U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________to____________
Commission File Number: 0-27713
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.)
11300 W. Olympic Boulevard, Suite 800, Los Angeles, CA 90064
(Address of Principal Executive Offices)
(604) 633-2342
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Act:
NONE
Securities registered under Section 12(g) of the Act:
Common Stock
----------------------------
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the preceding 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
ninety (90) days. YES [X] NO [ ]
Check here if there is no disclosure of delinquent filers in
response to Item 405 of Regulation SB is not contained in this
form, and no disclosure will be contained, to the best of the
Registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of the Form
10-KSB or any amendment to this Form 10-KSB. [X]
The Registrant's operational revenues for its most recent fiscal
year ending December 31, 1999 were $ Nil. The Registrant's
Common Shares outstanding at March 30, 2000 was 2,500,000. The
aggregate market value based on the voting stock held by
non-affiliates as of March 30, 2000 was $2,500,000 (based on
2,500,000 shares and on an average of bid and asked prices of
$1.00).
Except for the historical information contained herein, the
matters set forth in this Form 10-KSB are forward looking
statements within the meaning of the "Safe Harbor" provision of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to risk and uncertainties
that may cause actual results to differ materially. These
forward-looking statements speak only as of the date hereof and
the Company disclaims any intent or obligation to update these
forward-looking statements.
DOCUMENTS INCORPORATED BY REFERENCE
Audited Annual Financial Statements
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. BUSINESS DEVELOPMENT
The Registrant is a development stage telecommunications company
with headquarters in Los Angeles, California and a satellite
office in Vancouver, B.C. Canada.
The primary business of the Registrant 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 that is planned
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 Registrant expects to develop and expand through strategic
partnerships and joint venture agreements with government
telephone companies or Post, Telegraph & Telecommunications (PTT)
and Internet Service Provider (ISP) companies. Several PTT
companies have expressed interest in working with the Registrant
to develop telecom programs with the Registrant. These include
Russia with Incomtel TG (Moscow), Malta with The M. Demajo Group,
and Indonesia with Elephantnet Inc.
The Registrant plans to deploy a telecommunications network by
setting up circuit switches, voice-over-the-Internet protocol
(VoIP) servers, and direct circuit connections, all of which
provide international long distance services and offer a suite of
enhanced services to its customer base. Through partnering
arrangements with local exchange operators and carriers, the
Registrant plans to accelerate deployment of its services in
its initial targeted countries and thereafter to several other
countries where relationships exist.
The Registrant was incorporated in the State of Nevada on June
30, 1989 under the name "Homefront Safety Services of Nevada
Inc." On April 26, 1999, by majority vote of the Shareholders
and the Board of Directors, the Registrant's name was changed to
"LITEWAVE CORP." The Registrant's principal executive office is
located at 11300 W. Olympic Boulevard, Suite 800, Los Angeles,
California 90064, with a satellite office at Suite 402, 609 West
Hastings Street, Vancouver, B.C. V6B 4W4.
On October 20, 1998, pursuant to the Information Statement filed
with the National Association of Security Dealers, Regulations
Inc., by the Registrant under provisions of Section 15(c)2-11
(a)5 of the Securities and Exchange Act of 1934 as amended, the
Registrant received permission for quotation on the National
Association of Security Dealers Bulletin Board (NASD OTC-BB).
Subsequently, the Registrant's common shares were eligible to be
quoted on the NASD Bulletin Board on October 20, 1998.
On April 19, 1999, the Registrant entered into a Technology
Purchase and Assignment Agreement to acquire the assets of and
the world-wide rights to the technology of International
Communications and Equipment, Inc. ("ICE") a telecom
connectivity, products, and services company, based in Kirkland,
Washington. The ICE technology covers intellectual property,
contacts, strategic partnerships and capital equipment configured
to deploy a telecommunications network by setting up circuit
switches, satellite connectivity, Voice-over-the-Internet
Protocol servers, direct circuit connections, to provide
international long distance services and offer additional
enhanced services to its customer base. Consideration for the
acquisition of ICE assets was to consist of 10,300,000 common
shares of the Registrant's restricted capital stock.
The execution of the agreement with ICE was completed in
conjunction with the name change to LiteWave Corp. Mr. Ken
Martin, founder and Chief Executive Officer of ICE, was appointed
Chief Executive Officer and Director of the Registrant.
