U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
(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 March 31, 2000
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.
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(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.)
Suite 402, 609 West Hastings Street, Vancouver, BC V6B 4W4
(Address of Principal Executive Offices)
(604) 633-2342
(Issuer's Telephone Number)
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 March 31, 2000: 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. Management 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)
MARCH 31, 2000
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
BALANCE SHEETS
(Unaudited Prepared by Management)
<TABLE>
<S> <C> <C>
March 31, December 31,
2000 1999 Audited
ASSETS
Accounts receivable $ 5,733 $ 5,733
----------- ------------
$ 5,733 $ 5,733
=========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Bank indebtedness $ 2,408 $ 4,771
Accounts payable and
accrued liabilities 38,785 44,113
Note payable (Note 4) 1,050,862 1,021,614
----------- ------------
1,092,055 1,070,498
----------- ------------
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 (1,089,662) (1,068,105)
----------- ------------
(1,086,322) (1,064,765)
----------- ------------
$ 5,733 $ 5,733
=========== ============
History and organization of the Company (Note 1)
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>
Cumulative
Amounts From
Inception on Three Month Period Ended
June 30, 1989 March 31, March 31,
to March 31, 2000 2000 1999
EXPENSES
Accounting and legal $35,862 $ 6,149 $ -
Consulting 275,783 11,250 2,680
General and
administrative 53,140 913 912
Marketing and
advertising 41,860 - 308
Rent 33,481 1,031 175
Salaries, Benefits 26,369 - -
Telephone, Utilities 37,674 774 406
Transfer Agent, Filing Fees 14,900 683 -
Travel 202,915 - -
Website Development 13,678 757 -
Write-down of capital assets 353,000 - -
---------- --------- ---------
Loss for the period $(1,088,662) $(21,557) $(4,481)
========== ========= =========
Basic loss per share $ (0.01) $ (0.01)
========== ========= =========
Weighted average number of
common shares outstanding 2,500,000 1,000,000
========== ========= =========
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,
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 year - - - (1,064,085) (1,064,085)
--------- --------- ---------- ---------- ----------
Balance, December 31,
1999 2,500,000 2,500 840 (1,068,105) (1,064,765)
Loss for the period - - - (21,557) (21,557)
--------- --------- ---------- ---------- ----------
Balance, March 31,
2000 2,500,000 $ 2,500 $ 840 $(1,089,662) $(1,086,322)
========= ========= ========== ========== ==========
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 March 31, March 31,
to March 31, 2000 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (1,086,662) $ (21,557) $(4,481)
Adjustment to reconcile loss to net
cash used in operating activities:
Issuance of common shares
for services 1,340 - -
Write-down of capital assets 353,000 -
Changes in non-cash working capital items
Increase in accounts receivable (5,733) - -
Increase (decrease)in accounts payable
and accrued liabilities 38,785 (5,328) 5,143
----------- ---------- ----------
Net cash used in operating activities (701,270) (26,885) 662
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital stock 1,000 -
Note payable 1,050,862 29,248 -
---------- ---------- ----------
Net cash provided by financing
activities 1,051,862 29,248 -
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of capital assets (353,000) - -
Acquisition of other assets - - (662)
----------- ---------- ----------
Net cash used in investing activities (353,000) - (662)
----------- ---------- ----------
Increase (decrease) in cash
for the period (2,408) 2,363 -
Cash, beginning of period - (4,771) -
----------- ---------- ----------
Cash, end of period $ (2,408) $ (2,408) $ -
=========== ========== ==========
Cash and cash equivalents consists of:
Cash and cash equivalents $ - $ - $ -
Bank indebtedness (2,408) (2,408) -
----------- ---------- ----------
$ (2,408) $ (2,408) $ -
=========== ========== ==========
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes - - -
=========== ========== ==========
Supplemental disclosure for non-cash operating, financing and investing activities (Note 9)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
LITEWAVE CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
1. 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 cash proceeds of $1,000. On April 26,
1999, the Company changed its name from Homefront Safety Services of
Nevada, Inc. to Litewave Corp.
The accompanying financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations, changes in
stockholders' equity and cash flows at March 31, 2000 and for the
periods then ended have been made. These financial statements should
be read in conjunction with the audited financial statements of the
Company for the year ended December 31, 1999. The results of
operations for the period ended March 31, 2000 are not necessarily
indicative of the results to be expected for the year ending December
31, 2000.
