U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB AMENDED
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
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.)
11300 W. Olympic Boulevard, Suite 800, Los Angeles, California 90064
(Address of Principal Executive Offices)
(604) 633-2342
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
Common Stock
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(Title of Class)
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TABLE OF CONTENTS
Cautionary Note: Forward Looking Statements
Glossary
Part I
Item 1. Description of Business.
Risk Factors
Item 2. Management's Discussion and Analysis or Plan of Operation.
Item 3. Description of Property.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Item 6. Executive Compensation.
Item 7. Certain Relationships and Related Transactions.
Item 8. Description of Securities.
Part II
Item 1. Market for Common Equity and Related Shareholder Matters.
Item 2. Legal Proceedings
Item 3 Changes In And Disagreements With Accountants On Accounting
And Financial Disclosure.
Item 4. Recent Sales of Unregistered Securities.
Item 5. Indemnification of Directors and Officers.
Part F/S
Part III
Glossary of Terms
Index to Exhibits
Exhibits
Signature Page
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CAUTIONARY NOTICE
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.
The accompanying information contained in this Registration, including,
without limitation, the information set forth under the heading "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" identifies important additional
factors that could materially adversely affect actual results and
performance. All of these factors should be carefully considered and
evaluated. Any forward-looking statements in this report should be
evaluated in light of these important risk factors. The Registrant is also
subject to other risks detailed herein or set forth from time to time in
the Registrant's filings with the Securities and Exchange Commission.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
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.
A glossary of terms and acronyms unique to the nature of this business can
be found in Part III following the Financial Statements.
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.
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. (see Agreements) 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 September 30, 1999 the Company
was in a working capital deficit position of approximately $1,729,919,
including interest-free loans. At present, the Company has two full time
employees, though this may be increased as required and funding permits.
Business Approach
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.
Sales and Marketing
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.
In the wholesale market, the Registrant's sales and marketing employees
will utilize the extensive customer-specific usage reports and network
utilization data that will be generated by the Registrant's sophisticated
information systems that are part of the network control software obtained
from suppliers to effectively negotiate agreements with customers. The
Registrant believes that it will be able to compete more effectively as a
result of its plans to provide greater personalized service and ongoing
senior management-level attention given to each customer.
The Registrant's marketing efforts will include but will not be limited
to: advertising in both domestic and foreign print, media and trade
publications; demonstration stations at trade fairs; and the
distribution of multilingual literature outlining the Registrant's
services. The Registrant has targeted certain niche markets around the
world such as ethnic market segments; small-to-medium-sized businesses
and trade organizations that are involved in international trade.
How International long Distance Switching Works
International switched long distance services are provided through
switching and transmission facilities that automatically route calls to
circuits based upon a predetermined set of routing criteria. The call
typically originates on a local exchange carrier's network and is
transported to the caller's domestic long distance carrier. The
domestic long distance provider then carries the call to an
international switch provided by the Registrant. The Registrant will
either purchase a switch, or lease a portion of an existing switch from
a third party, which is standard industry practice. At this point, an
international long distance provider picks up the call and sends it
either directly or through one or more additional long distance
providers to a corresponding switch owned and operated in the
destination country by the Registrant. Once the call reaches the
country of destination it is routed to the party being called by that
country's domestic telephone network.
International long distance companies can be categorized by their
ownership, use of switches, and their transmission facilities. The
largest global carriers, such as British Telecom, Deutsche Telecom,
AT&T, MCI and Sprint primarily use owned transmission facilities and
generally use other long distance providers to carry their overflow
traffic. Since only very large carriers have transmission facilities
that cover the more than 200 countries to which major long distance
providers generally offer service, a significantly larger group of long
distance providers own and operate their own switches. However,
they rely solely on resale agreements with other long distance
carriers to terminate their traffic, or use a combination of resale
agreements and owned facilities to terminate their traffic.
Voice-over-the-Internet Protocol (VoIP)
Circuit switching technology uses traditional telephone networks
inefficiently when it opens and maintains a dedicated line for every
call, regardless of the density of the information being transmitted.
The result is wasted bandwidth as the end-to-end connection remains in
place even during those moments when no information is being transmitted.
Newer Internet Protocol "packet" technology breaks the information down
into pieces, places them into electronic packets and then fills the
"pipe" with these packets of information. The packets not only fill the
pipe but are also directed along the way by routers that read the
address information and direct each packet along the fastest route to
the destination, at which point all of the pieces of information are
reassembled, ready for receipt by fax, computer, or listener. All of
this takes place in a fraction of a second.
In order to understand the difference between circuit switching and
packet switching, it helps to visualize a highway between two cities.
Traditional telephone technology would dedicate an entire lane of the
highway to one single car for the duration of the trip. IP technology
would fill the entire lane with cars, thus making more efficient use of
the transmission path.
Packet Switching Versus Circuit Switching
There are two fundamental ways to switch traffic in a network:
connection-oriented and connectionless. Connection-oriented
technologies, of which the circuit-switched public telephone network is
the best example, have a setup process at the beginning of a telephone
call (session) to determine the best way to handle the session. Once a
call link is established, connection information is maintained
throughout the duration of the call.
By contrast, connectionless technologies, are exemplified by the
Internet. Both the endpoint and the network nodes send self-contained
packets of data by the most efficient route available at the time of
processing. There is no notion of a "session" or "call". No
information is kept from packet to packet. Since connectionless data
transfer is simpler, it relies on end stations to perform many necessary
functions, and as noted previously, "packets" of additional information
from many other sources can be inserted between the packets for a
quicker, more efficient and less costly method of transmission.
There are various technical methods to establish direct circuit
connections to a foreign country. The Registrant will partner with
local in country entities to set up the connections, assist in financing
and provide all installation and support services for turn-key
solutions.
Direct circuit installations between certain countries provide alternate
access for telephone traffic at lower rates. Market analysis is
performed for each country to determine the economic viability of
proposed routes.
Information and Billing Services
The Registrant's operations will employ advanced information systems
including all data collection and call data storage linked to a proprietary
reporting system. The Registrant will also maintain
comprehensive billing systems for rapid and accurate customer billing,
using software provided by the equipment suppliers.
The Registrant's switching facilities will be linked to reporting
systems which provide reports on a real-time basis to determine the most
cost-effective alternatives for customer usage and manage gross margins
by route.
The Registrant's systems will also enable it to assure accurate and timely
billing and to reduce routing errors using tested and proven software
developed and supplied by the manufacturers of the network equipment. The
system tracks start and end times for each call that permits accurate
reporting of call duration data. The system will also manage the call
initiation approval and routing management activities and provide
operational reports to facilitate management of all networks.
While the Registrant bears ultimate responsibility for collections, its
agents' compensation is based on actual revenue received, thus providing
the agent with great incentive to assist in the collection process. As
the Registrant will monitor collection closely, it will also be able to
implement additional procedures quickly and as needed in order to
control receivables. The agents may assist the Registrant in
establishing local banking relationships and providing local information
regarding local legal, political, and economic conditions, changing
situations and pending changes.
Agreements
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 covers 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
On June 17, 1999, the Registrant entered into a Letter of Intent to form
a joint venture with the M. Demajo Group of Companies of Valletta, Malta,
in order to provide VoIP network and services, pre-paid calling cards,
Internet Service Provider access and other telephony services for
Lebanon, Syria, Jordan, Libya, Iraq, Iran, Turkey, Cyprus, Egypt, and
potentially several other Middle Eastern and African countries where the
Demajo Group has relationships. Malta will serve as the base for these
operations. The joint venture will be the core for international VoIP
and work with Maltacom to provide bandwidth to carry traffic to and from
other Mediterranean and North African countries and to provide gateway
installation, maintenance, and network operation activities. It is
proposed that the registrant would provide VoIP servers and M. Demajo would
become the area managing arm, providing facilities, operating staff,
marketing personnel, etc. as their contribution to the joint venture.
The first step in developing VoIP network and services for the M. Demajo
joint venture is to meet with Maltacom and establish an agreement to
participate in the joint venture. It is anticipated that these meetings
will commence once the Registrant has raised further working capital to
fund expansion (See Capital requirements and Use of Funds), and is not
expected to take place until the second half of year 2000. Despite the
Letter of Intent, the Registrant cautions that there is no guarantee that
either the M. Demajo group or Maltacom will actually consummate a joint
venture agreement with the Registrant.
Based on proceeding in Malta, the Registrant will deploy a standard model
of its VoIP network in a limited number of countries initially, but should
be able to rapidly duplicate the service in other countries. The base
command center and network control system for Malta would require a one
time expenditure by the Registrant of approximately $500,000.
Establishment of the command center to observe and manage network
operations in real time would take three months to install and test.
Budgets and time frames for installation of points of presence in different
countries will vary depending upon the volumes of traffic at each location,
the types of switch gear in each location, and the infrastructure
associated with each location. It is anticipated that the marketing and
selling costs for each location would average $35,000 for each country,
such costs being borne by the other joint venture partner(s).
Typically, the costs to the Registrant of equipment and setup to become
operational averages $50,000 per point of presence for a volume of one
million minutes per month. A typical installation can be set up and
operational within sixty days of an agreement being confirmed. Once an
agreement is established, a site visit takes place to establish a
provisioning plan to install and test the gateway with the local provider's
switch. Concurrently, bandwidth would be leased from fiber optic cable
providers sufficient to meet two to three year forecasted demand. Once
operations commence, operating costs would be covered by revenue from the
individual contracts, which could run between 6 and 20 cents per minute,
depending on traffic volumes.
The Registrant has established a vendor/supplier relationship with
Clarent Corporation, a leading manufacturer of VoIP switch/servers that
have proven very effective in the industry, in which Clarent will supply
VoIP equipment to the Registrant. On October 1, 1999, Clarent shipped
the first equipment to the Registrant. This company has physical
equipment installations in a variety of international markets which have
been operating for the past several years. According to Cape Saffron,
a UK-based research group focused on the international voice market in
a report published in 1999, entitled "Global IP Voice / Fax Market
1999", more minutes travel across Clarent-enabled networks worldwide
than those of any other equipment supplier.
Additionally, there are several other equipment manufacturers which are
optional providers of Internet Protocol telephony such as Cisco, Lucent,
Intertel, Netspeak, Siemens, Oki, and Rockwell. The Registrant will
deploy VoIP solutions with dedicated circuits from foreign partnering
PTTs to create low cost voice and data connections between numerous
countries. By establishing dedicated leased circuits for the VoIP
transmission from gateway to gateway, the Registrant's networks
will avoid the problems sometimes associated with traditional VoIP
installations that lack sufficient quality of service or experience
signal delay (latency) problems and signal loss.
In addition to long distance voice traffic, Internet specific features
such as "unified messaging" can add to the Registrant's revenue base.
These features include voice mail, e-mail, fax mail and paging, which
can all be combined to provide efficient services to customers on
traditional wire line devices as well as wireless devices.
Other services can include: voice mail that can be transferred between
locations for customers who travel; mass faxing that can be conducted
through the Internet at low cost, making it a viable revenue source for
the Registrant; e-mail-to-voice conversion (text-to-speech) that allows
non-computer users to access electronic mail.
The Registrant's present management believes it possesses substantial
knowledge in global business. The Registrant is planning to establish its
technical operation and European headquarters in France or Germany to
facilitate the development of working relationships and management of
network control command centers. By augmenting the management team with
European based, industry experienced personnel, and leveraging management's
relationships and knowledge of global business, the Registrant anticipates
capturing significant market share by reacting efficiently in regions where
deregulation is occurring.
Regulatory Developments
In the past two years, three significant regulatory changes have
substantially improved the telecom marketplace for businesses and their
customers worldwide.
1. On January 1, 1998, the European Union, accounting for a third of
the world's telephone lines, decreed an open telecommunications market.
This has transformed one of the world's most protected markets into one
of the most open. This is a signal that governments are beginning to
recognize and accept the link between competitive telecommunications and
economic prosperity based on widely-accepted forecasts of cost
reduction, service improvement and increased competition.
2. On February 5, 1998, the World Trade Organization's Agreement on
Basic Telecommunication Services came into effect. As a result, 69
countries, accounting for 90% of the world's telecom equipment and
services market, agreed to move from the rigid bilateral agreements of
the former limited structure to embrace national and international
competition. The World Trade Organization agreement on
telecommunications services collectively accounts for more than 90% of
all telecommunications trade in the world and calls for the
liberalization for nearly all markets by the year 2000 or shortly
thereafter. The Registrant is in position to take advantage of
these changes in order to market newly discounted services to current
and new customers in all 69 countries where this deregulation has taken
place.
3. During 1998, the Japanese telecommunications market, which is the
world's second largest became fully open. The Japanese government
passed extensive legislation designed to liberalize the market and was
one of the first to ratify the World Trade Organization protocol on
Basic telecommunications Services.
Deregulation and privatization have allowed new long distance providers
to emerge in foreign markets. By eroding the traditional monopolies
previously held by single national providers, many of which were
partially or wholly government owned, deregulation presents an
opportunity for businesses to negotiate more favorable agreements with
post telephone and telegraph operators and emerging foreign providers.
In addition, deregulation in certain foreign countries will enable the
Registrant to establish local switching and transmission facilities,
thus allowing the Registrant to terminate traffic and begin carrying
international long distance traffic originating in those countries. The
Registrant believes that the growth of traffic originating in several
markets worldwide will be significant due to relative economic growth
rates and increasing access to telecommunications facilities in emerging
markets.
The Registrant is in the process of acquiring telecom reseller
operations in order to establish alliances, partnerships and joint
ventures with telecom facilities-based firms and carriers on every
continent. The Registrant has the ability to offer leadership models,
marketing support services, and financial support to its acquired
telecom resellers and service its allied facilities-based operating
firms and carriers.
The Development of the U.S. and Overseas Markets
The international long distance industry consists of all transmissions
of voice and data that originate in one country and terminate in
another. This industry is undergoing a period of fundamental change
which has resulted in substantial growth in international traffic.
According to industry sources, world-wide gross revenues for providers
of international telephone service exceeded $80 billion in 1998 and the
volume of international traffic on public telephone networks is expected
to compound at an annual growth rate of approximately 13 to 17% from
1999 through the year 2003.
Additional Marketing Opportunities
This section describes certain contact made by the registrant in various
European and Asian countries. These opportunities serve only as examples
of possible agreements that might result from further discussions.
However, there is no certainty the Registrant will be successful in
entering into any agreement with any of the following contacts.
FRANCE
The Registrant has had several meetings in Paris with a potential joint
venture partner and French Telecom. Should an agreement be reached between
the parties, the Registrant has the opportunity to carry up to 20,000,000
minutes per month through VoIP from France. The terms of the agreement have
not been fully negotiated, but the Registrant would be prepared to provide
and install all necessary network equipment and gateways to handle this
volume of traffic at an expected cost of $1 to $1.5 million. It would be
the Registrant's intent to have the joint venture partner staff any
marketing and administrative functions. Typically, the Registrant would
expect to earn between 1 and 3 cents per minute before depreciation,
amortization, and interest expenses.
RUSSIA
The Registrant entered into a joint venture Agreement with
government-licensed Crosna to create a VoIP platform in Moscow. As
previously noted, this agreement has been assigned to ICE which will
arrange and provide further funding. (See Agreements.) In the continuing
belief that excellent potential exists for multiple providers in Russia,
the Company has had discussions with other entities interested or involved
in providing VoIP services to and from Russia, but as yet has made no joint
venture or acquisition arrangements.
MALTA
After numerous visits to Malta, strong affiliations have been
established and the Registrant is relying on its intended joint venture
associates, the Demajo Group and Maltacom (PTT) to help the Registrant
establish footholds throughout the region. To date, no further detailed
plans have been developed regarding an implementation strategy, as the
Registrant is presently seeking an equity financing for adequate working
capital prior to formalizing any installation commitments in the
Mediterranean. (See Agreements.)
In order to take advantage of any of these marketing opportunities, the
Registrant will have to expend funds to travel to and communicate with
people in these jurisdictions. There are no specific proposals in place at
this time, but the registrant incorporate and invest in capital equipment
and overhead in one or more areas. Finders fees and other transaction fees
may be payable by the registrant in cash or stock.
It is estimated that a startup in any specific country, including
installation of gateway equipment would total a minimum of $50,000 from
inception to operation of the first million minutes per month of traffic
volume.
STRATEGIC ALLIANCES
Management plans to utilize as many relationships and strategic
alliances that have already been formed as is possible. Many of the
relationships were formed as a result of the introductions made since the
original acquisition with ICE. Since that agreement has been rescinded,
the Registrant cannot be assured that any of those contacts will be
available to the Registrant. Additionally, the Registrant will continue to
seek other partnerships that have global market reach and significant
compatibility with the Registrant's business goals.
RISK FACTORS
The Registrant does not have any significant operating history upon
which to evaluate its future performance. As there is no lengthy
history of operations, investors will be unable to assess future
operating performance or future financial results or conditions by
comparing these criteria against their past or present equivalents. No
revenues have been received as yet and no services have actually been
delivered to any customers.
The Registrant expects to incur losses on both a quarterly and an annual
basis for the foreseeable future and cannot assure investors of ever
achieving profitability.
Because Voice-over-the-Internet Protocol is a rapidly developing
technology, the Registrant cannot assure investors that future developments
will not render its technology outdated or obsolete, thus creating the need
for high or prohibitive expenditures to remain competitive.
The Registrant's ability to generate revenue will depend upon a number
of factors, including:
(A) pricing of VoIP services delivered by competing companies;
(B) the amount of traffic on its proposed sites;
(C) the ability of the Registrant to demonstrate user demographic
characteristics that are attractive to VoIP service providers;
(D) the establishment of desirable business governmental, and technical
relationships.
Acceptance of VoIP services will also depend to a large extent on the
level of Internet use by consumers and upon growth in the commercial use
of the Internet.
Because global commerce and the on-line exchange of information is new
and evolving, we are unable to predict with any assurance whether the
Internet will prove to be a viable commercial marketplace in the long
term. Prospective revenues would be adversely affected if widespread
commercial use of the Internet does not develop or is substantially
delayed, especially in under-developed regions.
Dependence on Continued Growth and Viability of the Internet.
The Company's future success is substantially dependent upon continued
growth in the use of the Internet. The Internet's recent and rapid growth
must continue, and e-Commerce on the Internet must become widespread. None
of these can be assured. The Internet may prove not to be a viable
commercial marketplace. If use of the Internet does not continue to grow,
the Company's business, results of operations and financial condition
might be adversely affected, only because the continued requirement for
capital investment by large telephone carriers might be diminished, thereby
decreasing the availability of data communications capacity. Additionally,
to the extent that the Internet continues to experience significant growth
in the number of users and the level of use, there can be no assurance that
its technical infrastructure will continue to be able to support the
demands placed upon it. Furthermore, security and authentication concerns
with respect to transmission over the Internet of confidential information,
such as credit card numbers, may remain.
If use of the Internet and other online services does not continue to grow
or grows more slowly than expected, if the infrastructure for the Internet
and other online services does not effectively support growth that may
occur, or if the Internet and other online services do not become a viable
commercial marketplace, the Company's business, results of operations and
financial condition could be adversely affected.
