UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED:
For the Quarterly Period Ended September 30, 2005
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Commission File No. 0-28606
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NUWAVE TECHNOLOGIES, INC.
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(Exact Name Of Small Business Issuer)
Florida 65-0847995
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
109 North Post Oak Lane, Suite 422
Houston, Texas 77024
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code (713) 621-2737
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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 filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes[x] No[ ]
The number of shares of common stock issued and outstanding as of September 30,
2005 was 22,710,816.
Transitional Small Business Disclosure Format (check one).
Yes[ ] No[x]
PART I
FINANCIAL INFORMATION
NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO UNAUDITED CONSOLIDATED FINANCIALS STATEMENTS
CONTENTS
Page(s)
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Unaudited Consolidated Balance Sheet as of September 30, 2005 2
Unaudited Consolidated Statements of Operations
for the Nine Months Ended September 30, 2005 and 2004 3
Unaudited Consolidated Statements of Operations
for the Three Months Ended September 30, 2005 and 2004 4
Unaudited Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2005 and 2004 5
Notes to Unaudited Consolidated Financial
Statements as of September 30, 2005 6-12
1
NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2005
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ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 483,582
Purchased accounts receivable 159,515
Other accounts receivable 48,166
Notes receivable 111,315
Note receivable-affiliated company 463,343
Investment in marketable securities 647,425
Deferred tax asset 19,105
Deferred expenses 137,981
Prepaid expense 84,473
-----------
Total current assets 2,154,905
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NONCURRENT ASSETS
Land held for development and sale 2,890,426
Investments 14,819
Fixed assets, net 124,775
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Total noncurrent assets 3,030,020
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TOTAL ASSETS $ 5,184,925
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LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES
Notes payable $ 339,206
Accounts payable 251,942
Accrued liabilities 209,469
Convertible debentures 855,260
Current tax liability 14,055
Due to clients 249,037
-----------
Total current liabilities 1,918,969
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NONCURRENT LIABILITIES
Convertible debentures 1,700,000
Secured notes payable 4,631,605
Accrued interest payable 331,679
Deferred tax liability 22,148
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Total noncurrent liabilities 6,685,432
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Minority interest --
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT
Preferred Stock, par value $.01, 2,000,000 shares authorized:
Series A Convertible Preferred Stock, noncumulative, $.01 par value;
400,000 shares authorized; none issued --
Series B Convertible Preferred Stock, 100,000 shares authorized;
100,000 shares issued and outstanding; no liquidation or redemption
value 1,000
Series C Preferred stock; liquidation preference of $855,000
redeemable at $1,500 per share at Company option, cumulative dividends
of $120.00 per share per year, non-voting, par value $.01, 1,000
shares authorized, 570 shares issued and outstanding 6
Common stock, $.001 par value; 140,000,000 shares authorized;
22,710,816 shares issued and outstanding 22,711
Additional paid-in capital 1,174,344
Retained deficit (4,617,537)
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Total shareholders' deficit (3,419,476)
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 5,184,925
===========
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
2
NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2005 AND 2004
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2005 2004
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REVENUE
Commission income $ 834,415 $ 856,283
Discount income 136,987 120,181
Consulting revenue 132,000 90,270
Marketable securities gain 78,517 229,796
Other income 735 7,350
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Total revenue 1,182,654 1,303,880
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GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and benefits 522,044 390,776
Commission and loan processing 512,389 468,022
Advertising 140,158 115,662
Business development, travel and entertainment 109,042 51,682
Rent 98,481 46,720
Depreciation and amortization 34,622 23,960
Professional fees 274,200 187,587
Other 170,340 106,315
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Total general and administrative expenses 1,861,276 1,390,724
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OTHER (INCOME) EXPENSE
Minority interest (1,000) (14,476)
Interest expense 202,167 350,923
Other expense 19,469 47,270
Other income (90,547) --
Interest income (21,739) (18,645)
Merger expense 3,020,787 --
------------ ------------
Total other income 3,129,137 365,072
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Loss before income tax (3,807,759) (451,916)
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INCOME TAX PROVISION
Current income tax expense (benefit) -- (39,000)
Deferred income tax expense (benefit) (102,651) 27,062
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Total income tax provision (benefit) (102,651) (11,938)
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NET LOSS FROM CONTINUING OPERATIONS (3,705,108) (439,978)
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DISCONTINUED OPERATIONS
Loss from discontinued operations 26,791 --
Provision for income tax expense -- --
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Net loss from discontinued operations 26,791 --
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NET LOSS (3,731,899) (439,978)
Preferred dividends paid 45,128 55,039
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LOSS APPLICABLE TO COMMON SHARES $ (3,777,027) $ (495,017)
============ ============
Basic and diluted loss per share $ (0.19) $ (0.02)
============ ============
Basic and diluted average shares outstanding 20,247,868 20,247,868
============ ============
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
3
NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2005 AND 2004
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2005 2004
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REVENUE
Commission income $ 235,146 $ 272,225
Discount income 38,379 47,558
Consulting revenue 15,000 29,500
Marketable securities gain (loss) (116,047) 167,078
Other income -- 3,850
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Total revenue 172,478 520,211
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GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and benefits 193,985 128,900
Commission and loan processing 141,678 162,318
Advertising 50,621 42,490
Business development, travel and entertainment 27,632 18,276
Rent 37,105 16,092
Depreciation and amortization 12,867 8,716
Professional fees 112,287 89,691
Other 41,613 36,913
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Total general and administrative expenses 617,788 503,396
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OTHER (INCOME) EXPENSE
Minority interest (250) 2,832
Interest expense 60,100 113,799
Other expense (5,543) --
