ITEM 1.
BUSINESS.
Background
Asia Document Transition, Inc. (“ADT”) was incorporated in the State of Nevada on April 13, 2006 as a wholly owned subsidiary of Cell Source Research Inc., a Nevada corporation. ADT has generated limited revenue and is still a development stage corporation. ADT’s plan of operations is to provide (a) document formatting (“Edgarizing”), and electronic filing services to companies and individuals that desire to submit filings, such as annual and quarterly reports, prospectuses, registration statements, and other documents pursuant to the federal securities laws, to the United States Securities and Exchange Commission (“SEC”), via EDGAR, the SEC's electronic data gathering analysis and retrieval system and (b) provide virtual office services consisting of providing phone numbers, fax numbers and mail delivery addresses to local and foreign companies desirous of establishing a presence in Hong Kong (“Virtual Office”). We commenced both our Edgarizing and Virtual Office operations in April 2006. However, we temporarily ceased the operations of our Edgarizing business at the beginning of year 2008, and we have not resumed the operations of this Edgarizing business as of this date. On April 13, 2006, the Company issued 125,000 shares of its common stock to Cell Source Research, Inc. in exchange for services valued at $1,000.00. Cell Source Research, Inc. recently distributed its shares of the Company’s stock in a dividend to its shareholders. On April 17, 2006, the Company issued 375,000 shares of its common stock to V3 Consulting, Inc., an outside consultant, for services valued at $3,000.00. On April 26, 2006, ADT acquired all the issued and outstanding shares of Vast Opportunity Limited, a Hong Kong Incorporated Limited Company through the issuance a total of 24,500,000 shares of the Common Shares to 6 shareholders.
Our Business Generally
VIRTUAL OFFICE SERVICES:
We currently provide virtual office services intended to allow local and foreign companies to establish a presence in Hong Kong at minimum cost. Many companies require a presence in Hong Kong to facilitate the business they conduct in the Greater China area. The use of a “virtual office” is a very cost-effective alternative to the establishment of specifically dedicated offices in Hong Kong, where office space is at a premium and lease rates are quite high on a worldwide standard. In addition, by using a virtual office, the client is not making a long-term financial commitment to its presence in the market. Each client is assigned a dedicated phone number, a fax number and mail address. The phone number can be forwarded to a number assigned by the client, or be answered by a well-trained individual who takes care of the communication for the client. We also provide Internet access (we have wireless broadband internet access in our office which can be accessed by clients utilizing wireless capable laptops which they provide) and a temporary meeting room, consisting of 10 square meters of space, for our clients. Advanced booking is required for use of the meeting room and /or Internet access for which the client will incur an additional charge on an as-needed basis. These services started generating revenue in 2006 and a monthly fixed fee is charged for each account based on the level of services chosen by each individual client. These services are provided on a month-to-month basis with fees paid in advance of the month in which these services are to be provided.
Our virtual office service packages are broken up into three categories for client’s to choose from:
A) Basic Package: Mailing address only
B) Dual Package: Phone and fax numbers only
C) Premium Package: Mailing address, phone and fax numbers
Prices of these packages are on a case-by-case basis and vary according to negotiation, term, volume and usage. The following reflects our current pricing for virtual office services:
A) Basic Package: Mailing address only, $100 to $250
B) Dual Package: Phone and fax numbers only, $150 to $350
C) Premium Package: A + B above, $300 to $550
Other packages including internet access are also available a negotiated fee basis.
Since inception, we have been charged between $250 and $550 per month per client on a case-by-case basis for an all-in-one package which include the provisions of desk space, internet access, cleaning, phone and fax numbers.
EDGARIZING:
We commenced both our Edgarizing and Virtual Office operations in April 2006. However, we temporarily ceased the operations of our Edgarizing business at the beginning of year 2008, and we have not resumed the operations of this Edgarizing business as of this date.
Employees
As of June 30, 2010, the Company had one part-time employee.
ITEM 1A.
ITEM 1A. RISK FACTORS
Risk Factors
There are several material risks associated with the Company. You should carefully consider the risks and uncertainties described below, which constitute all of the material risks relating to the Company. If any of the following risks are realized, our business, operating results and financial condition could be harmed. This means investors could lose all or a part of their investment.
Risks Related to Our Financials
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to continue as a going concern and our ability to obtain future financing.
In their report dated September 22, 2010, our independent auditors stated that our financial statements for the period ended June 30, 2010 were prepared assuming that we would continue as a going concern. Our ability to continue as a going concern is an issue raised as a result of recurring losses from operations and cash flow deficiencies since our inception. We continue to experience net losses. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining loans and grants from various financial institutions where possible. If we are unable to continue as a going concern, you may lose your entire investment.
We were formed on April 13, 2006 and have a limited operating history and, accordingly, you will not have any basis on which to evaluate our ability to achieve our business objectives.
We are a development stage company with limited operating results to date. Since we do not have an established operating history or regular sales yet, you will have no basis upon which to evaluate our ability to achieve our business objectives.
The absence of any significant operating history for us makes forecasting our revenue and expenses difficult, and we may be unable to adjust our spending in a timely manner to compensate for unexpected revenue shortfalls or unexpected expenses.
As a result of the absence of any operating history for us, it is difficult to accurately forecast our future revenue. In addition, we have limited meaningful historical financial data upon which to base planned operating expenses. Current and future expense levels are based on our operating plans and estimates of future revenue. Revenue and operating results are difficult to forecast because they generally depend on our ability to promote and sell our services. As a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected revenue shortfall, which would result in further substantial losses. We may also be unable to expand our operations in a timely manner to adequately meet demand to the extent it exceeds expectations.
Our limited operating history does not afford investors a sufficient history on which to base an investment decision.
We were formed on April 13, 2006 and are currently in the early stages of developing our business. There can be no assurance that at this time that we will operate profitably or that we will have adequate working capital to meet our obligations as they become due.
Investors must consider the risks and difficulties frequently encountered by early stage companies, particularly in rapidly evolving markets. Such risks include the following:
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· competition;
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· ability to anticipate and adapt to a competitive market;
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· ability to effectively manage expanding operations;
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· amount and timing of operating costs and capital expenditures relating to expansion of our business, operations, and infrastructure; and
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· dependence upon key personnel to market and sell our services and the loss of one of our key managers may adversely affect the marketing of our services.
We cannot be certain that our business strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected and we may not have the resources to continue or expand our business operations.
