U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 for the Quarterly
period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 for the transition
period from _______ to _______.
Commission File No. _________
LITEWAVE CORP.
-------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada, U.S.A. 95-4763671
(State or other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
3300 NE 191st Street, Suite 1015, Aventura, Florida 33180
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number (305) 805-0344
Check whether the registrant (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
As of September 30, 1999: 2,500,000 shares of common stock were
outstanding.
<PAGE>
TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
Part I. Financial Information
- -------
Item 1. Financial Statements (unaudited)
Item 2. Managements Discussion and Analysis or Plan of Operation
Part II. Other Information
- --------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security holders
Item 5. Other Information
Item 6. Exhibits and reports on form 8-K
SIGNATURES
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
FINANCIAL STATEMENTS
(Unaudited Prepared by Management)
SEPTEMBER 30, 1999
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
BALANCE SHEETS
(Unaudited Prepared by Management)
<TABLE>
<S> <C> <C>
September 30, December 31,
1999 1998
ASSETS
Accounts receivable $ 1,514 $ -
Advances receivable 27,326 -
Capital assets (Note 3) 123,614 -
----------- ------------
$ 1,262,454 $ -
=========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Bank indebtedness $ 182,802 $ -
Accounts payable and
accrued liabilities 17,642 680
Equipment Contract payable 871,000 -
Loan payable (Note 4) 685,315 -
----------- ------------
1,758,759 680
----------- ------------
Stockholders' deficit
Capital stock (Note 5)
Authorized
25,000,000 common shares
with a par value of $0.001
Issued
2,500,000 common shares
(December 31, 1998
2,500,000 common shares) 2,500 2,500
Additional paid in capital 840 840
Deficit accumulated during
the development stage (499,645) (4,020)
----------- ------------
(496,305) (680)
----------- ------------
$ 1,262,454 $ -
=========== ============
History and organization of the Company (Note 1 (ii))
Subsequent events and commitments (Note 8)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited Prepared by Management)
<TABLE>
<S> <C> <C> <C> <C> <C>
Cumulative
Amounts From
Inception on Three Month Period Ended Nine Month Period Ended
June 30, 1989 Sept. 30, Sept. 30, Sept. 30, Sept. 30,
to Sept. 30, 1999 1999 1998 1999 1998
INCOME
Interest Income 56 56 56
EXPENSES
Amortization $ 1,218 $ 406 $ - $ 1,218 $ -
Consulting 198,003 96,886 - 198,003 -
General and
administrative 67,703 52,438 - 63,683 -
Marketing and
advertising 35,163 4,577 - 35,163 -
Rent 22,686 9,513 - 22,686 -
Telephone 21,377 7,298 - 21,377 -
Travel 153,551 122,448 - 153,551 -
---------- --------- --------- --------- ---------
499,701 293,566 495,681
---------- --------- --------- --------- ---------
Loss for the period $ (499,645) $(293,510) $ - $(495,625) $ -
========== ========= ========= ========= =========
Basic and dilutive
Loss per share $ (0.12) $ - $ (0.20) $ -
========== ========= ========= ========= =========
Weighted average number of
common shares
outstanding 2,500,000 2,000,000 2,500,000 2,000,000
========== ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(Unaudited Prepared by Management)
<TABLE>
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Capital Stock Additional During the
--------------------- Paid-in Development
Shares Amount Capital Stage Total
Balance, December 31,
1995, 1996 and 1997 2,000,000 $ 2,000 $ - $ (2,000) $ -
Shares issued for
services 500,000 500 840 - 1,340
Loss for the year - - - (2,020) (2,020)
--------- --------- ---------- ---------- ----------
Balance, December 31,
1998 2,500,000 2,500 840 (4,020) (680)
Loss for the period - - - (495,625) (495,625)
--------- --------- ---------- ---------- ----------
Balance, Sept. 30,
1999 2,500,000 $ 2,500 $ 840 $ (499,645) $ (496,305)
========= ========= ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited Prepared by Management)
<TABLE>
<S> <C> <C> <C>
Cumulative
Amounts From
Inception on
June 30, 1989 Sept. 30, Sept. 30,
to Sept. 30, 1999 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (499,645) $ (495,625) $(1,680)
Adjustment to reconcile loss to net
cash used in operating activities:
Amortization 1,218 1,218 -
Issuance of common shares
for services 1,340 - -
Changes in non-cash working capital items
Increase in accounts receivable (1,514) (1,514) -
Increase in accounts payable
and accrued liabilities 889,642 887,962
680
----------- ---------- ----------
Net cash used in operating activities 391,041 392,041 (1,000)
