UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedNovember 30, 2009
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number000-52401
LIONS GATE LIGHTING CORP.
(Exact name of registrant as specified in its charter)
| Nevada | 47-0930829 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
600 – 999 West Hastings Street, Vancouver, British Columbia V6C 2W2
(Address of principal executive offices) (Zip code)
604-729-5759
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)
Yes [ ] No [ ] Not currently applicable to the Registrant
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer (Do not check if a smaller reporting company) [ ] | Smaller reporting company [ x ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ x ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
7,450,000(1) common shares issued and outstanding as of January 11, 2010.
(1) Takes into account the 550,000 shares of common stock that a former director has agreed to return to treasury as disclosed in our current report on Form 8-K filed with SEC on May 12, 2009
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
It is the opinion of management that the interim consolidated financial statements for the quarter ended November 30, 2009 include all adjustments necessary in order to ensure that the interim consolidated financial statements are not misleading.
LIONS GATE LIGHTING CORP. AND SUBSIDIARY
(A Development Stage Company)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2009
(Stated in US Dollars)
(Unaudited)
| LIONS GATE LIGHTING CORP. AND SUBSIDIARY |
| (A Development Stage Company) |
| INTERIM CONSOLIDATED BALANCE SHEET |
| November 30, 2009 and February 29, 2009 |
| (Stated in US Dollars) |
| (Unaudited) |
| November 30, | February 29, | |||||
| ASSETS | 2009 | 2009 | ||||
| Current | ||||||
| Cash | $ | 28,945 | $ | 7,895 | ||
| Total current assets | $ | 28,945 | $ | 7,895 | ||
| LIABILITIES | ||||||
| Current | ||||||
| Accounts payable | $ | 6,271 | $ | 3,456 | ||
| Due to related parties – Note 3 | 132,369 | 68,673 | ||||
| Total current liabilities | 138,640 | 72,129 | ||||
| STOCKHOLDERS’ DEFICIENCY | ||||||
| Capital stock | ||||||
| Authorized: | ||||||
| 100,000,000 common shares, par value $0.001 per share | ||||||
| Issued and outstanding: | ||||||
| 7,450,000 common shares | 7,450 | 8,000 | ||||
| Additional paid-in capital | 45,550 | 45,000 | ||||
| Comprehensive income (loss) | (2,983 | ) | 12,543 | |||
| Deficit | (159,712 | ) | (129,777 | ) | ||
| Total stockholders’ deficiency | (109,695 | ) | (64,234 | ) | ||
| $ | 28,945 | $ | 7,895 |
Nature and Continuance of Operations – Note 2
SEE ACCOMPANYING NOTES
| LIONS GATE LIGHTING CORP. AND SUBSIDIARY |
| (A Development Stage Company) |
| INTERIM CONSOLIDATED STATEMENT OF OPERATIONS |
| for the three and nine months ended November 30, 2009 and 2008 and |
| for the period September 1, 2008 (Commencement of Development Stage) |
| to November 30, 2009 |
| (Stated in US Dollars) |
| (Unaudited) |
| September 1, | |||||||||||||||
| 2007 | |||||||||||||||
| (Commencement | |||||||||||||||
| of | |||||||||||||||
| Development | |||||||||||||||
| Three months ended | Nine months ended | Stage) to | |||||||||||||
| November 30, | November 30 | November 30, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | 2009 | |||||||||||
| Operating expenses | $ | 4,066 | 22,197 | $ | 29,935 | 40,880 | $ | 56,138 | |||||||
| Loss from operations | (4,066 | ) | (22,197 | ) | (29,935 | ) | (40,880 | ) | (56,138 | ) | |||||
| Other: | |||||||||||||||
| Foreign currency translation | |||||||||||||||
| adjustment | (3,838 | ) | 2,183 | (15,526 | ) | 715 | (4,036 | ) | |||||||
| Net comprehensive loss for the | |||||||||||||||
| period | $ | (7,904 | ) | $ | (20,014 | ) | $ | (45,461 | ) | $ | (40,165 | ) | $ | (60,174 | ) |
| Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||
| Weighted average number of | |||||||||||||||
| shares outstanding | 7,450,000 | 8,000,000 | 7,596,000 | 8,000,000 | |||||||||||
SEE ACCOMPANYING NOTES
| LIONS GATE LIGHTING CORP. AND SUBSIDIARY |
| (A Development Stage Company) |
| INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS |
| for the nine months ended November 30, 2009 and 2008 and |
| for the period September 1, 2008 (Commencement of Development Stage) |
| to November 30, 2009 |
| (Stated in US Dollars) |
