ITEM 1. BUSINESS
Business Development
APD Antiquities, Inc. (hereinafter "We", the "Registrant" or the "Company") was incorporated in the State of Nevada on July 23, 1996.
APD Antiquities, Inc. is an e-Commerce based Company engaged in the business of acquiring and marketing antiques. As of December 31, 2009 our inventory consists of four antiques, with an inventory cost of $4,709.00. Retail sales of antiques and collectibles are primarily facilitated through our website: www.apd-antiquities.com.
On December 27, 2004, APD Antiquities, Inc., a Nevada corporation and GCJ, Inc., ("GCJ") a Nevada corporation entered into to an Acquisition Agreement and Plan of Merger, whereby APD has acquired all the outstanding shares of common stock of GCJ from its sole stockholder in an exchange for $3,600 cash in a transaction where APD is the successor corporation. Pursuant to Rule 12g-3(g) of the General Rules and Regulations of the Securities and Exchange Commission, the APD Antiquities, Inc. is the successor issuer to GCJ for reporting purposes under the Securities Exchange Act of 1934, as amended (the "Act"). The purpose of this transaction was for APD Antiquities, Inc. to succeed to the registration status of GCJ under the Exchange Act pursuant to Rule 12g-3.
Inventory of Antiques Owned
We purchase and sell rare, high quality Asian antiques, Chinese art and other collectibles having their origin in Hong Kong and the Peoples Republic of China. In particular, we specialize in museum quality antique items such as statues, pottery, porcelain, earthen sculptures, and gilt lacquer accessories. These avenues of supply are likely to continue to be our main sources of inventory. We hope to create a brand synonymous with a large selection including a wide variety of antique types from the Far East. Other than this general mission, we have no established criterion or procedures for selecting merchandise.
In order to catalogue our inventory, we utilize a computerized inventory control system. The computer system allows our sales staff to quickly identify and obtain information about every antique in inventory. In addition, our sales staff can obtain digital images of the antiques from our website to exhibit to customers.
Clientele
Our marketing efforts principally target individuals who have appreciated or collected antiques and collectibles, but who may not be aware of the availability of antiques for purchase. In addition, antique collectors, interior decorators, interior designers, private clients and corporations are being targeted as these groups may have an appreciation for antiques or collectibles.
We have two primary sales and marketing strategies. The first is a direct sales approach via an Internet retail site. Originating from our corporate headquarters, we have contracted with a local Web Designer/Internet Service Provider (ISP) for the development and hosting of our retail website. Upon accessing the site, interested parties are able to read about our Company, browse the some of the inventory items and place orders. Currently, two of our pieces can be viewed in our gallery at www.apd-antiquities.com. Utilizing the internet has allowed us to market antiques on a global basis. At the current time, due to the expense associated with secure credit card transactions, we do not accept credit card orders via the website.
Our second marketing and sales strategy is a proposed direct mail approach. The direct mail approach will focus on antique collectors, interior decorators, home designers, private clients and corporations. This marketing effort is aimed at attracting persons who have not necessarily had an awareness of the existence of antiques available for private sale. At the present time, management has agreed upon a plan concerning our direct sales approach. In this regard, we will
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need to undertake an assessment of local and national business, economic and social demographics. When we are in a position to conduct this research we will seek the services of a marketing/public relations firm. We are uncertain, at this time, which local or national firm we will secure to undertake such a demographic study. Due to capital constraints, we cannot implement our proposed direct sales approach at this time.
For the year ended December 31, 2009, the Company sold no items and recorded no revenues.
Certificates of Authenticity
Antiques in our inventory are frequently acquired with guarantees from the sellers. In order to verify authenticity the Company may also: (a) utilize information provided by the seller as to age, condition and origin of an antique upon the transfer of ownership; (b) subject the antique or collectible to our own expert examination; (c) employ outside experts available to it to examine the antique items or (d) use other means.
We honor the Certificates of Authenticity provided by our wholesale vendors. Therefore, we have an obligation to refund to the customer the purchase price paid if any document is proven non-authentic. Should our determination of authenticity of an antique be erroneous we would, as a consequence, likely suffer a loss unless redress by the Company against the seller of the antiques could be obtained. We do not carry any insurance and are currently not aware of any entity that would offer or underwrite such insurance at commercially reasonable rates to protect us against a loss arising from either the purchase of antiques lacking authenticity or claims by customers for recovery against the Certificates of Authenticity. Currently, there are no claims against us and there have been no claims made against the Company pursuant to the Certificates of Authenticity. Accordingly, we have not established a reserve against the risk of forgery or against any exposure under the Certificates of Authenticity.
The Company
The Company’s plan of operation for the coming year is to identify and acquire a favorable business opportunity through merger or acquisition. We have not yet entered into any agreement, nor do we have any commitment or understanding to enter into or become engaged in any transaction, as of the date of this filing.
Although the Company is still investigating the profitability of pursuing the antiquities business, management is of the belief that there may be more value for our shareholders if we were able to attract a more substantial operating company and engage in a merger or business combination of some kind, or acquire assets or shares of an entity actively engaged in business which generates revenues. Any business combination or transaction may result in a significant issuance of shares and substantial dilution to our present stockholders. The Company may also purchase stock or assets of an existing business. On the consummation of a transaction, it is possible that the present management and shareholders of the Company will not be in control of the Company. In addition, the Company’s officers and directors may, as part of the terms of the acquisition transaction, resign and be replaced by new officers and directors without a vote of the Company’s shareholders.
The Company does not intend to restrict its consideration to any particular business or industry segment, and the Company may consider, among others, finance, brokerage, insurance, transportation, communications, research and development, biotechnology, service, natural resources, manufacturing or high-technology. However, due to the Company’s limited financial resources, the scope and number of suitable business venture candidates is limited, and most likely the Company will not be able to participate in more than a single business venture. Accordingly, it is anticipated that the Company will not be able to diversify, but may be limited to one merger or acquisition. This lack of diversification will not permit the Company to offset potential losses from one business opportunity against profits from another.
