U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
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 Number 333-34308
NeWave, Inc.
(Exact name of small business issuer as specified in its charter)
Utah 87-0520575
---------- --------------
(state of (IRS Employer
incorporation) I.D. Number)
404 EAST 1ST STREET, #1345
LONG BEACH, CA 90802
(Address and telephone number of principal executive offices)
(562) 983-5331
--------------
(Issuer's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
As of March 31, 2004, the Issuer had 10,464,785 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (check one): Yes ___ No X
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEWAVE, INC. AND SUBSIDIARY
TABLE OF CONTENTS
PAGE
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEET 1
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS 2
UNAUDITED CONSOLIDATED CONDENSEED STATEMENT OF CASH FLOWS 3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4-5
NEWAVE, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS
March 31,
2004
------------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 68,329
Accounts receivable, net of allowance for doubtful accounts
of $125,000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228,250
Loans receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,245
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,118
Prepaid Consulting Services . . . . . . . . . . . . . . . . . . . . . . 856,371
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . 4,372
------------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1,221,685
------------
PROPERTY & EQUIPMENT, net of accumulated depreciation
and amortization of $48,646 . . . . . . . . . . . . . . . . . . . . . 199,092
------------
DEPOSITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,416
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,443,193
============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,653
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . 277,153
Loans payable - related parties . . . . . . . . . . . . . . . . . . . . 150,000
Current portion of notes payable. . . . . . . . . . . . . . . . . . . . 117,500
------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 638,306
------------
LONG TERM LIABILITIES
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,245
Convertible debts . . . . . . . . . . . . . . . . . . . . . . . . . . . 808,000
------------
TOTAL LONG TERM LIABILITIES. . . . . . . . . . . . . . . . . . . . . . 875,245
------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,513,551
------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, authorized 100,000,000 shares at $.001 par
value, issued and outstanding 10,844,566. . . . . . . . . . . . . . . 10,845
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . 3,293,582
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (3,315,696)
Subscription Receivable. . . . . . . . . . . . . . . . . . . . . . . . . (59,880)
Share to be Issued. . . . . . . . . . . . . . . . . . . . . . . . . . . 791
------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT). . . . . . . . . . . . . . . . . . (70,358)
------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,443,193
============
See Notes to Consolidated Condensed Financial Statements
NEWAVE, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Three Months Ended March 31,
2004
------------------------------
REVENUE . . . . . . . . . . . . $ 827,627
OPERATING EXPENSES. . . . . . .
Salaries. . . . . . . . . . . 479,716
Advertising. . . .. . . . . . 452,241
Directors' fees. . . . . . . . 1,548,000
Other operating expenses. . . . 392,469
------------------------------
TOTAL OPERATION EXPENSES 2,872,426
Loss from operations. . . . . . (2,044,799)
------------------------------
OTHER INCOME (EXPENSES)
Interest expense. . . . . . . . (554,813)
------------------------------
TOTAL OTHER INCOME
(EXPENSES). . . . . . . . . . (554,813)
------------------------------
NET LOSS. . . . . . . . . . . . (2,599,612)
------------------------------
BASIC AND DILUTED LOSS
PER SHARE . . . . . . . . . . $ (0.25)
==============================
WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING. 10,464,785
==============================
See Notes to Consolidated Condensed Financial Statements
NEWAVE, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOW
Three
months ended
March 31, 2004
----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . $ (2,599,612)
Adjustment to reconcile net loss to net cash
(used in) operating activities:
Depreciation and amortization . . . . . . . . 123,888
Issuance of stocks for directors fees. . . . . . 1,548,000
Debt Conversion Feature Expense. . . . . . . . . 202,000
Debt Inducement Expense. . . . . . . . . . . . . 337,291
(Increase) / decrease in current assets:
Accounts receivable. . . . . . . . . . . . . . . (18,506)
Inventory. . . . . . . . . . . . . . . . . . . . 3,983
Other current assets . . . . . . . . . . . . . . (20,711)
Increase in current liabilities:
Accrued expenses and accounts payable. . . . . (28,422)
----------------
NET CASH USED IN OPERATING ACTIVITIES. . . . . . (452,089)
----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment . . . . . . . (8,432)
----------------
NET CASH USED IN INVESTING ACTIVITIES. . . . . . (8,432)
----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment For Acquisition of Utah Clay, Inc. . . . (150,000)
Proceeds from line of credit. . . . . . . .. . . 515,178
Payments on line of credit. . . . . . . .. . . . (446,438)
Proceeds from issuance of convertible debentures 533,000
Payments on long term borrowings . . . . . . . . (890)
Proceeds from related party debts. . . . . . . . 205,000
Payments on Related Party Debts . . . . . . .. . (155,000)
Proceeds from long term borrowings . . . . . . . 28,000
----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . 528,850
----------------
NET INCREASE IN CASH. . . . . . . . . . . . . . 68,329
CASH AT BEGINNING OF PERIOD. . . . . . . . . . . -
----------------
CASH AT END OF PERIOD. . . . . . . . . . . . . . $ 68,329
================
See Notes to Consolidated Condensed Financial Statements
NEWAVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2004
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Basis of Presentation
----------------------------------
NeWave, Inc., formerly known as Utah Clay Technology, Inc. (together with its
subsidiary, the "Company") offers a comprehensive line of products and services
at wholesale prices through an online club membership. Additionally, the Company
creates, manages and maintains effective website solutions for eCommerce. The
Company is doing business under the name "Onlinesupplier.com".
