U

10-Q 1 ltwv0608q.htm U

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES AND EXCHANGE ACT OF 1934 for the Quarterly

period ended June 30, 2008

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934 for the transition

period from___________ to ____________.

Commission File No. 0-27713

LITEWAVE CORP.

(Name of Small Business Issuer in its Charter)

Nevada, U.S.A. 95-4763671

(State or other Jurisdiction (IRS Employer

of Incorporation or Organization) Identification No.)

1166 Alberni Street, Suite 1006, Vancouver, BC V6E 3Z3

(Address of Principal Executive Offices)

(604) 628-1974

(Issuer's Telephone Number)

Copies to:

DIETERICH & MAZAREI, LP

11300 W. Olympic Blvd., #800

Los Angeles CA 90064-1637

(310) 312-6888

Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past

12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [X] NO [ ]

As of June 30, 2008: 79,715,275 shares of common stock were outstanding.

TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT

Part I. Financial Information

-------

Item 1. Financial Statements (unaudited)

Item 2. Management Discussion and Analysis or Plan of Operation

Item 3. Controls and Procedures.

Part II. Other Information

--------

Item 1. Legal Proceedings

Item 2. Changes in Securities

Item 3. Defaults upon Senior Securities

Item 4. Submission of Matters to a Vote of Security holders

Item 5. Other Information

Item 6. Exhibits and reports on form 8-K

SIGNATURES

PART I

ITEM 1. FINANCIAL STATEMENTS

LITEWAVE CORP.

(An Exploration Stage Company)

SECOND QUARTER FINANCIAL STATEMENTS

JUNE 30, 2008

(Stated in U.S. Dollars)

(Unaudited)

LITEWAVE CORP.

(An Exploration Stage Company)

BALANCE SHEETS

(Unaudited)

(Stated in U.S. Dollars)


		June 30		December 31
		2008		2007

ASSETS

Current
Cash	$	7,821	$	14,181
Accounts receivable		-		67
Goods and services tax receivable		3,867		1,660
Prepaid – investor relations		26,667		66,667
		38,355		82,575

Equipment (Note 5)		392		560
Natural Gas and Oil Properties (Note 6)
Unproved properties		100,000		100,000

	$	138,747	$	183,135

LIABILITIES

Current
Accounts payable and accrued liabilities	$	298,189	$	297,444
Advances payable (Note 8)		606,423		606,423
Current portion of loans and note payable (Note 9)		285,175		236,339
		1,189,787		1,140,206

STOCKHOLDERS’ EQUITY (DEFICIENCY)

Capital Stock
Authorized:
100,000,000 common voting shares with a par value of $0.001

Issued:
79,715,275 common shares (December 31, 2007: – 79,715,275 common shares)		79,715		79,715

Additional paid-in capital		7,441,973		7,441,973

Deficit Accumulated During The Exploration Stage		(8,572,728)		(8,478,759)
		(1,051,040)		(957,071)

	$	138,747	$	183,135

The accompanying notes are an integral part of these financial statements.

LITEWAVE CORP.

(An Exploration Stage Company)

STATEMENTS OF OPERATIONS

(Unaudited)

(Stated in U.S. Dollars)


	Three Month Period Ended June 30				Six Month Period Ended June 30					Period From June 30 1989 (Inception) To June 30 2008



	2008		2007		2008		2007

Expenses
Depreciation		84	$	84	$	168		$	168	$	760
Consulting		-		52,500		-			105,000		2,810,019
Foreign exchange (gain) loss		209		2,805		(1,566)			2,238		23,136
General and administrative		56		2,724		206			3,912		87,582

Impairment of natural gas and oil properties		-		-		-			-		708,485
Impairment of intellectual and property rights		-		-		-			-		1,000
Interest on long term debt		6,136		4,910		11,286			9,820		77,958
Loss on sale of oil and gas property		-		-		-			-		771,648
Marketing and promotion		20,000		-		40,000			1,865		650,154
Natural gas and oil operating costs, net of incremental revenue		-		(6,853)		-			(22,099)		12,876
Permits and licenses		-		-		-			-		1,150
Professional fees		39,725		8,559		42,925			23,459		534,931
Provision for settlement of litigation		-		-		-			-		139,133
Rent		-		6,244		-			12,149		99,777
Salaries and benefits		-		-		-			-		36,770
Stock accretion expense		-		58,000		-			408,000		1,400,000
Stock based compensation		-		7,750		-			136,300		763,100
Telephone and utilities		-		384		-			1,613		72,859
Transfer agent and filing fees		500		370		550			415		30,478
Travel		-		1,357		-			7,635		320,713
Website development		250		711		400			711		84,091
Write off of advances receivable		-		-		-			-		178,311
Write off of accounts payable		-		-		-			-		(232,203)
		66,960		139,545		93,969			691,166		8,572,728

Net Loss		(66,960)	$	(139,545)	$	(93,969)		$	(691,166)	$	(8,572,728)



Basic And Diluted Loss Per Common Share	(0.00)	$	(0.01)	$	(0.00)	$	(0.01)


Weighted Average Number Of Common Shares Outstanding – Basic and Fully Diluted	79,715,275		75,715,275		79,715,275		75,715,275

The accompanying notes are an integral part of these financial statements.

