ITEM 1. BUSINESS
Organization within the Last Five Years
We were incorporated on February 20, 2007 under the laws of the State of Nevada.
Company Background
Witel, Corp. will offer global mobile communication services over WiFi networks. The Company designs, manufactures, and markets proprietary mobile communication devices that are offered in conjunction with its phone service. The Company is planning on launching its service in the third quarter of 2009 and will be selling its products worldwide through its online store, and value-added resellers. The Company was founded in 2007 and its fiscal year ends on December 31st. Unless otherwise stated, all information presented in this Form 10-K is based on the Company’s fiscal calendar.
Business Strategy
The Company is committed to leveraging the rapid expansion of global wireless networks by establishing a cost-free platform that allows its customers to make and receive phone calls around the world at substantial discounts to conventional telecom operators. The Company's business strategy relies on its ability to design and develop its own operating system, mobile communication devices, and unique service packages. Our goal is to deliver an experience that is user friendly and creates tremendous value for our customers.
To date, our operations have been limited to developing our proprietary WiFi phone, implementation of our communications service platform, developing our online website, and the development of our billing and online order taking system. To date, we have generated no revenues from our operations.
Service Offerings
We will be offering our global communication services through two calling plans with different pricing structures. In order to access our plans a customer need only to purchase on of our proprietary phones. Both our service plans include an array of unique features that deliver cost-savings and global accessibility:
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Free Global Witel to Witel Calls - All Witel to Witel calls are Free no matter where the two callers may be located in the world. Each customer receives a special seven digit Virtual Number and can make or receive Witel to Witel calls with this number from any place on earth with an accessible WiFi network.
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Free Global Incoming Calls - All Witel plans include unlimited incoming calls with no roaming charges. For example, a customer can have a U.S phone number and receive free incoming calls while traveling in China.
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Witel Phone Number - A phone number from the U.S./Canada/United Kingdom that is linked to a customers Witel account and allows them to receive calls with that number regardless of their geographic location. Numbers from other countries are available for $4.99 a month.
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Free Caller ID - Witel offers its customers free caller identification.
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Free Global Voicemail - Witel provides its customers with the ability to listen to voicemails through their phone, their email, or through an internet browser on the Witel control panel.
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Witel Control Panel - A unique web-based tool that allows a customer to exercise full control over their Witel account.
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Ability to Login from any Witel Handset - Since no SIM Cards are used, Witel service is available through any Witel enabled handset. A customer just needs to enter their Witel virtual number and password and that handset would then be linked to their Witel account.
Plans
Witel Basic $9.99 a month - The Witel Basic plan provides a customer with all the features above in addition to 500 minutes of one time call credit to call non-Witel phones. After that credit is used up a customer pays for non-Witel calls on a per-minute basis. Witel per-minute calls are considerably less expensive than conventional telecommunication operators. Below is an example of some of our per-minute rates:
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Australia - 1.8¢ per minute
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Canada - 1.8¢ per minute
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China - 1.5¢ per minute
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Germany - 1.5¢ per minute
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Denmark - 1.5¢ per minute
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Spain - 1.5¢ per minute
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France - 1.5¢ per minute
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United Kingdom - 1.5¢ per minute
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Greece - 1.5¢ per minute
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Ireland - 1.5¢ per minute
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Israel - 1.5¢ per minute
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Italy - 1.5¢ per minute
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Netherlands - 1.5¢ per minute
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Norway - 1.8¢ per minute
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Portugal - 1.5¢ per minute
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Sweden - 1.5¢ per minute
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Singapore - 1.5¢ per minute
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Puerto Rico - 1.5¢ per minute
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Poland - 1.8¢ per minute
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United States - 1.8¢ per minute
The rest of our per-minute rates can be found on our website: http://www.witel.com
The basic plan allows a customer from anywhere in the world to make calls for free to other Witel customers, receive incoming calls for free regardless of their location, and make non-Witel calls at very low per-minute rates.
Witel Unlimited $19.99 a month - The Witel Unlimited plan provides a customer with all the features included in the Basic plan plus unlimited calling to non-Witel phones in 48 countries. Calls to other non-Witel phones are charged at our low per-minute rates. The unlimited plan allows a customer from anywhere in the world to make calls for free to other Witel customers, receive incoming calls for free regardless of their location, and make non-Witel calls to 48 countries for free.
Products
The Company plans to offer a range of related products that will compliment its global mobile phone service. To date the Company has developed a proprietary WiFi mobile phone that will be the cornerstone of its product offering. The Company places emphasis on making its products affordable to customers on a global scale. By outsourcing certain aspects involved in the design and development of its products the Company is able to reduce expenses and pass on considerable savings to the customer:
Witel Jetter $59.99 - The Witel Jetter is WiFi-enabled mobile phone that allows a user from anywhere in the world to connect to the Witel phone service. The Jetter works by connecting to local WiFi networks. Once it has successfully connected to a network it can be used like an ordinary mobile phone to make or receive calls as long as the user has signed up for one of two Witel calling plans. The Jetter also provides users with the following features:
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Phonebook
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Speed Dial
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Call Logging
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New Call, Mute, Hold, Second Call, Swap, Transfer, Handsfree and Call Recording functions.
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Email Access
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WiFi Site Survey feature
Market Opportunity
Annual service revenues of the global telecommunications industry will reach US $1.3 trillion by the end of 2008, according to a report from Insight Research. The research report, entitled “The 2007 Industry Review, an Anthology of Market Facts and Forecasts,” states that wireless revenues will increase by a compounded rate of nearly 10% annually.
Witel is taking advantage of the convergence of two major technologies, wireless internet and mobile phones. By using the platform of wireless internet to deliver calls to its subscribers, Witel can effectively offer communications service to virtually anyone in the world as long as they are within the vicinity of a WiFi network.
WiFi Availability
Wi-Fi is a growing phenomenon with enormous growth in public hotspots, home wireless networks, and hundreds of Municipal Mesh Wi-Fi deployments or trials worldwide. As Wi-Fi technology becomes ubiquitous in homes, hot zones, and hotspots, an increasing number of mobile WiFi devices will be demanded. According to ON World, Inc. one hundred million consumer Mobile-WiFi devices will ship in 2011 as shown by this bar chart:
Of this market, Witel is targeting the WiFi VoIP (Voice over Internet Protocol) segment. In which users will be placing phone calls over wireless internet networks. According to ON World, Inc. the number of WiFi-VoIP users worldwide will increase significantly from 1.9 million in 2006 to 66.8 million in 2011 as shown in this bar chart:
The Company believes that these trends will stimulate demand for a low cost provider of global communications services and that we are positioned to benefit from the projected growth. We intend on establishing our brand as the de-facto global communications provider over WiFi.
Marketing
Rapid market exposure is critical to drive broad acceptance of the phones and services. We intend to initiate this rapid exposure by a comprehensive marketing plan via the internet. Our marketing objective is to achieve cost effective ways of acquiring and retaining subscribers. We will maintain a fully operational website and will drive substantial traffic to our website via search marketing, PPC (Pay per Click), viral marketing, and social networking. We will utilize our website as a direct marketing tool to increase product awareness and generate sales.
We will monitor the results of our marketing efforts closely in an effort to evaluate which approaches produce the best results.
Sales and Distribution
Direct Sales
The primary sales channels for our service will be through online direct sales. Customers will be able to subscribe to our service at our website: http://www.witel.com. Our website will be available in several languages allowing for us to target a global client base. We will compliment our sales channel with relevant marketing campaigns through online banner advertisements, PPC (Pay per Click) advertising, and social networks.
Customer Service
We will offer customer support 24 hours a day, seven days a week through our online Control Panel and Support section of our website. Additionally support queries may be sent via email. We have put emphasis on developing a user-friendly service that will require substantially less support than conventional phone service. We will also provide animated tutorials that will explain how to use various Witel features as well as a troubleshooting guide.
Billing
All customer billing is automated through our website. We automatically collect all fees from our customer's credit cards. By collecting monthly subscription fees in advance, we are able to reduce the amount of accounts receivable that we have outstanding, thus allowing us to have lower working capital requirements.
Inventory and Shipping
All inventories are housed with our third-party warehouse and logistics partner. Our automated order system sends a shipping request upon successful order confirmation and credit card authorization. The order is then shipped globally from the warehouse and a confirmation email is send to the customer with tracking information. We prefer this method of operation over maintaining our own warehouse so that we can reduce our overhead and deliver cost-savings to our customers.