Based on a verbal agreement negotiated during late December,
1999, and signed on January 7, 2000, the agreement with ICE was
rescinded due to lack of progress by both parties in financing
and developing the business opportunity envisioned by the
agreement with ICE. Mr. Martin resigned as Chief Executive
Officer and Director of the Registrant and the 10,300,000 shares
were not issued.
As a result of the rescission of the April 19, 1999 Agreement,
the Registrant ("LITEWAVE") and ICE may both pursue any business
activities they so choose, without interference from the other
party. Additionally, an agreement has been reached between
LITEWAVE and 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.
At this time, the Registrant has not completed any major
financing, but continues to seek $2 to $3 million in equity
financing. Certain parties have advanced the necessary capital
to permit the Company to continue operations (see Item 2. Plan of
Operation). There is no guarantee that this will continue, and
the Company will need to raise further working capital to execute
its business plan. At December 31, 1999 the Company was in a
working capital deficit position of approximately $1,064,765,
including interest-free loans. At present, the Company has two
full time employees, though this may be increased as required and
funding permits.
B. BUSINESS OF THE REGISTRANT
The Registrant is an emerging international telecommunications
company focused primarily on international connectivity solutions
and the international long distance market. 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 Registrant will provide
voice-over-the-Internet services in countries where it is
appropriate. The Registrant's network will employ
state-of-the-art digital switching and transmission
technologies and will be supported by comprehensive monitoring
and technical support personnel. The Registrant's switching
facilities will be staffed 24 hours per day at the Command
Center. This will require the hiring of 6 to 8 diploma level
technicians based on 8 to 12 hour/day rotating shifts. The
Registrant intends to grow its revenues rapidly by capitalizing
on the deregulation of international telecommunications markets,
combining sophisticated telecom and information systems with
flexible routing, and by hiring management with industry
expertise.
The Registrant will market its services together with its
strategic partners to large global carriers and corporations
seeking lower rates and high-quality overflow capacity.
Additionally the Registrant will market services to small and
medium-sized long distance companies that do not have the
critical mass to invest in their own international transmission
facilities or to obtain volume discounts from the larger
facilities-based carriers. The Registrant will be focused on
building customer bases in many countries through its
acquisitions and partnerships, in Europe and Asia.
Because of the plan to develop joint ventures, it is not
anticipated that the Registrant will initially require any sales
or marketing staff, but will utilize staff of its joint venture
partners. The Registrant anticipates entering into joint
ventures with entities that have sales and marketing staff
already in place, and who already have established relationships
with potential wholesale and retail customers. This represents a
significant cost saving to the Registrant. As the Registrant
establishes itself to provide outbound traffic from one country
to various others by installation of VoIP gateways, the
Registrant plans to market its services on a wholesale basis to
other carriers to provide inbound services to the established
gateways. This will be accomplished through an experienced direct
sales force and marketing/account management team who depend upon
the long-term industry relationships of the registrant's joint
venture partners. Once the initial network is deployed and
operational in at least four countries, the Registrant expects to
employ direct sales and marketing employees and telemarketing
representatives and use its direct sales forces to target larger
commercial customers, concentrating at first on potential
customers and selected European cities where competition for
commercial customers is less mature.
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant sub-lets space located at 11300 W. Olympic
Boulevard, Suite 800, Los Angeles, California 90064 at the rate
of US$500 per month and satellite office space at Suite 402, 609
West Hastings Street, Vancouver, B.C. Canada V6B 4W4. The rent
for this space is US$750 per month, on a month-to-month basis.
Management believes that this space is suitable for the
Registrant's needs in North America for the next twenty-four
months. The Registrant expects to establish an office in Europe
prior to the end of the year 2000. Costs are unknown and need to
be determined, but are currently not expected to exceed $3,000
per month.
ITEM 3. LEGAL PROCEEDINGS
To the best knowledge of the officers and directors of the
Registrant, neither the Registrant nor any of its officers or
directors are parties to any material legal proceeding or
litigation and such persons know of no other material legal
proceeding or litigation contemplated or threatened. There are
no judgments against the Registrant or its officers or directors.
