ITEM 1. BUSINESS
We were organized under the laws of the State of Illinois on June 6, 2005. We purchase antiques and collectible items for resale, accept items on consignment, and sell items through various auctions and internet websites. We purchase any item which we believe we can make a reasonable profit on resale. These items include, but are not limited to:
-
furniture;
-
vehicles;
-
jewelry;
-
art;
-
collectible glass;
-
antique toys;
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china;
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silverware;
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antique clocks
-
stamps; and
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coins
We use other already existing websites to post auctions. We do not have any physical retail stores but may use stores owned or operated by others for placement of various purchases and consignments.
We pursue the following:
1. make purchases for resale:
Purchases may be made from estate sales, trade shows or directly from private parties. These items may be resold in the following ways:
-
resold at trade shows
-
utilizing our customer database which is to be developed after our business is operational.
-
wholesale to retail outlets
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through the use of various internet websites.
2. accept consignments for sale:
Consignments may be obtained from estate sales, trade shows or directly from private parties. These items may be resold in the following ways:
-
resold at trade shows
-
utilizing our customer mailing list
-
wholesaled to retail outlets
-
through the use of various internet websites.
3. make purchases for auction:
Purchases may be made in order to be sold in various auction formats. Live auctions and online auctions using:
- Ebay,
- Yahoo,
- TIAS, an antiques and collectibles website,
- NAA Live, the National Auctioneers Association website,
- or other applicable web applications catering to the auction industry will be utilized.
4. accept consignments for auction:
Consignments may be sold using various auction formats. Live auctions and online auctions using Ebay, Yahoo, TIAS, NAA Live or other applicable web applications catering to the auction industry will be utilized.
5. attend Trade Shows and make exhibits:
As the opportunity presents itself, American Antiquities plans to attend and exhibit whatever inventory it may have at that time. In addition, trade shows may be used as a means to buy, sell, solicit consignments, and to obtain customers.
We do not purchase items from, or sell items to, officers or companies in which the officers are affiliated.
Distribution
If the items are sold through a live auction, the items are distributed at the auction site after the purchasers make payment. If the items are sold through an online auction, distribution is made via US mail, Federal Express, UPS or other carrier after payment for the item is received from the winning bidder.
Suppliers
American Antiquities does not yet have any current or expected principal suppliers.
Patents, trademarks or licenses
American Antiquities does not have any patents, trademarks or licenses.
Customers
American Antiquities is not dependent on a few major customers.
Revenues
Our revenues are derived from identifying undervalued items that can be purchased at below retail prices and resold for a profit and from receipt of a percentage, yet to be determined, of any consignment sales. We receive revenues from 10%-30% of the sales price of the item consigned. The percentage is dependent on the value of the item consigned.
Marketing Strategy
Key elements of our marketing strategy are as follows;
Customer Marketing Plan: We are developing a database of collectors, dealers and museums who seek to add to and/or dispose of their collections. We estimate initial marketing costs of $10,000 to create a database of contacts and to send direct mail marketing campaigns to those contacts. This database allows us to perform targeted follow-ups and helps to market future items to buyers as well as to assist us in finding new sellers. After initial contact with potential customers, we identify their specific needs and determine how we are able to serve them in the most appropriate manner.
Sales Strategy: We estimate the annual costs of these activities will be approximately $4,000. These funds will be used for fees directly associated with the marketing and sale of consigned items.
The various items owned by the registrant are not be surcharged the customary auction consignment fees, but all other normal marketing charges such as design, set up, advertising and printing related fees apply to any items sold by us. The auction consignment fees we receive are directly proportional to the value of the assigned items and will range from as low as 10% to as high as 30% of the price realized for the items auction.
Internet: We estimate the monthly costs of these activities to be approximately $300. Monthly internet expenses are comprised of commission fees, listing fees and web site hosting fees. These fees vary, depending on the cost of the items, the specific web sites used and the number of items listed. These costs are passed to the consignor(s) of the items we offer on the various auction sites. These costs are the same whether an item is consigned or we own the items.
Establish Procedures: We are developing a centralized system to audit sales and receipts of consigned items, accounts payable, accounts receivable, inventory and payroll. We estimate the cost of this activity to be approximately $1,000. Most of the funds will be used to purchase software to perform these functions.
Development of Website: If the volume warrants, we will initiate our own internet website. This would be done to advertise our auctions and to solicit new customers.
The home page would include the following links:
-
relevant company information such as phone numbers and personal contacts
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current auctions
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past auctions and highlights
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items available for direct sale
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links to other useful resources
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links to research of specific antiquities and collectibles fields.
We are developing our plan for the next twelve months using a combination of minimum proceeds of the offering and the cash flow generated from sales and commissions. Additional funds raised beyond the minimum proceeds will be for the acquisition of selected inventory.