LITEWAVE CORP.

(An Exploration Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

(Stated in U.S. Dollars)


	Six Month Period Ended June 30				Period From June 30 1989 (Inception) To June 30



	2008		2007		2008

Cash provided by (used in):

Operating Activities
Net loss	$	(93,969)	$	(691,166)	$	(8,572,728)
Items not involving cash:
Amortization		168		168		760
Website development expenses paid by shares of common stock		-		-		56,900
Professional fees paid by shares of common stock		-		-		9,727
Consulting expenses paid by stock options and warrants		-		-		1,396,362
Write off of advances receivable		-		-		184,311
Professional fees paid by stock options		-		-		100,854
Consulting expenses paid by shares of common stock		-		-		11,740
General and administrative expenses paid by shares of common stock		-		-		3,000
Investor relations expenses paid by shares of common stock		40,000		-		98,333
Impairment of intellectual and property rights		-		-		1,000
Write off of accounts payable		-		-		(232,203)
Impairment of natural gas and oil properties		-		-		708,485
Loss on sale of oil and gas property		-		-		771,648
Consulting fees accrued		-		74,739		506,406
Interest accrued on loans		10,300		9,820		88,936
Stock-based compensation		-		136,300		763,100
Stock accretion expense		-		408,000		1,400,000
		(43,501)		(62,139)		(2,703,369)
Changes in non-cash operating working capital items:
Decrease, (Increase) in Goods and Services Tax receivable		(2,207)		(6,128)		(3,867)
Decrease,(Increase) in accounts receivable		67		22,507		(4,291)
Decrease (Increase) in prepaid expenses		-		-
Increase (Decrease) in accounts payable and accrued liabilities		(5,055)		(15,313)		689,216
		(50,696)		(61,073)		(2,022,311)
Investing Activities
Advances receivable		-		-		(184,311)
Acquisition of equipment		-		-		(1,152)
Acquisition and exploration of natural gas and oil properties		-		(48,342)		(781,881)
Recovery of natural gas and oil property oil exploration costs		-		-		72,823
Acquisition of intellectual and property rights		-		-		(1,000)
		-		(48,342)		(895,521)

The accompanying notes are an integral part of these financial statements.

LITEWAVE CORP.

(An Exploration Stage Company)

STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

(Stated in U.S. Dollars)


	Six Month Period Ended June 30				Period From June 30 1989 (Inception) To June 30 2008



	2008		2007

Financing Activities
Advances payable		-		(4,678)		537,908
Loan proceeds		-		-		200,000
Note payable		44,336		-		1,326,755
Issuance of common stock		-		-		872,400
Share issuance costs		-		-		(11,410)
		44,336		(4,678)		2,925,653

Change In Cash For The Period		(6,360)		(114,093)		7,821
Cash, Beginning Of Period		14,181		135,023		-

Cash, End Of Period	$	7,821	$	20,930	$	7,821


Cash Paid During The Period For:

Interest expense	$	-	$	-	$	-
Income taxes	$	-	$	-	$	-

The accompanying notes are an integral part of these financial statements.

LITEWAVE CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(Stated in U.S. Dollars)

JUNE 30, 2008

BASIS OF PRESENTATION, HISTORY AND OF THE COMPANY

The unaudited financial information furnished herein reflects all adjustments, which in the opinion of management are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented. This report on Form 10-QSB should be read in conjunction with the Company’s Form 10-K for the fiscal year ended December 31, 2007. The Company assumes that the users of the financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained in the Company’s Form 10-K for the fiscal year ended December 31, 2007, has been omitted. The results of operations for the six-month period ended June 30, 2008 are not necessarily indicative of results for the entire year ending December 31, 2008.

Litewave Corp. (“the Company”) was organized on June 30, 1989, under the laws of the State of Nevada, as Homefront Safety Services of Nevada, Inc. On April 26, 1999, the Company changed its name from Homefront Safety Services of Nevada, Inc. to Litewave Corp.

The Company is considered an exploration stage company engaged in the exploration for and production of natural gas and oil in the United States.

GOING CONCERN

These financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation.

As shown in the accompanying financial statements, the Company has incurred a net loss of $8,572,728 for the period from June 30, 1989 (inception) to June 30, 2008. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its properties. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America. The significant accounting policies adopted by the Company are as follows:

Natural Gas and Oil Properties

The Company utilizes the full cost method to account for its investment in natural gas and oil properties. Under this method, all costs of acquisition and exploration of natural gas and oil reserves, including such costs as leasehold acquisition costs, geological expenditures, tangible and intangible exploration costs, and direct internal costs are capitalized as incurred.