None of the officers or directors have been convicted of a felony
or misdemeanor relating to securities or performance in corporate
office.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of security holders of the
Company during the fourth quarter of the fiscal year ended
December 31, 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
A. MARKET INFORMATION
Since October 20, 1998, the Company's stock has been listed for
sale on the OTC Bulletin Board. Pursuant the OTC Bulletin Board
Eligibility Rule, the Company was delisted from the OTC Bulletin
Board for non-compliance and quoted on the NASD "Pink Sheets" on
December 16, 1999. As of December 31, 1999 there were sixteen
stock brokerage firms making a market in the Company's common
stock. The high ask and low bid prices of the Common Stock of
the Company have been as follows:
Quarter Ending: High ask per share: Low bid per share:
- -------------- ------------------- ------------------
March 31, 1999 $2.375 $1.00
June 30, 1999 $9.00 $2.4375
September 30, 1999 $5.125 $1.50
December 31, 1999 $3.375 $0.375
The above quotations reflect inter-dealer prices, without retail
mark-up, markdown, or commission and may not necessarily
represent actual transactions.
B. HOLDERS
There were approximately 60 holders of the Company's common stock
as of December 31, 1999. This includes three holders of 500,000
shares of the Company's common stock whose certificates are
restricted, which were issued on November 10, 1998. The holder
of 100,000 shares is an affiliate of the Company.
C. DIVIDENDS
The Company has paid no dividends to date on its common stock.
The Company reserves the right to declare a dividend when
operations merit.
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATIONS
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, which were $0.6928 U.S. for
one Canadian dollar at December 31, 1999.
A. RESULTS OF OPERATIONS
In 1999, the Company recorded a loss from operations of $714,105,
and a loss from write down of a note receivable of $353,000, with
the cumulative loss totaling $1,067,105 for the year. For the
period from January 1, 1999 to December 31, 1999, the Company
incurred expenses of $264,533 for consulting, including $24,890
in fees to Messrs. Lambert and Lawson and consultants fees of
$239,643 for management and technical planning; $41,860 for
marketing and investor relations; professional accounting and
legal fees of $29,713; general and administrative expenses of
$52,227; $26,369 for miscellaneous salaries; transfer agent and
filing fees of $14,217; rent of $32,450; travel costs of
$202,915; website development cots of $12,921; and $36,900 for
telephone expenses. Expenses for the previous year ended
December 31, 1998 were basically general and administrative,
totaling $2,020.
B. CAPITAL RESOURCES
The Registrant had a working capital deficiency of $1,064,765 at
December 31, 1999. The Registrant is pursuing a private placement
at $0.625 per share to finance business development and settle
the outstanding notes payable of $1,021,614 at December 31, 1999.
In the meantime is meeting its obligations through funds loaned
by shareholders. The company anticipates that it will be able to
raise further funds through share issuances once its Form 10-SB
registration statement is completed and the Registrant is listed
for trading on the NASD Over The Counter Bulletin Board.
The Company has made no specific commitments for capital
expenditures, but anticipates further requirements to expend
funds on equipment acquisition once new agreements are signed for
VoIP installations.
C. LIQUIDITY
The Company is illiquid at the present time and is dependent upon
a shareholder to provide funds to maintain its activities, though
the Registrant expects to be able to raise funds through the
issuance of shares over the next two to four months.
D. YEAR 2000 COMPUTER ISSUE
Neither the Registrant nor any of its suppliers experienced any
problems related to the Year 2000 issues and no funds were
expended relating to this issue.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements of the Company are filed
under this Item, and are included herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial
disclosures from the inception of the Company through to the date
of this Form 10-KSB. The principal accountants' report on the
financial statements of the fiscal years 1999, 1998, and 1997
contained no adverse opinions, nor a disclaimer of opinion,
nor qualified as to uncertainty, audit scope, or accounting
principles.
Effective September 8, 1999, Barry L. Friedman, P.C., Certified
Public Accountant, the Registrant's Certifying Accountant for the
1996, 1997 fiscal years and period ended October 30, 1998, was
dismissed. On September 8, 1999, Davidson & Company, Chartered
Accountants, were engaged to serve as the Registrant's new
auditors. The selection of Davidson & Company was approved by
the Registrant's Board of Directors. There was no consultation
regarding accounting policy or procedures with Davidson & Company
prior to their engagement.