Taxes
Various states are increasingly seeking to impose sales or use taxes on inter-state mail order sales and are aggressively auditing sales tax returns of mail order businesses. Complex legal issues arise in these areas, relating, among other things, to the required nexus of a business with a particular state, which may permit the state to require a business to collect such taxes. At the present time, we are not aware of any states in which we may operate who would impose sales taxes on our transactions. Although we believe that we can adequately provide for sales taxes on mail order sales, there can be no assurance as to the effect of actions taken by state tax authorities on our financial condition or results of operations. In the future, we may be required to collect sales tax on sales made to customers in all of the state in which we will conduct our operations. All of the factors cited above may negatively affect our financial condition and results of operations in the future. Any such impact cannot currently be quantified.
Competition
The antiques and collectibles industries are highly fragmented and competitive. In addition to other antiques and collectibles retailers, we compete with antiques stores, mid-to-upscale department stores, gift stores, TV shopping, and collectors clubs. We even, in certain cases, compete with the owners of the licensed products who sell products through their own stores and other marketing channels.
All of our competitors are larger and have substantially greater financial, marketing and other resources than us. We compete on the basis of customer preference and availability of desirable products.
Other retailing companies with significantly greater capital and other resources than us may enter or expand their operations in the collectibles industry, which could change the competitive dynamics of the industry. Because retailers of collectibles generally do not own the proprietary rights to the products that they sell, the barriers to entry to these industries are not significant. Therefore, there can be no assurance that additional participants will not enter the preliminary activities. We have not commenced operations. We are new, have a limited operating history and, therefore, will have difficulty competing with established companies. There are numerous competitors that are larger, better established, better financed and better known than we are now or can expect to be in the foreseeable future. We cannot expect to be a significant participant in the market for antiques and collectibles within the foreseeable future.
Governmental Regulation
There are no governmental regulations regarding aucitions or licenses that are required to conduct auctions in the state of Michigan, where all day to day operations will take place.
Employees
We presently have no full-time employees and no part-time employee. We have entered into oral employment agreements with our officers to commence upon mutual agreement when revenues are sufficient to fund the agreements.
Reports to Security Holders
We file the necessary quarterly and other reports with the Securities and Exchange Commission. Although we are not required to deliver our annual or quarterly reports to security holders, we would be pleased to forward this information to security holders upon receiving a written request to receive such information. The reports and other information filed by us will be available for inspection and copying at the public reference facilities of the Securities and Exchange Commission located at 100 F Street, NE, Washington, D.C. 20549.
Copies of such material may be obtained by mail from the Public Reference Section of the Securities and Exchange Commission at 100 F Street, NE, Washington, D.C. 20549, at prescribed rates.
Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the Commission maintains a World Wide Website on the Internet at: http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission.
ITEM 1A.
ITEM 1A. RISK FACTORS
Not Applicable
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable to smaller reporting companies.
ITEM 2.
ITEM 2. PROPERTIES
Our principal office is located at 2800 Sylvan Rd, Chelsea, MI 48118, with a rental rate of $50 per month on a month to month basis under an oral lease commencing June 1, 2005. This office space consists of approximately 800 square feet in a room in the home of Joseph A. Merkel, an officer and director and will be used exclusively for our operations. Additionally, an auxiliary company office utilized primarily for administrative activities is located at 1085 Cambridge Drive, Buffalo Grove, Illinois 60089 consisting of 300 square feet. This space is leased to Kevin T. Quinlan, an officer and director by John and Ann Quinlan, his parents and is subleased to the registrant on a month-to-month basis under an oral lease for $50 per month commencing June 1, 2005. We believe that these offices will be sufficient for us during at least the next twelve months.
As of October 31, 2009, we paid the president a total of $6,620 for office rent.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
American Antiquities, Inc. is not involved in any legal proceedings at this date.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the last quarter of the fiscal year ended October 31, 2009, no matters were submitted to a vote of American Antiquities, Inc. security holders, through the solicitation of proxies.
PART II
ITEM 5.
ITEM 5. MARKET FOR CORPORATION'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Item 5(a)
a) Market Information. The registrant's common A shares have been listed in the NASD over-the-counter bulletin board under the symbol "AAQS" since September 6, 2007. As of June 25, 2009, there was only a limited market for the registrant's common A shares.
The following table sets forth the range of high and low bid quotations for the registrant's common stock for each quarter since trading commenced. The quotations represent inter-dealer prices without retail markup, markdown or commission, and may not necessarily represent actual transactions.
b) Holders. At June 25, 2009, there were 68 shareholders of the registrant.
c) Dividends. Holders of the registrant's common stock are entitled to receive such dividends as may be declared by its board of directors. No dividends on the registrant's common stock have ever been paid, and the registrant does not anticipate that dividends will be paid on its common stock in the foreseeable future.
d) Securities authorized for issuance under equity compensation plans. No securities are authorized for issuance by the registrant under equity compensation plans.
e) Performance graph. Not applicable.
f) Sale of unregistered securities. None
5(b) Use of Proceeds. Not applicable.