| (Unaudited) |
| September 1, | |||||||||
| 2007 | |||||||||
| (Commencement | |||||||||
| of | |||||||||
| Development | |||||||||
| Nine months ended | Stage) to | ||||||||
| November 30, | November 30, | ||||||||
| 2009 | 2008 | 2009 | |||||||
| Operating Activities | |||||||||
| Net loss for the period | $ | (29,935 | ) | $ | (40,880 | ) | $ | (56,138 | ) |
| Changes in operating working capital items: | |||||||||
| Accounts payable | 2,815 | 1,564 | (3,406 | ) | |||||
| (27,120 | ) | (39,316 | ) | (59,544 | ) | ||||
| Financing Activity | |||||||||
| Increase in due to related parties | 63,696 | 36,947 | 88,302 | ||||||
| Effect of foreign exchange on cash | (15,526 | ) | 715 | (4,036 | ) | ||||
| Increase (decrease) in cash during the period | 21,050 | (1,654 | ) | 24,722 | |||||
| Cash, beginning of the period | 7,895 | 1,721 | 4,223 | ||||||
| Cash, end of the period | $ | 28,945 | $ | 67 | $ | 28,945 | |||
SEE ACCOMPANYING NOTES
| LIONS GATE LIGHTING INC. AND SUBSIDIARY |
| (A Development Stage Company) |
| CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY |
| for the period May 2, 2005 to November 30, 2009 |
| (Stated in US Dollars) |
| (Unaudited) |
| Deficit | |||||||||||||||||||||
| Common Stock | Accumulated | ||||||||||||||||||||
| Additional | During the | ||||||||||||||||||||
| Paid-in | Comprehensive | Development | |||||||||||||||||||
| Shares | Par Value | Capital | Income (Loss) | Deficit | Stage | Total | |||||||||||||||
| Capital stock issued for cash: | |||||||||||||||||||||
| May 2, 2005 - at $0.001 | 3,000,000 | $ | 3,000 | $ | - | $ | - | $ | - | $ | - | $ | 3,000 | ||||||||
| May 15 to July 15, 2005 - at $0.01 | 5,000,000 | 5,000 | 45,000 | - | - | - | 50,000 | ||||||||||||||
| Foreign currency translation adjustment | - | - | - | 3,479 | - | - | 3,479 | ||||||||||||||
| Net loss for the period | - | - | - | - | (35,533 | ) | - | (35,533 | ) | ||||||||||||
| Balance, February 28, 2006 | 8,000,000 | 8,000 | 45,000 | 3,479 | (35,533 | ) | - | 20,946 | |||||||||||||
| Foreign currency translation adjustment | - | - | - | 689 | - | - | 689 | ||||||||||||||
| Net loss for the year | - | - | - | - | (54,597 | ) | - | (54,597 | ) | ||||||||||||
| Balance, February 28, 2007 | 8,000,000 | 8,000 | 45,000 | 4,168 | (90,130 | ) | - | (32,962 | ) | ||||||||||||
| Foreign currency translation adjustment | - | - | - | (7,560 | ) | - | - | (7,560 | ) | ||||||||||||
| Net loss for the year | - | - | - | - | (13,444 | ) | (6,389 | ) | (19,833 | ) | |||||||||||
| Balance, February 29, 2008 | 8,000,000 | 8,000 | 45,000 | (3,392 | ) | (103,574 | ) | (6,389 | ) | (60,355 | ) | ||||||||||
| Foreign currency translation adjustment | - | - | - | 15,935 | - | - | 15,935 | ||||||||||||||
| Net loss for the year | - | - | - | - | - | (19,814 | ) | (19,814 | ) | ||||||||||||
| Balance, February 28, 2009 | 8,000,000 | 8,000 | 45,000 | 12,543 | (103,574 | ) | (26,203 | ) | (64,234 | ) | |||||||||||
| Return to treasury – May 12, 2009 - at $0.01 | (550,000 | ) | (550 | ) | (4,950 | ) | - | - | - | (5,500 | ) | ||||||||||
| Capital contribution | - | - | 5,500 | - | - | - | 5,500 | ||||||||||||||
| Foreign currency translation adjustment | - | - | - | (15,526 | ) | - | - | (15,526 | ) | ||||||||||||
| Net loss for the period | - | - | - | - | - | (29,935 | ) | (29,935 | ) | ||||||||||||
| Balance, November 30, 2009 | 7,450,000 | $ | 7,450 | $ | 45,550 | $ | (2,983 | ) | $ | (103,574 | ) | $ | (56,138 | ) | $ | (109,695 | ) | ||||
SEE ACCOMPANYING NOTES
| LIONS GATE LIGHTING CORP. AND SUBSIDIARY |
| (A Development Stage Company) |
| NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS |
| November 30, 2009 |
| (Stated in US Dollars) |
| (Unaudited) |
| Note 1 | Interim Reporting |
While the information presented in the accompanying interim financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim period presented. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Company’s February 29, 2009 financial statements. | |
The results of operations for the period ended November 30, 2009 are not necessarily indicative of the results that can be expected for the year ended February 28, 2010. | |
| Note 2 | Nature and Continuance of Operations |
The Company’s principal business operations as an internet-based distributor of lighting products ceased September 1, 2007. Consequently, the Company’s operations are disclosed as being in the development stage commencing September 1, 2007. | |