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets 1,234,832 1,234,832 -
----------- ---------- ----------
Net cash used in investing activities 1,234,832 1,234,832 -
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances receivable (27,326) (27,326)
Loan payable 685,315 685,315 -
Issuance of capital stock 1,000 - 1,000
----------- ---------- ----------
Net cash provided by financing
activities 658,989 657,989 1,000
----------- ---------- ----------
Change in cash and cash equivalents
for the period (184,802) (184,802) -
Cash and cash equivalents
at the beginning of period - - -
----------- ---------- ----------
Cash and cash equivalents
at the end of period $ (184,802) $ (184,802) (184,802)
$ -
=========== ========== ==========
Cash and cash equivalents consists of:
Cash and cash equivalents $ - $ - $ -
Bank indebtedness (184,802) (184,802) -
----------- ---------- ----------
$(184,802) $ (184,802) $ -
=========== ========== ==========
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes - - -
=========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited Prepared by Management)
SEPTEMBER 30, 1999
1. (i) BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-QSB and
Article 310(b) of Regulation SB. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the nine months ended September 30,
1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999. The unaudited
financial statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's annual
report on Form 10SB for the year ended December 31, 1998.
(ii) HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized on June 30, 1989, under the laws of the
State of Nevada, as Homefront Safety Services of Nevada, Inc. and
issued 10,000 common shares for $1,000 in cash. The Company currently
has no operations and, in accordance with SFAS#7, is considered a
development stage company. On April 26, 1999, the Company changed its
name to Litewave Corp.
2. SIGNIFICANT ACCOUNTING POLICIES
Foreign currency translation
The Company accounts for foreign currency transactions and translation
of foreign currency financial statements under Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS
52"). Transaction amounts denominated in foreign currencies are
translated at exchange rates prevailing at transaction dates.
Carrying values of monetary assets and liabilities are adjusted at
each balance sheet date to reflect the exchange rate at that date.
Non monetary assets and liabilities are translated at the exchange
rate on the original transaction date. Gains and losses from
restatement of foreign currency monetary and non-monetary assets and
liabilities are included in income. Revenues and expenses are
translated at the rates of exchange prevailing on the dates such items
are recognized in earnings.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies
to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to account for
stock-based compensation using Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." Accordingly
compensation cost for stock options is measured as the excess, if any,
of the quoted market price of the Company's stock at the date of the
grant over the amount an employee is required to pay for the stock.
Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes". A deferred tax asset or liability is recorded for all
temporary differences between financial and tax reporting and net
operating loss carryforwards. Deferred tax expenses (benefit) result
from the net change during the year of deferred tax assets and
liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
Financial instruments
The Company's financial instruments consist of accounts receivable,
advances receivable, bank indebtedness, accounts payable and accrued
liabilities and note payable. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues
and expenses during the year. Actual results could differ from these
estimates.
Loss per share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("FAS 128"). Under FAS 128, basic and diluted earnings per
share are to be presented. Basic earnings per share is computed by
dividing income available to common shareholders by the weighted
average number of common shares outstanding in the period. Diluted
earnings per share takes into consideration common shares outstanding
(computed under basic earnings per share) and potentially dilutive
common shares.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with
original maturities of three months or less.
Capital assets
Capital assets, being computer equipment, are recorded at cost less
accumulated amortization. Amortization will be provided for over
their useful life using the declining balance method at a rate of 30%
per annum.