Patents, Trademarks, Copyrights and Licenses
We have filed applications to register the following trademarks in the United States and Canada, which have been approved:
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“Witel”
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“The World is Your Network”
Competition
We face strong competition from incumbent telephone companies, cable companies, alternative voice communication providers and wireless companies. Because most of our target customers are already purchasing communications services from one or more of these providers, our success is dependent upon our ability to attract these customers away from their existing providers. This will become more difficult as the early adopter market becomes saturated and mainstream customers make up more of our target market. We believe that the principal competitive factors affecting our ability to attract and retain customers are price, call quality, reliability, customer service, and enhanced services and features.
Incumbent telephone companies
The incumbent telephone companies are our primary competitors and have historically dominated their regional markets. These competitors include AT&T, Qwest Communications and Verizon Communications as well as rural incumbents, such as Windstream Corporation. These competitors are substantially larger and better capitalized than we are and have the advantage of a large existing customer base, and larger marketing budgets than we have.
In many cases our communications plans are significantly lower than prices charged by the incumbent phone companies. We believe that we can successfully compete with the incumbent phone companies on the basis of the features we offer and our ability to attract clients globally as opposed to regionally.
Cable companies
These competitors include companies such as Cablevision, Comcast Corporation, Cox Communications and Time Warner Cable (a division of Time Warner Inc.). Cable companies have significant financial resources and have made and are continuing to make substantial investments in delivering broadband Internet access and phone service to their customers. Providing Internet access and cable television to many of our existing and potential customers allows them to engage in highly targeted, low-cost direct marketing and may enhance their image as trusted providers of services.
Cable companies are also aggressively using their existing customer relationships to bundle services. For example, they bundle Internet access, cable television and phone service with an implied price for the phone service that may be significantly below ours. They are able to advertise on their local access channels with no significant out-of-pocket cost and through mailings in bills with little marginal cost. They also receive advertising time as part of their relationships with television networks, and they are able to use this time to promote their telephone service offerings.
Many cable companies send technicians to customers’ premises to initiate service. Although this is expensive, it also can be more attractive to customers than installing their own router. In addition, these technicians may install an independent source of power, which can give customers assurance that their phone service will not be interrupted during power outages.
We believe that we can successfully compete with cable companies by offering services such as global mobility, unlimited international calling, and our ability to attract clients globally as opposed to regionally.
Wireless telephone companies
We also compete with wireless phone companies, such as Vodafone, AT&T, America Movil, NTT Docomo, Verizon Wireless, Deutsche Telekom AG and others. Some consumers use wireless phones, as a replacement for a wireline phone. Also, wireless phone companies increasingly are providing wireless broadband Internet access to their customers and may in the future offer VoIP to their customers. As wireless providers offer more minutes at lower prices and companion landline alternative services, their services have become more attractive to households as a competing replacement for wireline service. Wireless telephone companies have a strong retail presence and have significant financial resources.
We believe our ability to successfully compete with the wireless telephone companies is enhanced by our ability to leverage WiFi networks as a cost-free infrastructure. Because we maintain no infrastructure cost we can provide competitive rates to our customers. For example Witel to Witel calling allows to people with Witel handsets to talk for free no matter where they are in the world as long as they are both within the vicinity of a WiFi network. Currently there are no wireless telephone companies that offer global in network calling.
Alternative voice communication providers
We also compete against established alternative voice communication providers, such as Skype (a service of eBay Inc.), Vonage, and independent VoIP service providers. Some of these service providers have chosen to sacrifice revenue in order to gain market share and have offered their services at lower prices or for free. Google Inc., Microsoft Corporation and Yahoo! Inc. also offer free instant messaging services that are voice enabled.
While not all of these competitors currently offer the ability to call or be called by anyone not using their service, in the future they may integrate such capabilities into their service offerings.
We believe our strongest competitive advantage versus the existing alternative voice communication providers is that our service revolves around the use of our low-cost handsets as opposed to computers. By removing the computer-element we provide increased accessibility, mobility, and affordability for our service.
Staffing
As of December 31, 2008, we had no permanent staff other than our officers and directors. Since then we have hired 3 full-time employees.
Product Warranties
Our manufacturers warrant all of our products against defect for a period of one year. We will provide a replacement phone to customers who obtain a defective product and work with the supplier to fix defective products.
Government Regulation
We are not aware of any government approvals required in connection with the operation of our business and the sale of our products.
WHERE YOU CAN FIND MORE INFORMATION
You are advised to read this Form 10-K in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.
ITEM 1A.
ITEM 1A. RISK FACTORS
We are subject to those financial risks generally associated with development stage companies. Since we have sustained losses since inception, we will require financing to fund our development activities and to support our operations. However, we may be unable to obtain such financing. We are also subject to risks factors specific to our business strategy and the wireless retail industry. Rapid changes in industry standards for wireless phones and services may require us to introduce new products and services before we can attain profitable operations. We may be unable to introduce new products and services on a timely basis. Moreover, there is no guarantee that any such products will allow us to achieve profitable operations in the future.
We consider the following to be the material risks to an investor in us. We should be viewed as a high-risk investment and speculative in nature. An investment in our common stock may result in a complete loss of the invested amount.
Cautionary Statement Regarding Forward-Looking Statements
This Annual Report contains forward-looking statements relating to events anticipated to happen in the future. We base these forward-looking statements on the beliefs of our management, as well as assumptions made by and information currently available to our management. Forward-looking statements also may be included in other written and oral statements made or released by us. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. The words "believe," "anticipate," "intend," "expect," "estimate," "project" and similar expressions are intended to identify forward-looking statements. Forward-looking statements describe our expectations today of what we believe is most likely to occur or may be reasonably achievable in the future, but they do not predict or assure any future occurrence and may turn out to be wrong. Forward-looking statements are subject to both known and unknown risks and uncertainties and inaccurate assumptions that we might make can affect them. Consequently, we cannot guarantee any forward-looking statement. Actual future results may vary materially. We do not undertake any obligation to update publicly any forward-looking statements to reflect new information or future events or occurrences. These statements reflect our current views with respect to future events and are subject to risks and uncertainties about us, including, among other things:
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our ability to market our services successfully to new subscribers;
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our ability to retain a high percentage of our customers;
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the possibility of unforeseen capital expenditures and other upfront investments required to deploy new technologies or to effect new business initiatives;
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our ability to access markets and finance product and service developments and operations;
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our expansion, including consumer acceptance of new price plans and bundled offerings;
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additions or departures of key personnel;
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competition, including the introduction of new products or services by our competitors;
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existing and future laws or regulations affecting our business and our ability to comply with these laws or regulations;
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our reliance on the systems and provisioning processes of third party vendors;
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technological innovations;
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the outcome of legal and regulatory proceedings;
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general economic and business conditions, both nationally and in the regions in which we operate; and
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other factors described in this document, including those described in more detail below.
We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this document.
RISKS RELATED TO OUR FINANCIAL CONDITION
There Is Substantial Doubt About Our Ability To Continue As A Going Concern.
Our auditor’s report on our December 31, 2008 and 2007 financial statements expresses an opinion that substantial doubt exists as to whether we can continue as an ongoing business. Since our directors and/or shareholders may be unwilling or unable to loan or advance capital to us, we believe that if we do not raise additional capital within 6 months, we may be required to suspend or cease the implementation of our business plan.
As we have been issued an opinion by our auditors that substantial doubt exists as to whether we can continue as a going concern, it may be more difficult for us to attract investors.
Since the Company Anticipates Operating Expenses Will Increase Prior To Earning Revenue, We May Never Achieve Profitability.
We anticipate increases in its operating expenses, while realizing minimal revenues from our products and services. Within the next 12 months, these increases in expenses will be attributed to the cost of (i) developing and modifying our packaging and distributing our products and services, (ii) initiating our sales and marketing capabilities (iii) hiring staff and (iv) other general corporate and working capital purposes.
We will incur financial losses in the foreseeable future to pay for our products and services and to solicit product and services orders from a significant number of customers. There is no history upon which to base any assumption as to the likelihood that we will prove successful. We cannot provide investors with any assurance that our products and services will attract customers among established wireless customers generate any operating revenue or ever achieve profitable operations. If we are unable to address these risks, there is a high probability that our business will fail, which will result in the loss of your entire investment.
If We Do Not Obtain Adequate Financing, Our Business Will Fail, Which Will Result In The Complete Loss Of Your Investment.