LITEWAVE CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(Stated in U.S. Dollars)

JUNE 30, 2008

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Natural Gas and Oil Properties (Continued)

Should the Company’s properties become productive, the cost of these natural gas and oil properties will be depleted and charged to operations using the unit of production method based on the ratio of current production to proved natural gas and oil reserves as estimated by independent engineering consultants.

Costs directly associated with the acquisition and evaluation of unproved properties are excluded from the depletion computation until it is determined whether or not proved reserves can be assigned to the properties or whether impairment has occurred. If the results of a quarterly assessment indicate that the properties are impaired, the amount of the impairment along with the costs of drilling exploratory dry holes and geological and geophysical costs that cannot be directly associated with specific unevaluated properties are charged to operations for the period.

Internal costs not directly associated with acquisition and exploration activities are expensed as incurred.

iii)

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities”, an amendment of FASB Statement No. 133, which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008, We do not expect the adoption of SFAS 161 will have an effect on our financial statements.

In January 2008, Staff Accounting Bulletin (“SAB”) 110, “Share-Based Payment” was issued. Registrants may continue, under certain circumstances, to use the simplified method in developing estimates of the expected term of share options as initially allowed by SAB 107, “Share-Based Payment”. The adoption of SAB 110 should have no effect on the financial position and results of operations of the Company.

In December 2007 the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51. SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary.

LITEWAVE CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(Stated in U.S. Dollars)

JUNE 30, 2008

RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

Specifically, this statement requires the recognition of a non-controlling interest (minority interest) as equity in the consolidated financial statements and separate from the parent's equity. The amount of net income attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement. SFAS 160 clarifies that changes in a parent's ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the non-controlling equity investment on the deconsolidation date. SFAS 160 also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. We do not expect the adoption of SFAS 160 will have an effect on our financial statements.

In December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”. SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective for the fiscal year beginning after December 15, 2008. We do not expect the adoption of SFAS 141 will have an effect on our financial statements.

EQUIPMENT


	June 30		December 31
	2008		2007

Computer equipment and software	$	1,152	$	1,152
Less: Accumulated amortization		(760)		(592)

	$	392	$	560

NATURAL GAS AND OIL PROPERTIES

The natural gas and oil properties consist of the following at June 30, 2008 and December 31, 2007:


	June 30		December 31
	2008		2007


Non-Producing unproved properties

- Waterton Lakes, Oklahoma		60,000		60,000

- Roark Prospect, New York	$	40,000	$	40,000


Total costs	$	100,000	$	100,000

LITEWAVE CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(Stated in U.S. Dollars)

JUNE 30, 2008

NATURAL GAS AND OIL PROPERTIES (Continued)

Waterton Lakes, Oklahoma

On April 30, 2003, the Company entered into a purchase and sale agreement with Waterton Lakes Hotels (1956) Co. Ltd. (“Waterton Lakes”), a privately held corporation, for an interest in an natural gas and oil lease in Oklahoma, USA. Under the terms of the agreement and for the consideration of a payment to Waterton Lakes of $20,000 made May 7, 2003, Waterton Lakes has assigned a working interest portion equal to 50% in a natural gas and oil property, known as the Smith Lease, recorded in Woods County record covering 157 mineral acres (more or less) situated on Lots 3 and 4, and E ½ of SW ¼ of Section 31, Township 26 North, Range 13 West, Woods County, Oklahoma, USA.

ii)

Roark Prospect, New York

On March 22, 2006 the Company entered into an agreement with Arrandale Financial Corp. (“Arrandale”) to acquire a 75% net revenue interest in the Roark Prospect, Steuben County, New York, consisting of oil and gas leases covering approximately 885 net acres. Arrandale purchased an 80% interest in the Roark Prospect during February 2006 from Thomasson Partner Associates, Inc. (“Thomasson”). As consideration for the acquisition of the Roark Prospect the Company

a) guaranteed the obligations of Arrandale under its acquisition agreement with Thomasson and has made payments aggregating $11,704 in respect of these obligations,

b) make a payment of $150,000 (settled by stock issuance) as reimbursement of lease acquisition costs and lease bonuses,

c) issue of 2 million restricted common shares of valued at $200,000 (issued)

During the period ended June 30, 2008, the Company entered into an agreement with Next Millennium Commercial Corp., which closes on November 7, 2008, to sell the property for $40,000. During the year ended December 31, 2007, the Company recorded an impairment of $310,000 to the carrying value of the property.