Certain of the Company's competitors with other revenue sources may be able
to devote greater resources to marketing and promotional campaigns, adopt
more aggressive pricing policies and devote substantially more resources to
systems development than the Company or may try to attract traffic by
offering ancillary services for free. Increased competition may result in
reduced operating margins, loss of market share and diminished value in the
Company's brand recognition. There can be no assurance that the Company
will be able to compete successfully against current and future
competitors. Further, as a strategic response to changes in the
competitive environment, the Company may, from time to time, make certain
pricing, service or marketing decisions or acquisitions that could have a
material adverse effect on its business, results of operations and
financial condition. New technologies and the expansion of existing
technologies may increase the competitive pressures on the Company by
enabling the Company's competitors to offer a lower-cost service.
Internet infrastructure failures or disruptions caused by increased
traffic, technical difficulties, vandalism or acts of God, among other
factors, may impede the Registrant's ability to provide VoIP services.
Repeated failures or disruptions may result in user dissatisfaction with
the Internet as a transmission medium, which may lead to a diminution of
the Registrant's customer base and a resultant impairment of the
Registrant's ability to generate revenues.
The Registrant will have to rely on local and long-distance
telecommunications companies to provide data communications capacity.
These providers may experience service disruptions or have limited
capacity, which could disrupt the provision of VoIP services. The
Registrant may not be able to replace or supplement these services
on a timely basis, if at all. In addition, because the Registrant must
rely on third-party telecommunications services providers for connection
to the Internet, the Registrant may not be able to control decisions
regarding the availability of, or our access to, services at any given
time.
The Registrant's success will depend to a large degree upon the efforts
of its management, technical and marketing personnel. The Registrant's
success will also depend on its ability to attract and retain additional
qualified management, technical and marketing personnel. Hiring
employees with the combination of skills and attributes required to
carry out the strategy is extremely competitive.
The Registrant does not have "key person" life insurance policies upon
any of its officers or other personnel. The loss of the services of key
personnel together with an inability to attract qualified replacements,
could adversely affect prospective growth.
The Registrant's intended establishment of operations in foreign
countries will entail significant expenditures and some knowledge of
each country's national and local laws, including tax and labor laws.
Furthermore, there are certain risks inherent in conducting business
internationally, including, among others, regulatory requirements,
difficulties in staffing and managing foreign operations, longer payment
cycles, different accounting practices, currency exchange rate
fluctuations, tariffs and other trade barriers, political instability
and potentially adverse tax consequences, any of which could adversely
affect growth opportunities.
The Registrant relies upon a combination of confidentiality and
non disclosure agreements and contractual provisions with its employees
and with third parties to establish and protect proprietary rights. The
Registrant has applied for federal trademark protection for "LiteWave
Corp." and intends to apply for federal trademark protection for all
domain names used. Legal standards relating to the validity,
enforceability and scope of protection of certain rights in Internet
related industries are uncertain and still evolving. The Registrant is
unable to assure investors as to the future viability or value of any of
its rights or those of other companies within the industry. The
Registrant is also unable to assure investors that the steps taken to
protect its rights will be adequate. Furthermore, the Registrant can
have no assurance that its proposed business activities will not
infringe upon the rights of others, or that other parties will not
assert infringement claims against the Registrant.
The Registrant will require substantial additional financing in order to
expand its network offerings beyond the initial venues, and to become a
meaningful competitor in the industry. There is no assurance that such
financing will be available. Moreover, if additional capital is raised
through borrowing or other debt financing, this would incur interest
expense.
Although there are currently few laws and regulations directly
applicable to the Internet and VoIP services, it is likely that new laws
and regulations will be adopted in the United States and elsewhere
covering issues such as privacy, pricing, taxes and characteristics and
quality of Internet services. The adoption of restrictive laws and
regulations could slow Internet growth or its use as a viable VoIP
commercial medium. Should such financing not be raised, it would put the
ability for the Registrant to pursue its business plan and continue as a
going concern at substantial risk.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATIONS
Plan of Operation.
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 to a maximum of
$200,000, 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. It is anticipated that
the Lambert advances would be sufficient to maintain short term operating
costs for up to six 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 loaned
the Registrant a total of approximately $1,050,000 ($685,315 at September
30, 1999), at no interest. The lenders have agreed to convert the loans to
private placement subscriptions for common stock to be issued at $0.625 per
share, for a total of approximately 1,680,000 shares, restricted pursuant
to Rule 144.
The Registrant has 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 above loan conversion is 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 to the Registrant and he may discontinue funding at any
time.
The Registrant's auditor has issued its opinion that the Registrant has
not established revenues sufficient to cover its operating costs and
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 funds, in the interim, so as to enable the
Registrant's operations during such period. Notwithstanding the foregoing,
the auditor advises as at December 31, 1998 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 additional
financing will be available on terms favorable to the Registrant, or at
all. 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, 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. 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.
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.
The following discussion and analysis explains the financial condition
for the period from January 1, 1999 to September 30, 1999, which
supplements the financial statements and related notes for that period and
the audited financial statements for the fiscal year ended December 31,
1998.
Revenues. The Registrant does not anticipate that revenue generating
operations will commence until the second half of 2000. No revenues
were generated for the period January 1, 1999 to September 30, 1999, nor
prior to that date.
Expenses. For the period from January 1, 1999 to September 30, 1999, the
Registrant incurred expenses of $198,003 for consulting, including
$68,136 in fees to Messrs. Martin and Lambert, $20,994 for investor
relations, consultants fees of $108,873 for management and technical
planning; general and administrative expenses of $63,683, including
$45,758 for office and $17,925 for miscellaneous salaries; marketing and
advertising costs of $35,163, including $32,704 for marketing and
promotion, and $2,459 for newswire service; rent of $22,686; travel costs
of $153,551; and $21,377 for telephone expenses. Expenses for the
previous year ended December 31, 1998 were basically general and
administrative, totaling $2,020. No expenses were incurred in the previous
two years. All operating capital was advanced to the Registrant by
Hemisphere & Associates, Ltd.
Net Loss. A net loss of $495,625 was incurred for the period January 1,
1999 to September 30, 1999. The total net loss since incorporation,
through to December 31, 1998, was $3,020.
Liquidity and Capital Resources. On September 30, 1999, Hemisphere and
Associates Ltd. had advanced a total of $685,315 as loans to the Registrant
to cover operating costs. They have agreed that these advances will be
converted to restricted common stock as part of the $0.625 private
placement in the first quarter of 2000. As of September 30, 1999, the
working capital deficiency was $1,729,919, not including the loan payable
of $685,315 which is to be converted to common stock.
Results of Operations
At this time, the Registrant has not commenced revenue generating
operations. As noted previously, the Registrant does not anticipate
commencing operations until the second half of 2000. The Registrant also
cautions that while it does not foresee any such eventuality, delays in the
anticipated start of operations might occur.
Year 2000 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 3. 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 4. 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 issuer'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. There are no agreements between or among any of
the shareholders which would restrict the issuance of shares in a manner
that would cause any change of control of the Registrant. There are no
voting trusts, pooling arrangements or similar agreements in place between
or among any of the shareholders, nor do the shareholders anticipate the
implementation of such an agreement in the near term.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.
Directors and Executive Officers:
All directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until their
successors are duly elected and qualified, unless they sooner resign or
cease to be directors in accordance with the Articles of Incorporation
of the Registrant. Executive officers are appointed and serve at the
pleasure of the Board of Directors.
Currently, the following persons are directors and executive officers.
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: 53
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
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
Involvement in Certain Legal Proceedings: During the past five years, none
of the officers or directors of the Registrant has been subject to a
bankruptcy petition, criminal conviction, or any order, judgment or decree,
not subsequently reversed, suspended or vacated of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities, or found to be guilty of any securities laws
infractions.
(b) There are no significant employees who are not described as
executives above, and there are no family relationships among directors,
executive officers or any nominees to these positions.
ITEM 6. EXECUTIVE COMPENSATION.
Compensation of Officers
The Registrant has the following officers:
Ian D. Lambert - President
Harvey M. Lawson - Secretary
Ian Lambert and Harvey Lawson provide executive, management and technical
services for the Registrant. During the period ended September 30, 1999,
Mr. Lambert was paid a salary in the amount of $20,136 and Mr. Lawson nil.
Mr. Ken Martin, former CEO and Director was paid a total of $48,000 to
September 30, 1999. For further details of salary arrangements between the
Registrant and Mr. Lambert and Mr. Lawson, refer to "Termination in
Employment, Change in Responsibilities and Employment Contracts".
Options Granted During the Most Recently Completed Fiscal Year
During the Registrant's most recently completed three quarters to September
30, 1999 and prior fiscal year ended December 31, 1998, there were no
incentive stock options granted to the executive officers.
Termination of Employment, Change in Responsibilities, and Employment
Contracts
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") to
be effective as at October 1, 1999, Ian Lambert, the Registrant's President
and a Director, will be 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 Lambert Executive Employment Agreement will
be for one year, subject to earlier termination as provided therein.
There were no payments made to any officers or directors prior to 1999.
Proposed Compensation.
The aggregate amount that the Registrant anticipates it will pay to its
current executive officers during its current fiscal year is $33,636. Each
of the Executive Employment Agreements will contain provisions for
increases to the base salary based on the Registrant achieving positive
cash flow, and upon achieving certain monthly gross income targets. In
addition to the foregoing, the executive officers of the Registrant will
also be entitled to participate in any stock option, profit sharing,
medical reimbursement, insurance or other employee benefit plan as may
be in effect from time to time, subject to the participation standards
and other terms thereof. Reference should be made to further disclosure
under Item 7 - Certain Relationships and Related Transactions.
Compensation of Directors
Other than compensation proposed to be paid to Ian Lambert and Harvey
Lawson as disclosed under the previous sub-heading "Compensation of
Officers", none of the directors of the Registrant have received any cash
compensation, directly or indirectly, for their services rendered during
the most recently completed financial year. The Registrant has no
additional arrangements, standard or otherwise, pursuant to which directors
are compensated by the Registrant for their services in their capacity as
directors, or for committee participation, involvement in special
assignments or for services as consultants or experts.
Other than as disclosed in Compensation of Officers, none of the
Registrant's directors have received any manner of compensation for
services provided in their capacity as directors during the Registrant's
most recently completed financial quarter ended September 30, 1999
As at ended September 30, 1999, being a date within 135 days of this
Registration Statement, the Registrant had no outstanding incentive stock
options and share purchase warrants.
Proposed Annual Compensation Table
Name and Year Salary($) Bonus($) Other Annual
Principal Position Compensation
Ian Lambert 2000 54,000(1) Nil Nil
President
Harvey Lawson 2000 6,000 Nil Nil
Secretary
Additional proposed terms:
(1) Increases to $120,000 per annum once Registrant achieves gross
income derived from sales of $5 million monthly.
Long-Term Compensation
As at September 30, 1999, being a date within 135 days of this Registration
Statement, the Registrant had no Long-Term Compensation plans or
agreements with any of its officers or directors.
ITEM 7. 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 8. DESCRIPTION OF SECURITIES.
The Registrant's only class of stock is Common Stock. Each share has
equal and identical rights to every other share for purposes of
dividends, liquidation preferences, voting rights and any other
attributes of a company's common stock. No voting trusts or any other
arrangement for preferential voting exist among any of the shareholders,
and there are no restrictions in the bylaws or articles of incorporation
precluding issuance of further common stock or requiring any liquidation
preferences, voting rights or dividend priorities with respect to this
class of stock. As of September 30, 1999, there were 2,500,000 shares
issued and outstanding. Each share of Common Stock entitles the holder
thereof to one vote, either in person or by proxy, at a meeting of
shareholders. The holders are not entitled to vote their shares
cumulatively. Accordingly, the holders of more than 50% of the issued and
outstanding shares of Common Stock can elect all of the directors of the
Registrant.
All shares of common Stock are entitled to participate ratably in
dividends when and as declared by the Registrant's Board of Directors
out of the funds legally available therefor. Any such dividends may be
paid in cash, property or additional shares of Common Stock. The
Registrant has not paid any dividends since its inception and presently
anticipates that no dividends will be declared in the foreseeable
future. Any future dividends will be subject to the discretion of the
Registrant's Board of Directors and will depend upon, among other
things, future earnings, the operating and financial condition of the
Registrant, its capital requirements, general business conditions and
other pertinent facts. Therefore, there can be no assurance that any
dividends on the Common Stock will be paid in the future.
Holders of Common Stock have no preemptive rights or other subscription
rights, conversion rights, redemption or sinking fund provisions. In
the event of the dissolution, whether voluntary or involuntary, of the
Registrant each share of Common Stock is entitled to share ratably in
any assets available for distribution to holders of the equity
securities of the Registrant after satisfaction of all liabilities.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED SHAREHOLDER MATTERS.
A. Market Information
The Common Stock of the Registrant's securities were eligible to be
quoted on the National Association of Securities Dealers (NASD) Over-
The-Counter Bulletin Board ("OTC BB"), on October 20, 1998
Trading History
The following table sets for the periods indicated, the high and low
trading prices of the Registrant's common stock and the quarterly volume
as reported for each quarterly period since the Registrant's stock was
eligible to be quoted on October 20, 1998:
1999:
4th Quarter High Low Volume for Quarter
Oct 1 - Dec 31 3 1/4 3/4
3rd Quarter High Low Volume for Quarter
Jul 1 - Sep 30 5 1/8 1 1/2 2,027,200
2nd Quarter High Low Volume for Quarter
Apr 1 - Jun 30 9 2 7/16 1, 834,200
1st Quarter High Low Volume for Quarter
Jan 1 - Mar 31 2 3/8 1 392,300
1998:
4th Quarter High Low Volume for Quarter
Oct 1 - Dec 31 1 1/4 11/16 26,200
(i) There is currently no Common Stock which is subject to outstanding
options or warrants to purchase, or securities convertible into, the
Registrant's Common Stock.
(ii) There is currently no common stock of the Registrant which could be
sold under Rule 144 under the Securities Act of 1933 as amended or that
the Registrant has agreed to register for sale by security holders.
(iii) There is currently no common equity that is being or is proposed
to be publicly offered by the Registrant, the offering of which could
have a material effect on the market price of the issuer's common
equity.
B. Holders
As of the date of this filing, the Registrant has 2,500,000 shares issued
and outstanding of which 2,000,000 are free trading shares and 500,000 are
restricted. There are approximately 100 public shareholders.
Applicability of Low-Priced Stock Risk Disclosure Requirements.
The securities of the Registrant will be considered low-priced or
"designated" securities under rules promulgated under the Exchange Act.
Penny Stock Regulation Broker-dealer practices in connection with
transactions in "Penny Stocks" are regulated by certain rules adopted by
the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the
NASDAQ system). The penny stock rules require a broker-dealer, prior to
a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document that provides
information about penny stocks and the risk associated with the penny
stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation
of the broker- dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock
held in the customer's account. In addition, the penny stock rules
generally require that prior to a transaction in a penny stock, the
broker-dealer must make a written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may
have the effect of reducing the level of trading activity in the
secondary market for a stock that becomes subject to the penny stock
rules. The stock currently has a trading price of less than $5.00 per
share and will not be traded on any national exchanges. Therefore, the
Registrant's stock is subject to the penny stock rules and investors may
find it more difficult to sell their securities, should they desire to
do so.
C. Dividend Policy
The Registrant has not paid any dividends to date. In addition, it does
not anticipate paying dividends in the immediate foreseeable future. The
Board of Directors of the Registrant will review its dividend policy
from time to time to determine the desirability and feasibility of
paying dividends after giving consideration to the Registrant's
earnings, financial condition, capital requirements and such other
factors as the board may deem relevant.
D. Reports to Shareholders
The Registrant intends to furnish its shareholders with annual reports
containing audited financial statements and such other periodic
reports as the Registrant may determine to be appropriate or as may be
required by law. Upon the effectiveness of this Registration
Statement, the Registrant will be required to comply with periodic
reporting, proxy solicitation and certain other requirements by the
Securities Exchange Act of 1934.
Transfer Agent and Registrar
The Transfer Agent for the shares of common voting stock of the
Registrant is Alexis Stock Transfer Inc., 42450 Bob Hope Drive, Suite
225, Rancho Mirage, California 92270.
ITEM 2. 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 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
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 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article IX of the Registrant's Articles of Incorporation and Article 7 of
the Registrant's Bylaws provide that no director of the Registrant shall
have personal liability to the Registrant or to its stockholders for
damages for breach of fiduciary duty as a director or officer in such
capacity. This limitation on personal liability shall not apply to acts
or omissions which involve intentional misconduct, fraud, a knowing
violation of law, or unlawful payment of dividends in violation of Nevada
Revised Statute 78.300 (Liability of Directors for Unlawful Distributions)
as follows:
So far as permitted by the Nevada Business Corporation Act, the Company may
indemnify its directors and officers against expenses and liabilities they
incur to defend, settle or satisfy any civil or criminal action brought
against them on account of their being or having been Company directors or
officers unless, in any such action, they are adjudged to have acted with
gross negligence or to have engaged in willful misconduct.
Section 78.751(1) of the Nevada Revised Statutes (NRS) authorizes a Nevada
corporation to indemnify any director, officer, employee, or corporate
agent who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the
right of the corporation due to his or her corporate role. Section
78.751(1) extends this protection against expenses, including attorney's
fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the action, suit or
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
Section 78.751(2) of the NRS also authorizes indemnification of the
reasonable defense or settlement expenses of a corporate director, officer,
employee or agent who is sued, or is threatened with a suit, by or in the
right of the corporation. The party must have been acting in good faith
and with the reasonable belief that his of her actions were not opposed to
the corporation's best interests. Unless the court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification
must not have been found liable to the corporation.
To the extent that a corporate director, officer, employee, or agent is
successful on the merits or otherwise in defending any action or proceeding
referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of the NRS
requires that he or she be indemnified against expenses, including
attorneys fees, actually and reasonably incurred by him in connection with
the defense.
Section 78.751(4) of the NRS limits indemnification under Section 78.751(1)
and 78.751(2) to situations in which either (i) the stockholders; (ii) the
majority of a disinterested quorum of directors; or (iii) independent legal
counsel determine that indemnification is proper under the circumstances.
Pursuant to Section 78.175(5) of the NRS, the corporation may advance an
officer's or director's expenses incurred in defending any action or
proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides
that the rights to indemnification and advancement of expenses shall not be
deemed exclusive of any other rights under any bylaw, agreement,
stockholder vote or vote of disinterested directors. Section 78.751(6)(b)
extends the rights to indemnification and advancement of expenses to former
directors, officers, employees and agents, as well as their heirs,
executors, and administrators.
Regardless of whether a director, officer, employee or agent has the right
to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his or her behalf against liability resulting from
his or her corporate role.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to officers, directors or persons controlling the Company
pursuant to the foregoing, the Company has been informed that in the
opinion of the U.S. Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.
PART F/S
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<PAGE>
<PAGE>
<TABLE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
BALANCE SHEETS
AS AT SEPTEMBER 30, 1999
(Unaudited Prepared by Management)
<S> <C> <C>
September 30, December 31,
1999 1998
ASSETS
Current Assets
Accounts receivable $ 1,514 $ -
Advances receivable 27,326 -
----------- ---------
Total Current Assets 28,840 -
Capital assets (Note 3) 1,233,614 -
----------- ------------
$ 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 -
----------- ------------
Total Current Liabilities 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>
<TABLE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited Prepared by Management)
<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>
<TABLE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited Prepared by Management)
<S> <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>
<TABLE>
LITEWAVE CORP.