NeWave. Inc. historically engaged in the mining, processing and marketing of
minerals. After experiencing losses, NeWave sold substantially all of its assets
relating to its prior operations. On December 23, 2003, NeWave, Inc. entered
into an Agreement and Plan of Reorganization with NeWave dba Onlinesupplier.com
in which NeWave dba Onlinesupplier became a wholly owned subsidiary of NeWave,
Inc. The Agreement and Plan of Reorganization was consummated on January 15,
2004.
Although from a legal perspective, NeWave, Inc. acquired NeWave dba
Onlinesupplier.com, the transaction is viewed as a recapitalization of NeWave
dba Onlinesupplier.com accompanied by an issuance of stock by NeWave
Onlinesupplier.com for the net assets of NeWave, Inc. This is because NeWave,
Inc. did not have operations immediately prior to the transaction, and following
the reorganization, NeWave Onlinesupplier.com was the operating company.
NeWave, Inc. dba Onlinesupplier.com commenced operations in August 2003;
therefore there were no operations for the three months ended March 31, 2003.
The accompanying unaudited condensed interim financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for the presentation of interim financial information, but
do not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. The audited financial
statements of the parent at December 31, 2003 were filed on April 14, 2004 with
the Securities and Exchange Commission and are hereby referenced. In the opinion
of management, all adjustments considered necessary for a fair presentation have
been included. Operating results for the three-months period ended March 31,
2004 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2004.
Going Concern
- --------------
The accompanying financial statements have been prepared on a going concern
basis of accounting, which contemplates continuity of operations, realization of
assets and liabilities and commitments in the normal course of business. The
accompanying financial statements do not reflect any adjustments that might
result if the Company is unable to continue as a going concern. The Company's
losses and negative cash flows from operations might indicate that the Company
will be unable to continue as a going concern. The ability of the Company to
continue as a going concern and appropriateness of using the going concern basis
is dependent upon, among other things, profitability of future operations and
additional cash infusion.
The Company is raising capital through convertible debentures. Management
believes this will generate the additional cash required to fund the Company's
operations and allow it to meet its obligations.
Principle of Consolidation
- ----------------------------
The accompanying financial statements include the accounts of NeWave, Inc.,
formerly Utah Clay Technology, Inc. (legal acquired, the "Parent"), and its 100%
subsidiary NeWave dba Onlinesupplier.com. All significant intercompany accounts
and transactions have been eliminated in the consolidation. The results for the
three months ended March 31, 2004 include the accounts of NeWave dba
Onlinesupplier.com, and the results of operations of the Parent from January 15,
2004 through March 31, 2004. No comparative results are presented for the three
months ended March 31, 2003, as NeWave dba Onlinesupplier.com was not operating
during this period.
Use of Estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the accompanying financial statements.
Significant estimates made in preparing these financial statements include the
allowance for doubtful accounts, deferred tax asset valuation allowance and
useful lives for depreciable and amortizable assets. Actual results could differ
from those estimates.
Cash Equivalents
- -----------------
The Company considers all highly liquid investments purchased with an original
maturity at date of purchase of three months or less to be cash equivalents.
Cash and cash equivalents are carried at cost, which approximates market value.
Accounts Receivable
- --------------------
The Company maintains an allowance for doubtful accounts for estimated losses
that may arise if any of its customers are unable to make required payments.
Management specifically analyzes the age of customer balances, historical bad
debt experience, customer credit-worthiness, and changes in customer payments
terms when making estimates of the uncollectability of the Company's trade
accounts receivable balances. If the Company determines that the financial
conditions of any of its customers deteriorated, whether due to customer
specific or general economic issues, increase in the allowance may be made.
Accounts receivable are written off when all collection attempts have failed.
Prepaid Consulting Services
- -----------------------------
The Company issued 580,000 shares of common stock valued at $969,350 and paid
$25,00 cash for advertising and legal services to be rendered during the next 8
to 12 months. The Company expensed $137,979 during the quarter ended March 31,
2004, leaving a prepaid balance outstanding of $856,371.
Property & Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets,
generally three to five years. Leasehold improvements are amortized over the
remaining lease term at the date of installation.
Fair Value of Financial Instruments
- ---------------------------------------
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities are carried at
cost, which approximates their fair value, due to the relatively short maturity
of these instruments. As of March 31, 2004 and December 31, 2003, the Company's
notes payable have stated borrowing rates that are consistent with those
currently available to the Company and, accordingly, the Company believes the
carrying value of these debt instruments approximates their fair value.