New accounting standards
In June 1998, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133") which
establishes accounting and reporting standards for derivative
instruments and for hedging activities. SFAS 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The
Company does not anticipate that the adoption of the statement will
have a significant impact on its financial statements.
Comprehensive income
In 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income".
This statement establishes rules for the reporting of comprehensive
income and its components. The adoption of SFAS 130 had no impact on
total stockholders' equity as of December 31, 1998.
3. CAPITAL ASSETS
Accumulated Net
Cost Amortization Book Value
Computer equipment $ 10,832 $ 1,218 $ 10,020
IP Telephony Equipment 1,224,000 1,224,000
--------- --------- ----------
1,234,832 1,218 1,233,614
========== ========= ==========
4. LOAN PAYABLE
The loan payable is a short-term loan that is non-interest bearing and
has no fixed terms of repayment.
5. CAPITAL STOCK
Additional paid-in capital
The excess of proceeds received for common shares over their par value
of $0.001, less share issue costs, is credited to additional paid in
capital.
6. INCOME TAXES
The Company's total deferred tax asset at September 30 is as follows:
(Audited)
September 30, 1999 December 31, 1998
Tax benefit of net operating
loss carryforward $ 104,505 $ 424
Valuation allowance (104,505) (424)
----------- ----------
$ - $ -
=========== ==========
The Company has a net operating loss carryforward of approximately
$497,645 (1998 - $2,020). The valuation allowance increased by
$104,121 from $424 during the nine month period ended September 30,
1999.
The operating loss carryforwards expire as follows:
2005 $ 2,020
2006 496,625
----------
$ 497,645
==========
The Company provided a full valuation allowance on the deferred tax
asset because of the uncertainty regarding realizability.
7. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING,
AND INVESTING ACTIVITIES
The significant non-cash transactions for the year ended December 31,
1998 consisted of the Company issuing 500,000 common shares at a
deemed value of $1,340 as consideration for services rendered.
The significant non-cash transactions for the period ended September
30, 1999 were acquisition of IP Telephony equipment $1,224,000, with
vendor 30 day financing in the amount of $353,000 and 120 day vendor
financing in the amount of $518,000.
8. SUBSEQUENT EVENTS AND COMMITMENTS
a) On April 19, 1999, the Company entered into an agreement to
purchase all the assets, intellectual property and technology of
International Communications and Equipment, Inc. As consideration for
the purchase, the Company will issue 10,300,000 common shares.
b) On September 10, 1999, the Company entered into a joint
venture agreement with Crosna Research & Production Association
("Crosna"), incorporated under the laws of the Russian Federation, to
set up an Internet Protocol-telephone network in a number of regions
of the Russian Federation. The agreement calls for the Company to
incorporate a company under the laws of the Russian Federation and
contribute, in phases, up to $30,000,000 of equipment to the new
company.
c) On September 22, 1999, the Company placed an order with
Clarent Corporation effective October 1, 1999 for the purchase of
$1.224 million of VoIP equipment and software for set up of operations
for the Crosna joint venture project.
ITEM 2. PLAN OF OPERATION
GENERAL
The Company is a development-stage company whose primary business is
the development and delivery of telecom network solutions, products
and services to the global marketplace, and the expansion of worldwide
digital, voice, data and image delivery services via ultra modern
fiber optic, internet circuit, satellite and Public Switched Telephone
Network (PSTN) systems. The network deployment will utilize gateways,
digital signal processors, and routers coupled to trans-oceanic fiber
optics networks with both originating and terminating facilities
installed in North America, Western Europe, Asia, Russia, China,
Indonesia, and other regions.
The Company has not yet completed the exercise of installing and
operating its initial Voice over Internet Protocol (VoIP) based
telecommunications system which will provide long distance calling
services to people in Moscow, St. Petersberg, Yazoslavl and Volgogzad
within and outbound from the Russian Federation.
The initial equipment has been ordered, and the gateways have been
shipped to Russia. During the fourth quarter, the Company intends to
install and test the network in Russia with the command center in the
USA, with the expectation of live operation during the first quarter
of year 2000. The forecasted traffic volumes are anticipated to
provide positive cash flow within approximately three months of
startup, including providing for payment of the outstanding balance of
the equipment order financed by Clarent Corporation.
