James McKillop, both directors of the Company and the then president and vice president, respectively, resigned such directorships and all offices of the Company. Neither Messrs. Cassidy nor McKillop retain any shares of the Company's common stock.

 

Ban Siong Ang was named as Sole Director of the Company and serves as its Chief Executive Officer. On January 14, 2014, the Company issued 1,000,000 shares of its common stock at par representing 100% of the then total outstanding 1,000,000 shares of common stock.

 

On August 8, 2014, the Company issued additional 59,000,000 shares of its common stock at par value for an aggregated amount of $5,900 in cash. Accordingly, the total outstanding of common stock is 60,000,000 shares as at September 30, 2014. These securities cannot be sold, transferred or otherwise disposed of by any investor to any other person or entity unless subsequently registered under the Securities Act of 1933, as amended, and under applicable law of the state or jurisdiction where sold, transferred or disposed of, unless such sale, transfer or disposition shall qualify under an allowed exemption to such registration.

 

Hung Seng Tan is appointed as the Executive Director and Guan Chuan Tan is appointed as the Director of the Company during the period. Ban Siong Ang is appointed as Managing Director and serves as Chief Executive Officer subsequent to the appointment of new Directors.

 

 

HEYU LEISURE HOLIDAYS CORPORATION

Noted to Condensed Consolidated Financial Statements

(Unaudited)

 

On February 9, 2015, Heyu Leisure Holiday Corp. (“Heyu Leisure” or the “Company” or the “Registrant”) merged with Heyu Capital Ltd (“Heyu Capital”), a corporation existing under the laws of Hong Kong (Special Administrative Region of the PRC). Pursuant to the merger, the Company acquired all of the outstanding common shares of Heyu Capital through the issuance of common shares of the Company to the shareholders of Heyu Capital.

 

As a result of the Merger and pursuant to the Resolution, Heyu Capital has become a wholly-owned subsidiary of the Company and the Company issued shares of its common stock to shareholders of Heyu Capital at a rate of 1,000 shares of the Registrant’s common stock for all Heyu Capital common share. Immediately prior to the Merger, the Registrant had 60,000,000 shares of common stock outstanding.

 

Following the Merger, the Company has 60,001,000 shares of common stock outstanding after the share exchange and the issuance of 1,000 common shares to the shareholder of Heyu Capital.

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Heyu Leisure Holidays Corporation (the "Company") was incorporated on July 2, 2013 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions.

 

In addition to a change in control of its management and shareholders, the Company's operations to date have been limited to issuing shares and filing a registration statement on Form 10 pursuant to the Securities Exchange Act of 1934. The Company was formed to provide a method for a foreign or domestic private company to become a reporting company with a class of securities registered under the Securities Exchange Act of 1934.

 

On September 30, 2013, the Company registered its common stock on a Form 10 registration statement filed pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 12(g) thereof which became automatically effective 60 days thereafter.

 

 

The Company files with the Securities and Exchange Commission periodic and current reports under Rule 13(a) of the Exchange Act, including quarterly reports on Form 10-Q and annual reports Form 10-K.

 

The Company entered into an agreement with Tiber Creek Corporation of which the former president of the Company is the president and controlling shareholder. Tiber Creek Corporation assists companies to become public reporting companies and for the preparation and filing of a registration statement pursuant to the Securities Act of 1933, and the introduction to brokers and market makers.

 

On January 13, 2014, the following events occurred which resulted in a change of control of the Company:

 

The Company redeemed an aggregate of 20,000,000 of the then 20,000,000 shares of outstanding stock at a redemption price of $.0001 per share for an aggregate redemption price of $2,000.

 

James Cassidy and James McKillop, both directors of the Company and the then president and vice president, respectively, resigned such directorships and all offices of the Company. Neither Messrs. Cassidy nor McKillop retain any shares of the Company's common stock.

 

Ban Siong Ang was named as the director of the Company and serves as its Chief Executive Officer.

 

On January 14, 2014 the Company issued 1,000,000 shares of its common stock at par representing 100% of the then total outstanding 1,000,000 shares of common stock.

 

On August 8, 2014, the Company issued additional 59,000,000 shares of its common stock at par. Accordingly, the total outstanding of common stock is 60,000,000 shares as at 30 September 2014.

 

On February 9, 2015, the Company acquired all of the outstanding common shares of Heyu Capital through the issuance of 1,000 shares of common shares of the Company to the sole shareholder of Heyu Capital- Ban Siong,Ang. Following the Merger, the Company has 60,001,000 shares of common stock outstanding after the share exchange.