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At November 30, 2009, the Company had not yet achieved profitable operations, has accumulated losses of $159,712 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available. | |
| Note 3 | Related Party Transactions |
As of November 30, 2009, the Company received loans from directors totalling $132,369 (February 28, 2009: $68,673). These loans are unsecured, do not bear interest and are due on demand. |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements as that term is defined in Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Financial information contained in this quarterly report and in our consolidated unaudited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. All references to “CDN$” refer to Canadian dollars and all references to “common shares” refer to the common shares in our capital stock. The following discussion should be read in conjunction with our consolidated unaudited financial statements and the related notes that appear elsewhere in this quarterly report.
As used in this quarterly report, and unless otherwise indicated, the terms “we”, “us”, “our”, “the company” and “Lions Gate Lighting” mean Lions Gate Lighting Corp., and the term “LG Lighting” means LG Lighting Corp.
RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended November 30, 2009
We did not generate any revenues during the three month periods ended November 30, 2009 and November 30, 2008. On August 31, 2007, our sole supplier agreement with Sunway Lighting Technology Co., Ltd. terminated. To date, we have been unsuccessful in entering into an agreement with a new supplier in order to resume our business of selling and marketing lighting technology products. Consequently, our company is pursuing alternate business opportunities in order to maximize shareholder value. Such opportunities may involve opportunities with entities outside of the lighting technology business. We may seek a business opportunity with entities that have recently commenced operations, or entities who wish to utilize the public marketplace in order to raise additional capital to expand business development activities, to develop a new product or service, or for other corporate purposes. We may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries. In certain instances, a target business may wish to become a subsidiary of us or may wish to contribute assets to us rather than merge.
During the three months ended November 30, 2009, our operating expenses totalled $4,066, compared to $22,197 for the three months ended November 30, 2008. We reported a loss from operations of $4,066 for the three months ended November 30, 2009, compared to a loss from operations of $22,197 for the three months ended November 30, 2008. The loss from operations for the three months ended November 30, 2009 decreased by $18,131 compared to the loss from operations for the three months ended November 30, 2008 primarily as a result of decreased legal and accounting expenses.
Results of Operations for the Nine Months Ended November 30, 2009
We did not generate any revenues during the nine month periods ended November 30, 2009 and November 30, 2008. During the nine months ended November 30, 2009, our operating expenses totalled $29,935, compared to $40,880 for the nine months ended November 30, 2008. We reported a loss from operations of $29,935 for the nine months ended November 30, 2009, compared to a loss from operations of $40,880 for the nine months ended November 30, 2008. The loss from operations for the nine months ended November 30, 2009 decreased by $10,945 compared to the loss from
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operations for the nine months ended November 30, 2008 primarily as a result of decreased legal and accounting fees associated with public company filings.
Liquidity and Capital Resources
Presently, our revenue is not sufficient to meet our operating and capital expenses. Management projects that we will require additional funding to expand our current operations. In addition, there is some doubt about our ability to continue as a going concern as the continuation of our business is dependent upon our finding an alternate business opportunity to pursue.