Our cash balance, as of December 31, 2008 is $138,280. We will require additional financing in order to maintain our corporate existence and status as a reporting issuer and implement our business plan and strategy. We intend to raise additional capital through private placements once we either gain a listing on a recognized exchange or our common stock is quoted on the Over the Counter Bulletin Board.
We require significant capital over the next twelve months, to develop and market our wireless “Wi-Fi” products and services and establish our sales and marketing initiatives. We will require additional funds to establish our website and build our customer base by soliciting service contracts and product orders from customers throughout North America. If we are not successful in earning revenues once we have our products and services and commenced business operations, we may require additional financing to sustain business operations. Currently, we do not have any arrangements for financing and can provide no assurance to investors that we will be able to obtain financing when required. Obtaining additional financing would be subject to a number of factors, including our ability to attract customers from established wireless carriers and service providers. These factors may have an effect on the timing, amount, terms or conditions of additional financing and make such additional financing unavailable to us.
No assurance can be given that we will obtain access to capital markets in the future, or that financing adequate to satisfy the cash requirements to implement our business strategies will be available on acceptable terms. Our inability to gain access to capital markets, or obtain acceptable financing could have a material adverse effect upon the results of its operations and upon its financial condition.
RISKS RELATED TO OUR STOCK
There is no public market for our stock.
There is currently no traded public market for our common stock. There are no assurances that any public market will be established or maintained for our stock. As a result, investors may face difficulties in selling shares at attractive prices when they want to.
If no market develops, the holders of our common stock may find it difficult or impossible to sell their shares. Further, even if a market develops, our common stock will be subject to fluctuations and volatility.
Our common stock is quoted on the FINRA Over-The-Counter Bulletin Board (OTC). Additionally, the stock may be traded only to the extent that there is interest by broker-dealers in acting as a market maker in our stock. Despite our best efforts, we may not be able to convince any broker/dealers to act as market-makers and make quotations on the OTC Bulletin Board.
In the event that our shares are traded, they may trade under $5.00 per share and thus will be a penny stock. Trading in penny stocks has many restrictions and these restrictions could severely affect the price and liquidity of our shares.
In the event that our shares are traded, and our stock trades below $5.00 per share, our stock would be known as a "penny stock", which is subject to various regulations involving disclosures to be given to you prior to the purchase of any penny stock. The U.S. Securities and Exchange Commission (the "SEC") has adopted regulations, which generally define a "penny stock" to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Depending on market fluctuations, our common stock could be considered to be a "penny stock." A penny stock is subject to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established customers and accredited investors. For transactions covered by these rules, the broker/dealer must make a special suitability determination for the purchase of these securities. In addition, he must receive the purchaser’s written consent to the transaction prior to the purchase. He must also provide certain written disclosures to the purchaser. Consequently, the "penny stock" rules may restrict the ability of broker/dealers to sell our securities, and may negatively affect the ability of holders of shares of our common stock to resell them. These disclosures require you to acknowledge that you understand the risks associated with buying penny stocks and that you can absorb the loss of your entire investment. Penny stocks are low priced securities that do not have a very high trading volume. Consequently, the price of the stock is often volatile and you may not be able to buy or sell the stock when you want to.
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.
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 December 31, 2007, 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 December 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. 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.
RISKS RELATED TO INVESTING IN US
Key Management Personnel May Leave Us, Which Could Adversely Affect Our Ability To Continue Operations
We are entirely dependent on the efforts of our officers and directors. The loss of our officers and directors, or of other key personnel hired in the future, could have a material adverse effect on the business and its prospects. We believe that we have made all commercially reasonable efforts to minimize the risks attendant with the departure by key personnel and we plan to continue these efforts in the future. However, there is no guarantee that replacement personnel, if any, will help us to operate profitably. We do not maintain key person life insurance on our officers and directors.
Since The Majority Of Our Officers And Directors Have No Direct Experience In The Wireless Retail Industries, We May Never Be Successful In Implementing Our Business Strategy, Which Will Result In The Loss Of Your Investment.
Mr. Triston has no direct experience in the sales and marketing of wireless products and services. As a result, our management may not be fully aware of many of the specific requirements of operating a wireless business. Management’s decisions and choices may also not account for the business or sales strategies, which are commonly deployed in the wireless services industry. Consequently, our operations, earnings and ultimate financial success could suffer irreparable harm due to management’s lack of experience in this area. As a result, we may have to suspend or cease operations, which will result in the loss of your investment.
If We Dissolve, It Is Unlikely That There Will Be Sufficient Assets Remaining To Distribute To The Shareholders
In the event of our dissolution, we will distribute the proceeds realized from the liquidation of our assets, if any, to our shareholders only after we satisfy the claims of our creditors, if any. In that case, the ability of purchasers of the offered shares to recover all or any portion of his or her purchase price for the offered shares will depend on the amount of funds realized and the claims to be satisfied therefrom.
We May Pay Compensation to Our Officers, Director and Employees Regardless Of Our Profitability. Such Payments May Negatively Affect Our Cash Flow and Our Ability to Finance Our Business Plan, Which Would Cause Our Business to Fail
The officers and directors and any future employees of us may be entitled to receive compensation, payments and reimbursements regardless of whether we operate at a profit or a loss. Any compensation received by our officers and directors, or any other management personnel in the future, will be determined from time to time by the Board of Directors. We expect to reimburse our officers and directors and any future management personnel for any direct out-of-pocket expenses they incur on our behalf.
Our internal controls over financial reporting may not be considered effective in the future, which could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock price
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on our internal controls over financial reporting. Such report must contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. If we are unable to continue to assert that our internal controls are effective, our investors could lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.
We do not pay cash dividends
We do not pay cash dividends. We have not paid any cash dividends since inception and have no intention of paying any cash dividends in the foreseeable future. Any future dividends would be at the discretion of our board of directors and would depend on, among other things, future earnings, our operating and financial condition, our capital requirements, and general business conditions. Therefore, shareholders should not expect any type of cash flow from their investment.
RISKS RELATED TO OUR MARKET AND STRATEGY
Since We Are a New Company and Lack an Operating History, We Face a High Risk of Business Failure, Which May Result In the Loss of Your Investment
We are a development stage company formed recently to carry out the activities described in this prospectus and thus have only a limited operating history upon which an evaluation of its prospects can be made. We were incorporated on February 20, 2007 and to date have been involved primarily in organizational activities, wireless products and services evaluation and market research; we have transacted no business operations. Thus, there is no internal or industry-based historical financial data for any significant period of time upon which to estimate our planned operating expenses.
We expect that our results of operations may also fluctuate significantly in the future as a result of a variety of factors. These include, among other factors, the entry of new competitors into the wireless product and services industry, the introduction and acceptance of new or enhanced wireless products and services by us or our competitors, our ability to anticipate and effectively adapt to developing markets, our ability to attract, retain and motivate qualified personnel, the initiation, renewal or expiration of our customer base, pricing changes by the company or its competitors, specific economic conditions and general economic conditions. Accordingly, our future sales and operating results are difficult to forecast.
We anticipate expenses are relatively fixed in the short term and we expect that they will be partially offset by our future revenues. We may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in relation to its expectations would have an immediate adverse impact upon our business, financial condition and the results of its operations. In addition, we may decide from time to time to make certain pricing, service or marketing decisions or acquisitions that could have a material adverse effect on our business, financial condition or the results of our operations and may not result in the long-term benefits intended. Due to all of the foregoing factors, it is probable that in some future period our operating results may be less than the expectations of public market analyses and investors. In such event, the price of our securities, including our common stock, would probably be materially adversely affected.
As of the date of this prospectus, we have earned no revenue. Failure to generate revenue will cause us to go out of business, which will result in the complete loss of your investment.
Our Ability to Implement Our Business Strategy
Although we intend to pursue a strategy of aggressively marketing our wireless products and services, implementation of this strategy will depend in upon a number of factors. These include our ability to establish a significant base of customers, maintain favorable relationships with customers, effectively design customized products and services for our customers, obtain adequate financing on favorable terms in order to fund our business, maintain appropriate procedures, policies and systems, hire, train and retain skilled employees and to continue to operate within an environment of increasing competition. Our inability to obtain or maintain any or all of these factors could impair our ability to implement our business strategy successfully, which could have a material adverse effect on the results of its operations and its financial condition.