The Company’s operation following any future merger or acquisition of a business cannot be predicted at the present time.
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Competition
We do not regard the business of marketing antiques as a definable industry. There are a great number of dealers of antiquities, many of which are only part-time operators, many are located in homes without any established commercial location and many are located in commercial office buildings or have retail space in metropolitan areas. We compete primarily with art galleries, antique stores and sellers of other collectible items, as well as dealers in Asian antiquities.
When acquiring an antique or collectible, APD Antiquities, Inc. competes with persons who acquire similar antiques and collectibles for resale, as well as private collectors. The principal sources for antiques are wholesale vendors in Hong Kong and the People's Republic of China, as well as other Asian countries, such as Thailand, Viet Nam and South Korea. In the event prices for antiques increase materially, our ability to acquire antiques and, in turn, our ability to market such newly acquired antiques to the general public, may be adversely affected. However, if prices for antiques significantly increase, the resale/wholesale value of our inventory would be positively affected.
There is no assurance that we will be able to continue to realize profits for existing inventory or items purchased for resale in the future. Moreover, existing dealers may choose to compete with us in the same manner or in a more favorable format than that of the Company.
Barriers to entry into the market of sales of Asian antiques and collectibles are relatively low, and current and new competitors can launch new sites at relatively low costs using commercially available software. We potentially compete with a number of other companies marketing similar antiquities over the Internet. Pressures created by our competitors could have a material adverse effect on our business, results of operations and financial condition. We believe that the principal competitive factors in our market are volume and selection of goods, population of buyers and sellers, customer service, reliability of delivery and payment by users, brand recognition, Website convenience and accessibility, price, quality of search tools and system reliability. Some of our potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing, technical and other resources. In addition, other online trading services may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies. Therefore, some of our competitors with other revenue sources may be able to devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies, and devote substantially more resources to Website and systems development, or may try to attract traffic by offering incentives such as free products and/or services. Increased competition may result in reduced operating margins, loss of market share and diminished value in the Company brand.
As a strategic response to changes in the competitive environment, we may, from time to time, make certain pricing, service or marketing decisions or acquisitions. Such decisions or acquisitions could have a material adverse effect on our business, results of operations and financial condition. New technologies and the expansion of existing technologies may increase competitive pressures on the Company by enabling our competitors to offer products at a lower cost. Certain Web-based applications that direct Internet traffic to certain Websites may channel users to retail services that compete with us. Although we plan to establish arrangements with online services and have listed our site with search engine companies, there can be no assurance that arrangements can be initially established, will be renewed on commercially reasonable terms or that they will otherwise bring traffic to our website. In addition, companies that control access to transactions through network access or web browsers could promote our competitors or charge us substantial fees for inclusion. Any and all of these events could have a material adverse effect on our business, results of operations and financial condition.
Seasonal Business
The nature of the business in which the Company engages is not seasonal.
Employees
As of that date of this filing, the Company has two part time independent, commissioned officers, including it executive officers, Ms. Swank and Mr. Edward Wong Wah On. Ms. Swank is currently employed by Eastern Washington
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University. Mr. Wong Wah On is currently employed by Anka Consultants Limited, a consultant service provider headquartered in Sheung Wan, Hong Kong. APD Antiquities, Inc. does not serve as either individual's primary source of income. Ms. Swank currently spends about five percent (5%) of her free time on our operations. Mr. Wong is currently only able to dedicate a few hours per week working on our operations and is the person primarily responsible for selecting and purchasing antiques and collectibles. Our bylaws do not establish a minimum time commitment expected of each officer. We have no employment agreements with Ms. Swank or Mr. Wong.
ITEM 1A.
ITEM 1A. RISK FACTORS
Smaller reporting companies are not required to provide the information required by this item.
ITEM 2.
ITEM 2. PROPERTIES
The address of the principal office is: 1314 S. Grand Boulevard, Suite 2 - 250, Spokane, WA 99202. An unaffiliated party is providing approximately 1,250 square feet of office space on a month-to-month basis at the rate of $300 per month. The subleased space is currently fully utilized by our operation.
Management believes that this space is currently suitable for the Company's needs for an additional twelve (12) months.
Our officers own the computer equipment the Company utilizes.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We are not involved in any legal proceedings, and there are no material pending legal proceedings of which we are aware.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our Annual Meeting of Stockholders on January 30, 2010. Set forth below is a summary of each matter voted upon at the meeting and the number of votes cast for, against, withheld or abstained. Both proposals passed.
Proposal #1: The re-election of Cindy Swank, Edward Wong Wah On , and Timothy Kuh to serve on the Board of Directors:
Proposal #2: Ratification of the appointment of BehlerMick PS as our independent auditors for the year ending December 31, 2010:
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PART II
ITE M 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
THERE IS NO PUBLIC MARKET FOR THE COMPANY'S COMMON STOCK. THE COMPANY'S COMMON STOCK, PAR VALUE $.001, HAS NEVER BEEN TRADED ON ANY NATIONAL EXCHANGE OR OTHER FORMAL PUBLIC EXCHANGE QUOTATION MEDIUM. THERE IS NO TRADING MARKET FOR OUR COMMON STOCK AT PRESENT AND THERE HAS BEEN NO TRADING MARKET TO DATE.
As of December 31, 2009 there were approximately 51 holders of record of the Company's Common Stock before calculating individual participants in security position listings pursuant to Rule 17Ad-8 under the Securities Exchange Act of 1934. The Company's transfer agent Nevada Agency and Trust Company, 50 West Liberty Street, Suite 880, Reno, Nevada 89501, reported approximately 51 beneficial owners of 2,711,111 shares the Company's issued and outstanding common stock, as of December 31, 2009.