2. GOING CONCERN
The Company's financial statements are prepared using the
generally accepted accounting principles applicable to a going
concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. However, the Company
has no current source of revenue. Without realization of additional
capital, it would be unlikely for the Company to continue as a going
concern. It is management's plan to seek additional capital through
equity financings.
March 31, December 31,
2000 1999
Deficit accumulated during the $(1,089,622) $(1,068,105)
development stage
Working capital deficiency (1,086,322) (1,064,765)
3. SIGNIFICANT ACCOUNTING POLICIES
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.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with
original maturities of three months or less.
Loss per share
Loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share". Due to
the Company's simple capital structure, with only common stock
outstanding, only basic loss per share is presented. Basic loss per
share is computed by dividing losses applicable to common stockholders
by the weighted average number of common shares outstanding during the
period.
<PAGE>
LITEWAVE CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...)
Income taxes
Income taxes are provided in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). 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.
Capital assets
Capital assets are stated at cost unless the future undiscounted
cash flows expected to result from either the use of an asset or its
eventual disposition is less than its carrying amount in which case an
impairment loss is recognized based on the fair value of the assets.
Amortization of capital assets is based on the estimated useful
lives of the assets and is computed using the straight-line method as
follows:
Computer equipment 3 years
Accounting for derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard 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. In
June 1999, the FASB issued SFAS 137 to defer the effective date of
SFAS 133 to fiscal quarters of fiscal years beginning after June 15,
2000. The Company does not anticipate that the adoption of the
statement will have a significant impact on its financial statements.
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.
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 March 31, 2000.
<PAGE>
LITEWAVE CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...)
Financial instruments
The Company's financial instruments consist of accounts
receivable, note receivable, bank indebtedness, accounts payable 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, except for the note payable whose fair
value is not readily determinable, approximate their carrying values.
4. CAPITAL ASSETS
In 1999, the Company entered into a Technology Purchase and
Assignment Agreement whereby the Company would purchase the assets of
International Communications and Equipment, Inc. ("ICE") through the
issuance of common shares of the Company.
In 1999, the Company also incurred expenses towards a joint
venture project with NPO ZAO Crosna (the "Crosna Project") to develop
an internet protocol telephone network in Russia. The Company
purchased capital assets, which consisted of computer equipment, of
$353,000 in anticipation of the joint venture.
During 1999, management decided to write-off the carrying value
of the capital assets to $Nil to reflect an impairment in value.
5. NOTE RECEIVABLE
During the period ended March 31, 2000, the Technology Purchase
and Assignment Agreement with ICE was cancelled and the Company's
rights, titles and interest in the Crosna Project including capital
assets (Note 4) were assigned to ICE in exchange for a note receivable
of $1,100,000. The note receivable is unsecured, non-interest bearing
and is to be repaid from a portion of the profits of the Crosna
Project assigned to ICE.
Due to the uncertainty of collecting the $1,100,000 note
receivable, management has taken a full provision of $1,100,000
against the note receivable.
6. NOTE PAYABLE
The note payable is unsecured, non-interest bearing with no fixed
terms of repayment. The fair value of the note payable is not
determinable as it has no repayment terms and is non-interest bearing.
<PAGE>
LITEWAVE CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
7. CAPITAL STOCK
On June 30, 1989, the Company issued 10,000 common shares for
proceeds of $1,000.
On November 10, 1998, the Company issued 500,000 common shares at
a deemed value of $1,340 for services rendered, of which 340,000
common shares were issued at a deemed value of $340 to former officers
and directors of the Company.
Authorized share capital
On July 16, 1998, the State of Nevada approved the Company's
restated Articles of Incorporation, which increased its authorized
capital from 10,000 common shares to 25,000,000 common shares. The
par value was unchanged at $0.001 per share.
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.
Stock split
On July 25, 1998, the Company implemented a 200:1 stock split.
The number of outstanding common shares increased from 10,000 common
shares to 2,000,000 common shares. Stockholders' equity has been
restated to give retroactive recognition to the stock split for all
periods presented by reclassifying from additional paid-in capital to
common shares the par value of the additional shares arising from the
split. In addition, all references to number of shares and per share
amounts of common shares have been restated to reflect the stock
split.
8. RELATED PARTY TRANSACTIONS
During the period ended March 31, 2000, the Company paid $11,250
(1999 - $2,680) in consulting fees to directors, a former director and
to a company related by a common director.
9. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING AND
INVESTING ACTIVITIES
There were no non-cash transactions for the periods ended March
31, 2000 and March 31, 1999.