Revenue Recognition
- --------------------
The Company recognizes income when the products are shipped, and when the
service is provided. The Company applies the provisions of SEC Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements" which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements. SAB No. 101 outlines the basic criteria that must be met
to recognize revenue and provides guidance for the disclosure of revenue
recognition policies. The Company's revenue recognition policy for sale of
products is in compliance with SAB No. 104. Revenue from the sale of products is
recognized when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed and collectibility is reasonably assured. Generally,
the Company extends credit to its customers and does not require collateral. The
Company performs ongoing credit evaluations of its customers and historic credit
losses have been within management's expectations.
Net Loss Per Share
- ---------------------
Net loss per common share is computed using the weighted average number of
common shares outstanding during the periods presented. Convertible debentures
may have a dilutive effect on the Company's earnings per share in the future but
are not included in the calculation for the three months ended March 31, 2004
because they have an antidilutive effect in these periods.
Advertising Costs
- ------------------
Advertising and promotional activities are expensed when incurred. Total
advertising costs were $452,241 for the three months ended March 31, 2004.
Income Taxes
- -------------
The Company uses the liability method of accounting for income taxes. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to the financial statements carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. The measurement of deferred tax assets and liabilities is based
on provisions of applicable tax law. The measurement of deferred tax assets is
reduced, if necessary, by a valuation allowance based on the portion of tax
benefits that are more likely than not, not to be realized based on available
evidence.
2. NOTES PAYABLE AND RELATED PARTIES
On March 9, 2004, the Company was issued a revolving credit facility by
shareholders totaling $50,000. The Revolver carries an interest rate or 1% per
month, and a minimum payment is due each month of $500. The Company also had
another $100,000 of notes payable outstanding to another shareholder of the
Company. These notes bear interest at 15% and matured on March 4, 2004.
The Company has a note payable to an unrelated party that was issued in 2003.
This note was settled for $180,000 in August of 2004, payable $30,000 in August
2004, and $12,500 per month thereafter. As of March 31, 2004, the balance of
this note was $180,000, of which $117,500 is presented as current.
On February 4, 2004, the Company issued a Debenture to a related party totaling
$155,000. The term of the debenture was 14 calendar days. The debenture was paid
in full and there is no balance outstanding.
The Company has a consulting agreement payable to Barrett Evans that was entered
into on August 18, 2003. The term of the agreement was for twelve months at
$10,000 per month, and as of March 31, 2004, the Company paid $0 on the
agreement during the three months ended March 31, 2004 and currently owes $55,
166.
The Company has a consulting agreement payable to Michael Hill that was entered
into on September of 2003. The term of the agreement was for twelve months at
$12,000 per month, and as of June 30, 2004, the Company paid $0 on the agreement
during the three months ended March 31, 2004 and currently owes $59,000.
3. CONVERTIBLE DEBENTURES
During the quarter ended March 31, 2004, the Company issued a total of $533,000
worth of 6%, 5-Year Term, Convertible Debentures (the "Debentures"),
The Debentures shall pay six percent (6%) cumulative interest and are subject to
automatic conversion at the end of five (5) years from the date of issuance at
which time all Debentures outstanding will be automatically converted based upon
the formula set forth in the agreement. The Debentures convert at the lower of
a) 75% of the lowest closing bid price of the common stock during the 15 trading
days immediately preceding conversion or b) 100% of the average of the five
lowest closing bid prices for the 30 trading days immediately following the
first reverse split in the stock price. In accordance with EITF 00-27 98-5, the
beneficial conversion feature on the issuance of the convertible debenture for
the quarter ended March 31, 2004 has been recorded is interest expense in the
amount of $202,000. Some of the debentures provided for the holders to be
granted shares as inducement to contract the debentures. Inducement expense
totaling $337,291 was recorded as interest expense during the three months ended
March 31, 2004.
4. COMMITMENTS AND CONTINGENCIES
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. It is the opinion of management, that such
litigation and claims will be resolved without a material effect on the
Company's financial position.
5. RECAPITALIZATION
On January 15, 2004, the Company consummated an Agreement and Plan of
Reorganization with NeWave dba Onlinesupplier.com, a Nevada Corporation,
pursuant to which the Onlinesupplier.com became a wholly owned subsidiary of
NeWave, Inc.
All the shares of NeWave dba Onlinesupplier.com were acquired by the Parent in
exchange for 100% of the common shares of the Parent. In addition, the Company
issued 94 shares of Class C Convertible Preferred Stock to the shareholders of
NeWave, Inc. (Parent), and 1 share of Class C Preferred Stock to Dutchess
Private Equities Fund L.P. as an incentive for an investment of a convertible
debenture in the amount of $250,000 cash and the release of all outstanding debt
of UCT with the exception of $165,000 debt related to certain convertible
debentures of UCT issued in November and December 2001. 14 shares of 95 total
Series C Preferred shares were issued to Dutchess Advisors, LLC. Thus, Dutchess
Private Equity Fund, L.P. and Dutchess Advisors, LLC together own 15 shares of
the Class C Preferred Stock of the Registrant. The 95 Class C Preferred Stock
shares were converted into 9,500,000 shares of the Company's common stock after
giving effect to reverse stock split.