We have no profitable operating history and May Never Achieve Profitability
The Company commenced operations in 2006 and to date has operated on a relatively small scale. Through June 30, 2010, the Company has an accumulated deficit of $158,957 notwithstanding the fact that the principals of the Company have worked without salary and the Company has operated with minimal overhead. We are an early stage company and have a limited history of operations and have not generated meaningful revenues from operations since our inception. We are faced with all of the risks associated with a company in the early stages of development. Our business is subject to numerous risks associated with a relatively new, low-capitalized company engaged in our business sector. Such risks include, but are not limited to, competition from well-established and well-capitalized companies, and unanticipated difficulties regarding the marketing and sale of our services. There can be no assurance that we will ever generate significant commercial sales or achieve profitability. Should this be the case, our common stock could become worthless and investors in our common stock or other securities could lose their entire investment.
Risks Related to Our Business
Dependence on the Founder, without whose services Company business operations could cease.
At this time, the sole officer and director of the Company is Bernard Chan, who is wholly responsible for the development and execution of our business. Mr. Chan is under no contractual obligation to remain employed by us, although he has no present intent to leave. If Mr. Chan should choose to leave us for any reason before we have hired additional personnel our operations may fail. Even if we are able to find additional personnel, it is uncertain whether we could find qualified management who could develop our business along the lines described herein or would be willing to work for compensation the Company could afford. Without such management, the Company could be forced to cease operations and investors in our common stock or other securities could lose their entire investment.
Our sole officer and director devotes limited time to the Company’s business and is engaged in other business activities
At this time, the sole officer and director of the Company, Bernard Chan, does not devote his full-time attention to the Company’s business. Currently, while the Company is in the development stage, Mr. Chan devotes approximately ten hours per week to the Company’s business, which he believes is sufficient to operate the business as it is presently constituted. Based upon the growth of the business, Mr. Chan would intend to employ additional consultant, part-time and full-time support for the business once the Company becomes a “reporting company” and such is warranted by the business of the Company. At the present time, Mr. Chan believes that he has sufficient resources at hand to manage the Company’s financial and other reporting requirements. The limited time devoted to the Company’s business could adversely affect the Company’s business operations and prospects for the future. Without full-time devoted management, the Company could be forced to cease operations and investors in our common stock or other securities could lose their entire investment.
Concentrated control risks; shareholders could be unable to control or influence key corporate actions or effect changes in the Company’s board of directors or management.
Our principal shareholder, Bernard Chan, owns 18,850,000 shares of our common stock, representing approximately 75.4% of the voting control of the Company. In addition, Mr. Chan is the sole officer and director of the Company. Mr. Chan therefore has the power to make all major decisions regarding our affairs, including decisions regarding whether or not to issue stock and for what consideration, whether or not to sell all or substantially all of our assets and for what consideration and whether or not to authorize more stock for issuance or otherwise amend our charter or bylaws. Mr. Chan is in a position to elect all of our directors and to dictate all of our policies.
Lack of employment agreements with key management risking potential of the loss of the Company’s top management
We do not currently have an employment agreement with Mr. Chan or key man insurance on Mr. Chan’s life. Our future success will depend in significant part on our ability to retain and hire key management personnel. Competition for such personnel is intense and there can be no assurance that we will be successful in attracting and retaining such personnel. Without such management, the Company could be forced to cease operations and investors in our common stock or other securities could lose their entire investment.
Lack of additional working capital may cause curtailment of any expansion plans while raising of capital through sale of equity securities would dilute existing shareholders’ percentage of ownership
Our available capital resources will not be adequate to fund our working capital requirements based upon our present level of operations for the 12-month period subsequent to July 1, 2010. A shortage of capital would affect our ability to fund our working capital requirements. If we require additional capital, funds may not be available on acceptable terms, if at all. In addition, if we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could dilute existing shareholders. If funds are not available, we could be placed in the position of having to cease all operations.
We do not presently have a traditional credit facility with a financial institution. This absence may adversely affect our operations
We do not presently have a traditional credit facility with a financial institution. The absence of a traditional credit facility with a financial institution could adversely impact our operations. If adequate funds are not otherwise available, we may be required to delay, scale back or eliminate portions of our operations and product development efforts. Without such credit facilities, the Company could be forced to cease operations and investors in our common stock or other securities could lose their entire investment.
Our inability to successfully achieve a critical mass of sales could adversely affect our financial condition
No assurance can be given that we will be able to successfully achieve a critical mass of sales in order to cover our operating expenses and achieve sustainable profitability. Without such critical mass of sales, the Company could be forced to cease operations.
Many companies with greater resources and operating experience offer services similar to the services we sell. These companies could successfully compete with us and negatively affect our opportunity to achieve profitability
We operate in a competitive industry with many established and well-recognized competitors. In particular, Vintage Filings and certain similar enterprises maintain a dominant position in our principal business sectors. Such entities may have significantly more extensive customer relationships, longer operating histories and industry experience, greater financial, technical, sales, marketing and other resources, more name recognition and larger customer bases than we do and potentially may react strongly to our marketing efforts. In addition, many competitors exist who, because of their substantial resources, customer relationships and customer base, could temporarily drop prices to be more competitive with our Company. Other competitive responses might include, without limitation, intense and aggressive price competition and offers of employment to our key marketing or management personnel. There can be no assurance that we will be successful in the face of increasing competition from existing or new competitors, or that competition will not have a material adverse effect on our business, financial condition and results of operations. If we are not successful in competing with our competitors, the Company’s revenue stream could suffer and we could be forced to cease operations.
Our sales and marketing efforts have yielded limited revenues and there can be no assurance that our future sales and marketing efforts will lead to increased sales of our services.
Our sales and marketing efforts have yielded limited revenues to date and we believe we will have to significantly expand our sales and marketing capabilities in order to establish sufficient awareness to launch broader sales of our services. There can be no assurance that we will be able to expand our sales and marketing efforts to the extent we believe necessary or that any such efforts, if undertaken, will be successful in achieving substantial sales of our services. If we are unable to expand our sales and marketing efforts, the Company could be in a position where it never reaches a critical mass of business and profitability.
There could be changes in the manner documents are processed for filing and filed with the U.S. Securities and Exchange Commission, which could render our document conversion systems obsolete.
Assuming that we resume document formatting and electronic filing services, changes in the manner documents are filed with the U.S. Securities and Exchange Commission could render our document formatting services obsolete and we may not be able to adapt to any new formats or procedures. If we are unable to provide state-of-the-art service offerings, the Company could be placed in an uncompetitive posture and face suspension of operations.
The average selling prices of our services and our gross margins resulting from the sale of our services may decline as a result of competitive pressures, industry trends and other factors.