Due To Our Dependence on Computer and Telecommunications Infrastructure and Computer Software, Any Systems Disruptions or Operating Malfunctions Would Affect Our Costs of Doing Business and Could Cause Our Business to Fail
We will market our wireless products and services and provide customer services through our website and the internet. We will rely upon the internet and certain third party vendors to administer our customers accounts, distribute information to our customers, distribute periodic software upgrades to our customers’ phones and, finally, to contact and solicit orders from prospective customers. Our success will be depend in part on computer systems that deliver the software upgrades and the networks that connect those computer systems, especially the e-commerce connections that allow us to collect revenues for the phones and services we provide. Operating malfunctions in the software systems of financial institutions and other parties may also have an adverse affect on our operations.
If We Cannot Create a Significant Market for Our Wireless Products And Services in What Is an Extremely Competitive Industry, Our Business Will Fail and Our Shareholders May Lose Their Entire Investment
Our strategy for growth is substantially dependent upon our ability to market our products and services successfully to prospective customers. However, our planned wireless products and services may not achieve significant acceptance among our target customers. Such acceptance, if achieved, may not be sustained for any significant period of time. There is no guarantee that any substitute services or products we develop will be sufficient to permit us to recover our associated costs. Failure of our products and services to achieve or sustain market acceptance could have a material adverse effect on our business, financial condition and the results of our operations.
We May Not Be Able To Continue Operating If We Are Unable To Manage Our Future Growth
We expect to experience growth and expect such growth to continue for the foreseeable future. Our growth may place a significant strain on our management, financial, operating and technical resources. Failure to manage this growth effectively could have a material adverse effect on our financial condition or the results of our operations.
There Is A Risk We May Be Unable To Continue Our Services Or Continue Operations If We Experience Uninsured Losses Or An Act Of God.
We may, but are not required to, obtain comprehensive liability and other business insurance of the types customarily maintained by similar businesses. There are certain types of extraordinary occurrences, however, which may be either uninsurable or not economically insurable. For example, in the event of a major earthquake, our computer systems could be rendered inoperable for protracted periods of time, which would impair our ability to distribute products and services or collect revenues and thus adversely affect our financial condition. In the event of a major civil disturbance, our operations could be adversely affected. Should such an uninsured loss occur, we could lose significant revenues and financial opportunities in amounts that would not be partially or fully compensated by insurance proceeds.
Our Entire Business Strategy Is Dependent On the Sale of Our Wireless Products and Services. If We Are Unable To Achieve Our Sales Estimates, We May Fail and Shareholders May Lose Their Investment
Our strategy for growth may be substantially dependent upon our ability to market and distribute wireless products and services successfully and may require us to introduce successful new products and services. Other companies, including those with substantially greater financial, marketing and sales resources, compete with us. There can be no assurance that we will be able to market and distribute our products and services on acceptable terms, or at all. There can be no assurance that we will be able to develop new products and services that will be commercially successful. Failure to market our products and services successfully, or develop, introduce and market new products and services successfully, could have a material adverse effect on our business, financial condition or the results of our operations.
We Are Dependant on Third-Party Providers for Our Products and Services and May Not Be Able To Continue Operations If There Is A Disruption in the Supply of Such Products and Services
We will depend upon third party independent wireless phone and service providers to supply our wireless phone, accessories and provide us with service. Further, we have and plan on retaining independent contractors to provide other essential products and services to us. We have also hired contractors to build our web site. Such third party suppliers and contractors have no fiduciary duty to our shareholders and may not perform as expected. Inasmuch as the capacity for certain services by certain third parties may be limited, the inability of those third parties, for economic or other reasons, to provide services could have a material adverse effect upon the results of our operations and financial condition.
RISKS RELATED TO INVESTING IN OUR INDUSTRY
Our Future Success Depends On The Growth In The Use Of The Internet As A Means Of Communications.
If the market for IP communications, in general, and our services in particular, does not grow at the rate we anticipate or at all, we will not be able to increase our number of users or generate revenues we anticipate. To be successful, IP communications requires validation as an effective, quality means of communication and as a viable alternative to traditional telephone service. Demand and market acceptance for recently introduced services are subject to a high level of uncertainty. The Internet may not prove to be a viable alternative to traditional telephone service for reasons including:
·
inconsistent quality or speed of service;
·
traffic congestion on the Internet;
·
potentially inadequate development of the necessary infrastructure;
·
lack of acceptable security technologies;
·
lack of timely development and commercialization of performance improvements, and;
·
unavailability of cost-effective, high-speed access to the Internet.
If Internet usage grows, the Internet infrastructure may not be able to support the demands placed on it by such growth, or its performance or reliability may decline. In addition, Web sites may from time to time experience interruptions in their service as a result of outages and other delays occurring throughout the Internet network infrastructure. If these outages or delays frequently occur in the future, Internet usage, as well as usage of our communications portal and our services, could be adversely affected.
Wireless Products And Services Is Closely Regulated And Changes In Laws And Practices May Have An Adverse Affect On Our Ability To Market Our Products And Services.
The United States and Canada closely regulate the wireless phone industry. Several lawsuits have challenged various aspects of federal and state telecommunication laws. If such lawsuits are successful in those states in which we operate or if state laws are changed to restrict the wireless s industry, our customer will be required to change the manner in which they utilize our products and services. Such developments could make our products and services obsolete, require costly modifications of our product line or reduce our customer base.
There is a substantial risk that our customers may be materially and adversely affected by future litigation, new state or federal regulations or consumer initiatives directed against our customers individually or against wireless industry in general. Several states have also raised questions related to the proper regulatory framework for wireless service. Each state where we operate regulates the wireless business through consumer protection laws (such as truth-in-lending and unfair competition). These laws and regulations, among other things, establish licensing requirements, regulate approval and application procedures, establish fees, require specified disclosures to customers and govern collection practices. Our customers’ inability or failure to comply with any adverse changes in the regulatory environment, such as new laws and regulations or new interpretations of existing laws and regulations, could result in fines, class-action litigation or interruption or cessation of certain of their business activities. Any of these events would hurt our customer base and could have a material and adverse effect upon our business, operating results and financial condition.
As Our Products Are Primarily Intended For Use In Retail Wireless Industry, Any Downturn In The Industry Would Reduce The Demand For Our Services And Products And Could Make Our Business Unprofitable.
We have identified a growing market in the emerging wireless products and services industry utilizing “wi-fi” for communication. Many factors could lead to a downturn in this industry, such as changes in our customers’ regulatory environment. Any such industry downturn would restrict our target market and adversely affect our ability to conduct our business and achieve profitability.
Our Business Strategy Anticipates International Sales. There Is Significant Risk Associated With Doing Business In International Markets And We May Fail To Meet Sales Levels Required In Order To Remain In Business.
We anticipate that revenue from the sale of our products will be derived from customers located primarily in the United States of America and Canada. Since a number of our principal customers may be located in other countries as well, we anticipate that international sales may account for a portion of our revenues. There can be no assurance that we will be able to manage any international operations effectively or that our activities will enable us to compete successfully in international markets or to satisfy the service and support requirements of our customers. There can be no assurance that any of these factors will not have a material adverse effect on our business, financial condition, and results of operations.
We may sell our services and products in currencies other than the United States dollar, which would make the management of currency fluctuations difficult and expose us to risks in this regard. Our results of operations may be subject to fluctuations in the value of various currencies against the United States dollar. Although management will monitor our exposure to currency fluctuations, there can be no assurance that exchange rate fluctuations will not have a material adverse effect on our results of operations, or financial condition.
There Are Potential Competitors In Out Marketplace That Could Affect Our Business.
We have identified a market opportunity for wireless products and services utilizing “Wi-Fi.”. Competitors may enter this segment of the wireless industry with superior products and services, thus rendering our products and services obsolete and nullifying our competitive advantage. There may be companies in certain vertical markets, such as the traditional telecommunications industry that are better financed and have long standing business relationships with our primary potential customers. There can be no guarantee that such pre-existing companies will not mimic WiTel’s business model. This would infringe on our client and customer base and have an adverse affect upon our business and the results of our operations.
Intense Competition Could Reduce Our Market Share And Harm Our Financial Performance.
