UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission file number 0-52877
AirtimeDSL
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(Exact name of registrant as specified in its charter)
Nevada 20-8257363
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(State of incorporation) (I.R.S. Employer ID No.)
2920 N. Green Valley Pkwy, Suite 321, Henderson, NV 89014
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(Address of principal executive offices)(Zip Code)
Issuer's telephone number, including area code: (702) 898-7158
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No
Indicate by checkmark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
[ ] Large accelerated filer [ ] Accelerated filer
[ ] Non-accelerated filer [X] Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes[ ] No [X]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of the last business day of the registrant's most recently completed fiscal
year.:
The aggregate market value of the issuer's common stock held by non-affiliates
of the registrant as of October 27, 2008, was approximately $9,721,250, based
on $1.01, the price at which the registrant's common stock was last sold on
June 4, 2008.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
As of October 27, 2008, there were 25,645,000 shares of the issuers Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
INDEX
Title Page
ITEM 1. BUSINESS 5
ITEM 2. PROPERTIES 21
ITEM 3. LEGAL PROCEEDINGS 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 23
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 30
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES 30
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 33
ITEM 11. EXECUTIVE COMPENSATION 35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, 37
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 38
AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 39
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 40
2
FORWARD-LOOKING STATEMENTS
This document contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact are "forward-looking statements" for purposes
of federal and state securities laws, including, but not limited to, any
projections of earnings, revenue or other financial items; any statements of
the plans, strategies and objections of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements or
belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words "may," "could," "estimate,"
"intend," "continue," "believe," "expect" or "anticipate" or other similar
words. These forward-looking statements present our estimates and assumptions
only as of the date of this report. Accordingly, readers are cautioned not to
place undue reliance on forward-looking statements, which speak only as of
the dates on which they are made. We do not undertake to update forward-
looking statements to reflect the impact of circumstances or events that
arise after the dates they are made. You should, however, consult further
disclosures we make in future filings of our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Although we believe that the expectations reflected in any of our forward-
looking statements are reasonable, actual results could differ materially
from those projected or assumed in any of our forward-looking statements. Our
future financial condition and results of operations, as well as any forward-
looking statements, are subject to change and inherent risks and
uncertainties. The factors impacting these risks and uncertainties include,
but are not limited to:
o inability to raise additional financing for working capital;
o inability to identify Broadband wireless access markets that fit into
our organization;
o deterioration in general or regional economic, market and political
conditions;
o the fact that our accounting policies and methods are fundamental to how
we report our financial condition and results of operations, and they may
require management to make estimates about matters that are inherently
uncertain;
o adverse state or federal legislation or regulation that increases the costs
of compliance, or adverse findings by a regulator with respect to existing
operations;
o changes in U.S. GAAP or in the legal, regulatory and legislative
environments in the markets in which we operate;
3
o inability to efficiently manage our operations;
o inability to achieve future operating results;
o our ability to recruit and hire key employees;
o the inability of management to effectively implement our strategies and
business plans; and
o the other risks and uncertainties detailed in this report.
In this form 10-K references to "AirtimeDSL", "the Company", "we," "us,"
and "our" refer to AirtimeDSL.
AVAILABLE INFORMATION
We file annual, quarterly and special reports and other information with the
SEC. You can read these SEC filings and reports over the Internet at the
SEC's website at www.sec.gov. You can also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 100
F Street, NE, Washington, DC 20549 on official business days between the
hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for
further information on the operations of the public reference facilities. We
will provide a copy of our annual report to security holders, including
audited financial statements, at no charge upon receipt to of a written
request to us at AirtimeDSL, 2920 N. Green Valley Pkwy, Suite 321,
Henderson, NV 89014.
4
PART I
ITEM 1. BUSINESS
History and Organization
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The Company was organized December 28, 2006 (Date of Inception) under the laws
of the State of Nevada, as AirtimeDSL. AirtimeDSL is in the business of
providing high speed wireless services to the business, residential and
consumer marketplace. Activities to date have been limited primarily to
organization, initial capitalization, and developing business strategies.
Our Business
- ------------
AirtimeDSL or ("the Company"), is a Nevada Corporation with a principal
business strategy of providing high speed wireless services at discounted
rates to business, residential and the consumer marketplace.
The Company partners with existing wireless organizations to leverage their
legacy infrastructure to provide converged communications to its future
subscriber base. Some of these services include Internet Access (ISP), Voice
Over Internet Service (VOIP), Cell Phone Service, Video On Demand (VOD) and
802.11 WIFI Service.
The Company plans to provide fixed Broadband Wireless Access in the use of a
wireless communications link as a connection for delivering and broadband
internet services to its customers.
Broadband wireless access is the use of a wireless communications link as the
"last mile/first mile" connection for delivering plain old telephone service
and broadband Internet to telecommunications customers. It is the part of
the telecommunications network that links users with broadband/faster access.
The Broadband wireless access market offers Internet Service Providers
immediate access to customer markets without having to either lay cable
through a metropolitan area or work through the local telephone companies,
reselling the telephone, cable or satellite networks, owned by companies that
prefer to largely sell direct. We plan to rent/utilize space on fixed
communication towers to provide direct-line internet access to its future
customer base at a reasonable price.
Our goal is to provide customers with a complete solution to their entire
current and future Internet and private network needs. Our services will be
directed towards all consumers and all small-to medium-sized businesses.
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We plan to offer competitive pricing on most services. We will be competing
against other ISPs located in or around Southern California, including
national carriers, such as Covad, AT&T, Verizon and the following regional
companies: Jump.Net, EarthLink, and Mindspring. Most competitors offer
solutions for Windows, and perhaps Macintosh, but ignore all other operating
systems. With the rise of Linux and other alternative operating systems, we
have a potential to capture some of their market share. Our initial focus
includes six areas of growth:
o Increase personnel to handle sales, service, and development efforts.
o Increase marketing to assure future customers are aware of our
services and aggressive pricing.
o Provide competitive commercial broadband access
o Expand our base of operations to offer our services outside of Southern
California.
o Provide broadband service for multi-dwelling residences
o Perform research and development to bring new products to market.
Our equipment will allow us to offer a broad range of internet and telephone
services to residential and small businesses in the area. The advantages our
services offer, include:
o Faster internet connectivity
o Flexibility in service delivery using shared or dedicated bandwidth
o Scalability to handle rural and urban subscriber densities on the same
infrastructure
o Security, performance and reliability that meets a leased line networks
It is our goal to provide a cost-effectively create wireless network to
capture new customers and deliver secure and reliable access to high-speed
data and voice services.
1. Business Internet Access
Internet access for business is different from Internet access for home use.
When companies offer home Internet access, they expect that in most cases
just one or two computers will be connected to the service and only a tiny
amount of bandwidth will be consumed. Businesses on the other hand typically
boast intranets with dozens (or hundreds or even thousands) of computers
hooked up to them and are large consumers of bandwidth. Businesses also rely
on their ISP services more (on the average) and potentially lose money if
their connection goes down. ISPs thus treat business customers more seriously,
and they tend to likewise charge significantly more for business accounts.
Data services. We believe that we are in a position to take advantage of the
growing demand for wireless data services. Our strategy is to build a wireless
data, voice, messaging and multi-media operations for both consumer and
business customers.
We plan to offer an array of data transmission and content services, such as:
6
Fixed Wireless High Speed Internet - This will provide increased data
transmission rates on existing applications and enable the provisioning of
enhanced data applications that can operate at broadband speeds. In addition,
our digital technology enables higher-speed applications, such as e-mail,
enterprise applications, image downloads, and full browsing capabilities for
laptop computer users.
Wireless Business Solutions - Through our suite of services, we plan to
provide business customers solutions for accessing the Internet and corporate
intranet, which will allow for optimized wireless access to the customer's
corporate applications or databases.
The Industry
- ------------
The wireless industry is characterized by changing technology and the rapid
widespread adoption of such technology. From being a luxury utilized by only
a small percentage of the population one generation ago, wireless technologies
have now come to be widespread in the United States. This expansion in the
numbers of users has advanced alongside radical improvements in the quality of
wireless products available, and a remarkable drop in their cost.
A return to recessionary or inflationary conditions, whether in the United
States or globally, additional terrorist attacks or similar events could have
further adverse effects on consumer confidence and spending and, as a result,
could have a material adverse effect on the Company's future financial
condition and results of operations.
AirtimeDSL Funding Requirements
- -------------------------------
AirtimeDSL has completed its initial round of funding to capitalize the
operations of the Company on March 15, 2007. The Company issued 5,000,000
shares of its $0.001 par value common stock pursuant to a regulation 506
offering in exchange for $200,000. Management believes that the Company
has sufficient funding to sustain itself for the next twelve months.
Future funding could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect the Company's business, results of
operations and financial condition. Any future acquisitions of other
businesses, technologies, services or product(s) might require the Company to
obtain additional equity or debt financing, which might not be available on
terms favorable to the Company, or at all, and such financing, if available,
might be dilutive.