(formerly Homefront Safety Services Of Nevada, Inc.)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
AS AT SEPTEMBER 30, 1999
(Unaudited Prepared by Management)
<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. The loan is payable to Hemisphere and
Associates, Inc., a non-related party.
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.
<PAGE>
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
DAVIDSON & COMPANY
CHARTERED ACCOUNTANTS
A Partnership of Incorporated Professionals
Suite 1270 Tel (604) 687-0947
Stock Exchange Tower Fax (604) 687-6172
609 Granville Street Vancouver, B.C., Canada V7Y 1G6
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Homefront Safety Services of Nevada, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Homefront Safety Services
of Nevada, Inc. as at December 31, 1998 and the related statements of
operations, stockholders' deficit and cash flows for the year then ended
and the cumulative amounts from incorporation on June 30, 1989 to December
31, 1998. 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 audit.
We conducted our audit in accordance with 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 audit provides 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, 1998 and
the results of its operations and its cash flows for the year then ended
and the cumulative amounts from incorporation on June 30, 1989 to December
31, 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
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.
The audited financial statements as at December 31, 1997 and for the year
then ended were audited by another auditor who expressed an opinion without
reservation on those statements in his audit report dated November 2, 1998.
/s/ Davidson & Company
Vancouver, Canada Chartered Accountants
September 27, 1999
<PAGE>
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
(A Development Stage Company)
BALANCE SHEETS
AS AT DECEMBER 31
<TABLE>
<S> <C> <C>
1998 1997
ASSETS $ - $ -
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities $ 680 $ -
----------- -----------
Stockholders' deficit
Capital stock (Note 4)
Authorized
25,000,000 common shares
with a par value of $0.001
Issued
2,500,000 common shares
(1997 2,000,000 common shares) 2,500 2,000
Additional paid in capital 840 -
Deficit accumulated during
the development stage (4,020) (2,000)
----------- -----------
(680) -
$ - $ -
=========== ===========
History and organization of the Company (Note 1)
Subsequent events (Note 7)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
Cumulative
Amounts From
Inception on Year Ended December 31,
June 30, 1989
to December 31, ---------------------------------------
1998 1998 1997 1996
EXPENSES
General and
administrative $ 3,020 $ 2,020 $ - $ -
---------- --------- --------- ---------
Loss for the period $ 3,020 $ 2,020 $ - $ -
========== ========= ========= =========
Basic and dilutive
Loss per share $ (0.01) $ - $ -
========== ========= ========= =========
Weighted average number
of common shares
outstanding 2,069,863 2,000,000 2,000,000
========== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
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,
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)
========= ========= ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
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, --------------------------------------
1998 1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (3,020) $ (2,020) $ - $ -
Adjustment to reconcile loss to net
cash used in operating activities:
Issuance of common shares
for services 1,340 1,340 - -
Changes in non-cash working capital items
Increase in accounts payable
and accrued liabilities 680 680 - -
----------- ---------- ---------- ----------
Net cash provided by
operating activities (1,000) - - -
----------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of capital stock 1,000 - - -
----------- ---------- ---------- ----------
Net cash provided by financing
activities 1,000 - - -
----------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES - - - -
----------- ---------- ---------- ----------
Change in cash position for the period - - - -
----------- ---------- ---------- ----------
Cash, beginning of period - - - -
----------- ---------- ---------- ----------
Cash, end of period $ - $ - $ - $ -
=========== ========== ========== ==========
Cash paid during the period for:
Interest expense $ - $ - $ - $ -
Income taxes - - - -
=========== ========== ========== ==========
Supplemental disclosure for non-cash operating, financing and investing activities (Note 5)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
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. The Company currently has no
operations and, in accordance with SFAS#7, is considered a development
stage company.
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 a merger with an
existing operating company.
3. SIGNIFICANT ACCOUNTING POLICIES
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.
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.
New accounting standards
In June 1998 the Financial Accounting Standards Board 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. The Company does not
anticipate that the adoption of the statement will have a 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 does not anticipate that the statement will have a
significant impact on its future 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.
4. 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.
Restricted shares
On November 10, 1998, the Company issued 500,000 common shares at a deemed
value of $1,340 for services rendered. These shares are restricted for a
period of one year from the date of issuance. Of these, 340,000 common
shares were issued at a deemed value of $340 to former officers and
directors of the Company.
5. SUPPLEMENTAL DISCLOSURE FOR NON-CASH OPERATING, FINANCING AND
INVESTING ACTIVITIES
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.
There were no significant non-cash transactions for the years ended
December 31, 1997 and 1996.
6. INCOME TAXES
The Company's total deferred tax asset at December 31 is as follows:
1998 1997
Tax benefit of net operating
loss carryforward $ 424 $ -
Valuation allowance (424) -
-------- -------
$ - $ -
======== =======
The Company has a net operating loss carryforward of approximately $2,020
(1997 - $Nil). The valuation allowance increased to $424 from $Nil during
the year ended December 1998. The Company provided a full valuation
allowance on the deferred tax asset because of the uncertainty regarding
realizability.
The operating loss carryforwards of $2,020 expire in 2005.
7. SUBSEQUENT EVENTS
The following events occurred subsequent to year end:
a) On April 19, 1999, the Company entered into an agreement with
International Communications and Equipment, Inc. ("ICE") to acquire all the
assets, intellectual property and technology of ICE in exchange for issuing
10,300,000 common shares of the Company.
b) The Company changed its name from Homefront Safety Services of
Nevada, Inc. to Litewave Corp. on April 26, 1999.
c) On September 10, 1999, the Company entered into a joint venture
agreement with Crosna Research & Production Association ("Crosna"), a
company 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.
8. 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
incorrectly recognize the year 2000 as some other date, resulting in
errors. The effects of the Year 2000 Issue may be experienced before, on,
or after January 1, 2000 and, if not addressed, the impact on operations
and financial reporting may range from minor errors to significant systems
failure which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
<PAGE>
<PAGE>
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
INDEPENDENT AUDITORS' REPORT
Board of Directors November 2, 1998
Homefront Safety Services of Nevada, Inc.
Palm Springs, California
I have audited the accompanying Income Statement of Homefront Safety
Services of Nevada, Inc., (A Development Stage Company), for the year ended
December 31, 1997. These financial income statements are the
responsibility of the Company's management. My responsibility is to
express an opinion on these financial income statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial income statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
income statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial income statement presentation. I believe
that my audit provides a reasonable basis for my opinion.
In my opinion, the financial income statements referred to above present
fairly, in all material respects, the results of the operations of
Homefront Safety Services of Nevada, Inc., (a Development Stage Company),
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
The accompanying financial income statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 3 to
the financial income 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 3. The financial income statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Barry L. Friedman
Certified Public Accountant
<PAGE>
<TABLE>
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<S> <C>
Year
Ended
Dec. 31,
1997
INCOME:
Revenue $ 0
EXPENSES:
General, Selling
and Administrative $ 0
Total Expenses $ 0
Net Profit/Loss(-) $ 0
Net Profit/Loss (-)
per weighted
share (Note 1) $ .0000
=======
Weighted average
number of common
shares 2,000,000
=========
See accompanying notes to financial income statements & audit report
<PAGE> -2-
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized June 30, 1989, under the laws of the State of
Nevada, as Homefront Safety Services of Nevada, Inc. The company currently
has no operations and, in accordance with SFAS #7, is considered a
development stage company.
On June 30, 1989, the company issued 10,000 shares of $.001 par value
common stock for $ 1,000. in cash.
On July 16, 1998, the State of Nevada approved the Company's restated
Articles of Incorporation, which increased its capitalization from 10,000
common shares to 25,000,000 common shares. The par value was unchanged at
$.00l.
On July 25, 1998, the Company forward split its common stock 200:1, thus
increasing the number of outstanding common shares from 10,000 shares to
2,000,000 shares.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. Earnings per share is computed using the weighted average number of
common shares outstanding.
3. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since incept ion.
NOTE 3 - 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 a merger with an existing operating
company.
NOTE 4 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
<PAGE> -3-
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
December 31, 1997
NOTE 5 - RELATED PARTY TRANSACTION
The Company neither owns or leases any real or personal property. Office
services are provided without charge by a director. Such costs are
immaterial to the financial statements and, accordingly, have not been
reflected therein. The officers and directors of the Company are involved
in other business activities and may, in the future, become involved in
other business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in selecting between the
Company and their other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 6 - OFFICERS ADVANCES
While the Company is seeking additional capital through a merger with an
existing operating company, an officer of the Company has advanced funds on
behalf of the Company to pay for any costs incurred by it. These funds are
interest free.
Part III
GLOSSARY OF TERMS:
Backbone - The network of lines and routes over which Internet traffic
is carried
Bit - One Binary Digit represented as either 0 or 1
Byte - Eight Bits
Buffer Size - Pre-determined size of temporary data storage capacity.
Checksum - Number calculated using the values within a packet to
validate the information contained therein
Circuit Switch - Telecom switch on a traditional voice telephone network
Compression - Techniques used to represent data in shortened form.
DSP - Digital Signal Processing - the process by which a device
processes a digital signal into sound or data.
End Station - Destination station to which a call is sent on the network
Expiry Date - The date on which an agreement, letter of intent, grant,
option, warrant, contract, etc., ceases to be in force.
Fiber Optics - A form of telecom line material designed to handle high
volumes of voice and data
Frame Relay - Low-overhead protocol similar to IP in application
Full Duplex - Simultaneous bi-directional communication
Gateway - device to bridge two network designs and allow
interoperability
Header - component of a packet which contains address and other
information about the packet
Host - A computer designed for running applications over a network.
Hybrid - A combination of media types (e.g. two-pair and four-pair) on
a single circuit
Intranet - internal network based on the architecture and interface of
the internet
IP Address - Internet Protocol Address - the unique, 32-Bit number used
to identify a given computer on a network or the Internet
IP telephony - Technology that uses the lnternet Protocol to carry
voice conversations
Latency - The time elapsed between the transmission of a message and
its receipt
Line - The generic term for a physical connection between two points.
Modem Modulation demodulation - the device that converts signals
between analog and digital for transmission over the Public Switched
Telephone Network.
Moore's Law - The rule attributed to the founder of Intel stating that
processing speed doubles every 18 months.
Multiplexing - The technique of combining a number of signals into a
single signal.
NASD - National Association of Securities Dealers
OCR - Optical Character Recognition The ability of a device, such as a
scanner, to translate or convert a letter or word into digital signal.
Octet - The eight-Bit space reserved for representation of up to 256
values.
Option - a right, granted by a company, to certain individuals or
groups, to purchase a designated number of shares in the company at a
specific predetermined price for a set period of time.
OTC - Over The Counter. Refers to the listing of the Registrant's
shares for trading on the National Association of Securities Dealers
(NASD) Bulletin Board market.
Polling - The activity of checking a line for incoming data.
Port - A physical or virtual socket for connecting a line with a
device
Protocol - An agreement between parties on how to conduct a given
activity
Router - A device that uses internal algorithms and tables to route
packets to the appropriate destination
Routing Table - A table of paths from which a given router can choose
to deliver a packet
Switch - A device used to direct and complete calls on the Public
Switched Telephone Network
Standards - Universally accepted collections of protocols and
configurations by which industry abides.
Virtual Circuit - A circuit created between two points on a temporary
basis.
Warrant - A certified right to purchase treasury shares in stated
quantities, prices and time limits.
Word - Four bytes.
<PAGE>
Acronyms common to the industry:
ACTA American Carriers Telecommunication Assoc.
ANI Automatic Number Identification
ATM Asynchronous Transfer Mode
CAGR Compound Annual Growth Rate
CLEC Competitive Local Exchange Carrier
CO Central Office
CPU Central Processing Unit
DSP Digital Signal Processing
FCC Federal Communications Commission
IEEE Institute of Electrical and Electronics Engineers
ILEC Incumbent Local Exchange Carrier
IP Internet Protocol
IPvX Internet Protocol, Version X
ISDN Integrated Services Digital Network
ISP Internet Service Provider
ITSP Internet Telephony Service Provider
ITU International Telecommunication Union
IXC Interexchange Carrier
K Kilobytes
LAN Local Area Network
LEC Local Exchange Carrier
MAN Metropolitan Area Network
Mbps Megabits per second
Ms Millisecond (one thousandth of a second)
NAP Network Access Point
NSP National / Network Service Provider
POP Point of Presence
POTS Plain Old Telephone Service
PSTN Public Switched Telephone Network
PTT Post Telegraph & Telephone
RAM Random Access Memory
RBOC Regional Bell Operating Company
ROW Right Of Way
RSP Regional Service Provider
RX Receive
TDM Time Division Multiplexing
TX Transmit
VoN Voice over Internet
VoIP Voice over Internet Protocol
WAN Wide Area Network
XDSL Digital Subscriber Line
<PAGE>
INDEX TO EXHIBITS
Exhibit 3.1 Articles of Incorporation filed June 30, 1989.
Exhibit 3.2 Certificate of Amendment of Articles of Incorporation filed
July 16, 1998, increasing authorized capital stock in the
Corporation to 25 million shares at $0.001 par value.
Exhibit 3.3 Certificate of Amendment of Articles of Incorporation
effecting a split of 200 for 1, effective July 25, 1998
Exhibit 3.4 Certificate of Amendment of Articles of Incorporation filed
May 10, 1999, changing the name of the Corporation from
Homefront Safety Services of Nevada, Inc. to LITEWAVE CORP.
Exhibit 3.5 Bylaws of the Corporation.
Exhibit 10.1 Technology Purchase and Assignment Agreement, dated April
19, 1999, to acquire the assets of and the world-wide rights
to the technology agreement between the Corporation and
International Communications and Equipment Inc.
(ICE).
Exhibit 10.2 Letter of Intent, dated May 27, 1999, from ZAO NPO Crosna of
the Russian Federation covering the installation and
operation of Voice-over-the-Internet Protocol technology for
long distance telephone traffic to and from the Russian
Federation.
Exhibit 10.3 Protocol of Intentions Agreement between the Corporation and
ZAO NPO Crosna, dated June 22, 1999, respecting the
organization of international and inter-city VoIP
communications channels in the territory of the Russian
Federation.
Exhibit 10.4 Agreement, dated September 10, 1999, between Crosna and the
Corporation entitled "Principles for Setting up the IP
Telephone Network and Providing IP Telephone Services in the
Territory of the Russian Federation"; establishing a 50/50
joint venture.
Exhibit 10.5 Agreement, dated January 7, 2000 Letter of Intent between
the Corporation and International Communications and
Equipment Inc. ("ICE") to rescind the Agreement dated April
19, 1999 between the two parties, and provide the terms for
the assignment of the Crosna Russian project to ICE .
Exhibit 10.6 Letter of Intent, dated June 15, 1999, between the
Corporation and M. Demajo Group of Companies of Valletta,
Malta, to form a joint venture with in order to provide VoIP
network and services, pre-paid calling cards, Internet
Service Provider access and other telephony services.
Exhibit 10.7 Officer/Director Employment Agreement dated October 1, 1999
between the Corporation and its President, Ian Lambert
Exhibit 27 Financial Data Schedule
<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 7, 2000
Ian Lambert,
President, Director
/s/ Harvey Lawson Dated: April 7, 2000
Harvey Lawson,
Secretary, Director
<PAGE>
Exhibit 3.1 Articles of Incorporation
FILED
IN THE STATE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
June 30, 1989
ARTICLES OF INCORPORATION
HOMEFRONT SAFETY SERVICES OF NEVADA, INC. (No. 5753-89)
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a corporation under and pursuant to the
laws of the State of Nevada, and we do hereby certify that:
I
The name of the Corporation is:
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
II
The principal office and place of business in Nevada of this
Corporation shall be located at the offices of Harry Paul Marquis,
Chartered, 501 South Rancho Drive, Suite G-46, Las Vegas, Nevada 89106.
Offices for the transaction of business of the corporation, and
where meetings of the Board of Directors and of the Shareholders may be
held, may be established and maintained in any other part of the State of
Nevada, or in any other state, territory or possession of the United States
of America, or in any foreign country.
III
The nature of the business and objects and purposes proposed to
be transacted, promoted, or carried on by the corporation are:
(a) To engage in any lawful activity.
IV
The members of the governing Board of the Corporation shall be
styled Directors, and the number thereof shall not be less than two (2),
except that, in cases where all the shares of the Corporation are owned
beneficially and of record by either one or two Shareholders, the number of
Directors may not be less than the number of Shareholders, but shall be of
full age and at least one shall be a citizen of the United States. The
names and addresses of the first Board of Directors, which shall consist of
two (2) persons and who shall hold office until his successors are duly
elected and qualified is:
NAME ADDRESS
JOHN BARR 501 South Rancho Drive, G-46
Las Vegas, Nevada 89106
DON HOKE 501 South Rancho Drive, G-46
Las Vegas, Nevada 89106
V
The number of Directors of the Corporation may be increased or
decreased from time to time as shall be provided in the By-Laws of the
Corporation.
VI
A. This Corporation is authorized to issue 10,000 shares of stock
with a par value of $.00l per share, said shares being non-assessable.
B. Shareholders shall be pre-emptive rights.
VII
This Corporation shall have perpetual existence.
VIII
The names and post office addresses of the incorporators of the
Corporation shall be as follows:
NAME ADDRESS
Loretta Gillespie 501 South Rancho Drive
Suite G-46
Las Vegas, Nevada 89106
Lisa Steiner 501 South Rancho Drive
Suite G 46
Las Vegas, Nevada 89106
IX
Except as hereinafter provided, the officers and Directors of the
Corporation shall not be personally liable to the Corporation or its
stockholders for damages for breach of fiduciary duty as a director or
officer. This limitation on personal liability shall not apply to acts or
omissions which involved intentional misconduct, fraud, knowing violation
off the law, or unlawful payments of dividends prohibited by Nevada Revised
Statutes Section 78.300.
We, the undersigned, for the purposes of forming a corporation
under the laws of the State of Nevada, do make, file and record this
Certificate, and do certify that the facts herein stated are true; and we
have accordingly hereunto set our hands and seals this 29th day of June,
1989.
/s/ Loretta Gillespie
LORETTA GILLESPIE
/s/ Lisa Steiner
LISA STEINER
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
On the 29 day of June, 1989, before me, the undersigned, a Notary Public in
and for the County of Clark, State of Nevada, personally appeared Loretta
Gillespie and Lisa Steiner, and for each for herself duly acknowledged to
me that she is one of the persons named in and who executed the above and
foregoing instrument and that she, and each of them, executed the same
freely and voluntarily and for the uses and purposed therein mentioned.
/s/ Candy Post
NOTARY PUBLIC
Notary Public-State of Nevada
CLARK COUNTY
My Appointment Expires Mar. 8, 1992
<PAGE>
Exhibit 3.2 Certificate of Amendment of Articles (16 Jul 98)
FILED
IN THE OFFICE OF THE
THE SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 16, 1998
No. c5753-89
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
of
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
We the undersigned M. ZAPARA, PRESIDENT and MARIA CONTERARS, SECRETARY of
HOMEFRONT SAFETY SERVICES OF NEVADA, INC. do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on the 16, day of December, 1993, adopted a
resolution to amend the original articles as follows:
Article VI is hereby amended to read as follows:
The total authorized capital stock is increased to Twenty-Five (25)
million shares at $.001 par value per share.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is Ten Thousand (10,000);
that the said change(s) and amendment have been consented to and approved
by a majority vote of the stockholder holding at least a majority of each
class of stock outstanding and entitled to vote thereon.