Competition in the market for IP communications services is becoming increasingly intense and is expected to increase significantly in the future. The market for Internet and IP communications is new and rapidly evolving. We expect that competition from companies both in the Internet and telecommunications industries will increase in the future. Our competitors include both start-up IP telephony service providers and established traditional communications providers. Many of our existing competitors and potential competitors have broader portfolios of services, greater financial, management and operational resources, greater brand-name recognition, larger subscriber bases and more experience than we have. In addition, many of our IP telephony competitors use the Internet instead of a private network to transmit traffic. Operating and capital costs of these providers may be less than ours, potentially giving them a competitive advantage over us in terms of pricing. We will also compete against the growing market of discount telecommunications services including calling cards, prepaid cards, call-back services, dial-around or 10-10 calling and collect calling services. In addition, some Internet service providers have begun to aggressively enhance their real time interactive communications, focusing on instant messaging, PC-to-PC and PC-to-phone, and/or broadband phone services.
In addition, traditional carriers, cable companies and satellite television providers are bundling services and products not offered by us with internet telephony services. This introduces the risk that they will introduce our services on their own utilizing other options while at the same time making it more difficult for us to compete against them with direct to consumer offerings of our own. If we are unable to provide competitive service offerings, we may be unable to attract users. In addition, many of our competitors, especially traditional carriers, enjoy economies of scale that result in a lower cost structure for transmission and related costs, which cause significant pricing pressures within the industry. In order to remain competitive we intend to increase our efforts to promote our services, and we cannot be sure that we will be successful in doing this.
In addition to these competitive factors, recent and pending deregulation in some of our markets may encourage new entrants. We cannot assure you that additional competitors will not enter markets that we plan to serve or that we will be able to compete effectively.
Other Technological Factors
The wireless product and services industry is generally characterized by rapidly changing technology that could result in the obsolescence or short life cycles of our products and services. These market characteristics are exacerbated by the emerging nature of the telecommunications business and the fact that in the near future many companies are expected to introduce wireless products and services such as Apple’s iPhone. Accordingly, our ability to compete will depend upon our ability to continually enhance and improve our products and services and to provide new and innovative products and services. Competitors may develop services or technologies that render ours obsolete or less marketable. In addition, our systems and services may not prove to be sufficiently reliable or robust in wide spread commercial application.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
ITEM 2. PROPERTIES.
Currently, our headquarters is located at Konigsallee 60F, Dusseldorf, Germany. This office is currently serving as our temporary administrative headquarters. We are in the process of viewing several long-term office space that we expect will serve us in our initial operating stage. In the interim, we pay a month to month rent of 660 EUROS per month.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are not currently a party to any legal proceedings and we are not aware of any pending legal, administrative or other adversary proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
No matters were submitted to a vote of the security holders, through the solicitation of proxies or otherwise, during the fourth quarter ended December 31, 2008.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a)
Market Information
Our common stock, $.001 par value (the “Common Stock”), is listed for trading under the symbol “WITL” on the FINRA Over-the-Counter Bulletin Board (“OTCBB”). As of the date of this annual report. there has been no public trading market for the common stock.
(b)
Holders
We have been advised by our transfer agent, Pacific Stock Transfer Company, that we had 25 holders of record of our Common Stock as of April 3, 2009.
(c)
Dividends
We have not paid regular quarterly cash dividends since our inception on February 20, 2007. We may never pay any dividends to our shareholders. Our Board of Directors does not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board of Directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board of Directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.
Transfer Agent and Registrar
The Company’s transfer agent and registrar is Pacific Stock Transfer Company, 500 E. Warm Springs Road, Suite 240 Las Vegas, NV 89119. Their phone number is (702) 361-3033.
Purchases of Equity Securities made by the Issuer and Affiliated Purchasers
None.
Recent Sales of Unregistered Securities
In October 2007, the Company authorized and issued 100,000 shares at $0.50 per share for total proceeds of $50,000 to an institutional investor in an exempt transaction in reliance on Section 4(2) and Regulation S of the Act.
In March 2008, the Company authorized and issued 150,000 shares at $0.33 per share for total proceeds of $50,000 to an institutional investor in an exempt transaction in reliance on Section 4(2) and Regulation S of the Act.
In July 2008, the Company authorized and issued 150,000 shares at $0.333 per share for total proceeds of $50,000 to an institutional investor in an exempt transaction in reliance on Section 4(2) and Regulation S of the Act.
In August 2008, the Company authorized and issued 200,000 shares at $0.25 per share for total proceeds of $50,000 to an institutional investor in an exempt transaction in reliance on Section 4(2) and Regulation S of the Act.
On December 8, 2008, the Company offered and sold 408,000 common shares (the “Shares”) in a private placement at a purchase price of $0.33 per share for an aggregate purchase price of $147,000 without any underwriting discounts or commissions.
The offer and sale of all Shares of our common stock listed above were affected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Regulation S promulgated under the Securities Act. The Investor acknowledged the following: Subscriber is not a United States Person, nor is the Subscriber acquiring the Shares directly or indirectly for the account or benefit of a United States Person. None of the funds used by the Subscriber to purchase the Units have been obtained from United States Persons. For purposes of this Agreement, “United States Person” within the meaning of U.S. tax laws, means a citizen or resident of the United States, any former U.S. citizen subject to Section 877 of the Internal Revenue Code, any corporation, or partnership organized or existing under the laws of the United States of America or any state, jurisdiction, territory or possession thereof and any estate or trust the income of which is subject to U.S. federal income tax irrespective of its source, and within the meaning of U.S. securities laws, as defined in Rule 902(o) of Regulation S, means:
(i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any estate of which any executor or administrator is a U.S. person; (iv) any trust of which any trustee is a U.S. person; (v) any agency or branch of a foreign entity located in the United States; (vi) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership or corporation if organized under the laws of any foreign jurisdiction, and formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Summary of Statements of Operations of Witel
Year Ended December 31, 2008 and 2007
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
From time to time, our representatives or we have made or may make forward-looking statements, orally or in writing, including in this Report. Such forward-looking statements may be included in, without limitation, press releases, oral statements made with the approval of one of our authorized executive officers and filings with the Securities and Exchange Commission. The words or phrases "anticipates," "believes," "expects," "intends," "will continue," "estimates," "plans," "projects," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.
Our forward-looking statements are subject to certain risks, trends, and uncertainties that could cause actual results to vary materially from anticipated results, including, without limitation, market acceptance of our marketing and merchandising concepts, changes in political and general market conditions, demand for and market acceptance of new and existing products, availability and development of new products, increased competition and our failure to attain satisfactory outside financing. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those discussed herein as expected, believed, estimated, intended or anticipated. We undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements.
Discussion and Analysis
During the year ended December 31, 2008, the Company’s operations were limited to satisfying continuous public disclosure requirements and seeking to identify prospective business opportunities.
The Company’s plan of operation for the coming year is to identify and acquire a favorable business opportunity. The Company does not plan to limit its options to any particular industry, but will evaluate each opportunity on its merits.
The Company has not yet entered into any agreement, nor does it have any commitment or understanding to enter into or become engaged in any transaction, as of the date of this filing.
Results of Operations
The Company has been funded since inception from private equity placements or by related parties in the form of loans.
For the current fiscal year, the Company anticipates incurring a loss as a result of administration expenses, accounting costs, and expenses associated with maintaining its disclosure obligations under the Exchange Act of 1934, as amended (“Exchange Act”). Since we do not anticipate generating any revenues in the near term we will continue to operate at a loss.
Net Losses
For the year ended December 31, 2008, the Company has recorded a cumulative net loss of $185,538. The Company’s operating losses are attributable to general and administrative expenses. The general and administrative expenses include accounting expenses, professional fees, consulting fees and costs associated with the preparation of disclosure documentation.
For the period from February 20, 2007 to December 31, 2007, the Company has recorded a cumulative net loss of $65,414. The Company’s operating losses are attributable to general and administrative expenses. The general and administrative expenses include accounting expenses, professional fees, consulting fees and costs associated with the preparation of disclosure documentation.
We expect to continue to operate at a loss through fiscal 2009 and there can be no assurance that we will ever generate revenues from operations.
Income Tax Expense (Benefit)
The Company has a prospective income tax benefit resulting from a net operating loss carryforward and start up costs that may offset any future operating profit.
Impact of Inflation
The Company believes that inflation has had a negligible effect on operations over the past year.
Capital Expenditures
The Company expended no amounts on capital expenditures for the year ended December 31, 2008 and for the period from inception to December 31, 2007.
Capital Resources and Liquidity
The Company had total assets of $247,280 and $36,936 as of the year ended December 31, 2008 and 2007, respectively, consisting exclusively of cash on hand and inventory. Net stockholders' equity in the Company was $213,812 and $36,936 at December 31, 2008 and 2007, respectively. The Company is in the development stage and, since inception, has experienced significant changes in liquidity, capital resources and shareholders’ equity.