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Competition
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The Company offers high speed wireless services to the business, residential
and consumer marketplace. AirtimeDSL competes with many established companies
in the wireless business, including Covad, AT&T, Verizon and a number of
smaller regional companies. The market for high speed wireless services is
projected to continue to grow, fueled by increasing demand from business
enterprises and residential customers. The projected growth has attracted both
established companies as well as new entrants offering high speed wireless
solutions. Because of increased demand for wireless services in the
residential market, competition is expected to increase.
The telecommunications industry is highly competitive. Factors contributing to
the industry's increasingly competitive market include regulatory changes,
product substitution, technological advances, excess network capacity and the
entrance of new competitors. In this environment, competition is based on price
and pricing plans, the types of services offered, the combination of services
into bundled offerings, customer service, the quality and reliability of
services provided and the development of new products and services. Current
and potential competitors in wireless service providers, long distance
companies, other local telephone companies, foreign telecommunications
providers, electric utilities, Internet service providers and other companies
that offer network services. Many of these companies have a strong market
presence, brand recognition and existing customer relationships, all of which
contribute to intensifying competition and may affect our future revenue
growth.
Patent, Trademark, License and Franchise Restrictions and Contractual
Obligations and Concessions
- ----------------------------------------------------------------------
Much of the Company's technology depends upon the non-patentable technology,
knowledge, and experience of its technical personnel and collaborators. To
help protect its rights, the Company will require employees, collaborators,
and significant consultants and advisors with access to confidential
information, to enter into confidentiality agreements with the Company.
There can be no assurance, however, that these agreements will provide
adequate protection for the Company's trade secrets, know-how or proprietary
information in the event of any unauthorized use or disclosure. The Company's
success and ability to compete is dependent in part upon its proprietary
technology. There can be no assurance that the steps taken by the Company in
this regard will be adequate to prevent misappropriation of its technology or
that the Company's competitors will not independently develop technologies
that are substantially equivalent or superior to the Company's technologies.
8
The Company regards substantial elements of its underlying infrastructure and
wireless deployment techniques as proprietary information and will attempt to
protect them by relying on trademark, service mark, copyright and trade secret
laws and restrictions on disclosure and transferring title and other methods.
The Company plans to enter into confidentiality agreements with its future
employees, future suppliers and future consultants and in connection with its
license agreements with third parties and generally seeks to control access to
and distribution of its technology, documentation and other proprietary
information. Despite these precautions, it may be possible for a third party
to copy or otherwise obtain and use the Company's proprietary information
without authorization or to develop similar technology independently.
There can be no assurance that the steps taken by the Company will prevent
misappropriation or infringement of its proprietary information, which could
have a material adverse effect on the Company's business, results of
operations and financial condition. Litigation may be necessary in the future
to enforce the Company's intellectual property rights, to protect the
Company's trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation might result in substantial
costs and diversion of resources and management attention.
Research and Development Activities and Costs
- ---------------------------------------------
Airtime did not incur any research and development costs for the years ended
July 31, 2008 and 2007, and has no plans to undertake any research and
development activities during the next year of operations.
Government Regulation
- ---------------------
We are subject to federal, state and local laws and regulations affecting its
business, including the federal Communications Act of 1934. Although we plan
on obtaining all required federal and state permits, licenses, there can be
no assurance that our operations and profitability will not be subject to
more restrictive regulation or increased taxation by federal, state, or
local agencies.
Compliance With Environmental Laws
- ----------------------------------
We are not aware of any environmental laws that have been enacted, nor are we
aware of any such laws being contemplated for the future, that impact issues
specific to our business. In our industry, environmental laws are anticipated
to apply directly to the owners and operators of companies. They do not apply
to companies or individuals providing consulting services, unless they have
been engaged to consult on environmental matters. We are not planning to
provide environmental consulting services.
9
Employees
- ---------
We have no full-time employees at the present time. Our officer and
director is responsible for all planning, developing and operational duties,
and will continue to do so throughout the early stages of our growth.
All functions including development, strategy, negotiations and clerical work
are being provided by our officers/directors on a voluntary basis, without
compensation.
We have no intention of hiring employees until the business has been
successfully launched and we have sufficient, reliable revenue from our
operations. Our officer and director is planning to do whatever work is
required until our business to the point of having positive cash flow. We do
not expect to hire any employees during 2009.
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Item 1A. Risk Factors.
RISK FACTORS RELATING TO OUR COMPANY
------------------------------------
1. WE HAVE YET TO ATTAIN PROFITABLE OPERATIONS AND BECAUSE WE MAY NEED
ADDITIONAL FINANCING TO FUND OUR ACTIVITIES, OUR ACCOUNTANTS BELIEVE THERE IS
SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN.
The Company has prepared financial statements as of July 31, 2008 reporting
that the Company is in its developmental stages. Its ability to continue to
operate as a going concern is fully dependent upon the Company obtaining
sufficient financing to continue its development and operational activities.
The ability to achieve profitable operations is in direct correlation to the
Company's ability to successfully execute its business plan. Management
believes the Company's continued existence, future expansion, and ultimate
profitability is fully dependent upon generating revenues or raising sufficient
capital through future offerings. There is no guarantee that the Company will
ever be able to operate profitably or derive any significant revenues from its
operation.
It is also important to note that the Company anticipates that it will incur
losses and negative cash flow over the next six (6) to twelve (12) months.
There is no guarantee that the Company will ever operate profitably or even
receive positive cash flows from full operations.
2. WE MAY NOT BE ABLE TO COMPETE WITH OTHER BROADBAND WIRELESS INTERNET
SUPPLIERS, ALMOST ALL OF WHOM HAVE GREATER RESOURCES AND EXPERIENCE THAN WE DO.
The Broadband internet wireless business is subject to rapid change. We do not
have the resources to compete with larger providers of this service. With the
minimal resources we have available, we may experience great difficulties in
building a customer base. Competition by existing and future competitors could
result in our inability to secure any new customers. This competition from
other entities with greater resources and reputations may result in our failure
to maintain or expand our business as we may never be able to successfully
execute our business plan. Further, AirtimeDSL cannot be assured that it will
be able to compete successfully against present or future competitors or that
the competitive pressure it may face will not force it to cease operations.
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3. BECAUSE WE ARE A DEVELOPMENT STAGE COMPANY, WE HAVE GENERATED ONLY $5,284
IN REVENUES AND LACK AN OPERATING HISTORY, AN INVESTMENT IN THE SHARES OFFERED
HEREIN IS HIGHLY RISKY AND COULD RESULT IN A COMPLETE LOSS OF YOUR INVESTMENT
IF WE ARE UNSUCCESSFUL IN OUR BUSINESS PLAN.
Our company was incorporated on December 28, 2006; we have realized only $5,284
in revenues and a loss of $(37,292) since our inception through July 31, 2008.
We have little operating history upon which an evaluation of our future
prospects can be made. Based upon current plans, we expect to incur operating
losses in future periods as we incur significant expenses associated with the
initial startup of our business. Further, there are no assurances that we will
be successful in realizing revenues or in achieving or sustaining positive cash
flow at any time in the future. Any such failure could result in the possible
closure of our business or force us to seek additional capital through loans or
additional sales of our equity securities to continue business operations,
which would dilute the value of any shares you purchase in this offering.
4. THE SUCCESS OF OUR BUSINESS DEPENDS ON THE CONTINUED USE AND GROWTH OF
THE INTERNET AS A COMMERCE PLATFORM.
The existence and growth of our service depends on the continued acceptance
of the Internet as a commerce platform for individuals and enterprises. The
internet could possibly lose its viability as a tool to buy and sell consumer
items by the adoption of new standards and protocols to handle increased
demands of Internet activity, security, reliability, cost, ease-of-use,
accessibility and quality of service. The acceptance and performance of the
Internet has been harmed by "viruses," "worms," and "spy-ware". If for some
reason the Internet were no longer widely accepted as a tool to buy and sell
consumer items, the demand for our services would be significantly reduced,
which would harm or cause our business to fail.
5. EVOLVING REGULATION OF THE INTERNET MAY ADVERSELY AFFECT US.
As Internet commerce continues to evolve there may be increased regulation by
federal, state and/or foreign agencies. Any new regulations which restrict
our business could harm or cause our business to fail.
6. IF OUR BUSINESS PLAN IS NOT SUCCESSFUL, WE MAY NOT BE ABLE TO CONTINUE
OPERATIONS AS A GOING CONCERN AND OUR STOCKHOLDERS MAY LOSE THEIR ENTIRE
INVESTMENT IN US.
As discussed in the Footnote 3 to Financial Statements included in this
registration statement, our auditors have given us a Going Concern comment.
This raises substantial doubt that we will be able to continue operations as a
going concern, and our independent auditors included an explanatory paragraph
regarding this uncertainty in their report on our financial statements for the
period December 28, 2006 (inception) to July 31, 2008. Our ability to continue
as a going concern is dependent upon our generating cash flow sufficient to
fund operations and reducing operating expenses. Our business plans may not be
successful in addressing these issues. If we cannot continue as a going
concern, our stockholders may lose their entire investment in us.
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7. WE FACE STRONG AND VARIED COMPETITION.