Since its inception in July of 1996, the Company has never paid cash dividends to the holders of the common stock. We presently intend to retain future earnings, if any, to finance the expansion of our business and we do not anticipate that any cash dividends will be paid in the foreseeable future. Our future dividend policy will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors.
Recent Sales of Unregistered Securities; Use of Proceeds From Unregistered Securities
On November 10, 2009, we issued 111,111 unregistered shares of its common stock, par value $0.001, at $.045 per share to one corporation in exchange for $5,000 cash. We sold these restricted shares to further capitalize the Company in order to pay operating expenses and to execute our business plan . We relied on the exemption from registration provided by Section 4(2) and Rule 506 of Regulation D under the Securities Act of 1933, as amended (“Regulation D”), for sales to “accredited investors” (as such term is defined in Rule 501 of Regulation D). The purchaser has represented to the Company that it is an “accredited investor.” We believed that Section 4(2) was available because the offer and sale did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale and no fees were paid in connection with the transaction.
On April 20, 2009, we issued 555,000 unregistered shares of its common stock, par value $0.001, at $.045 per share to three corporations in exchange for $24,975 cash. Each purchaser invested $8,325 and was issued 185,000 shares. We sold these restricted shares to further capitalize the Company in order to pay operating expenses and to execute our business plan. We relied on the exemption from registration provided by Section 4(2) and Rule 506 of Regulation D under the Securities Act of 1933, as amended (“Regulation D”), for sales to “accredited investors” (as such term is defined in Rule 501 of Regulation D). Each purchaser has represented to the Company that they are an “accredited investor.” We believed that Section 4(2) was available because the offer and sale did not involve a public offering and there was not general solicitation or general advertising involved in the offer or sale and no fees were paid in connection with the transaction.
In November 2008, we issued 25,000 shares of common stock in a private placement at $.20 per share. The issuance of the securities was exempt from the registration requirements of the Securities Act pursuant to the exemption set forth in Section 4(2) and Regulation D, Rule 506 of the Securities Act. Gross proceeds of $5,000 were paid to the Company in this private placement. No commission or finder's fee was paid in regards to this transaction.
In September 2008, we issued 25,000 shares of common stock in a private placement at $.50 per share. The issuance of the securities was exempt from the registration requirements of the Securities Act pursuant to the exemption set forth in Section 4(2) and Regulation D, Rule 506 of the Securities Act. Gross proceeds of $12,500 were paid to the Company in this private placement. No commission or finder's fee was paid in regards to this transaction.
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In October 2007, we issued an aggregate of 25,000 shares of common stock in a private placement at $.50 per share. The issuance of the securities was exempt from the registration requirements of the Securities Act pursuant to the exemption set forth in Section 4(2) and Regulation D, Rule 506 of the Securities Act. Gross proceeds of $12,500 were paid to the Company in this private placement. No commission or finder's fee was paid in regards to this transaction.
In June 2005, we issued an aggregate of 250,000 shares of common stock in a private placement at $.10 per share. The issuance of the securities was exempt from the registration requirements of the Securities Act pursuant to the exemption set forth in Section 4(2) and Regulation D, Rule 506 of the Securities Act. Gross proceeds of $25,000 were paid to the Company in this private placement. No commission or finder's fee was paid in regards to this transaction.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING PLAN OF OPERATIONS SECTION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ON PAGES 15 THROUGH 25 OF THIS ANNUAL REPORT ON FORM 10-K. ALL STATEMENTS IN THIS ANNUAL REPORT RELATED TO APD ANTIQUITIES’ CHANGING FINANCIAL OPERATIONS AND EXPECTED FUTURE OPERATIONAL PLANS CONSTITUTE FORWARD-LOOKING STATEMENTS. THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED OR EXPRESSED IN SUCH STATEMENTS. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE.
The Company’s plan of operation for the coming year is to identify and acquire a favorable business opportunity through merger or acquisition. We have not yet entered into any agreement, nor do we have any commitment or understanding to enter into or become engaged in any transaction, as of the date of this filing.
The Company's existing cash position is not sufficient to support its operations. Accordingly, the Company is continuing to examine a range of possible funding sources, including additional strategic alliances, additional equity or debt private placements, the sale of existing assets, the possibility of entering into one or more business transactions that could involve the merger or sale of the Company and/or the sale of some or all of its assets. We do not currently have any contractual restrictions on our ability to incur debt. Any such indebtedness could contain covenants that would restrict our operations. There can be no assurance that additional financing will be available on terms favorable to the Company, or at all. If equity or convertible debt securities are issued, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution and such securities may have rights, preferences or privileges senior to those of the Company's common stock. This effect is attributed to the fact that while additional shares of common stock are issued from the company treasury, the Company's earnings at that particular moment remain consistent and, therefore, the earnings per share decreases. If the Company is unsuccessful in these efforts, the Company will be required to curtail its ongoing operations. If the Company were unable to sufficiently curtail its costs in such a situation, it might be forced to seek protection of the courts through reorganization, bankruptcy or insolvency proceeding or cease operations completely.
With respect to long term liquidity (periods in excess of one year), we are unable to reasonably project or otherwise make assumptions concerning future cash flows or amounts of funds that may be available to the Company. Long-term liquidity is directly dependent upon the future success of the Company's business, including our marketing strategy, our efforts to increase sales and the costs of goods sold relative to our market price. Management currently anticipates that cash flow from operations will increase in the long-term as the Company increases its sales and marketing activities. However, management also anticipates that our operating expenses will increase in the long-term as a result of the increase in sales and marketing activities as well as general and administrative activities.
For more information concerning the Company's ability to continue as a going concern, see Note 2 to the consolidated financial statements. The Company's significant accounting policies are also detailed in Note 2 of the Company's Consolidated Financial Statements.