The document formatting business is subject to intense competitive pressures where customers often view the services provided as an undifferentiated commodity. Average service selling prices vary due to a number of factors, particularly competitive and macroeconomic pressures. Our competitors have and will likely continue to lower sales prices from time to time in order to gain greater market share. We may have to reduce the sales prices of our services in response to such intense pricing competition, which could cause our gross margins to decline and may adversely affect our business, operating results or financial condition. If we cannot maintain adequate profit margins on the sales of our services, the Company could deplete its working capital and be forced to cease operations.
Our success is substantially dependent on general economic conditions and business trends, particularly in the document formatting business, a downturn of which could adversely affect our operations
The success of our operations depends to a significant extent upon a number of factors relating to business spending. These factors include economic conditions, activity in the financial markets, general business conditions, personnel cost, inflation, interest rates and taxation. Our business is affected by the general condition and economic stability of our customers and their continued willingness to work with us in the future. An overall decline in the demand for document formatting services could cause a reduction in our sales and the Company could face a situation where it never achieves a critical mass of sales and thereby be forced to cease operations. Our business could also be significantly affected by business conditions in China. Since October 2008, the world economy has experienced deteriorating economic conditions which have not only reduced the number of new securities offering but have also caused companies to reassess the costs of maintaining a virtual presence in Hong Kong. We expect these conditions, if they persist, could have a profound and long-lasting negative impact on our business and limit the number of our prospective customers.
Our failure to manage growth effectively could impair our success
In order for us to expand successfully, management will be required to anticipate the changing demands of a growth in operations, should such growth occur, and to adapt systems and procedures accordingly. There can be no assurance that we will anticipate all of the changing demands that a potential expansion in operations might impose. If we were to experience rapid growth, we might be required to hire and train a large number of sales and support personnel, and there can be no assurance that the training and supervision of a large number of new employees would not adversely affect the high standards that we seek to maintain. Our future will depend, in part, on our ability to integrate new individuals and capabilities into our operations, should such operations expand in the future, and there can be no assurance that we will be able to achieve such integration. We will also need to continually evaluate the adequacy of our management information systems, including our web site. Failure to upgrade our information systems or unexpected difficulties encountered with these systems during an expansion in our operations (should such an expansion occur) could adversely affect our business, financial condition and results of operations.
Changes in generally accepted accounting principles could have an adverse effect on our business financial condition, cash flows, revenue and results of operations
We are subject to changes in and interpretations of financial accounting matters that govern the measurement of our performance. Based on our reading and interpretations of relevant guidance, principles or concepts issued by, among other authorities, the American Institute of Certified Public Accountants, the Financial Accounting Standards Board, and the United States Securities and Exchange Commission, our management believes that our current contract terms and business arrangements have been properly reported. However, there continue to be issued interpretations and guidance for applying the relevant standards to a wide range of contract terms and business arrangements that are prevalent in the industries in which we operate. Future interpretations or changes by the regulators of existing accounting standards or changes in our business practices could result in future changes in our revenue recognition and/or other accounting policies and practices that could have a material adverse effect on our business, financial condition, cash flows, revenue and results of operations.
Some of our competitors are more established and better capitalized than we are and we may be unable to establish market share.
Some of our competitors are well-known, more established and better capitalized than we are. As such, they may have at their disposal greater marketing strength and economies of scale. They may also have more resources to expend on sales and marketing in competition with us. Accordingly, we may not be successful in competing with them for market share.
We will need to increase the size of our organization, and may experience difficulties in managing growth.
We are a small company with minimal employees. We expect to experience a period of significant expansion in headcount, facilities, infrastructure and overhead and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate managers. Our future financial performance and its ability to compete effectively will depend, in part, on its ability to manage any future growth effectively.
We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.
We have offered and sold our common stock to investors pursuant to certain exemptions from the registration requirements of the Securities Act of 1933, as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is, the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering. We have not received a legal opinion to the effect that any of our prior offerings were exempt from registration under any federal or state law. Instead, we have relied upon the operative facts as the basis for such exemptions, including information provided by investors themselves.
If any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption from the registration or qualification provisions of such state statutes under the National Securities Markets Improvement Act of 1996. If investors were successful in seeking rescission, we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for the exemptions upon which it has relied, we may become subject to significant fines and penalties imposed by the SEC and state securities agencies.
We incur costs associated with SEC reporting compliance.
The Company made the decision to become an SEC “reporting company” in order to comply with applicable laws and regulations. We incur certain costs of compliance with applicable SEC reporting rules and regulations including, but not limited to attorneys fees, accounting and auditing fees, other professional fees, financial printing costs and Sarbanes-Oxley compliance costs in an amount estimated at approximately $25,000 per year. On balance, the Company determined that the incurrence of such costs and expenses was preferable to the Company being in a position where it had very limited access to additional capital funding.
The availability of a large number of authorized but unissued shares of common stock may, upon their issuance, lead to dilution of existing stockholders.
We are authorized to issue 100,000,000 shares of common stock, $0.001 par value per share, of which, as of June 30, 2010, 25,000,000 shares of common stock were issued and outstanding. These shares may be issued by our board of directors without further stockholder approval. The issuance of large numbers of shares, possibly at below market prices, is likely to result in substantial dilution to the interests of other stockholders. In addition, issuances of large numbers of shares may adversely affect the market price of our common stock.
We may need additional capital that could dilute the ownership interest of investors.
We require substantial working capital to fund our business. If we raise additional funds through the issuance of equity, equity-related or convertible debt securities, these securities may have rights, preferences or privileges senior to those of the rights of holders of our common stock and they may experience additional dilution. We cannot predict whether additional financing will be available to us on favorable terms when required, or at all. Since our inception, we have experienced negative cash flow from operations and expect to experience significant negative cash flow from operations in the future. The issuance of additional common stock by our management, may have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock.
We may not have adequate internal accounting controls. While we have certain internal procedures in our budgeting, forecasting and in the management and allocation of funds, our internal controls may not be adequate.
We are constantly striving to improve our internal accounting controls. We do not have a dedicated Chief Financial Officer. We hope to develop an adequate internal accounting control to budget, forecast, manage and allocate our funds and account for them. There is no guarantee that such improvements will be adequate or successful or that such improvements will be carried out on a timely basis. If we do not have adequate internal accounting controls, we may not be able to appropriately budget, forecast and manage our funds, we may also be unable to prepare accurate accounts on a timely basis to meet our continuing financial reporting obligations and we may not be able to satisfy our obligations under US securities laws.
We have inadequate insurance coverage
We do not have any insurance coverage of any description at this time and therefore have the risk of loss or damages to our business and assets. We cannot assure you that we would not face liability upon the occurrence of any event which could result in any loss or damages being assessed against the Company. Moreover, any insurance we may ultimately acquire may not be adequate to cover any loss or liability we may incur.