The acquisition of NeWave dba Onlinesupplier.com was accounted for as a
recapitalization of NeWave dba Onlinesupplier.com followed by an issuance of
stock by NeWave dba Onlinesupplier.com for the assets of the Parent.
6. EQUITY
Common Stock
- -------------
During the quarter ended March 31, 2004, the following common stock transactions
were made:
The Company issued 80,000 shares of the Company's common stock and agreed to
issue an additional 500,000 shares for services totaling $969,350.
The Company issued 750,000 shares of the Company's common stock for board
compensation amounting to $1,548,000.
The Company issued 77,290 shares of the Company's common stock for the
conversion of $165,000 previously-issued debenture.
The Company issued 20,000 shares of the Company's common stock and agreed to
issue an additional 203,000 shares as an incentive for an investment in
debentures. The value of these shares is estimated at $337,291.
The Company effectuated the 344.33 to 1 reverse stock split on February 9, 2004.
All shares have been stated to retroactively affect this reverse stock split.
7. STOCK OPTIONS
The Company has a stock option plan, under which options granted may be
"employee incentive stock option" as defined under Section 422 of the Internal
revenue code or non-qualified stock options, as determined by the option
committee of the board of directors at the time of grant of an option. The plan
enables the option committee of the board of directors to grant up to 500,000
stock options to employees and consultants from time to time. The Option
Committee has granted no options. The date of grant of an Option shall, for all
purposes, be the date on which the Option Committee makes the determination
granting such Option, or such other date as is determined by the Option
Committee. The Company has not granted any option under the plan, through March
31, 2004.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Report on Form 10-QSB contains forward-looking statements, including,
without limitation, statements concerning possible or assumed future results of
operations and those preceded by, followed by or that include the words
"believes," "could," "expects," "intends" "anticipates," or similar expressions.
Our actual results could differ materially from these anticipated in the
forward-looking statements for many reasons including: materially adverse
changes in economic conditions in the markets that we and our subsidiary serve;
competition from others in the markets and industry segments occupied by us and
our subsidiary; the ability to enter, the timing of entry and the profitability
of entering new markets; greater than expected costs or difficulties related to
the integration of the businesses acquired by our subsidiary; and other risks
and uncertainties as may be detailed in our 10-KSB for the year ended December
31, 2003 and from time to time in our public announcements and SEC filings.
Although we believe the expectations reflected in the forward-looking statements
are reasonable, they relate only to events as of the date on which the
statements are made, and our future results, levels of activity, performance or
achievements may not meet these expectations. We do not intend to update any of
the forward-looking statements after the date of this document to conform these
statements to actual results or to changes in our expectations, except as
required by law.
The discussion and financial statements contained herein are for the three
months ended March 31, 2004 and March 31, 2003. The following discussion should
be read in conjunction with our financial statements and the notes thereto
included herewith.
OVERVIEW
We incorporated in the State of Utah on March 1, 1994 as Utah Clay Technology,
Inc. From our formation until January 15, 2004, our business plan included:
(1) locating kaolin deposits in Utah;
(2) obtaining the legal rights to these deposits;
(3) conducting exploratory operations;
(4) testing the extracted minerals in the laboratory; and
(5) selling samples of the processed form of our kaolin to a commercial company
for market evaluation.
Although we did obtain certain legal rights to properties possibly containing
kaolin, due to a lack of capital, we never commenced mining operations. As a
result, we have had no revenues since our inception. On January 15, 2004, we
abandoned our business plan. On the same date, pursuant to an Agreement and Plan
of Reorganization with NeWave, Inc., a Nevada corporation, we changed our name
to NeWave, Inc. and OnlineSupplier.com became our wholly-owned subsidiary. We
own and operate an online membership club that offers a comprehensive line of
products and services at wholesale prices through our membership program. As a
result of this change in our focus and direction, the entire former management
team and board of directors resigned and we employed a new management team and
appointed a new board of directors.
On January 30, 2004, the State of Utah recognized our name change to NeWave,
Inc. We acquired our operating subsidiary, Onlinesupplier.com, on January 15,
2004 and its operations are therefore not reflected on our financial statements
for the fiscal year ending December 31, 2003. We did not generate any revenues
in the fiscal year ending December 31, 2003.
Through our wholly-owned subsidiary, Onlinesupplier.com, we offer a
comprehensive line of products and services at wholesale prices through our
online club membership. Additionally, our technology allows both large complex
organizations and small stand-alone businesses to create, manage, and maintain
effective website solutions for eCommerce. Onlinesupplier.com's web address is
www.onlinesupplier.com.
Our integrated suite of electronic commerce products enables individuals and
businesses to conduct electronic commerce over the Internet at affordable price
levels. Our products integrate transaction processing, accounting and financial
systems, customer relationship management, advertising, merchant processing and
a wide array of wholesale products. Our suite of products is accessed by our
customers through our online club membership. Through our membership program, we
charge our members a monthly fee for unlimited access to our products and
services.
