SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-12
NUWAVE TECHNOLOGIES, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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October 23, 2002
PRESIDENT'S LETTER TO STOCKHOLDERS
Dear Stockholder,
I would like to take this opportunity to make you aware of NUWAVE's current
circumstances, needs and immediate near term outlook.
First, let me say that in my and management's opinion, we believe NUWAVE should
continue to implement its business plan to complete its transition from a
development stage company to a successful operating company. We believe we have
a viable business with desirable products and technology.
I know we have said this before, but let me explain why we continue to feel this
opportunity is significant, has merit and why stockholder approvals of changes
in our capital stock are required in order to put the Company in a position to
achieve its goals.
o The Company has substantially completed the development of its core
technology. During the summer we announced the completion of our new
NVP 1104 ASIC chip, a new line of retail products and a new
professional product line designed specifically to address the
security and surveillance market. The Company has begun building its
order book.
o The Company is in discussions with potential retail distribution
customers who have seen demonstrations of our new gaming retail cable
products and have expressed interest in going forward. These cables
contain our unique, patented technology powered by our new NVP 1104
ASIC chip. We expect to close some of these customers within the next
few months, which could put us at or near the break-even point for
2003.
o Our significant product development phase is now over and we have
substantially reduced our overhead. Therefore, once we are beyond the
break-even point, we should have a profitable business. We expect this
to become evident during 2003.
o We recently received an initial order for $2.85 million in
accessories, for deliveries expected to take place over the next 10
months beginning in this quarter.
o We recently announced a new line of retail set-top box products. This
new line is for currently existing products, such as audio/video
selector boxes that will now have the added video enhancement features
provided by our exclusive technology. We are also in discussions with
potential customers at major OEM's who have indicated their desire to
incorporate our technology into their products.
o During the summer, we received an order for our new security and
surveillance products, the NVP 203 and the Frame Grabber, from the NYC
office of a federal agency. This order will ship during the
1
current quarter. We are hopeful that this is an initial step to
receiving orders not only with this agency but also with other
federal, state and local municipal agencies.
The Company needs to raise approximately two- to three-million dollars to
continue to effectively implement its business plan. Although we have been and
continue to explore other means, we are currently relying on our existing equity
line of credit with Cornell Capital Partners, L.P., to fund operations. The
common stock we have issued under the Cornell equity line of credit has already
put substantial downward pressure on our stock price and is expected to continue
to do so. In addition each "put" is creating significant dilution to the current
stockholders. Absent the Cornell line or some other financing, the Company could
potentially be without a source of funds. In today's climate and with the
current per share price at approximately $0.04, we have not succeeded at this
time in identifying an alternative source of funding.
We believe that recapitalizing the Company is necessary in order to facilitate
raising the capital necessary to remain in business and to effectively and
successfully implement our business plan. We are asking our stockholders to
approve the following items, each of which is explained more fully in the
enclosed proxy statement:
1) Authorize management to use its discretion to effect a reverse split
of our common shares.
2) Approve an increase in the number of authorized shares of our common
stock from 40 million to 100 million and the preferred stock from 2
million to 5 million.
As explained in the enclosed proxy materials, we are asking the stockholders to
approve both the reverse split and the increase in the number of authorized
shares in order to have the flexibility to get the financing we need. Although
there is no assurance that approval of both proposals will result the success of
our business plan, if management does not have the authority to implement both
proposals, we will be unable to complete the transition and become a successful
operating company.
We recognize that because of the longer-than-anticipated development stage of
the Company and the recent overall market trends, our long-term stockholders
have little hope at the current time of recovering and profiting on their
initial investment. In that regard, and as an alternative to utilizing the
Cornell Equity facility, assuming stockholder approval of the capital stock
proposals, we are currently contemplating a rights offering to our stockholders
in order to provide them with a better opportunity to participate in the
expected growth outlined above. We will keep you informed as to the details as
soon as they are finalized.
I thank you for your patience and look forward to your support of the Company's
expected growth in the next year.
Gerald Zarin
Chairman of the Board of Directors,
President and Chief Executive Officer
2
NUWAVE TECHNOLOGIES, INC.
ONE PASSAIC AVE.
FAIRFIELD, NEW JERSEY 07004
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON _______, 2002.
To the Stockholders of NUWAVE Technologies, Inc.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders (the
"Meeting") of NUWAVE Technologies, Inc., a Delaware corporation (the "Company"),
will be held at [The Ramada Inn, 38 Two Bridges Road, Fairfield, New Jersey, at
10:00 a.m.] local time, on ______, _______, 2002, to consider and act upon the
following matters:
1. to elect four directors;
2. to authorize the Board of Directors to effect a reverse split of our
outstanding common stock at the discretion of the Board as to the
designated ratio that would not exceed a 1-for-50 split and as to the
timing, based upon it view as what is in the best interests of the
Company and the stockholders;
3. to approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of our common stock to
100,000,000 shares and preferred stock to 5,000,000 shares; and
4. to consider and act upon any other matters that properly may come
before the Meeting.
Only stockholders of record of common stock of the Company at the close of
business on ______, 2002 (the "Record Date") shall be entitled to receive notice
of and to vote at the Meeting and any adjournments or postponements thereof. A
list of such stockholders will be available for examination by a stockholder as
of the Record Date for any purpose germane to the Meeting during ordinary
business hours at the offices of the Company at One Passaic Avenue, Fairfield,
New Jersey, during the ten business days prior to the Meeting.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
All stockholders are cordially invited to attend the Meeting.
By Order of the Board of Directors,
Jeremiah F. O'Brien
Secretary
Fairfield, New Jersey
______, 2002
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
IS MAILED IN THE UNITED STATES. THE GIVING OF YOUR PROXY AS REQUESTED HEREBY
WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON SHOULD YOU DECIDE TO ATTEND THE
MEETING.
NUWAVE TECHNOLOGIES, INC.
ONE PASSAIC AVE.
FAIRFIELD, NEW JERSEY 07004
(973) 882-8810
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON ______, 2002.
TO THE STOCKHOLDERS:
GENERAL INFORMATION
This Proxy Statement has been prepared and is being furnished by the Board
of Directors of NUWAVE Technologies, Inc., a Delaware corporation (the
"Company"), in connection with the solicitation of proxies for the Annual
Meeting of Stockholders (the "Meeting") to be held at [The Ramada Inn, 38 Two
Bridges Road, Fairfield, New Jersey, on ______, _______, 2002, at 10:00 a.m.]
local time, and at any adjournment or postponement thereof, for the purposes set
forth in the attached Notice. When proxies are properly dated, executed, and
returned, the shares they represent will be voted at the Meeting in accordance
with the instructions of the stockholder completing the proxy.
It is anticipated that this Proxy Statement and the accompanying form of
proxy will be mailed to the stockholders on or about _______, 2002. The
Company's Annual Report, including audited financial statements for the fiscal
year ended December 31, 2001, and Form 10-QSB for the fiscal quarter ended
_______, 2002, are being mailed or delivered concurrently with this Proxy
Statement. The Annual Report and the Form 10-QSB are not to be regarded as proxy
soliciting material.
The Company is paying all the expenses of the solicitation of proxies,
including the expenses of printing and mailing this Proxy Statement, the
accompanying Notice of Annual Meeting of Stockholders, the enclosed proxy the
Annual Report and the Form 10-QSB. The Company will also reimburse brokerage
houses and other custodians, nominees and fiduciaries for their expenses, in
accordance with the regulations of the Securities and Exchange Commission (the
"SEC"), in sending proxies and proxy materials to the beneficial owners of the
Company's common stock. Officers or employees of the Company may also solicit
proxies in person, or by mail, telephone or by other means, but such persons
will receive no compensation for such work, other than their normal compensation
as such officers or employees.