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We have had minimal operations and very limited revenues. From inception we have accumulated an operating deficit of $189,522. For the year ended December 31, 2009, we had a net loss of $24,141 on gross revenues of $0 from no sales. As of December 31, 2009, we had cash of $1,962, inventories of $4,709 and accounts receivable of zero for total current assets of $6,671. We have realized only minimal revenue from sales and had a net loss for the year ended December 31, 2009. We believe that we could experience negative operating cash flow for the foreseeable future as a result of significant increased spending on advertising, augmentation of inventory, etc.
The only development costs incurred since inception are with respect to finding suitable products that offer the Company potential for revenues and profits, as we market these products through our Website.
Our ability to achieve profitable operations is subject to the validity of our assumptions and risk factors within the industry and pertaining to the Company.
Results of Operations
FISCAL 2009 COMPARED TO FISCAL 2008
There were no revenues for the years ending December 31, 2008 or 2009. This lack of revenue is attributed to the lack of time and focus of the president. The Company has capital restraints that have not allowed inventory augmentation and diversification, implementation of our marketing strategy, etc. There was no cost of goods sold for the years ending December 31, 2008 or 2009.
For the twelve months ending December 31, 2009, the Company reported a net loss of $24,141 on gross revenues of $0 with gross profit on sales of $0 compared to sales of $0, a gross profit of $0 and net loss of $48,441 in the year ended December 31, 2008. The Company incurred Operating Expenses of $24,141 in the year ended December 31, 2009 and $48,441 in the year ended December 31, 2008. This is a decrease of $24,300 from the year ending December 31, 2008 as compared to the year ended December 31, 2009. The major difference in the two periods being attributable to a decrease in professional fees.
The Company's independent public accountants have included explanatory paragraphs in their reports on the Company's financial statements for the years ended December 31, 2009 and 2008, which express substantial doubt about the Company's ability to continue as a going concern. As discussed in Footnote 2 to the Company's financial statements, included with this 10-K, the Company has suffered recurring losses from operations since inception and accumulated deficit that raises substantial doubt about its ability to continue as a going concern.
Liquidity and Capital Resources
APD Antiquities, Inc. has limited assets. As of December 31, 2009, our assets consisted of cash of $1,962, inventories of $4,709 and accounts receivable of zero for total assets of $6,671.
The current President of the Company owns a total of 202,004 shares of the Company's authorized stock, which she paid $1,150 in cash. Additionally, a private placement offering was made in reliance upon an exemption from the registration provisions of Section 5 of the Securities Act of 1933, as amended, pursuant to Regulation D, Rule 504, of the Act. Between May 1, 1999 and May 24, 1999, we raised $51,000 through the sale of 51,000 thousand (51,000) shares of common stock in connection with the above-mentioned private placement offering, at a price of $1.00 per share, to forty (40) unaffiliated shareholders. On December 21, 2004, the Company implemented a 4 for 1 split of the common stock. In September of 2004, we raised $10,000 through the sale of forty thousand (40,000) shares of common stock at a price of $.25 per share, to one unaffiliated shareholder. In June of 2005, we raised $25,000 through the sale of two hundred fifty thousand (250,000) shares of common stock at a price of $.10 per share, to one unaffiliated shareholder. In October of 2007, we raised $12,500 through the sale of twenty-five thousand (25,000) shares of common stock at a price of $.25 per share, to one unaffiliated shareholder. In September of 2008, we raised $12,500 through the sale of forty thousand (25,000) shares of common stock at a price of $.50 per share, to one unaffiliated shareholder. In November of 2008, we raised $5,000 through the sale of twenty-five thousand (25,000) shares of
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common stock at a price of $.20 per share, to one unaffiliated shareholder. In April 2009, we issued 555,000 unregistered shares of its common stock, par value $0.001, at $.045 per share from our treasury to three corporations in exchange for $24,975 cash. In November of 2009, we raised $5,000 through the sale of one hundred eleven thousand one hundred eleven (111,111) shares of common stock at a price of $.045 per share, to one unaffiliated company.
The inventory periodically reviewed by management to determine if there has been any known auction or interdealer sales of similar antiques at reduced prices and to determine if a reduction in the inventory carrying value is needed. The Company's review of its inventory of antiques has shown no decline in market value below cost.
During the past two fiscal years, the Company has not experienced any adverse impact arising from inflation. However, in the event prices for antiques increase materially or the value of the dollar decrease against other currencies, the Company's ability to acquire antiques, and, in turn, its ability to market such newly acquired antiques to its market, may be adversely affected. Thus, although the retail and wholesale values of the Company's existing inventory might be favorably affected by increasing prices, passing along such increases to customers could have an inhibiting effect on the Company's overall business. Management of the Company believes that tangible collectibles move inversely with financial assets over the long term. As a result, during times of greater inflationary expectations, tangible collectibles may actually be the beneficiary of greater interest.
The Company anticipates no material commitments for capital expenditures at the present time. Management is not aware of any trend in the Company's capital resources, which may have an impact on its income, revenue or income from continuing operations.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our 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 the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. We have disclosed all significant accounting policies in note 2 to the financial statements included in this Form 10-K. Our critical accounting policies are:
Revenue recognition: Sales are recognized as revenue when the amounts are contractually earned, fixed and determinable, and there is substantial probability of collection. Revenues from retail sales are recognized at the time the products are delivered.
Although the Company does not provide a written warranty on its items sold, the Company will refund the purchase price paid to any customer in those instances when an item sold is proven to be non-authentic. In a majority of instances, the Company receives a certificate of authenticity for documents (items) purchased from its vendors and is reasonably assured as to the provenance of its products. Since inception, the Company has made no refunds for the sale of any non-authentic items nor has the Company received any claims or notice of prospective claims relating to such items. Accordingly, the Company has not established a reserve against forgery or non-authenticity.
If a product proves not to be authentic, the Company would give a full refund to the purchaser and record a charge for sales returns.
Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. The Company’s accounting estimates principally concern the net reliability of its receivables and the marketability and value of its inventory. Actual results could differ from those estimates.