Our website offers wholesale merchandise in categories such as:
- - Consumer Electronics
- - Home, garden and outdoor living products
- - Kitchenware and House Wares
- - Sports and Outdoor Equipment
- - Automobile Accessories
- - Tools and hardware
- - Jewelry
- - Travel Accessories
Furthermore, our online membership program provides the following services and
capabilities:
- - Automated Webstore Generation and Customization
- - Merchant Processing Capabilities
- - Domain Name Registration
- - Online Training Modules
We are a publicly traded company, which trades on the Over-the-Counter Bulletin
Board of the National Quotation Service under the ticker symbol "NWAV."
The address of our principal executive office is 404 East 1st Street, #1345,
Long Beach, California 90802. Our telephone number is (562) 983-5331. Our
website address is www.newave-inc.com. Information contained on our website does
not constitute part of this report and our address should not be used as a
hyperlink to our website.
THREE MONTHS ENDED MARCH 31, 2004
NeWave, Inc. dba Onlinesupplier.com commenced operations in August 2003;
therefore there were no operations for the three months ended March 31, 2003.
Revenues
We generated revenues of $827,627 for the three months ended March 31, 2004,
due to the acquisition of NeWave.
Operating Expenses
- --------------------
We incurred costs of $2,872,426 for the three months ended March 31, 2004,
primarily due to of the acquisition of NeWave. The Operating Expenses were
comprised mostly of investor services, advertising expenses and salaries.
Net loss
- ---------
We had a net loss of ($2,599,612) for the three months ended March 31, 2004, due
to increased operations from the acquisition of NeWave. The increase in
expenses due to the factors above contributed mainly to the loss as well.
Basic and diluted loss per share
- -------------------------------------
Our basic and diluted loss per share for the three months ended March 31, 2004
was ($0.25).
Liquidity and Capital Resources
- ----------------------------------
We must continue to raise capital to fulfill our plan of acquiring companies and
assisting in the development of those companies internally. If we are unable to
raise any additional capital, our operations will be curtailed. As of March 31,
2004, we had total Current Assets of $1,221,685 and Current Liabilities of
$638,306. Cash and cash equivalents were $68,329. Our Stockholder's Deficit at
March 31, 2004 was ($70,358).
We had a net usage of cash due to operating activities in March 31, 2004 of
$(452,089). We had net cash provided by financing activities of $528,850 in the
three months ended March 31, 2004 including $533,000 of proceeds for convertible
debentures and $205,000 form related-party borrowings. We also had $28,000 from
long term borrowings in the period ended March 31, 2004.
Financing Activities
- ---------------------
On January 5, 2004, we issued convertible debentures of $250,000 to Dutchess
Private Equities Fund, LP. The debentures convert on January 5, 2009. The holder
of the debentures can convert the face value of the debenture plus accrued
interest into shares of our common stock at the lesser of (i) 75% of the lowest
closing bid price during the 15 full trading days prior to the Conversion Date
or (ii) 100% of the average of the five lowest closing bid prices for the 30
trading days immediately following the first reverse split in the stock price
after January 5, 2004. The convertible debentures shall pay 6% cumulative
interest, payable in cash or stock at our option, at the time of conversion.
On January 25, 2004, we issued convertible debentures of $50,000 to Dutchess
Private Equities Fund, LP. The debentures convert on January 25, 2009. The
holder of the debentures can convert the face value of the debenture plus
accrued interest into shares of our common stock at the lesser of (i) 75% of the
lowest closing bid price during the 15 full trading days prior to the Conversion
Date or (ii) 100% of the average of the five lowest closing bid prices for the
30 trading days immediately following the the first reverse split in stock price
after January 25, 2004. The convertible debentures shall pay 6% cumulative
interest, payable in cash or stock at our option, at the time of conversion.
On January 25, 2004, we contracted to issued 25,000 shares of our common stock
to Dutchess Private Equities Fund, as an incentive for an investment.
On January 26, 2004, we issued convertible debentures of $50,000 to eFund
Capital Partners. The debentures convert on January 26, 2009. The holder of the
debentures can convert the face value of the debenture plus accrued interest
into shares of our common stock at the lesser of (i) 75% of the lowest closing
bid price during the 15 full trading days prior to the Conversion Date or (ii)
100% of the average of the five lowest closing bid prices for the 30 trading
days immediately following the first reverse split in stock price after January
26, 2004. The convertible debentures shall pay 6% cumulative interest, payable
in cash or stock at our option, at the time of conversion.
On January 26, 2004, we contracted to issued 25,000 shares of our common stock
to eFund Capital Partners as an incentive for an investment.
On February 4, 2004, we issued a debenture to a related party totaling $155,000.
The term of the debenture was 14 calendar days. The debenture was paid in full
and there is no balance outstanding.
On February 19, 2004, we issued convertible debentures of $305,000 to eFund
Capital Partners for $150,000 advanced in 2003, and $155,000 advanced in 2004.