Barry L. Friedman, P.C.'s report on the financial statements for
the fiscal years ended December 31, 1996 and 1997 and period
ended October 30, 1998 contained an explanatory paragraph
regarding the Registrant's ability to continue as a going
concern. Barry L. Friedman, P.C.'s reports have not contained an
adverse opinion or a disclaimer of opinion, or were qualified or
modified as to uncertainty, audit scope, or accounting
principles. Nor has there been any disagreement with Barry L.
Friedman, P.C. on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure during the Registrant's 1996 and 1997 fiscal years and
from December 31, 1997 to the date of dismissal. Barry L.
Friedman, P.C. has not advised the Registrant that the internal
controls necessary for the Registrant to develop reliable
financial statements do not exist. Nor has Barry L. Friedman,
P.C. advised the Registrant that information has come to his
attention that has led him to no longer be able to rely on
management's representations, or that has made him unwilling to
be associated with the financial statements prepared by
management. Barry L. Friedman, P.C. has not advised the
Registrant of the need to expand significantly the scope of his
audit, or that information has come to his attention that if
further investigated may materially impact the fairness or
reliability of either: a previously issued audit report or the
underlying financial statements; or the financial statements
issued or to be issued covering the fiscal period(s) subsequent
to the date of the most recent financial statements covered by an
audit report (including information that may prevent him from
rendering an unqualified audit report on those financial
statements), or cause him to be unwilling to rely on management's
representations or be associated with the Registrant's financial
statements. Nor has Barry L. Friedman, P.C. advised the
Registrant that information has come to this attention that he
has concluded materially impacts the fairness or reliability of
either (i) a previously issued audit report or the underlying
financial statements, or (ii) the financial statements issued or
to be issued covering the fiscal period(s) subsequent to the date
of the most recent financial statements covered by an audit
report (including information that, unless resolved to the
accountant's satisfaction, would prevent him from
rendering an unqualified audit report on those financial
statements). Nor has Barry L. Friedman, P.C. advised the
Registrant of any other reportable event.
The Registrant has provided Barry L. Friedman, P.C. with a copy
of the disclosure contained herein and requested that Barry L.
Friedman, P.C. provide the Registrant with a letter addressed to
the U.S. Securities and Exchange Commission stating whether he
agrees with the disclosure. When Barry L. Friedman, P.C. provides
such a letter, the letter will be filed within two business days
of receipt with the Commission.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the names, positions, and municipalities of
residence and relevant backgrounds of key personnel of the
Corporation:
Ian Davidson Lambert: President, Director
Date Position Commenced: February 26, 1999
Term of Office: Annual
Address: 1220 Eastview Road, North Vancouver, B.C. V7J 1L6
Age: 54
Experience: Owner, Canasia Data Corporation, (management
services company) 1983 to present; Director, Covik Development
Corp.,(oil & gas exploration) April 1990 to present; Director,
Trade Winds Resources Ltd., (mineral exploration) April 1990 to
present; Director, Dimensions West Energy Inc., (oil & gas
production) April 1990 to present; Director, Quotemedia.com Inc.,
(financial internet portal) May, 1994 to present; Director, Tasty
Fries Inc., (vending machine manufacturer) September 1995 to
present. All companies are arms length with the Registrant,
except Canasia Data, which is a shareholder of the Registrant.
Harvey Lawson: Secretary, Treasurer
Date Position Commenced: January 18, 2000
Term of Office: Annual
Address: 464 Somerset Street, North Vancouver, BC Canada V7N 1G3
Age: 51
Experience: Director and Officer, Regeena Resources Inc. (Mining)
1998 to present; Director, Spectrum Ventures Inc. (Wine Importer)
1998 to 1999; Financial Planner 1993 to 1998; Lecturer in
Financial Management in Hong Kong, Singapore and Canada 1978 to
1993
ITEM 10. EXECUTIVE COMPENSATION
A. SUMMARY COMPENSATION
A private company wholly-owned by Mr. Ian Lambert received or was
due a total of $24,628 of compensation in the fiscal year ended
December 31, 1999, in accordance with a management employment
agreement approved by the directors in October, 1999 at a rate of
$4,500 per month.
Mr. Lawson was paid $262 at December 31, 1999 for consulting
services.
B. OPTIONS/SAR GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS)
The Company does not have a Directors and Officers Stock Option
Plan. There have been no options granted at this point in time.
C. AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
There were no options exercised in the last fiscal year.