Other income (44,030) --
Interest income (16,206) (14,605)
Merger expense 3,020,787 --
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Total other income 3,014,858 102,026
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Loss before income tax (3,460,168) (85,211)
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INCOME TAX PROVISION
Current income tax expense (benefit) -- (39,000)
Deferred income tax expense (benefit) (163,858) 62,291
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Total income tax provision (benefit) (163,858) 23,291
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NET LOSS FROM CONTINUING OPERATIONS (3,296,310) (108,502)
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DISCONTINUED OPERATIONS
Loss from discontinued operations 48,698 --
Provision for income tax expense -- --
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Net loss from discontinued operations 48,698 --
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NET LOSS (3,345,008) (108,502)
Preferred dividends paid 15,068 16,733
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LOSS APPLICABLE TO COMMON SHARES $ (3,360,076) $ (125,235)
============ ============
Basic and diluted loss per share $ (0.17) $ (0.01)
============ ============
Basic and diluted average shares outstanding 20,247,868 20,247,868
============ ============
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
4
NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
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2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,731,899) $ (439,978)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 34,622 23,960
Amortization of deferred expenses 95,509
Minority interest -- (14,476)
Loss from discontinued operations 26,791 --
Non-cash merger expenses 2,984,596 --
Non-cash expense for redemption of preferred stock 18,163 --
Non-cash interest expense 100,000 325,000
Non-cash expenses 5,522 (25,208)
Non-cash income (40,000) --
Non-cash deferred taxes (83,546) --
(Increase) decrease in assets:
Purchased accounts receivable 421,759 (92,573)
Other accounts receivable 1,057 (52,983)
Accounts receivable-shareholder -- 37,500
Notes receivable (136,126) (174,563)
Deferred tax asset (19,105) (39,000)
Prepaid and other (38,554) (40,549)
Investment in marketable securities 373,520 (293,847)
Deferred expenses -- 16,692
Increase (decrease) in liabilities:
Accounts payable 1,305 16,453
Accrued liabilities 21,905 (448)
Margin loans (392,891) --
Current tax liability -- (13,883)
Due to clients 227,576 (17,208)
Accrued interest 63,684 --
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Net cash used in operating activities (66,112) (785,111)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (94,365) (43,379)
Cash received in merger 35,853 --
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Net cash used in investing activities (58,512) (43,379)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on note payable (73,809) (9,463)
Net proceeds from sale of convertible debentures 335,000 1,135,000
Net proceeds from issuance of common stock -- 270,150
Proceeds from issuance of stock to minority interest 1,000 --
Preferred dividends paid (45,128) (55,039)
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Net cash provided by financing activities 217,063 1,340,648
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NET INCREASE IN CASH AND CASH EQUIVALENTS 92,439 512,158
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 391,143 306,562
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 483,582 $ 818,720
=========== ===========
SUPPLEMENTAL INFORMATION
Interest paid $ 8,856 $ 10,991
Taxes paid -- 40,945
Redemption of preferred stock:
Decrease in accounts receivable (43,500) (50,238)
Increase in accounts payable -- (65,530)
Decrease in paid-in capital 25,337 115,768
Net liabilities of subsidiary distributed to shareholders 44,697 --
Non-cash assets acquired in merger 3,128,348 --
Non-cash liabilities acquired in merger 6,112,387 --
Non-cash capitalized interest 6,419 --
Non-cash merger expenses 2,984,596 --
Preferred and common stock issued in merger 1,005 --
Increase in deferred expenses 65,000 165,000
Additional minority investment -- 8,330
Increase in common stock and reduction of additional
paid-in capital for stock split and change in par value -- 17,380
Increase in additional paid-in capital for beneficial
conversion feature 100,000 325,000
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
5
NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
NOTE 1 - DESCRIPTION OF MERGER AND RELATED EVENTS
On August 31, 2005, NuWave Technologies, Inc. (the "Company" or "NuWave")
entered into a merger agreement (the "Agreement") with Strategies Acquisition
Corp., a wholly-owned subsidiary of the Company ("SPV"), Corporate Strategies,
Inc. ("Corporate Strategies") and the shareholders of Corporate Strategies
("Shareholders"), whereby SPV merged with and into Corporate Strategies, with
Corporate Strategies remaining as the surviving corporation and continuing its
corporate existence under the laws of the State of Delaware and as a
wholly-owned subsidiary of the Company (the "Merger"). The separate existence of
SPV has ceased.
Pursuant to the terms of the Agreement, the Company issued one (1) share
of its common stock ("Common Stock"), par value $0.001 per share, to each holder
of Corporate Strategies Class A common stock in exchange for two (2) shares of
Corporate Strategies Class A common stock, par value $0.001 per share. Second,
the Company issued one (1) share of the Company's Series C preferred stock
("Series C Preferred"), par value $0.01 per share, to each holder of Corporate
Strategies Series A preferred stock for one (1) share of Corporate Strategies
Series A preferred stock, par value $0.001 per share.
6
The Company issued and delivered shares of its Series B convertible
preferred stock ("Series B Preferred") to each holder of Corporate Strategies
Class B common stock so that effectively upon conversion of the Series B
Preferred into common shares, the common shares issued upon conversion shall be
equal to ninety-five percent (95%) of the issued and outstanding stock of the
Company (calculated on a fully diluted basis as of the date of the Merger,
following the issuance of all the Merger Consideration (as such term is defined
in the Agreement) and after giving effect to such conversion, but not including
any shares of Common Stock issuable upon conversion of any then outstanding
Company convertible debentures). Therefore, the Merger Consideration for the
Common Stock, Series C Preferred and Series B Preferred was the Corporate
Strategies Class A common, Series A preferred and Class B common, respectively.
The number of shares issued to the Shareholders in connection with the Merger
was based upon a determination by the Company's Board of Directors (the
"Board").
The Series B Preferred shareholders and the holders of the Common Stock vote
together and the Shares of Series B Preferred shall be counted on an "as
converted" basis, thereby giving the Series B Preferred Shareholders control of
the Company. The transaction is being accounted for as a reverse acquisition
since control of the Company has passed to the shareholders of the acquired
company (Corporate Strategies).
The accompanying consolidated financial statements presented in this report
should be read in conjunction with Corporate Strategies' audited consolidated
financial statements and footnotes for the year ended December 31,2004 which are
included in the Company's Current Report on Form-8K/A as filed with the U.S.
Securities and Exchange Commission on November 14, 2005.