<PAGE>
LITEWAVE CORP.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2000
10. INCOME TAXES
The Company's total deferred tax asset is as follows:
March 31, December 31,
2000 1999
Tax benefit of net operating $ 410,400 $ 405,120
loss carryforward
Valuation allowance (410,400) (405,120)
$ - $ -
The Company has a net operating loss carry forward of
approximately $1,080,000 which expires in 2006 and 2007. The Company
provided a full valuation allowance on the deferred tax asset because
of the uncertainty regarding realization.
11. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to
conclude that all aspects of the Year 2000 Issue that may affect the
entity, including those related to customers, suppliers, or other
third parties, have been fully resolved.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
The following should be read in conjunction with the Selected
Financial Data and the Consolidated Financial Statements and
notes thereto appearing elsewhere in this report.
Revenue and expense transactions in Canadian funds are converted
to US dollars at the average rates in effect when the
transactions occurred. Asset and liability accounts are
converted at year-end closing rates, as at December 31, 1999.
Plan of Operation.
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
potential 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 Registrant plans to offer highly reliable, low-cost switched
and Internet driven services on a wholesale and retail basis.
The Registrant is in the process of formulating joint venture
agreements with telephone service entities in a targeted group of
up to 25 countries through a flexible network comprised of
various foreign termination relationships, international servers,
leased and owned transmission facilities and resale arrangements
with long distance providers. The planned 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 plans to deploy the initial phase of its VoIP network
in western European countries during the year 2000, carrying long
distance traffic for national and regional exchange carriers from
country to country. This initial deployment will be financed by
equity and/or debt financing.
Since its inception, the Company has had virtually no revenues
from operations and has relied almost exclusively on third-party
loans to raise working capital to fund operations. At March 31,
2000, the Company had a working capital deficiency of
approximately $1,086,322 in Notes payable and bank indebtedness,
and current payables of $38,785. Since that date, sufficient
loans have been advanced to cover the bank indebtedness and fund
current operations. It is anticipated that management will be
able to fund the Company's base operations by way of shareholder
advances and/or non-related third-party loans for up to twelve
months.
Based upon the low monthly overhead associated with current
operations, the Registrant believes that it has sufficient cash
on hand and borrowing arrangements made to meet its anticipated
needs for working capital, capital expenditures and business
expansion for the next six months of operations, before any
revenues are obtained. Should the business expand, and if the
needs of the clientele require further equipment support, the
Registrant will need to raise additional capital. Ian Lambert,
the President and a director of the Registrant, has committed to
make available and provide advances of the Registrant's operating
costs up to a maximum of $200,000 over the next twelve months,
until such time as the Registrant can generate sufficient
revenues and/or an alternate source of funding is secured to meet
operational requirements and repay the advances. The funding
agreement calls for an interest-free (if converted into Common
Stock of the Company) line of credit of up to $200,000, starting
in August, 2000, and limited to a maximum draw of $20,000 per
month. Sums borrowed under this agreement are convertible by Mr.
Lambert into Common Stock of the Company, at either 1) fifty
percent of the average "bid" price for the thirty-day period
immediately preceding the election to convert; or 2) prior to
listing on a public exchange, 75% of the then-most-recent private
placement share issuance price. The conversion price in either
case allows for recognition of the added risk associated with
stock that is restricted against transfer in the public
marketplace for a period of one year, as Mr. Lambert's stock
would be, should he elect to convert. (A copy of the Funding
Agreement is attached to the Company's latest Amended Form 10SB
as Exhibit 10.8).
It is anticipated that the Lambert advances would be sufficient
to maintain short term operating costs for up to twelve months,
depending upon the rate the business expands. If expansion is
rapid, the funding arrangements would likely be inadequate, and
other financing would be required to meet the Registrant's needs.
Should such other financing not be forthcoming, there is
substantial doubt regarding the Registrant's ability to continue
as a going concern.
To date, Hemisphere and Associates, Inc., a non-related party,
has caused to be loaned to the Registrant, on behalf of itself
and four independent lenders, a total of approximately
$1,024,614, at no interest. The lenders have recently been
offered the right to convert the loans to private placement
subscriptions for common stock to be issued at $0.625 per share,
for a total of approximately 1,635,000 shares, restricted
pursuant to Rule 144.