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Inventories: Inventories are accounted for using the specific identification method, and stated at the lower of cost or market, with market representing the lower of replacement cost or estimated net realizable value. The Company has no insurance coverage on its inventory.
The Company has no inventory on consignment at December 31, 2009 or 2008. In the future, if the Company consigns inventory, it will retain title and will insure the inventory until the inventory is sold, returned, lost, stolen, damaged, or destroyed.
ITEM 7 A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of the date hereof, the debt the Company has is with no variable or fixed interest, however, in the future we may incur debt or issue debt instruments. The fair market value of any future debt will be sensitive to changes in prevailing interest rates. The Company runs the risk that market rates will decline and the required payments will exceed those based on the current market rate. We do not use interest rate derivative instruments to manage our exposure to interest rate changes.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
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To the Board of Directors and
Stockholders of APD Antiquities, Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheets of APD Antiquities, Inc. as of December 31, 2009 and 2008, and the related statements of operations, stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement . The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 APD Antiquities, Inc. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended 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 2, the Company has a history of operating losses, has limited cash resources, and its viability is dependent upon its ability to meet its future financing requirements, and the success of future operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/BehlerMick PS
BehlerMick PS
Certified Public Accountants
Spokane, Washington
March 30, 2010
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APD ANTIQUITIES, INC.
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
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APD ANTIQUITIES, INC.
STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these financial statements.
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APD ANTIQUITIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY(DEFICIT)
The accompanying notes are an integral part of these financial statements.
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APD ANTIQUITIES, INC.
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements.
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APD ANTIQUITIES, INC.
Notes to the Financial Statements
December 31, 2009
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
APD Antiquities, Inc. (hereinafter “APD” or “the Company”) was incorporated on July 23, 1996 under the laws of the State of Nevada for the purpose of acquiring, importing, marketing, and selling valuable antiquity and art items of Asian origin. Examples of these items are such things as furniture, works of art, antiques, glass works, porcelain, statues, pottery, sculptures and other collectibles and collector items that have their origin in the Far East. These collectibles and antiques will be acquired through a variety of agents and wholesale distribution sources in Hong Kong and the Peoples Republic of China. Acquisitions will be made by agents of APD and as the result of direct buying trips and direct contact with wholesale companies located in several Asian countries. The Company changed its name from APD International Corporation in August of 1999.
The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company's financial position and results of operations.
The Company maintains its corporate office in Spokane, Washington and offers its products online. The Company’s fiscal year end is December 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
Accounting Method
The Company’s financial statements are prepared using the accrual method of accounting.
Advertising Costs
Advertising costs, including costs for direct mailings, are expensed when incurred. During the year ending December 31, 2009, and December 31, 2008 were $585 and $441, respectively.
Basic and Diluted Earnings Per Share
Basic net income (loss) per share is computed using the weighted average number of common shares outstanding. Diluted net income (loss) per share is the same as basic net income (loss) per share as there are no common stock equivalents outstanding.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a remaining maturity of three months or less to be cash equivalents.
Compensated Absences
The Company does not offer paid vacation or personal time to its employees. Accordingly, there is no related accrual of expenses.
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Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. At December 31, 2009, the Company had a history of operating losses, an accumulated deficit of $189,522 and limited cash resources. These conditions raise significant doubt about the Company’s ability to continue as a going concern.
The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations. Management's plans are to seek additional capital through sales of its common stock. If necessary, the Company may sell common stock to provide additional cash to future operations and market development. However, management has no plans to make a private offering of common stock at this time.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Inventories
Inventories are accounted for using the specific identification method, and stated at the lower of cost or market, with market representing the lower of replacement cost or estimated net realizable value. The Company has no insurance coverage on its inventory. The Company has no inventory on consignment at December 31, 2009. In the future, if the Company consigns inventory, it will retain title and will insure the inventory until the inventory is sold, returned, lost, stolen, damaged, or destroyed.
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.
Revenue and Cost Recognition
Revenues from retail sales are recognized at the time the products are delivered.
Although the Company does not provide a written warranty on its items sold, the Company will refund the purchase price paid to any customer in those instances when an item sold is proven to be non-authentic. In a majority of instances, the Company receives a certificate of authenticity for documents (items) purchased from its vendors and is reasonably assured as to the provenance of its products. Since inception, the Company has made no refunds for the sale of any non-authentic items nor has the Company received any claims or notice of prospective claims relating to such items. Accordingly, the Company has not established a reserve against forgery or non-authenticity.
If a product proves not to be authentic, the Company would give a full refund to the purchaser and record a charge for sales returns.
Use of Estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. At December 31, 2009, the Company had not participated in consignment or conditional sales; therefore, there are no unsettled transactions related to sales or cost of sales.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and
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the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and accrued expenses, approximate their fair values because of the short maturity of these instruments.
The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2009 or 2008, nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the period ended December 31, 2009 or 2008.
NOTE 3 - COMMITMENTS
Rental Agreement
The Company has a month-to-month rental agreement for office space in Spokane, Washington. The monthly rent is $300.
NOTE 4 - PROVISION FOR TAXES
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”).. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
At December 31, 2009, the Company had deferred tax assets of approximately $64,000 principally arising from net operating loss carry forwards for income tax purposes calculated at an expected rate of 34%. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax assets, a valuation allowance equal to the deferred tax assets was present at December 31, 2009 and 2008.
The significant components of the Company’s deferred tax assets at December 31, 2009 and December 31, 2008 were as follows:
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At December 31, 2009, the Company has net operating loss carry forwards of approximately $189,522, which expire in the years 2022 through 2029. The change in the allowance account from December 31, 2008 to December 31, 2009 was an increase of $8,000.
NOTE 5 - PREFERRED AND COMMON STOCK
The Company has 5,000,000 shares of preferred stock authorized and none issued.
On April 20, 2009 the Company sold 555,000 shares of common stock in a private placement for cash of $24,975 ($0.045 per share).