D. LONG-TERM INCENTIVE PLANS - AWARDS IN THE LAST FISCAL YEAR
There were no awards nor long term incentive plans made in the
last fiscal year.
E. COMPENSATION OF DIRECTORS
1. Standard Arrangements
The members of the Company's Board of Directors are reimbursed
for actual expenses incurred in attending Board meetings.
2. Other Arrangements
There are no other arrangements.
F. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT, CHANGE IN
CONTROL ARRANGEMENTS
The Registrant does not have any compensatory plan or arrangement
which will result from the resignation, retirement or other
termination of employment of an executive officer or from a
change of control of the Registrant or a change in an executive
officer's responsibilities following a change of control.
Pursuant to an agreement (the "Lambert Executive Employment
Agreement") effective as at October 1, 1999, Ian Lambert, the
Registrant's President and a Director, is employed by the
Registrant and paid a monthly salary of $4,500. The term of the
Lambert Executive Employment Agreement will be for one year,
subject to earlier termination as provided therein.
Pursuant to a proposed agreement (the "Lawson Employment
Agreement") to be effective as at January 18, 2000, Harvey
Lawson, the Registrant's Secretary and a Director, will be
employed by the Registrant and paid a monthly salary of $500.
The term of the Lawson Executive Employment Agreement will be for
one year, subject to earlier termination as provided therein.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
A. Security ownership of certain beneficial owners. The table
below identifies any individual (including any "group") who is
known to the Registrant to be the beneficial owner of more than
five percent of any class of the small business Registrant's
voting securities:
<TABLE>
<S> <C> <C> <C>
Title of Name and address Amount and nature Percentage
class of beneficial of beneficial of class (2)
Owner ownership
Common(1) Hemisphere and Associates, Inc. 320,000 7.65
Common(1) Vista Financial Corp. 320,000 7.65
Common(1) Eivissa Capital Corp. 320,000 7.65
Common(1) El Coyote Capital Corp. 320,000 7.65
Common(1) Torquay Holdings, Ltd. 400,000 9.57%
(1) As of the date of this filing, these shares have not been
issued. However, pursuant to conversion rights associated
with loans made to the Registrant, the holders have the option
to convert loans made to the Company, totaling approximately
US$1,050,000, in a private placement at a rate of US$0.625 per
share, for a total of 1,680,000 shares of the Company's Common
Stock.
(2) Assuming full conversion of the US$1,050,000 loans.
</TABLE>
B. Security ownership of management. The table below sets forth the
ownership by all directors and nominees, each of the named executive
officers of the Company, and all directors and executive officers of the
Registrant as a group.
<TABLE>
<S> <C> <C> <C>
Title of Name and address Amount and nature Percentage
class of beneficial of beneficial of class
Owner ownership
Common Canasia Data Corp. 100,000 4%
(Ian Lambert)
1220 Eastview Road
North Vancouver, B.C. V7J 1L6
Common Harvey Lawson
464 Somerset Street
North Vancouver, B.C. V7N 1G3 NIL NIL
Common All Officers and Directors
as a Group (three persons) 100,000 4%
</TABLE>
C. CHANGES IN CONTROL
Changes in control occurred in February, 1999, when Ian D.
Lambert was appointed the President and C.E.O. of the Company, in
April, 1999 when Mr. Ken Martin was appointed Chairman and CEO of
the Company and Mr. Ian Lambert was appointed
Secretary/Treasurer, and in January, 2000 when Mr. Martin
resigned and Mr. Ian Lambert was re-appointed President and
C.E.O. of the Company and Mr. Harvey Lawson was appointed
Secretary/Treasurer and a member of the Board of Directors.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise disclosed herein, no director, senior
officer, principal shareholder or any associate or affiliate, had
any material interest, direct or indirect, in any transaction
since incorporation that had or is anticipated to have a material
affect on the business, or any proposed transaction that would
materially affect the business, except for an interest arising
from the ownership of common shares of the Registrant where the
member will receive no extra or special benefit or advantage not
shared on a pro rata basis by all holders of shares in the
Registrant's capital.
Ian Lambert (President) and Harvey Lawson (Secretary) are
currently the principal management of the business, and they own
collectively 100,000 shares or 4% of the issued and outstanding
stock. The salary for these executive officers outlined in
Compensation of Officers was not established by arms length
negotiations, however it is believed that the terms of these
transactions are no less favorable to the Registrant than terms
expected to be negotiated with unrelated parties at arms length.