VOTING SECURITIES, VOTING AND PROXIES
RECORD DATE
As of the close of business on ______, 2002 (the "Record Date"), the date
for determining the stockholders of record entitled to notice of and to vote at
the Meeting and any adjournment or adjournments thereof, there were ________
issued and outstanding shares of the Company's common stock, $.01 par value. On
all matters to be voted on at the Meeting, the holders of our common stock are
entitled to one vote per share. The presence at the Meeting of a majority of
such shares, in person or by proxy, are required for a quorum. Any stockholder
who submits a proxy, even though the stockholder abstains as to one or more
proposals, or who is present in person, shall be counted for the purpose of
determining if a quorum is present.
VOTING
Under Delaware law: (i) a plurality of the votes cast at the Meeting is
necessary to elect directors; and (ii) the affirmative vote of the holders of at
least a majority of the outstanding shares is required for the approval of the
increase in the authorized shares of our common stock and preferred stock and
the reverse split (the "Reverse Split"), each being a separate amendment to the
Company's Certificate of Incorporation (the "Charter Amendments"). Broker
"non-votes" and the shares as to which a stockholder abstains from voting are
included for the purposes of determining whether a quorum of shares is present
at the Meeting. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not have discretionary voting power with respect to that
item and has not received voting instructions from the beneficial owner. A
broker "non-vote" will have the effect of an AGAINST vote on Charter Amendments.
If you are the beneficial owner, but not the registered holder of the
Company's shares, you cannot vote directly those shares at the Meeting. You must
provide voting instructions to your nominee holder, such as your brokerage firm
or bank. Alternatively, if you wish to vote in person at the Meeting, you must
obtain from your record holder a proxy issued in your name.
At the Meeting, ballots will be distributed with respect to each proposal
to be voted upon to each stockholder (or the stockholder's proxy if not the
management proxy holders) who is present and did not deliver a proxy to the
management proxy holders or another person. The ballots shall then be tallied,
one vote for each share owned of record, the votes being in three categories:
"FOR," "AGAINST" or "ABSTAIN," except in the case of the proposal to elect
directors, the three categories will be, with respect to each director to be
elected, "FOR" the director nominee, "WITHHOLD AUTHORITY" from voting "FOR" the
director nominee or "FOR" another person to be elected as a director.
PROXIES
The form of proxy solicited by the Board of Directors affords stockholders
the ability to specify a choice among approval of, disapproval of, or abstention
with respect to, each matter to be acted upon at the Meeting. Shares represented
by the proxy will be voted and, where the solicited stockholder indicates a
choice with respect to any matter to be acted upon, the shares will be voted as
specified. If no choice is given, a properly executed proxy will be voted for
the election of the nominated directors, for each of the Charter Amendments, and
as to any other matters that may properly come before the Meeting, at the
discretion of the persons designated as proxies.
Stockholders who execute proxies retain the right to revoke them by
notifying the Company at any time before they are voted. Such revocation may be
effected by execution of a subsequently dated proxy, or by a written notice of
revocation, sent to the attention of the Secretary at the address of the
Company's principal office set forth above in the introductory paragraph to this
Proxy Statement or delivered to him at the Meeting. Unless so revoked, the
shares represented by proxies, if received in time, will be voted in accordance
with the directions given therein.
Stockholders are requested, regardless of the number of shares owned, to
sign the proxy and return it promptly in the enclosed envelope.
PRINCIPAL STOCKHOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT
The table below is based on information obtained from the persons named
therein with respect to the shares of our common stock beneficially owned, as of
________, 2002 (except as noted below), by (i) each person known by the Company
to be the owner of more than 5% of the outstanding shares of our common stock,
(ii) each director of the Company, (iii) each executive officer of the Company,
and (iv) all executive officers and directors of the Company as a group.
2
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) OUTSTANDING SHARES OWNED
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Gerald Zarin 1,213,000(3) ___%
Edward Bohn 103,000(4) ___%
Lyle Gramley 63,000(5) ___%
Joseph A. Sarubbi 78,000(6) ___%
Jeremiah F. O'Brien 180,000(7) ___%
Robert Webb 90,000(8) ___%
All executive officers and directors 1,727,000(9) ___%
as a group (6 persons)
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(1) Unless otherwise noted, the address of the beneficial owner is: c/o NUWAVE
Technologies, Inc., One Passaic Ave., Fairfield, NJ 07004.
(2) The number of shares of our common stock beneficially owned by each person
is determined in accordance with the rules of the SEC, and the information
is not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares as to
which the individual has sole or shared voting power or investment power
and also any shares of our common stock which the individual has the right
to acquire within 60 days after the Record Date, through the exercise of
any stock option, warrant or other right. The inclusion herein of any
shares of our common stock deemed beneficially owned does not constitute an
admission of beneficial ownership of those shares. Unless otherwise
indicated, the persons named in the table have sole voting and investment
power with respect to all shares of our common stock shown as beneficially
owned by them.
(3) Includes 760,000 shares subject to exercisable options.
(4) Includes 97,000 shares subject to exercisable options.
(5) Includes 43,000 shares subject to exercisable options.
(6) Includes 43,001 shares subject to exercisable options.
(7) Includes 175,000 shares subject to exercisable options.
(8) Includes 90,000 shares subject to exercisable options.
(9) See footnotes (3) through (8) above.
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR
The Board of Directors of the Company consists of four members, all of whom
are currently Directors and have been renominated for election at the Meeting.
Richard E. Ekstract served as our fifth director until his resignation on
July 9, 2002. At this time, management has decided to fix the Board at four
members. Directors elected at the Meeting will serve until the next annual
meeting of stockholders and until their respective successors are elected and
qualified or until their death, resignation or removal. In the event that any
nominee is unable or unwilling to serve, discretionary authority is reserved to
the persons named in the accompanying form of proxy to vote for substitute
nominees. Management does not anticipate that such an event will occur. Each
Director shall be elected by a plurality of the votes cast.
AGE AS OF
NAME RECORD DATE POSITION
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Gerald Zarin 61 Chairman of the Board of Directors,
President and Chief Executive Officer
Edward Bohn 56 Director
Lyle E. Gramley 75 Director
Joseph A. Sarubbi 74 Director
3
GERALD ZARIN has been a Director and President and Chief Executive Officer
of the Company since July 1995. He has been Chairman of the Board of Directors
since January 28, 1996. From June 1993 to July 1995, he was President and Chief
Executive Officer at AMD Consulting, Inc., a business consulting firm. From June
1991 until January 1993, Mr. Zarin was the Chairman, President and Chief
Executive Officer of Emerson Radio Corporation ("Emerson Radio"), which designs
and sells consumer electronics products. From November 1990 to June 1991, he was
President and Chief Executive Officer of JEM, Inc., an importer of fine
furnishings. From August 1987 to October 1990, he was Senior Vice President and
Chief Financial Officer of Horn & Hardart, Inc., the parent company for Hanover
House and various other hotels and fast food chains. From 1976 to 1986, he was
President and Chief Executive Officer of Morse Electro, Inc., which designed and
sold consumer electronics products.