Risks Related to an Investment in Our Common Stock
We do not intend to pay cash dividends in the foreseeable future
We currently intend to retain all future earnings for use in the operation and expansion of our business. We do not intend to pay any cash dividends in the foreseeable future but will review this policy as circumstances dictate.
There is currently no market for our securities and there can be no assurance that any market will ever develop or that our common stock will be listed for trading.
Prior to the date of this prospectus, there has not been any established trading market for our common stock and there is currently no market for our securities. We will seek to have a market maker file an application with the NASD on our behalf to list the shares of our common stock on the NASD OTC Bulletin Board (“OTCBB”) or similar quotation service when we have a sufficient number of shareholders, if ever. There can be no assurance as to whether such market makers application will be accepted or, if accepted, the prices at which our common stock will trade if a trading market develops, of which there can be no assurance. We are not permitted to file such application on our own behalf. Until our common stock is fully distributed and an orderly market develops, (if ever) in our common stock, the price at which it trades is likely to fluctuate significantly. Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these Risk Factors, investor perception of us and general economic and market conditions. No assurances can be given that an orderly or liquid market will ever develop for the shares of our common stock. Due to the anticipated low price of the securities, many brokerage firms may not be willing to effect transactions in the securities.
Our common stock is subject to the Penny Stock Regulations
Our common stock will likely be subject to the SEC's “penny stock” rules to the extent that the price remains less than $5.00. Those rules, which require delivery of a schedule explaining the penny stock market and the associated risks before any sale, may further limit your ability to sell your shares.
The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our common stock, when and if a trading market develops, may fall within the definition of penny stock and subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 or $300,000, together with their spouse).
For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the `penny stock` rules may restrict the ability of broker-dealers to sell our common stock and may affect the ability of investors to sell their common stock in the secondary market.
Our common stock is illiquid and subject to price volatility unrelated to our operations
The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock. Sales of substantial amounts of common stock, or the perception that such sales could occur, could adversely affect the market price of our common stock and could impair our ability to raise capital through the sale of our equity securities.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2. PROPERTIES.
We have our corporate headquarters at 15D, Eton Building, 288 Des Voeux Road, Central Hong Kong, in the commercial center of Hong Kong. We lease these facilities, which are approximately 100 square meters, under an operating lease commencing April 16, 2010 and expiring April 15, 2012. Pursuant to the lease, we are obligated to pay monthly rent of approximately $1,823 as well as a management fee of approximately $253.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
As of June 30, 2010, the Company was not a party to any pending or threatened legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote or for the written consent of security shareholders, through the solicitation of proxies or otherwise, during the fiscal year ended June 30, 2010, and no meeting of shareholders was held.
PART II.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY; RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
Market Price
There is no public market for our common stock and no public market may ever develop. While we will seek to obtain a market maker after the effective date of this prospectus to apply for the inclusion of our common stock in the OTCBB, we may not be successful in our efforts and owners of our common stock may not have a market in which to sell the same. Even if the common stock were quoted in a market, there may never be substantial activity in such market, if there is substantial activity, such activity may not be maintained, and no prediction can be made as to what prices may prevail in such market.
Holders
As of September 1, 2010, we have issued an aggregate of 25,000,000 shares of our common stock to approximately 300 stockholders of record. The issued and outstanding shares of the Company’s common stock were issued in accordance with the exemptions from registration afforded by Section 4(2) of the Securities Act of 1933 and Regulation D promulgated under the Securities Act. 125,000 shares of the Company’s common stock were registered under a registration statement on Form S-1 which was declared effective by the U.S. Securities and Exchange Commission on March 26, 2009.
Options and Warrants
None of the shares of our common stock are subject to outstanding options or warrants.
Status of Outstanding Common Stock
As of June 30, 2010, 18,850,000 of our 25,000,000 issued and outstanding common shares are held by “affiliates” of the Company and the remaining shares are either registered or may be transferred subject to the requirements of Rule 144. We have not agreed to register any additional outstanding shares of our common stock under the Securities Act.
Dividends
We have not paid any dividends to date, and have no plans to do so in the immediate future.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities
The Company has never purchased nor does it own any equity securities of any other issuer.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Year Ended
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements. The reader should understand that several factors govern whether any forward-looking statement contained herein will be or can be achieved. Any one of those factors could cause actual results to differ materially from those projected herein. These forward-looking statements include plans and objectives of management for future operations, including plans and objectives relating to the products and the future economic performance of the company. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development projects, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the company. Although the company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of those assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in any of the forward-looking statements contained herein will be realized. Based on actual experience and business development, the company may alter its marketing, capital expenditure plans or other budgets, which may in turn affect the company's results of operations. In light of the significant uncertainties inherent in the forward-looking statements included therein, the inclusion of any such statement should not be regarded as a representation by the company or any other person that the objectives or plans of the company will be achieved.
OVERVIEW
We were incorporated in the State of Nevada on April 13, 2006 as a wholly owned subsidiary of Cell Source Research Inc., a Nevada corporation. The Company has generated limited revenue and is still a development stage corporation. The Company’s plan of operations is to provide (a) document formatting (“Edgarizing”), and electronic filing services to companies and individuals that desire to submit filings, such as annual and quarterly reports, prospectuses, registration statements, and other documents pursuant to the federal securities laws, to the United States Securities and Exchange Commission (“SEC”), via EDGAR, the SEC's electronic data gathering analysis and retrieval system and (b) provide virtual office services consisting of providing phone numbers, fax numbers and mail delivery addresses to local and foreign companies desirous of establishing a presence in Hong Kong (“Virtual Office”). We commenced both our Edgarizing and Virtual Office operations in April 2006. However, we temporarily ceased the operations of our Edgarizing business at the beginning of year 2008, and we have not resumed the operations of this Edgarizing business as of this date.
RESULTS OF OPERATIONS
The following table shows the financial data of the consolidated statements of operations of the Company and its subsidiaries for the years ended June 30, 2010 and June 30, 2009. The data should be read in conjunction with the audited consolidated financial statements of the Company and related notes thereto.
FISCAL YEAR ENDED JUNE 30, 2010 COMPARED TO YEAR ENDED JUNE 30, 2009.
OPERATING REVENUE
Since commencing operations in April 2006, we have been engaged to providing Edgarizing and Virtual Office businesses. However, due mainly to the inefficient minimal scale of operating the Edgarizing business, we temporarily ceased its operation and continue only the operation of Virtual Office.