/s/ M. Zapara
President
/s/ Maria Conterars
Secretary
<PAGE>
Exhibit 3.3 Certificate of Amendment of Articles (21 Aug 99)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
AUG 21, 1998
No. C5753.-89
WAIVER OF NOTICE OF
and
MINUTES, SPECIAL MEETING OF
BOARD OF DIRECTORS
OF
HOMEFRONT SAFETY SERVICES OF NEVADA, INC.
BE IT KNOWN that a Special Meeting of the Board of Directors of the
Corporation, was held on July 10, 1998, at 611 S. Palm Canyon Dr.,
Palm Springs, CA 92264.
There were present the following:
M. Zapara, Gina Zapara and John Jones
M. Zapara acted as President and Gina Zapara acted as Secretary.
John Jones recommended that the Corporation declare a forward stock
split. Upon motion duly made, seconded and unanimously carried, it was
RESOLVED, that the Corporation declare a 200 for 1 forward
stock split effective July 25 1998.
There being no further business to come before the meeting, upon
motion duly made, seconded and unanimously carried, it was adjourned.
Signing of these MINUTES constitutes WAIVER OF NOTICE of the Meeting
by the signatories.
/s/ M. Zapara /s/ Gina Zapara
M. Zapara, President Gina Zapara, Secretary
<PAGE>
Exhibit 3.4 Certificate of Amendment of Articles (10 May 99)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 10, 1999
No. C5753.-89
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
HOMEFRONT SAFETY SERVICES OF NEVADA INC.
The undersigned, being the President and the Secretary of Homefront
Safety Services of Nevada, Inc., a Nevada Corporation, hereby certify
that by majority vote of the Shareholders and the Board of Directors at
a meeting held on April 26, 1999, it was voted and adopted as a
resolution to amend the original Articles of Incorporation as follows:
The undersigned further certify that ARTICLE ONE of the original
Articles of Incorporation filed on June 30, 1989 is ameded to
read as follows:
ARTICLE ONE, NAME is amended to read:
The name of the Corporation is:
"LITEWAVE CORP."
The undersigned hereby certify that they have on this 26th day of April,
1999, executed this Certificate amending the original Articles of
Incorporation heretofore filed with the Secretary of State of Nevada.
/s/ Ian Lambert
Ian D. Lambert, President
/s/ Shirley Bethurum
Shirley Bethurum, Secretary
<PAGE>
Exhibit 3.5 Bylaws of the Corporation
BYLAWS
OF
HOMEFRONT SAFETY SERVICES OF NEVADA, INC
(the "Corporation")
Article I.
Office
The Board of Directors shall designate and the Corporation shall
maintain a principal office. The location of the principal office may be
changed by the Board of Directors. The Corporation also may have offices
in such other places as the Board may from time to time designate. The
location of the initial principal office of the Corporation shall be
designated by resolution.
Article II.
Shareholders Meetings
I. Annual Meetings
The annual meeting of the shareholders of the Corporation shall be
held at such place within or without the State of Nevada as shall be set
forth in compliance with these Bylaws. The meeting shall be held on the
31 '~ of December of each year. If such day is a legal holiday, the
meeting shall be on the next business day. This meeting shall be for the
election of Directors and for the transaction of such other business as
may properly come before it.
2. Special Meetings
Special meetings of shareholders, other than those regulated by
statute, may be called by the President upon written request of the
holders of 50% or more of the outstanding shares entitled to vote at
such special meeting. Written notice of such meeting stating the place,
the date and hour of the meeting, the purpose or purposes for which it
is called, and the name of the person by whom or at whose direction the
meeting is called shall be given.
3. Notice of Shareholders Meetings
The Secretary shall give written notice stating the place, day, and
hour of the meeting, and in the case of a special meeting, the purpose
or purposes for which the meeting is called, which shall be delivered
not less than ten or more than fifty days before the date of the
meeting, either personally or by mail to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, addressed to
the shareholder at his address as it appears on the books of the
Corporation, with postage thereon prepaid. Attendance at the meeting
shall constitute a waiver of notice thereof.
4. Place of Meeting
The Board of Directors may designate any place, either within or
without the State of Nevada, as the place of meeting for any annual
meeting or for any special meeting called by the Board of Directors. A
waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of
Nevada, as the place for the holding of such meeting. If no designation
is made, or if a special meeting is otherwise called, the place of
meeting shall be the principal office of the Corporation.
5. Record Date
The Board of Directors may fix a date not less than ten nor more than
sixty days prior to any meeting as the record date for the purpose of
determining shareholders entitled to notice of and to vote at such
meetings of the shareholders. The transfer books may be closed by the
Board of Directors for a stated period not to exceed fifty days for the
purpose of determining shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any
other purpose.
6. Quorum
A majority of the outstanding shares of the Corporation entitled to
vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. If less than a majority of the outstanding
shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further
notice. At a meeting resumed after any such adjournment at which a
quorum shall be present or represented, any business may be transacted,
which might have been transacted at the meeting as originally noticed.
7. Voting
A holder of an outstanding share, entitled to vote at a meeting, may
vote at such meeting in person or by proxy. Except as may otherwise be
provided in the currently filed Articles of incorporation, every
shareholder shall be entitled to one vote for each share standing in his
name on the record of shareholders. Except as herein or in the currently
filed Articles of Incorporation otherwise provided, all corporate action
shall be determined by a majority of the vote's cast at a meeting of
shareholders by the holders of shares entitled to vote thereon.
8. Proxies
At all meetings of shareholders, a shareholder may vote in person or
by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No
proxy shall be valid after six months from the date of its execution.
9. Informal Action by Shareholders
Any action required to be taken at a meeting of the shareholders, may
be taken without a meeting if a consent in wilting, setting forth the
action so taken, shall be signed by a majority of the shareholders
entitled to vote with respect to the subject matter thereof
Article III.
Board Of Directors
1. General Powers
The business and affairs of the Corporation shall be managed by its
Board of Directors. The Board of Directors may adopt such rules and
regulations for he conduct of their meetings and the management of the
Corporation as they appropriate under the circumstances. The Board shall
have authority to authorize changes in the Corporation's capital
structure.
2. Number, Tenure and Qualification
The number of Directors of the Corporation shall be a number between
one and five, as the Directors may by resolution determine from time to
time. Each of the Directors shall hold office until the next annual
meeting of shareholders and until his successor shall have been elected
and qualified.
3. Regular Meetings
A regular meeting of the Board of Directors shall be held without
other notice than by this Bylaw, immediately after and, at the same
place as the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place for the holding of additional
regular meetings without other notice than this resolution.
4. Special Meetings
Special meetings of the Board of Directors may be called by order of
the Chairman of the Board or the President. The Secretary shall give
notice of the time, place and purpose or purposes of each special
meeting by mailing the same at least two days before the meeting or by
telephone, telegraphing or telecopyzng the same at least one day before
the meeting to each Director. Meeting of the Board of Directors may be
held by telephone conference call.
5. Quorum
A majority of the members of the Board of Directors shall constitute
a quorum for the transaction of business, but less than a quorum may
adjourn any meeting from time to time until a quorum shall be present,
whereupon the meeting may be held, as adjourned, without further notice.
At any meeting at which every Director shall be present, even though
without any formal notice, any business may be transacted.
6. Manner of Acting
At all meetings of the Board of Directors, each Director shall have
one vote. The act of a majority of Directors present at a meeting shall
be the act of the full Board of Directors, provided that a quorum is
present.
7. Vacancies
A vacancy in the Board of Directors shall be deemed to exist in the
case of death, resignation, or removal of any Director, or if the
authorized number of Directors is increased, or if the shareholders
fail, at any meeting of the shareholders, at which any Director is to be
elected, to elect the full authorized number of Director to be elected
at that meeting.
8. Removals
Directors may be removed, at any time, by a vote of the shareholders
holding a majority of the shares outstanding and entitled to vote. Such
vacancy shall be filled by the Directors then in office, though less
than a quorum, to hold office until the next annual meeting or until his
successor is duly elected and qualified, except that any directorship to
be filled by election by the shareholders at the meeting at which the
Director is removed. No reduction of the authorized number of Directors
shall have the effect of removing any Director prior to the expiration
of his term of office.
9. Resignation
A Director may resign at any time by delivering written notification
thereof to the President or Secretary of the Corporation. A resignation
shall become effective upon its acceptance by the Board of Directors;
provided, however, that if the Board of Directors has not acted thereon
within ten days from the date of its delivery, the resignation shall be
deemed accepted.
10. Presumption of Assent
A Director of the Corporation who is present at a meeting of the Board
of Directors at which action on any corporate matter is taken shall be
presumed to have assented to the action(s) taken unless his dissent
shall be placed in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a Director who voted in favor of such action.
11. Compensation
By resolution of the Board of Directors, the Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of
Directors or a stated salary as Director. No such payment shall preclude
any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
12. Emergency Power
When, due to a national disaster or death, a majority of the Directors
are incapacitated or otherwise unable to attend the meetings and
function as Directors, the remaining members of the Board of Directors
shall have all the powers necessary to function as a complete Board, and
for the purpose of doing business and filling vacancies shall constitute
a quorum, until such time as all Directors can attend or vacancies can
be filled pursuant to these Bylaws.
13. Chairman
The Board of Directors may elect from its own number a Chairman of the
Board, who shall preside at all meetings of the Board of Directors, and
shall perform such other duties as may be prescribed from time to time
by the Board of Directors. The Chairman may by appointment fill any
vacancies on the Board of Directors.
Article IV.
Officers
1. Number
The Officers of the Corporation shall be a President, one or more Vice
Presidents, and a Secretary Treasurer, each of whom shall be elected by
a majority of the Board of Directors. Such other Officers and assistant
Officers as may be deemed necessary may be elected or appointed by the
Board of Directors. In its discretion, the Board of Directors may leave
unfilled for any such period as it may determine any office except those
of President and Secretary. Any two or more offices may be held by the
same person. Officers may or may not be Directors or shareholders of the
Corporation.
2. Election and Term of Office
The Officers of the Corporation to be elected by the Board of
Directors shall be elected annually by the Board of Directors at the
first meeting of the Board of Directors held after each annual meeting
of the shareholders. If the election of Officers shall not be held at
such meeting, such election shall be held as soon thereafter as
convenient. Each Officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner
hereinafter provided.
3. Resignations
Any Officer may resign at any time by delivering a written resignation
either to the President or to the Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery.
4. Removal
Any Officer or agent may be removed by the Board of Directors whenever
in its judgment the best interests of the Corporation will be served
thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an
Officer or agent shall not of
itself create contract rights. Any such removal shall require a majority
vote of the Board of Directors, exclusive of the Officer in question if
he is also a Director.
5. Vacancies
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, or if a new office shall be created, may
be filled by the Board of Directors for the un-expired portion of the
term.
6. President
The President shall be the chief executive and administrative Officer
of the Corporation. He shall preside at all meetings of the stockholders
and, in the absence of the Chairman of the Board, at meetings of the
Board of Directors. He shall exercise such duties as customarily pertain
to the office of President and shall have general and active supervision
over the property, business, and affairs of the Corporation and over its
several Officers, agents, or employees other than those appointed by the
Board of Directors. He may sign, execute and deliver in the name of the
Corporation powers of attorney, contracts, bonds and other obligations,
and shall perform such other duties as may be prescribed from time to
time by the Board of Directors or by the Bylaws.
7 Vice President
The Vice President shall have such powers and perform such duties as
may be assigned to him by the Board of Directors or the President. In
the absence or disability of the President, the Vice President
designated by the Board or the President shall perform the duties and
exercise the powers of the President. A Vice President may sign and
execute contracts and other obligations pertaining to the regular course
of his duties.
8. Secretary
The Secretary shall keep the minutes of all meetings of the
stockholders and of the Board of Directors and, to the extent ordered by
the Board of Directors or the President, the minutes of meetings of all
committees. He shall cause notice to be given of meetings of
stockholders, of the Board of Directors, and of any committee appointed
by the Board. He shall have custody of the corporate seal and general
charge of the records, documents and papers of the Corporation not
pertaining to the performance of the duties vested in other Officers,
which shall at all reasonable times be open to the examination of any
Directors. He may sign or execute contracts with the President or a Vice
President thereunto authorized in the name of the Corporation and affix
the seal of the Corporation thereto. He shall perform such other duties
as may be prescribed from time to time by the Board of Directors or by
the Bylaws.
9. Treasurer
The Treasurer shall have general custody of the collection and
disbursement of funds of the Corporation. He shall endorse on behalf of
the Corporation for collection checks, notes and other obligations, and
shall deposit the same to the credit accounts to any Director of the
Corporation upon application at the office of the Corporation during
business hours; and, whenever required by the Board of Directors or the
President, shall render a statement of his accounts. He shall perform
such other duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws.
10. Other Officers
Other Officers shall perform such duties and shall have such powers
as may be assigned to them by the Board of Directors.
11. Salaries
The salaries or other compensation of the Officers of the Corporation
shall be fixed from time to time by the Board of Directors, except that
the Board of Directors may delegate to any person or group of persons
the power to fix the salaries or other compensation of any subordinate
Officers or agents. No Officer shall be prevented from receiving any
such salary or compensation by reason of the fact that he is also a
Director of the Corporation.
12. Surety Bonds
In case the Board of Directors shall so require, any Officer or agent
of the Corporation shall execute to the Corporation a bond in such sums
and with such surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his duties to the
Corporation, including responsibility for negligence and for the
accounting for all property, moneys or securities of the Corporation,
which may come into his hands.
Article V.
Contracts, Loans, Checks And Deposits
1. Contracts
The Board of Directors may authorize any Officer or Officers, agent
or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation and such
authority may be general or confined to specific instances.
2. Loans
No loan or advance shall be contracted on behalf of the Corporation,
no negotiable paper or other evidence of its obligation under any loan
or advance shall be issued in its name, and no property of the
Corporation shall be mortgaged, pledged, hypothecated or transferred as
security for the payment of any loan, advance, indebtedness or liability
of the Corporation unless and except as authorized by the Board of
Directors. Any such authorization may be general or confined to specific
instances.
3. Deposits
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositories as the Board of Directors may select, or
as may be selected by an Officer or agent of the Corporation authorized
to do so by the Board of Directors.
4. Checks and Drafts
All notes, drafts, acceptances, checks, endorsements and evidence of
indebtedness of the Corporation shall be signed by such Officer or
Officers or such agent or agents of the Corporation and in such manner
as the Board of Directors from time to time may determine. Endorsements
for deposits to the credit of the Corporation in any of its duly
authorized depositories shall be made in such manner as the Board of
Directors may from time to time determine.
5. Bonds and Debentures
Every bond or debenture issued by the Corporation shall be in the form
of an appropriate legal writing, which shall be signed by the President
or Vice President and by the Treasurer or by the Secretary, and sealed
with the seal of the Corporation. The seal may be facsimile, engraved or
printed. Where such bond or debenture is authenticated with the manual
signature of an authorized Officer of the Corporation or other trustee
designated by the indenture of trust or other agreement under which such
security is issued, the signature of any of the Corporation's Officers
named thereon may be facsimile. In case any Officer who signed, or whose
facsimile signature has been used on any such bond or debenture, shall
cease to be an Officer of the Corporation for any reason before the same
has been delivered by the Corporation, such bond or debenture may
nevertheless be adopted by the Corporation and issued and delivered as
though the person who signed it or whose facsimile signature has been
used thereon had not ceased to be such Officer.
Article VI
Capital Stock
1. Certificate of Share
The shares of the Corporation shall be represented by certificates
prepared by the Board of Directors and signed by the President. The
signatures of such Officers upon a certificate may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a
registrar other than the Corporation itself or one of its employees. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the Corporation.
All certificates surrendered to the Corporation for transfer shall be
canceled except that in case of a lost, destroyed or mutilated
certificate, a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.
2. Transfer of Shares
Transfer of shares of the Corporation shall be made only on the stock
transfer books of the Corporation by the holder of record thereof or by
his legal representative, who shall furnish proper evidence of authority
to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation,
and on surrender for cancellation of the certificate for such shares.
The person in whose name shares stand on the books of the Corporation
shall be deemed by the Corporation to be the owner thereof for all
purposes.
3. Transfer Agent and Registrar
The Board of Directors of shall have the power to appoint one or more
transfer agents and registrars for the transfer and registration of
certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of
such transfer agents and registrars.
4. Lost or Destroyed Certificates
The Corporation may issue a new certificate to replace any certificate
theretofore issued by it alleged to have been lost or destroyed. The
Board of Directors may require the owner of such a certificate or his
legal representative to give the Corporation a bond in such sum and with
such sureties as the Board of Directors may direct to indemnify the
Corporation as transfer agents and registrars, if any, against claims
that may be made on account of the issuance of such new certificates. A
new certificate may be issued without requiring any bond.
5. Consideration for Shares
The capital stock of the Corporation shall be issued for such
consideration as shall be fixed from time to time by the Board of
Directors. In the absence of fraud, the determination of the Board of
Directors as to the value of any property or services received in full
or partial payment of shares shall be conclusive.
6. Registered Shareholders
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder thereof, in fact, and shall not
be bound to recognize any equitable or other claim to or on behalf of
this Corporation to any and all of the rights and powers incident to the
ownership of such stock at any such meeting, and shall have power and
authority to execute and deliver proxies and consents on behalf of this
Corporation in connection with the exercise by this Corporation of the
rights and powers incident to the ownership of such stock. The Board of
Directors, from time to time, may confer like powers upon any other
person or persons.
Article VII.
Indemnification
No Officer or Director shall be personally liable for any obligations
of the Corporation or for any duties or obligations arising out of any
acts or conduct of said Officer or Director performed for or on behalf
of the Corporation. The Corporation shall and does hereby indemnify and
hold harmless each person and his heirs and administrators who shall
serve at any time hereafter as a Director or Officer of the Corporation
from and against any and all claims, judgments and liabilities to which
such persons shall become subject by reason of his having heretofore or
hereafter been a Director or Officer of the Corporation, or by reason of
any action alleged to have heretofore or hereafter taken or omitted to
have been taken by him as such Director or Officer, and shall reimburse
each such person for all legal and other expenses reasonably incurred by
him in connection with any such claim or liability, including power to
defend such persons from all suits or claims as provided for under the
provisions of the Nevada Revised Statutes; provided, however, that no
such persons shall be indemnified against, or be reimbursed for, any
expense incurred in connection with any claim or liability arising out
of his own negligence or willful misconduct. The rights accruing to any
person under the foregoing provisions of this section shall not exclude
any other right to which he may lawfully be entitled, nor shall anything
herein contained restrict the right of the Corporation to indemnify or
reimburse such person in any proper case, even though not specifically
herein provided for. The Corporation, its Directors, Officers, employees
and agents shall be fully protected in taking any action or making any
payment, or in refusing so to do in reliance upon the advice of counsel.
Article VIII.