NOTE 2 - REAL ESTATE DEVELOPMENT BUSINESS SEGMENT
In December 2003 NuWave purchased a parcel of land in New Jersey from a related
entity and intends to develop and sell residential units. In April 2004, NuWave
acquired land and building that it intends to develop and sell.
NOTE 3 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See footnotes to financial statements for Corporate Strategies described in Note
1 above for other significant accounting policies which have not changed.
Land Held for Development and Sale
Land held for development and sale is stated at the seller's historical
cost basis, plus the costs of improvements.
Interest Capitalization
The Company follows SFAS No. 34, "Capitalization of Interest Costs", which
provides for the capitalization of interest as part of the historical cost of
acquiring certain assets. Interest is capitalized on assets that require a
period of time to get them ready for their intended use, such as real estate
development projects. Interest is capitalized from the period activities begin,
such as planning and permitting, until such time as the project is complete.
Interest costs include interest recognized on obligations having explicit rates,
as well as the amortization of discounts that result from imputing interest on
convertible debentures over the life of the obligation. Interest is capitalized
on only the net book value of the land and improvements, net of the discount
recorded on the acquisition of the land. Interest on specific borrowings
associated with the land, that are in excess of its net book value are expensed
as incurred.
Impairment of Long-Lived Assets
The Company periodically assesses the recoverability of long-lived assets,
including property and equipment and land held for development and sale, when
there are indications of potential impairment, based on estimates of
undiscounted future cash flows. The amount of impairment is calculated by
comparing anticipated discounted future cash flows with the carrying value of
the related asset. In performing this analysis, management considers such
factors as current results, trends, and future prospects, in addition to other
economic factors.
7
Revenue Recognition
Revenues from sales of real estate are recorded when title is conveyed to
the buyer, adequate cash payment has been received and there is no continued
involvement.
NOTE 4 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of NuWave
have been prepared in accordance with the accounting principles generally
accepted in the United States of America for interim financial reporting and
with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B. They do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, considered necessary for a fair
presentation, have been included in the accompanying unaudited financial
statements. Operating results for the periods presented are not necessarily
indicative of the results that may be expected for the full year.
Since Corporate Strategies is the surviving entity of the reverse merger, the
financial reports include the unaudited consolidated balance sheet at September
30, 2005 and the results of operations for the month of September 2005 for
NuWave and its consolidated subsidiaries, and the operations of Corporate
Strategies for the eight (8) months ended August 31, 2005. The unaudited
statement of operations for the period ended September 30, 2004 are those of
Corporate Strategies.
The unaudited condensed consolidated financial statements include the accounts
of NuWave Technologies, Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
These unaudited condensed consolidated financial statements should be read in
conjunction with the financial statements and footnotes for the year ended
December 31, 2004 for Corporate Strategies, Inc., which were filed on the
Company's Current Report on Form 8-K/A on November 14, 2005.
NOTE 5 - CONVERTIBLE DEBENTURES AND NOTES PAYABLE
During 2003 and 2004, the Company issued, to four (4) individuals, five (5)
convertible debentures totaling $480,000 with substantially the same terms and
conditions. These debentures bear interest at a rate of five percent (5%) per
annum, with interest due at maturity or upon conversion. Debentures in the
amount of $280,000 mature in December 2005, $100,000 matures in January 2006 and
$100,000 matures in October 2006. On the second anniversary date of issuance,
the Company has the option of paying all the unpaid principal and accrued
interest on the unconverted debentures or converting the debentures into common
stock. At the option of the holder, at any time prior to maturity, any portion
of this convertible debenture may be converted into Common Stock. The value of
principal and accrued interest is convertible at the per share price equal to
the lesser of (a) one hundred twenty percent (120%) of the initial bid price, or
(b) eighty percent (80%) of the lowest closing bid price for the five days
immediately preceding the conversion date. In addition, the Company may redeem,
with fifteen (15) days advance notice, a portion or all of this outstanding
debenture at 110% of the dollar value of the amount redeemed plus accrued
interest.
During May and July 2005, the Company issued a $250,000 and a $150,000
convertible debenture with the same terms to Cornell Capital Partners, LP. These
debentures bear interest at a rate of twelve percent (12%) per annum, with
interest due at maturity or upon conversion. The $250,000 debenture matures in
December 2005 and the $150,000 debenture matures in February 2006. At the option
of the holder, at any time prior to maturity, any portion of this convertible
debenture may be converted into Common Stock. The value of principal and accrued
interest is convertible at $0.10 per share. At the option of the Company at any
time, or upon maturity for any amounts not converted, the Company may redeem
this convertible debenture and upon such, shall pay a twenty percent (20%)
redemption premium to Cornell.
8
On May 6, 2004, the Company entered into a Security Purchase Agreement with
Cornell Capital Partners, LP ("Cornell") for the sale of $1,200,000 of 5%
Secured Convertible Debentures. The debentures, along with unpaid interest are
convertible, at the option of the holder, into Class A common stock at a
conversion price equal to the lesser of 120% of the initial bid price of the
common stock or 80% of the closing bid price as listed on a principal market. On
the second anniversary date of issuance, the Company has the option of paying
all the unpaid principal and accrued interest on the unconverted debentures or
converting the debentures into common stock. The Company also has the right to
redeem the debentures, in whole or part, at any time for 120% of the face amount
of the debentures plus accrued interest. The debentures are secured by all of
the Company's assets. At closing $400,000 of the debentures were issued and
funded. The second $400,000 was funded in September, 2004. The final $400,000
was funded in April, 2005.
On June 29, 2004, the Company entered into an agreement with iVoice, Inc. for
the sale of $500,000 of 5% Secured Convertible Debentures. Proceeds were
received and the debentures issued at the closing date. The redemption and
convertibility terms are identical with the securities discussed in the
paragraph above. These debentures have been sold to Cornell Capital LP.
During January 2005, the Company and Cornell terminated a $3,300,000 convertible
debenture issued to Cornell, by the Company on December 22, 2003. Upon the
termination of the convertible debenture, the Company issued a $3,481,274
promissory note (the "Promissory Note") to Cornell, representing the sum of the
unpaid balance of $3,300,000 and accrued interest of $181,274 through the date
of the termination. The Promissory Note bears interest at a rate of five percent
(5%) per annum, with interest due at maturity. The Promissory Note matures on
December 22, 2008 and is collateralized by the Company's investment in its land
held for development and sale located in Cranford, New Jersey.