EDWARD BOHN has been a Director of and a consultant to NUWAVE since July
1995. Since March 2001, he has been Chief Financial Officer of Nova Corp., which
constructs and manages the construction of data centers serving the
telecommunications (Internet) industry both domestically and internationally,
after having been a Director and Consultant since December 1999. Since February
1995, he has been a Director and Consultant of Jennifer Convertibles, a
furniture distributor. Since September 1994, he has operated as an independent
consultant in financial and operational matters. From January 1983 to March
1994, Mr. Bohn was employed in various capacities by Emerson Radio, including
from March 1993 to March 1994, as Senior Vice President-Special Projects; and
from March 1991 to March 1993, as Chief Financial Officer and Treasurer/Vice
President of Finance. Prior to March 1991, he was Vice President of Finance and
Treasurer. Prior to Emerson, he held positions as and Officer and Assistant
Controller of Jersey Central Power and Light, as Coordinator of Internal
Auditing for the GPU System, controller of a multi-million food manufacturing
company, and held various positions in a public accounting firm.
LYLE E. GRAMLEY has been a Director of the Company since December 1995.
Since 1985, he has been employed by the Mortgage Bankers Association in
Washington, D.C., serving as Senior Staff Vice President and Chief Economist
since 1985 to 1992, and as a Consulting Economist since 1992. From 1980 to 1985,
Mr. Gramley was a member of the Board of Governors of the Federal Reserve Board.
JOSEPH A. SARUBBI has been director of the Company since March 1996. From
October 1993 to June 6, 1996, he was a director of The Panda Project, Inc., a
manufacturer of computers and semiconductor packages. Since April 1988, Mr.
Sarubbi has been a self-employed management and technical consultant to various
technology companies. From February 1986 to April 1988, he was Senior Vice
President of Manufacturing Operations for Tandon Corporation, a computer
manufacturer. From December 1952 to January 1986, Mr. Sarubbi was employed by
IBM in various senior engineering positions.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company are entitled to a fee of
$2,500 per year and $500 per meeting attended (other than telephonic meetings)
for serving on the Board of Directors. Each director is also reimbursed for
expenses incurred in connection with attendance at meetings of the Board of
Directors. For the fiscal year ended December 31, 2001, Messrs. Bohn, Gramley
and Sarubbi received compensation of $1,500 for attendance at non-telephonic
board meetings. [At the Board Meeting held February 19, 2002, Mr. Bohn stated
that he wanted to waive the board stipend due to him until such time as the
Company has adequate sales and financing.]
The 1996 Non-Employee Director Stock Option Plan (the "Director Stock
Option Plan") provides for the automatic grant to each individual elected,
re-elected or continuing as a non-employee director of our Company of a stock
option for 5,000 shares of our common stock at an option exercise price equal to
the fair market value of our common stock on the date of grant. 235,000 shares
have been reserved for issuance under the Director Stock Option Plan. At
December 31, 2001, options for an aggregate of 213,000 shares of our common
stock exercisable at prices ranging from $0.81 to $6.75 per share expiring from
May 3, 2003 to January 3, 2011 were outstanding under the Director Stock Option
Plan. [As of _____, 2002, options for an aggregate of ______ shares of our
common stock exercisable at prices ranging from $0.__ to $0.__ per share,
expiring from _______, to ______ have been granted under the Director Stock
Option Plan for the year ending December 31, 2002.]
4
For a description of consulting fees paid to Messrs. Bohn and Sarubbi, see
"Certain Relationships and Related Transactions."
BOARD AND COMMITTEE MEETINGS
Our Board of Directors held six meetings during the fiscal year ended
December 31, 2001. During 2001, no member of the Board of Directors attended
fewer than 75% of the aggregate of (i) the total number of meetings of the Board
of Directors held during the period for which he has been a director and (ii)
the total number of meetings held by all committees on which he served.
The Board of Directors has a standing Audit Committee and a standing
Compensation Committee. The Audit Committee met three times and the Compensation
Committee met once during the fiscal year ended December 31, 2001.
Messrs. Bohn, Gramley and Sarubbi comprise the Audit Committee. This
Committee makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the results of the
audit engagement, approves professional services provided by the independent
accountants, reviews the independence of the independent public accountants,
considers the range of audit and non-audit fees, and reviews the adequacy of our
internal accounting controls. The Audit Committee operates under a formal
written charter.
Messrs. Bohn and Sarubbi comprise the Compensation Committee. The
Compensation Committee makes recommendations to the Board regarding the
executive and employee compensation programs of our Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1996, Edward Bohn, a director of our Company, has been acting as a
consultant to us from time to time on matters specified by our President. In
March 1997, Mr. Bohn entered into a consulting agreement with us pursuant to
which he agreed to act as our consultant at a rate of $1,000 per day with a
maximum of $2,750 per week regardless of the actual time spent on our behalf.
For the years ended December 31, 2001 and 2000, Mr. Bohn received $0 and $2,800,
respectively on account of such consulting services. [As of _____, 2002,
Mr. Bohn has received $____ on account of such services for the year ending
December 31, 2002.]
Since 1996, Joseph A. Sarubbi, a director of our Company, has been acting
as a consultant to us from time to time on matters specified by our President.
In that connection he has received compensation on a per diem basis of $1,000
per day. For the years ended December 31, 2001 and 2000, Mr. Sarubbi received $0
and $3,000, respectively, on account of such consulting services. [As of _____,
2002, Mr. Sarubbi has received $____ on account of such services for the year
ending December 31, 2002.]
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL NOMINEES
FOR DIRECTOR.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual and long-term compensation paid
by our Company for services performed on our Company's behalf for the three
fiscal years ended December 31, 2001, with respect to those persons who were, as
of December 31, 2001, our Chief Executive Officer and our executive officers who
received more than $100,000 in compensation for fiscal 2001 (the "Named
Executive Officers").
5
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -------------------
NUMBER
OTHER OF SHARES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ---- ------ ----- ------------ ------- ------------
Gerald Zarin, 2001 $161,000 0 $0 200,000 $0
President and Chief 2000 $140,000 $50,000 $0 0 $0
Executive Officer 1999 $120,000 $25,000 $0 50,000 $0
Jeremiah F. O'Brien, 2001 $120,000 0 $0 50,000 $0
Chief Financial 2000 $114,000 $25,000 $0 0 $0
Officer, Vice President 1999 $100,000 $10,000 $0 20,000 $0
and Secretary
Robert Webb, Vice 2001 $125,000 0 $0 0 $0
President, Marketing/ 2000 $119,000 $25,000 $0 0 $0
Technical Development 1999 $108,000 $10,000 $0 20,000 $0
EMPLOYMENT AGREEMENTS
Mr. Zarin entered into an employment agreement with the Company, dated as
of April 2000, pursuant to which he agreed to serve as the Company's President
and Chief Executive Officer through December 31, 2007 after which time the
Employment Agreement shall automatically continue for additional one year
periods (the "Renewal Terms") unless either Zarin or the Corporation notifies
the other at least six months prior to the end of the initial or any Renewal
Term. The agreement provided for an initial salary of $120,000 per year, which
was increased to $150,000 on May 11, 2001. Mr. Zarin's base salary was
voluntarily decreased to $137,500 in March 2002. Mr. Zarin is also entitled to
an annual bonus based on the performance of the Corporation equal (i) 50% of his
base compensation if the Company's net profits before taxes are equal to
projections be approved by the Company's Board of Directors, (ii) 75% of his
base compensation if the Company net profits before taxes are equal to 105% of
such projections, and (iii) 100% of his base compensation if the Company's net
profits before taxes are equal to 115% of such projections. Mr. Zarin can
terminate the agreement upon 180 days notice. The Company can terminate the
agreement for good cause at any time. If the Company elects not to renew the
Agreement and has given proper notification, Mr. Zarin will receive on the date
of termination an amount equal to 150% of his base compensation his entitled
performance bonus and an amount equal to the average of any discretionary bonus
paid if the preceding two calendar years (the "Termination Bonuses"). If the
Company otherwise terminates the agreement without cause, or otherwise
materially breaches the agreement prior to December 31, 2005, Mr. Zarin will
receive a single payment equal to the remaining payments he would have been
entitled to receive during the unexpired portion of the agreement, an additional
two years base compensation and any termination bonuses. If the Company
otherwise terminates the agreement without cause, or otherwise materially
breaches the agreement after December 31, 2005, Mr. Zarin will receive a single
payment equal to the remaining payments he would have been entitled to receive
during the unexpired portion of the agreement, an additional three years base
compensation and any termination bonuses. Pursuant to an earlier employment
agreement Mr. Zarin was granted an option purchase 200,000 shares of our common
stock at $1.50 per share. The option expires December 31, 2005, and terminates
if Mr. Zarin voluntarily leaves the Company or the employment agreement is
terminate by the Company for good cause.