For the year ended June 30, 2010, Asia Document Transition, Inc. generated revenue in the amount of $9,808, compared to $8,205 for the same corresponding period in year 2009, an increase of $1,603 or 19.5%. The increase was primarily the result of increased service revenue from existing clients during the twelve-month period ended June 2010. We had an average total of 3 clients in fiscal year 2010 (versus 3 clients in fiscal year 2009) whom we charged between $250 and $550 per month per client on a case-by-case basis for both fiscal years 2010 and 2009. As a result thereof, the change in revenues from 2009 to 2010 was almost entirely due to changes in the volume of services rather than changes in pricing.
DEPRECIATION EXPENSES
Depreciation expenses for the reporting period amounted to $1,329, compared to $1,388 for the same corresponding period in year 2010, a decrease of $59 or 4.3%. This decrease was the result of less depreciation recorded from the Company’s property and equipment. These expenses were related to the depreciation charged on office equipments and computers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the twelve-month period ended June 30, 2010, selling, general and administrative expenses were $39,948, compared to $39,337 for the same corresponding period in year 2009, an increase of $611 or 1.6%. This increase was primarily related to the increase in professional fee, including audit fee and edgarizing fee for the reporting period.
LOSS ON DISPOSAL
For the period ended June 30, 2010, there was no loss on disposal was being recorded.
INTEREST INCOME
There was no interest income for the reporting period ended June 30, 2010, compared to none for the same corresponding period in year 2009.
NET LOSS
Net loss was approximately $31,469 for the reporting period ended June 30, 2010, compared to $32,520 for the same corresponding period in year 2009, a decrease of $1,050 or 3.2%. The loss was the result of the overhead expenses exceeding our revenue generated to maintain a physical office as well as to provide sufficient space for clients.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2010, cash and cash equivalents totaled $4,036. This cash position was the result of net cash provided by financing activities in the amount of $30,832, offsetting by net cash used in operating activities in the amount of $28,469. The cash increase in financing activities was the result of additional loans from related party. The net cash used by operating activities was mainly the result of increase overheads expenses to maintain Company office and spaces to provide services for clients as well as additional professional fees in relation to our preparation and filings of a registration statement.
We believe that the level of financial resources is a significant factor for our future development, and accordingly we may choose at any time to raise capital through private debt or equity financing to strengthen its financial position, facilitate growth and provide us with additional flexibility to take advantage of business opportunities. However, we do not have immediate plans to have a public offering of our common stock.
CRITICAL ACCOUNTING POLICIES
In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. If there is a significant unfavorable change to current conditions, it could result in a material adverse impact to our consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our businesses operate in environments where we pay a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.
Valuation of long-lived assets
We review our long-lived assets for impairment, including property, plant and equipment, and identifiable intangibles with definite lives, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of our long-lived assets, we evaluate the probability that future undiscounted net cash flows will be greater than the carrying amount of our assets. Impairment is measured based on the difference between the carrying amount of our assets and their estimated fair value.
Allowance for Doubtful Accounts
We perform ongoing credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience credit loss rates similar to those we have experienced in the past. Measurement of such losses requires consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and financial health of specific customers.
Goodwill on consolidation
Our long-lived assets include goodwill. SFAS No. 142 "Goodwill and Other Intangible Assets" requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests in certain circumstances. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.
Changes in internal controls over financial reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Changes in Connection with Becoming a Public Company
As a public company, we incur significant additional operating expenses and expenses related to hiring additional personnel and expanding our administrative functions. Many of these expenses were not incurred or were incurred at a lower level by us as a private company and are not included in our prior results of operations. We began to incur certain of these expenses during fiscal 2009, and we expect that these expenses will continue to increase. Specifically, we will incur certain costs of compliance with applicable SEC reporting rules and regulations including, but not limited to attorneys fees, accounting and auditing fees, other professional fees, financial printing costs and Sarbanes-Oxley compliance costs in an amount estimated at $25,000 per year.
Lease Obligation
We have our corporate headquarters at 15D, Eton Building, 288 Des Voeux Road, Central Hong Kong, in the commercial center of Hong Kong. We lease these facilities, which are approximately 100 square meters, under an operating lease commencing April 16, 2010 and expiring April 15, 2012.
Pursuant to the lease, we are obligated to pay monthly rent of approximately $1,823 as well as a management fee of approximately $253.
Minimum lease commitments per calendar year at June 30, 2010 are summarized as follows:
Rent expense charged to operations under this operating lease aggregated $23,850 for the year ended June 30, 2010.
Going Concern
Our independent auditors have added an explanatory paragraph to their audit issued in connection with the financial statements for the period ended June 30, 2010, relative to our ability to continue as a going concern. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. The Company has suffered net losses and as of June 30, 2010, its total liabilities exceeded its total assets by $133,956. We had an accumulated deficit of $158,956 incurred through such date and recorded a loss of $31,469 for the fiscal year ended June 30, 2010. Because our auditors have issued a going concern opinion, there is substantial uncertainty we will be able to continue operations. Because our auditors have issued a going concern opinion, there is substantial uncertainty we will continue operations. Based upon our operating budgets, we believe that these additional infusions of cash will enable us to fund our operations through December 31, 2010. We will need to raise additional investment capital to fund our operations beyond that date and until we can operate on a cash flow positive basis. There is no guarantee that we will be able to obtain such additional funding or that any funding will be offered on terms and conditions which are acceptable to us.
Off-Balance Sheet Arrangements
As of the end of fiscal 2010, we had no off-balance sheet arrangements, other than operating leases reported above under “Lease Obligation”.
Inflation and Seasonality
Our business and operating results are not affected in any material way by inflation or seasonality.
ITEM 7A.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Set forth below are the audited financial statements for the Company for the fiscal years ended June 30, 2010 and 2009 and the reports thereon of Paritz & Co., P.A.
ASIA DOCUMENT TRANSITION, INC.
FINANCIAL STATEMENTS
INDEX
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Asia Document Transition, Inc.:
We have audited the accompanying balance sheet of Asia Document Transition, Inc. as of June 30, 2010 and 2009, and the related statements of operations, changes in shareholders’ equity (deficit), and cash flows for the years ended June 30, 2010 and 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 Asia Document Transition, Inc. as of June 30, 2010 and 2009, and the results of its operations and its cash flows for the years ended June 30, 2010 and 2009 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred operating losses since inception and has a net capital deficit at June 30, 2010, which raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Paritz & Co.
Paritz & Co.
Hackensack, NJ
September 22, 2010
ASIA DOCUMENT TRANSITION, INC.
Consolidated Balance Sheets
(A Development Stage Company)
The accompanying notes are an integral part of the financial statements.
ASIA DOCUMENT TRANSITION, INC.
Consolidated Statements of Operations
(A Development Stage Company)
The accompanying notes are an integral part of the financial statements.