During January 2005, the Company's wholly-owned subsidiary, Lehigh Acquisition
Corp. ("Lehigh"), entered into an Assignment and Amendment Agreement (the
"Assignment Agreement") related to that certain $1,400,000 Note Payable issued
by Lehigh on December 22, 2003 to Stone Street Asset Management, LLC ("Stone
Street"). Pursuant to the Assignment Agreement, Stone Street assigned its rights
under the note to Cornell. As issued, the note provided for the payment of sixty
(60) equal monthly installments of principal and interest of $27,741 beginning
on January 1, 2006, maturing on January 10, 2010 and secured through a second
mortgage on the land. The Note Payable bears interest at a rate of five percent
(5%) per annum.
Annual maturities of notes payable and convertible debentures at September 30,
2005 are as follows:
Period Ending September 30, Amount
-------------------------- -----------
2006 $ 1,220,953
2007 1,564,995
2008 4,160,542
2009 294,271
2010 310,050
-----------
7,550,081
Less: unamortized debt discount (24,740)
-----------
Total note payable and convertible
debentures $ 7,526,071
===========
9
NOTE 6 DESCRIPTION OF CAPITAL STOCK
The current authorized capital stock of the Company consists of One Hundred
Forty Million (140,000,000) shares of Common Stock, par value $0.001 per share,
One Hundred Thousand (100,000) shares of convertible Series B Preferred, par
value $0.01 per share and One Thousand (1,000) non-voting shares of Series C
Preferred, par value $0.01 per share. As of September 30, 2005, 22,710,816
shares of Common Stock, One Hundred Thousand (100,000) shares of Series B
Preferred and 570.199 shares of Series C Preferred stock were issued and
outstanding. The following description is a summary of the capital stock and
contains the material terms of voting capital stock.
Each share of Common Stock entitles the holder to one (1) vote on each matter
submitted to a vote of our shareholders, including the election of Directors.
There is no cumulative voting. Subject to preferences that may be applicable to
any outstanding preferred stock, Shareholders are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the Board of
Directors. Shareholders have no preemptive, conversion or other subscription
rights.
The Company is authorized to issue Two Million (2,000,000) shares of preferred
stock. As a class, the holders of the Company's Series B Preferred shall,
collectively, be entitled to cast a number of votes equal to ninety-five percent
(95%) of the total issued and outstanding voting stock of the Company on all
matters submitted to the Shareholders for approval, which votes shall be
distributed among the holders of Series B Preferred on a pro rata basis based
upon the number of shares of Series B Preferred held by such respective holders.
The holders of shares of the Series B Preferred shall be entitled to vote on all
matters on which the Common Stock shall be entitled to vote. The Series C
Preferred shares have no voting rights, except as required under Delaware
General Corporation Law.
NOTE 7 - WARRANTS AND STOCK OPTIONS
At September 30, 2005 warrants were outstanding to purchase 200,000 shares of
the Company's common stock for $1.00 per common share. The warrants expire in
September 2008. At September 30, 2005, warrants were outstanding to purchase
3,100 shares of the Company's common stock at a weighted average price of $38.39
per common share. The warrants expire in January through October 2007.
There are no stock options outstanding.
NOTE 8 -INCOME TAXES
The Company will file a consolidated tax return with its subsidiaries. NuWave
Technologies, Inc. pre-merger has federal net operating loss carryforwards
("NOL") of approximately $28,185,000 which will expire in years 2010-2024, and
unused state NOL's of $9,914,000 which will expire in years 2007 to 2011. The
Company's federal net operating loss carryforward will be subject to significant
annual limitations which will reduce or defer the utilization of the loss as a
result of ownership change as defined in Section 382 of the Internal Revenue
Code.
The net deferred tax assets that would result from use of net operating
loss carryforwards discussed above have been fully reserved for in the financial
statements.
NOTE 9 - CONCENTRATION
The $1,700,000 convertible debentures, the $4,631,605 secured notes payable and
$400,000 of the $855,260 convertible debentures classified as a current
liability on the balance sheet are owed to a single creditor, Cornell Capital
Partners, LP.
Substantially all of the land held for development and sale relates to a parcel
of land in New Jersey purchased from a related party.
NOTE 10 - SEGMENTS
The Company has four (4) segments: (i) mortgage brokerage (through its 85% owned
subsidiary, Aim American Mortgage, Inc., and subsidiary, which originates
non-government insured loans in Texas), (ii) equipment leasing through CSI
Business Finance, Inc., the former wholly-owned subsidiary of Corporate
Strategies, Inc. (distributed to the shareholders of Corporate Strategies, Inc.
effective September 1, 20005), and is treated as a discontinued operation in the
financial statements), (iii) consultant and turnaround services and (iv) real
estate development.
10
Corporate Strategies helps micro cap public and private companies accelerate
growth, provides management restructuring and turnaround expertise, and in
select cases, makes direct investments in its client companies.
The Company evaluates segment performance and allocates resources based on
several factors, of which revenue and income before federal income tax are the
primary financial measures. The accounting policies of the reportable segments
are the same as those described in the footnote entitled "Summary of Significant
Accounting Policies" in the Note 3 of these to the Consolidated Financial
Statements.