The debentures convert on February 19, 2009. The holder of the debentures can
convert the face value of the debenture plus accrued interest into shares of our
common stock at the lesser of (i) 75% of the lowest closing bid price during the
15 full trading days prior to the Conversion Date or (ii) 100% of the average of
the five lowest closing bid prices for the 30 trading days immediately following
the first reverse split in stock price after February 19, 2004. The convertible
debentures shall pay 6% cumulative interest, payable in cash or stock at our
option, at the time of conversion.
On February 19, 2004, we contracted to issued 152,500 shares of our common stock
to eFund Capital Partners as an incentive for an investment.
On March 3, 2004, we issued convertible debentures of $28,000 to Preston Capital
Partners, LLC. The debentures convert on March 3, 2009. The holder of the
debentures can convert the face value of the debenture plus accrued interest
into shares of our common stock at the lesser of (i) 75% of the lowest closing
bid price during the 15 full trading days prior to the Conversion Date or (ii)
100% of the average of the five lowest closing bid prices for the 30 trading
days immediately following the first reverse split in stock price after March 3,
2004. The convertible debentures shall pay 6% cumulative interest, payable in
cash or stock at our option, at the time of conversion.
On March 5, 2004,, we issued 77,290 shares of our common stock for the
conversion of $165,000 in previously-issued debentures.
On March 9, 2004, we were issued a revolving credit facility by shareholders
totaling $50,000. The Revolver carries an interest rate or 1% per month, and a
minimum payment is due each month of $500. We also had another $100,000 of
notes payable outstanding to another shareholder of ours. These notes bear
interest at 15% and matured on March 4, 2004.
On March 10, 2004, we issued 10,000 shares of our common stock to each Dutchess
Private Equities Fund, LP and eFund Capital Partners amounting to $25,000 each
as an incentive for a loan. The shares were valued at $34,500.
On April 14, 2004, we contracted to issue 28,000 shares of our common stock to
Jennifer Strohl for an incentive for an investment amounting to $28,000 advanced
to us in 2003.
Subsidiaries
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As of March 31, 2004, we have one subsidiary, Onlinesupplier.com, Inc.
Item 3. Controls and Procedures
Evaluation of disclosure controls and procedures. Our management, with the
participation of our principal executive officer and principal financial
officer, has evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this Quarterly Report on Form 10-QSB. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that these disclosure controls and procedures are effective and
designed to ensure that the information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the requisite time periods.
Changes in internal controls. There was no change in our internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934, as amended) that occurred during our last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On February 20, 2004, we initiated legal proceedings in Superior Court, County
of Santa Barbara, Anacapa Division against Paydirt, L.P., a Utah limited
partnership, alleging causes of action for usury, unfair business practices and
unfair competition in connection with loan agreements entered into with Paydirt
in September and November 2003. This action is entitled NeWave, Inc. et al. v.
Paydirt, Case No. 01156046 (S.B.S.C.). The parties to the lawsuit dispute
whether we currently owe Paydirt the sum of $225,829. Paydirt retained
California counsel, who removed our superior court action to the United States
District Court, Central District of California. On April 5, 2004, Paydirt filed
a motion to dismiss our action. While this motion was pending, Paydirt initiated
an action in the State of Utah, Washington County entitled Paydirt, LP v.
NeWave, Inc. et al., Civil No. 040500597 (Wash. County, Utah). On May 3, 2004,
the District Court dismissed our complaint without prejudice to our filing the
action in Utah. Subsequently, we have settled the lawsuit by agreeing to make an
aggregate payment to Paydirt of $180,000.
We believe that there are no other claims or litigation pending, the outcome of
which could have a material adverse effect on our financial condition or
operating results.
Item 2. Changes in Securities
(a) Amendment to the Certificate of Incorporation
On January 30, 2004, the state of Utah accepted our certificate of amendment to
our certificate of incorporation wherein (i) our name was changed to NeWave,
Inc. and (ii) we effected a 344.33:1 reverse split. Shareholders received 1
share of NeWave for every 344.33 outstanding shares of Utah Clay Technology,
Inc. We also authorized the creation and issuance of 95 shares of a Series C
Convertible Preferred Stock, each share being entitled to 100,000 votes on all
matters presented to the Corporation's shareholders for a vote.
(b) Not Applicable
(c) Recent Sales of Unregistered Securities
On January 5, 2004, we issued convertible debentures of $250,000 to Dutchess
Private Equities Fund, LP. The debentures convert on January 5, 2009. The holder
of the debentures can convert the face value of the debenture plus accrued
interest into shares of our common stock at the lesser of (i) 75% of the lowest
closing bid price during the 15 full trading days prior to the Conversion Date
or (ii) 100% of the average of the five lowest closing bid prices for the 30
trading days immediately following the first reverse split in stock price after
January 5, 2004. The convertible debentures shall pay 6% cumulative interest,
payable in cash or stock at our option, at the time of conversion.