The Registrant had stated its intention to conduct a private
placement of up to one million common shares at a price of $2.00
per share, announced August 18, 1999. As of this date, no
subscription funds have been received and that private placement
has been cancelled. The Company has recently announced a private
placement of 2,000,000 shares at $0.625 per share (in which the
potential loan conversion above has been included). The common
shares to be issued by way of this private placement, under
Regulation D, Rule 506 and/or Regulation S, would be restricted
securities. Though he has indicated an intention to provide
necessary working capital, Lambert, who has not yet provided any
funding, is not under any obligation to provide further funding
over and above the $200,000 committed to the Registrant and he
may discontinue funding at any time should other financing be
arranged.
The Registrant's auditor has issued its opinion that there is
substantial doubt about the Registrant's ability to continue as a
going concern. The Registrant has not established revenues
sufficient to cover its operating costs and to allow it to
continue as a going concern. In order to cover this contingency,
the Registrant has secured the previously-described commitment
from its President and Director, Mr. Ian Lambert, that he will
advance sufficient interim funds, up to $200,000, so as to enable
the Registrant's operations during such period. Notwithstanding
the foregoing, the auditor advises in a Note to the Financial
Statements as at December 31, 1999 that due to no established
source of revenue, there is substantial doubt regarding the
Registrant's ability to continue as a going concern, and as
such, the Registrant is substantially dependent upon its ability
to generate sufficient revenues to cover its operating costs.
If the Registrant needs to raise additional funds in order to
fund expansion, develop new or enhanced services or products,
respond to competitive pressures or acquire complementary
products, businesses or technologies, any additional funds raised
through the issuance of equity or convertible debt securities
will reduce the percentage ownership of the stockholders of the
Registrant. Stockholders may also experience additional dilution.
Such securities may have rights, preferences or privileges senior
to those of the Registrant's Common Stock. The Registrant does
not currently have any contractual restrictions on its ability to
incur debt and, accordingly, the Registrant could incur
significant amounts of indebtedness to finance its operations.
Any such indebtedness could contain covenants which would
restrict the Registrant's operations. There can be no assurance
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 deploy and expand its network development
efforts over the next twelve months. Based upon its past
history, management believes that it may be able to obtain
funding from investors or lenders, but is unable to predict with
any certainty the amount and/or terms thereof. If adequate funds
are not available or are not available on acceptable terms, the
Registrant may not be able to continue in business, or to a
lesser extent, may not be able to take advantage of acquisition
opportunities, develop or enhance services or products or respond
to competitive pressures.
The Registrant intends to hire additional employees as and only
if the volume of business increases. The Registrant is not
obligated to provide any further equipment over and above the
$350,000 expended, for the Crosna joint venture project, since it
has been assigned to ICE. The Registrant may be required in the
future to purchase and provide equipment for the new agreements,
but the amount is indeterminable at this time. Such agreements
will contain qualifications that the supply of such equipment
will be subject to the Registrant obtaining necessary financing
or raising equity capital to fund such a commitment.
As of the date of this filing, no sales revenue has been
generated by the Registrant. Accordingly, no table showing
percentage breakdown of revenue by business segment or product
line is included.
Capital Requirements & Use of Funds
The Registrant will be seeking financing in the order of $2 to $3
million over the next twelve months to establish up to four
points of presence. Due to the divestiture of the Crosna
Agreement, the registrant will no longer need to raise large sums
up to $50,000,000 over the next two to three years. Funds raised
will be used to launch the Company's business plan and establish
international offices starting in the USA and Europe. There is
no guarantee that the Registrant will actually be able to
complete such financing within a twelve month period, or at all.
Should this funding not be raised, it would put the ability for
the Registrant to pursue its business plan at risk (See Risk
Factors).
This level of financing in the $2 to $3 million range can be
undertaken by way of a combination of private placements, vendor
equipment financing mechanisms, and debt financing secured by
Letters of Credit provided by carriers contracting with the
Registrant to carry VoIP based international traffic, and may
only be required in tranches of $50,000 per Point of Presence.
It is an industry norm for irrevocable Letters of Credits
("L/C's") to be provided by carriers as a guarantee of payment
for contracts with wholesale providers such as the Registrant,
committing to specific levels of VoIP traffic volume, typically
guaranteeing three months of the contract. The Registrant can
assign the proceeds of such L/C's to lending institutions to
provide security for debt financing. Such security often affords
debt at a maximum borrowing cost of prime plus two percent. Such
loans would typically be repaid over three years from operating
revenues. The L/C's may be drawn down if the providing exchange
carrier fails to pay the regularly scheduled invoices, usually
billed weekly.