Consulting
Mortgage Equipment and Turnaround Real Estate
Brokerage Leasing (1) Services Development Total
----------- ------------ -------------- -------------- -----------
Nine (9) Months Ended September 30,2004
Revenue $ 834,435 $ -- $ 469,445 -- $ 1,303,880
Interest expense/(income) (6,505) -- 338,783 -- $ 332,278
Income before income tax (144,183) -- (307,733) -- $ (451,916)
Segment assets 354,161 -- 2,149,106 -- $ 2,503,267
Additions to long-term assets 34,938 -- 8,441 -- $ 43,379
Depreciation 11,512 -- 12,448 -- $ 23,960
Nine (9) Months Ended September 30,2005
Revenue $ 829,986 $ 117,793 $ 352,668 -- $ 1,300,447
Interest expense/(income) (2,978) 6,371 147,610 35,796 $ 186,799
Income (Loss) before income tax (145,474) (26,791) (601,956) (3,060,329) $(3,834,550)
Segment assets 148,321 363,336 1,841,075 3,195,529 $ 5,548,261
Additions to long-term assets 2,483 1,000 85,463 6,419 $ 95,365
Depreciation and Amortization 17,626 223 16,996 -- $ 34,845
(1) There are no amounts presented for September 30, 2004 as operations
commenced in the fourth quarter of 2004. The subsidary was distributed to
shareholders of Corporate Strategies on August 25, 2005. Operation of this
subsidary is reflected as discontinued operations in the financial
statements.
(2) The real estate development segment relates to operations acquired from
NuWave in the merger transaction in August 2005. Operations for September
2005 are included in this table.
NOTE 11 - STANDBY EQUITY DISTRIBUTION AGREEMENT
On January 26, 2005, the Company entered into a Standby Equity Distribution
Agreement with Cornell Capital Partners, LP, and at the same time, terminated
the former Standby Equity Distribution Agreement, dated May 2004. Pursuant to
the Standby Equity Distribution Agreement, the Company may, at its discretion,
periodically sell to Cornell Capital Partners, LP shares of common stock
("Common Stock") for a total purchase price of up to $30.0 million; the purchase
commitment. For each share of Common Stock purchased under the Standby Equity
Distribution Agreement, Cornell Capital Partners, LP will pay 99% of the lowest
volume weighted average price on the Over-the-Counter Bulletin Board or other
principal market on which our Common Stock is traded for the five (5) days
immediately following the notice date.
The Company may request advances under the Standby Equity Distribution Agreement
after the underlying shares are registered with the U.S. Securities and Exchange
Commission. Thereafter, they may continue to request advances until Cornell
Capital Partners, LP has advanced $30.0 million or twenty four (24) months after
the effective date of the accompanying registration statement, whichever occurs
first.
In addition, the Company may not request advances if the shares to be issued in
connection with such advances would result in Cornell Capital Partners, LP
owning more than 9.9% of our outstanding common stock.
Cornell Capital Partners, LP is permitted to terminate the Standby Equity
Distribution Agreement if (i) there is a stop order or suspension of the
effectiveness of this registration statement for 50 trading days or (ii) NuWave
fails to materially comply with certain covenants, which include the following:
11
o Maintaining a quotation of the Common Stock on the Over-the-Counter
Bulletin Board,
o Maintaining NuWave's status as a public company under Section 12(g)
of the Securities Act of 1934,
o Delivering instructions to the transfer agent to issue shares in
connection with an advance notice,
o Failing to notify Cornell Capital Partners, LP of events impacting
the registration of the stock to be issued, including the issuance
of a stop order,
o Issuing stock or convertible securities at a price less than the
market price of our Common Stock on the date of issuance, or
o Merging or consolidating NuWave with another company where the
acquiring entity does not assume NuWave's obligations under the
Standby Equity Distribution Agreement.
We cannot predict the actual number of shares of Common Stock that will be
issued pursuant to the Standby Equity Distribution Agreement, in part, because
the purchase price of the shares will fluctuate based on prevailing market
conditions and we have not determined the total amount of advances we intend to
draw.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction - Forward Looking Statements
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), NuWave Technologies,Inc. Inc.
and its subsidiaries (collectively, the "Company") is hereby providing
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements made herein. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions of
future events or performance are not statements of historical facts and may be
forward-looking. These forward-looking statements are based largely on the
Company's expectations and are subject to a number of risks and uncertainties,
including but not limited to, economic, competitive, regulatory, growth
strategies, available financing and other factors discussed elsewhere in this
report and in documents filed by the Company with the U.S. Securities and
Exchange Commission ("SEC"). Many of these factors are beyond the Company's
control. Actual results could differ materially from the forward-looking
statements made. In light of these risks and uncertainties, there can be no
assurance that the results anticipated in the forward-looking information
contained in this report will, in fact, occur.
Any forward-looking statement speaks only as of the date on which such statement
is made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the impact of each
such factor on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
The Merger
On August 31, 2005 NuWave Technologies, Inc. (the "Company") entered into a
merger agreement (the "Agreement") with Strategies Acquisition Corp., a
wholly-owned subsidiary of the Company ("SPV"), Corporate Strategies, Inc.
("Corporate Strategies") and the shareholders of Corporate Strategies listed
therein ("Shareholders"), whereby SPV merged with and into Corporate Strategies,
with Corporate Strategies remaining as the surviving corporation and continuing
its corporate existence under the laws of the State of Delaware and as a
wholly-owned subsidiary of the Company (the "Merger"). The separate existence of
SPV has ceased.
12
Pursuant to the terms of the Agreement, the Company issued one (1) share
of its common stock ("Common Stock"), par value $0.001 per share, to each holder
of Corporate Strategies Class A common stock in exchange for two (2) shares of
Corporate Strategies Class A common stock, par value $0.001 per share. Second,
the Company issued one (1) share of the Company's Series C preferred stock
("Series C Preferred"), par value $0.01 per share, to each holder of Corporate
Strategies Series A preferred stock for one (1) share of Corporate Strategies
Series A preferred stock, par value $0.001 per share.
The Company issued and delivered shares of its Series B convertible
preferred stock ("Series B Preferred") to each holder of Corporate Strategies
Class B common stock so that effectively upon conversion of the Series B
Preferred into common shares, the common shares issued upon conversion shall be
equal to ninety-five percent (95%) of the issued and outstanding stock of the
Company (calculated on a fully diluted basis as of the date of the Merger,
following the issuance of all the Merger Consideration (as such term is defined
in the Agreement) and after giving effect to such conversion, but not including
any shares of Common Stock issuable upon conversion of any then outstanding
Company convertible debentures). Therefore, the Merger Consideration for the
Common Stock, Series C Preferred and Series B Preferred was the Corporate
Strategies Class A common, Series A preferred and Class B common, respectively.