In the US area, there are many larger companies who produce similar products
which AirtimeDSL plans to produce. The competition includes larger
companies, such as Embarq, Cox Communications, AT&T, and other local
providers and resellers. These companies are better funded and more
established than AirtimeDSL.
8. WE MAY NOT BE ABLE TO FIND SUITABLE EMPLOYEES.
The Company currently relies heavily upon the services and expertise of our
sole officer and director. In order to implement the aggressive business
plan of the Company, management recognizes that additional clerical staff
will be required. The sole officer is the only personnel at the outset of
operations. The sole officer can manage the office functions and bookkeeping
services until the Company can generate enough revenues to hire additional
staff.
No assurances can be given that the Company will be able to find suitable
employees that can support the above needs of the Company or that these
employees can be hired on terms favorable to the Company.
9. WE MAY NOT EVER PAY CASH DIVIDENDS.
The Company has not paid any cash dividends on the Common Shares to date, and
there can be no guarantee that the Company will be able to pay cash dividends
on the Common Shares in the foreseeable future. Initial earnings that the
Company may realize, if any, will be retained to finance the growth of the
Company. Any future dividends, of which there can be no guarantee, will be
directly dependent upon earnings of the Company, its financial requirements
and other factors that are not determined. (See "CAPITALIZATION")
10. WE ARE SUBJECT TO GOVERNMENT REGULATION.
The Company is subject to federal, state and local laws and regulations
affecting its business, including the federal Communications Act of 1934.
Although the Company plans on obtaining all required federal and state
permits, licenses, and bonds to operate its facilities, there can be no
assurance that the Company's operation and profitability will not be subject
to more restrictive regulation or increased taxation by federal, state, or
local agencies.
13
11. WE MAY BE LIABLE FOR THE PRODUCTS AND SERVICES WE PROVIDE.
There is no guarantee that the level of insurance coverage secured by the
Company will be adequate to protect the Company from risks associated with
claims that exceed the level of coverage maintained. As a result of the
Company's limited operations to date, no threatened or actual liability
claims have been made upon the Company.
12. SINCE OUR OFFICER WORKS OR CONSULTS FOR OTHER COMPANIES, HIS OTHER
ACTIVITIES COULD SLOW DOWN OUR OPERATIONS.
Ed Heckerson, our sole officer, does not work for us exclusively and does not
devote all of his time to our operations. Therefore, it is possible that a
conflict of interest with regard to his time may arise based on his
employment in other activities. His other activities will prevent him from
devoting full-time to our operations which could slow our operations and may
reduce our financial results because of the slow down in operations.
Ed Heckerson, the President and Director of the company, currently devotes
approximately 10-20 hours per week to company matters. The responsibility of
developing the company's business, the offering and selling of the shares
through this prospectus all fall upon Mr. Heckerson. He has no prior
experience serving as a principal accounting officer or principal financial
officer in a public company. We have not formulated a plan to resolve any
possible conflict of interest with his other business activities. Mr.
Heckerson intends to limit his role in his other business activities and
devote more of his time to AirtimeDSL after we attain a sufficient level of
revenue and are able to provide sufficient officers' salaries per our
business plan. In the event he is unable to fulfill any aspect of his duties
to the company we may experience a shortfall or complete lack of sales
resulting in little or no profits and eventual closure of the business.
14
13. OUR PRINCIPAL STOCKHOLDER, WHO IS OUR SOLE OFFICER AND DIRECTOR OWNS A
CONTROLLING INTEREST IN OUR VOTING STOCK AND INVESTORS WILL NOT HAVE ANY
VOICE IN OUR MANAGEMENT, WHICH COULD RESULT IN DECISIONS ADVERSE TO OUR
GENERAL SHAREHOLDERS.
Our sole officer and our principal stockholder, beneficially owns
approximately or has the right to vote approximately 63% of our outstanding
common stock. As a result, this stockholder, acting alone, will have the
ability to control substantially all matters submitted to our stockholders
for approval including:
a) election of our board of directors;
b) removal of any of our directors;
c) amendment of our Articles of Incorporation or bylaws; and
d) adoption of measures that could delay or prevent a change in control or
impede a merger, takeover or other business combination involving us.
As a result of his ownership and positions, this individual has the ability
to influence all matters requiring shareholder approval, including the
election of directors and approval of significant corporate transactions. In
addition, the future prospect of sales of significant amounts of shares held
by our director and executive officer could affect the market price of our
common stock if the marketplace does not orderly adjust to the increase in
shares in the market and the value of your investment in the company may
decrease. Management's stock ownership may discourage a potential acquirer
from making a tender offer or otherwise attempting to obtain control of us,
which in turn could reduce our stock price or prevent our stockholders from
realizing a premium over our stock price.
14. THE LOSS OF ONE OR MORE OF OUR FUTURE BUSINESS PARTNERS MAY INTERRUPT
OUR OPERATIONS.
The Company partners with existing wireless organizations to leverage there
legacy infrastructure to provide converged communications to its future
subscriber base. The loss of one or more of these partners could interrupt
our operations and impact our ability to deliver products and services to our
customers, which would have a material adverse effect on our net sales and
profitability.
15. INCREASES IN THE BASE COST OF OUR SERVICES COULD MATERIALLY INCREASE OUR
COSTS AND DECREASE OUR PROFITABILITY.
The wireless industry is characterized by changing technology and the rapid
widespread adoption of such technology. The costs of this technology
fluctuate. Significant increases in these costs could decrease our
profitability.
15
16. THE WIRELESS INDUSTRY IS INFLUENCED BY GENERAL ECONOMIC CONDITIONS.
The wireless industry is highly competitive and reactive to the overall level
of consumer spending. Consumer spending is dependent on a number of factors,
including actual and perceived economic conditions affecting disposable
consumer income (such as unemployment, wages and salaries), business
conditions, interest rates, availability of credit and tax rates in the
general economy and in the international, regional and local markets where
our products are sold. As a result, any deterioration in general economic
conditions, reductions in the level of consumer spending or increases in
interest rates could adversely affect the future sales of our products and
services.
A return to recessionary or inflationary conditions, whether in the United
States or globally, additional terrorist attacks or similar events could have
further adverse effects on consumer confidence and spending and, as a result,
could have a material adverse effect on our financial condition and results
of operations.
Other Risks Factors
-------------------
17. WE MAY, IN THE FUTURE, ISSUE ADDITIONAL COMMON SHARES, WHICH WOULD
REDUCE INVESTORS' PERCENT OF OWNERSHIP AND MAY DILUTE OUR SHARE VALUE.
Our Articles of Incorporation authorize the issuance of 70,000,000 shares of
common stock and 5,000,000 preferred shares. The future issuance of common
stock may result in substantial dilution in the percentage of our common
stock held by our then existing shareholders. We may value any common stock
issued in the future on an arbitrary basis. The issuance of common stock for
future services or acquisitions or other corporate actions may have the
effect of diluting the value of the shares held by our investors, and might
have an adverse effect on any trading market for our common stock. (See
"DILUTION")
18. OUR COMMON SHARES ARE SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND
THE TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN
OUR STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes relevant to
us, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to
certain exceptions.
For any transaction involving a penny stock, unless exempt, the rules
require:
(a) that a broker or dealer approve a person's account for transactions in
penny stocks; and
(b) the broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock
to be purchased.
16
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must: (a) obtain financial information and investment
experience objectives of the person; and (b) make a reasonable determination
that the transactions in penny stocks are suitable for that person and the
person has sufficient knowledge and experience in financial matters to be
capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the
penny stock market, which, in highlight form: (a) sets forth the basis on
which the broker or dealer made the suitability determination; and (b) that
the broker or dealer received a signed, written agreement from the investor
prior to the transaction. Generally, brokers may be less willing to execute
transactions in securities subject to the "penny stock" rules. This may make
it more difficult for investors to dispose of our Common shares and cause a
decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks
in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies available to an
investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny
stocks.
19. BECAUSE WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS ON OUR COMMON STOCK,
OUR STOCKHOLDERS WILL NOT BE ABLE TO RECEIVE A RETURN ON THEIR SHARES UNLESS
THEY SELL THEM.
We intend to retain any future earnings to finance the development and
expansion of our business. We do not anticipate paying any cash dividends on
our common stock in the foreseeable future. Unless we pay dividends, our
stockholders will not be able to receive a return on their shares unless they
sell them. There is no assurance that stockholders will be able to sell
shares when desired.
17
20. WE MAY ISSUE SHARES OF PREFERRED STOCK IN THE FUTURE THAT MAY ADVERSELY
IMPACT YOUR RIGHTS AS HOLDERS OF OUR COMMON STOCK.
Our articles of incorporation authorize us to issue up to 5,000,000 shares of
"blank check" preferred stock. Accordingly, our board of directors will have
the authority to fix and determine the relative rights and preferences of
preferred shares, as well as the authority to issue such shares, without
further stockholder approval. As a result, our board of directors could
authorize the issuance of a series of preferred stock that would grant to
holders preferred rights to our assets upon liquidation, the right to receive
dividends before dividends are declared to holders of our common stock, and
the right to the redemption of such preferred shares, together with a
premium, prior to the redemption of the common stock. To the extent that we
do issue such additional shares of preferred stock, your rights as holders of
common stock could be impaired thereby, including, without limitation,
dilution of your ownership interests in us. In addition, shares of preferred
stock could be issued with terms calculated to delay or prevent a change in
control or make removal of management more difficult, which may not be in
your interest as holders of common stock.
21. FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN
ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS.
It may be time consuming, difficult, and costly for us to develop and
implement the additional internal controls, processes and reporting
procedures required by the Sarbanes-Oxley Act. We may need to hire additional
financial reporting, internal auditing, and other finance staff in order to
develop and implement appropriate additional internal controls, processes,
and reporting procedures. If we are unable to comply with these requirements
of the Sarbanes-Oxley Act, we may not be able to obtain the independent
accountant certifications that the Sarbanes-Oxley Act requires of publicly
traded companies.
If we fail to comply in a timely manner with the requirements of Section 404
of the Sarbanes-Oxley Act regarding internal control over financial reporting
or to remedy any material weaknesses in our internal controls that we may
identify, such failure could result in material misstatements in our
financial statements, cause investors to lose confidence in our reported
financial information and have a negative effect on the trading price of our
common stock.
18
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC
regulations, beginning with our annual report on Form 10-K for our fiscal
period ending July 31, 2008, we will be required to prepare assessments
regarding internal controls over financial reporting and beginning with our
Annual Report on Form 10-K for our fiscal period ending July 31, 2008,
furnish a report by our management on our internal control over financial
reporting. We have begun the process of documenting and testing our internal
control procedures in order to satisfy these requirements, which is likely to
result in increased general and administrative expenses and may shift
management time and attention from revenue-generating activities to
compliance activities. While our management is expending significant
resources in an effort to complete this important project, there can be no
assurance that we will be able to achieve our objective on a timely basis.
There also can be no assurance that our auditors will be able to issue an
unqualified opinion on management's assessment of the effectiveness of our
internal control over financial reporting. Failure to achieve and maintain an
effective internal control environment or complete our Section 404
certifications could have a material adverse effect on our stock price.
In addition, in connection with our on-going assessment of the effectiveness
of our internal control over financial reporting, we may discover "material
weaknesses" in our internal controls as defined in standards established by
the Public Company Accounting Oversight Board, or the PCAOB. A material
weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be
prevented or detected.
The PCAOB defines "significant deficiency" as a deficiency that results in
more than a remote likelihood that a misstatement of the financial statements
that is more than inconsequential will not be prevented or detected. In the
event that a material weakness is identified, we will employ qualified
personnel and adopt and implement policies and procedures to address any
material weaknesses that we identify. However, the process of designing and
implementing effective internal controls is a continuous effort that requires
us to anticipate and react to changes in our business and the economic and
regulatory environments and to expend significant resources to maintain a
system of internal controls that is adequate to satisfy our reporting
obligations as a public company. We cannot assure you that the measures we
will take will remediate any material weaknesses that we may identify or that
we will implement and maintain adequate controls over our financial process
and reporting in the future. Any failure to complete our assessment of our
internal control over financial reporting, to remediate any material
weaknesses that we may identify or to implement new or improved controls, or
difficulties encountered in their implementation, could harm our operating
results, cause us to fail to meet our reporting obligations, or result in
material misstatements in our financial statements.
19
Any such failure could also adversely affect the results of the periodic
management evaluations of our internal controls and, in the case of a failure
to remediate any material weaknesses that we may identify, would adversely
affect the annual auditor attestation reports regarding the effectiveness of
our internal control over financial reporting that are required under Section
404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause
investors to lose confidence in our reported financial information, which
could have a negative effect on the trading price of our common stock.
22. WE WILL INCUR INCREASED COSTS AS A RESULT OF BEING A PUBLIC COMPANY,
WHICH COULD AFFECT OUR PROFITABILITY AND OPERATING RESULTS.
The Sarbanes-Oxley Act of 2002 and the new rules subsequently implemented by
the Securities and Exchange Commissions, the NASDAQ National Market and the
Public Company Accounting Oversight Board have imposed various new
requirements on public companies, including requiring changes in corporate
governance practices. We expect these rules and regulations to increase our
legal and financial compliance costs and to make some activities more time-
consuming and costly. These costs could affect profitability and our results
of operations.
20
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our corporate headquarters are located at 2920 N. Green Valley Pkwy, Suite
321, Henderson, NV 89014. We believe our current office space is adequate
for our immediate needs; however, as our operations expand, we may need to
locate and secure additional office space.
Item 3. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal
proceedings, which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in
these or other matters may arise from time to time that may harm our
business.
We are not presently a party to any material litigation, nor to the knowledge
of management is any litigation threatened against us, which may materially
affect us.
Item 4. Submission of Matters to a Vote of Security Holders.
We did not submit any matters to a vote of our security holders during the
past fiscal year.
21
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
(a) Market Information
AirtimeDSL common stock, $0.001 par value, is traded on the OTC-Bulletin
Board under the symbol: ATIM. The stock was cleared for trading on the
OTC-Bulletin Board on December 26, 2007.
Since the Company has been cleared for trading, through October 27, 2008,
there have been minimum trades of the Company's stock. There are no
assurances that a market will ever develop for the Company's stock.
(b) Holders of Common Stock
As of October 27, 2008, there were approximately 34 holders of record of
our Common Stock and 25,645,000 shares outstanding.
(c) Dividends
In the future we intend to follow a policy of retaining earnings, if any, to
finance the growth of the business and do not anticipate paying any cash
dividends in the foreseeable future. The declaration and payment of future
dividends on the Common Stock will be the sole discretion of board of
directors and will depend on our profitability and financial condition,
capital requirements, statutory and contractual restrictions, future
prospects and other factors deemed relevant.
(d) Securities Authorized for Issuance under Equity Compensation Plans
There are no outstanding grants or rights or any equity compensation plan in
place.
(e) We did not repurchase any of our equity securities during the years
ended July 31, 2008 or 2007.
Recent Sales of Unregistered Securities
- ---------------------------------------
On December 28, 2006, the Company issued 20,000,000 par value $0.001 common
shares of stock to the Company's five founders for $20,000 cash equivalents.
In March, 2007, the Company completed a public offering of shares of common
stock of the Company. The Company 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, whereby it sold 5,000,000 shares of its $0.001 par
value common stock for cash in the amount of $200,000.
22
In May, 2007, the Company sold 645,000 common shares at par value of $0.001
per share for $6,450 cash. All common shares were issued in reliance upon
an exemption from registration under Section 4(2) of the Securities Act
and/or Rule 506 of Regulation D promulgated.
Issuer Purchases of Equity Securities
- -------------------------------------
We did not repurchase any of our equity securities during the years ended
July 31, 2008 or 2007.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview of Current Operations
- ------------------------------
AirtimeDSL, was organized by the filing of Articles of Incorporation with the
Secretary of State of the State of Nevada on December 28, 2006. AirtimeDSL
is in the business of providing high speed wireless services to business,
residential and the consumer marketplace.
We a developmental stage company whose goal is to provide customers with a
complete solution to their entire current and future Internet and private
network needs. Our services are directed towards all consumers and all
small-to medium-sized businesses.
We plan to provide fixed Broadband Wireless Access in the use of a wireless
communications link as a connection for delivering and broadband internet
services to its customers. The Broadband wireless access market offers
Internet Service Providers immediate access to customer markets without
having to either lay cable through a metropolitan area or work through the
local telephone companies, reselling the telephone, cable or satellite
networks, owned by companies that prefer to largely sell direct. We plan to
rent/utilize space on fixed communication towers to provide direct-line
internet access to its future customer base at a reasonable price.
We partner with existing wireless organizations to leverage their legacy
infrastructure to provide converged communications to its future subscriber
base. Some of these services include Internet Access (ISP), Voice Over
Internet Service (VOIP), Cell Phone Service, Video On Demand (VOD) and 802.11
WIFI Service.
23
Results of Operations for the year ended July 31, 2008
- ------------------------------------------------------
We have earned $5,284 in revenues since our inception on December 28, 2006
through July 31, 2008. We do not anticipate earning any significant revenues
until such time as can rent/utilize space on fixed communication towers to
provide direct-line internet access to its future customer base. We are
presently in the development stage of our business, there are no assurances
that our business plan will be successful.
Since our inception on December 28, 2006 we experienced a net loss of
$(37,292). Our loss was attributed to organizational expenses, accounting
and legal fees. We anticipate our operating expenses will increase as we
start to open markets for our services. We anticipate our ongoing operating
expenses will also increase since we are a reporting company under the
Securities Exchange Act of 1934.
Revenues
- --------
We have earned $5,284 in revenues for the period from December 28, 2006
(inception) through July 31, 2008. We do not anticipate generating any
significant revenues until we establish a solid customer base.
Going Concern
- -------------
Our independent auditors included an explanatory paragraph in their report on
the accompanying financial statements regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional
note disclosures describing the circumstances that lead to this disclosure by
our independent auditors.
Summary of any product research and development that we will perform for the
term of our plan of operation.