ASIA DOCUMENT TRANSITION, INC.
Consolidated Statements of Stockholders' Equity (Deficit)
(A Development Stage Company)
The accompanying notes are an integral part of the financial statements.
ASIA DOCUMENT TRANSITION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(A Development Stage Company)
The accompanying notes are an integral part of the financial statements.
ASIA DOCUMENT TRANSITION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30,
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Asia Document Transition, Inc. (the “Company”) was incorporated in the State of Nevada on April 13, 2006. The Company is in the business of (a) providing services consisting of converting documents from word processing format to HTML in order that they may be filed with the U.S. Securities and Exchange Commission ("SEC") electronically through EDGAR, the SEC's Electronic Data Gathering, Analysis, and Retrieval system and (b) providing of mailing address, phone and fax service, internet access temporary meeting space (“Virtual Office Services”) to small and single operator businesses within Hong Kong . The Company has been in the development stage since formation on April 13, 2006 and has only generated minimal revenue to date.
On April 26, 2006, the Company acquired all of the issued and outstanding shares of Vast Opportunity Limited, (VOL) a Hong Kong incorporated limited company, through the issuance of 24,500,000 common shares to the shareholders of VOL. VOL has been since its inception, a corporation with minimal operations. As of the date of the acquisition, V OL had assets of $374 and total liabilities of $1,302. The acquisition resulted in the shareholders of VOL becoming the controlling shareholders of the Company, accordingly the transaction was recorded as a recapitalization of VOL.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Accounting
The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a June 30 fiscal year-end. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary VOL. All material intercompany balances have been eliminated.
B. Revenue Recognition
Revenues from document formatting and Virtual Office Services are recognized at the time the services have been provided to the customer.
C. Basic Earnings (Loss) Per Share
Basic net loss per share amounts is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted earnings per share are the same as basic earnings per share due to the lack of dilutive items in the Company.
ASIA DOCUMENT TRANSITION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30,
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Cash and Cash Equivalents
For purpose of reporting the statement of flows, cash and cash equivalents include highly liquid investments with investments with maturities of three months or less at the time of purchase.
E. Property and Equipment
The value of fixed assets is at historical cost as required by generally accepted accounting principles. Depreciation is calculated on a straight-line over the 5 year expected useful life of the asset as follows:
Fixed assets at June 30, 2010 are comprised as follows:
Depreciation of $1,329 had been accounted for during the year ended June 30, 2010.
F. Foreign currency translation
Assets and liabilities of the Company whose functional currency is the Hong Kong dollar are translated into U.S. dollars at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at average exchange rates for the year. The net exchange differences resulting from these translations will be reported in other income. Gains and losses resulting from foreign currency transactions will be included the consolidated statements of operations. There are no exchange differences or Gains and Losses resulting from foreign currency translations to report for the period commencing with inception and ending June 30, 2010.
G. Related Party Notes Payable
Notes Payable consists of $146,756 in loans made by an officer and shareholder of the Company to the Company and its wholly owned subsidiary, VOL. These loans bear no interest, are unsecured and due and payable upon demand.
ASIA DOCUMENT TRANSITION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30,
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
H. Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles 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 statement and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
I. Development Stage
The Company continues to devote substantially all of its efforts in the development of its plan to(a) provide services consisting of converting documents from word processing format to HTML in order that they may be filed with the SEC electronically through EDGAR, the SEC's Electronic Data Gathering, Analysis, and Retrieval system and (b) providing of mailing address, phone and fax service, internet access temporary meeting space (“Virtual Office Services”) to small and single operator businesses within Hong Kong .
J. Income Taxes
The Company provides for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. SFAS No. 109 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate to net loss before provision for income taxes for the following reasons:
ASIA DOCUMENT TRANSITION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30,
J. Income Taxes (Continued)
Net deferred tax assets consist of the following components as of:
The Company has a net operating loss carryover of $133,957 as of June 30, 2010 which expires in 2028. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
K. Equity-based compensation.
The Company adopted SFAS No. 123-R effective January 1, 2006 using the modified prospective method. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1,2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123-R.
L. Restatement of Financial Statements (in Part)
The Company discovered an erroneous entry being made in year 2006, which required a reclassification of this entry. The effects of the restatement on the Company’s consolidated balance sheet as of June 30, 2007 and 2008, as well as the effects of these changes on the Company’s consolidated statements of income and consolidated statements of cash flows for fiscal years 2008 and 2007. The cumulative effect of the restatement relating to fiscal years 2008 and 2007 is the increase of additional paid-in capital from negative $21,000 to zero; write-off of goodwill in the amount of $25,000; and a decrease in selling, general and administrative expenses of $3,125. As a result, deficit accumulated fiscal years ended June 30, 2007 and 2008 increased by $21,875.
NOTE 3. COMMON STOCK TRANSACTIONS
On April 13, 2006 the Company issued 125,000 shares of common stock in exchange for services valued at $1,000.
On April 17, 2006 the Company issued 375,000 shares of common stock to an outside consultant for services valued at $3,000.
NOTE 4. WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of common stock.
ASIA DOCUMENT TRANSITION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30,
NOTE 5. TRANSACTIONS WITH RELATED PARTY
On April 26, 2006, Bernard Chan, the Company’s sole Officer and Director, received 18,850,000 common shares of the Company in connection with the Company’s acquisition of Vast Opportunity, Ltd.
As of June 30, 2010, the Company is indebted to Bernard Chan in the amount of $146,756 for loans made by Bernard Chan to the Company and the Company’s wholly owned subsidiary, VOL. These loans bear no interest and are due and payable by the Company upon demand.
NOTE 6. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB issued guidance now codified in FASB Accounting Standards Codification ("ASC") Topic 105, Generally Accepted Accounting Principles, as the single source of authoritative nongovernmental GAAP. FASB ASC Topic 105 does not change current GAAP, but is intended to simplify user access to all authoritative GAAP by providing all authoritative literature related to a particular topic in one place. All existing accounting standard documents have been superseded and all other accounting literature not included in the FASB Codification is now considered non-authoritative. These provisions of FASB ASC Topic 105 are effective for interim and annual periods ending after September 15, 2009 and, accordingly, are effective for the Company for the current fiscal reporting period. The adoption of this guidance did not have an impact on the Company’s financial condition or results of operations, but impacted its financial reporting process by eliminating all references to pre-codification standards. On the effective date of this guidance, the Codification superseded all then-existing non-SEC accounting and reporting standards, and all other non-grandfathered, non-SEC accounting literature not included in the Codification became non-authoritative.