The number of shares issued to the Shareholders in connection with the Merger
was based upon a determination by the Company's Board of Directors (the
"Board").
The Series B Preferred Shareholders and the holders of the Common Stock vote
together and the Series B Preferred shall be counted on an "as converted" basis,
thereby giving the Series B Preferred Shareholders control of the Company. The
transaction is being accounted for as a reverse acquisition since control of the
Company has passed to the shareholders of the acquired company (Corporate
Strategies).
The accompanying unaudited consolidated financial statements presented in this
report should be read in conjunction with Corporate Strategies' audited
consolidated financial statements and footnotes for the year ended December 31,
2004 which are included in the Form-8K/A filed August 31,2005.
PLAN OF OPERATIONS
The Company has been historically focused on technology sales and real estate
development. On August 31, 2005, the Company entered into a reverse merger
agreement with Corporate Strategies and discontinued all technology sales
activities. The Company intends to develop and sell the Company's real estate
investments, and focus on the business activities of Corporate Strategies going
forward.
Corporate Strategies helps micro cap public and private companies accelerate
growth, provides management restructuring and turnaround expertise, and in
select cases, makes direct investments in its client companies. It has two
primary operating subsidiaries, Corporate Strategies, Inc. and Aim American
Mortgage, Inc. The Company intends to dedicate its resources to the growth of
Corporate Strategies as we believe the market for serving the micro cap public
company market has significant growth potential, while the mortgage markets
served by our subsidiary Aim American Mortgage, Inc. are slowing due to higher
interest rates and slower demand.
Corporate Strategies markets its services to hedge funds, institutional
investors, and banks who have significant exposure in troubled micro cap public
companies. These companies are typically in financial difficulty, may be in
default of lending or equity agreements, and facing bankruptcy or liquidation if
their operations are not turned around. The Company believes that the large
amount of capital invested in the micro cap public market over the last three
(3) years will result in significant growth opportunities for services in
restructuring and turnaround management.
13
Corporate Strategies is generally compensated with a combination of cash
payments on a monthly or quarterly basis, and outright grants of equity in the
form of common stock, and/or warrants for purchasing common stock that is
intended to reward the Company for the possible equity growth in value for
successfully restructuring the client company. Equity in client companies is the
Company's largest potential source of compensation, as the Company believes that
the possibility of turnaround value is greater than cash compensation alone.
This performance based compensation arrangement clearly demonstrates that the
Company's interests are consistent with both the Company's customers and their
investors.
The Company minimizes risk from restructuring and turnaround clients by
implementing the following policies:
o The Company will not assume the financial obligations of the client
company in any circumstance. In most cases, the financial
institution with the greatest risk has referred the Company to the
transaction.
o The Company requires them to provide the client company with working
capital necessary to execute the turnaround plan.
o The Company requires the client to fully indemnify the Company
against any actions, with the exception of gross negligence or
malfeasance.
o If the client has officer and director insurance, we require the
company to add the Company or any of the Company's contractors as
insured parties under the policy.
o If further financial resources are later needed to restructure the
client, necessary borrowings for the client company's needs will
only be on a non recourse basis.
o Should the company consider altering any of the policies above, it
will require a vote of the board of directors to waive them and
agree to the maximum amount of risk that the Company will assume.
Results Of Operations
Results Of Operations For The Nine (9) Months Ended September 30, 2005
compared to The Nine (9) Months Ended September 30, 2004
Revenues
Commission income decreased by approximately $22,000 to $834,415 in 2005. The
increase in mortgage interest rates during 2005 resulted in a decrease in the
volume of loans originated. Discount income increased by approximately $17,000
to $136,987 in 2005, reflecting increased business volumes for customers and
longer loan periods. Management anticipates decreased volumes in the future.
Consulting revenue increased by approximately $42,000 to $132,000 in 2005.
Consulting revenues are generally one-time fees related to specific events.
During January 2005, the Company entered into a contract to provide ongoing
consulting services at $5,000 per month to Power Technologies, Inc. There are
no Power Technology consulting revenues reflected in the period ending September
30, 2004.
The marketable securities gain decreased from $229,796 in 2004 to $78,517 in
2005. The company incurred a substantial loss on marketable securities in the
third quarter 2005, largely offsetting first and second quarter gains. The
company both accepts compensation for its services and invests in micro cap
marketable securities. Most of these securities are in companies defined as
penny stocks and are volatile, trading substantially up or down in any given
quarter. In the third quarter of 2005, our overall portfolio of these securities
declined in value. Management is investigating additional procedures to mitigate
this risk in the future, but cannot assure investors at this time that this risk
can or will be eliminated or even minimized.
There were no revenues from the real estate business segment.
General and Administrative Expenses
14
Commission and loan processing costs increased by approximately $44,000 to
$512,389 in 2005; related commission income decreased by $27,000 from 2004.
Corporate Strategies was forced to increase commission rates to be competitive
with the market. The Company expects this trend to higher commission rates to
continue for the forseeable future.
Salaries and benefits increased by approximately $130,000 to $522,044 in 2005.
The Company added new administrative personnel to improve the Company's
infrastructure and support for growth and operations as a public company.
Business development, travel and entertainment more than doubled to $109,042 in
2005; The Company's changing focus to turnarounds and management restructuring
of public companies resulted in additional travel to call on hedge funds,
institutional investors and banks throughout the country, and increased
advertising to improve the Company's visibility.
Rent more than doubled to $98,481 in 2005, reflecting the addition of a new
location to support the improved infrastructure, and the utilization of
additional space at the original location.
Professional fees increased by approximately $87,000 to $274,200 in 2005.
Amortization of deferred expenses on the issuance of convertible debentures was
$30,407 in 2004 and $88,969 in 2005.
Other increased by approximately $63,000 in 2005 reflecting the increases for
utilities, supplies, phone and similar costs to support the increased business
development effort and the additional infrastructure.