Notice
Whenever any notice is required to be given to any shareholder or
Director of the Corporation under the provisions of the Articles of
Incorporation, or under the provisions of the Nevada Statutes, a waiver
thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Attendance at any meeting shall
constitute a waiver of notice of such meetings, except where attendance
is for the express purpose of objecting to the holding of that meeting.
Article IX.
Amendments
These Bylaws may be altered, amended, repealed, or new Bylaws adopted
by a majority of the entire Board of Directors at any regular or special
meeting. Any Bylaw adopted by the Board may be repealed or changed by
the action of the shareholders.
Article X.
Fiscal Year
The fiscal year of the Corporation shall be fixed and may be varied
by resolution of the Board of Directors.
Article XI.
Dividends
The Board of Directors may at any regular or special meeting, as they
deem advisable, declare dividends payable out of the surplus of the
Corporation.
Article XII.
Corporate Seal
The seal of the Corporation shall be in the form of a circle and shall
bear the name of the Corporation and the year of incorporation per
sample affixed hereto.
Date: June 30, 1989
/s/ Maria Contreras
Maria Contreras, Secretary
<PAGE>
Exhibit 10.1 Technology Purchase Agreement
TECHNOLOGY PURCHASE AND ASSIGNMENT AGREEMENT
This agreement (the "Agreement") dated as of April 19, 1999 is by
and between Litewave Corp., a Nevada corporation ("Litewave"), formerly
known as Homefront Safety Services of Nevada, Inc. ("Homefront"),
having its principal offices at 110 Cambie Street, Suite 404,
Vancouver, BC V6B 2M8, and the shareholders and principals of
International Communications and Equipment, Inc., a Nevada corporation
("ICE"), all of whom are listed on Exhibit A (collectively, the
"Shareholders") to this Agreement, and having its principal offices at
12865 NE 85th Street, Suite 362, Kirkland, WA 98033.
RECITALS:
A. Litewave desires to acquire all of the assets, intellectual
property and technology of ICE (collectively, the "assets of ICE") and
the Shareholders of ICE desire to exchange all of their assets of ICE
for authorized but unissued shares of Litewave common stock as
hereinafter provided.
B. It is the intention of the parties hereto that: (i) Litewave
shall acquire all of the assets of ICE in exchange solely for the
number of shares of Litewave's authorized but unissued shares of Common
Stock, par value $0.001 ("Common Stock"), set forth below (the
"Exchange"); (ii) the Exchange shall qualify as a tax free
reorganization under Section 368(a)(1)(C) of the Internal Revenue Code
of 1986, as amended, and related sections thereunder; and (iii) the
Exchange shall qualify as a transaction in securities exempt from
registration or qualification under the Securities Act of 1933, as
amended, and under the applicable securities laws of each state or
jurisdiction where the Shareholders reside.
C. The board of directors of Litewave deems it to be in the best
interest of Litewave and its shareholders to acquire all of the assets
of ICE.
D. The Shareholders of ICE deem it to be in the best interest of
ICE to exchange all of the assets of ICE for shares of Litewave,
authorized but unissued, as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties contained in this
Agreement, the parties hereto agree as follows:
SECTION 1. EXCHANGE OF SHARES
1.1 Exchange of Shares. Litewave and the Shareholders of ICE hereby
agree that the Shareholders shall, on the Closing Date (as hereinafter
defined), exchange all of the Assets of ICE for 10,300,000 shares of
Litewave, which will be restricted against resale for a period in
compliance with Rule 144. The ICE assets being tendered will represent all
of the assets of ICE. The number of shares of ICE owned by each
Shareholder and the number of shares of Litewave Common Stock which
each will receive in the Exchange are set forth in Exhibit A hereto.
1.2 Delivery of Shares. On the Closing Date, the Shareholders will
deliver to Litewave the documents representing the assets of ICE, duly
endorsed (or with executed stock powers) so as to make Litewave the sole
owner thereof. Simultaneously, Litewave will deliver certificates
representing the Litewave Shares to the Shareholders subject to certain
conditions as set forth in Section 8 of this Agreement. The Exchange shall
not be effected unless one hundred (100%) percent of the assets of ICE are
delivered to Litewave on the Closing Date (as is more fully set forth
in Section 8 of this Agreement).
1.3 Investment Intent. The Litewave Shares have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not be
resold unless the Litewave Shares are registered under the Act or an
exemption from such registration is available. The Shareholders represent
and warrant that each of them is acquiring the Litewave Shares for his own
account, for investment, and not with a view to the sale or
distribution of the Litewave shares. Each certificate representing the
Litewave Shares will have a legend thereon incorporating language or
substantially similar language, as follows:
"The Shares represented by the certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"). The shares have been acquired for investment and may not
be sold or transferred in the absence of an effective Registration
Statement for the shares under the Act unless in the opinion of
counsel satisfactory to the Company, registration is not required
under the Act."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF ICE
ICE hereby represents and warrants as follows:
2.1 Organization and Good Standing: Ownership of Assets. ICE is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada. There are no outstanding rights, options or
other agreements obligating ICE to issue, sell or transfer any interests,
rights or other assets of ICE except as listed on Schedule 2.1
attached hereto and made a part hereof.
2.2 Corporate Authority. ICE has the corporate power to enter into
this Agreement and to perform its respective obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transaction contemplated hereby have been duly authorized by the
Shareholders of ICE. The execution and performance of this Agreement will
not constitute a material breach of any agreement, indenture, mortgage,
license or other instrument or document to which ICE is a party and
will not violate any judgment, decree, order, writ, rule, statute, or
regulation applicable to ICE or its properties. The execution and
performance of this Agreement will not violate or conflict with any
provision of the Articles of Incorporation or By-Laws of ICE.
2.3 Ownership of Shares. Except as set forth on Schedule 2.3, the
Shareholders are the owners of record and beneficially of all of the Assets
of ICE, which Assets are free and clear of all rights, claims, liens and
encumbrances, and have not been sold, pledged, assigned or otherwise
transferred except pursuant to this Agreement. The Assets represent
all of the Assets of ICE.
2.4 Access to Records. The corporate financial records, minute books
and other documents and records of ICE as of March 31, 1999 have been made
available to Litewave prior to the Closing hereof.
2.5 No Material Adverse Changes. Since March 31, 1999 there has not
been:
(i) any material adverse change in the financial
position of ICE except changes arising in the ordinary course
of business, which changes will in no event materially or
adversely affect the financial position of ICE;
(ii) any damage, destruction or loss materially affecting
the assets, prospective business, operations or condition
(financial or otherwise) of ICE whether or not covered by
insurance;
(iii) any sale of an asset (other than in the ordinary
course of business) or any mortgage or pledge by ICE of any
properties or assets, other than as set forth in Section 2.12
below; or
(iv) adoption of any pension, profit sharing, retirement
or similar plan or arrangement.
2.6 Taxes. As of December 31, 1998, ICE has filed all material
tax, governmental and/or related forms and reports (or extensions
thereof) due or required to be filed and has (or will have) paid or
made adequate provisions for all taxes or assessments which had become
due as of December 31, 1998, and there are no deficiency notices
outstanding.
2.7 Compliance with Laws. ICE has complied with all federal,
state, county and local laws, ordinances, regulations, inspections,
orders, judgments, injunctions, awards or decrees applicable to it or
its business which, if not complied with, would materially and
adversely affect the business of ICE.
2.8 No Breach. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
will not:
(i) violate any provision of the Articles of Incorporation
or By-Laws of ICE;
(ii) violate, conflict with or result in the breach of any
of the terms of, result in a material modification of,
otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time, or
both constitute) a default under any contract or other
agreement to which ICE is a party or by or to which it or any
of its assets or properties may be bound or subject;
(iii) violate any order, judgment, injunction, award or
decree of any court, arbitrator or governmental or regulatory
body against, or binding upon, ICE or upon the properties or
business of ICE; or
(iv) violate any statute, law or regulation of any
jurisdiction applicable to the transactions contemplated herein
which could have a materially adverse effect on the business or
operations of ICE.
2.9 Actions and Proceedings. ICE is not a party to any
material pending litigation or, to its knowledge, any governmental
investigation or proceeding not reflected in the ICE Financial
Statements, and to its best knowledge, no material litigation, claims,
assessments or Non-governmental proceedings are threatened against ICE
except as set forth on Schedule 2.10 attached hereto and made a part
hereof.
2.10 Agreements. Schedule 2.10 sets forth any material contract
or arrangement to which ICE is a party or by or to which it or its
assets, properties or business are bound or subject, whether written
or oral.
2.11 Brokers or Finders. No broker's or finder's fee will be
payable by ICE in connection with the transactions contemplated by
this Agreement, nor will any such fee be incurred as a result of any
actions by ICE or any of its Shareholders.
2.12 Real Estate. Except as set forth on Schedule 2.12, ICE owns
no real property nor is a party to any leasehold agreement.
2.13 Tangible Assets. ICE has full title and interest in all
machinery, equipment, furniture, leasehold improvements, fixtures,
projects, owned or leased by ICE, any related capitalized items or
other tangible property material to the business of ICE (the "Tangible
Assets"), other than as set forth in Section 2.12. ICE holds all
rights, title and interest in all the Tangible Assets owned by it on
the Balance Sheet or acquired by it after the date on the Balance
Sheet free and clear of all liens, pledges, mortgages, security
interests, conditional sales contracts or any other encumbrances. All
of the Tangible Assets are in good operating condition and repair and
are usable in the ordinary course of business of ICE and conform to
all applicable laws, ordinances and government orders, rules and
regulations relating to their construction and operation, except as
set forth on Schedule 2.13 hereto.
2.14 Liabilities. ICE did not have any direct or indirect
indebtedness, liability, claim, loss, damage, deficiency, obligation
or responsibility, known or unknown, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued or absolute, contingent or
otherwise, including, without limitation, any liability on account of
taxes, any governmental charge or lawsuit (all of the foregoing
collectively defined to as "Liabilities"), which are not fully, fairly
and adequately reflected on the Financial Statement except for a
specific Liabilities set forth on Schedule 2.14 attached hereto and
made a part hereof. As of the date of Closing, ICE will not have any
Liabilities, other than Liabilities fully and adequately reflected on
the Financial Statements except for Liabilities incurred in the
ordinary course of business and as set forth in Schedule 2.14. To the
best knowledge of the Shareholders, there is no circumstance,
condition, event or arrangement which may hereafter give rise to any
Liabilities not in the ordinary course of business.
2.15 Operations of ICE. From March 31, 1999 through date of
Closing, hereto ICE has not and will not have:
(i) any materially adverse change in the financial
position of ICE except changes arising in the ordinary
course of business, which changes will in no event
materially and adversely affect the financial position of
ICE for the period ended March 31, 1999, and will be
consistent with the representations made by ICE to Litewave;
(ii) declared or paid any dividend or declared or made
any distribution of any kind to any shareholder, or made any
direct or indirect redemption, retirement, purchase or other
acquisition of any shares of its capital stock;
(iii) made any loan or advance to any shareholder,
officer, director, employee, consultant, agent or other
representative or made any other loan or advance otherwise
than in the ordinary course of business;
(iv) except in the ordinary course of business,
incurred or assumed any indebtedness or liability (whether
or not currently due and payable);
(v) disposed of any Assets of ICE except in the
ordinary course of business, except as described in Schedule
2.13;
(vi) materially increased the annual level of
compensation of any executive employee of ICE;
(vii) increased, terminated, amended or otherwise
modified any plan for the benefit of employees of ICE.
(viii) issued any equity securities or rights to
acquire such equity securities; or
(ix) except in the ordinary course of business, entered
into or modified any contract, agreement or transaction,
except as described in Schedule 2.13.
2.16 Capitalization. ICE has not granted, issued or agreed to
grant, issue or make any commitments of any character relating to the
Assets of ICE except as set forth on Schedule 2.16 attached hereto and
made a part hereof. ICE has no subsidiaries or other entities except
as listed on Schedule 2.16 attached hereto, setting forth the shares
or percentage interest owned by ICE.
2.17 Full Disclosure. No representation or warranty by ICE in
this Agreement or in any document or schedule to be delivered by them
pursuant hereto, and no written statement, certificate or instrument
furnished or to be furnished by ICE pursuant hereto or in connection
with the negotiation, execution or performance of this Agreement
contains or will contain any untrue statement of a material fact or
omits or will omit to state any fact necessary to make any statement
herein or therein not materially misleading or necessary to a complete
and correct presentation of all material aspects of the business of
ICE.
2.18 Minimum Gross Sales and/or Net Worth. The gross sales of ICE
are no less than those of ICE on March 31, 1999, and the net worth of
ICE will not be any less than at March 31, 1999, on the date of
Closing.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF LITEWAVE
Litewave hereby represents and warrants as follows:
3.1 Organization and Good Standing. Litewave is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Nevada. It has the corporate power to own its own
property and to carry on its business as now being conducted and is
duly qualified to do business in any jurisdiction where so required
except where the failure to so qualify would have no material negative
impact.
3.2 Corporate Authority. Litewave has the corporate power to
enter into this Agreement and to perform its respective obligations
hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Litewave and the shareholders
as required by Nevada law. The execution and performance of this
Agreement will not constitute a material breach of any agreement,
indenture, mortgage, license or other instrument or document to which
Litewave is a party and will not violate any judgment, decree, order,
writ, rule, statute, or regulation applicable to Litewave or its
properties. The execution and performance of this Agreement will not
violate or conflict with any provision of the respective Articles of
Incorporation or By-Laws of Litewave.
3.3 The Litewave Shares. As of the Closing Date, there are
approximately 30 shareholders of record that are the owners of
2,500,000 shares of Litewave Common Stock, and zero (0) shares of
Preferred Stock, none of whom owns in excess of 5% of the issued and
outstanding shares, except as may be set forth on Schedule 3.3
attached hereto and made a part hereof. There are no outstanding
warrants, issued stock options, stock rights or other commitments of
any character relating to the issued or unissued shares of either
Common Stock or Preferred Stock of Litewave, other than those which are
set forth on Schedule 3.3 attached hereto. The Litewave shares on said
schedule 3.3 represent all of the outstanding capital stock of
Litewave.
At the Closing, the Litewave Shares to be issued and delivered to
the ICE Shareholders hereunder will when so issued and delivered,
constitute valid and legally issued shares of Litewave Common Stock,
fully paid and non-assessable.
3.4 Financial Statement: Books and Records. Schedule 3.4
consists of the financial statements (balance sheet, income statement
and Notes) of Litewave (f.k.a. Homefront) for the fiscal period ended
December 31, 1998, and for the preceding 2-year period (collectively
the "Financial Statements"). The Financial Statements fairly
represent the financial position of Litewave as at such date and the
results of their operations for the periods then ended. The Financial
Statements were prepared in accordance with generally accepted
accounting principles applied on a consistent basis with prior periods
except as otherwise stated therein. The books of account and other
financial records of Litewave are in all respects complete and correct
in all material respects and are maintained in accordance with good
business and accounting practices.
3.5 No Material Adverse Changes.
Since December 31, 1998, there has not been:
(i) any materially adverse change in the financial
position of Litewave except changes arising in the ordinary
course of business, which changes will in no event
materially and adversely affect the financial position of
Litewave, and the past audit for the fiscal year ended
December 31, 1998 will be consistent with the
representations made by Litewave to ICE.
(ii) any damage, destruction or loss materially
affecting the assets, prospective business, operations or
condition (financial or otherwise) of Litewave whether or not
covered by insurance;
(iii) any declaration setting aside or payment of
any dividend or distribution with respect to any redemption
or repurchase of Litewave capital stock;
(iv) any sale of an asset (other than in the ordinary
course of business) or any mortgage pledge by Litewave of any
properties or assets; or
(v) an adoption or modification of any pension, profit
sharing, retirement, stock bonus, stock option or similar
plan or arrangement.
(vi) except in the ordinary course of business,
incurred or assumed any indebtedness or liability, whether
or not currently due and payable;
(vii) any loan or advance to any shareholder,
officer, director, employee, consultant, agent or other
representative or made any other loan or advance otherwise
than in the ordinary course of business;
(viii) any material increase in the annual level of
compensation of any executive employee of Litewave;
(ix) except in the ordinary course of business, entered
into or modified any contract, agreement or transaction,
except as described in Schedule 3.5;
(x) an issuance of any equity securities or rights to
acquire equity securities other than as set forth in
Schedule 3.5.
3.6 Taxes. Litewave has timely filed all material tax,
governmental and/or related forms and reports (or extensions thereof)
due or required to be filed and has paid or made adequate provisions
for all taxes or assessments which have become due as of the Closing
Date, and there are no deficiencies outstanding.
3.7 Compliance with Laws. Litewave has complied with all
federal, state, county and local laws, ordinances, regulations,
inspections, orders, judgments, injunctions, awards or decrees
applicable to it or its business, which, if not complied with, would
materially and adversely affect the business of Litewave or the trading
market for the Litewave Shares and specifically, and to the best of its
knowledge, Litewave complied with provisions for registration under the
Securities Act of 1933 and all applicable blue sky laws in connection
with its public stock offering and there are no outstanding, pending
or threatened stop orders or other actions or investigations relating
thereto.
3.8 Actions and Proceedings. Litewave is not a party to any
material pending litigation or, to its knowledge, any governmental
proceedings are threatened against Litewave, except as set forth on
Schedule 3.8 attached hereto and made a part hereof.
3.9 Periodic Reports. Litewave has delivered to ICE true and
complete copies of all forms filed pursuant to SEC Rules and
Regulations under the Securities Exchange Act of 1934, as amended. As
of their respective dates, such reports and statements did not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstance under which they were made, not
misleading. Schedule 3.9 sets forth all of the documentation of such
reports Litewave has delivered to ICE.
3.10 Disclosure. Litewave has (and at the Closing it will have)
disclosed in writing all events, conditions and facts materially
affecting the business, financial conditions or results of operation
of Litewave all of which have been set forth herein. Litewave has not
now and will not have, at the Closing, withheld disclosure of any such
events, conditions, and facts which they have knowledge of or have
reasonable grounds to know may exist. Litewave has identified all oral
and written agreements between Litewave and third parties affecting the
business credit and/or stock pledges of Litewave which have been fully
disclosed to ICE in writing on Schedule 3.10.
3.11 Capitalization. The authorized Capital Stock of Litewave
consists of 25,000,000 shares of Common Stock of which 2,500,000
shares of Common Stock are issued and outstanding and has authorized
Nil shares of Preferred Stock, par value $0.00l per share, of which
zero (0) shares are issued and outstanding.
3.12 Access to Records. The corporate financial records, minute
books, and other documents and records of Litewave have been made
available to ICE prior to the Closing hereof.
3.13 No Breach. The execution, delivery and performance of this
of this Agreement and the consummation of the transactions
contemplated hereby will not:
(i) violate any provision of the Articles of
Incorporation or By-Laws of Litewave;
(ii) violate, conflict with or result in the breach of
any of the terms of, result in a material modification of,
otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or
both constitute) a default under, any contract or other
agreement to which Litewave is a party or by or to which it
or any of its assets or properties may be bound or subject;
(iii) violate any order, judgment, injunction,
award or decree of any court, arbitrator or governmental or
regulatory body against, or binding upon, Litewave or upon
the securities, properties or business to Litewave; or
(iv) violate any statute, law or regulation of any
jurisdiction applicable to the transactions contemplated
herein.