We have incurred operating losses since inception, and this is likely to continue for the next twelve month period. Management projects that we may require an additional $30,000 to $70,000 to fund our operating expenditures for the next twelve month period. Projected working capital requirements for the next twelve month period are broken down as follows:
| Estimated Working Capital Expenditures During the Next Twelve Month Period | |||||||||
| Operating expenditures | |||||||||
| Marketing and Consultant Costs | $ | 4,000 | - | $ | 25,000 | ||||
| Office and General Expenses | $ | 5,000 | - | $ | 8,000 | ||||
| Professional Fees | $ | 15,000 | - | $ | 25,000 | ||||
| Website development costs | $ | 1,000 | - | $ | 2,000 | ||||
| Working capital | $ | 5,000 | - | $ | 10,000 | ||||
| Total | $ | 30,000 | - | $ | 70,000 | ||||
Our cash on hand as at November 30, 2009 was $28,945. As at November 30, 2009, we had a working capital deficiency of $109,695. We require funds to enable us to address our minimum current and ongoing expenses and to identify and acquire an alternate business opportunity. We anticipate that our cash on hand will not be sufficient to satisfy our cash requirements for the next twelve month period. We plan to raise any such additional capital primarily through the private placement of our securities.
We will incur additional expenses if we are successful in entering into an agreement to acquire a new business opportunity. In the event that we do acquire such a business, we will require significant funds to develop the business in addition to any acquisition costs. It is not possible to estimate such funding requirements until such time as we enter into a definitive agreement to acquire an interest in a business or enter into a business combination.
Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on our audited annual financial statements for the year ended February 28, 2009, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our independent auditors. There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon our company locating and acquiring a business opportunity and achieving a profitable level of operation. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
The financial requirements of our company for the next twelve months are primarily dependent upon the financial support through credit facilities of our directors and additional private placements of our equity securities to our directors and shareholders or new shareholders. The issuance of additional equity securities by us may result in a significant dilution in the equity interests of our current shareholders. Even though our company has determined that we may not have sufficient working capital for the next twelve month period, our company has not yet pursued such financing options. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If
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we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.
Operating Activities
Operating activities used cash of $27,120 for the nine months ended November 30, 2009, compared to $39,316 for the nine months ended November 30, 2008. The decrease in cash used in operating activities during the nine months ended November 30, 2009 was largely the result of a decrease in the net loss in comparison to the nine months ended November 30, 2008.
Financing Activities
Financing activities provided cash of $63,696 for the nine months ended November 30, 2009. Financing activities provided cash of $36,947 for the nine months ended November 30, 2008. The increase in cash provided from financing activities was a result of loans from related parties for the nine months ended November 30, 2009.
Investing Activities
We did not receive or incur any amounts in regards to investing activities during the nine months ended November 30, 2009 and November 30, 2008.
Purchase or Sale of Equipment
We do not anticipate that we will expend any significant amount on equipment for our present or future operations. We may purchase computer hardware and software for our ongoing operations.
Off-Balance Sheet Arrangements
Our company has no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. Our company does not engage in trading activities involving non-exchange traded contracts.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.
Going Concern
The audited consolidated financial statements included with our Form 10-K filed with the Securities and Exchange Commission on May 29, 2009 were prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the audited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.
In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in our financial statements.
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NEW ACCOUNTING POLICIES
As of November 30, 2009, there were no new accounting policies that will materially affect our company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable
Item 4T. Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president and our secretary and treasurer, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of November 30, 2009, the end of the nine month period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our president and our secretary and treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and our secretary and treasurer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
There have been no changes in our internal control over financial reporting that occurred during the quarter ended November 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As of January 11, 2010, we were not aware of any material, existing or pending legal proceedings against our company, nor were we involved as a plaintiff in any material proceeding or pending litigation. There were no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, was an adverse party or had a material interest adverse to our interest.
Item 1A. Risk Factors.
Much of the information included in this quarterly report includes or is based upon estimates, projections or other forward-looking statements. Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.
Such estimates, projections or other forward-looking statements involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other forward-looking statements. Prospective investors should consider carefully the risk factors set out below.
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On August 31, 2007, our sole distribution agreement with Sunway Lighting Technology terminated. Since then, we have operated without a supplier of lighting products and accessories. We have been unsuccessful in entering into an agreement with a new supplier and consequently are now pursuing alternate business opportunities. There is no assurance that we will be successful in finding such an opportunity.