Other Income And Expense
Interest expense decreased by approximately $148,000 to $202,167 in 2005. During
2004 the Company had expenses totaling $325,000 related to beneficial conversion
features on convertible debt entered into during the period. The expense related
to beneficial conversion features on convertible debt entered into during 2005
was $100,000. Interest expense on convertible debt was approximately $15,000 in
2004 and $94,000 in 2005. Interest on convertible debt will be substantially
higher in future periods, since NuWave convertible debt will be outstanding for
the entire period. (NuWave interest on convertible debt was approximately
$36,000 for September 2005.)
Other income of $90,547 in 2005 includes a $40,000 gain on the distribution of
CSI Business Finance, Inc. to shareholders, and approximately $30,000 related to
a settlement received for termination of a business relationship.
Merger expenses of $3,020,787 in 2005 primarily represents liabilities assumed
in excess of assets acquired ($3,004,596) in the merger.
Results Of Operations
Results Of Operations For The Three (3) Months Ended September 30, 2005 compared
to The 3 Months Ended September 30, 2004
Revenues
Commission income decreased by approximately $37,000 to $235,146 in 2005. The
increase in mortgage interest rates during 2005 resulted in a decrease in the
volume of loans originated.
Discount income decreased by approximately $8,000 to $38,379 in 2005. The
Company ceased factoring for a client we had factored in 2004.
Consulting revenue decreased by approximately $15,000 to $15,000 in 2005.
Consulting revenues are generally one-time fees related to specific events. All
2004 income was of this type and there was none in 2005. During January 2005,
the Company entered into a contract to provide ongoing consulting services at
$5,000 per month to Power Technologies, Inc. There are no Power Technology, Inc.
consulting revenues reflected in the period ending September 30, 2004.
The marketable securities gain decreased from $167,078 in 2004 to a loss of
$116,047 in 2005. The Company incurred a substantial loss on its portfolio of
marketable securities in the third quarter 2005. The Company both accepts
compensation for its services and invests in micro cap marketable securities.
Most of these securities are in companies defined as penny stocks and are
volatile, trading substantially up or down in any given quarter. In the third
quarter of 2005, the Company's overall portfolio of these securities declined in
value. Management is investigating additional procedures to mitigate this risk
in the future, but cannot assure investors at this time that this risk can or
will be eliminated or even minimized.
There were no revenues from the real estate business segment.
15
General and Administrative Expenses
Commission and loan processing costs decreased by approximately $20,000 to
$141,678 in 2005; related commission income decreased by $37,000 from 2004.
Lower commission income volumes were partially offset by higher commission
rates. Corporate Strategies was forced to increase commission rates to be
competitive with the market. The Company expects this trend to higher commission
rates to continue for the forseeable future.
Salaries and benefits increased by approximately $65,000 to $193,985 in 2005.
The Company added new administrative personnel to improve the Company's
infrastructure and support for growth and operations as a public company.
Business development, travel and entertainment increased by fifty percent (50%)
to $27,632 in 2005; the Company's changing focus to turnarounds and management
restructuring of public companies resulted in additional travel to call on hedge
funds, institutional investors and banks throughout the country, and increased
advertising to improve the Company's visibility.
Rent more than doubled to $37,105 in 2005, reflecting the addition of a new
location to support the improved infrastructure, and the utilization of
additional space at the original location.
Professional fees increased by approximately $23,000 to $112,287 in 2005.
Increased amortization of deferred debenture costs and increased legal fees
caused the increase.
Other Income And Expense
Interest expense decreased by approximately $53,000 to $60,100 in 2005.
During 2004 the Company had expense of approximately $100,000 related to
beneficial conversion features on convertible debt entered into during the
period (none in 2005). Interest expense on convertible debt was approximately
$15,000 in 2004 and $94,000 in 2005. Interest on convertible debt will be
substantially higher in future periods, since NuWave convertible debt will be
considered outstanding for the entire period. (NuWave interest on convertible
debt was approximately $36,000 for September 2005).
Other income of $44,053 in 2005 includes a $40,000 gain on the
distribution of CSI Business Finance, Inc. to the shareholders of Corporate
Strategies.
Merger expenses of $3,020,787 in 2005 primarily represents liabilities
assumed in excess of assets acquired ($3,004,596) in the merger.
Liquidity And Capital Resources
As of September 30, 2005, the Company had working capital of $235,936
including $483,582 in cash. The Company at its option can force conversion of
$1,700,000 of convertible debentures into the Company's common stock. In
addition, the Company has a Standby Equity Distribution Agreement with Cornell
Capital Partners, LP, under which the Company may, at its discretion,
periodically sell to Cornell Capital Partners, LP shares of common stock for a
total purchase price of up to $30.0 million, the purchase commitment. For each
share of common stock purchased under the Standby Equity Distribution Agreement,
Cornell Capital Partners, LP will pay 99% of the lowest volume weighted average
price on the Over-the-Counter Bulletin Board or other principal market on which
the Company's common stock is traded for the five (5) days immediately following
the notice date
This amount of available working capital plus, availability of forced
debenture conversion and amounts available under the Standyby Equity
Distribution Agreement should be sufficient to satisfy the Company's need for
working capital for the short-term.
During the nine months ending September 30, 2005, the Company had a net
increase in cash equivalents of $92,439 from December 31, 2004. The Company's
sources and uses of funds are as follows:
Net cash used in operating activities was $66,112 for the nine months
ended September 30, 2005, resulting primarily from the net loss of $3,731,899
offset by non-cash merger expenses of $2,984,596, non cash interest expense of
$100,000, depreciation and amortization of $130,131, and the net change in
current assets and liabilities of $523,950 and increased by other non-cash
income and expense items of $73,070.
Net cash used in investing activities for the nine months ended September
30, 2005 was $58,512, representing primarily purchases of fixed assets less cash
received in the merger of $35,853.
Net cash provided from financing activities for the nine months ended
September 30, 2005 was $217,063 representing primarily net proceeds of $335,000
from the sale of convertible debentures less principal payments on notes payable
and dividend payments of $118,937.