3.14 Brokers or Finders. No broker's or finder's fee will be
payable by Litewave in connection with the transactions contemplated by
this Agreement, nor will any such fee be incurred as a result of any
actions of Litewave.
3.15 OTC Bulletin Board. Litewave shares are listed on the OTC
Bulletin Board under the symbol "LTWV". No representation is being
made by Litewave of any value as to the trading of the shares of
Litewave, At the Closing Date, Litewave documentation and reports
required to be filed with the SEC as discussed above shall have been
updated and shall be current in all material respects, except as may
appear on Schedule 3.15.
3.16 Authority to Execute and Perform Agreements. Litewave has
the full legal right and power and all authority and approval required
to enter into, execute and deliver this Agreement and to perform fully
its obligations hereunder. This Agreement has been duly executed and
delivered and is the valid and binding obligation of Litewave
enforceable in accordance with its terms, except as may be limited by
bankruptcy, moratorium, insolvency or other similar laws generally
affecting the enforcement of creditors' rights. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and the performance by Litewave of this Agreement,
in accordance with its respective terms and conditions will not:
(i) require the approval or consent of any
governmental or regulatory body or the approval or consent
of any other person;
(ii) conflict with or result in any breach or violation
of any of the terms and conditions of, or constitute (or
with any notice or lapse of time or both would constitute) a
default under, any order, judgment or decree applicable to
Litewave, or any instrument, contract or other agreement to
which Litewave is a party or by or to which Litewave is bound
or subject; or
(iii) result in the creation of any lien or other
encumbrance on the assets or properties of Litewave.
3.17 Full Disclosure. No representation or warranty by Litewave
in this Agreement or in any document or schedule to be delivered by
them pursuant hereto, and no written statement, certificate or
instrument furnished or to be furnished by Litewave pursuant hereto or
in connection with the negotiation, execution or performance of this
Agreement contains or will contain any untrue statement of a material
fact or omits or will omit to state any fact necessary to make any
statement herein or therein not materially misleading or necessary to
complete and correct presentation of all material aspects of the
business of Litewave.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to the Obligation of ICE and its
Shareholders. All obligations of ICE and its Shareholders under this
Agreement are subject to the fulfillment, prior to or as of the
Closing Date, as indicated below, of each of the following conditions:
(a) The representations and warranties by or on behalf
of Litewave contained in this Agreement or in any certificate
or document delivered pursuant to the provisions hereof
shall be true in all material respects at and as of Closing
Date as though such representations and warranties were made
at and as of such time.
(b) Litewave shall have performed and complied in all
material respects, with all covenants, agreements, and
conditions set forth in, and shall have executed and
delivered all documents required by this Agreement to be
performed or complied with or executed and delivered by them
prior to or at the Closing.
(c) On or before the Closing, the Board of Directors
and the shareholders of Litewave shall have approved, in
accordance with Nevada law, the execution, delivery and
performance of this Agreement and the consummation of the
transaction contemplated herein and authorized all of the
necessary and proper actions to enable Litewave to comply
with the terms of the Agreement.
(d) The Exchange shall be permitted by Nevada law and
Litewave shall have sufficient shares of Litewave Common Stock
authorized to complete the Exchange.
(e) At the Closing, all instruments and documents
delivered to ICE and the Shareholders pursuant to provisions
hereof shall be reasonably satisfactory to legal counsel for
ICE.
(f) At the Closing, Litewave shall have delivered to
ICE an opinion of counsel dated as of the Closing to the
effect that:
(i) Litewave is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Nevada;
(ii) This Agreement has been duly authorized
executed and delivered by Litewave and is a valid and
binding obligation of Litewave enforceable in accordance
with its terms;
(iii) Litewave, through its Board of Directors
and its shareholders, has taken all corporate action
necessary for performance under this Agreement;
(iv) The documents executed and delivered to ICE
and the ICE Shareholders hereunder are valid and
binding in accordance with their terms to the shares of
Litewave Shares to be issued pursuant to Section 1.1
hereof, and such Shares will be duly and validly
issued, fully paid and non-assessable; and
(v) Litewave has the corporate power to execute,
deliver the Shares and perform under this Agreement.
(g) The shares of restricted Litewave Common Stock to
be issued to the Shareholders of ICE at Closing will be
validly issued, non-assessable and fully paid under Nevada
corporation law and will be issued in a non-public offering
and isolated transaction in compliance with all federal and
state securities laws, bearing a restrictive legend, as is
more fully set forth above.
(h) This transaction must have been approved by ICE.
Litewave shall have performed the following financial
commitments:
(i) Provide financing commitments in the
aggregate amount of US$800,000, by way of a
debt, equity or a combination of both, at the
rate of US $100,000 per month for a total of
eight months, or until an alternative source
for major financing is secured.
4.2 Conditions Precedent to the Obligations of Litewave and
Litewave Shareholders. All obligations of Litewave under this Agreement
are subject to the fulfillment, prior to or at Closing, of each of the
following conditions:
(a) The representations and warranties by ICE and its
Shareholders, contained in this Agreement or in any
certificate or document delivered pursuant to the provisions
hereof shall be true in all material respects at and as of
the Closing as though such representations and warranties
were made at and as of such time;
(b) ICE and its Shareholders shall have performed and
complied with, in all material respects, with all covenants,
agreements, and conditions set forth in, and shall have
executed and delivered all documents required by this
Agreement to be performed or complied or executed and
delivered by them prior to or at the Closing;
(c) ICE shall deliver on behalf of its Shareholders to
Litewave a letter commonly known as an "Investment Letter,"
or investment representations acknowledging that the shares
of Litewave Common Stock are being acquired for investment
purposes.
(d) ICE and its Shareholders shall deliver an opinion
of its legal counsel to Litewave to the effect that:
(i) ICE is a corporation duly organized validly
existing and in good standing under the laws of the
State of Nevada and is duly qualified to do business in
any jurisdiction where so required except where the
failure to so qualify would have no material adverse
impact on the company;
(ii) ICE has the corporate authority to carry on
its business as now being conducted; and
(iii) This Agreement has been duly authorized,
executed and delivered by ICE.
SECTION 5. COVENANTS
5.1 Corporate Examinations and Investigations. Prior to the
Closing Date, the parties acknowledge that they have been entitled,
through their employees and representatives, to make such
investigation of the assets, properties, business and operations,
books, records and financial condition of the other as they each may
reasonably require. No investigations, by a party hereto shall,
however, diminish or waive any of the representations, warranties,
covenants or agreements of the party under this Agreement.
5.2 Expenses. Each party hereto agrees to pay its own costs and
expenses incurred in negotiating this Agreement and consummating the
transactions described herein, other than as set forth in Section
4.1(i) above.
5.3 Further Assurances. The parties shall execute such
documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof
and the transactions contemplated hereby. Each such party shall use
its best efforts to fulfill or obtain the fulfillment of the
conditions to the Closing, including, without limitation, the
execution and delivery of any documents or other papers, the execution
and delivery of which are necessary or appropriate to the Closing.
5.4 Confidentiality. In the event the transactions contemplated
by this Agreement are not consummated, Litewave, ICE and their
respective Shareholders agree to keep confidential any information
disclosed to each other in connection therewith for a period of three
(3) years from the date hereof; provided, however, such obligation
shall not apply to information which:
(i) at the time of the disclosure was public
knowledge;
(ii) after the time of disclosure becomes public
knowledge (except due to the action of the receiving party);
or
(iii) the receiving party had within its possession
at the time of disclosure.
(iv) is ordered disclosed by a Court of proper jurisdiction.
5.5 Asset Documents. At the Closing, the ICE and/or its
Shareholders shall have delivered the documents representing the
Assets duly endorsed so as to make Litewave the sole owner thereof. At
such Closing, Litewave shall issue to the Shareholders the Litewave
Shares.
5.6 Investment Letters. The ICE Shareholders shall have
delivered to Litewave an "Investment Letter" agreeing that the shares
are being acquired for investment purposes only and not with the view
to public resale or distribution.
SECTION 6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF ICE AND
LITEWAVE
Notwithstanding any right of either party to investigate the
affairs of the other party and/or its Shareholders, each party has the
right to rely fully upon representations, warranties, covenants and
agreements of the other party and its Shareholders contained in this
Agreement or in any document delivered to one by the other or any of
their representatives, in connection with the transactions
contemplated by this Agreement. All such representations, warranties,
covenants and agreements shall survive the execution and delivery
hereof and the closing hereunder for 3 years following the Closing.
SECTION 7. INDEMNIFICATION
For a period of three (3) years from the Closing, Litewave, ICE
and their respective Shareholders agree to indemnify and hold harmless
the other, at all times after the date of this Agreement, against and
in respect of any liability, damage, or deficiency, all actions,
suits, proceedings, demands, assessments, judgments, costs and
expenses, including attorneys' fees, incident to any of the foregoing,
resulting from any material misrepresentation made by any indemnifying
party to an indemnified party, an indemnifying party's breach of
covenant or warranty or an indemnifying party's non-fulfillment of any
agreement hereunder, or from any material misrepresentation or
omission from any certificate furnished or to be furnished hereunder.
SECTION 8. DOCUMENTS AT CLOSING AND THE CLOSING
8.1 Documents at Closing At the Closing, the following
transactions shall occur, all of such transactions being deemed to
occur simultaneously:
(a) ICE will deliver, or will cause to be delivered, to
Litewave the following:
(i) a certificate executed by the Shareholders of ICE
to the effect that all representations and warranties made
by ICE under this Agreement are true and correct as of the
Closing, the same as though originally given to Litewave on
said date;
(ii) a certificate from the State of Nevada dated at or
about the Closing to the effect that ICE is in good
standing under the laws of said State;
(iii) Investment Letters or investment representations
in the form executed by each ICE Shareholder;
(iv) Certificates representing all the Assets of ICE to
be exchanged for Litewave Shares;
(v) all other items, the delivery of which is a
condition precedent to the obligations of ICE, as set forth
in Section 4 hereof.
(b) Litewave will deliver or cause to be delivered to ICE
and the ICE Shareholders:
(i) stock certificates representing those shares of
Litewave Shares to be issued as a part of the Exchange as
described in Section I hereof;
(ii) a certificate from Litewave executed by the
President or Secretary of Litewave, to the effect that all
representations and warranties of Litewave made under this
Agreement are true and correct as of the Closing, the same
as though originally given to ICE on said date;
(iii) certified copies of resolutions by Litewave
Board of Directors authorizing this transaction; and an
opinion of Litewave counsel as described in Section 4 above;
(iv) certificates from the Nevada Secretary of State
dated at or about the Closing Date that Litewave is in good
standing under the laws of said State;
(v) all other items, the delivery of which is a
condition precedent to the obligations of Litewave, as set
forth in Section 4 hereof.
8.2 The Closing. The Closing shall take place at the conclusion
of the Escrow or at such other later time or place as may be agreed
upon by the parties hereto. At the Closing, the parties shall provide
each other with such documents as may be necessary.
SECTION 9. MISCELLANEOUS
9.1 Waivers. The waiver of a breach of this Agreement or the
failure of any party hereto to exercise any right under this Agreement
shall in no way constitute waiver as to future breach whether similar
or dissimilar in nature or as to the exercise of any further right
under this Agreement.
9.2 Amendment. This Agreement may be amended or modified only
by an instrument of equal formality signed by the parties or the duly
authorized representatives of the respective parties.
9.3 Assignment. This Agreement is not assignable except by
operation of law.
9.4 Notice. Until otherwise specified in writing, the mailing
addresses and fax numbers of the parties of this Agreement shall be as
follows:
To: Litewave Corp.:
Mr. Ian Lambert, Director
110 Cambie Street, Suite 404
Vancouver, BC V6B ZM8
Fax (604) 688-9519
cc: Christopher Dieterich
11300 West Olympic Boulevard, Suite 800
Los Angeles, California 90064
To: International Communications and Equipment Inc.
Mr. Ken Martin
12685 NE 85th Street, Suite 362
Kirkland, WA 98033
Fax: (425) 885-7441
Any notice or statement given under this Agreement shall be deemed to
have been given if sent by registered mail addressed to the other party
at the address indicated above or at such other address which shall have
been furnished in writing to the addressor.
9.5 Governing Law. This Agreement shall be construed, and the
legal relations be the parties determined, in accordance with the laws
of the State of Nevada, thereby precluding any choice of law rules which
may direct the application of the laws of any other jurisdiction.
9.6 Arbitration.
(a) All disputes and differences arising in connection with
or relating to the provisions of this Agreement, including what
constitutes a dispute or difference, shall be settled and finally
determined by arbitration unless agreement in writing has been
reached between the parties within ninety (90) days after either
party shall have given written notice to the other party of the
existence of a dispute or difference which it desires to have
arbitrated. Such notice shall state the point or points in
dispute.
(b) Arbitration shall be conducted in Los Angeles,
California, in accordance with the rules of the American
Arbitration Association augmented by the rights of Civil Discovery
included in the Federal Rules of Civil Procedure by three (3)
arbitrators, one of whom shall be selected by Litewave, one by ICE,
and a Chairman of the Arbitration Court selected by the two
arbitrators so selected. The applicable law shall be as provided
above. Each party shall notify the other party of the arbitrator
selected by it within sixty (60) days of the giving of written
notice referred to above. In the event that the two arbitrators
selected by the parties are unable to reach agreement as to the
third arbitrator, the third arbitrator shall be selected by the
American Arbitration Association. Arbitration shall be held in the
jurisdiction of the party against which or whom the arbitration is
instituted. Each party shall be given the opportunity to present
to the arbitrators its evidence, witnesses and arguments, and the
right to be represented by counsel of its selection when the other
party be represented by counsel, of its selection when the other
party presents its evidence, witnesses and arguments. In the event
one of the parties shall fail, after reasonable notice, to appear
and participate in the arbitration proceedings as normally
interpreted by the above-mentioned rules, the arbitrators shall be
entitled to make their decision and award on the basis of evidence,
witnesses and arguments presented by the party appearing.
(c) The decision and the award of the arbitrators shall be in
writing and shall be final and binding upon the parties hereto.
Judgment upon the award rendered my be entered in any court having
jurisdiction thereof, or application may be made to such court for
a judicial acceptance of the award and an order of enforcement, as
the case may be. The expenses of arbitration shall be borne n
accordance with the determination of the arbitrators with respect
thereto. Pending decision by the arbitrators with respect to the
dispute or difference undergoing arbitration, all other obligations
of the parties hereto shall continue as stipulated herein, and all
monies not directly involved in such dispute or difference shall be
paid when due. All parties will have the right to appeal as if the
award had been rendered in Federal District Court.
9.7 Publicity. No publicity release or announcement concerning
this Agreement or the transactions contemplated hereby shall be issued
by either party hereto at any time from the signing hereof without
advance approval in writing of the form and substance by the other
party.
9.8 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the collateral agreements executed in connection
with the consummation of the transactions contemplated herein contain
the entire agreement among the parties with respect to the purchase of
the ICE Assets, the issuance of the Litewave Shares and any transactions
related thereto, and supersede all prior agreements, written or oral,
with respect thereto.
9.9 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
9.10 Severability of Provisions. The invalidity or
unenforceability of any term, phrase, clause, paragraph, restriction,
covenant, agreement or provision of this Agreement shall in no way
affect the validity or enforcement of any other provision or any part
thereof.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed, shall constitute an
original copy hereof, but all of which together shall consider but one
and the same document.
9.12 Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their respective
heirs, administrators, executors,
successors and assigns.
9.13 Press Releases. The parties will mutually agree as to the
wording and timing of any informational releases concerning this
transaction prior to and through Closing.
SECTION 10. ESCROW PENDING CLOSING
The parties anticipate the utilization of an Escrow Agent, agreed
to be the law firm of Dieterich & Associates, as represented by
Christopher H. Dieterich, to effect the transaction contemplated by this
Agreement, with the Escrow to close on or before August 31, 1999. The
Notes, Shares, Financial Statements and all supporting Schedules to this
Agreement and the Financial Statements, Cash Payments and Financial
Commitments and similar documentation necessary or incident to Closing,
will be delivered to the Escrow Agent. Following receipt in escrow of
these items, both parties are then committed to this Agreement, and may
suffer damages if there is a breach. Either party may demand
arbitration under paragraph 9.6 for actual damages or specific
performance at that time. Upon receipt of the items, the Escrow Agent
will transfer relevant documents, funds, and financial instruments to
the appropriate party. If, during the escrow period, either party
determines that a material misrepresentation has occurred, or that a
condition precedent has not been met, the transaction may be canceled
with no further obligation of either party to the other. The parties
will execute this Agreement prior to completion of all Schedules,
however the Schedules must be provided to Escrow prior to Closing. Any
party may cancel this Agreement upon review of the relevant Schedules,
with no liability assessed against either party for cancellation. There
will be no remedies for breach of this agreement other than as set forth
in paragraph 9.6.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
Litewave Corporation
a Nevada corporation
By: /s/ Ian D. Lambert
Ian D. Lambert, Director
International Communications and Equipment Inc.
a Nevada corporation
By: /s/ Ken Martin
Ken Martin, CEO
<PAGE>
EXHIBIT "A"
LIST OF ICE SHAREHOLDERS
</TABLE>
<TABLE>
<S> <C> <C>
<C>
Name of Shareholder Approximate Percentage Number of Shares of
Number of Shares of
of ICE of Holding ICE Common Stock
Litewave Common Stock
- ------------------- ---------------------- -------------------
- ---------------------
Ken Martin 29.1 3,000,000
3,000,000
Michael Rogers 24.3 2,500,000
2,500,000
Joanne Gilman 0.1 10,000
10,000
Rosemary Harer 0.1 10,000
10,000
David Scott 0.1 10,000
10,000
Randy Fitzhugh 0.1 10,000
10,000
Steve McCowan 0.05 5,000
5,000
Mike Herman 0.05 5,000
5,000
Victor Voldemarov 3.9 400,000
400,000
Sigfrid Lietzman 0.1 10,000
10,000
Todd Moore 1.2 125,000
125,000
J. Brian Walsh 1.9 200,000
200,000
Cuno von Buckwaldt 1.9 200,000
200,000
Harold Hartz 1.9 200,000
200,000
Will Robertson 0.5 50,000
50,000
Anthony Mueting 1.0 100,000
100,000
Torquay Holdings Ltd. 4.1 425,000
425,000
Canasia Data Corporation 1.5 150,000
150,000
Vista Financial Ltd. 0.5 50,000
50,000
Chariot Group Ltd. 0.5 50,000
50,000
Jahwula Ventures Ltd. 0.5 50,000
50,000
El Coyote Capital Corp. 0.5 50,000
50,000
Jupiter Financial
Services Inc. 0.2 25,000
25,000
Kyline Investment Corp. 0.1 15,000
15,000
Aberdeen Holdings Limited 3.4 350,000
350,000
Laiy Limited 3.4 350,000
350,000
Clyde Resources Ltd. 3.4 350,000
350,000
Melbourne Investments Ltd.3.4 350,000
350,000
Iguana Investments Ltd. 3.4 350,000
350,000
Albury Capital
Corporation 4.4 450,000
450,000
Eivissa Capital
Corporation 4.4 450,000
450,000
---- ---------
- ---------
TOTAL: 100.0 10,300,000
10,300,000
</TABLE>
<PAGE>
EXHIBITS
A List of ICE Shareholders (See table above)
SCHEDULES
ICE Schedules
ICE Warrants and Options currently in existence - None
2.3 ICE Ownership of Shares - None
2.9 ICE Claims, Litigation, Government actions pending - None
2.10 ICE Significant contracts - attached
2.11 ICE Brokers Agreements due by ICE contract - None
2.12 ICE List of Real Estate Owned and List of Leases - None
2.13 ICE List of exceptions to the Tangible Assets on balance sheets -
None
2.14 ICE List of undisclosed Liabilities - None
2.16 ICE List of Subsidiaries - None
Litewave Schedules
3.3 Litewave list of 5% or greater shareholders, and outstanding
warrants and options
3.4 Litewave Financial Statements
3.5 List of transactions of Litewave for contracts and in which stock
has been issued or committed
3.8 Litewave List of Pending Actions not disclosed in financial
statements
Litewave list of periodic reports filed with SEC or Broker/Dealers
3.10 Litewave list of third party agreements affecting business credit and
stock pledges
3.14 Litewave list of brokers due pursuant to Litewave contracts
3.15 Litewave list of exceptions to any current SEC filings
Schedule 2.10 - ICE Significant contracts
Lebanon
San Marino
<PAGE>
Exhibit 10.2 Letter of Intent / 27 May 99 / Crosna
CROSNA
27.05.99 MOSCOW
To Mr. C.E.O Litewave corp K.F. Martin
Letter of intent
We are ready to confirm our possibility to intriduce your
tecnology of digital packeting cjmpressing telecommunication on
the russion market.