On November 9, 2009 the Company sold 111,111 shares of common stock in a private placement for cash of $5,000 ($0.045 per share).
On December 29, 2009 the Company converted a payable of $13,200 to 264,000 shares of common stock at $0.05 per share.
NOTE 6 - STOCK OPTION PLAN
The Company’s board of directors approved the adoption of the “2001 Non-Qualified Stock Option and Stock Appreciation Rights Plan” by unanimous consent on January 15, 2001. This plan was initiated to encourage and enable officers, directors, consultants, advisors and other key employees of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. A total of 1,000,000 of the authorized shares of the Company’s common stock may be subject to, or issued pursuant to, the terms of the plan. No options have been issued under the plan as of December 31, 2009.
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB approved the “FASB Accounting Standards Codification” (the “Codification”) as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. The Codification is effective for interim and annual periods ending after September 15, 2009.
In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-04 “Accounting for Redeemable Equity Instruments - Amendment to Section 480-10-S99” which represents an update to section 480-10-S99, distinguishing liabilities from equity, per EITF Topic D-98, Classification and Measurement of Redeemable Securities. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.
In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-05 “Fair Value Measurement and Disclosures Topic 820 - Measuring Liabilities at Fair Value”, which provides amendments to subtopic 820-10, Fair Value Measurements and Disclosures - Overall, for the fair value measurement of liabilities. This Update provides
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clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1. A valuation technique that uses: a. The quoted price of the identical liability when traded as an asset b. Quoted prices for similar liabilities or similar liabilities when traded as assets. 2. Another valuation technique that is consistent with the principles of topic 820; two examples would be an income approach, such as a present value technique, or a market approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. The amendments in this Update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The amendments in this Update also clarify that both a quoted price in an active market for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.
In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-08 “Earnings Per Share - Amendments to Section 260-10-S99”,which represents technical corrections to topic 260-10-S99, Earnings per share, based on EITF Topic D-53, Computation of Earnings Per Share for a Period that includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.
In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-09 “Accounting for Investments-Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees”. This Update represents a correction to Section 323-10-S99-4, Accounting by an Investor for Stock-Based Compensation Granted to Employees of an Equity Method Investee. Additionally, it adds observer comment Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees to the Codification. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.
In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-12 “Fair Value Measurements and Disclosures Topic 820 - Investment in Certain Entities That Calculate Net Assets Value Per Share (or Its Equivalent)”, which provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this Update permit, as a practical expedient, a reporting entity to measure the fair value of an investment that is within the scope of the amendments in this Update on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner consistent with the measurement principles of Topic 946 as of the reporting entity’s measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with Topic 820. The amendments in this Update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this Update, such as the nature of any restrictions on the investor’s ability to redeem its investments at the measurement date, any unfunded commitments (for example, a contractual commitment by the investor to invest a specified amount of additional capital at a future date to fund investments that will be make by the investee), and the investment strategies of the investees. The major category of investment is required to be determined on the basis of the nature and risks of the investment in a manner consistent with the guidance for major security types in U.S. GAAP on investments in debt and equity securities in paragraph 320-10-50-1B. The disclosures are required for all investments within the scope of the amendments in this Update regardless of whether the fair value of the investment is measured using the practical expedient. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.
In January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-01 “Equity Topic 505 - Accounting for Distributions to Shareholders with Components of Stock and Cash”, which clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend for purposes of applying Topics 505 and 260 (Equity and Earnings Per Share (“EPS”)). Those distributions should be accounted for and included in EPS calculations in accordance with paragraphs 480-10-25- 14 and 260-10-45-45 through 45-47 of the FASB Accounting Standards codification. The
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amendments in this Update also provide a technical correction to the Accounting Standards Codification. The correction moves guidance that was previously included in the Overview and Background Section to the definition of a stock dividend in the Master Glossary. That guidance indicates that a stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the stockholders. It also indicates that the proportional interest of each shareholder remains the same, and is a key factor to consider in determining whether a distribution is a stock dividend.
In January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-02 “Consolidation Topic 810 - Accounting and Reporting for Decreases in Ownership of a Subsidiary - a Scope Clarification”, which provides amendments to Subtopic 810-10 and related guidance within U.S. GAAP to clarify that the scope of the decrease in ownership provisions of the Subtopic and related guidance applies to the following:
1.
A subsidiary or group of assets that is a business or nonprofit activity
2.
A subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture
3.
An exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in an entity (including an equity method investee or joint venture).
The amendments in this Update also clarify that the decrease in ownership guidance in Subtopic 810-10 does not apply to the following transactions even if they involve businesses:
1.
Sales of in substance real estate. Entities should apply the sale of real estate guidance in Subtopics 360-20 (Property, Plant, and Equipment) and 976-605 (Retail/Land) to such transactions.
2.
Conveyances of oil and gas mineral rights. Entities should apply the mineral property conveyance and related transactions guidance in Subtopic 932-360 (Oil and Gas-Property, Plant, and Equipment) to such transactions.
If a decrease in ownership occurs in a subsidiary that is not a business or nonprofit activity, an entity first needs to consider whether the substance of the transaction causing the decrease in ownership is addressed in other U.S. GAAP, such as transfers of financial assets, revenue recognition, exchanges of nonmonetary assets, sales of in substance real estate, or conveyances of oil and gas mineral rights, and apply that guidance as applicable. If no other guidance exists, an entity should apply the guidance in Subtopic 810-10.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were certain reportable subsequent events to be disclosed as follows:
On March 1, 2010, the Company signed a promissory note with an unrelated party for $10,000 at eight percent (8%) interest which is due and payable on February 28, 2011.
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ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.