Critical Accounting Policies And Estimates
Management's discussion and analysis of our financial condition and
results of operations are based upon our unaudited consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires that we make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. At each balance sheet date,
management evaluates its estimates, including but not limited to, those related
to accrued liabilities and the valuation allowance offsetting deferred income
taxes. The Company also reviews its investments in marketable securities, notes
receivable, land held for development and fixed assets for possible impairment
whenever events indicate that their carrying value may not be recoverable. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates under different assumptions or conditions. The
estimates and critical accounting policies that are most important in fully
understanding and evaluating our financial condition and results of operations
include those listed above.
16
Revenue Recognition
The Company follows the guidance of the U.S. Securities and Exchange
Commission's Staff Accounting Bulletin No. 104 for revenue recognition. The
Company records revenue when persuasive evidence of an arrangement exists,
services have been rendered or product delivery has occurred, the sales price to
the customer is fixed or determinable, and collectibility is reasonably assured.
17
ITEM 3. CONTROLS AND PROCEDURES
(A) Evaluation Of Disclosure Controls And Procedures
As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's Chief Executive Officer and the part-time Chief Financial Officer of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures. The Company's disclosure controls and procedures are
designed to provide a reasonable level of assurance of achieving the Company's
disclosure control objectives.
During this review the Chief Executive Officer and part-time Chief
Financial Officer determined that the Company has significant deficiencies. The
specific deficiencies include numerous informal or undocumented internal control
procedures as well as instances of inadequate segregation of duties. In addition
the Company lacks procedures and required expertise to properly account for
complex non-routine transactions and preparation of its required financial
statements and disclosures on a timely basis.
The nature and size of the Company's business have prevented the Company
from being able to employ sufficient resources to enable the Company to have an
adequate segregation of duties within its internal control system. The Company
will continue to monitor and assess the costs and benefits of additional
staffing in the accounting and financial reporting area.
The Company's Chief Executive Officer and part-time Chief Financial
Officer have concluded that the Company's disclosure controls and procedures
are, in fact, effective at a reasonable assurance level as of the period
covered.
(B) Changes In Internal Controls Over Financial Reporting
In connection with the evaluation of the Company's internal controls
during the Company's last fiscal quarter covered by this report, the Company's
Chief Executive Officer and part-time Chief Financial Officer have determined
that there are no changes to the Company's internal controls over financial
reporting that has materially affected, or is reasonably likely to materially
effect, the Company's internal controls over financial reporting.
18
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved in any material legal proceedings. The
Company may become involved in litigation, from time to time, in the ordinary
course of business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 20, 2005, the Company issued a $150,000 debenture (the "Debenture") to
Cornell Capital Partners, LP ("Cornell"). Any part of the principal amount of
the Debenture, plus accrued interest, is convertible at Cornell's option any
time up to maturity into shares of the Company's common stock at a fixed price
equal to $0.10 per share. The Debenture has a two hundred ten (210) day term,
piggy-back registration rights and accrues interest at twelve percent (12%) per
year.
On August 31, 2005 the Company entered into a merger agreement (the "Agreement")
with Strategies Acquisition Corp., a wholly-owned subsidiary of the Company
("SPV"), Corporate Strategies, Inc. ("Corporate Strategies") and the
shareholders of Corporate Strategies listed therein (collectively, the
"Shareholders"), whereby SPV merged with and into Corporate Strategies, with
Corporate Strategies remaining as the surviving corporation and wholly-owned
subsidiary of the Company (the "Merger"). Pursuant to the terms of the
Agreement, the Company issued one (1) share of its common stock, par value
$0.001 per share, to each holder of Corporate Strategies Class A common stock in
exchange for two (2) shares of Corporate Strategies Class A common stock, par
value $0.001 per share. Second, the Company issued one (1) share of the
Company's Series C preferred stock ("Series C Preferred"), par value $0.01 per
share, to each holder of Corporate Strategies Series A preferred stock for one
(1) share of Corporate Strategies Series A preferred stock, par value $0.001 per
share.
Third, the Company issued and delivered shares of its Series B convertible
preferred stock ("Series B Preferred") to each holder of Corporate Strategies
Class B common stock so that effectively upon conversion of the Series B
Preferred into common shares, the common shares issued upon conversion shall be
equal to ninety-five percent (95%) of the issued and outstanding stock of the
Company (calculated on a fully diluted basis as of the date of the Merger,
following the issuance of all the Merger Consideration (as such term is defined
in the Agreement) and after giving effect to such conversion, but not including
any shares of common stock issuable upon conversion of any then outstanding
Company convertible debentures).
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report.
10.1 $150,000 Convertible Debenture issued to Cornell Capital Partners,
LP, dated July 20, 2005, incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K as filed with the U.S. Securities and
Exchange Commission on July 28, 2005.
10.2 Merger Agreement, dated August 31, 2005, by and among the Company,
the Company's wholly-owned subsidiary, Strategies Acquisition Corp., Corporate
Strategies Inc. and the shareholders of Corporate Strategies, Inc. listed
therein, incorporated by reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K as filed with the U.S. Securities and Exchange Commission on
September 8, 2005.
31.1 Certification by Chief Executive Officer pursuant to 15 U.S.C.
Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification by Chief Financial Officer pursuant to 15 U.S.C.
Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification by Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K:
On July 28, 2005, the Company filed a Current Report on Form 8-K with the
U.S. Securities and Exchange Commission announcing that it had issued a $150,000
debenture to Cornell Capital Partners, LP, and the Company.
On September 8, 2005 the Company filed a Current Report on Form 8-K with
the U.S. Securities and Exchange Commission announcing that the Company had
entered into a merger agreement with Strategies Acquisition Corp., a
wholly-owned subsidiary of the Company, Corporate Strategies, Inc. and the
shareholders of Corporate Strategies, Inc. listed therein.
On September 21, 2005 the Company filed a Current Report on Form 8-K with
the U.S. Securities and Exchange Commission announcing that it had entered into
an executive employment agreement with Mr. Tobin Smith. Subsequent to this
Report, Mr. Smith amicably and effectively resigned from his positions with the
Company.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, NuWave Technologies, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 21, 2005 NUWAVE TECHNOLOGIES, INC.
By: /s/ Timothy J. Connolly
Name: Timothy J. Connolly
Title: Chief Executive Officer
21