Also we are ready to propose our experience and possibilities
for our cooperation in russion telecommunication systems.
We are looking forward to your visit to sign all necessary
documents. Best regards.
General director /s/ A.Romanovskiy
A.Romanovskiy
<PAGE>
Exhibit 10.3 Protocol of Intentions Agreement
PROTOCOL OF INTENTIONS
Moscow June, 22, 1999
In June, 21-22, 1999 there were the meetings between
representatives of LiteWave corporation and the JSC NPO
Crosna companies in Moscow.
From LiteWave corporation the participants were as
follows:
* William R. Robertson, Presidentl/COO;
* Harald Hartz;
* Ken Martin.
From the JSC NPO Crosna the participants were as follows:
* Romanovsky A. G., General Director;
* Demchenko L. M., Deputy of General Director.
During the meetings the parties expressed their intention
to develop a cooperation in a field of organization of
international and inter-city communication channels at the
territory of Russia and CIS using the LiteWave corporation
equipment and have agreed as follows:
1. The LiteWave corporation shall provide the JSC NPO
Crosna with information on VoIP equipment with the purpose to
determine the specifications to this equipment concerning the
terms of application at the territory of Russia and CIS.
2. The JSC PO Crosna shall study the juridical
questions (a receipt of licenses, ets.) and determine the
conditions of VoIP equipment use.
3. The JSC NPO Crosna shall discuss with Internet
providers and companies having the telecommunication networks
at the territory of Russia the questions on international and
inter-city traffic organization on the basis of LiteWave
corporation technologies.
From LiteWave corporation From JSC NPO Crosna
/s/ William R. Robertson /s/ A.G. Romanovsky
William R. Robertson, A.G. Romanovsky,
President/COO General Director
<PAGE>
Exhibit 10.4 Agreement between Crosna and Company/IP Network
Principles
for Setting up the IP-Telephone Network and Providing IP-
Telephone Services in the
Territory of the Russian Federation
Moscow
September 10, 1999
"LiteWave Corporation", a corporation incorporated in the State
of Nevada, having its registered office located at: 12865 N.E.
85th Street Suite 362 Kirkland, WA 98033, (hereinafter referred
to as the Corporation "LiteWave",) represented by Chief
Executive Officer Ken Martin on the one part, and Joint-Stock
Company "Crosna Research & Production Association" incorporated
in accordance with the current Law of the Russian Federation,
having its registered office at 123557, Moscow, Presnensky Val
27 (hereinafter referred to as ZAO NPO "Crosna") represented by
Director General A.G. Romanovsky on the other part, both
referred to as the "Parties", concluded these Principles on the
following:
WHEREAS ZAO NPO "Crosna" has expert knowledge and professional
skills in setting up communication networks and providing
communication services, including local and long-distance
networks using facilities of radio access and data transmission,
WHEREAS Corporation "LiteWave" has up-to-date telecom equipment
necessary to provide IP-telephone services and intends to
introduce this equipment in the territory of the Russian
Federation, and
WHEREAS the Parties have common commercial interests in setting
up the IP telephone network to meet the needs of clients in the
territory of the Russian Federation and outside it,
the Parties agreed on the following:
1. The Parties agree to set up the IP-telephone network in a
number of regions of the Russian Federation and provide services
on its use. Towards this end a new legal person - a resident of
the Russian Federation with 100% foreign investments as an
authorized capital (hereinafter referred to as the "Associated
Company" or AC) - shall be registered.
2. This AC shall be instituted as a limited liability company.
The objective for which the AC will be established is to lease
the equipment delivered by the Corporation "LiteWave" for
setting up the IP-telephone network.
3. The Corporation "LiteWave" will be the founder of the AC and
shall provide duly executed documents required for registration
of the AC in accordance with the Law of the Russian Federation.
3.1 The authorized capital of the AC shall be formed as a sum of
the basic equipment and money contribution necessary for the AC
to implement the equipment, carry out start-and-adjusting works
and put the equipment into operation, as well as to cover
expenses of the AC connected with personnel remuneration and
other expenses due to its activities, including by not limited
to certification of the equipment and personnel training, until
appropriate profit performances are achieved.
Terms and procedure for the payment of the authorized capital
shall be determined separately and account for recommendations
of ZAO NPO "Crosna".
3.2 All the expenses in Connection with registration of the AC
shall be borne by the founder. ZAO NPO 'Crosna" undertakes to do
all organizational work on institution of the AC without
indemnity.
3.3 The solo executive body of management of the AC (Director
Genera]) and Chief Accountant shall be appointed as proposed by
LiteWave.
3.4 Deputy General Director and Chief Financial Officer shall
be appointed by the Corporation "I.iteWave' without prior
agreement with ZAO NPO "Crosna".
4. The Parties agree to provide for other terms for
establishment of the AC in the constituent documents.
5. In order to Set up the IP-telephone network in the
territory of the Russian federation and provide successful
activities of the AC. ZAO NPO 'Crosna" got license No.12690
authorizing it to provide telematic services.
6. Technical base for The. IP-telephone network shall be built
up on the basis of the equipment of the Corporation "LiteWave"
for the amount up to USD 30,000,00o delivered to the territory
of the Russian Federation and for the entire project as a
contribution to the authorized capital of the instituted AC.
ZA0 NPO "Crosna' shall provide services on the use of the IP-
telephone system using its license.
6.1 ZAO NPO "Crosna" undertakes to make out a list of
perspective legions of Russia fur introduction of the .IP-
telephone network and a schedule of installation of the
equipment.
6.2 ZAO NPO "Crosna" undertakes to do its best in order to
minimize, within the limits defined by the current Law of the
Russian Federation, the expenses connected with delivery by the
Corporation "LiteWave" of the equipment intended to he a
contribution to the authorized capital. The Corporation
"LiteWave" undertakes to follow instructions of ZAO NPO "Crosna"
in drawing up a specification of the equipment to be delivered
and routes of its delivery to destination points in order to
minimize additional expenses.
7. The Corporation 'LiteWave" shall be responsible for
formation of the authorized capital, including delivery of the
basic equipment for the IP-telephone network intended to be a
contribution to the authorized capital. within the deadlines as
agreed between Parties and in such a manner as to meet the
requirements of the law regulating registration matters.
Upon completion of the mounting and start-and-adjusting works,
the equipment delivered will be offered for lease to ZAO NPO
"Crosna". The rent shall be established as part of proceeds from
IP-telephone services provided in the territory of the Russian
Federation.
8. ZAO NPO "Crosna" undertakes to:
- lease premises for installation of the equipment;
-- conclude agreements with Internet providers. owners of
switching and non-switching networks and other counterparts
necessary to provide IP-telephone services
in the territory of the Russian Federation:
- obtain necessary permissions of competent bodies for the
importation of the
equipment, its certification arid registration of the AC (State
Telecom Committee of
Russian Federation, Ministry for Antimonopoly Policy and
Assistance to Business of
Russian Federation and others);
- promote IP-telephone. networks.
9. In its effort to build up the IP-telephone network, the AC
shall conclude a contractor's agreement under which ZAO NPO
"Crosna" or one of companies of the 'Crosna" Group shall be
bound to perform design works and to install and put into
operation the IP-telephone facilities and then to transfer them
to the AC, the Corporation "LiteWave' being responsible for
chief-mounting works, if any.
10. Acting on the basis of its license. ZAO NPO "Crosna" shall
provide IP-telephone services to clients and make. necessary
settlements with them.
11. As it is agreed between the Parties that 50% of the net
profit from IP-telephone services in the territory of the
Russian Federation ZAO NPO "Crosna" shall transfer to the
Corporation "LiteWave" and vice versa, the Corporation
"LiteWave" shall transfer 50% of the net profit flout IP-
telephone services provided outside the territory of the Russian
Federation to ZAO NPO "Crosna". The Parties shall conclude
counter-contracts on providing services for bringing the
outgoing traffic to the end user. In doing so. the Parties shall
take necessary steps consistent with an appropriate law, to
avoid double taxation.
These 50% of the net profit from IP-telephone cervices in the
territory of the Russian Federation to be transferee to the
Corporation "LiteWave" shall include the rent for the AC and
that part of net profit which is due to the Corporation "Lite
Wave" under the contract on providing IP-telephone services.
12. The Parties agree to provide IP-services under the same
trade mark and in accordance with the mutually agreed marketing
policy.
13. The Principles agreed upon by the Parties shall be.
reflected and defined exactly by separate contracts and
constituent documents of the AC.
14. The Parties further agree that ZAG NPO "Crosna" shall have
the right to involve companies of the "Crosna" Group in
implementing the terms of the present Principles In this case
ZAO NPO "Crosna" shall be responsible fur their compliance with
these Principles.
15. Each of the Parties undertakes to fulfill its partner
obligations in a proper manner, render mutual assistance in
managerial decision making in order to implement the aims of
these Principles, and to provide all requested information about
its activities under these Principles to the other Party.
16. Each Party shall keep confidential all the information
obtained from the other Party, avoid taking steps that may
involve damage to the other Party, advise in advance the other
Party of the actions which may affect its interests and shall
not transfer rights and obligations under these Principles to a
third party without prior consent of the other Party,
17. The present Principles is drawn up and signed in six
original copies (3 in Russian and 3 in English) for each of the
Parties. Both texts are identical.
/s/ A.G.Romanovsky /s/ Ken Martin
Director General Chief Executive Officer
ZAO NPO "Crosna" "LiteWave Corporation"
A.G.Romanovsky Ken Martin
<PAGE>
Exhibit 10.5 Letter of Intent
LITEWAVE CORP.
Suite 404, 110 Cambie Street, Vancouver, BC
V6B 2M8
January 7, 2000
INTERNATIONAL COMMUNICATIONS AND EQUIPMENT INC.
12865 NE 85th St., Suite 362
Kirkland, WA 98033
Attention: Mr. Ken Martin
LETTER OF INTENT
Dear Mr. Martin:
This Letter of Intent sets forth the understanding of the principal terms
and conditions upon which LiteWave Corp. ("LTWV"), a Nevada corporation
whose shares are publicly traded, will agree to terminate its interest in
the assets, Intellectual Property, Contacts and Technology (the "Assets")
acquired from International Communications and Equipment Inc. ("ICE"), a
Nevada corporation, pursuant to the Technology Purchase and Assignment
Agreement between LTWV and ICE dated April 19, 1999 (the "April 19, 1999
Agreement").
1. Whereas LTWV has not yet been able to raise all of the necessary
financing required to pursue the opportunities contemplated upon the
execution of the April 19, 1999 Agreement, and the Closing has not yet been
effected by way of issuance of 10,300,000 restricted common shares of LTWV
(the "Restricted Shares"), both parties agree to rescind the April 19, 1999
Agreement. LTWV will return the Assets to ICE, LTWV will not issue and the
shareholders and principals of ICE will not receive the Restricted Shares.
2. As a result of the rescission of the April 19, 1999 Agreement, LTWV
and ICE may both pursue any business activities they so choose, without
interference from the other party.
This Letter of Intent also serves as a basis for the terms and conditions
of an agreement between LTWV and ICE whereby LTWV will assign all its
right, title and interest in its Russian Federation Joint Venture IP
Telephony Project pursuant to an agreement between LTWV and NPO ZAO Crosna
dated September 10, 1999 (the "Crosna Project"), in return for ICE agreeing
to the following:
Paying to LTWV a total of US $1,100,000 from profits generated by the
Crosna Project as reimbursement of costs incurred by LTWV to date, at the
rate of 20% of ICE's share of the Crosna Project profits earned, payable
monthly.
INTERNATIONAL COMMUNICATIONS AND EQUIPMENT INC.
January 7, 2000
Paying to LTWV 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.
Pay 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 LTWV might have with
Michael Rogers, Gerry Fitzgerald, Tony Mueting and/or Hemisphere
Communications Inc., and indemnifying LTWV from any further responsibility
for such claims by any or all of those parties.
5. Accepting any financial responsibility that LTWV might have with
Clarent Corp., and indemnifying LTWV from any further responsibility for
such claims by Clarent.
Both parties further agree to execute any and all such agreements necessary
to effect the nature of and precise terms intended by this Letter of
Intent. Should you agree to these terms, please indicate you acceptance by
signing hereunder.
Yours very truly,
LITEWAVE CORP.
Per: /s/ Ian Lambert
Ian D. Lambert, Authorized Signatory
INTERNATIONAL COMMUNICATIONS AND EQUIPMENT INC.
Per: /s/ Ken Martin
Ken Martin, Authorized Signatory
CC: Christopher Dieterich
<PAGE>
Exhibit 10.6 Letter of Intent, June 15, 1999 / Malta
LETTER OF INTENT TO FORM A JOINT VENTURE
AGREEMENT
Date: 6-15-99
This document shall constitute the intent to form an agreement
to complete a business arrangement between LiteWave Corporation,
(LWC) located at 1933 West 11th St. Suite E, Upland, CA, 91786,
USA (Tele 909-985-3000 (Fax 909-985-2262, and the Demajo Group
(MDG) of Companies located at Demajo House, Archbishop Street,
Valletta VLT 09, Malta (Tele (356)233121, (Fax (356) 250603.
IT IS THE INTENTION OF LWC THAT THE CONTRIBUTION OF LWC WILL BE:
1. Commence with the installation of VoIP servers in the
following countries (not in the shown order)
* Lebanon
* Syria
* Jordan
* Libya
* Iraq
* Iran
* Turkey
* Cyprus
* Egypt
* And various countries in Africa and the Middle East
2. The M. Demajo Group of Companies will be assigned by LWC
to become the area managing arm, and where necessary and
agreed, marketing and facilities provider, for the
mutually beneficial telephony operations in these
countries. Such involvement will include, but not be
limited to the elements of consideration as outlined in
this document. Such services may include Voice over
Internet Protocol, Pre-paid calling cards, ISP access and
other services as needed or requested by either party.
3. It is our intention that MDG shall work with Maltacom to
assign them the joint operating agreement that will allow
them to become the hub for some applications that offer an
economic advantage to all parties including the sharing of
revenues by and between LWC and the JV Partnership with
MDG. It is also expected that Maltacom may be invited to
become a partner m the JV agreement with MDG allowing them
to share in revenues generated by the operations of the JV
between LWC and MDG. It should be noted that Maltacom
Management have already been verbally invited to
participate in the IV if they so wish.
4. LWC's partnership with MDG will allow an additional
agreement to allow both Maltacom and MDG to assign one or
more persons to become technically competent operatives in
the areas of gateway installation, maintenance, and
operation of such equipment to be located in a place
suitable to all parties.
5. While LWC considers the current top priorities for service
installation, and maintenance to be Turkey and Egypt,
other countries are being considered.
6. In addition, LWC and the JV with MDG plans to offer
ventures outside of Malta including calling cards, pre-
paid cards, re-charging ability by phone and with possible
voice activation operations, and other added services as
they become available.
7. The percentage of the sharing of the profits resulting
from the Joint Venture activity and the relative
allocation of costs shall be determined prior to the
finalization of the Joint Venture agreement.
8. It is understood that there shall be a sharing of stock
shares in LWC in the form of stock options issued upon the
completion of the agreement with Maltacom between the JV
(LWC and MDG) and that firm. It is the intention of the
agreement to allow MDG one million options with a strike
price equal to 75% of the average trading price of the
stock determined based on the trading having taken place
over the prior 90 days as of the close of the agreement.
Such options shall have a restriction of one year or until
registration rights are confirmed by the public
corporation Lite Wave Corporation as ratified by its Board
of Directors. MDG shall have the final decision on whether
it wishes to exercise this option or to forego this entire
or any part of this option. Transfer of option rights is
subject to both the formal request of MDG and the
agreement and ratification of the Board of Directors of
LiteWave Corporation.
9. Revenue sharing between LWC and MDG as well as that of the
JV and Maltacom shall be determined as part of the
agreement between the IV of LWC and MDG and potentially
Maltacom. It is understood that MDG shall be entitled to
additional shareholding in the form of promoter's rights.
The quantum of this right is yet to be determined.
10. If it is found to be preferable, LWC and MDG may together
operate a formal company registered in Malta in lieu of
the IV mentioned in this document. Such action is subject
to the approval and ratification of both Boards of
Directors. Furthermore, MDG may delegate the participation
of their responsibility in such agreement to any of its
wholly owned member companies subject to the agreement and
ratification of the Boards of Directors of both firms.
Signed for and on behalf of the parties to this letter of
intent:
/s/ Ken Martin
Date: 6-15-99
Ken Martin, CEO LiteWave Corp.
/s/ Brian Walsh
Date: 6-15-99
Brian Walsh, Director of European Operations
/s/ Norman J. Miller
Date: 6-15-99
Norman J. Miller, Deputy Managing Director, Joseph Cachia &
Sons Ltd.
/s/ John Darmanin
Date: 6-15-99
John Darmanin, Business Development Manager, Demajo Group
<PAGE>
Exhibit 10.7 Officer/Director Employment Agreement - Ian Lambert
October 1, 1999
OFFICER/ DIRECTOR EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
this 1st day of October, 1999, between LiteWave Corp., a Nevada corporation
(the "Company"), whose principal place of business is 3300 NE 191w Street,
#1015, Aventura, FL, 33180, and Ian Lambert, an individual (the
"Executive"), whose address is 1220 Eastview Road, North Vancouver, B.C.
V7J 1L6
RECITALS
WHEREAS, the Executive is desirous of being employed by the Company; and
WHEREAS, the Company has agreed to hire the Executive, upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and the Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Executive in the capacity
of Chief Financial Officer, Corporate Secretary, and Director, and the
Executive hereby accepts such employment, upon the terms and conditions
hereinafter set forth.