- ----------------------------------------------------------------------------
We do not anticipate performing any additional significant product research
and development under our current plan of operation.
Expected purchase or sale of plant and significant equipment
- -------------------------------------------------------------
We do not anticipate the purchase or sale of any plant or significant
equipment; as such items are not required by us at this time.
24
Significant changes in the number of employees
- -----------------------------------------------
As of July 31, 2008, we did not have any employees. We are dependent upon
our sole officer and director for our future business development. As our
operations expand we anticipate the need to hire additional employees,
consultants and professionals; however, the exact number is not quantifiable
at this time.
Liquidity and Capital Resources
- -------------------------------
Our balance sheet as of July 31, 2008 reflects cash of $129,892 and current
liabilities of $2,625. Cash and cash equivalents from inception to date have
been sufficient to provide the operating capital necessary to operate to
date.
On December 28, 2006 (inception), the Company issued 20,000,000 shares of its
$0.001 par value common stock to the founders of the Company for $20,000 cash
equivalents.
On March 15, 2007, the Company issued 5,000,000 shares of its $0.001 par
value common stock pursuant to a regulation 506 offering for $200,000 cash.
On May 31, 2007, the Company issued 645,000 shares of its $0.001 par value
common stock pursuant to a regulation 505 offering for $6,450 cash.
Management believes it has sufficient funds to remain operational for next
twelve months.
As a result of the Company's limited operations, no officer or director
received cash compensation during the year ended July 31, 2008. The Company
has no employment agreements in place with its officers.
Off-Balance Sheet Arrangements
- ------------------------------
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results or operations,
liquidity, capital expenditures or capital resources that is material to
investors.
Critical Accounting Policies and Estimates
- ------------------------------------------
Revenue Recognition: We recognize revenue from product sales once all of the
following criteria for revenue recognition have been met: pervasive evidence
that an agreement exists; the services have been rendered; the fee is fixed
and determinable and not subject to refund or adjustment; and collection of
the amount due is reasonable assured.
25
New Accounting Standards
- ------------------------
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 163, "Accounting for Financial Guarantee Insurance Contracts-and
interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how
Statement 60 applies to financial guarantee insurance contracts, including
the recognition and measurement of premium revenue and claims liabilities.
This statement also requires expanded disclosures about financial guarantee
insurance contracts. SFAS No. 163 is effective for fiscal years beginning on
or after December 15, 2008, and interim periods within those years. SFAS No.
163 has no effect on the Company's financial position, statements of
operations, or cash flows at this time.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS
No. 162 sets forth the level of authority to a given accounting pronouncement
or document by category. Where there might be conflicting guidance between
two categories, the more authoritative category will prevail. SFAS No. 162
will become effective 60 days after the SEC approves the PCAOB's amendments
to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no
effect on the Company's financial position, statements of operations, or cash
flows at this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities-an
amendment of FASB Statement No. 133. This standard requires companies to
provide enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. This Statement is
effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early application encouraged.
The Company has not yet adopted the provisions of SFAS No. 161, but does not
expect it to have a material impact on its consolidated financial position,
results of operations or cash flows.
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110
regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123 (R), Share-Based Payment. In
particular, the staff indicated in SAB 107 that it will accept a company's
election to use the simplified method, regardless of whether the company has
sufficient information to make more refined estimates of expected term. At
the time SAB 107 was issued, the staff believed that more detailed external
information about employee exercise behavior (e.g., employee exercise
patterns by industry and/or other categories of companies) would, over time,
become readily available to companies. Therefore, the staff stated in SAB 107
that it would not expect a company to use the simplified method for share
option grants after December 31, 2007. The staff understands that such
detailed information about employee exercise behavior may not be widely
26
available by December 31, 2007. Accordingly, the staff will continue to
accept, under certain circumstances, the use of the simplified method beyond
December 31, 2007. The Company currently uses the simplified method for
"plain vanilla" share options and warrants, and will assess the impact of SAB
110 for fiscal year 2009. It is not believed that this will have an impact on
the Company's consolidated financial position, results of operations or cash
flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51. This statement
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. Before this statement was
issued, limited guidance existed for reporting noncontrolling interests. As a
result, considerable diversity in practice existed. So-called minority
interests were reported in the consolidated statement of financial position
as liabilities or in the mezzanine section between liabilities and equity.
This statement improves comparability by eliminating that diversity. This
statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1,
2009, for entities with calendar year-ends). Earlier adoption is prohibited.
The effective date of this statement is the same as that of the related
Statement 141 (revised 2007). The Company will adopt this Statement beginning
March 1, 2009. It is not believed that this will have an impact on the
Company's consolidated financial position, results of operations or cash
flows.
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations.'This Statement replaces FASB Statement No. 141, Business
Combinations, but retains the fundamental requirements in Statement 141.
This Statement establishes principles and requirements for how the acquirer:
(a) recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in
the acquiree; (b) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase; and (c) determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. This
statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. The effective date of this statement is the same as that of
the related FASB Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements. The Company will adopt this statement beginning March
1, 2009. It is not believed that this will have an impact on the Company's
consolidated financial position, results of operations or cash flows.
27
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities-Including an Amendment of FASB Statement No.
115. This standard permits an entity to choose to measure many financial
instruments and certain other items at fair value. This option is available
to all entities. Most of the provisions in FAS 159 are elective; however, an
amendment to FAS 115 Accounting for Certain Investments in Debt and Equity
Securities applies to all entities with available for sale or trading
securities. Some requirements apply differently to entities that do not
report net income. SFAS No. 159 is effective as of the beginning of an
entities first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of the previous fiscal year
provided that the entity makes that choice in the first 120 days of that
fiscal year and also elects to apply the provisions of SFAS No. 157 Fair
Value Measurements. The Company will adopt SFAS No. 159 beginning March 1,
2008 and is currently evaluating the potential impact the adoption of this
pronouncement will have on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
This statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This statement applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that
fair value is the relevant measurement attribute. Accordingly, this statement
does not require any new fair value measurements. However, for some entities,
the application of this statement will change current practice. This
statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. Earlier application is encouraged, provided that the reporting entity
has not yet issued financial statements for that fiscal year, including
financial statements for an interim period within that fiscal year. The
Company will adopt this statement March 1, 2008, and it is not believed that
this will have an impact on the Company's consolidated financial position,
results of operations or cash flows.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
28
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Financial Statement
-------------------
PAGE
----
Independent Auditors' Report F-1
Balance Sheet F-2
Statements of Operations F-3
Statements of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financials F-6
29
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
------------------------
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Board of Directors
AirTimeDSL
(A Development Stage Company)
We have audited the accompanying balance sheets of AirTimeDSL (A Development
Stage Company) as of July 31, 2008 and July 31, 2007, and the related
statements of operations, stockholders' equity and cash flows for the year
ended July 31, 2008 and the period from December 28, 2006 to July 31, 2007 and
from inception on December 28, 2006 through July 31, 2008. 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 conduct our audits in accordance with 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. 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 AirTimeDSL (A Development
Stage Company) as of July 31, 2008 and July 31, 2007, and the related
statements of operations, stockholders' equity and cash flows for the year
ended July 31, 2008 and the period from December 28, 2006 to July 31, 2007 and
from inception on December 28, 2006 through July 31, 2008, 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 3 to the
financial statements, the Company has had limited revenues since inception,
which raises substantial doubt about its ability to continue as a going
concern. Management's plans concerning these matters are also described in
Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Moore & Associates, Chartered
- ---------------------------------
Moore & Associates, Chartered
Las Vegas, Nevada
October 22, 2008
2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146
(702) 253-7499 Fax (702) 253-7501
F-1
AirtimeDSL
(A development stage company)
Balance Sheets
Balance Sheets
July 31, July 31,
2008 2007
----------- ----------
ASSETS
Current Assets:
Cash $ 127,634 $ 150,552
Funds held in escrow - 6,450
Accounts Receivable 2,258 -
----------- ----------
Total current assets 129,892 157,002
----------- ----------
Equipment, net of accumulated
depreciation of $5,100 at July 31, 2008
and $1,500 at July 31, 2007 62,321 65,921
----------- ----------
TOTAL ASSETS $ 192,213 $ 222,923
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 2,625 -
----------- ----------
Total current liabilities 2,625 -
----------- ----------
Stockholders' Equity:
Preferred stock, $0.001
par value, 5,000,000 shares authorized,
no shares issued or outstanding - -
Common stock, $0.001 par value, 70,000,000
shares authorized, 25,645,000, 25,645,000
shares issued and outstanding as of
7/31/2007 and 7/31/2008, respectively 25,645 25,645
Additional paid-in capital 201,235 201,235
Earnings (Deficit) accumulated during
development stage (37,292) (3,957)
----------- ----------
Total stockholders' equity 189,588 222,923
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 192,213 $ 222,923
=========== ==========
The accompanying notes are an integral part of these financial statements.