On September 11, 1995, we entered into an employment agreement with Robert
Webb, pursuant to which Mr. Webb was appointed Vice President-Marketing. In
March 1997, his title was changed to Vice President-Marketing/Technical
Development in order to more accurately reflect his duties. The employment
agreement continued until March 31, 1996 and thereafter has been continuing for
successive 3-month periods. Mr. Webb's base salary for 2002 is $70,000. In
connection with his employment agreement, Mr. Webb received options to purchase
70,000 shares of our common stock at $1.50 per share.
6
In connection with services performed by Mr. O'Brien, on July 17, 1995, he
received 5,000 shares of our common stock valued at $.01 per share and has been
granted options to purchase 25,000 shares of our common stock at $1.50 per share
and 5,000 shares of our common stock at $2.00 per share. Mr. O'Brien's base
salary for 2002 is $110,000.
1996 STOCK INCENTIVE PLAN FOR EMPLOYEES AND CONSULTANTS
As of January 31, 1996, we adopted the 1996 Stock Incentive Plan for
Employees and Consultants, pursuant to which stock options (both Nonqualified
Stock Options and Incentive Stock Options), stock appreciation rights and
restricted stock in the aggregate exercisable for up to 1,205,000 shares of our
common stock may be granted to key employees and consultants. The purpose of the
Employee Stock Incentive Plan is to provide our employees and consultants with
an increased incentive to make significant and extraordinary contributions to
the long-term performance and growth of our Company, to align the interest of
employees and consultants with the interests of the stockholders of our Company,
and to attract and retain employees and consultants of exceptional ability.
As of October 4, 2002, we have granted options to purchase a total of
1,413,000 shares of our common stock at prices ranging from $0.61 to $6.88 per
share under the Employee Stock Incentive Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The number of shares available for grant under our 1996 Stock Incentive
Plan for Employees and Consultants is 70,000. Options for an aggregate of
1,135,000 shares have been granted under the 1996 Stock Incentive Plan for
Employees and Consultants. During our 2001 fiscal year, options covering an
aggregate of 320,000 shares of our common stock were granted under our Employee
Stock Option Plan to three persons at exercise prices ranging from $0.61 to
$1.05 per share. During the first nine months of 2002, no options were granted.
The following table sets forth all grants of options for our common stock
to the Named Executive Officers of the Company during fiscal 2001.
OPTION GRANTS FOR YEAR ENDED DECEMBER 31, 2001
(INDIVIDUAL GRANTS IN FISCAL YEAR)
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO PRICE EXPIRATION
NAME OPTIONS EMPLOYEES PER SHARE(1) DATE
---- ------- --------- ------------ ----
Gerald Zarin 150,000 42.8 $0.79 June 12, 2006
50,000 14.3 $0.79 December 31, 2001
Jeremiah F. O'Brien 50,000 14.3 $0.79 June 12, 2006
Robert Webb -0- -0- -0- -0-
------------------------------
TOTAL 255,000 61.4%
======= =====
----------
(1) All grants of options have been made with exercise prices equal to fair
value at date of grant.
OPTION EXERCISES AND YEAR-END OPTION VALUES
No options were exercised in fiscal year 2001 by any of the Named Executive
Officers. The following table sets forth, as of December 31, 2001, the number of
stock options and the value of unexercised stock options held by the Named
Executive Officers.
7
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 2001
AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS(1)
NAME OPTIONS AT DECEMBER 31, 2001 AT DECEMBER 31, 2001
---- ---------------------------- --------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Gerald Zarin 785,000 0 $35,000 $0
Robert Webb 110,000 0 $0 $0
Jeremiah F. O'Brien 175,000 0 $13,000 $0
---------------- ---------------
TOTAL 1,170,000 $48,000
========= =======
----------
(1) The dollar value of the unexercised options has been calculated by
determining the difference between the fair market value of the securities
underlying the options and the exercise price of the option at fiscal
year-end.
PROPOSAL 2
AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A REVERSE SPLIT OF OUR
OUTSTANDING COMMON STOCK
BACKGROUND
The Board of Directors authorized, subject to stockholder approval, a
Reverse Split of the Company's outstanding common stock that may be effected,
depending on market conditions, at a time and upon a ratio to be determined by
the Board. The intent of the Reverse Split is to increase the marketability and
liquidity of our common stock. The failure of stockholders to approve this
proposal would create severe hardship for future operations of the Company and
could result in substantial future dilution to stockholders.
If the Reverse Split is approved by the stockholders at the Meeting, the
Board of Directors will select the ratio, up to one post-split for fifty
pre-split shares, which, in its judgment, would result in the greatest
marketability and liquidity of our common stock, based upon prevailing market
conditions, on the likely effect on the market price of our common stock and
other factors deemed relevant.
If approved by the stockholders, the Reverse Split would become effective
on any date (the "Effective Date") selected by the Board of Directors on or
prior to the Company's next meeting of stockholders. The form of resolutions for
the consummation of the Reverse Split which will be included in the Certificate
of Amendment to the Certificate of Incorporation are attached hereto as APPENDIX
A.
There are presently 40,000,000 shares of our common stock authorized of
which _______ shares are issued and outstanding as of the Record Date. In
addition, the Company has reserved 6,355,355 shares for issuance upon conversion
of options under option plans and upon conversion of outstanding warrants. The
Company also desires to have additional authorized shares for future capital
raising, acquisitions and other options. We may issue shares of our common stock
through the Equity Line of Credit Agreement, which is described below under the
heading "The Equity Line of Credit." The Equity Line of Credit is non-exclusive,
thereby permitting us to offer and sell our securities to third parties while
the Equity Line of Credit is in effect. We are pursuing alternative means of
raising capital, through private placements of our equity securities, which
could include preferred stock or convertible debt. We are also considering
making a rights offering to holders of our common stock as a way of raising
additional capital. If we are able to raise capital by making a private
placement of our securities, or if we decide to make a rights offering to
holders of our common stock, we would need to issue additional shares of common
stock. If we raise capital through private placements or a rights offering, we
may decide not to draw further on the Equity Line of Credit, but the Equity Line
of Credit will still be available to us during its term, and any time we decide
to request an advance, we will need to issue additional shares of our common
stock. A Reverse Split will make more shares of common stock available, giving
management the flexibility to take advantage of capital raising opportunities as
they arise.