 

Hung Seng Tan is appointed as the Executive Director and Guan Chuan Tan is appointed as the Director of the Company during the period. Ban Siong Ang is appointed as Managing Director and serves as Chief Executive Officer subsequent to the appointment of new Directors.

 

Results of Operations for the period ended June 30, 2015 and June 30, 2014

 

		For the three month ended June 30,								For the six month ended June 30,
		2015				2014				2015				2014
Revenue		$	79,595			$	72,170			$	144,869			$	123,508
Cost of revenue			(128,774	)			(110,399	)			(250,071	)			(198,362	)
Operating expenses			(293,679	)			(256,093	)			(514,886	)			(2,028,919	)

 

 

The revenue increased from $123,508 to $144,869 from the six months ended June 30, 2014 to the six months ended June 30, 2015. These increases resulted primarily from the increase of hotel room occupancy rate during the period.

 

The increase in Cost of revenue is consistent with the increase of revenue for the six months ended June 30, 2015. The cost of revenue consists of water, electricity, cost of rental and related taxes of hotel.

 

The Group operating expenses decreased from $2,028,919 to $514,886 from the six months ended June 30, 2014 to June 30, 2015. There was consultant fee payments to consultant related to the share listing and project fee in previous year. However, no such payments incurred during the period and resulted in decrease in operating costs.

 

Liquidity and Capital Resources

 

Working Capital

 

		As at June 30, 2015				As at December 31, 2014
Total current assets		$	76,295			$	236,708
Total current liabilities			990,024				592,714
Working capital (deficit)			(913,729	)			(356,006	)

 

As of June 30, 2015 and December 31, 2014, total current assets were $76,295 and $236,708 respectively. The decrease is mainly due to decrease in cash and cash equivalent as a result of payment of hotel daily operating expenses.

 

As of June 30, 2015 and December 31, 2014, total current liabilities were $990,024 and $592,714 respectively. The increase is mainly from the advances from shareholder, which paid for daily hotel operation expenses and staff salaries during the period.

 

The Company had negative working capital of $913,729 and an accumulated deficit of $5,635,350 as of June 30, 2015.

 

 

Cash Flows

 

		For the period ended June 30, 2015				For the period ended June 30, 2014
Net cash used in operating activities		$	(492,658	)		$	(2,035,986	)
Net cash provided by (used in) investing activities			39,167				(670,904	)
Net cash provided by financing activities			396,521				2,579,426
Effect of exchange rate changes on cash and cash equivalent			118				8,689
Net change in cash			(56,852	)			(118,775	)

 

For the six month ended June 30, 2014 and 2015 we spent $2,035,986 and $492,658 on operating activities. The decrease in our expenditures on operating activities was primarily due to the payment to consultant in relation to the potential project acquisition and share listing expenses in prior period. However, there is no such expense incurred and therefore decrease in operating expenses during the period.

 

For the six month ended June 30, 2014 and 2015, $2,579,426 and $396,521 was provided by financing activities, the decrease is mainly from the lesser capital contribution from shareholder during the period.

 

Business

 

The Company was incorporated on July 2, 2013 under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has been in the developmental stage since inception.

 

The Company intends to operate and manage budget hotels chains in China. The Company intends that it will develop its business plan through the acquisition or business combination with an existing private company in China or otherwise through growth and development of its projects.

 

The Company may develop its operations by marketing and internal growth and/or by effecting a business combination with an operating company in the field. The Company anticipates that if it enters such a business combination it would likely take the form of a merger. It is anticipated that such private company will bring with it to such merger key operating business activities and a business plan. As of the date of this Report, no agreements have been executed to effect any business combination.

 

A combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. The Company may wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended.

 

On February 9, 2015, Heyu Leisure Holiday Corp. (“Heyu Leisure” or the “Company”) merged with Heyu Capital Ltd (“Heyu Capital”), a corporation existing under the laws of Hong Kong (Special Administrative Region of the PRC). Pursuant to the merger, the Registrant acquired all of the outstanding common shares of Heyu Capital through the issuance of common shares of the Registrant to the shareholders of Heyu Capital.

 

 

The Company's independent auditors have issued a report raising substantial doubt about the Company's ability to continue as a going concern. At present, the Company has no operations and the continuation of the Company as a going concern is dependent upon financial support from its stockholders, its ability to obtain necessary equity financing to continue operations and/or to successfully locate and negotiate with a business entity for a business combination that would provide a basis of possible operations.