NATURAL GAS AND OIL EXPLORATION RISK

Exploration Risk

The Company’s future financial condition and results of operations will depend upon prices received for its natural gas and oil production and the cost of finding, acquiring, developing and producing reserves. Substantially all of its production is sold under various terms and arrangements at prevailing market prices. Prices for natural gas and oil are subject to fluctuations in response to changes in supply, market uncertainty and a variety of other factors beyond its control. Other factors that have a direct bearing on the Company’s prospects are uncertainties inherent in estimating natural gas and oil reserves and future hydrocarbon production and cash flows, particularly with respect to wells that have not been fully tested and with wells having limited production histories; access to additional capital; changes in the price of natural gas and oil; availability and cost of services and equipment; and the presence of competitors with greater financial resources and capacity.

LITEWAVE CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(Stated in U.S. Dollars)

JUNE 30, 2008

NATURAL GAS AND OIL EXPLORATION RISK

Distribution Risk

At June 30, 2008, the Company has no producing wells, accordingly at June 30, 2008 no distribution risk exists.

Credit Risk

At June 30, 2008, the Company has no producing wells, and no accounts receivable, accordingly at June 30, 2008, no credit risk exists.

ADVANCES PAYABLE

Advances payable are unsecured, interest free and repayable on demand. Included in advances payable as at June 30, 2008 is $429,224 (December 31, 2007 - $429,224) due to directors and to companies related by virtue of common ownership or common directors.

LITEWAVE CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(Stated in U.S. Dollars)

JUNE 30, 2008

LOANS AND NOTES PAYABLE


	June 30		December 31
	2008		2007

i) Loans From Related Parties

On December 20, 2004, the Company entered into an agreement with two related corporations whereby the related corporations agreed to lend $200,000 to the Company. The amounts owing are secured by the Company’s interest in nine Kansas gas wells (Note 6(ii)) and bear interest at 4% per annum and are due on April 15, 2005. The Company received $100,000 of the loan proceeds in December 2004, and the remaining $100,000 in early January 2005. Under the terms of the agreement, the Company also agreed to pay a bonus of $60,000 to each of the lenders from cash flow generated by the wells. The loans matured in April 2005. The Company negotiated an extension of the loan and the new maturity date is December 31, 2007.	$	229,526	$	225,026

ii) Promissory Notes

Notes payable to Next Millennium Corp, unsecured, repayable upon demand, bearing interest at 10% per annum.		44,336		-


On January 7, 2002, the Company converted accounts payable of $10,475 owing to a former director to a convertible promissory note which bears interest at 4% per annum and matured on December 31, 2002. This convertible feature expired in 2002.		11,313		11,313
		285,175		236,339
Less: Current portion		285,175		236,339

	$	-	$	-

10.

CAPITAL STOCK

Common Stock

No Common shares were issued during the six month period ended June 30, 2008.

LITEWAVE CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(Stated in U.S. Dollars)

JUNE 30, 2008

10.

CAPITAL STOCK (Continued)

ii)

Stock Options

The Company approved the 2000 Stock Option Plan (the “Plan”) for directors, employees and consultants of the Company. The Company originally reserved 3,000,000 shares of common stock of its unissued share capital for the Plan.

During the year ended December 31, 2006 the Company increased this reserve to 4,000,000. The Plan provides for vesting of options granted pro-rata over five months from the date of grant.

The exercise price of options granted under the Plan will be as follows:

not less than the fair market value per common share at the date of grant;

not less than 75% of the fair market value per common share at the date of grant for options granted to shareholders owning greater than 10% of the Company.

Options granted under the Plan that have vested will expire the earlier of:

five years from the date of grant;

five years from the date of grant for options granted to shareholders owning greater than 10% of the Company;

the termination of the officer, employee or consultant upon cause;

90 days after the termination of the officer, employee or consultant other than by cause, death or disability;

one year after the date of termination of the officer, employee or consultant due to death or disability.

Options granted under the Plan that have not vested will expire the earlier of five years from the date of the grant and the date of termination of the officer, employee or consultant for any reason.

The following is a summary of the stock option activity during the six month period ended June 30, 2008 and the year ended December 31, 2007:


	June 30, 2008			December 31, 2007
		Weighted			Weighted
	Number	Average		Number	Average
	Of	Exercise		Of	Exercise
	Shares	Price		Shares	Price

Outstanding, beginning of period	4,950,000	$	0.10	1,800,000	$	0.12

Granted	-		-	3,150,000		0.09
Exercised	-		-	-		-
Expired	-		-	-		-
Cancelled	(300,000)		(0.09)

Outstanding, end of period	4,650,000	$	0.10	4,950,000	$	0.10

LITEWAVE CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(Stated in U.S. Dollars)

JUNE 30, 2008

10.