On January 25, 2004, we issued convertible debentures of $50,000 to Dutchess
Private Equities Fund, LP. The debentures convert on January 25, 2009. The
holder of the debentures can convert the face value of the debenture plus
accrued interest into shares of our common stock at the lesser of (i) 75% of the
lowest closing bid price during the 15 full trading days prior to the Conversion
Date or (ii) 100% of the average of the five lowest closing bid prices for the
30 trading days immediately following the first reverse split in stock price
after January 25, 2004. The convertible debentures shall pay 6% cumulative
interest, payable in cash or stock at our option, at the time of conversion.
On January 25, 2004, we contracted to issued 25,000 shares of our common stock
to Dutchess Private Equities Fund, as an incentive for an investment.
On January 26, 2004, we issued convertible debentures of $50,000 to eFund
Capital Partners. The debentures convert on January 26, 2009. The holder of the
debentures can convert the face value of the debenture plus accrued interest
into shares of our common stock at the lesser of (i) 75% of the lowest closing
bid price during the 15 full trading days prior to the Conversion Date or (ii)
100% of the average of the five lowest closing bid prices for the 30 trading
days immediately following the first reverse split in the stock price after
January 26, 2004. The convertible
debentures shall pay 6% cumulative interest, payable in cash or stock at our
option, at the time of conversion.
On January 26, 2004, we contracted to issued 25,000 shares of our common stock
to eFund Capital Partners as an incentive for an investment.
On January 27, 2004 we issued 250,000 shares of our common stock for services
rendered.
On February 4, 2004, we issued a debenture to a related party totaling $155,000.
The term of the debenture was 14 calendar days. The debenture was paid in full
and there is no balance outstanding.
On February 18, 2004, we issued 50,000 shares of our common stock for services
rendered
On February 18, 2004, we issued 750,000 shares of our common stock for Board
compensation.
On February 19, 2004, we issued convertible debentures of $305,000 to eFund
Capital Partners for $150,000 advanced in 2003, and $155,000 advanced in 2004.
The debentures convert on February 19, 2009. The holder of the debentures can
convert the face value of the debenture plus accrued interest into shares of our
common stock at the lesser of (i) 75% of the lowest closing bid price during the
15 full trading days prior to the Conversion Date or (ii) 100% of the average of
the five lowest closing bid prices for the 30 trading days immediately following
the the first reverse split in stock price after February 19, 2004. The
convertible debentures shall pay 6% cumulative interest, payable in cash or
stock at our option, at the time of conversion.
On February 19, 2004, we contracted to issued 152,500 shares of our common stock
to eFund Capital Partners as an incentive for an investment.
On March 2, 2004, we issued 30,000 shares of our common stock and agreed to
issue an additional 250,000 shares for services to be rendered over a twelve
month period.
On March 3, 2004, we issued convertible debentures of $28,000 to Preston Capital
Partners, LLC. The debentures convert on March 3, 2009. The holder of the
debentures can convert the face value of the debenture plus accrued interest
into shares of our common stock at the lesser of (i) 75% of the lowest closing
bid price during the 15 full trading days prior to the Conversion Date or (ii)
100% of the average of the five lowest closing bid prices for the 30 trading
days immediately following the first reverse split in stock price after March 3,
2004. The convertible debentures shall pay 6% cumulative interest, payable in
cash or stock at our option, at the time of conversion.
On March 5, 2004,, we issued 77,290 shares of our common stock for the
conversion of $165,000 in previously-issued debentures.
On March 10, 2004, we issued 10,000 shares of our common stock to each Dutchess
Private Equities Fund, LP and eFund Capital Partners amounting to $25,000 each
as an incentive for a loan.
On April 14, 2004,, we contracted to issue 28,000 shares of our common stock to
Jennifer Strohl for an incentive for an investment amounting to $28,000 advanced
to us in 2003.
The securities issued in the foregoing transactions were offered and sold in
reliance upon exemptions from the Securities Act of 1933 ("Securities Act")
registration requirements set forth in Section 4(2) of the Securities Act, and
any regulations promulgated thereunder, relating to sales by an issuer not
involving any public offering. No underwriters were involved in the foregoing
sales of securities.
(d) Not Applicable
(e) Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
We submitted the Amendment to the Certificate of Incorporation wherein (i) our
name was changed to NeWave, Inc. and (ii) we effected a 344.33:1 reverse split
to the shareholders on January 20, 2004. Of the 198,668,524 shares outstanding
as of the record date, the majority shareholders, consisting of 160,345,416
shares voted to ratify the Amendments and were effective by the State of Utah as
of January 30, 2004.
Item 5. Other Information.
On March 18, 2004, our Board of Directors unanimously voted to appoint Pacific
Stock Transfer as our transfer agent located at: 500 E. Warm Springs Road, Suite
240, Las Vegas NV 89119, (702) 361-3033.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description of Exhibit
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2.1 Agreement and Plan of Reorganization between Utah Clay Technologies, Inc.
and NeWave, Inc. (previously filed as Exhibit 2.1 to the Registrant's 8-K
filed on February 12, 2004 and incorporated herein by reference).