Our management, including our principal Executive Officer and our principal Financial Officer, has evaluated the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the United States Securities Exchange Act of 1934, as amended), as of December 31, 2009. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive and Chief Financial Officer, to allow timely decisions regarding required disclosures. As described below in the Management’s Report on Internal Control over Financial Reporting, management has reported material weaknesses in the internal control over financial reporting as of December 31, 2009. Based on that evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2009, due to the reported material weaknesses.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework and Internal Control over Financial Reporting-Guidance for Smaller Public Companies.
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A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
We identified a material weakness in our internal control over financial reporting as of December 31, 2009 because fundamental elements of an effective control environment were missing or inadequate as of December 31, 2009, including a documented ethics or values statement, a code of conduct, and independent oversight and monitoring of financial reporting, financial reporting processes and procedures, and internal control procedures. At present, the Board of Directors is comprised entirely of individuals performing management functions. Because no Directors are independent, no Audit Committee has been established to which the Board could delegate its oversight responsibilities. Accordingly, our management has determined that this control deficiency constitutes a material weakness.
Additionally, due to the size of the Company, it was not possible to ensure adequate segregation of duties between incompatible functions, and management has not established or implemented monitoring procedures to mitigate this risk. Due to a lack of personnel, it was not possible to ensure that both routine and non-routine financial information was adequately analyzed and reviewed on a timely basis to detect misstatements.
Based on this assessment and the material weakness described above, management has concluded that as of December 31, 2009, our internal control over financial reporting was not effective based on criteria in Internal Control - Integrated Framework and Internal Control over Financial Reporting-Guidance for Smaller Public Companies issued by the COSO.
This annual 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 annual report.
Management intends, as capital resources allow, to take the following steps to remediate the material weaknesses we identified as follows:
·
To the extent management is able to attract competent, independent Directors, the Board will delegate its oversight responsibilities to an Audit Committee of independent Directors.
·
We will adopt a code of conduct and ethics.
·
We will increase the oversight and review procedures of the board of directors with regard to financial reporting, financial reporting processes and procedures and internal control procedures.
·
We will segregate incompatible functions using existing personnel where possible or, given sufficient capital resources, we will contract additional personnel to perform those functions.
Changes in Internal Controls Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control performed during our last fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None.
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PART III
Item 10.
Item 10. Directors, Executive Officers, and Corporate Governance
A. Directors, Executive Officers, Promoters and Control Persons
Set forth below are the present directors, executive officers and any significant employees of the Company. Note that there are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. Directors are elected until the next annual meeting of shareholders and until their successors are duly elected and qualified. Officers are elected for terms of one year, or until their successors are duly elected and qualified or until terminated by the action of the Board of Directors.
There is no relationship by blood, marriage or adoption (not more remote than first cousin) between any Director or executive officer of the Company.
Set forth below are brief accounts of the business experience during the past five years of each director and executive officer of the Company.
Ms. Cindy K. Swank has been the President/Treasurer, or Secretary and Director of APD Antiquities, Inc. since 1999 and has focused on developing sales and marketing programs for the Company's products. From 1997 through the present, Ms. Swank has been self-employed as a manager-promoter of her daughter, a singer/stage performer, as well as other activities in the marketing and reorganization of websites. She attended Eastern Washington University in Cheney, WA and has awards for her accomplishments and creativity in the design industry. Mrs. Swank founded, owned and managed Daisy's Bloomers, from 1990 until 1997, when she sold the business to L&L Limited Partnership. The principle business of Daisy's Bloomers was retail sales of flowers and gifts.
Mr. Wong Wah On Edward, Secretary and director of APD Antiquities, Inc., was elected to these offices in March 2003. Mr. Wong obtained his professional diploma in Company Secretaryship and Administration from the Hong Kong Polytechnic University in 1988 and is an associate of the Chartered Association of Certified Accountants, the Hong Kong Society of Accountants, and the Institute of Chartered Secretaries and Administrators. He is also a certified public accountant in Hong Kong. He joined Ernst & Young Hong Kong following his graduation and worked as audit supervisor until late 1992. Thereafter, he commenced private practice in Hong Kong and is a partner in the firm of Tam & Wong CPA. Mr. Wong is also currently a shareholder, director and Financial Controller of China Resources Development, Inc. (CHRB), a company listed on Nasdaq SmallCap market. Mr. Wong currently resides in Hong Kong and assists the company in purchasing antiques as an agent for the company. He helps the Company find qualified suppliers of antiques.
Mr. Timothy J. Kuh, Vice President and director of APD Antiquities, Inc. was elected to these offices in December of 2004. Mr. Kuh obtained his Bachelor Degree in International Affairs from Eastern Washington University in 2004. Mr. Kuh was employed by Horizon/Alaska Airlines from 1999 until November 2004. He is currently employed by Triax Capital Management, Inc. as their operations manager. Mr. Kuh resides in Spokane, Washington and will assist the company in operations and administrative activities.
B. Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than ten percent of the Company's Common Stock, to file with the Securities and Exchange
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Commission initial reports of ownership and reports of changes of ownership of Common Stock of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
The Company has no knowledge that, as of the date of this filing, the Company's directors, executive officers and persons who own more than ten percent of the Company's Common Stock have filed an initial Form 3 or an annual Form 5.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
A. Summary Compensation Table
The following summary compensation table sets forth information concerning the annual and long-term compensation for services in all capacities to the Company for the fiscal years ended December 31, 2009 and 2008, of those persons who were (i) the chief executive officer and (ii) the other most highly compensated executive officers of the Company, whose annual base salary and bonus compensation was in excess of $100,000. No person received compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
*The officers/directors do not receive salaries but are to be compensated for sales generated on behalf of the Company. Compensation is based solely on bringing business to the Company. A nine percent (9%) commission is equally divided amongst the officers/directors for each sale made. No commissions were paid during the year ended December 31, 2009.
B. Narrative Disclosure to Summary Compensation Table
During the fiscal year ended December 31, 2009, no director received any compensation for attending meetings of the Board of Directors and the Company presently intends that the same will be the case for the fiscal year ended December 31, 2010. Directors are reimbursed, however, for reasonable expenses incurred on behalf of the Company.