Item 5(c) Purchases of Equity Securities by the issuers and affiliated purchasers. None
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to smaller reporting company.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Trends and Uncertainties.
We are a development stage company. Our auditors have raised substantial doubt as to our ability to continue as a going concern. We have experienced a loss from operations from inception aggregating $(913,492). In addition, we have not earned any significant revenue from operations.
Our ability to continue as a going concern is contingent upon our ability to secure additional financing, increase ownership equity and attain profitable operations. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.
We are pursuing private debt and/or equity financing for our operations. No specific terms have been determined. We will need a minimum of $50,000 over the next twelve months to commence and continue operations. Failure to secure such financing or alternatively, to raise additional debt or equity capital in the next twelve months and to develop our revenue base may result in American Antiquities depleting our available funds and not being able pay our obligations. There can be no assurance that we could be able to continue our business plan.
Demand for American Antiquities' future products will be dependent on, among other things, market acceptance of our proposed operations and general economic conditions that are cyclical in nature. Inasmuch as all of our activities are the revenues generated from the sale of antiques and collectibles, American Antiquities' business operations may be adversely affected by changing consumer tastes, competitors and prolonged recessionary periods.
We expect our profits will be generated by identifying undervalued items that can be purchased at below retail prices and resold for a profit.
Capital and Source of Liquidity.
For the year ended October 31, 2009, the registrant received $9000 in financing from Bellevue Holdings, Inc., in exchange for 3,000,000 share of common stock. This resulted in stock-based compensation of $741,000.
For the year ended October 31, 2007, the registrant purchased equipment of $4,813 resulting in net cash used in investing activities of $4,813.
For the year ended October 31, 2007, American Antiquities received proceeds from the sale of its common stock of $99,025 resulting in net cash provided by financing activities of $99,025.
At October 31, 2007, American Antiquities had $16,128 cash available. Comparatively, at October 31, 2007, American Antiquities had $30,274 cash available.
Our internal and external sources of liquidity have included the issuance of common shares for cash, goods and services and cash generated from advances from related parties. We are currently not aware of any trends that are reasonably likely to have a material impact on our liquidity.
We will rely on revenues, sales of our common shares, additional issuances of common shares for services and advances from our officers and directors to fund our current operations.
In the event we are not successful in obtaining additional financing, it may take considerably longer to successfully establish a market for our products, delay our ability to establish a market, or we may not be successful at all.
Results of Operations.
We are a development stage company that has not generated significant revenues from operations. For the year ended October 31, 2009, we had no commission income and had operating expenses of $803,625. For the year ended October 31, 2009, we had no commission income. For the year ended October 31, 2008, we received commission income of $46,408 and had operating expenses of $62,158. Comparatively, for the year ended October 31, 2007, we received commission income of $10,112 and had operating expenses of $85,229.
For years ended October 31, 2009 and 2008, there were no expenses for contributed services by the officers. There was no rent expense in 2009. Rent was paid of $6,620 in 2008. In 2009, there were professional fees of $15,550 as compared to $15,198 in 2008. Other general and administrative expenses in 2009 were $7,075, as compared to $10,340 in 2008.
Off-balance Sheet Arrangements.
The registrant does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the registrant's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Contractual Obligations.
The registrant does not have any contractual obligations.
Plan of Operation. The registrant experienced a net loss of $(803,625) in 2009. A net loss of $(15,750) was experienced in 2008.
We only have sufficient cash on hand to meet funding requirements for the next three to six months. We do not have sufficient cash on hand to meet funding requirements for the next twelve months. Although we eventually intend to primarily fund general operations with revenues received from the sale of antiques and collectibles, we have not yet achieved significant operations. We will have to seek alternative funding through advances from our officers and directors, or debt or equity financing in the next twelve months that could result in increased dilution to the shareholders. No specific terms of possible equity or debt financing have been determined or pursued. Officers and directors have verbally agreed to advance any funds necessary to pay offering expenses not covered by the proceeds received at each level of funding. The advances are to be repaid when sufficient revenues are obtained.
Management will pursue the following milestones in order to successfully complete our business plan.
Milestone
Steps
Timeline
1. Develop customer marketing
We are developing a database
months
plan
of collectors, dealers and museums who
seek to add to and/or dispose of their
collections. We anticipate initial
marketing costs of $9,500 to create a
database of contacts and to send direct
mail marketing campaigns to those contacts.
This database will allow us to perform
targeted follow-ups and help to market
future items to buyers as well as to
assist us in finding new sellers.
After initial contact with potential
customers, we will identify their specific
needs and determine how we are able to
serve them in the most appropriate manner.
2. Implement Sales Strategy
We estimate the annual costs of
months
these activities will be approximately
$4,000. We will develop print
advertisements and internet based media
advertisements.
3. Establish Procedures
We plan to develop a centralized system
to audit sales and receipts of consigned
items, accounts payable, accounts receivable,
inventory and payroll. We estimate the
cost of this activity to be approximately
$1,000. Most of the funds will be used
to purchase software to perform these
functions.