 

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk. - Information not required to be filed by Smaller reporting companies.

 

ITEM 4.

Controls and Procedures.

 

Disclosures and Procedures

 

Pursuant to Rules adopted by the Securities and Exchange Commission, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rules. This evaluation was done as of the end of the period covered by this report under the supervision and with the participation of the Company's principal executive officer (who is also the principal financial officer).

 

Based upon that evaluation, he believes that the Company's disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to ensure that the information required to be disclosed by the Company in its periodic reports is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

This Quarterly Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Quarterly Report.

 

 

Changes in Internal Controls

 

Although the Company has effected a change in control, the Company remains, as it was previously, a development stage company under the direct control of its officers. There was no change in the Company's internal control over financial reporting that was identified in connection with such evaluation that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

There are no legal proceedings against the Company and the Company is unaware of such proceedings contemplated against it.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During the past three years, the Company has issued common shares pursuant to Section 4(2) of the Securities Act of 1933 as follows:

 

On July 9, 2013 the Company issued the following shares of its common stock:

 

Name		Number of Shares		Consideration
James Cassidy		10,000,000		$	1,000
		(10,000,000 redeemed on March 13, 2014)
James McKillop		10,000,000		$	1,000
		(10,000,000 redeemed on March 13, 2014)

 

January 14, 2014, The Company issued the following shares of its common stock:

 

Name		Number of Shares		Consideration
Ban Siong Ang		1,000,000		$	100

 

 

On August 8, 2014, The Company issued additional 59,000,000 shares of its common stock as follow:

 

Name		Number of Shares				Consideration
Ban Siong Ang			45,388,604			$	4,538
Tiang Lee Ng			4,272,419			$	427
Boon Hong Haw			2,000,000			$	200
Hung Seng Tan			1,484,423			$	149
Teik Kui Ang			651,854			$	65
Xiu Mei Zheng			525,355			$	53
Bing Ren Zhong			408,387			$	41
Kwee Huwa Tan			349,550			$	35
Tek Mun Chin			340,000			$	34
Guan Chuan Tan			300,000			$	30
ShuHui Dai			257,416			$	26
Hooi Pheng Ang			254,569			$	26
TaoYing Yang			241,098			$	24
XiuHua Xian			200,000			$	20
ZhenYu Zeng			180,354			$	20
MeiJiao Xu			166,354			$	17
XiaoDi Rao			153,709			$	15
MeiMei Weng			147,355			$	15
WenJin Zhong			121,354			$	12
MeiYun Zhong			119,064			$	12
Xin Chen			109,354			$	11
ShuYing Wang			105,354			$	11
Swiss Teo Swee Kiong			103,064			$	10
DeZhao Zhang			100,000			$	10
Lee Hiang Tan			97,355			$	10
Hup Teong Tan			90,000			$	9
Xing En Zhong			84,710			$	9
HaiBin Gao			80,000			$	8
Lan Tan			78,209			$	8
Kean Heong Wong			76,203			$	8
EnYu Lin			70,000			$	7
XieMing Fan			66,000			$	7
XingHua Zhong			65,032			$	7
JianShu Huang			60,000			$	6
Wee Lee Sim			60,000			$	6
Hang Kiang Tan			60,000			$	6
ZhuEn Xu			50,000			$	5
QingQiang Li			42,854			$	4
FenJin Lin			40,000			$	4
Total			59,000,000			$	5,900

 

On February 9, 2015, the Company acquired all of the outstanding common shares of Heyu Capital through the issuance of 1,000 shares of common shares of the Company to the sole shareholder of Heyu Capital- Ban Siong, Ang. Following the Merger, the Company has 60,001,000 shares of common stock outstanding after the share exchange.

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

Not applicable.

 

ITEM 5.

OTHER INFORMATION

 

(a) Not applicable.

(b) Item 407(c)(3) of Regulation S-K:

During the quarter covered by this Report, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.

 

ITEM 6. EXHIBITS

 

(a)

Exhibits

  

	31	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101.INS	XBRL Instance Document
	101.SCH	XBRL Taxonomy Extension Schema Document
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

  

 

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.

 

HEYU LEISURE HOLIDAYS CORPORATION

 

By:	/s/ Ban Siong Ang
Chief Executive Officer
By:	/s/ Kean Tat Che
Chief Financial Officer
Dated: August 19, 2015