8
We will need to raise capital for operations because of delays in revenues
and realization of sales proceeds. Since our Company's inception, we have raised
capital from time to time through private placements of equity securities to
obtain funds needed to develop our technologies. These technologies are in the
process of being commercialized. While management believes these technologies
present opportunities for revenues, the process is taking longer than
anticipated [and there can be no assurance that revenues sufficient to satisfy
our operating needs will be available in the near future]. In addition, during
this period, there has been a general downturn in the stock markets, which has
also affected the trading price of the Company's stock. As of August 12, 2002,
our common stock was delisted from the Nasdaq SmallCap National Market in part
because its market price had fallen below the required minimum market price for
continued listing. Since that date, our common stock has been traded on the Over
the Counter Bulletin Board, and the per share trading price has continued to
decline. Our stock is a "penny stock" because its per share price is lower than
$5.00 per share and it is not traded on a national market. Because of the
decline in our share price, when we raise capital through placements of equity
securities to investors, the number of shares of common stock we need to issue
rises dramatically. As the price declines, the number of shares we issue to
raise the same amount of capital increases.
PURPOSES AND EFFECTS OF A REVERSE SPLIT
The Company will have to raise additional capital through private
placements of our common stock to investors, or by continuing to draw on the
Equity Line of Credit, which is discussed in more detail below under the heading
"The Equity Line of Credit." In order to attract investors to raise the capital
we will need, our per share stock price must be increased. Consummation of the
Reverse Split will not alter the number of authorized shares of our common
stock, which will remain 40,000,000 shares, $.01 par value, assuming Proposal 3
is not approved. Consummation of the Reverse Split will not have any federal tax
consequences to stockholders.
The Board believes that the current per share price of our common stock
limits the effective marketability of our common stock because of the reluctance
of many brokerage firms and institutional investors to recommend lower-priced
stocks to their clients or to hold them in their own portfolios. Certain
policies and practices of the securities industry may tend to discourage
individual brokers within those firms from dealing in lower-priced stocks. Some
of those policies and practices involve time-consuming procedures that make the
handling of lower-priced stocks economically unattractive. The brokerage
commission on a sale of lower-priced stock may also represent a higher
percentage of the sale price than the brokerage commission on a higher-priced
issue. Any reduction in brokerage commissions resulting from the Reverse Split
may be offset, however, in whole or in part, by increased brokerage commissions
required to be paid by stockholders selling "odd lots" created by such Reverse
Split. Effecting a Reverse Split of our outstanding common stock will increase
the per share market price and will make our common stock more attractive to
investors.
If the Reverse Split is approved, the Board will have discretion, based on
market conditions and other factors, whether or not to effect the Reverse Split,
and if so, to determine the ratio to be established for the Reverse Split, up to
an exchange ratio of one share for each fifty shares outstanding at the time the
Reverse Split is effected. If the ratio is set at a high number, there will be a
corresponding effect on the public float and on the on the number of holders of
round lots of our common stock. For example, if the ratio is set at
one-for-fifty, 5,000 currently outstanding shares of our common stock will
convert to a round lot of 100 shares of post-Reverse Split shares. After a
one-for-fifty Reverse Split, current stockholders who hold less than 5,000
shares of our common stock will have less than a round lot. Such stockholders
may choose to sell their odd lots, with the result that we may have fewer
stockholders after the Reverse Split is effected. Pending Securities and
Exchange Commission approval, next year the OTC Bulletin Board will require that
to remain listed, an issuer must have 100 round-lot stockholders and 200,000
shares circulating in the public float. Also, in order for our common stock to
requalify for listing on the Nasdaq SmallCap Market, in addition to meeting per
share price requirements, we would also be required to have at least 300
round-lot stockholders and at least 500,000 publicly held shares in the public
float, having a market value of at least $1 million. Notwithstanding the
reduction in the number of outstanding shares of our common stock by reason of a
Reverse Split, the Board has no present intention to cause the Company to "go
private."
Before approving a particular ratio for implementing the Reverse Split, the
Board will consider the impact a Reverse Split at that ratio will have on the
per share market price of our common stock, as well as on the number of
round-lot stockholders and the number of shares in the public float and the
market value of the public float. Before determining a particular ratio, the
Board will also consider such factors as the effect the predicted new per share
9
market price will have on the potential volatility of the market for our common
stock, market trends in general, and the performance of and potential revenues
and cash flow from our products.
Our common stock is listed for trading on the OTC Bulletin Board under the
symbol WAVEBB. On the Record Date, the reported closing price of our common
stock on the OTC Bulletin Board was $0.__ per share.
The Reverse Split would have the following effects upon the number of
shares of our common stock outstanding and the number of authorized and unissued
shares of our common stock (assuming that no additional shares of our common
stock are issued by the Company after the Record Date). The following examples
are not exhaustive of all possible Reverse Splits that fall within the Board
approved range, and are only intended for illustrative purposes.
Common Unissued and
Reverse Stock Split Stock Outstanding* Reserved Shares** Authorized Common Stock***
------------------- ----------------- --------------- -----------------------
Current 15,818,125 6,355,355 17,826,520
1 for 10 1,581,812 635,535 37,782,653
1 for 25 632,725 252,214 39,113,061
1 for 50 316,362 127,107 39,556,531
----------
* As of October 23, 2002.
** Includes: (i) 235,000 shares reserved under the 1996 Non-Employee Director
Stock Option Plan, (ii) 1,205,000 shares reserved under the 1996 Stock
Incentive Plan for Employees and Consultants, (iii) 2,057,207 shares
reserved for issuance upon exercise of outstanding Class A Warrants, (iv)
1,044,304 shares reserved for issuance upon exercise of outstanding Class B
Warrants, (v) 680,000 shares reserved for issuance upon exercise of
outstanding common stock purchase warrants, and (vi) 1,133,844 shares
reserved for issuance upon exercise of outstanding placement agent unit
warrants.
*** Based upon 40,000,000 shares as presently authorized, assumes stockholder
approval of the Reverse Split, but does not assume stockholder approval of
the increase in the authorized capital stock.
There can be no assurance that the market price per share of our common
stock after the Reverse Split is effected will rise or remain constant in
proportion to the reduction in the number of shares of our common stock
outstanding before the Reverse Split. For example, based on the closing market
price of our common stock on [October 23], 2002, of $0.05 per share, if the
Board of Directors decided to implement the Reverse Split at a ratio of
one-for-fifty, there can be no assurance that the post-Reverse Split market
price of our common stock would be $2.50 per share. Accordingly, the total
market capitalization of our common stock after the proposed Reverse Split may
be lower than the total market capitalization before the proposed Reverse Split
and, in the future, the market price of our common stock following
implementation of the Reverse Split may not exceed or remain higher than the
market price prior to the proposed Reverse Split. In many cases, the total
market capitalization of an issuer following a reverse stock split is lower than
the total market capitalization before the reverse stock split.
While the Board of Directors believes that a higher stock price may help
generate investor interest, there can be no assurance that the reverse stock
split will result in a per share price that will attract institutional investors
and brokers. The market price of our common stock will also be based on our and
other factors, some of which are unrelated to the number of shares outstanding.
If the Reverse Split is effected and the market price of our common stock
declines, the percentage decline as an absolute number and as a percentage of
our overall market capitalization may be greater than would occur in the absence
of a Reverse Split. In many cases, both the total market capitalization of an
issuer and the market price of a share of such company's common stock following
a reverse stock split are lower than they were before the reverse stock split.