The Company plans to expand its network into other European countries
during the year 2000, carrying long distance traffic for national and
regional exchange carriers from country to country. This expansion
will be financed from equity, debt and cash flow.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has had virtually no revenues from
operations and has relied almost exclusively on shareholder loans to
raise working capital to fund operations. At September 30, 1999, the
Company had a working capital deficiency of approximately $184,802 in
bank indebtedness, and current payables of $17,642. Since that date,
sufficient shareholder loans have been advanced to cover the bank
indebtedness and fund current operations.
While management currently anticipates that a debt or equity financing
will forthcoming, sufficient to allow it to complete the company's
initial phase VoIP network deployment in Russia, no assurances can be
given that the Company will be able to do so. Further, the Company
will need to secure additional funds to allow it to enter into its
subsequent installations of gateways in other European countries.
No assurances can be given that the Company will be able to secure
adequate financing from any source to pursue its current plan of
operation, to meet its obligations or to expand its network
development efforts over the next 12 months. Based upon its past
history, management believes that it may be able to obtain funding in
such manner but is unable to predict with any certainty the amount and
terms thereof. If the Company is unable to obtain needed funds, it
could be forced to curtail or cease its activities.
FORWARD-LOOKING STATEMENTS
The Registrant cautions readers that certain important factors may
affect the Registrant's actual results and could cause such results to
differ materially from any forward-looking statements that may be
deemed to have been made in this document or that are otherwise made
by or on behalf of the Registrant. For this purpose, any statements
contained in the Document that are not statements of historical fact
may be deemed to be forward-looking statements. This Registration
contains statements that constitute "forward-looking statements."
These forward-looking statements can be identified by the use of
predictive, future-tense or forward-looking terminology, such as
"believes," "anticipates," "expects," "estimates," "plans," "may,"
"will," or similar terms. These statements appear in a number of
places in this Registration and include statements regarding the
intent, belief or current expectations of the Registrant, its
directors or its officers with respect to, among other things: (i)
trends affecting the Registrant's financial condition or results of
operations for its limited history; (ii) the Registrant's business and
growth strategies; (iii) the Internet and telecommunications commerce;
and, (iv) the Registrant's financing plans. Investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve significant risks and uncertainties, and that
actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. Factors
that could adversely affect actual results and performance include,
among others, the Registrant's limited operating history, dependence
on continued growth in the use of the Internet, the Registrant's
inexperience with the Internet, potential fluctuations in quarterly
operating results and expenses, security risks of transmitting
information over the Internet, government regulation, technological
change and competition.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
On September 22, 1999, the registrant placed an order for $1.224
million of VoIP equipment and software with Clarent Corporation, and
took delivery of the first five gateways effective October 1, 1999.
The equipment order consists of 5 digital GC-E120-3 E1 Span gateways,
2 digital GC-T096-3 T1 Span gateways, 792 FC-3 analog or digital
ports, 28 pieces command center, database server, associated
installation hardware, together with all software necessary to operate
the network. Terms were $353,000 on placement of the order, $353,000
by 9-29-99 and $518,000 due 120 days from date of shipment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
NONE
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant has caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
LITEWAVE CORP.
/s/ Kenneth Martin Dated: November 12, 1999
Kenneth Martin,
Chairman, Chief Executive Officer
/s/ Ian Lambert Dated: November 12, 1999
Ian Lambert,
Chief Financial Officer, Secretary, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 28840
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28840
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1262454
<CURRENT-LIABILITIES> 1758759
<BONDS> 0
0
0
<COMMON> 2500
<OTHER-SE> 840
<TOTAL-LIABILITY-AND-EQUITY> 1262454
<SALES> 0
<TOTAL-REVENUES> 56
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 499701
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (499645)
<INCOME-TAX> 0
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<NET-INCOME> (499645)
<EPS-BASIC> (0.20)
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</TABLE>