In August 2009, the FASB issued an updated Accounting Standards Update ("ASU") regarding fair value measurements and disclosures. The guidance provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, an entity is required to measure fair value using certain prescribed valuation techniques. The amendments in the pronouncements were effective for the Company’s first quarter of fiscal 2010. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.
In January 2010, the FASB authoritative guidance regarding “Improving Disclosures about Fair Value Measurements”. The guidance provides amendments to literature on fair value measurements and disclosures currently within the ASC by clarifying certain existing disclosures and requiring new disclosures for the various classes of fair value measurements. It is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.
In February 2010, the FASB amended certain authoritative guidance on Amendments to Certain Recognition and Disclosure Requirements for Subsequent Events. The guidance addresses both the interaction of the requirements of Subsequent Events, with the SEC’s reporting requirements and the intended breadth of the reissuance disclosures provision related to subsequent events, potentially changing reporting by both private and public entities depending on the facts and circumstances surrounding the nature of the change. All of the amendments are effective upon issuance of the final update, except for the use of the issued date for conduit debt obligors which is effective for interim and annual periods ending after June 15, 2010. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.
ASIA DOCUMENT TRANSITION, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30,
NOTE 6. RECENT ACCOUNTING PRONOUNCEMENTS (CON’T)
In April 2010, the FASB issued authoritative guidance on Stock Compensation and its Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. The guidance provides amendments to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as the adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.
NOTE 7. GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. However, The Company has a negative net working capital of US$142,977 as of June 30, 2010 and a net loss of $31,470 and $32,520 for the year ended June 30, 2010 and 2009 respectively. The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
NOTE 8. COMMITMENTS
The Company leases its facilities under an operating lease commencing April 16, 2010 and expiring April 15, 2012.
Pursuant to the lease, the Company is obligated to pay monthly rent of approximately $1,823 as well as a management fee of $253.
The following is a summary of future minimum lease payments under operating leases as of June 30, 2010. Rental expense was $23,850 for the year ended June 30, 2010.
Twelve months ending June 30,
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
The Company’s Chief Executive Officer and Chief Financial Officer performed an evaluation of the Company’s disclosure controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of June 30, 2010.
Management’s Annual Report on Internal Control over Financial Reporting
ASIA DOCUMENT TRANSITION, INC.
REPORT OF MANAGEMENT
Management prepared, and is responsible for, the financial statements and the other information appearing in this annual report. The financial statements present fairly the Company’s financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. In preparing its financial statements, the Company includes amounts that are based on estimates and judgments that Management believes are reasonable under the circumstances. The Company’s financial statements have been audited by Paritz & Co., an independent registered public accounting firm appointed by the Company’s Board of Directors. Management has made available to Paritz & Co. all of the Company’s financial records and related data, as well as the minutes of the stockholders’ and Directors’ meetings.
MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by or under the supervision of our Chief Executive Officer and our Chief Accounting Officer and effected by our 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.
Our evaluation of internal control over financial reporting as of December 31, 2009 was conducted on the basis of the framework in “Internal Control-Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2009.
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 requirements by the Company’s registered public accounting firm pursuant to temporary rules of the Commission that permit the Company to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting during the fiscal year ended June 30, 2010 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None
PART III.
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors, Executive Officers and Significant Employees
The following table sets forth information with respect to our directors and executive officers. Other than these persons, there are no significant employees.
Directors and Executive Officers
Position/Title
Age
Bernard Chan
Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and sole Director
Bernard Chan, (46). Mr. Chan has served as our CEO, CFO, President, Secretary, Principal Financial Officer, Treasurer and Director since May 10, 2006. From July 1, 2006 to the December 31, 2006, Mr. Chan has served as Chief Financial officer of Asia Payment Systems, Inc., a publicly traded Asia focus corporation, which provides processing services for payment cards and loyalty cards. From April 2003 to February 2006, Mr. Chan served as Chief Financial Officer of China World Trade Corp, a publicly traded China based corporation, which provides travel related services and value added business services as well as operating business centers and clubs throughout the major cities of China. From April 2004 to the Present, Mr. Chan is a Registered Investment Advisor, registered with the Securities and Futures Commission of Hong Kong, under the laws of Hong Kong Special Administrative Region. Mr. Chan earned his Master of Business Administration Degree in International Management and Investment Finance, Master of Science Degree in Applied Econometrics, and Bachelor of Business Administration Degree in Investment Finance, from the University of Hawaii.
Mr. Chan currently devotes approximately 10 hours per week to the business of Asia Document Transition, Inc.
Family Relationships
There are no family relationships among our directors or officers.
Board of Directors; Election of Officers
All directors hold their office until the next annual meeting of shareholders or until their successors are duly elected and qualified. Any vacancy occurring in the board of directors may be filled by the shareholders, the board of directors, or if the directors remaining in the office constitute less than a quorum of the board of directors, they may fill the vacancy by the affirmative vote of a majority of the directors remaining in office. A director elected to fill a vacancy is elected for the unexpired term of his predecessor in office. Any directorship filled by reason of an increase in the number of directors shall expire at the next shareholders' meeting in which directors are elected, unless the vacancy is filled by the shareholders, in which case the terms shall expiree on the later of (i) the next meeting of the shareholders or (ii) the term designated for the director at the time of creation of the position being filled.
Board of Directors and Corporate Governance
Our board of directors consists of one member, and the board held no formal meetings in fiscal year 2010.
Director Independence
Our stock is not quoted on any stock exchange or on the NASDAQ market system. As such, we are not subject to any director independence requirements. We have no independent directors at this time.
Board Committees
In light of our small size and our early development stage, and the fact that we have only one director, our board has not yet designated a nominating committee, an audit committee, a compensation committee, or committees performing similar functions. The board intends to designate one or more such committees when practicable.
Our board of directors intends to appoint such persons and form such committees as are required to meet the corporate governance requirements imposed by Sarbanes-Oxley and any applicable national securities exchanges. Therefore, we intend that a majority of our directors will eventually be independent directors and at least one director will qualify as an "audit committee financial expert" within the meaning of Item 401(h) of Regulation S-K, as promulgated by the SEC. Additionally, our board of directors is expected to appoint an audit committee, nominating committee and compensation committee and to adopt charters relative to each such committee. Until further determination by the board of directors, the full board of directors will undertake the duties of the audit committee, compensation committee and nominating committee. We do not currently have an "audit committee financial expert" since we currently do not have an audit committee in place.