F-2
AirtimeDSL
(A development stage company)
Statements of Operations
Statements of Operations
Period from
For the December 28, 2006 From December 28,
Year Ending to 2006 (Inception)
July 31, 2008 July 31, 2007 to July 31, 2008
---------------- ------------------ ----------------
Revenue $ 5,284 $ - $ 5,284
---------------- ------------------ ----------------
Expenses:
General and administrative
expenses 35,019 2,457 37,476
Depreciation 3,600 1,500 5,100
---------------- ------------------ ----------------
Total expenses 38,619 3,957 42,576
---------------- ------------------ ----------------
Net loss before income
taxes (33,335) (3,957) (37,292)
Income tax expense - - -
---------------- ------------------ ----------------
Net income (loss) $ (33,335) $ (3,957) $ (37,292)
================ ================== ================
Net (loss) per
share - basic
and fully
diluted $ (0.00) $ (0.00)
================ ==================
Weighted average
number of
common shares
outstanding -
basic and fully
diluted 25,645,000 23,376,597
================ ==================
The accompanying notes are an integral part of these financial statements.
F-3
AirtimeDSL
(A development stage company)
Statements of Stockholders' Equity
Statements of Stockholders' Equity
Deficit
Accumulated
Additional During the Total
Common Stock Paid-In Development Stockholders'
Shares Amount Capital Stage Equity
---------- ------- --------- ----------- -------------
Founders initial
investment, 12/28/2006
$0.001 per share 20,000,000 $20,000 $ - $ - $ 20,000
Donated capital
for incorporating
costs 430 430
Common stock issued
for cash, 506
offering at
$0.04 per share
3/15/07 5,000,000 5,000 195,000 - 200,000
Common stock issued
for cash, 505
offering at
$0.01 per share
5/31/07 645,000 645 5,805 6,450
Net (loss) for the
year ending
July 31, 2007 (3,957) (3,957)
---------- ------- --------- ----------- -------------
Balance,
July 31, 2007 25,645,000 25,645 201,235 (3,957) 222,923
Net (loss) for the
year ending
July 31, 2008 (33,335) (33,335)
---------- ------- --------- ----------- -------------
Balance,
July 31, 2008 25,645,000 $25,645 $ 201,235 $ (37,292) $ 189,588
========== ======= ========= =========== =============
The accompanying notes are an integral part of these financial statements.
F-4
AirtimeDSL
(A development stage company)
Statements of Cash Flows
Statements of Cash Flows
Period from
For the December 28, 2006 From December 28,
Year Ending to 2006 (Inception)
July 31, 2008 July 31, 2007 to July 31, 2008
---------------- ------------------ ----------------
Operating activities:
Net income (loss) $ (33,335) $ (3,957) $ (37,292)
Adjustments to reconcile
net loss to net cash
Used by operating
activities
Depreciation 3,600 1,500 5,100
Increase in
accounts payable 2,625 - 2,625
---------------- ------------------ ----------------
Net cash (used) from operating
activities (27,110) (2,457) (29,567)
Investing activities:
Purchase of fixed asset - (67,421) (67,421)
---------------- ------------------ ----------------
Net cash provided
(used) by investing
activities - (67,421) (67,421)
Financing activities:
Officer Donated Capital - 430 430
Issuances of common stock - 226,450 226,450
---------------- ------------------ ----------------
Net cash provided from financing
activities - 226,880 226,880
Net increase (decrease) in
cash (27,110) 157,002 129,892
Cash and
equivalents-
beginning 157,002 - -
---------------- ------------------ ----------------
Cash and
equivalents-
ending 129,892 $ 157,002 $ 129,892
================ ================== ================
Supplemental disclosures:
Interest paid $ - $ - $ -
================ ================== ================
Income taxes paid $ - $ - $ -
================ ================== ================
Non-cash transactions $ - $ - $ -
================ ================== ================
The accompanying notes are an integral part of these financial statements.
F-5
AirtimeDSL
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
July 31, 2008
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
AirtimeDSL ("Airtime" or "the Company") was incorporated in the State of Nevada
on December 28, 2006, under the name AirtimeDSL. AirtimeDSL is in the
business of providing high speed wireless services to the business, residential
and consumer marketplace. The Company has minimal operations and in
accordance with SFAS #7, the Company is considered a development stage
company.
On June 11, 2008, AirtimeDSL amended its Articles of Incorporation to change
its name to China H2O. The name change was filed with the Nevada Secretary of
State pursuant to the Acquisition Agreement and Plan of Merger with Beijing
Happy Vitamins Trading Co., Ltd. When the Acquisition Agreement and Plan of
Merger was rescinded on June 24, 2008, the Company filed a Correction Notice
with the Nevada Secretary of State to cancel the Amended Articles and restate
the corporate name back to AirtimeDSL.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The Company has cash assets of $127,634 and liabilities of $2,625 as of
July 31, 2008. The relevant accounting policies are listed below.
Basis of Accounting
- -------------------
The basis is United States generally accepted accounting principles.
Earnings per Share
- ------------------
The basic earnings (loss) per share is calculated by dividing the Company's
net income (loss) available to common shareholders by the weighted average
number of common shares during the year. The diluted earnings (loss) per share
is calculated by dividing the Company's net income (loss) available to common
shareholders by the diluted weighted average number of shares outstanding
during the year. The diluted weighted average number of shares outstanding is
the basic weighted number of shares adjusted as of the first of the year for
any potentially dilutive debt or equity.
The Company has not issued any options or warrants or similar securities since
inception.
Revenue recognition
- -------------------
The Company recognizes revenue on an accrual basis as it invoices for services.
Dividends
- ---------
The Company has not yet adopted any policy regarding payment of dividends. No
Dividends have been paid during the period shown.
F-6
AirtimeDSL
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
July 31, 2008
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES-CONTINUED
Income Taxes
- ------------
The provision for income taxes is the total of the current taxes payable and
the net of the change in the deferred income taxes. Provision is made for the
deferred income taxes where differences exist between the period in which
transactions affect current taxable income and the period in which they enter
into the determination of net income in the financial statements.
Year-end
- --------
The Company has selected July 31 as its year-end.
Advertising
- -----------
Advertising is expensed when incurred. There has been no advertising
during the period.
Use of 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 revenue and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course
of business. However the Company has had limited revenues since its inception.
Without realization of additional capital, it would be unlikely for the
Company to continue as a going concern. It is management's plan to complete
and execute a business plan in order to supply the needed cash flow.
NOTE 4. STOCKHOLDERS'EQUITY
Preferred Stock
- ---------------
The Company is authorized to issue 5,000,000 shares of $0.001 par value
preferred stock.
There have been no issuances of preferred stock.
F-7
AirtimeDSL
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
July 31, 2008
NOTE 4. STOCKHOLDERS'EQUITY-CONTINUED
Common Stock
- ------------
The Company is authorized to issue 70,000,000 shares of $0.001 par value common
stock.
On December 28, 2006 (inception), the Company issued 20,000,000 shares of its
$0.001 par value common stock to the founders of the Company for $20,000 cash
equivalents.
On March 15, 2007, the Company issued 5,000,000 shares of its $0.001 par value
common stock pursuant to a regulation 506 offering.
On May 31, 2007, the Company issued 645,000 shares of its $0.001 par value
common stock pursuant to a regulation 505 offering.
There have been no other issuances of common stock.
NOTE 5. RELATED PARTY TRANSACTIONS
The officer and director of the Company is involved in other business
activities. This person may face a conflict in selecting between the Company
and their other business interests. The Company has not formulated a policy
for the resolution of such conflicts.
NOTE 6. PROVISION FOR INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which
requires use of the liability method. SFAS No. 109 provides that deferred
tax assets and liabilities are recorded based on the differences between the
tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes, referred to as temporary differences. Deferred tax assets
and liabilities at the end of each period are determined using the currently
enacted tax rates applied to taxable income in the periods in which the
deferred tax assets and liabilities are expected to be settled or realized.
The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes.
The sources and tax effects of the differences are as follows:
U.S federal statutory rate (34.0%)
Valuation reserve 34.0%
------
Total -%
F-8
AirtimeDSL
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
July 31, 2008
NOTE 7. REVENUE AND EXPENSES
The Company currently has had revenues of $5,284 and expenses of $42,576
since its inception on December 28, 2006 through July 31, 2008.
NOTE 8. OPERATING LEASES AND OTHER COMMITMENTS:
The Company also has no lease obligations.
NOTE 9 RECENT PRONOUNCEMENTS
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 163, "Accounting for Financial Guarantee Insurance Contracts-and
interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how
Statement 60 applies to financial guarantee insurance contracts, including
the recognition and measurement of premium revenue and claims liabilities.
This statement also requires expanded disclosures about financial guarantee
insurance contracts. SFAS No. 163 is effective for fiscal years beginning on
or after December 15, 2008, and interim periods within those years. SFAS No.
163 has no effect on the Company's financial position, statements of
operations, or cash flows at this time.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS
No. 162 sets forth the level of authority to a given accounting pronouncement
or document by category. Where there might be conflicting guidance between
two categories, the more authoritative category will prevail. SFAS No. 162
will become effective 60 days after the SEC approves the PCAOB's amendments
to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no
effect on the Company's financial position, statements of operations, or cash
flows at this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities-an
amendment of FASB Statement No. 133. This standard requires companies to
provide enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. This Statement is
effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008, with early application encouraged.