Furthermore, the liquidity of our common stock could be adversely affected by
the reduced number of shares that would be outstanding after the reverse stock
split.
THE EQUITY LINE OF CREDIT
In April 2002, we obtained an Equity Line of Credit pursuant to an Equity
Line of Credit Agreement with Cornell Capital Partners, L.P., under which, we
may, at our discretion, periodically sell to Cornell Capital Partners, L.P.
10
shares of common stock for a total purchase price of up to $3.0 million. For
each share of common stock purchased under the Equity Line of Credit, Cornell
Capital Partners, L.P. will pay 97% of the lowest closing bid price on the Over
the Counter Bulletin Board or other principal market on which our common stock
is traded for the five days immediately following the advance notice date.
Further, Cornell Capital Partners, L.P. receives a fee of 4% of each advance
under the Equity Line of Credit.
We may only put shares of our common stock to the extent that such shares
of common stock are covered by a valid registration statement. On May 31, 2002,
the Securities and Exchange Commission declared effective a registration
statement covering 5,000,000 shares of our common stock issued or issuable under
the Equity Line of Credit. We may request advances until Cornell Capital
Partners, L.P. has advanced $3.0 million, or two years after the effective date
of that registration statement, whichever occurs first. The amount of each
advance is subject to an aggregate maximum advance amount of $100,000 in any
seven business day period. The amount available under the Equity Line of Credit
is not dependent on the price or volume of our common stock. However, under the
Equity Line of Credit Agreement, we cannot request in any single advance a
number of shares that would exceed 9.9% of our then-outstanding common stock.
We have begun to draw on the Equity Line of Credit and issue shares of our
common stock to Cornell Capital Partners, L.P., which has had a depressive
effect on the market price of our common stock, and we have had to issue greater
numbers of share of our common stock each time we draw an advance on the Equity
Line of Credit. As of October 23, 2002, under the terms of the Equity Line of
Credit Agreement, Cornell Capital Partners, L.P. has advanced $190,000 to NUWAVE
and we have issued to Cornell Capital Partners, L.P., 2,261,928 shares of our
common stock, leaving $2,810,000 available in advances under the Equity Line,
but only 2,738,072 shares covered by the registration statement declared
effective on May 31, 2002. We filed a registration statement to cover up to an
additional 14,000,000 shares of our common stock issuable under the Equity Line
of Credit, which was declared effective by the Securities and Exchange
Commission on November 1, 2002.
We cannot predict the actual number of shares of common stock that will be
issued pursuant to the Equity Line of Credit, 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. Also, there
is an inverse relationship between our stock price and the number of shares to
be issued under the Equity Line of Credit. That is, as our stock price declines,
we are required to issue a greater number of shares under the Equity Line of
Credit for a given advance.
Nonetheless, we can estimate the number of shares of our common stock that
will be issued using certain assumptions. Assuming NUWAVE drew the remaining
$2,810,000 on the Equity Line of Credit and issued shares of its common stock at
a recent price of $[0.08] per share, we would issue [35,125,000] shares of our
common stock, which is more than is currently registered. To fully draw on the
Equity Line of Credit, we would have to register additional shares. If a Reverse
Split is effected by the Board, the per share price of our common stock will
increase and the number of shares we need to issue for each advance will
decrease.
In the event neither this Proposal nor Proposal 3 is adopted, the Company
will be compelled to seek approval at the next stockholders meeting of an
increase in the authorized shares of capital stock beyond the increase sought in
Proposal 3, and may have to postpone implementation of certain corporate
transactions pending approval of a further increase in the authorized capital
stock.
PRINCIPAL EFFECTS OF THE REVERSE SPLIT
If approved and effected, the Reverse Split would have the following effects:
o At the Effective Date, up to fifty shares of Old Common Stock, as
determined by the Board, owned by a stockholder would be exchanged for
one share of New Common Stock subject to the treatment of fractional
share interests as described below.
o The number of shares of our common stock issued and outstanding will
be proportionately reduced. Upon the implementation of the Reverse
Split, the number of authorized shares of common stock that are not
11
issued or outstanding would increase due to the reduction in the
number of shares of our common stock issued and outstanding. As of
October 23, 2002, we had 40,000,000 shares of common stock and
2,000,000 shares of preferred stock authorized. If Proposal 3 outlined
below is approved by the stockholders, we will increase the number of
authorized shares of our common stock and preferred stock to
100,000,000 and 5,000,000 respectively. Authorized but unissued shares
will be available for issuance, and we may issue such shares in
financings or otherwise. If we issue additional shares, the ownership
interest of holders of our common stock may also be diluted.
o The shares of our common stock will continue trading on the OTC
Bulletin Board.
o Proportionate adjustments will be made to the per share exercise price
and the number of shares issuable upon the exercise of all outstanding
options and warrants entitling the holders thereof to purchase shares
of our common stock, which will result in approximately the same
aggregate price being required to be paid for such options or warrants
upon exercise of such options or warrants immediately preceding the
Reverse Split.
o The number of shares reserved for issuance under our existing stock
option plans and employee stock purchase plans will be reduced
proportionately.
o No scrip or fractional certificates will be issued in connection with
the Reverse Split. Instead, any fractional share that results from the
Reverse Split will be rounded up to the next whole share of our common
stock, but not less than one share.
o If approved and effected, the Reverse Split will result in some
stockholders owning "odd lots" of less than 100 shares of our common
stock. Brokerage commissions and other costs of transactions in odd
lots are generally somewhat higher than the costs of transactions in
"round lots" of even multiples of 100 shares.
o The reverse stock split will not affect the par value of our common
stock. As a result, as of the Effective Date, the stated capital on
our balance sheet attributable to our common stock will be reduced
proportionately, and the additional paid-in capital account will be
credited with the amount by which the stated capital is reduced. The
per share net income or loss and net book value of our common stock
will be restated because there will be fewer shares of our common
stock outstanding.
If the stockholders approve the proposal to authorize the Board of
Directors to implement the Reverse Split and the Board of Directors decides to
implement the Reverse Split on or prior to the next meeting of stockholders, we
will file a Certificate of Amendment to our Certificate of Incorporation with
the Secretary of State of the State of Delaware to amend our existing
Certificate of Incorporation, as amended to date. The Reverse Split will become
effective at the time specified in the Certificate of Amendment to the
Certificate of Incorporation, which is referred to below as the "Effective
Date." Beginning at the Effective Date each certificate representing Old Common
Stock will be deemed for all corporate purposes to evidence ownership of New
Common Stock. The text of the Certificate of Amendment to the Certificate of
Incorporation to effect the Reverse Split, if implemented by the Board of
Directors, would be in substantially the form attached hereto as APPENDIX A. The
text of the form of Certificate of Amendment to our Certificate of Incorporation
attached to this proxy statement includes certain revisions to our current
Certificate of Incorporation which are described in Proposal 3, concerning an
increase in the number of authorized shares of our common stock and preferred
stock. If Proposal 3 is not approved, these revisions will not be included in
the Certificate of Amendment when it is filed with the Secretary of State of the
State of Delaware. In addition, the text of the form of Certificate of Amendment
to our Certificate of Incorporation attached to this proxy statement is subject
to modification to include such changes as may be required by the Office of the
Secretary of State of the State of Delaware and as the Board of Directors deems
necessary and advisable to effect the Reverse Split, including the insertion of
the Effective Date determined by the Board of Directors.