C. Outstanding Equity Awards at Fiscal Year End
No director had been granted any equity compensation, including option grants, as of December 31, 2009.
D. Compensation of Directors
No compensation was paid to directors for their director services during the fiscal year ending December 31, 2009.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth the number and percentage of Common Shares beneficially owned, as of the date of this filing, out of 2,711,111 shares, by: (i) the beneficial owners of more than five percent of the Common Stock of the Company; (ii) all Directors of the Company; (iii) each of the named Executive Officers; and, (iv) all Officers and Directors of the Company as a group:
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(1)
Unless otherwise indicated, the address of each of the listed beneficial owners identified above is c/o 1314 South Grand Boulevard, Suite 2-250, Spokane, WA 99202.
(2)
Cindy K. Swank. Includes 202,004 shares of common stock held by Cindy Swank.
(3)
Wong Wah On Edward. Includes 400 shares of common stock held by Edward Wong.
(4)
Raymond J. Kuh. Includes 201,004 shares of common stock held by Raymond Kuh.
(5)
Peter Yauschew. Includes 133,732 shares of common stock held by Peter Yauschew.
(6)
Merridy Buttice. Includes 133,732 shares of common stock held by Merridy Buttice.
(7)
Peter Schmid. Includes 133,732 shares of common stock held by Peter Schmid.
(8)
Klaus Lewin. Includes 308,564 shares of common stock held by Klaus Lewin.
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(9)
Donna Street. Includes 133,332 shares of common stock held by Donna Street.
(10)
Timothy J. Kuh. Includes 2,000 shares of common stock held by Timothy Kuh.
(11)
Yu Shum Cheung. Includes 251,500 shares of common stock held by Shum Cheung Yu.
(12)
Medford Financial, Ltd. Includes 185,000 shares of common stock held by Medford Financial, Ltd.
(13)
Sierra Growth, Inc. Includes 185,000 shares of common stock held by Sierra Growth, Inc.
(14)
Stonehurst Limited. Includes 185,000 shares of common stock held by Stonehurst Limited.
(15)
Includes the shares of Common Stock beneficially owned by Ms. Swank, Mr. Tim Kuh, and Mr. Wong Wah On.
Unless otherwise indicated, the owners have sole voting and investment power with respect to their respective shares. In general, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of such security, or the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which the person has the right to acquire beneficial ownership within 60 days. At December 31, 2009 we had outstanding 2,711,111 shares of common stock.
(a) Changes in Control
There are no arrangements known to the Company, the operation of which may at a subsequent date result in a change of control of the Registrant.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
APD Antiquities, Inc. was incorporated on July 23, 1996, in the state of Nevada. During the year ended December 31, 1999, 300,000 shares of common stock were issued to officers and directors for cash in the amount of $300 (par value), 51,000 common shares were sold for $1.00 per share and 10,000 common shares were issued for converted debt. In September 2004, the Company issued 10,000 shares of common stock for cash in the amount of $10,000. On December 21, 2004 the company undertook a 1 for 4 split of the common stock, resulting in a total of 1,448,000 shares being issued and outstanding.
The Company's officers/directors do not receive salaries but are being compensated for sales generated on behalf of the Company. Compensation is based solely on bringing business to the Company. A nine percent (9%) commission is equally divided amongst the officers/directors for each item sold. From inception the current corporate officer/director, Ms. Swank, was paid a total of $ 4,529.35 for sales arranged on behalf of the Company. Additionally, as a result of no revenue and minimal operations, no commissions were accrued during the year ended December 31, 2009 and any commissions payable to Ms. Swank were accrued on our books during that fiscal year.
Equity Compensation Plan Information
The following table sets forth information about the common stock available for issuance under compensatory plans and arrangements as of December 31, 2009.
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ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
BehlerMick PS, Certified Public Accountants, are the Company’s independent auditors to examine the financial statements of the Company for the fiscal year ending December 31, 2009. BehlerMick PS has performed the following services and has been paid the following fees for these fiscal years.
Audit Fees. Aggregate fees billed for professional services rendered by BehlerMick in connection with its audit of APD’s financial statements as of and for the years ended December 31, 2009, and 2008, its reviews of APD’s unaudited condensed consolidated interim financial statements, and for SEC consultations and filings were $26,932 and $28,529, respectively.
Audit-Related Fees. BehlerMick PS was not paid additional fees for the fiscal year ended December 31, 2008 and December 31, 2009 for assurance and related services reasonably related to the performance of the audit or review of the Company’s financial statements.
Tax Fees - BehlerMick any aggregate fees for the fiscal year 2009 for professional services rendered for tax compliance. We did not incur any fees and expenses from BehlerMick PS for the fiscal year 2008 for professional services rendered for tax compliance, tax advice and tax planning.
All Other Fees - We did not incur any other fees and expenses from BehlerMick PS for the fiscal years 2008 and 2009 annual audits.
Our pre-approval policies and procedures for the board, acting in lieu of a separately designated, independent audit committee, described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.
The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was 0%.
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PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) 1 & 2. Financial Statements See Item 8 in Part II of this report.
All other financial statement schedules are omitted because the information required to be set forth therein is not applicable or because that information is in the financial statements or notes thereto.
(a) 3
* Incorporated by reference to the Registrant's Registration Statement on Form 10SB12G filed on May 3, 2004, File No. 000-50738
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 12, 2010
APD ANTIQUITIES, INC.
By:
/s/ Cindy Swank
Cindy Swank
President, Treasurer, CEO,
Principal Financial Officer
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
/s/ Cindy K. Swank
Dated: April 12, 2010
Cindy K. Swank
Director
/s/ Edward Wong Wah On
Dated: April 12, 2010
Edward Wong Wah On
Director
/s/ Timothy J. Kuh
Dated: April 12, 2010
Timothy J. Kuh
Director
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