CAPITAL STOCK (Continued)

iii)

Stock Options (Continued)

The following is a summary of the status of stock options outstanding and exercisable at June 30, 2008:


			Weighted
			Average
Number			Remaining
Of	Exercise		Contractual
Options	Price		Life

950,000	$	0.03	2.30 years
100,000		0.04	1.61 years
300,000		0.26	1.65 years
50,000		0.33	1.68 years
200,000		0.38	1.75 years
1,500,000		0.10	2.37 years
1,550,000		0.08	3.55 years

iv)

Stock-Based Compensation

Compensation costs attributable to share options granted to employees, directors or consultants is measured at fair value at the grant date and expensed with a corresponding increase to contributed surplus over the vesting period. Upon exercise of the stock options, consideration paid by the option holder is recorded as an increase to share capital and additional paid-in capital. Compensation costs attributable to the issuance of share purchase warrants to employees, directors or consultants, is measured at fair value at the date of issuance of the warrant and expensed with a corresponding increase to contributed surplus at the time of issuance of the warrants. Upon exercise of the warrant, consideration paid by the warrant holder is recorded as an increase to share capital and additional paid-in capital.

No options were granted during the six month period ended June 30, 2008. The total fair value of the 3,150,000 options granted during the year ended December 31, 2007 was $142,000 based on the Black-Scholes option pricing model. Since the options vested immediately the Company recorded $142,000 in stock-based compensation for options vesting during the year ended December 31, 2007.

The weighted average assumptions used in calculating the fair value of stock options granted during the period ended June 30, 2008 and the year ended December 31, 2007 using the Black-Scholes option pricing model are as follows:


	June 30	December 31
	2008	2007

Risk-free interest rate	-	3.97%
Expected life of the options	-	3 years
Expected volatility	-	143%
Expected dividend yield	-	-

LITEWAVE CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

(Stated in U.S. Dollars)

JUNE 30, 2008

11.

RELATED PARTY TRANSACTIONS

Unless disclosed elsewhere in the financial statements, the following represents all significant balances and transactions entered into by the Company with its directors, shareholders or with companies related by virtue of common ownership or common directors:

As at June 30, 2008, accounts payable included an amount of $17,066 (December 31. 2007 - $17,066) to a company with common directors and an amount of $793 (December 31. 2007 - $793), to a director.

During the six month periods ended June 30, 2008 and 2007, the Company paid or accrued $nil (2007 - $81,000) in consulting fees to directors and to a company related by a common director, $nil (2007 - $6,000) in legal fees to a company controlled by a director, $nil (2007 - $12,149) in rent to a company related by common directors and $2,250 (2007 - $2,160) in interest expense to a company with common directors.

These transactions were in the normal course of operations and were measured at the exchange value, which represented the amount of consideration established and agreed to by the related parties.

During the six month period ended June 30, 2008, directors and officers were granted no stock options. During the six month period ended June 30, 2007 directors and officers were granted 850,000 stock options at $0.08, expiring January 12, 2012. Stock based compensation of $nil (2007 - - $42,397) was recorded in respect of these options.

During May 2006, persons related to the Directors subscribed to 810,000 units of the 7,500,000 unit private placement. During the six month period ended June 30, 2008 the Company has charged $nil (2007 - $50,275) of stock based compensation, to record the fair value attributable to these units.

12.

PROVISION FOR SETTLEMENT OF LITIGATION

On October 11, 2002, a judgment, in the amount of $139,133, was entered in the District Court of the Seventh Judicial District of the State of Idaho, in and for the County of Bonneville, against the Company for damages sought for breach of contract under an advertising agreement. The financial statements for June 30, 2008 have reflected the cost of the judgment in the cumulative data.

13.

COMPARATIVE AMOUNTS

The comparative financial statements have been reclassified to conform with the presentation adopted for the current period.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

GENERAL

The Company is a development-stage company whose primary business since 2003 has been in the oil and gas industry, acquiring 50% networking interest in various leases and drilling or planning to drill natural gas wells in the States of Kansas, Missouri and Oklahoma, in the United States. See Item 2. Description of Property - Disclosure of Oil & Gas Operations.

In addition, the Company participated in a natural gas drilling project on the Northeast Deer Creek Prospect, Grant County, OK. The AFE cost was estimated at $396,000, with the Company participating for approximately a 6.6% net working interest after return of invested capital of $44,000. The initial well on the Deer Creek Prospect was drilled mid December 2003, testing the Oswego/Big Lime formation at a depth of 3,950 feet. The Operator encountered oil, gas and water, and the well was fraced and tested to determine if production was possible. After extensive testing, the well failed to become an economic producer.

From June through September 2003, the Company engaged McGown Drilling, Inc. to complete drilling a total of nine shallow gas wells to an average depth of approximately 400 feet on 5 groups of leases in Bourbon County, KS. Four others were started but abandoned. Since then, McGown Drilling has drilled another seven wells on leasehold property, with six being completed prior to December 31, 2005. The gas leases were not registered in the name of Litewave, but continue to be held in the name of the Operator, McGown Drilling, Inc.