3. Duties During Employment Period. During the Tem" (including any
renewals thereof as defined in Section 5 of this Agreement, the Executive
shall:
A. diligently devote the Executive's time and efforts to the business and
affairs of the Company. The Executive shall have such duties and powers
that are commensurate and consistent with those of a Chief Financial
Officer, Corporate Secretary, and Director, subject to the authority and
directions of the Company's Board of Directors; and
B. devote attention and render services to the Company and shall be
employed by the Company according to the terms and conditions of this
Agreement.
4. Compensation and Benefits
A. Salary. The Executive shall be paid a base salary (the "Base Salary"),
payable bi-monthly, in arrears, at an annual rate of no less than
Fifty-Four Thousand Dollars ($54,000) per year. Further, the Base Salary
shall increase to One Hundred and Twenty Thousand Dollars ($120,000) per
year when the Company reaches a gross income derived from sales of Five
Million Dollars ($5,000,000) monthly.
B. Bonus. As additional compensation, the Executive shall be entitled to
receive a bonus ("Bonus") for each fiscal year during the Term and each
Renewal Term in the amount as to be determined by the Company's Board of
Directors.
C. Employee Benefits. The Executive shall be entitled to participate in
all benefit programs of the Company currently existing or hereafter made
available to executives and/or other executive employees, including, but
not limited to, pension and other retirement plans, including any 401K
Plan, group life insurance, dental, hospitalization, surgical and major
medical coverage, sick leave, salary continuation, vacation and holidays,
long-term disability, and other fringe benefits.
D. Dental and Medical Insurance. The Company shall provide dental,
hospitalization, surgical and major medical coverage for the Executive and
Executive's family.
E. Vacation. During each year of the Term, and each year of any Renewal
Term, the Executive shall be entitled to four (4) weeks of vacation time to
be utilized or paid for each year, or accrue and carry over into the
following year; provided, however, that the Executive shall evidence
reasonable judgment with regard to appropriate vacation scheduling.
F. Business Expense Reimbursement. The Executive shall be provided with
Company credit cards, either American Express or Visa/Master Card, for
business travel and entertainment, and the Executive shall be entitled to
receive proper reimbursement for all reasonable, out-of-pocket expenses
incurred directly by the Executive (in accordance with the policies and
procedures established by the Company for its executive officers),
including first class accommodations for air travel, in performing services
hereunder.
G. Portable Cellular Telephone. The Company shall provide the Executive
with a portable cellular telephone by the Company, and the Company shall
also be responsible for all costs and expenses in connection with such
telephones, including, but not limited to, monthly service charges and
maintenance, usage charges and long distance, whether these be incurred for
personal or Company business.
H. Stock. The Executive shall:
1. receive One Hundred Fifty Thousand (150,000) shares of the Company's
common stock upon the signing of this Agreement.; and
2. receive Two Hundred Fifty Thousand (250,000) options at $2.00 per share
upon the signing of this Agreement; and
3. receive such other options as may be determined, from time to time, by
the Company's Board of Directors.
The Executive shall have the right to sell or transfer any or all of the
shares, or options, without restrictions, except for those imposed by the
Securities Exchange Commission.
I. Insurance and Disability Payments. The Company agrees to obtain at its
sole expense, and for the benefit of the Executive's heirs, life insurance
policies on the Executive in the amount of no less than ten (10) times
Executive's current rate of salary. Furthermore, the Company agrees to
provide, at its sole expense, a disability policy for the Executive which
shall provide for payments equal to one hundred percent (100%) of
Executive's current salary.
J. Computers. Executive will be provided with a fixed location computer
to be selected by the Executive to be used by the Executive at the location
selected by Executive. The Company will also provide Executive with a
laptop computer to his specification. Executive will have the option to
return such computers the Company upon Executive's employment termination,
or at his option, he may retain such computers for his personal benefit
upon his departure from the Company.
5. Term. The term of employment hereunder will commence on the Effective
Date and end one (1) year from such Effective Date (the "Term"), unless
terminated pursuant to Section 6, of this Agreement, provided that the
Executive and the Company may, upon mutual written consent, renew this
Agreement for such duration as may be mutually agreed upon by the parties
("Renewal Term"). For purposes of this Agreement, "Effective Date" shall
mean October 1, 1999.
6. Consequences of Termination of Employment.
A. Death. In the event of the death of the Executive during the Term or
Renewal Term of this Agreement, salary shall be paid to the Executive's
designated beneficiary, or, in the absence of such designation, to the
estate or other legal representative of the Executive for a period of one
(1) year from and after the date of death. The Company shall also be
obligated to pay to the Executive's estate or heirs, as the case may be,
any accrued or declared Bonus. Other death benefits will be determined in
accordance with the terms of the Company's benefit programs and plans.
B. Disability.
1. In the event of the Executive's disability, as hereinafter defined,
the Executive shall be entitled to compensation in accordance with the
Company's disability compensation practice for senior executives, including
any separate arrangement or policy covering the Executive, but in all
events the Executive shall continue to receive the Executive's salary for a
period, at the annual rate in effect immediately prior to the commencement
of disability, of not less than one (1) year from the date on which the
disability has deemed to occur as hereinafter provided below. Any amounts
provided for in this Section 6B shall be offset by other long-term
disability benefits provided to the Executive by the Company.
2. "Disability," for the purposes of this Agreement, shall be deemed to
have occurred in the event
i) the Executive is unable by reason of sickness or accident to perform the
Executive's duties under this Agreement for a cumulative total of twelve
(12) weeks within any one calendar year; or
ii) the Executive is unable to perform Executive's duties for ninety (90)
consecutive days; or
iii) the Executive has a guardian of the person or estate appointed by a
court of competent jurisdiction. Termination due to disability shall be
deemed to have occurred upon the first day of the month following the
determination of disability as defined in the preceding sentence.
Anything herein to the contrary notwithstanding, if, following a
termination of employment hereunder due to disability as provided in the
preceding paragraph, the Executive becomes re-employed by a third party,
whether as an executive or as a consultant, any salary, annual incentive
payments or other benefits earned by the Executive from such employment
shall offset any salary continuation due to the Executive hereunder
commencing with the date of re-employment.
C. Termination by the Company for Cause.
1. Nothing herein shall prevent the Company from terminating employment
for "Cause" as hereinafter defined. The Executive shall continue to receive
salary only for the period ending with the date of such termination as
provided in this Section 6G. Any rights and benefits the Executive may have
in respect of any other compensation shall be determined in accordance with
the terms of such other compensation arrangements or such plans or
programs.
2. "Cause" shall mean:
(a) committing or participating in an injurious act of fraud, gross
neglect, intentional misrepresentation, or embezzlement against the
Company; or
(b) committing or participating in any other injurious act of omission
wantonly or willfully against the Company, monetarily or otherwise.
3. Notwithstanding anything else contained in this Agreement, this
Agreement will not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Executive a notice of
termination stating that the Executive committed one of the types of
conduct set forth in this Section 6C contained in this Agreement and
specifying the particulars thereof and the Executive shall be given a
thirty (30) day period to cure such conduct set forth in Section 6G.
D. Termination by the Company Other than for Cause. The foregoing
notwithstanding, the Company may terminate the Executive's employment for
whatever reason it deems appropriate; provided, however, that in the event
such termination is not based on Cause, as provided in Section 6C above, or
if Executive's employment is terminated under Sections 6F or 6G hereof, the
Company shall continue to be obligated to pay to Executive all salary and
current and future Bonuses and Executive shall be entitled to all stock
options earned or not yet earned through the Term (and any Renewal Term) of
this Agreement and Company will register all shares owned by the Executive,
his family, and companies controlled by the Executive or his family as well
as all options at Company's expense.
E. Voluntary Termination. In the event the Executive terminates the
Executive's employment on the Executive's own volition (except as provided
in Section 6F and/or Section 6G prior to the expiration of the Term or
Renewal Term of this Agreement, including any renewals thereof), such
termination shall constitute a voluntary termination and in such event the
Executive shall be limited to the same rights and benefits as provided in
connection with Section 6A.
F. Constructive Termination of Employment. A termination by the Company
without Cause under Section 6D shall be deemed to have occurred upon the
occurrence of one or more of the following events without the express
written consent of the Executive:
1. a significant change in the nature or scope of the authorities, powers,
functions, duties or responsibilities attached to Executive's position as
described in Section 3; or
2. a change in Executive's principal office to a location outside the
Dade-Broward County, Florida area; or
3. A five percent (5%) reduction in the Executive's salary below the salary
in effect immediately prior to such reduction or a reduction in any Bonus
announced to Executive by the Company's Board of Directors; or
4. A material breach of this Agreement by the Company; or
5. A material reduction of the Executive's benefits under any employee
benefit plan, program or arrangement (for Executive individually or as part
of a group) of the Company as then in effect or as in effect on the
Effective Date of this Agreement, which reduction shall not be effectuated
for similarly situated employees of the Company; or
6. Failure by a successor company to assume the obligations of the
Company under this Agreement; or
7. If at any time Executive is not a member of the Board of Directors of
the Company.
G. Termination Following a Change of Control.
1. In the event that a "Change in Control," as hereinafter defined, of
the Company shall occur at any time during the Term or Renewal Term hereof,
the Executive shall have the right to terminate the Executive's employment
under this Agreement upon thirty (30) days written notice given at any time
within one (1) year after the occurrence of such event, and such
termination of the Executive's employment with the Company pursuant to this
Section 6G1, then, in any such event, such termination shall be deemed to
be a termination by the Company other than for Cause and the Executive
shall be entitled to such compensation and benefits as set forth in Section
6D of this Agreement.
2. For purposes of this Agreement, a "Change in Control" of the Company
shall mean a change in control:
a) as set forth in Section 280G of the Internal Revenue Code; or
b) the occurrence of any of the following:
i) any person, group or organization, other than the Executive, is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the combined voting
power of the Company's outstanding securities then having the right to vote
at elections of directors; or
ii) the individuals who at the Effective Date of this Agreement constitute
the Board of Directors cease for any reason to constitute a majority
thereof unless the election, or nomination for election, of each new
director was approved by the Executive; or
iii) there is a failure to elect two or more (or such number of directors
as would constitute a majority of the Board of Directors) candidates
nominated by management of the Company to the Board of Directors; or
iv) the business or over fifty percent (50%) of the business revenues of
the Company for which the Executive's services are principally performed
is/ are disposed of by the Company pursuant to a partial or complete
liquidation of the Company, a sale of assets (including stock of a
subsidiary of the Company) or otherwise.
Anything herein to the contrary notwithstanding, this Section 6G2 will not
apply where the Executive gives the Executive's explicit written waiver
stating that for the purposes of this Section 6G2 a Change in Control shall
not be deemed to have occurred. The Executive's participation in any
negotiations or other matters in relation to a Change in Control shall in
no way constitute such
a waiver which can only be given by an explicit written waiver as provided
in the preceding sentence.
An "Attempted Change in Control" shall be deemed to have occurred if any
substantial attempt, accompanied by significant work efforts and
expenditures of moneys made to accomplish a Change in Control, as described
in Section 6G2 above, whether or not such attempt is made with the approval
of a majority of the then current members of the Board of Directors.
3. In the event that, within twelve (12) months of any Change in Control
of the Company or any Attempted Change in Control of the Company, the
Company terminates the employment of the Executive under this Agreement,
for any reason other than for Cause as defined in Section 6C2, then, in any
such event, such termination shall be deemed to be a termination by the
Company other than for Cause and the Executive shall be entitled to such
compensation and benefits as set forth in Subsection 6D of this Agreement.
4. For purposes of this Section 6G, the Executive's employment shall be
deemed constructively terminated in the event one or more of the following
events occurs without the express written consent of the Executive:
a) Significant change in the nature or scope of the authorities, powers,
functions, duties or responsibilities attached to Executive's position as
described in Section 3; or
b) A five percent (5%) reduction in the Executive's salary below the
salary in effect immediately prior to such reduction or a reduction in any
Bonus announced to Executive by the Company's Board of Directors; or
c) Material breach of this Agreement by the Company; or
d) Material reduction of the Executive's benefits under any employee
benefit plan, program or arrangement (for Executive individually or as part
of a group) of the Company as then in effect or as in effect on the
Effective Date of this Agreement, which reduction shall not be effectuated
for similarly situated employees of the Company; or
e) Failure by a successor company to assume the obligations of Company
under this Agreement; or
f) Change in the Executive's principal office to a location outside the
Dade-Broward County, Florida area; or
g) Executive is not re-elected in his current capacity or is not
re-elected to be a director of the Company; or
h) The Company's Board of Directors elects any chairman without the
express written consent of the Executive.
5. Anything in this Section 6G to the contrary notwithstanding, in no event
will any action or non-action by the Executive at any time prior to the
first anniversary date of the applicable Change in Control or Attempted
Change in Control (including any action or non-action prior to the
Effective Date of this Agreement) be deemed consent to any of the events
described in this Section 6G.
7. Non-Disclosure of Confidential Information.
A. Executive acknowledges that the Company's trade secrets, private or
secret processes, as they exist from time to time, business records and
plans, inventions, acquisition strategy, price structure and pricing,
discounts, costs, computer programs and listings, source code and/or
subject code, copyright, trademark, proprietary information, formulae,
protocols, forms, procedures, methods for operating the Company's business,
credit and financial data concerning the Company's clients, sales
presentations, revenues, acquisitions, practices and plans and information
which is embodied in written or otherwise recorded form, and other
information of a confidential nature not known publicly or by other
companies selling to the same markets (collectively, the "Confidential
Information") are valuable, special and unique assets of the Company,
access to and knowledge of which have been provided to Executive by virtue
of Executive's association with the Company. In light of the highly
competitive nature of the industry in which the Company's business is
conducted, Executive agrees that all Confidential Information, heretofore
or in the future obtained by Executive as a result of Executive's
association with the Company, shall be considered confidential.
B. The Executive agrees that the Executive shall:
1) hold in confidence and not disclose or make available to any third
party any such Confidential Information obtained directly or constructively
from the Company, unless so authorized in writing by the Company;
2) exercise all reasonable efforts to prevent third parties from gaining
access to the Confidential Information;
3) take such protective measures as may be reasonably necessary to
preserve the confidentiality of the Confidential Information.
C. Excluded from the Confidential Information, and therefore not subject
to the provisions of this Agreement, shall be any information which the
Executive can show:
1) at the time of disclosure, is in the public domain; or
2) after the disclosure, enters the public domain by way of printed
publication through no fault of the Executive; or
3) was in his possession at the time of disclosure and which was not
acquired directly or indirectly from the Company; or
4) was acquired, after disclosure, from a third party who did not receive
it from the Company, and who had the right to disclose the information
without any obligation to hold such information confidential.
D. Upon written request of the Company, Executive shall return to the
Company all written materials containing the Confidential Information.
8. Covenants as Essential Elements of this Agreements: Survival of
Covenants, It is understood by and between the parties hereto that the
foregoing covenants by Executive contained in Section 7 of this Agreement
shall be construed to be agreements independent of any other element of
Executive's relationship with the Company. The existence of any other claim
or cause of action, whether predicated on any other provision in this
Agreement, or otherwise, as a result of the relationship between the
parties, shall not constitute a defense to the enforcement of the covenants
in Section 7 of this Agreement against Executive.
9. Remedies and Enforcement.
A. Executive acknowledges and agrees that the Company's remedy at law for
a breach of any of the provisions of Section 7 herein would be inadequate
and the breach shall be per se deemed as causing irreparable harm to the
Company. In recognition of this fact, in the event of a breach by Executive
of any of the provisions of Section 7, Executive agrees that, in addition
to any remedy at law available to the Company, including, but not limited
to monetary damages, the Company, without posting any bond, shall be
entitled to obtain equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available to the Company.
B. It is further expressly understood and agreed that the provisions of
this Agreement shall apply whether this Agreement is terminated by Company
or Executive or upon its expiration or termination.
C. Nothing herein contained shall be construed as prohibiting Company or
Executive from pursuing any other remedies available to it/ him for any
breach or default of this Agreement.
10. Litigation-Attorneys' Fees. In connection with any litigation arising
out of the enforcement of this Agreement or for its interpretation, the
prevailing party shall be entitled to recover its costs, including
reasonable attorneys' fees, at the trial and all appellate levels from the
other party hereto, who was the adverse party to such litigation; however,
the Company will advance to the Executive a minimum of $10,000, if the
Company tiles any litigation as a result of this Agreement to cover
Executive's legal costs and continue to fund Executive's legal defense fees
to the extent required to defend against the Company's actions. In
addition, the Company agrees to pay for any and all legal work or
representation required to defend and or settle any claims made by or
against Executive as a result of his employment with the Company.
11. Freedom to Contract. The Executive represents and warrants that the
Executive has the right to negotiate and enter into this Agreement, and
that this Agreement does not breach, interfere with or conflict with any
other existing contractual agreement
12. Effect on Prior Agreements. This Agreement supersedes any and all
prior oral or written agreements, concerning the subject matter hereof, in
their entirety between the parties, which shall be void and of no further
force and effect after the date of this Agreement.
13. Notices. Any notice required or permitted to be given under the terms
of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested, by
overnight delivery, or by courier to the addresses of the respective
parties set forth in the preamble of this Agreement.
14. Waiver. Unless agreed in writing, the failure of either party, at any
time, to require performance by the other of any provision hereunder shall
not affect its rights thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision
of this Agreement. No extension of time for the performance of any
obligation or act shall be deemed to be an extension of time for the
performance of any other obligation or act hereunder.
15. Complete Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the contents hereof and
supersedes all prior agreements and understandings between the parties with
respect to such matters, whether written or oral. Neither this Agreement
nor any term or provision hereof may be changed, waived, discharged or
amended in any manner other than by an instrument in writing, signed by the
party against which the enforcement of the change, waiver, discharge or
amendment is sought.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one agreement.
17. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns.
This Agreement shall not be assignable by the Executive but shall be
assignable by the Company in connection with the sale, transfer or other
disposition of its business or to any of the Company's affiliates
controlled by or under common control with the Company, with the written
approval of Executive.
18. Governing Law. Venue. Waiver of Jury Trial. The parties agree that
this Agreement shall be deemed made and entered into in the State of
Florida and shall be governed and construed under and in accordance with
the laws of the State of Florida without giving effect to any principles of
conflicts of law. Company and Executive acknowledge and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the Judicial Circuit (or its successor) in and for Dade
County, Florida, shall be the exclusive venue and proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly,
under or in connection with this Agreement in these courts, they will not
contest or challenge the jurisdiction or venue of these courts. The parties
further agree and hereby waive and release any right to a trial by jury in
any action arising out of the interpretation, enforcement or breach of this
Agreement.
19. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope
or intent of any of the provisions of this Agreement.
20. Survival. Any termination of this Agreement shall not affect the
ongoing provisions of this Agreement which shall survive such termination
in accordance with their terms.
21. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal
or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or any other jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
22. Construction. This Agreement shall be constructed within the fair
meaning of each of its terms and not against the party drafting the
document.
23. Service Restriction. Nothing in this Agreement will prevent or
restrict Executive from serving on the Board of Directors of any public or
private companies and receive compensation from such service.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, UNDERSTAND ITS
TERMS AND CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT
COUNSEL OF THEIR
OWN CHOICE AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LiteWave Corp.
EXECUTIVE
By: /s/ Ian Lambert
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