Corporate uses of funds shall include but not be limited to the
following:
*Purchase of telecommunications equipment including switches,
compression equipment, IP (Internet Protocol) servers, computers
and software.
*Build out of switching facilities including property leases,
facilities charges, utilities etc.
*Purchase of office equipment and associated software as
necessary to increase efficiency, improve service, and expand
market penetration.
*International market development, research, media trade shows,
sales tools and support toward further development of the
Company's international sales and service network of local
strategic relations and agents offshore.
*Product development, enhancements and implementation to current
products such as international direct connects, Voice over
Internet Protocol (VoIP).
*Pursue telecommunication licensing and the establishment of
corporate entities in strategic foreign countries to allow
further exploitation of those markets. Expenses include license
fees, legal costs and corporate development costs.
Administration and operational expenses
Capital is expected to be raised in stages, as the various
strategic partnerships and joint ventures undergo installation of
VoIP equipment.
The next phase of funding is anticipated to require approximately
$2 to $3 million, depending upon installation schedules
negotiated under planned joint ventures and partnerships.
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 June 10, 1999, the Registrant announced a Letter of Intent,
dated May 27, 1999, from ZAO NPO Crosna ("Crosna") of the Russian
Federation. The Crosna Group consists of four closely held joint
stock companies registered and located in the Russian Federation,
predominantly in Moscow. The core of the group is composed of
telecommunication systems design, manufacturing, research and
development, operating, and servicing companies; companies
providing a wide range of financial services including banking,
depository, registrar, broker and dealer services; electrical
motors and low voltage equipment manufacturers, and consumer
goods production lines. ZAO NPO Crosna is a telecommunications
operator providing satellite communication with remote users with
access to the Moscow city telephone network. It also provides the
Crosna Group Industrial Division with a number of security
infrastructure and administrative services, and is used as a
contractual party for the Ministry of Defense and other
governmental orders which have certain tax exemptions.
The Agreement covered the installation and operation of Voice
over the Internet Protocol technology for carrying long distance
telephone traffic to and from the Russian Federation. This
initial intent resulted in the signing of the Protocol of
Intentions Agreement of June 22, 1999, covering organization of
international and inter-city VoIP communications channels in the
territory of Russia and CIS. On September 10, 1999, an agreement
entitled "Principles for Setting up the IP Telephone Network and
Providing IP Telephone Services in the Territory of the Russian
Federation" was signed in Moscow, establishing a 50/50 joint
venture between Crosna and the Registrant. The Agreement
established the set up of IP telephone networks in a number of
regions of the Russian Federation utilizing the Registrant's
provided management, equipment and technology, and Crosna's
premises, clients and its license (No. 12690) issued under the
Law of the Russian Federation to provide telematic services.
Since then, an agreement has been reached between the Registrant
("LITEWAVE") and International Communications and Equipment Inc.
("ICE") whereby LITEWAVE will assign all its right, title and
interest in its Russian Federation Joint Venture IP Telephony
Project pursuant to an agreement between LITEWAVE and NPO ZAO
Crosna dated September 10, 1999 (the "Crosna Project"), in return
for ICE agreeing to the following: (1.) Paying to LITEWAVE a
total of US $1,100,000 from profits generated by the Crosna
Project as reimbursement of costs incurred by LITEWAVE to date,
at the rate of 20% of ICE's share of the Crosna Project profits
earned, payable monthly. (2.) Paying to LITEWAVE a bonus of 10%
of ICE's net profits earned (not including management bonuses)
should the Crosna Project process 200,000,000 minutes of traffic
in an eighteen month period commencing from the time of full
operation, either within the Russian Federation, or originating
from the Russian Federation to other countries. (3.) Paying any
proceeds of lease funds or any return credit or sale proceeds for
existing equipment toward the outstanding balance of the amount
due pursuant to paragraph 1. (4.) Accepting any financial
responsibility that LITEWAVE might have with respect to the
project, and indemnifying LITEWAVE from any further
responsibility for such claims by any or all of those parties.
There is no certainty that LITEWAVE will receive any proceeds
pursuant to paragraphs (1) or (2) above. As a result of this
Agreement, LITEWAVE will not be required to expend any further
funds on the Crosna project
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/ Ian Lambert Dated: July 12, 2000
Ian Lambert,
President, Director
/s/ Harvey Lawson Dated: July 12, 2000
Harvey Lawson,
Chief Financial Officer, Secretary, Director