Shortly after the Effective Date, the Company will send transmittal forms
to the holders of the Old Common Stock to be used in forwarding their
certificates (the "Old Certificates") formerly representing shares of Old Common
Stock for surrender and exchange for certificates (the "New Certificates")
representing whole shares of New Common Stock. Holders of Old Common Stock will
12
be asked to surrender to the exchange agent certificates representing Old Common
Stock in exchange for certificates representing New Common Stock in accordance
with the procedures to be set forth in the letter of transmittal we will send to
our stockholders. No new certificates will be issued to a stockholder until that
stockholder has surrendered that stockholder's outstanding certificate or
certificates representing Old Common Stock, together with the properly completed
and executed letter of transmittal, to the exchange agent. We expect that our
transfer agent, American Stock Transfer and Trust Company, will act as exchange
agent for purposes of implementing the exchange of stock certificates. Any
certificates of Old Common Stock submitted for transfer, whether pursuant to a
sale, other disposition or otherwise, will automatically be exchanged for a
certificate or certificates representing shares of New Common Stock.
Stockholders should not destroy any stock certificate(s) and should not
submit any certificate(s) until requested to do so.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE REVERSE SPLIT.
PROPOSAL 3
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
AND PREFERRED STOCK
GENERAL
The Company has authorized 40,000,000 shares of our common stock, $.01 par
value, of which ________ shares are presently issued and outstanding. The Board
of Directors has unanimously adopted a resolution seeking stockholder approval
to amend our Certificate of Incorporation to increase the number of authorized
common shares to 100,000,000 and the authorized preferred shares to 5,000,000.
The holders of our common stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors then up for election. In the event of
liquidation, dissolution or winding up of the Company, the holders of our common
stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over our common
stock. Holders of our common stock, as such, have no conversion, preemptive or
other subscription rights, and there are no redemption provisions applicable to
our common stock.
Holders of shares of our common stock are entitled to receive dividends
when, as and if declared by the Board of Directors from funds legally available
therefore, subject to any preferred or contemporaneous dividend on any
outstanding series of our preferred stock. Management does not intend to declare
cash dividends on our common stock in the foreseeable future.
The Company has authorized 2,000,000 shares of preferred stock, $.01 par
value, none of which is outstanding. The shares of our preferred stock may be
issued having such preferences and rights as the Board of Directors may
designate at the time of issuance, including having anti-takeover provisions.
Frequently, opportunities arise that require prompt action, and the Board of
Directors believes that the delay necessary for stockholder approval of a
specific issuance would be a detriment to the Company and its stockholders. The
Board of Directors does not intend to issue any of our preferred stock except on
terms which the Board of Directors deems to be in the best interests of the
Company and its then existing stockholders.
13
PURPOSE
In order to provide flexibility for future transactions, we desire to
increase the number of authorized shares of common stock from 40,000,0000 to
100,000,000 and our preferred stock from 2,000,000 to 5,000,000.
We anticipate that we may in the future issue additional shares in
connection with one or more of the following:
o financing transactions, such as public or private offerings of equity
or convertible securities as an alternative to the Cornell Equity Line
of Credit (see Proposal 2);
o a rights offering to our stockholders;
o strategic investment;
o mergers and/or acquisitions;
o Cornell Equity Line of Credit, if necessary; and
o otherwise for corporate purposes that have not yet been identified.
In order to provide the Board of Directors with certainty and flexibility
to undertake such transactions to support our future business growth, the board
deems it appropriate at this time to increase the number of authorized shares of
our preferred stock. If this proposal is adopted, the additional authorized
shares of common stock may be issued upon the approval of the Board of Directors
at such times, in such amounts, and upon such terms as the Board of Directors
may determine, without further approval of the stockholders, unless such
approval is expressly required by applicable law, regulatory agencies. Further,
our stockholders will have no preemptive rights to purchase additional shares.
The growth of the Company is dependent on its ability to have sufficient
available authorized capital stock. In light of the recent low market price of
our common stock, management believes that a considerable number of shares
should be authorized. Although future issuances of capital stock may be dilutive
to current stockholders, and may have anti-takeover or management entrenchment
effects, such issuances are integral to the Company having the means to seek to
fulfill its objectives.
In determining the number of shares for the increase in the authorized
shares of our common stock, the Board assumed that the maximum number of shares
of our common stock under the Equity Line of Credit would be issued. Based upon
such assumption and therefore to avoid having the Board seek a further increase
in the authorized shares at the next stockholders meeting, which could affect
the ability of the Company to engage in certain transactions until the
authorized capital stock is further increased, management decided to seek
stockholder approval at this Meeting for the proposed authorized shares of
capital stock. Management believes there may be a need for the additional
authorized shares even if the stockholders approve the Reverse Split, see
Proposal 2.
We may issue shares of our common stock through the Equity Line of Credit
Agreement. We are pursuing alternative means of raising capital, through private
placements of our equity securities, which could include preferred stock or
convertible debt. We are also considering making a rights offering to holders of
our common stock as a way of raising additional capital. If we draw on the
Equity Line of Credit or are able to raise capital by making a private placement
of our securities, or if we decide to make a rights offering to holders of our
common stock, we would need to issue additional shares of common stock. An
increase in the number of authorized shares of common stock and preferred stock
will provide management with the flexibility to take advantage of capital
raising opportunities as they arise.
If the proposed amendment is approved by the stockholders, generally no
further stockholder approval would be required for the issuance of the
authorized shares of our common stock or our preferred stock, unless required by
law or by the rules of any national securities exchange or automated quotation
system on which our common stock may then be listed. Our common stock is
presently traded on the Over the Counter Bulletin Board.
14
As discussed above, under the heading "The Equity Line of Credit" in
Proposal 2, we have entered into an Equity Line of Credit Agreement with Cornell
Capital Partners, L.P. Although we cannot predict the number of shares of our
common stock that will be issued pursuant to the Equity Line of Credit because
we may not choose to fully draw on the Equity Line of Credit and because of the
inverse relationship between our stock price and the number of shares of our
common stock we must issue each time we draw an advance on the Equity Line of
Credit, we can estimate the number of shares of our common stock that will be
issued using certain assumptions. Assuming NUWAVE drew the remaining $2,810,000
on the Equity Line of Credit and issued shares of its common stock at a recent
price of $[0.08] per share, we would issue [35,125,000] shares of our common
stock. The Company presently has [17,826,520] authorized but unissued shares of
our common stock, including shares reserved for issuance under option plans and
upon exercise of outstanding common stock purchase warrants, which means that it
is possible with the number of shares we currently have authorized, we might not
be able to fully draw on the Equity Line of Credit, unless the increase in the
number of authorized shares of our common stock is approved.
The Company also desires to have shares of our common stock available for
the exercise of any options which may be declared under the 1996 Non-Employee
Director Stock Option Plan, the 1996 Stock Incentive Plan for Employees and
Consultants and any other compensatory arrangements established in the future,
for other forms of raising capita through issuances of equity securities to
private investors and for acquisitions.
RECOMMENDATION
Management believes it is essential that the Company have a sufficient
number of authorized but unissued shares of our common stock and our preferred
stock in order to meet its business objectives for the benefit of stockholders
as the current available shares of our common stock is insufficient.
The Company's Board of Directors has unanimously approved and recommends to
the Stockholders the adoption of an amendment to Article FOURTH, Section 1 of
the Company's Certificate of Incorporation (the "Amendment") to increase the
number of shares of common stock and preferred stock that the Company is
authorized to issue.