4. Development of Website
If the volume warrants, we will initiate
6-9 months
our own internet website. This would
be done to advertise our auctions and
to solicit new customers.
We are currently working on completing milestone 1. No one milestone needs to be complete to pursue any other milestone.
As future revenues allow, we will continue ongoing operations which include:
- making purchases for resale and to resell such items at trade shows, retail outlets or through internet websites
- accepting consignments for sale and resell at trade shows, to customers through mailing lists, retail outlets or through the internet
- making purchases for auction and sell through live auctions on Ebay, Yahoo, TIAS or other web applications;
- accepting consignments for auction and sell on online auctions; and
- attending trade shows and make exhibits.
The costs and expenses involved in pursuing our ongoing operations are variable and will be based on market conditions. There is no way to determine specific costs in advance.
We anticipate developing our plan for the next twelve months using a combination of minimum proceeds of the offering and the cash flow generated from future sales and commissions. If we do not raise sufficient funds in this offering, we will still proceed with our plan of operation on a delayed basis until alternative funding, either through officer and director advances, debt or equity funding, yet to be determined.
Recent Pronouncements. In May 2008, the FASB issued Statement of Financial Accounting Standards No. 163 ("SFAS 163"), "Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60." SFAS 163 prescribes accounting for insures of financial obligations, bringing consistency to recognizing and recording premiums and to loss recognition. SFAS 163 also requires expanded disclosures about financial guarantee insurance contracts. Except for some disclosures, SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of SFAS 163 will not have an impact on our results of operations or financial position.
In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162 ("SFAS 162"), "The Hierarchy of Generally Accepted Accounting Principles." SFAS 162 makes the hierarchy of generally accepted accounting principles explicitly and directly applicable to preparers of financial statements, a step that recognizes preparers' responsibilities for selecting the accounting principles for their financial statements. The effective date of SFAS 162 is 60 days following the U.S. Securities and Exchange Commission's approval of the Public Company Accounting Oversight Board's related amendments to remove the GAAP hierarchy from auditing standards, where it has resided for some time. The adoption of SFAS 162 will not have an impact on our results of operations or financial position.
On March 19, 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 ("SFAS No. 161"). SFAS No. 161 requires enhanced disclosures about an entity's derivative and hedging activities. These enhanced disclosures will discuss (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We have not determined the impact, if any SFAS No. 161 will have on our financial statements.
In December 2007, the FASB issued FASB 141(R), "Business Combinations" of which the objective is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination.
In December 2007, the FASB issued FASB 160 "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" of which the objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards by requiring all entities to report noncontrolling (minority) interests in subsidiaries in the same way - as equity in the consolidated financial statements. Moreover, Statement 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions.
Both FASB 141(R) and FASB 160 are effective for fiscal years beginning after December 15, 2008. The registrant does not believe that the adoption of these standards will have any impact on its financial statements.
ITEM 7A
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
The response to this item is being submitted as a separate section of this report appearing at the end hereof.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Changes in Internal Controls
During the year ended October 31, 2009, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of October 31, 2009. Based on this evaluation, our principal executive officer and principal financial officer have concluded such controls and procedures were not effective as of October 31, 2009 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and 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 officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Management of the registrant is responsible for establishing and maintaining adequate internal control over financial reporting as derived in Rule 13a-15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of those internal controls as of October 31, 2009, using the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") Internal Control Integrated Framework as a basis for our assessment.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the registrant's ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the registrant's annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we have identified a material weakness in our internal control over financial reporting. Therefore, it is our conclusion that the registrant's internal controls over financial reporting were not effective as of October 31, 2009.
This annual report does not include an attestation report of the registrant's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the registrant to provide only management's report in this annual report.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATION GOVERANCE
Board of Directors. Our bylaws provide that the number of directors who shall constitute the whole board shall be such number as the board of directors shall at the time have designated. We confirm that the number of authorized directors has been set at three pursuant to our bylaws. Each director shall be selected for a term of one year and until his successor is elected and qualified. Vacancies are filled by a majority vote of the remaining directors then in office with the successor elected for the unexpired term and until the successor is elected and qualified.
The directors and executive officers are as follows:
NAME
AGE
POSITIONS HELD
SINCE
Joseph A. Merkel
CEO/Director
June 6, 2005
President
To present
Kevin T. Quinlan
CFO/Director
June 6, 2005
Controller
To present
Our officers are currently contributing their time on an "as needed" basis. The officers devote approximately 15-20 hours per week until operations increase.