Operational sources of potential revenue called for planned sales of natural gas from these shallow gas wells drilled in Bourbon County, Kansas, which commenced during 2006. Management had completed the negotiation of a Gas Purchase Contract for delivery of natural gas from the wellhead to an established Buyer, Bourbon County Pipeline LLC. During 2005, the Company commenced the construction and installation of facilities and an eleven mile pipeline gathering system necessary and required to deliver gas to the Buyer. The Buyer had agreed to accept delivery of gas in accordance with the provisions of the Contract, calling for payment of 70% of the total price received by the Buyer at their point of resale.

The Company obtained the right-of-way and easements, together with rights of ingress and egress necessary for the construction, maintenance, and operation from Bourbon County to construct a natural gas pipeline from the wellhead locations to a measurement station connection at the distribution network delivery point with Bourbon County Pipeline LLC.

Natural gas normally consists of 80% or more methane with the balance comprising such hydrocarbons as butane, ethane and propane. In some cases it may contain minute quantities of highly poisonous hydrogen sulfide, referred to as "sour gas". It is thought that this gas emanates from deeper coal beds which release methane gas, which has been subsequently trapped in a 25 foot thick sand formation at the 375 foot level. Methane is, generally, a sweet gas consisting of 95% methane and thus is normally of pipeline quality.

There are literally hundreds of natural gas producers in America's lower 48 states, many located in Kansas, Oklahoma and Missouri. Demand for natural gas is fairly high, and competition is somewhat negated due to the high demand. Of more importance is the ability to minimize surface access costs by identifying and leasing flat, sparsely populated marginal ranch or farmland which makes transportation and access less expensive, together with proximity to major gas transmission lines that have available capacity translating to access to markets.

Oil and gas operations are subject to various United States federal, state and local governmental regulations. Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas.

The production, handling, storage, transportation and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state, provincial and local laws and regulations relating primarily to the protection of human health and the environment.

No significant expenditures related to complying with these laws have been incurred by the Company. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and the Company is unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.

The Company's business development plan had initially focused on a strategy for maximizing the long-term exploration and development of our Bourbon County prospects. To date, execution of the current business plan has largely focused on

acquiring prospective leases and drilling initial shallow gas wells on this acreage from which to establish a going forward expansion plan. As of June 30, 2008 we had spent approximately $811,791 including pipeline costs on our Bourbon County, KS, prospect.

In the course of bringing the wells into production a series of unexpected events occurred that affected the economics of the project. Unexpected insurance costs related to a railway crossing, compressor lease costs required to compete for pipeline space, and extremes in weather, both summer and winter, impacted the operation in such a way that the expected economics of low cost well development and operator experience were not realized.

In the second year of attempting to establish economic production the issue of water production became the final straw in terms of the expectation of a low cost production operation. Management decided that further expenditure involved risk that was not justified on what had become a low return project.

During 2005, the Company announced that it has entered into an agreement with Arrandale Financial Corp. to acquire a 75% net revenue interest in the Roark Prospect, Steuben County, New York consisting of oil and gas leases covering approximately 885 net acres.

The terms of the deal called for the payment of $150,000 as reimbursement of lease acquisition costs and lease bonuses (paid), and the issuance of 2 million restricted common shares of Litewave Corp.

The Roark Prospect is located three miles west of the Howard Field in western New York state, a 1937 discovery from the Devonian Oriskany Sandstone at 3400’. The Howard Field has produced approximately 4.5 BCFG from ten wells, producing an average per well recovery of 4.5 MMCFG. This region is within a strong gas market, located nearby transmission pipeline and storage facilities.

Litewave had been planning to drill an initial well targeting the Oriskany Sandstone on a large soil iodine anomaly that extends east and north of the Howard Field, near the point of intersection coincidental with the westward projection of the Howard Field. Consulting Geologists had indicated that the areal extent of the anomaly is approximately double that of the drilled extent of the Howard Field, so a target with potential in the range of 8 to 10 BCFG was anticipated.

Because of the Company’s inability to raise funds for this work a drilling program has not been initiated for this property. During the period ended June 30, 2008, the Company entered into an agreement with Next Millennium Commercial Corp., which will close on November 7, 2008 to sell the property for $40,000 and a 1% overriding royalty.

Currently there are two full time employees and one part-time employee who are also officers of our company, none of whom have charged fees for their services during 2008. We do not expect any material changes in the number of employees over the next 12 month period. We do and will continue to outsource contract employment as needed. However, if we are successful in our initial and any subsequent drilling programs we may retain additional employees. Given that Litewave is still in the formative stages of this new business direction, if the Company is unable to obtain needed funds or generate anticipated revenues, it could be forced to curtail or cease its activities.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has had virtually no revenues from operations and has relied almost exclusively on shareholder loans and private placements to raise working capital to fund operations. At June 30, 2008, the Company had a working capital deficiency of approximately $1,151,432 in Loans, Notes payable and current Accounts Payable. It is anticipated that management will be able to fund the company's base operations by way of shareholder loans and further private placements for up to twelve months.