During the preceding year ended December 31, 1998, the Registrant
issued 340,000 common shares under Rule 4(2), at a deemed value
of $340 for minimal services rendered, to former officers and
directors of the Registrant.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES & REPORTS ON
FORM 8-K
The following documents are filed as part of this report under
Part II, Item 7:
Audited Financial Statements and notes thereto: Pages F-1 to F-10
Exhibits as required by Item 601 of Regulation S-B
None
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services of Nevada, Inc.)
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of LITEWAVE CORP.
(formerly Homefront Safety Services of Nevada, Inc.)
(A Development Stage Company)
We have audited the accompanying balance sheets of Litewave Corp.
(formerly Homefront Safety Services of Nevada, Inc.) as at
December 31, 1999 and 1998 and the related statements of
operations, changes in stockholders' deficit and cash flows for
the years then ended and the cumulative amounts from inception on
June 30, 1989 to December 31, 1999. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States
generally accepted auditing standards. Those standards require
that we plan and perform an audit 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 the 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, these financial statements present fairly, in all
material respects, the financial position of the Company as at
December 31, 1999 and 1998 and the results of its operations,
changes in stockholders' deficit and cash flows for the years
then ended and the cumulative amounts from inception on June 30,
1989 to December 31, 1999 in conformity with generally accepted
accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming
that Litewave Corp. (formerly Homefront Safety Services of
Nevada, Inc.) will continue as a going concern. As discussed in
Note 2 to the financial statements, the Company has no
established source of revenue. This raises substantial doubt
about its ability to continue as a going concern. Management's
plan in regard to these matters are also described in Note 2.
The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Davidson & Company
Vancouver, Canada Chartered Accountants
March 22, 2000
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services of Nevada, Inc.)
(A Development Stage Company)
BALANCE SHEETS
AS AT DECEMBER 31
<TABLE>
<S> <C> <C>
1999 1998
ASSETS
Current
Accounts Receivable $ 5,733 $ -
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Bank Indebtedness $ 4,771 $ -
Accounts payable and accrued liabilities 44,113 680
Note Payable (Note 5) 1,021,614 -
----------- -----------
Total Current Liabilities 1,070,498 680
----------- -----------
Stockholders' deficit
Capital stock (Note 6)
Authorized
25,000,000 common shares
with a par value of $0.001
Issued
2,500,000 common shares
(1998 - 2,500,000 common shares) 2,500 2,500
Additional paid in capital 840 840
Deficit accumulated during
the development stage (1,068,105) (4,020)
----------- -----------
(1.064,765) (680)
----------- -----------
$ 5,733 $ -
=========== ===========
History and organization of the Company (Note 1)
Subsequent event (Note 10)
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
<TABLE>
<S> <C> <C> <C>
Cumulative
Amounts From
Inception on Year Ended December 31,
June 30, 1989
to December 31, -----------------------
1999 1999 1998
EXPENSES
Accounting & legal $ 29,713 $ 29,713 $ -
Consulting 264,533 264,533 -
General and
administrative 52,227 49,207 2,020
Marketing and
Promotion 41,860 41,860 -
Rent 32,450 32,450 -
Salaries & Benefits 26,369 26,369 -
Telephone & Utilities 36,900 36,900 -
Transfer Agent &
Filing Fees 14,217 14,217 -
Travel 202,915 202,915 -
Website Development 12,921 12,921 -
---------- --------- ---------
Loss before Other Item (714,105) (711,085) (2,020)
---------- --------- ---------
OTHER ITEM
Write-down of
Note Receivable (353,000) (353,000) -
---------- --------- ---------
Loss for the period $(1,067,105) $(1,064,085) $ (2,020)
=========== ========== =========
Basic loss per share $ (0.42) $ (0.01)
=========== ========== =========
Weighted average number
of common shares
outstanding 2,500,000 2,069,863
=========== ========== =========
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
<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)
========= ======== ======= =========== ===========
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
<TABLE>
<S> <C> <C> <C> <C>
Cumulative
Amounts From
Inception on
June 30, 1989 Year Ended December 31,
to December 31, ----------------------
1999 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $(1,067,105) $(1,064,085) $ (2,020)
Adjustments to reconcile loss to net
cash used in operating activities:
Issuance of common shares
for services 1,340 - 1,340
Write-down of Note Receivable 353,000 353,000 -
Changes in non-cash working capital items
Increase in accounts payable
and accrued liabilities 44,113 44,113 -
Increase in accounts receivable (5,733) (5,733) -
---------- ---------- -------
Net cash provided by
operating activities (674,385) (673,385) -
---------- ---------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of capital stock 1,000 - -
Acquisition of Capital Assets 353,000 353,000 -
Note Payable 1,021,614 1,021,614 -