Code of Ethics
The Company has not adopted a Code of Ethics for its principal executive and financial officers. Due to the Company’s limited operations the Company's Board of Directors does not believe a code of ethics is necessary at this time. The Company’s Board of Directors will revisit this issue in the future to determine if adoption of a code of ethics is appropriate. In the meantime, the Company's management intends to promote honest and ethical conduct, full and fair disclosures in its reports with the SEC, and compliance with the applicable governmental laws and regulations.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our officers for services during the last three fiscal years in all capacities to us, our subsidiaries and predecessors. No executive officer received compensation of $100,000 or more in any of the last three fiscal years.
Summary Compensation Table
Outstanding Equity Awards at Fiscal Year End
None of our executive officers received any equity awards, including, options, restricted stock or other equity incentives, during the fiscal year ended June 30, 2010.
Additional Narrative Disclosures
All of our employees, including our executive officers, are employed at will and none of our employees has entered into an employment agreement with us. We do not have any bonus, deferred compensation or retirement plan.
Director Compensation
We have no standard arrangements in place to compensate our directors for their service as directors or as members of any committee of directors. In the future, if we retain non-employee directors, we may decide to compensate them for their service to us as directors and members of committees.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding beneficial ownership of our common stock as of September 1, 2010 (i) by each person who is known by us to beneficially own more than five percent of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group:
(1)
In determining beneficial ownership of our common stock, the number of shares shown includes shares which the beneficial owner may acquire upon exercise of warrants and options which may be acquired within 60 days. In determining the percent of common stock owned by a person or entity on September 1, 2010, (a) the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which the beneficial ownership may acquire within 60 days of exercise of debentures, warrants and options, and (b) the denominator is the sum of (i) the total shares of that class outstanding on September 1, 2010 (25,000,000 shares of common stock), and (ii) the total number of shares that the beneficial owner may acquire upon exercise of the debentures, warrants and options. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares.
(2)
In addition, in determining the percent of common stock owned by a person or entity on September 1, 2010, (a) the numerator is the number of shares of the class beneficially owned by such person and includes shares which the beneficial owner may acquire within 60 days upon conversion or exercise of a derivative security, and (b) the denominator is the sum of (i) the shares of that class outstanding on September 1, 2010, (25,000,000 shares of common stock) and (ii) the total number of shares that the beneficial owner may acquire upon conversion or exercise of a derivative security within such 60 day period. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of the shares.
Changes in Control
We do not currently have any arrangements which if consummated may result in a change of control of our Company.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Certain Relationships and Transactions with Related Persons
On April 26, 2006, Bernard Chan, the Company’s sole Officer and Director, received 18,850,000 common shares of the Company in connection with the Company’s acquisition of Vast Opportunity, Ltd.
As of June 30, 2010, the Company is indebted to Bernard Chan in the amount of $146,756 for loans made by Bernard Chan to the Company and the Company’s wholly owned subsidiary, Vast Opportunity Limited. These loans bear no interest and are due and payable by the Company upon demand.
Director Independence
The Board of Directors is currently composed of only 1 member, Mr. Chan. None of our directors are “independent” directors, as that term is defined under the Nasdaq listing standards.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
The aggregate fees billed by our auditors, Paritz & Co., for professional services rendered for the audit of our annual financial statements for fiscal years ended June 30, 2010 and June 30, 2009 and review our interim financial statements for the first, second and third quarters of 2010 will be approximately $7,000.
AUDIT-RELATED FEES
During the last two fiscal years, no fees were billed or incurred for assurance or related services by our auditors that were reasonably related to the audit or review of financial statements reported above.
TAX FEES
There were no tax preparation fees billed for the fiscal years ended June 30, 2010 or 2009.
ALL OTHER FEES
During the last two fiscal years, no other fees were billed or incurred for services by our auditors other than the fees noted above. Our board, acting as an audit committee, deemed the fees charged to be compatible with maintenance of the independence of our auditors.
THE BOARD OF DIRECTORS PRE-APPROVAL POLICIES
We do not have a separate audit committee. Our full board of directors performs the functions of an audit committee. Before an independent auditor is engaged by us to render audit or non-audit services, our board of directors pre-approves the engagement. Board of directors pre-approval of audit and non-audit services will not be required if the engagement for the services is entered into pursuant to pre-approval policies and procedures established by our board of directors regarding our engagement of the independent auditor, provided the policies and procedures are detailed as to the particular service, our board of directors is informed of each service provided, and such policies and procedures do not include delegation of our board of directors' responsibilities under the Exchange Act to our management. Our board of directors may delegate to one or more designated members of our board of directors the authority to grant pre-approvals, provided such approvals are presented to the board of directors at a subsequent meeting. If our board of directors elects to establish pre-approval policies and procedures regarding non-audit services, the board of directors must be informed of each non-audit service provided by the independent auditor. Board of directors pre-approval of non-audit services, other than review and attest services, also will not be required if such services fall within available exceptions established by the SEC. For the fiscal year ended June 30, 2010, 100% of audit-related services, tax services and other services performed by our independent auditors were pre-approved by our board of directors.
Our board has considered whether the services described above under the caption "All Other Fees", which are currently none, is compatible with maintaining the auditor's independence.
The board approved all fees described above.
PART IV
ITEM 15.
ITEM 15. Exhibits, Financial Statement Schedules
The following documents are filed as part of this 10-K:
1. FINANCIAL STATEMENTS
The following documents are filed in Part II, Item 8 of this annual report on Form 10-K:
·
Report of Paritz & Co., Independent Registered Certified Public Accounting Firm
·
Balance Sheets as of June 30, 2010 and 2009
·
Statements of Operations for the years ended June 30, 2010 and 2009 and for the period from inception (April 13, 2006) to June 30,
·
Statements of Changes in Stockholders’ Equity as of June 30,
·
Statements of Cash Flows for the years ended June 30, 2010 and 2009 and for the period from inception (April 13, 2006) to June 30,
·
Notes to Financial Statements for the period ended June 30,
2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included.
3. EXHIBITS
The exhibits listed below are filed as part of or incorporated by reference in this report.
Exhibit No.
Identification of Exhibit
23.1.
Consent of Paritz & Co. regarding audited financial statements for the periods ending June 30, 2010 and June 30, 2009
31.1.
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2.
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Asia Document Transition, Inc.
(Registrant)
By
/s/ Bernard Chan
Bernard Chan
Chief Executive Officer, Chief Financial
Officer, Principal Executive Officer,
Principal Accounting Officer, President,
Secretary, treasurer and sole Director
Date
September 29, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity and on the date indicated.
By
/s/ Bernard Chan
Bernard Chan
Sole Director
Date
September 29, 2010
EXHIBIT INDEX
Exhibit No.
Identification of Exhibit
23.1.
Consent of Paritz & Co. regarding audited financial statements for the periods ending June 30, 2010 and June 30, 2009
31.1.
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2.
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.