Based upon the low monthly overhead associated with current operations, the Company believes that it has sufficient cash on hand and financing arrangements planned to meet its anticipated needs for working capital for the next twelve months of operations. For business expansion including any new planned capital expenditures, the Company will need to raise additional capital.

The Company has not established revenues sufficient to cover its operating costs and to allow it to continue as a going concern. A Note to the Financial Statements as at June 30, 2008, states that due to no established source of revenue, there is substantial doubt regarding the Company's ability to continue as a going concern, and as such, the Company is substantially dependent upon its ability to generate sufficient revenues to cover its operating costs.

If the Company needs to raise additional funds in order to fund drilling, acquire property and leases, construct a pipeline, or expand, develop new or enhanced facilities for production, 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 Company. Stockholders may also experience additional dilution.

Such securities may have rights, preferences or privileges senior to those of the Company's Common Stock. The Company does not currently have any contractual restrictions on its ability to incur debt and, accordingly, the Company could incur significant amounts of indebtedness to finance its operations. Any such indebtedness could contain covenants which would restrict the Company's operations. There can be no assurance that the Company will be able to secure adequate financing from any source to pursue its current plan of operation, to meet its obligations or to deploy and expand its network development efforts over the next twelve months. Based upon its past history, Management believes that it may be able to obtain funding from investors or lenders, but is unable to predict with any certainty the amount and/or terms thereof. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to continue in business, or to a lesser extent, may not be able to take advantage of acquisition opportunities, develop or enhance services or products or respond to competitive pressures.

As of the date of this filing, no further production natural gas sales are in place. Accordingly, no table showing percentage breakdown of revenue by business segment or product line is included.

Capital Requirements & Use of Funds

The Company will be seeking financing of at least $500,000 over the next six months to finance further acquisitions for the pursuit of oil and natural gas production. There is no guarantee that the Company will actually be able to complete such financing within that period, or at all. Should this funding not be raised, it would put the ability for the Company to pursue its business plan at risk (See Risk Factors).

Corporate uses of funds shall include but not be limited to the following:

- administration and operational expenses

- corporate overhead expenses necessary to maintain the Company's operations

- acquisition of additional oil and natural gas properties

- lease acquisition costs for potential oil and gas leases

- drilling programs for new oil and natural gas properties.

The next phase of funding is anticipated to require approximately $500,000, depending upon further acquisition plans. Capital is expected to be raised in stages, as the financing climate permits. Should this funding not be raised, it would put the ability for the Company to pursue its business plan at risk (See Risk Factors).

The following discussion and analysis explains the financial condition for the period from January 1, 2008 to June 30, 2008, which supplements the financial statements and related notes for that period and the audited financial statements for the fiscal year ended December 31, 2007.

Revenues. The Company does not anticipate generating production revenue until it acquires another suitable project in 2008 which is unlikely to commence production before the second or third quarter of 2009. The Company’s first other income from incidental gas sales was generated during the period March 1, 2006 to December 31, 2007, with none prior to that date.

Expenses. For the period from January 1, 2008 to June 30, 2008, the Company incurred expenses of $nil for stock based compensation; $nil for stock accretion expense; $nil for consulting fees to directors and a company related by a common director, $nil in legal fees to a company controlled by a director, $2,250 in interest expenses to a company with common directors, $nil in rent to a company with common directors, and $nil in other consulting fees; marketing and promotion of $40,000; general and administrative expenses of $206; transfer agent and filing fees of $550; other professional fees of $42,925; $9,036 in other interest expense; $nil for travel expenses; $400 for website development and $nil for telephone expenses.

For the period from January 1, 2007 to June 30, 2007, the Company incurred expenses $136,300 for stock based compensation; $408,000 for stock accretion; $81,000 for consulting fees to directors and a company related by a common director, $6,000 in legal fees to company controlled by a director, $2,160 in interest expenses to a company with common directors, $12,149 in rent to a company with common directors and $24,000 in other consulting fees; marketing and promotion of $1,865; general and administrative expenses of $3,912; transfer agent and filing fees of $415; professional fees of $17,459; rent of $12,149; $7,660 in other interest expense; $7,635 for travel expenses; website development of $711; and $1,613 for telephone expenses.

Net Loss. For the period from January 1, 2008 to June 30, 2008, the Company recorded a loss from operations of $93,969. The total net loss since inception through to June 30, 2008, was $8,572,728.

As at June 30, 2008 certain management, business associates and related parties have advanced a total of $429,224 to the Company to cover operating costs. As of June 30, 2008, the working capital deficiency was $1,151,432.