Our supplier agreement with our former sole supplier, Sunway Lighting Technology, was terminated on August 31, 2007. To date, we have not been successful in establishing a relationship with a new supplier. Consequently, we have determined to pursue alternate business opportunities in order to maximize shareholder value. We can provide no assurance that we will be able to locate compatible business opportunities. In the event that we do identify a potential business opportunity, we will incur substantial expenses in the acquisition and development of such business. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from our activities, our entire business may fail. There is no history upon which to base any assumption as to the likelihood that we will be successful in our pursuit of a new business opportunity. Even if we are able to acquire a new business opportunity, there is no assurance that we will generate any revenues or that revenues generated will be sufficient to provide a return to investors.
The worldwide macroeconomic downturn may reduce the ability of our company to obtain the financing necessary to continue our business and may reduce the number of viable businesses that we may wish to acquire.
In 2008 and 2009, there was a downturn in general worldwide economic conditions due to many factors, including the effects of the subprime lending and general credit market crises, volatile but generally declining energy costs, slower economic activity, decreased consumer confidence and commodity prices, reduced corporate profits and capital spending, adverse business conditions, increased unemployment and liquidity concerns. These macroeconomic effects, including the resulting recession in various countries and slowing of the global economy, resulted in decreased business opportunities as potential target companies faced increased financial hardship. Tightening credit and liquidity issues also resulted in increased difficulties for our company to raise capital for our continued operations and to consummate a business opportunity with a viable business. Although conditions appear to be becoming more favourable, it is unclear whether such improvements will continue and whether our company will see any improvements in our ability to raise capital as a result. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be forced to delay a new business acquisition or our entire business may fail.
We have had minimal revenues from operations and if we are not able to obtain further financing we may be forced to scale back or cease operations or our business operations may fail.
To date we have not generated significant income from our operations and we have been dependent on sales of our equity securities to meet the majority of our cash requirements. As at November 30, 2009, we had cash of $28,945 and a working capital deficiency of $109,694. We do not expect to generate cash flow from operations in the foreseeable future. We estimate that we will require between $30,000 and $70,000 to carry out our business plan for the next twelve month period. Accordingly, we will require additional funds, either from equity or debt financing, to maintain our daily operations and to locate, acquire and develop a prospective business opportunity. Obtaining additional financing is subject to a number of factors, including investor acceptance of any business we may acquire in the future and investor sentiment. Financing, therefore, may not be available on acceptable terms, if at all. The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital, however, will result in dilution to existing shareholders. If we are unable to raise additional funds when required, we may be forced to delay potential business acquisitions and our entire business may fail.
The fact that we have only generated limited revenues since our incorporation raises substantial doubt about our ability to continue as a going concern, as indicated in our independent auditors’ report in connection with our audited consolidated financial statements.
We have generated limited revenues since our inception on May 2, 2005. At February 28, 2009, our independent auditors’ report included an explanatory paragraph about our ability to continue as a going concern. We will, in all likelihood, continue to incur operating expenses without revenues until we acquire and develop a new business opportunity. We estimate our average monthly operating expenses to be between $2,500 and $5,833 per month. We will not be able to effectively pursue a new business opportunity without obtaining further financing. Our primary source of funds has been the sale of our common stock. If we cannot attract additional financing, we will not be able to acquire and
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develop a new business opportunity or generate any significant revenues or income. If we are unable to establish and generate material revenues, or obtain adequate future financing, our business will fail and you may lose some or all of your investment in our common stock. These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent auditors’ report on the financial statements for the period ended February 28, 2009.
We will need to raise additional funds in the near future. If we are not able to obtain future financing when required, we might be forced to scale back or cease operations or discontinue our business.
We do not currently have any arrangements for financing and we can provide no assurance to investors we will be able to find such financing when such funding is required. Obtaining additional financing would be subject to a number of factors, including investor acceptance. Furthermore, there is no assurance that we will not incur further debt in the future, that we will have sufficient funds to repay our future indebtedness or that we will not default on our future debts, thereby jeopardizing our business viability. Finally, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to pursue a new business opportunity, which might result in the loss of some or all of your investment in our common stock.