Business Experience of Officers and Directors
Joseph A. Merkel. Mr. Merkel has been an officer and director since June 6, 2005. From 1999 to the present, he has been president of Merkel's Auction Specialists, Inc., dba Merkel's Auctioneers and Appraisers in Michigan. As president, Mr. Merkel manages and acts, on a part time basis, as auctioneer for live, onsite auctions. Management is of the opinion that no possible conflicts of interest exist due to Mr. Merkel's position as American Antiquities does not intend to engage in any live, onsite public auctions. From 1997 to 1999, he was president and head grader of Sports Guaranty Corporation in New Jersey. As head grader, he was the primary person responsible for the grading of items. He set the standards for defining the condition of the time(s) being graded and reviewed the grading done by others who work for him. In 2000, he developed and trained the staff of SCD Authentics, a sports collectible company in Wisconsin. Since 2001, Mr. Merkel has been a full time real estate agent for Gary Lillie & Associates, Inc., a company engaged in the sales and auctioneering of real estate. Since October 2003, Mr. Merkel has been an officer of Midwest Sports Collectibles, Inc., a company in the business of buying and selling sports and non-sports collectibles. Mr. Merkel attended Michigan State University from 1985 through 1988.
Kevin T. Quinlan. Mr. Quinlan has been chief financial officer and a director of American Antiquities since June 2005. From May 1, 2006 to present, Mr. Quinlan has been working part time of Fluid Management Corporation, a management company, as a customer services representative. From December 2003 to April 30, 2006, Mr. Quinlan was employed full time as a desk manager for the Linn Group, a commodity trading and investment firm at the Chicago Board of Trade. From August 2002 to April 2003, Mr. Quinlan was a senior customer service representative for Allstate Financial, an insurance and annuity company. Mr. Quinlan graduated from Illinois State University in August 2002 with a bachelor of arts degree in history.
The above named directors will serve in their capacity as director until our next annual shareholder meeting to be held within six months of our fiscal year's close. Directors are elected for one-year terms.
Option/SAR Grants in the Last Fiscal Year. There have not been any options /SAR grants made by American Antiquities in the last fiscal year.
Directors Compensation. We do not have any standard arrangements by which directors are compensated for any services provided as a director. No cash has been paid to the directors in their capacity as such.
Section 16(a) Beneficial Ownership Reporting Compliance
To the registrant's knowledge and with the exception of any current Schedule 13D, no director, officer or beneficial owner of more than ten percent of any class of equity securities of The registrant, beneficial owner of more than ten percent and prior director, failed to file on a timely basis reports required by Section 16(a) of the Exchange Act during 2008.
Code of Ethics Policy
We have not yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.
Corporate Governance
There have been no changes in any state law or other procedures by which security holders may recommend nominees to our board of directors. In addition to having no nominating committee for this purpose, we currently have no specific audit committee and no audit committee financial expert. Based on the fact that our current business affairs are simple, any such committees are excessive and beyond the scope of our business and needs.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
Mr. Merkel received no compensation for the year ended October 31, 2009. For the years ended October 31, 2009, Mr. Merkel received $40,000 and he received $30,000 in fiscal year ended October 31, 2008. No other executive compensation has been paid. The officers contributed services valued at $0 for the years ended October 31, 2009 and 2008, and $20,330 in 2007 based upon the terms of an employment agreement approved by the Board of Directors but not executed as of October 31, 2009.
Messrs. Quinlan and Merkel have renewed their oral agreements that will pay each of them $4000 per month as long as the company has funds to pay them. We have entered into oral employment agreements with our officers. The term of the oral agreements are two years each. There are no other material terms to the oral agreements.
We may elect to award a cash bonus to key employees, directors, officers and consultants based on meeting individual and corporate planned objectives.
Option/SAR Grants in the Last Fiscal Year. There have not been any options /SAR grants made by American Antiquities in the last fiscal year.
Directors Compensation. We do not have any standard arrangements by which directors are compensated for any services provided as a director. No cash has been paid to the directors in their capacity as such.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth, as of June 25, 2009, the number and percentage of outstanding shares of American Antiquities common stock owned by (i) each person known to us to beneficially own more than 5% of its outstanding common stock, (ii) each director, (iii) each named executive officer, and (iv) all officers and directors as a group.
(1) Based upon 12,980,500 issued and outstanding as of October 31, 2009.
(2) The 2,905,000 common shares are owned by Merkel's Auction Specialists, Inc. dba Merkel's Auctioneers and Appraisers, an entity 100% controlled by Joseph A. Merkel, an officer and director.
(3) A company controlled by John T. Quinlan, father of Kevin T. Quinlan, an officer and director of American Antiquities.
Joseph A. Merkel and Kevin T. Quinlan would be deemed to be promoters of American Antiquities.
On May 14, 2007, our president, treasurer, and another insider surrendered at total of 24,500,000 (post-split) shares of our common stock, which were initially issued during October 2005. The shares were surrendered following discussions with our market maker in order to increase our public float to approximately 20 percent. Following the surrender of the shares, the number of common shares issued and outstanding totaled 9,980,500 (post-split).