Cash flow used in operating activities was $172,656 and $75,731 for the year ended December 31, 2008 and for the period from inception to December 31, 2007, respectively. Cash flow used in operating activities in the current period can be attributed to accounting costs and consulting expenses.
Cash flow provided from financing activities was $297,000 and $98,600 for the year ended December 31, 2008 and for the period from inception to December 31, 2007, respectively. Cash flow provided by financing activities in the current period can be attributed to subscriptions for shares of common stock.
Cash flows used in investing activities was $0 and $8,933 for the year ended December 31, 2008 and for the period from inception to December 31, 2007, respectively.
The Company’s current assets are not sufficient to conduct its plan of operation over the next twelve (12) months. Further, the Company will have to seek debt or equity financing to fund operations. The Company has no current commitments or arrangements with respect to, or immediate sources of funding although it is in discussions with a few potential investors. Further, no assurances can be given that funding would be available or available to the Company on acceptable terms. The Company’s shareholders are the most likely source of new funding in the form of loans or equity placements though none have made any firm commitment for future investment and the Company has no formal agreement.
The Company had no formal long term lines or credit or other bank financing arrangements as of December 31, 2008.
The Company has no current plans for the purchase or sale of any plant or equipment.
The Company has no current plans to make any changes in the number of employees.
We are a development-stage company organized to enter into the wireless services industry by selling wireless phones, accessories and services, worldwide, utilizing “Wi-Fi.” We have recently commenced business operations and have not generated any revenues.
If we are unsuccessful in raising the additional proceeds through a private placement offering, we will then have to seek additional funds through debt financing, which would be highly difficult for a new development stage company to secure. Therefore, we are highly dependent upon the success of a future private placement offering and failure thereof would result in our having to seek capital from other resources such as debt financing, which may not even be available to us. However, if such financing were available, because we are a development stage company with no operations to date, we would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If we cannot raise additional proceeds via a private placement of our common stock or secure debt financing we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment.
The staged procurement of our wireless systems will continue over the next 12 months. Other than purchasing our products and services, we do not anticipate obtaining any further products or services. We do not expect the purchase or sale of plant or any significant equipment and we do not anticipate any change in the number of our employees.
We have no current plans, preliminary or otherwise, to merge with any other entity.
If we are unable to complete any phase of our product or marketing efforts because we do not have enough money, we will cease our development and or marketing operations until we raise money. Attempting to raise capital after failing in any phase of our product plan would be difficult. As such, if we cannot secure additional proceeds we will have to cease operations and investors would lose their entire investment.
Management does not plan to hire additional employees at this time. Our officers and directors will be responsible for the initial product and service sourcing. We have hired an independent consultant to build the site. We also intend to hire sales representatives initially on a commission only basis to keep administrative overhead to a minimum.
Going Concern
Our auditors have issued a "going concern" opinion and we have experienced losses for the year ended December 31, 2008 and for the period from our inception, February 20, 2007 through December 31, 2007. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any substantial revenues and no substantial revenues are anticipated until we obtain financing. Accordingly, we must raise cash from sources other than from the sale of our products and services. Our only other source for cash at this time is investments by others in us. We must raise cash to implement our business strategy and stay in business.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flows to meet our obligations on a timely basis.
We are continuing our efforts to raise equity financing. However, there can be no assurance that we will be able to service additional financing or that if such financing is available, whether the terms or conditions would be acceptable to us.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations is discussed throughout management's Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 1 in the Notes to the Financial Statements in Item 15 of this Annual Report on Form 10-K, beginning on page. Note that our preparation of this Annual Report on Form 10-K requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.
Revenue Recognition
The Company recognizes revenue from the sale of its products upon shipment, at which time title passes. The Company will estimate an allowance for sales returns based on historical experience with product returns once products sales commence.
Inventory
We value our inventory at the lower of the actual cost to purchase the inventory or the current estimated market value of the inventory. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and production requirements for the future. We did not experience any inventory obsolescence in 2008. During the last quarter of 2007 we determined that a certain portion of our inventory is excess or obsolete, and accordingly, we expensed its carrying value in the amount of $5,000.
Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. In the future, if our inventory is determined to be overvalued, we would be required to recognize such costs in our cost of goods sold at the time of such determination. Likewise, if our inventory is determined to be undervalued, we may have over-reported our costs of goods sold in previous periods and would be required to recognize such additional operating income at the time of sale.
Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our reported operating results. We have experienced, and may continue to experience, significant fluctuations in sales and operating - results from quarter to quarter.
Contingencies
We determine whether to disclose and accrue for loss contingencies based on an assessment of whether the risk of loss is remote, reasonably possible or probable and where reasonable estimates can be made of the amount of potential loss, of the materiality of the loss contingency, in accordance with Statement of Financial Accounting Standards No. 5 ("SFAS 5"), "Accounting for Contingencies." We develop our assessment in consultation with outside advisors and is based on an analysis of possible outcomes under various strategies. Loss contingency assumptions involve judgments that are inherently subjective and frequently involve matters that are in litigation, which by its nature is unpredictable. We believe that our loss contingency assumptions are sound, but because of the subjectivity involved and the unpredictable nature of the subject matter at issue, our assumptions may prove to be incorrect, which could materially impact our consolidated financial statements in future periods.
Recent Accounting 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 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 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.
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 entity’s 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. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans." This Statement requires an employer to recognize the over funded or under funded status of a defined benefit post retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position, and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The Company does not expect that the implementation of SFAS No. 158 will have any material impact on its financial position and results of operations.
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.
In September 2006, the SEC issued Staff Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending after November 15, 2006. The Company is currently evaluating the impact of adopting SAB No. 108 but does not expect that it will have a material effect on its financial statements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold any derivative instruments and do not engage in any hedging activities.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our audited financial statements, together with the Report thereon of Moore & Associates, Chartered, independent certified public accountants, are included elsewhere in Item 15 as through.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have no changes or disagreements with our auditors.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
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;
-
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 as of the year ended December 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 due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, 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 Chief Executive Officer in connection with the review of our financial statements as of the year ended December 31, 2008.
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 and the lack of a majority of outside directors on our board of directors results 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, we plan to appoint one or more outside directors to our board of directors who shall be appointed to 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 one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.
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, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
LACK OF INDEPENDENT BOARD OF DIRECTORS AND AUDIT COMMITTEE
Management is aware that an audit committee composed of the requisite number of independent members along with a qualified financial expert has not yet been established. Considering the costs associated with procuring and providing the infrastructure to support an independent audit committee and the limited number of transactions, Management has concluded that the risks associated with the lack of an independent audit committee are not justified. Management will periodically reevaluate this situation.
LACK OF SEGREGATION OF DUTIES
Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
Set forth below is information regarding the Company’s current directors and executive officers. There are no family relationships between any of our directors or executive officers. The directors are elected annually by stockholders. The executive officers serve at the pleasure of the Board of Directors.
Name
Age
Year Elected/
Appointed
Position
Gary Tsitron
Director, President, Chief Executive Officer and Chief Accounting Officer
Mr. Gary Tsitron, Director, President, Chief Executive Officer and Chief Accounting Officer
Gary Tsitron has almost thirty years of experience in the field of telecommunications. Mr. Tsitron has been retired for the past 6 years. Previous to his retirement he served in several leading positions with European Telecommunications Companies. Mr. Tsitron graduated from the Moscow University of Arts and Technology in 1976 with a Bachelors of Science degree in Radio Communications.
Composition of the Board
Our board of directors has three directors with only one class of directors being elected in each year. Upon the expiration of the term of a director, the director will be elected for an annual term at the annual meeting of stockholders in the year in which their term expires.
Board of Directors Committees and Other Information
Our sole director serves until a successor is elected and qualified. The officers were appointed by the Board of Directors to serve until successor(s) are duly appointed and qualified, or until removed from office. The Board of Directors is not composed of any nominating, auditing or compensation committees.
The Board of Directors currently has no committees. As and when required by law, it will establish Audit Committee and a Compensation Committee. The Audit Committee will oversee the actions taken by our independent auditors and review our internal financial and accounting controls and policies. The Compensation Committee will be responsible for determining salaries, incentives and other forms of compensation for our officers, employees and consultants and will administer our incentive compensation and benefit plans, subject to full board approval.
The functions of the Audit Committee and the Compensation Committee are currently performed by the Board of Directors.