Our company anticipates that our funds will not be sufficient to satisfy our cash requirements for the next twelve month period. Also, there is no assurance that actual cash requirements will not exceed our estimates. We will depend almost exclusively on outside capital to pay for the continued operation of our company. Such outside capital may include the sale of additional stock, shareholder advances and/or commercial borrowing. There can be no assurance that capital will continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us will result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be forced to delay a new business acquisition or our entire business may fail.
All of our directors and officers are engaged in other business activities and accordingly may not devote sufficient time to our business affairs, which may affect our ability to conduct operations and generate revenues.
All of our directors and officers are involved in other business activities. Robert Fraser, our chief executive officer, president and director spends approximately 2 hours per week, or 5%, of his business time on the management of our company and William Grossholz, our secretary, treasurer and director, spends approximately 2 hours per week, or 5%, of his business time on the management of our company. As a result of their other business endeavours, Mr. Fraser and Mr. Grossholz may not be able to devote sufficient time to our business affairs, which may negatively affect our ability to conduct our ongoing operations and our ability to generate revenues. In addition, the management of our company may be periodically interrupted or delayed as a result of Mr. Fraser’s or Mr. Grossholz’s other business interests.
All of our assets and all of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.
All of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States. In addition, all of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them.
Because our officers, directors and principal shareholders control a large percentage of our common stock, such insiders have the ability to influence matters affecting our shareholders.
Our officers and directors, in the aggregate, beneficially own 32.9% of the issued and outstanding shares of our common stock. As a result, they have the ability to influence matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our officers, directors and principal shareholders control such shares, investors may find it difficult to replace our management if they
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disagree with the way our business is being operated. Because the influence by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.
Because we do not have sufficient insurance to cover our business losses, we might have uninsured losses, increasing the possibility that you would lose your investment.
We may incur uninsured liabilities and losses as a result of the conduct of our business. We do not currently maintain any comprehensive liability or property insurance. Even if we obtain such insurance in the future, we may not carry sufficient insurance coverage to satisfy potential claims. We do not carry any business interruption insurance. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.
Because we can issue additional common shares, purchasers of our common stock may incur immediate dilution and may experience further dilution.
We are authorized to issue up to 100,000,000 common shares, of which 7,450,000 are issued and outstanding as of January 11, 2010, which takes into account 550,000 shares of common stock a former director has agreed to return to treasury. Our board of directors has the authority to cause our company to issue additional shares of common stock without the consent of any of our shareholders. Consequently, our shareholders may experience more dilution in their ownership of our company in the future.
Because we do not intend to pay any dividends on our common shares, investors seeking dividend income or liquidity should not purchase shares.
We do not currently anticipate declaring and paying dividends to our shareholders in the near future. It is our current intention to apply net earnings, if any, in the foreseeable future to increasing our working capital. Prospective investors seeking or needing dividend income or liquidity should, therefore, not purchase our common stock. We currently have no revenues and a history of losses, so there can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders of our shares, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors, who currently do not intend to pay any dividends on our common shares for the foreseeable future.
Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. 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 in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must 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. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special 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 the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
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Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits.
| Exhibit | Description | |
| Number | ||
| 3.1 | Articles of Incorporation (incorporated by reference from our SB-2 filed on July 12, 2006) | |
| 3.2 | Bylaws (incorporated by reference from our SB-2 filed on July 12, 2006) | |
| 10.1 | Return to Treasury Agreement dated May 12, 2009 with Robert McIsaac (incorporated by reference from our Current Report on Form 10-Q filed on May 12, 2009) | |
| 14.1 | Code of Ethics (incorporated by reference from our Quarterly Report on Form 10-QSB filed on February 28, 2007) | |
| 21.1 | Subsidiaries of Lions Gate Lighting Corp.: LG Lighting Corp., a British Columbia company | |
| 31.1* | ||
| 31.2* | ||
| 32.1* | Section 906 Certification of Robert Fraser and William Grossholz | |
| 99.1 | Audit Committee Charter (incorporated by reference from our Annual Report on Form 10-K filed on May 29, 2009) |
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
LIONS GATE LIGHTING CORP.
| /s/ Robert Fraser | |
| By: Robert Fraser, President, Chief | |
| Executive Officer and Director | |
| (Principal Executive Officer) | |
| Dated: January 12, 2010 | |
| /s/ William Grossholz | |
| By: William Grossholz, Treasurer, | |
| Secretary and Director | |
| (Principal Financial Officer and | |
| Principal Accounting Officer) | |
| Dated: January 12, 2010 |