The Company has not yet adopted the provisions of SFAS No. 161, but does not
expect it to have a material impact on its consolidated financial position,
results of operations or cash flows.
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110
regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123 (R), Share-Based Payment. In
F-9
AirtimeDSL
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
July 31, 2008
NOTE 9 RECENT PRONOUNCEMENTS - CONTINUED
particular, the staff indicated in SAB 107 that it will accept a company's
election to use the simplified method, regardless of whether the company has
sufficient information to make more refined estimates of expected term. At
the time SAB 107 was issued, the staff believed that more detailed external
information about employee exercise behavior (e.g., employee exercise
patterns by industry and/or other categories of companies) would, over time,
become readily available to companies. Therefore, the staff stated in SAB 107
that it would not expect a company to use the simplified method for share
option grants after December 31, 2007. The staff understands that such
detailed information about employee exercise behavior may not be widely
available by December 31, 2007. Accordingly, the staff will continue to
accept, under certain circumstances, the use of the simplified method beyond
December 31, 2007. The Company currently uses the simplified method for
"plain vanilla" share options and warrants, and will assess the impact of SAB
110 for fiscal year 2009. It is not believed that this will have an impact on
the Company's consolidated financial position, results of operations or cash
flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51. This statement
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. Before this statement was
issued, limited guidance existed for reporting noncontrolling interests. As a
result, considerable diversity in practice existed. So-called minority
interests were reported in the consolidated statement of financial position
as liabilities or in the mezzanine section between liabilities and equity.
This statement improves comparability by eliminating that diversity. This
statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1,
2009, for entities with calendar year-ends). Earlier adoption is prohibited.
The effective date of this statement is the same as that of the related
Statement 141 (revised 2007). The Company will adopt this Statement beginning
March 1, 2009. It is not believed that this will have an impact on the
Company's consolidated financial position, results of operations or cash
flows.
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations.'This Statement replaces FASB Statement No. 141, Business
Combinations, but retains the fundamental requirements in Statement 141.
This Statement establishes principles and requirements for how the acquirer:
(a) recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in
the acquiree; (b) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase; and (c) determines
what information to disclose to enable users of the financial statements to
F-10
AirtimeDSL
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
July 31, 2008
NOTE 9 RECENT PRONOUNCEMENTS - CONTINUED
evaluate the nature and financial effects of the business combination. This
statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. The effective date of this statement is the same as that of
the related FASB Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements. The Company will adopt this statement beginning March
1, 2009. It is not believed that this will have an impact on the Company's
consolidated financial position, results of operations or cash flows.
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities-Including an Amendment of FASB Statement No.
115. This standard permits an entity to choose to measure many financial
instruments and certain other items at fair value. This option is available
to all entities. Most of the provisions in FAS 159 are elective; however, an
amendment to FAS 115 Accounting for Certain Investments in Debt and Equity
Securities applies to all entities with available for sale or trading
securities. Some requirements apply differently to entities that do not
report net income. SFAS No. 159 is effective as of the beginning of an
entities first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of the previous fiscal year
provided that the entity makes that choice in the first 120 days of that
fiscal year and also elects to apply the provisions of SFAS No. 157 Fair
Value Measurements. The Company will adopt SFAS No. 159 beginning March 1,
2008 and is currently evaluating the potential impact the adoption of this
pronouncement will have on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
This statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This statement applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that
fair value is the relevant measurement attribute. Accordingly, this statement
does not require any new fair value measurements. However, for some entities,
the application of this statement will change current practice. This
statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. Earlier application is encouraged, provided that the reporting entity
has not yet issued financial statements for that fiscal year, including
financial statements for an interim period within that fiscal year. The
Company will adopt this statement March 1, 2008, and it is not believed that
this will have an impact on the Company's consolidated financial position,
results of operations or cash flows.
F-11
Item 9. Changes in and Disagreements With Accountants On Accounting and
Financial Disclosure.
None.
Item 9A(T). Controls and Procedures.
Evaluation of disclosure controls and procedures
- ------------------------------------------------
Management is responsible for establishing and maintaining adequate internal
control over financial reporting and for the assessment of the effectiveness
of those internal controls. As defined by the SEC, internal control over
financial reporting is a process designed by our principal executive
officer/principal financial officer, to provide reasonable assurance
regarding the reliability of financial reporting and the reparation of the
financial statements in accordance with U. S. generally accepted accounting
principles.
As of the end of the period covered by this report, we initially carried out
an evaluation, under the supervision and with the participation of our
President (who is also our principal financial and accounting officer), of
the effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our President and chief financial
officer initially concluded that our disclosure controls and procedures were
not effective.
Management's Report On 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 defined in Rule 13a-15(f) or 15d-15(f) promulgated under the
Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, the company's principal executive and principal financial
officers and effected by the 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 accounting principles generally accepted in the
United States of America 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;
30
- - Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate. All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Because of the inherent limitations of
internal control, there is a risk that material misstatements may not be
prevented or detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known features of the
financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
As of July 31, 2008 management assessed the effectiveness of our internal
control over financial reporting based on the criteria for effective internal
control over financial reporting established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") and SEC guidance on conducting such assessments. Based
on that evaluation, they concluded that, during the period covered by this
report, such internal controls and procedures were not effective to detect
the inappropriate application of US GAAP rules as more fully described below.
This was due to deficiencies that existed in the design or operation of our
internal controls over financial reporting that adversely affected our
internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management
considered to be material weaknesses under the standards of the Public
Company Accounting Oversight Board were: (1) lack of a functioning audit
committee resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures; (2) inadequate
segregation of duties consistent with control objectives; and (3) ineffective
controls over period end financial disclosure and reporting processes. The
aforementioned material weaknesses were identified by our President in
connection with the review of our financial statements as of July 31, 2008.
31
Management believes that the material weaknesses set forth in items (2) and
(3) above did not have an effect on our financial results. However,
management believes that the lack of a functioning audit committee resulted in
ineffective oversight in the establishment and monitoring of required
internal controls and procedures, which could result in a material
misstatement in our financial statements in future periods.
This annual report does not include an attestation report of the
Corporation's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation
by the Corporation's registered public accounting firm pursuant to temporary
rules of the SEC that permit the Corporation to provide only the management's
report in this annual report.
Management's Remediation Initiatives
- ------------------------------------
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control
objectives and will increase our personnel resources and technical accounting
expertise within the accounting function when funds are available to us.
And, on August 28, 2008, we appointed outside directors to our board of
directors who shall appoint an audit committee resulting in a fully
functioning audit committee who will undertake the oversight in the
establishment and monitoring of required internal controls and procedures
such as reviewing and approving estimates and assumptions made by management
when funds are available to us.
Management believes that the appointment of the outside directors, who shall
appoint a fully functioning audit committee, will remedy the lack of a
functioning audit committee.
We anticipate that these initiatives will be at least partially, if not
fully, implemented by July 31, 2009. Additionally, we plan to test our
updated controls and remediate our deficiencies by July 31, 2009.
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, that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
Item 9B. Other Information.
None.
30
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth certain information regarding our current
directors and executive officers. Our executive officers serve one-year
terms.
Name Age Position
- ------------------------------------------------------------------
Ed Heckerson 40 President/Secretary/Treasurer/Director
All directors hold office until the next annual meeting of stockholders of
the Company and until their successors have been elected and qualified.
Directors currently receive no fees for services provided in that capacity.
The officers of the Company are elected annually and serve at the discretion
of the Board of Directors.
Set forth below is a brief description of the background and business
experience of our officers and directors.
Edward Heckerson, President and Director
- ----------------------------------------
Edward Heckerson (President/Secretary/Treasurer/Director)
December 2006 to Present - AirtimeDSL - Director
December 2002 to November 2006 - Airtime Wireless, Inc. - President
September 1999 to August 1999 - Independent Communications Consultant
Education:
Bonita High School, San Dimas, CA - Graduated, 1986
Attended Colorado State University, Fort Collins, CO
33
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our executive officers and directors, and persons
who beneficially own more than ten percent of our common stock, to file
initial reports of ownership and reports of changes in ownership with the
SEC. Executive officers, directors and greater than ten percent beneficial
owners are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. Based upon a review of the copies of such
forms furnished to us and written representations from our executive officers
and directors, we believe that as of the date of this report they were not
current in his 16(a) reports.
Board of Directors
- ------------------
Our board of directors currently consists of: Ed Heckerson.. Our director
serve one-year terms.
Audit Committee
- ---------------
The company does not presently have an Audit Committee. No qualified
financial expert has been hired because the company is too small to afford
such expense.
Code of Ethics
- --------------
We have not adopted a Code of Ethics for the Board and any salaried
employees.
Limitation of Liability of Directors
- ------------------------------------
Pursuant to the Nevada General Corporation Law, our Articles of Incorporation
exclude personal liability for our Directors for monetary damages based upon
any violation of their fiduciary duties as Directors, except as to liability
for any breach of the duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, or any
transaction from which a Director receives an improper personal benefit. This
exclusion of liability does not limit any right which a Director may have to
be indemnified and does not affect any Director's liability under federal or
applicable state securities laws. We have agreed to indemnify our directors
against expenses, judgments, and amounts paid in settlement in connection
with any claim against a Director if he acted in good faith and in a manner
he believed to be in our best interests.