During May 2007, we declared a 5 for 1 forward split of our common stock to shareholders of record at the close of business on May 20, 2007. The number of shares issued on May 20, 2007 totaled 7,984,400 and increased the number of common shares outstanding to 9,980,500. Shares issued prior to May 20, 2007 have been retroactively restated to reflect the impact of the stock split.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
During the period from December 1, 2007 through October 31, 2008, the Company rented office space from its president at a rate of $946 per month. Rent expense totaled $6,620 for the year ended October 31, 2008.
On September 15, 2006, we issued a promissory note to an officer in exchange for $8,500. The note included an interest payment of $1,500. The note was payable once we broke escrow on our initial public offering (see Note 3), or 12 months from the date of the note, which ever came first. As of October 31, 2006, $188 of the $1,500 interest charge was accrued and recorded as interest expense. We repaid the $8,500 note and $1,500 of interest expense during December 2006.
In June 2005, our Board of Directors approved the payment of $50 per month to both our president and treasurer for the use of office space. The office rentals ended in October 2007; however, as of October 31, 2008, we still owed the two officers a total of $2,350 for office rent, which is included in the accompanying financial statements as "indebtedness to related parties".
Our president and treasurer each contributed services for the years ended October 31, 2007 and 2006, and the period from June 6, 2005 (inception) through October 31, 2005. The services were valued at $20,330, $3,240 and $530, respectively, based upon the terms of an employment agreement approved by the Board of Directors but not executed as of October 31, 2007. The contributed services are included in the accompanying financial statements as "contributed services" with a corresponding credit to "additional paid-in capital". There were no contributed services during the year ended October 31, 2008.
During the period from inception through October 31, 2005, our treasurer paid incorporation fees totaling $175 on our behalf and advanced us $100 to open a bank account. These amounts were repaid during the year ended October 31, 2006.
During October 2005, we sold 12,500,000 (post-split) shares of our common stock to our president for $15,000, or $.0012 (post-split) per share. On May 14, 2007, our president voluntarily surrendered 9,500,000 (post-split) of the shares back to the Company for cancellation. The shares were surrendered following discussions with our market maker in order to increase our public float to approximately 20 percent.
During October 2005, we sold 12,500,000 (post-split) shares of our common stock to our treasurer for $15,000, or $.0012 (post-split) per share. On May 14, 2007, our treasurer voluntarily surrendered 9,500,000 (post-split) of the shares back to the Company for cancellation. The shares were surrendered following discussions with our market maker in order to increase our public float to approximately 20 percent.
During October 2005, we sold 7,500,000 (post-split) shares of our common stock to a relative of our treasurer for $9,000, or $.0012 (post-split) per share. On May 14, 2007, this individual voluntarily surrendered 5,500,000 (post-split) of the shares back to the Company for cancellation. The shares were surrendered following discussions with our market maker in order to increase our public float to approximately 20 percent.
Director Independence.
The registrant's Board of Directors consists of Joseph Merkel and Kevin Quinlan. Neither Joseph Merkel nor Kevin Quinlan is independent as such term is defined by a national securities exchange or an inter-dealer quotation system. During the fiscal year ended October 31, 2008, there were no transactions with related persons other than as described herein.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees. We incurred aggregate fees and expenses of approximately $11,039, $10,732 and $6,460 from Cordovano and Honeck LLP for the 2009, 2008 and 2007 fiscal years, respectively. Such fees included work completed for our annual audits and for the review of our financial statements included in our Form 10-Qs.
Tax Fees. We did not incur any aggregate tax fees and expenses from Cordovano and Honeck LLP for the 2008 and 2007 fiscal years for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees. We did not incur any other fees from Cordovano and Honeck LLP during fiscal 2009, 2008 or 2007.
The board of directors, acting as the Audit Committee considered whether, and determined that, the auditor's provision of non-audit services was compatible with maintaining the auditor's independence. All of the services described above for fiscal year 2006 were approved by the Board of Directors pursuant to its policies and procedures. We intend to continue using Cordovano and Honeck LLP solely for audit and audit-related services, tax consultation and tax compliance services, and, as needed, for due diligence in acquisitions.
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
The following financial statements as of October 31, 2009 and 2008 are included herewith:
(2) Supplemental Schedules
All schedules have been omitted since the required information is not present in amounts sufficient to require submission of the schedule, or because the required information is included in the financial statements or notes thereto.
(3) Exhibits
The following exhibits are filed with this report:
Exhibit 31 - 302 certification
Exhibit 32 - 906 certification
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, The registrant has duly caused this Report to be signed on its behalf by the undersigned duly authorized person.
Date: January 20, 2010
American Antiquities, Inc.