Director Independence
The Company is quoted on the OTC Bulletin Board inter-dealer quotation system, which does not have director independence requirements or on any other exchange. However, for purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 4200(a)(15). NASDAQ Rule 4200(a)(15) states that a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. Accordingly, we have no independent directors.
Conflicts of Interest
Potential investors should be aware of the following potential conflicts of interest:
· None of our officers and directors is required to commit his or her full time to our affairs and, accordingly, they may have conflicts of interest in allocating management time among various business activities.
· In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to our company as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
· Our officers and directors may in the future become affiliated with entities, including other companies, engaged in business activities similar to those intended to be conducted by our company.
· In general, officers and directors of a corporation incorporated under the laws of the State of Nevada are required to present business opportunities to a corporation if:
· the Corporation could financially undertake the opportunity;
· the opportunity is within the corporation’s line of business; and
· it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation.
Accordingly, as a result of other business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to other entities. We cannot make any assurances that any of the above mentioned conflicts will be resolved in our favor.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company is aware that all filings of Form 4 and 5 required of Section 16(a) of the Exchange Act of Directors, Officers or holders of 10% of the Company's shares have not been timely and the Company has instituted procedures to ensure compliance in the future.
Indemnification of Officers and Directors
As permitted by Nevada law, our Articles of Incorporation provide that we will indemnify its directors and officers against expenses and liabilities they incur to defend, settle, or satisfy any civil or criminal action brought against them on account of their being or having been Company directors or officers unless, in any such action, they are adjudged to have acted with gross negligence or willful misconduct.
Pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable.
Code of Conduct and Ethics
We are committed to maintaining the highest standards of business conduct and ethics. We have adopted a code of conduct and ethics applicable to our directors, officers and employees. The code of conduct and ethics reflects our values and the business practices and principles of behavior that support this commitment. The code of conduct and ethics satisfies SEC rules for a “code of ethics” required by Section 406 of the Sarbanes-Oxley Act of 2002, as well as the American Stock Exchange rules for a “code of conduct and ethics.” A form of the code of conduct and ethics was filed as Exhibit 14.1 to this Annual Report on Form 10-K for December 31, 2007.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, for the year ended December 31, 2008 and 2007, compensation paid by us to (a) each person serving as our Chief Executive Officer during 2008 and 2007 and (b) each of our other most highly compensated executive officers (the "named executive officers") during 2008 and 2007 who was serving as an executive officer on December 31, 2008.
SUMMARY COMPENSATION TABLE
_______________________
The following table summarizes the number of shares and the terms of stock options we granted to the named executive officers in our 2008 fiscal year.
OPTIONS/SARS GRANTS DURING YEAR ENDED DECEMBER 31, 2008
The following table sets forth information concerning the number and value of unexercised options held by each of the named executive officers as of December 31, 2008. None of the named executive officers exercised options in 2008.
AGGREGATE YEAR END OPTION VALUES
(DECEMBER 31, 2007)
(1)
Represents the difference between the aggregate market value at December 31, 2008, as applicable, of our common stock (based on a last sale price of $0.33 such date) and the options’ aggregrate exercise price.
Outstanding Equity Awards At Fiscal Year-End Table
None.
Option Exercises And Stock Vested Table
None.
Pension Benefits Table
None.
Nonqualified Deferred Compensation Table
None.
All Other Compensation Table
None.
Perquisites Table
None.
Compensation of Directors
We currently have one director. Our current compensation policy for directors is to compensate them through options to purchase common stock as consideration for their joining our board and/or providing continued services as a director. We do not currently provide our directors with cash compensation, although we do reimburse their expenses, with exception for a chairman of the board. No additional amounts are payable to the Company’s directors for committee participation or special assignments. There are no other arrangements pursuant to which any directors was compensated during the Company’s last completed fiscal year for any service provided.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth, as of the date of this Annual Report, the total number of shares owned beneficially by our officers and directors, and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares based on 7,008,000 shares issued and outstanding as of April 3, 2009. The stockholders listed below have direct ownership of their shares and possess sole voting and dispositive power with respect to the shares.
[1] The person named above may be deemed to be a "parent" and "promoter" of our Company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his direct and indirect stock holdings. Mr. Renton is the only "promoter" of our Company.
[2] Deann Hampton has voting and/or dispositive power with respect to the shares owned by InterCap Partners Incorporated.
A person is considered to "beneficially own" any shares (a) over which such person exercises sole or shared voting or investment power, or (b) of which such person has the right to acquire ownership at any time within 60 days (e.g., through exercise of stock options). Except as otherwise indicated, voting and investment power relating to the shares referenced in the table above is exercised solely by the beneficial owner.
Capital Stock
The following is a summary of the material terms of the Company’s capital stock. This summary is subject to and qualified by our articles of incorporation and bylaws.
Common Stock
As of April 3, 2009, there were 25 shareholders of record holding a total of 7,008,000 shares of fully paid and non-assessable common stock of the 75,000,000 shares of common stock, par value $0.001, authorized.
The shares of our common stock presently outstanding, and any shares of our common stock issues upon exercise of stock options and/or warrants, will be fully paid and non-assessable. Each holder of common stock is entitled to one vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken by shareholders. In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled to share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation preference of any shares of preferred stock that may then be outstanding. The common stock has no preemptive rights, no cumulative voting rights, and no redemption, sinking fund, or conversion provisions. Since the holders of common stock do not have cumulative voting rights, holders of more than 50% of the outstanding shares can elect all of our Directors, and the holders of the remaining shares by themselves cannot elect any Directors. Holders of common stock are entitled to receive dividends, if and when declared by the Board of Directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any preferred stock that may then be outstanding.
Voting Rights
Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders.
Preferred Stock
None.
Warrants
None.
Stock Options
None.
Dividends
Subject to preferences that may be applicable to any then-outstanding shares of Preferred Stock, if any, and any other restrictions, holders of Common Stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the Company’s board of directors out of legally available funds. The Company and its predecessors have not declared any dividends in the past. Further, the Company does not presently contemplate that there will be any future payment of any dividends on Common Stock.
Amendment of our Bylaws
Our bylaws may be adopted, amended or repealed by the affirmative vote of a majority of our outstanding shares. Subject to applicable law, our bylaws also may be adopted, amended or repealed by our Board of Directors.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
None of the following parties have any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
o
Any of our directors or officers, except as described below;
o
Any person proposed as a nominee for election as a director;
o
Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
o
Any of our promoters;
o
Any relative or spouse of any of the foregoing persons who has the same house address as such person.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
(1)
Audit fees represent fees for professional services provided in connection with the audit of our financial statements and review of our quarterly financial statements.
(2)
During 2008, we did not incur fees for assurance services related to the audit of our financial statements and for services in connection with audits of our benefit plans, which services would be reported in this category.
(3)
Tax fees principally included tax advice, tax planning and tax return preparation.
(4)
Other fees related to registration statement reviews and comments.
The Board of Directors has reviewed and discussed with the Company's management and independent registered public accounting firm the audited consolidated financial statements of the Company contained in the Company's Annual Report on Form 10-K for the Company's 2008 fiscal year. The Board has also discussed with the auditors the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the audit of the Company's consolidated financial statements.
The Board has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has discussed with its auditors its independence from the Company. The Board has considered whether the provision of services other than audit services is compatible with maintaining auditor independence.
Based on the review and discussions referred to above, the Board approved the inclusion of the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for its 2008 fiscal year for filing with the SEC.
Pre-Approval Policies
The Board's policy is now to pre-approve all audit services and all permitted non-audit services (including the fees and terms thereof) to be provided by the Company's independent registered public accounting firm; provided, however, pre-approval requirements for non-audit services are not required if all such services (1) do not aggregate to more than five percent of total revenues paid by the Company to its accountant in the fiscal year when services are provided; (2) were not recognized as non-audit services at the time of the engagement; and (3) are promptly brought to the attention of the Board and approved prior to the completion of the audit.
The Board pre-approved all fees described above.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES
(a) Exhibits required by Item 601 of Regulation S-K
(a)(1) and (2) Financial Statements. We have listed the Financial Statements and Schedules in the Index to Financial Statements on page of this Form 10-K.
(a)(3) Exhibits:
The following exhibits are filed as part of this Registration Statement, pursuant to Item 601 of Regulation K. All exhibits have been previously filed unless otherwise noted.
EXHIBIT NO.
DOCUMENT DESCRIPTION
3.1
Articles of Incorporation of WiTel Corp.