34
Nevada Anti-Takeover Law and Charter and By-law Provisions
- ----------------------------------------------------------
The anti-takeover provisions of Sections 78.411 through 78.445 of the Nevada
Corporation Law apply to AirtimeDSL. Section 78.438 of the Nevada law
prohibits the Company from merging with or selling more than 5% of our assets
or stock to any shareholder who owns or owned more than 10% of any stock or
any entity related to a 10% shareholder for three years after the date on
which the shareholder acquired the AirtimeDSL shares, unless the transaction
is approved by AirtimeDSL' Board of Directors. The provisions also prohibit
the Company from completing any of the transactions described in the
preceding sentence with a 10% shareholder who has held the shares more than
three years and its related entities unless the transaction is approved by
our Board of Directors or a majority of our shares, other than shares owned
by that 10% shareholder or any related entity. These provisions could delay,
defer or prevent a change in control of AirtimeDSL.
Item 11. Executive Compensation.
The following table sets forth summary compensation information for the
fiscal years ended July 31, 2008 and July 31, 2007.
Compensation
- ------------
As a result of our the Company's current limited available cash, no officer
or director received compensation since December 28, 2006 (inception) of the
company through the fiscal years ending July 31, 2008 and July 31, 2007.
AirtimeDSL has no intention of paying any salaries at this time. We intend
to pay salaries when cash flow permits.
Summary Compensation Table
- --------------------------
All
Fiscal Other
Year Compen-
Ending Salary Bonus Awards sation Total
Name and Principal Position July 31 ($) ($) ($) ($) ($)
- ----------------------------------------------------------------------------
Ed Heckerson CEO/Dir. 2008 -0- -0- -0- -0- -0-
2007 -0- -0- -0- -0- -0-
35
We do not have any employment agreements with our officers/directors. We do
not maintain key-man life insurance for any our executive officers/directors.
We do not have any long-term compensation plans or stock option plans.
Stock Option Grants
- -------------------
We did not grant any stock options to the executive officers or directors
from inception through fiscal year end July 31, 2008.
Outstanding Equity Awards at Fiscal Year-Ending July 31, 2008
- -------------------------------------------------------------
We did not have any outstanding equity awards as of July 31, 2008.
Option Exercises for Fiscal Year-Ending July 31, 2008
- -----------------------------------------------------
There were no options exercised by our named executive officer in
fiscal year ending July 31, 2008.
Potential Payments Upon Termination or Change in Control
- --------------------------------------------------------
We have not entered into any compensatory plans or arrangements with respect
to our named executive officer, which would in any way result in payments to
such officer because of his resignation, retirement, or other termination of
employment with us or our subsidiaries, or any change in control of, or a
change in his responsibilities following a change in control.
Director Compensation
- ---------------------
We did not pay our director any compensation during fiscal years ending
July 31, 2008 or July 31, 2007.
36
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The following table presents information, to the best of our knowledge, about
the ownership of our common stock on October 27, 2008 relating to those
persons known to beneficially own more than 5% of our capital stock and by
our named executive officers and directors. The percentage of beneficial
ownership for the following table is based on 25,645,000 shares of common
stock outstanding.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and does not necessarily indicate
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes those shares of common stock over which the stockholder
has sole or shared voting or investment power. It also includes shares of
common stock that the stockholder has a right to acquire within 60 days after
October 27, 2008 pursuant to options, warrants, conversion privileges or
other right. The percentage ownership of the outstanding common stock,
however, is based on the assumption, expressly required by the rules of the
Securities and Exchange Commission, that only the person or entity whose
ownership is being reported has converted options or warrants into shares of
AirtimeDSL's common stock.
Name and Address Amount of Beneficial Percentage
Title of Class of Beneficial Owner Ownership of Class
- ---------------- ----------------------- ------------------ -------------
Common Stock Ed Heckerson, (1) 16,000,000 62.3%
2920 N. Green Valley Pkwy
Henderson, NV 89014
- ----------------------------------------------------------------------------
Common Stock All Executive Officers 16,000,000 62.3%
and Directors as a Group (1 person)
(1) Ed Heckerson's wife beneficially owns 20,000 common shares that are not
included in the above total.
We are not aware of any arrangements that may result in "changes in control"
as that term is defined by the provisions of Item 403(c) of Regulation S-B.
37
We believe that all persons named have full voting and investment power with
respect to the shares indicated, unless otherwise noted in the table. Under
the rules of the Securities and Exchange Commission, a person (or group of
persons) is deemed to be a "beneficial owner" of a security if he or she,
directly or indirectly, has or shares the power to vote or to direct the
voting of such security, or the power to dispose of or to direct the
disposition of such security. Accordingly, more than one person may be deemed
to be a beneficial owner of the same security. A person is also deemed to be
a beneficial owner of any security, which that person has the right to
acquire within 60 days, such as options or warrants to purchase our common
stock.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
The company's sole Director has contributed office space for the Company's
use for all periods presented. There is no charge to AirtimeDSL for the
space.
Through a Board Resolution, the Company hired the professional services of
Moore & Associates, Chartered, Certified Public Accountants, to perform
audited financials for the Company. Moore & Associates, Chartered owns no
stock in the Company. The company has no formal contracts with its
accountants, they are paid on a fee for service basis.
Other than as set forth, there are no transactions since our inception, or
proposed transactions, to which we were or are to be a party, in which any of
the following persons had or is to have a direct or indirect material
interest:
a) Any director or executive officer of the small business issuer;
b) Any majority security holder; and
c) Any member of the immediate family (including spouse, parents, children,
siblings, and in-laws) of any of the persons in the above.
38
Item 14. Principal Accountant Fees and Services.
Moore & Associates, Chartered served as our principal independent public
accountants for fiscal years ending July 31, 2008 and July 31, 2007.
Aggregate fees billed to us for the years ended July 31, 2008 and 2007 by
Moore & Associates were as follows:
For the Years Ended
July 31,
-------------------
2008 2007
-------------------
(1) Audit Fees(1) $5,000 $4,000
(2) Audit-Related Fees -0- -0-
(3) Tax Fees -0- -0-
(4) All Other Fees -0- -0-
Total fees paid or accrued to our principal accountant
(1) Audit Fees include fees billed and expected to be billed for services
performed to comply with Generally Accepted Auditing Standards (GAAS),
including the recurring audit of the Company's financial statements for such
period included in this Annual Report on Form 10-K and for the reviews of the
quarterly financial statements included in the Quarterly Reports on Form 10-
QSB filed with the Securities and Exchange Commission.
Audit Committee Policies and Procedures
- ---------------------------------------
We do not have an audit committee; therefore our President pre-approves
all services to be provided to us by our independent auditor. This process
involves obtaining (i) a written description of the proposed services, (ii)
the confirmation of our Principal Accounting Officer that the services are
compatible with maintaining specific principles relating to independence, and
(iii) confirmation from our securities counsel that the services are not
among those that our independent auditors have been prohibited from
performing under SEC rules. Our director(s) then makes a determination to
approve or disapprove the engagement of Moore & Associates for the proposed
services. In the fiscal year ending July 31, 2008, all fees paid to Moore &
Associates were unanimously pre-approved in accordance with this policy.
Less than 50 percent of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees.
39
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following information required under this item is filed as part of
this report:
(a) 1. Financial Statements
Page
----
Management's Report on Internal Control Over Financial Reporting 28
Report of Independent Registered Public Accounting Firm F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity F-4
Statements of Cash Flows F-5
(b) 2. Financial Statement Schedules
None.
40
(c) 3. Exhibit Index
Incorporated by reference
-------------------------
Filed Period Filing
Exhibit Exhibit Description herewith Form ending Exhibit date
- -------------------------------------------------------------------------------
3.1 Articles of Incorporation, SB-2 3.1 09/13/2007
as currently in effect
- -------------------------------------------------------------------------------
3.2 Bylaws SB-2 3.2 09/13/2007
as currently in effect
- -------------------------------------------------------------------------------
23.1 Consent Letter from Moore X
and Associates Chartered
- -------------------------------------------------------------------------------
31.1 Certification of President X
and Principal Financial
Officer, pursuant to Section
302 of the Sarbanes-Oxley
Act
- -------------------------------------------------------------------------------
31.2 Certification of President X
and Principal Financial
Officer, pursuant to Section
906 of the Sarbanes-Oxley
Act
- -------------------------------------------------------------------------------
41
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AirtimeDSL
- ----------------------------------
Registrant
By: /s/ Ed Heckerson
----------------
Ed Heckerson
President
Date: October 27, 2008
----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated have signed this report below.
Name:
By: /s/ Ed Heckerson
--------------------------------
Ed Heckerson
President, Secretary,
Treasurer and Director
(Principal Executive,
Principal Financial and
Principal Accounting Officer)
Date: October 27, 2008
----------------
42