/s/Joseph A. Merkel
By: Joseph A. Merkel, President/CEO
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
American Antiquities Incorporated:
We have audited the accompanying balance sheets of American Antiquities Incorporated (a development stage company) as of October 31, 2009 and 2008, and the related statements of operations, changes in shareholders’ equity, and cash flows for the years ended October 31, 2009 and 2008, and for the period from June 6, 2005 (inception) through October 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Antiquities Incorporated as of October 31, 2009 and 2008, and the results of its operations and its cash flows for the years ended October 31, 2009 and 2008, and for the period from June 6, 2005 (inception) through October 31, 2009, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a limited operating history and has suffered operating losses since inception, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Cordovano and Honeck LLP
Englewood, Colorado
December 10, 2009
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Balance Sheets
See accompanying notes to financial statements
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Statements of Operations
See accompanying notes to financial statements
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Statement of Changes in Shareholders' Equity (Deficit)
See accompanying notes to financial statements
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Statements of Cash Flows
See accompanying notes to financial statements
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Notes to Financial Statements
(1)
Nature of Organization and Summary of Significant Accounting Policies
Nature of Organization
American Antiquities Incorporated (referenced as “we”, “us”, “our” in the accompanying notes) was incorporated in the State of Illinois on June 6, 2005. We were organized to engage in the business of purchasing items and accepting items on consignment that will be sold at auction. We purchase our inventory from private individuals, through public auctions, and at estate sales. Consigned items are sold utilizing both live and on-line auctions. Items that are purchased will be sold to private entities or at auction. We do not plan to have a physical retail store location. We have earned minimal revenue since our inception, and we did not own any inventory at October 31, 2009.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has a limited operating history and has suffered losses since inception. These factors, among others, may indicate that the Company will be unable to continue as a going concern.
During the period from inception through October 31, 2009, we have sold common stock to insiders and issued a promissory note to an officer in order to raise capital to acquire inventory and commence revenue-producing operations. However, as of October 31, 2009, we have not acquired any inventory and have engaged in limited revenue-producing operations. In the longer term, we plan to expand our inventory and operations and eventually become profitable. There is no assurance that we will be successful in raising the capital required to develop our operations or that we will attain profitability.
The financial statements do not include any adjustments relating to the recoverability and classification of assets and/or liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to meet our obligations on a timely basis, and, ultimately to attain profitability.
Development Stage Company
We are in the development stage in accordance with the Accounting and Reporting by Development Stage Enterprises Topic of the Financial Accounting Standards Board’s Accounting Standards Codification (FASB ASC).
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles permits management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
We consider all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. We had no cash equivalents at October 31, 2009.
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Notes to Financial Statements
Equipment and Depreciation
Equipment is stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets, currently set at three years. Expenditures for additions and improvements are capitalized, while repairs and maintenance costs are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is recorded in the year of disposal.
Deferred Offering Costs
We have incurred legal and accounting fees related to the preparation of our public stock offering. Such costs are initially deferred until the offering is completed, at which time they are recorded as a reduction of gross proceeds from the offering, or expensed to operations if the offering is unsuccessful.
Financial Instruments
Our financial instruments consist of cash and accrued liabilities. At October 31, 2009, the fair value of our financial instruments approximates book value due to the short-term maturity of the instruments.
Earnings (Loss) per Common Share
We report loss per share using a dual presentation of basic and diluted loss per share. Basic loss per share excludes the impact of common stock equivalents. Diluted loss per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. At October 31, 2009, there were no variances between the basic and diluted loss per share as there were no potentially dilutive securities outstanding.
Auction Commission Revenue Recognition
We function as an agent accepting property on consignment from selling clients. We sell property as an agent of the consignor, billing the buyer for property purchased, receiving payment from the buyer and remitting to the consignor the consignor’s portion of the buyer’s payment after deducting our commissions, expenses and applicable taxes. Our commissions include those earned from the buyer (“buyer’s premium revenue”) and those earned from the consignor (“seller’s commission revenue”), both of which are calculated as a percentage of the hammer price of property sold at auction. Buyer’s premium and seller’s commission revenues are recognized at the time of the auction sale (i.e., when the auctioneer’s hammer falls) and are recorded net of commissions owed to third parties. Commissions owed to third parties are typically the result of the competitive environment or as a result of risk sharing arrangements, whereby we reduce our financial exposure under certain auction guarantees in exchange for sharing in the auction commissions with a partner. Also, in certain situations, an auction guarantee partner will assist us in valuing and marketing the property to be sold at auction.
Income Taxes
We account for income taxes as required by the Income Tax Topic of the FASB ASC, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Notes to Financial Statements
Recent Accounting Pronouncement
In May 2009, the FASB issued ASC 855-10, Subsequent Events. This standard establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, the Statement defines: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC 855-10 is effective for fiscal years and interim periods ending after June 15, 2009. Adoption of this standard as of June 30, 2009 had no impact on the Company’s financial position or results of operations. The Company’s management has reviewed events occurring through December 18, 2009, the date the financial statements were issued, and no subsequent events require disclosure.
(2)
Related Party Transactions
During the year ended October 31, 2009, a relative of one of our officers loaned us $9,000 under the terms of a promissory note. The note does not carry an interest rate and matures on December 31, 2009. On October 28, 2009, we issued 3 million shares of our restricted common stock as payment for the entire promissory note, or $.003 per share. On the transaction date, the quoted market value of our common stock was $.25 per share. As a result, we recognized stock-based compensation totaling $741,000 for the year ended October 31, 2009.