3.2
Bylaws of WiTel Corp.
14.
Code of Ethics
(b) DESCRIPTION OF EXHIBITS
EXHIBIT 3.1
Articles of Incorporation of WiTel Corp., dated February 20, 2007, incorporated by reference to the Company’s filing on Form SB-2, on August 3, 2008.
EXHIBIT 3.2
Bylaws of WiTel Corp., approved and adopted on February 28, 2007, incorporated by reference to the Company’s filing on Form SB-2, on August 3, 2008.
EXHIBIT 14.1
Code of Ethics adopted March 31, 2008 (incorporated by reference to the Form 10-K filed with the Securities and Exchange Commission on April 14, 2008).
(31)
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
(31.1)
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer of WiTel Corp.*
(31.2)
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Chief Accounting Officer of WiTel Corp.*
(32) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(32.1)
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer of WiTel Corp.*
(32.2)
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Accounting Officer of WiTel Corp.*
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the Dusseldorf, Germany on April 3, 2009.
WiTel Corp.
By: /s/ Gary Tsitron
Gary Tsitron, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the registrant and in the capacities indicated have signed this report below:
Signature
Title
Date
By: /s/ Gary Tsitron
Gary Tsitron
Director, Chief Executive Officer, President
April 3, 2009
WITEL CORP.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 2008 and 2007
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Witel Corp.
(A Development Stage Company)
We have audited the accompanying balance sheets of Witel Corp. (A Development Stage Company) as of December 31, 2008 and 2007, and the related statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2008 and since inception on February 20, 2007 through December 31, 2007 and since inception on February 20, 2007 through December 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 Witel Corp. (A Development Stage Company) as of December 31, 2008 and 2007, flows for the year ended December 31, 2008 and since inception on February 20, 2007 through December 31, 2007 and since inception on February 20, 2007 through December 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 1 to the financial statements, the Company has an accumulated deficit of $185,538, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Moore & Associates, Chartered
Moore & Associates, Chartered
Las Vegas, Nevada
April 2,
6490 West Desert Inn Rd, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
WITEL CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
See accompanying notes to financial statements.
WITEL CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
See accompanying notes to financial statements.
WITEL CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
See accompanying notes to financial statements
WITEL CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
See accompanying notes to financial statements.
WITEL CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
WiTel Corp. (the "Company") is in the initial development stage and has incurred losses since inception totaling $185,538. The Company was incorporated on February 20, 2007 in the State of Nevada. The fiscal year end of the Company is December 31. The Company intends to sell wireless phones that utilizes wireless internet (Wi-Fi) to deliver calls to its subscribers wherever they are in the world.
The ability of the Company to continue as a going concern is dependent on raising capital to fund its business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern. The Company is funding its initial operations by way of issuing Founders' shares for services rendered and by entering into private placement offerings for 2,250,000 shares at $0.02 per share for $48,600 and 100,000 shares at $0.50 per share for $50,000. As of December 31, 2007, the Company had issued 3,750,000 Founders shares at par value, $0.001 per share, for services rendered in the amount of $3,750, 2,250,000 shares at $0.02 per share for proceeds of $48,600, of which $48,600 has been received by the Company and 100,000 shares at $0.50 per share for proceeds of $50,000, of which $50,000 has been received by the Company. As of December 31, 2008, the Company had issued 300,000 shares at $0.33 per share for proceeds of $100,000, of which $100,000 had been received by the Company; 200,000 shares at $0.25 per share for proceeds of $50,000, of which $50,000 had been received by the Company and 403,333 shares at $0.33 per share for proceeds of $147,000 of which $147,000 had been received by the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market. The Company uses the first-in, first-out method for inventory.
INCOME TAXES
The Company follows the liability method of accounting for income taxes in accordance with Statements of Financial Accounting Standards ("SFAS") No.109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.
NET LOSS PER SHARE
Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, diluted loss per share is equal to basic loss per share.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in United States dollars. In accordance with SFAS No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction date. Revenue and expenses are translated at average rates of exchange during the period. Related translation adjustments are reported as a separate component of stockholders' equity (deficit), whereas gains or losses resulting from foreign currency transactions are included in results of operations.
STOCK-BASED COMPENSATION
The Company has not adopted a stock option plan and has not granted any stock options. The Company granted stock awards, at par value, to its officers, directors and advisors for services rendered in its formation. Accordingly, stock-based compensation has been recorded to date. In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123R, "SHARE-BASED PAYMENT." SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Public entities that file as small business issuers will be required to apply SFAS No. 123R in the first interim or annual reporting period that begins after December 15, 2005.
In March 2005, the SEC staff issued Staff Accounting Bulletin ("SAB") No. 107, "SHARE-BASED PAYMENT," to give guidance on the implementation of SFAS No. 123R. Management will consider SAB No. 107 during the implementation of SFAS No. 123R.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
RECENT ACCOUNTING 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 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 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.
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 entity’s 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. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans." This Statement requires an employer to recognize the over funded or under funded status of a defined benefit post retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position, and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The Company does not expect that the implementation of SFAS No. 158 will have any material impact on its financial position and results of operations.
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.
In September 2006, the SEC issued Staff Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending after November 15, 2006. The Company is currently evaluating the impact of adopting SAB No. 108 but does not expect that it will have a material effect on its financial statements.
NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of SFAS No. 107, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities approximate their carrying value due to the short-term maturity of the instruments.
NOTE 4 - CAPITAL STOCK
The Company's capitalization is 75,000,000 common shares with a par value of $0.001 per share. No preferred shares have been authorized or issued.
As of February 28, 2007, the Company issued 3,750,000 shares of its common stock at $0.001 per share for services rendered in the amount of $3,750 to its directors, professionals and others.
PRIVATE PLACEMENTS
In April 2007, the Company authorized a private placement offering of up to 2,250,000 shares of common stock at a price of $0.02 per share for a total amount of $48,600. As of May 1, 2007, the Company had issued 2,250,000 shares at $0.02 per share and received $48,600 from the sale of its private placement stock to 18 accredited investors in a transaction that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”) in reliance on Section 4(2) of the Act. In October 2007, the Company authorized and issued 100,000 shares at $0.50 per share for total proceeds of $50,000 to an institutional investor in an exempt transaction in reliance on Section 4(2) and Regulation S of the Act. In March 2008, the Company authorized and issued 150,000 shares at $0.33 per share for total proceeds of $50,000 to an institutional investor in an exempt transaction in reliance on Section 4(2) and Regulation S of the Act. In July 2008, the Company authorized and issued 150,000 shares at $0.33 per share for total proceeds of $50,000 to an institutional investor in an exempt transaction in reliance on Section 4(2) and Regulation S of the Act. In August 2008, the Company authorized and issued 200,000 shares at $0.25 per share for total proceeds of $50,000 to an institutional investor in an exempt transaction in reliance on Section 4(2) and Regulation S of the Act. In December 2008, the Company authorized and issued 403,333 shares at $0.33 per share for total proceeds of $147,000 to an institutional investor in an exempt transaction in reliance on Section 4(2) and Regulation S of the Act.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company previously recorded $17,500 as an advance from a shareholder for funds provided to it while it was seeking capital. The Company has since written-off the amount of the advance. As of December 31, 2008 and 2007, there was no balance due to a shareholder for funds advanced to the Company to pay for costs incurred by it while it was seeking additional capital. These funds had been interest free and the Company has included the amount forgiven as income.
NOTE 6 - INCOME TAXES
As of December 31, 2008 and 2007, the Company had net operating loss carry forwards of approximately $120,124 and $56,481, respectively for a total of $185,538 that may be available to reduce future years' taxable income and will expire commencing in 2027. Availability of loss usage is subject to change of ownership limitations under Internal Revenue Code 382. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and, accordingly, the Company has recorded a full valuation allowance for the deferred tax asset relating to these tax loss carry forwards.
NOTE 7 - SUBSEQUENT EVENTS
On February 10, 2009, the holders of the majority of the shares of common stock of Witel Corp. (the “Corporation”) (the “Shareholders”), pursuant to Section 205(b) of the Bylaws of the Corporation that states specifically: Any director may be removed from office, with or without cause, by the vote or written consent of stockholders representing not less than fifty percent of the issued and outstanding voting capital stock of the Corporation” removed John S. Neubauer and Raymond T. Bauer as members of the Board of Directors of the Corporation. A shareholder cancelled 1,550,000 shares inadvertently issued in his name.