A. RESULTS OF OPERATIONS

During 2007 the Company had not commenced production revenue generating operations, though it had incidental revenue from intermittent sales of natural gas during the development phase. As noted previously since the Company has now disposed of this operation it does not anticipate any production revenue generating operations until it acquires another suitable project in 2008/2009 which is unlikely to commence production before the second or third quarter of 2009, based on the plan to acquire new oil and gas leases and participate in drilling programs over the ensuing fiscal year. The Company also cautions that while it does not foresee any such eventuality, delays in the anticipated start of any such operations might occur.

DISCLOSURE OF OIL & GAS OPERATIONS

Until the aforementioned Sale to McGown Drilling, the Company had the right to a 50 percent net working interest in sixteen leases covering a total of 4,036 undeveloped acres. The Bourbon County, Kansas project encompassed 2,905 acres of prospective natural gas lands on 10 leases. The Vernon County, Missouri project comprises 5 leases for 974 acres. The Woods County, Oklahoma lease covers 157 acres.

The Company had drilled sixteen wells in Bourbon County. In late October 2003, Exact Engineering open-flow tested the nine wells drilled at the time, and determined that 5 were capable of sustained water free gas flow totalling 90 thousand cubic feet per day, two capable of an estimated 20 mcfpd which could not be measured due to associated water mixed with the gas, one which did not flow and one which had not yet been completed for production testing.

During the ensuing period, no well achieved those forecast levels of production. Continuous water handling problems along with freezing weather restricted the ability of the operator to maintain adequate levels of production with incurring further capital investment which carried significant risk. The decision was made to sell the operations in their entirety to the operator, McGown Drilling, in full settlement of outstanding obligations and obviation of future liability potential.

B. CAPITAL RESOURCES

The Company is pursuing private placements and debt financing to fund business development and settle the outstanding advances payable of $606,423, as well as the notes payable with accrued interest of $285,175 and a majority of the accounts payable of $298,189 at June 30, 2008 by conversion to private placement shares and other means. In the meantime, the Company is meeting its obligations through funds loaned by certain management and non-related third parties. The Company anticipates that it will be able to raise further funds through share issuances over the next year that will provide adequate working capital for the next twelve months.

The Company has recently undertaken the following Capital Expenditures. During 2006, the Company completed construction of the supplementary pipeline from its Bourbon County leasehold lands, where it had drilled several wells, to a natural gas distribution delivery point operated by Bourbon County Pipeline LLC. During 2007, the Company had intended to drill and connect more wells in Bourbon County. The anticipated budget for this Capital Expenditure was approximately $470,000, however, due to the inability to raise such funds, this program has been terminated and the operations disposed of. As well, the Company had anticipated drilling an additional two wells in Vernon County and one well in Steuben County, however no funds were raised to complete such programs. Meanwhile, in 2008 the Company will be evaluating new oil and gas prospects that have merit and for which adequate financing can be raised.

C. LIQUIDITY

The Company is illiquid at the present time and is dependent upon loans and small private placements to provide funds to maintain its activities, though the Company expects to be able to raise larger amounts of funds through the issuance of shares over the next six to twelve months.

D. 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 petroleum and energy industries; 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 levels of pricing and demand for oil and natural gas, the Registrant's inexperience with the petroleum industry, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition.

ITEM 3. CONTROLS AND PROCEDURES

Based on their evaluation, as of a date within 90 days prior to the date of the filing of this report, of the effectiveness of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures are effective and sufficient to ensure that we record, process, summarize, and report information required to be disclosed by us in our periodic reports filed under the Securities Exchange Act within the time periods specified by the Securities and Exchange Commission's rules and forms.

Subsequent to the date of their evaluation, there have not been any significant changes in our internal controls or in other factors that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses.

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

No material developments occurred during the period.

ITEM 2. CHANGES IN SECURITIES

No Common shares were issued during the six month period ended June 30, 2008

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

NONE

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE

ITEM 5. OTHER INFORMATION

The Company has not implemented any procedures by which security holders may recommend nominees to the registrant's board of directors.

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES & REPORTS ON FORM 8-K

(a) Exhibits

Exhibit Number Description

31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

None

SIGNATURES

The following pages include the Signatures page for this Form 10-QSB, and two separate Certifications of the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) of the company.

The first form of Certification is required by Rule 13a -14 under the Securities Exchange Act of 1934 (the Exchange Act) in accord with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certification). The Section 302 Certification includes references to an evaluation of the effectiveness of the design and operation of the company's "disclosure controls and procedures" and its "internal controls and procedures for financial reporting". Item 3 of Part I of this Quarterly Report presents the conclusions of the COO/CFO about the effectiveness of such controls based on and as of the date of such evaluation.

The second form of Certification is required by Section 906 of the Sarbanes -Oxley Act of 2002 (section 1350 of chapter 63 of title 18 of the United States Code).

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.

Dated: August 14, 2008

By: /s/ Ian Lambert

Ian Lambert

President, Chief Executive Officer, Director

/s/ Harvey Lawson

Harvey Lawson,

Secretary/Treasurer, Chief Financial Officer, Director