----------- ---------- -------
Net cash provided by financing
activities 0 669,614 668,614 -
---------- ---------- -------
CASH FLOWS FROM INVESTING ACTIVITIES - - -
---------- ---------- -------
Decrease in cash for the period (4,771) (4,771) -
---------- ---------- -------
Cash, beginning of period - - -
---------- ---------- -------
Cash, end of period $ (4,771) $ (4,771) $ -
========== ========== =======
Cash consists of:
Cash & equivalents $ - $ - $ -
Bank Indebtedness (4,771) (4,771) -
---------- ---------- -------
$ (4,771) $ (4,771) $ -
Cash paid during the period for:
Interest expense $ - $ - $ -
Income taxes - - -
========== ========== =======
Supplemental disclosure for non-cash operating, financing and
investing activities (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)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
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.
1999 1998
Deficit accumulated during the
development stage $ (1,068,105) $ (4,020)
Working capital deficiency (1,064,765) (680)
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 equivalents
Cash and 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.
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.
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services of Nevada, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Income taxes (cont'd.....)
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 assets 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
significant impact on its financial statements.
Reporting on costs of start-up activities
In April 1998, the American Institute of Certified Public
Accountant's issued Statement of Position 98-5 "Reporting on the
Costs of Start-Up Activities" ("SOP 98-5") which provides
guidance on the financial reporting of start-up costs and
organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with
initial adoption reported as the cumulative effect of a change in
accounting principle. The Company adopted SOP 98-5 during the
current period.
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 December
31, 1999.
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services of Nevada, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
3. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Financial instruments
The Company's financial instruments consist of accounts
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
During the current year, 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.
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.
Subsequent to year end, the Company assigned the capital assets
to ICE in exchange for a note receivable (Note 10). Management
has decided to write off the carrying value of the capital assets
to reflect the impairment in value.
5. NOTE PAYABLE
The note payable is unsecured, non-interest bearing with no fixed
terms of repayment.
6. CAPITAL STOCK
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.
<PAGE>
LITEWAVE CORP.
(formerly Homefront Safety Services of Nevada, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
6. CAPITAL STOCK (cont'd.....)
Restricted shares
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.
7. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1999, the Company entered into
the following transactions with related parties:
a) Paid $5,941 (1998 - $Nil) in administration fees to an
individual related to a director of the Company.
b) Paid $39,390 (1998 - $Nil) in consulting fees to
directors, a former director and to a company related by a common
director.
8. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING
AND INVESTING ACTIVITIES
There were no significant non-cash transactions for the year
ended December 31, 1999.
The significant non-cash transaction 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.
9. INCOME TAXES
The Company's total deferred tax asset at December 31 is as
follows:
1999 1998
Tax benefit of net operating
loss carryforward $ 405,120 $ 424
Valuation allowance (405,120) (424)
--------- --------
$ - $ -
The Company has a net operating loss carryforward of
approximately $1,066,105 (1998 - $2,020) which expire in 2006 and
2005, respectively. The valuation allowance increased to
$405,120 from $424 during the year ended December 31, 1999. The
Company provided a full valuation allowance on the deferred tax
asset because of the uncertainty regarding realizability.
10. SUBSEQUENT EVENT
Subsequent to year end, 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 esxchange 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.
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.
<PAGE>
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: April 14, 2000
Ian Lambert,
President, Director
/s/ Harvey Lawson Dated: April 14, 2000
Harvey Lawson,
Secretary, Director
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 5733
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5733
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5733
<CURRENT-LIABILITIES> 1070498
<BONDS> 0
0
0
<COMMON> 2500
<OTHER-SE> 840
<TOTAL-LIABILITY-AND-EQUITY> 1073838
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1064085
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1064085)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1064085)
<EPS-BASIC> (0.42)
<EPS-DILUTED> (0.42)
</TABLE>