3.1 Articles of Incorporation for Utah Clay Technologies, Inc. (previously
filed as Exhibit 3(i) to the Registrant's Form SB-2/A on April 11, 2000 and
incorporated herein by reference.)
3.2 Article of Amendment to Articles of Incorporation (previously filed as
Exhibit 3.2 to the Registrant's Quarterly Report of Form 10-QSB filed on
May 24, 2004 and incorporated herein by reference).
3.3 Bylaws for Utah Clay Technologies, Inc.(previously filed as exhibit 3(ii)
to the Registrant's Form SB-2/A on April 11, 2000 and incorporated herein
by reference).
4.1 Debenture Agreement between the Registrant and Dutchess Private Equities
Fund, dated January 5, 2004. (previously filed as Exhibit 4.1 to the
Registrant's Form 10-QSB filed on May 24, 2004 and incorporated herein by
reference).
4.2 Debenture Agreement between the Registrant and Dutchess Private Equities
Fund, dated January 25, 2004. (previously filed as Exhibit 4.2 to the
Registrant's Form 10-QSB filed on May 24, 2004 and incorporated herein by
reference).
4.3 Debenture Agreement between the Registrant and eFund Capital Partners, LLC,
dated January 26, 2004. (previously filed as Exhibit 4.3 to the
Registrant's Form 10-QSB filed on May 24, 2004 and incorporated herein by
reference).
4.4 Debenture Agreement between the Registrant and eFund Capital Partners, LLC,
dated February 19, 2004. (previously filed as Exhibit 4.4 to the
Registrant's Form 10-QSB filed on May 24, 2004 and incorporated herein by
reference).
4.5 Debenture Agreement between the Registrant and Preston Capital Partners
dated March 3, 2004. (previously filed as Exhibit 4.5 to the Registrant's
Form 10-QSB filed on May 24, 2004 and incorporated herein by reference).
4.6 Debenture Agreement between the Registrant and Dutchess Private Equities
Fund, II, dated February 4, 2004.
10.1 Registration Rights Agreement between the Registrant and Dutchess Private
Equities Fund, LP, dated January 14, 2004. (previously filed as Exhibit
10.1 to the Registrant's Form 10-QSB filed on May 24, 2004 and incorporated
herein by reference).
10.2 Registration Rights Agreement between the Registrant and Dutchess Private
Equities Fund, LP, dated January 26, 2004. (previously filed as Exhibit
10.2 to the Registrant's Form 10-QSB filed on May 24, 2004 and incorporated
herein by reference).
10.3 Registration Rights Agreement between the Registrant and eFund Capital
Partners, LLC, dated January 26, 2004 . (previously filed as Exhibit 10.3
to the Registrant's Form 10-QSB filed on May 24, 2004 and incorporated
herein by reference).
10.4 Registration Rights Agreement between the Registrant and eFund Capital
Partners, LLC dated February 19, 2004. (previously filed as Exhibit 10.4 to
the Registrant's Form 10-QSB filed on May 24, 2004 and incorporated herein
by reference).
10.5 Registration Rights Agreement between the Registrant and Preston Capital
Partners, LLC dated March 3, 2004. (previously filed as Exhibit 10.5 to the
Registrant's Form 10-QSB filed on May 24, 2004 and incorporated herein by
reference).
10.6 Sublease between the Registrant and Pinnacle Sales Group, LLC, dated August
18, 2003 (filed as Exhibit 10.1 to the Registrant's 10KSB filed on April
14, 2004 and incorporated herein by reference).
10.7 Sublease Agreement between the Registrant and Mammoth Moving Inc., dated
July 14, 2003 (filed as Exhibit 10.2 to the Registrant's 10KSB filed on
April 14, 2004 and incorporated herein by reference).
10.8 Consulting Agreement between NeWave and Luminary Ventures, Inc., dated
March 2, 2004 (filed as Exhibit 99.1 to the Registrant's S-8 filed on March
11, 2004 and incorporated herein by reference).
10.9 Consulting Agreement between the Registrant and Jeffrey Conrad, dated
January 30, 2004 (filed as Exhibit 99.2 to the Registrant's S-8 filed on
February 13, 2004 and incorporated herein by reference).
10.10 Consulting Agreement between the Registrant and Catherine Basinger, dated
January 30, 2004 (filed as Exhibit 99.3 to the Registrant's S-8 filed on
February 13, 2004 and incorporated herein by reference).
31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of the Interim Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Forms 8-K
On February 12, 2004, we filed an 8-K Item 1. pursuant to a change in control of
the Registrant.
On March 15, 2004, we filed an 8-K/A Item 1. pursuant to a change in control of
the Registrant
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
Date: August 20, 2004 NeWave, Inc.
/s/ Michael Hill
-----------------------
Michael Hill, Chief Executive
Officer
Dated: August 20, 2004
/s/ Barrett Evans
-----------------
Barrett Evans, Interim Chief
Financial Officer