During June 2009, our Board of Directors approved two-year employment contracts for our CEO and CFO. Each officer receives a salary of $4,000 per month commencing June 1, 2009. As of October 31, 2009, we owed the officers $40,000 which is included in the accompanying financial statements as “indebtedness to related parties”.
During the period from December 1, 2008 through June 30, 2008, we rented office space from our president at a rate of $946 per month. Rent expense totaled $6,620 for the year ended October 31, 2008.
On September 15, 2006, we issued a promissory note to an officer in exchange for $8,500. The note included an interest payment of $1,500. The note was payable once we broke escrow on our initial public offering (see Note 3), or 12 months from the date of the note, whichever came first. As of October 31, 2006, $188 of the $1,500 interest charge was accrued and recorded as interest expense. We repaid the $8,500 note and $1,500 of interest expense during December 2006.
In June 2005, our Board of Directors approved the payment of $50 per month to both our president and treasurer for the use of office space. The office rentals ended in October 2007; however, as of October 31, 2009, we still owed the two officers a total of $2,350 for office rent, which is included in the accompanying financial statements as “indebtedness to related parties”.
Our president and treasurer each contributed services for the years ended October 31, 2007 and 2006, and the period from June 6, 2005 (inception) through October 31, 2005. The services were valued at $20,330, $3,240 and $530, respectively, based upon the terms of an employment agreement approved by the Board of Directors but not executed as of October 31, 2007. The contributed services are included in the accompanying financial statements as “contributed services” with a corresponding credit to “additional paid-in capital”. There were no contributed services during the year ended October 31, 2009.
During the period from inception through October 31, 2005, our treasurer paid incorporation fees totaling $175 on our behalf and advanced us $100 to open a bank account. These amounts were repaid during the year ended October 31, 2006.
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Notes to Financial Statements
During October 2005, we sold 12,500,000 (post-split) shares of our common stock to our president for $15,000, or $.0012 (post-split) per share. On May 14, 2007, our president voluntarily surrendered 9,500,000 (post-split) of the shares back to the Company for cancellation. The shares were surrendered following discussions with our market maker in order to increase our public float to approximately 20 percent.
During October 2005, we sold 12,500,000 (post-split) shares of our common stock to our treasurer for $15,000, or $.0012 (post-split) per share. On May 14, 2007, our treasurer voluntarily surrendered 9,500,000 (post-split) of the shares back to the Company for cancellation. The shares were surrendered following discussions with our market maker in order to increase our public float to approximately 20 percent.
During October 2005, we sold 7,500,000 (post-split) shares of our common stock to a relative of our treasurer for $9,000, or $.0012 (post-split) per share. On May 14, 2007, this individual voluntarily surrendered 5,500,000 (post-split) of the shares back to the Company for cancellation. The shares were surrendered following discussions with our market maker in order to increase our public float to approximately 20 percent.
(3)
Shareholders’ Equity
During the period from November 2006 through March 2007, we sold 1,980,500 (post-split) shares of our common stock at a price of $.05 (post-split) per share for net proceeds of $62,775 after deducting $36,250 of offering costs. The offering was made pursuant to our SB-2 registration statement that became effective on August 11, 2006. All sales were conducted through our officers and directors.
During May 2007, we declared a 5 for 1 forward split of our common stock to shareholders of record at the close of business on May 20, 2007. The number of shares issued on May 20, 2007 totaled 7,984,400 and increased the number of common shares outstanding to 9,980,500. Shares issued prior to May 20, 2007 have been retroactively restated to reflect the impact of the stock split.
(4)
Income Taxes
A reconciliation of the U.S. statutory federal income tax rate to the effective tax rate is as follows:
At October 31, 2009, deferred tax assets consisted of a net tax asset of $290,484, due to operating loss carryforwards of $889,392 which was fully allowed for, in the valuation allowance of $290,484. The valuation allowance offsets the net deferred tax asset for which there is no assurance of recovery. The changes in the valuation allowance for the years ended October 31, 2009 and 2008 totaled $273,233 and $2,363, respectively. The current tax benefit also totaled $273,233 and $2,363, respectively, for the years ended October 31, 2009 and 2008. The net operating loss carryforward expires through the year 2029.
AMERICAN ANTIQUITIES INCORPORATED
(A Development Stage Company)
Notes to Financial Statements
The valuation allowance will be evaluated at the end of each year, considering positive and negative evidence about whether the deferred tax asset will be realized. At that time, the allowance will either be increased or reduced; reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required.
Should we undergo an ownership change as defined in Section 382 of the Internal Revenue Code, our net tax operating loss carryforwards generated prior to the ownership change will be subject to an annual limitation, which could reduce or defer the utilization of these losses.