Pursuant to the proposed Amendment, Article FOURTH, Section 1 will be
amended to read as follows:
"Authorized Capital. The total number of shares of all
classes of capital stock which the Corporation has authority
to issue shall be 105,000,000 shares, par value $.01 per
share, consisting of: (i) 100,000,000 shares of Common Stock
par value $.01 per share (the "Common Stock") and (ii)
5,000,000 shares of Preferred Stock, par value $.01 per
share (the "Preferred Stock").
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO OUR CERTIFICATE OF INCORPORATION FOR THE INCREASE IN THE NUMBER OF
AUTHORIZED SHARES OF OUR COMMON STOCK FROM 40,000,000 TO 100,000,000 AND
INCREASING THE NUMBER OF AUTHORIZED SHARES OF OUR PREFERRED STOCK FROM 2,000,000
TO 5,000,000.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Eisner LLP, independent accountants, who prepared the
audited balance sheet of the Company as of December 31, 2001, and the related
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended December 31, 2001, are expected to attend the
Meeting, will have the opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate questions. The Company has not
yet designated its independent auditors for the fiscal year to end December 31,
2002.
AUDIT FEES
For the fiscal year ended December 31, 2001, the aggregate fees billed by
Eisner LLP for professional services rendered for the audit of the Company's
annual financial statements and the reviews of the financial statement included
in the Company's quarterly reports on Form 10-QSB for that year, amounted to
$65,000.
15
ALL OTHER FEES
For the fiscal year ended December 31, 2001, the aggregate fees billed by
Eisner LLP for all other professional services rendered amounted to $20,000.
These services consisted of _____, _____ and _______.
The Company's Audit Committee has considered whether the provision of the
services described above is compatible with maintaining Eisner LLP's
independence.
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
The next annual meeting of stockholders of the Company is expected to be
held in _____ 2003 (the "2003 Annual Meeting"). Any stockholder who wishes to
present a proposal for action at such meeting must comply with the applicable
rules and regulations of the SEC then in effect, and the Company's By-laws. In
accordance with regulations issued by the SEC, stockholder proposals intended
for presentation at the next annual meeting of stockholders must be received by
the Secretary of the Company no later than ______, 2003, if such proposals are
to be considered for inclusion in the Company's proxy statement for the next
annual meeting of stockholders.
Stockholder proposals should be submitted to: Jeremiah F. O'Brien,
Secretary, NUWAVE Technologies, Inc., One Passaic Avenue, Fairfield, New Jersey
07004.
OTHER MATTERS
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH BENEFICIAL HOLDER OF ITS
COMMON STOCK ON THE RECORD DATE WHO DID NOT RECEIVE A COPY OF THE COMPANY'S
ANNUAL REPORT OR ITS FORM 10-QSB FOR THE QUARTER ENDED ______, 2002, ON THE
WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE ANNUAL REPORT ON FORM 10-KSB FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2001 AND A COPY OF THE FORM 10-QSB FOR THE
QUARTER ENDED ______, 2002, EACH AS FILED WITH THE SEC. ANY SUCH REQUEST SHOULD
BE MADE IN WRITING TO THE SECRETARY OF THE COMPANY, ONE PASSAIC AVENUE,
FAIRFIELD, NEW JERSEY 07004.
The Board is not aware of any matters to be presented at the Meeting other
than the matters described herein and does not intend to bring any other matters
before the Meeting. However, if any other matters should come before the
Meeting, or any adjournments or postponements thereof, the persons named in the
proxies will have discretionary authority to vote all proxies in accordance with
their best judgment.
By Order of the Board of Directors,
Gerald Zarin
Chairman
Fairfield, New Jersey
________, 2002
16
[PROXY CARD]
NUWAVE TECHNOLOGIES, INC.
PROXY FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD _______, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of NUWAVE Technologies, Inc., a Delaware corporation
(the "Company"), acknowledges receipt of the Notice of Annual Meeting of
Stockholders, Proxy Statement, dated ______, 2002, and 2001 Annual Report and,
revoking all prior proxies, hereby appoint(s) Gerald Zarin and Jeremiah F.
O'Brien, and each of them, with full power of substitution, as proxies to
represent and vote, as designated herein, all shares of stock of the Company,
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders to be held at on ______, 2002, and at any
adjournment or postponement thereof.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE
1. To elect the following four (4) directors (except as marked below) for
the ensuing year.
NOMINEES: Gerald Zarin, Edward Bohn, Lyle Gramley and Joseph A.
Sarubbi
|_| FOR all nominees (except as marked below)
|_| WITHHOLD AUTHORITY to vote for all nominees
FOR all nominees EXCEPT the following nominee(s):
_________________________________________
2. Authorize the Board of Directors to declare, if deemed appropriate, a
reverse split of the outstanding common stock at a ratio to be
designated by the Board, but not to exceed 1-for-50.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approve an increase in the authorized shares of Common Stock and
Preferred Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Other matters as may properly come before the Meeting or any
adjournment or adjournments thereof.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is given, this proxy will
be voted FOR the above proposals.
Please sign and date this proxy where shown below and return it promptly:
Date: ___________________, 2002
Signed: ___________________________________________________________________
SIGNATURE: ________________________________________________________________
SIGNATURE IF HELD JOINTLY: ________________________________________________
Please sign exactly as name appears hereon. If the stock is registered in the
names of two or more persons, each should sign. Executors, administrators,
trustees, guardians, attorneys, and corporate officers should add their titles.
APPENDIX A:
FORM OF CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION,
FOR PROPOSAL 2, REVERSE SPLIT (UP TO 1:50) AND
FOR PROPOSAL 3, INCREASE IN AUTHORIZED SHARES
* * *
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
NUWAVE TECHNOLOGIES, INC.
(PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF DELAWARE)
* * * *
NUWAVE TECHNOLOGIES, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, by the unanimous written
consent of all members thereof in lieu of a special meeting, pursuant to Section
141(f) of the General Corporation Law of the State of Delaware, duly adopted
resolutions setting forth a proposed amendment (the "Amendment to Effect the
Reverse Split") to the Certificate of Incorporation of the Corporation,
declaring the Amendment to Effect the Reverse Split to be advisable and calling
for the submission of the Amendment to the stockholders of the Corporation at
the annual meeting of stockholders held upon notice in accordance with Section
222 of the General Corporation Law of the State of Delaware, and stating that
the Amendment to Effect the Reverse Split will be effective only after adoption
thereof by the affirmative vote of a majority of the issued and outstanding
shares of voting Common Stock of the Corporation.
SECOND: Thereafter, pursuant to a resolution of the Board of Directors of
the Corporation, the Amendment was submitted to the holders of the issued and
outstanding shares of Common Stock of the Corporation at the Annual Meeting of
Stockholders of the Corporation held on ________, 2002, and a majority of the
stockholders voted in favor of the adoption of the following resolutions to
amend the Certificate of Incorporation of the Corporation:
RESOLVED, that, prior to the Company's next meeting of stockholders,
on the condition that no other amendment to the Company's Certificate
of Incorporation shall have been filed subsequent to ______ ___, 2003
effecting a reverse stock split of the Common Stock, Article FOURTH of
the Company's Certificate of Incorporation, as amended to date, be
amended by addition of the following provision:
"Reverse Stock Split. Simultaneously with the effective date
of this amendment (the "Effective Date"), each share of the
Company's Common Stock, issued and outstanding immediately
prior to the Effective Date (the "Old Common Stock") shall
automatically and without any action on the part of the
holder thereof be reclassified and changed, pursuant to a
reverse stock split, into any fraction thereof up to
one-for-fifty shares of the Company's outstanding Common
Stock (the "New Common Stock"), depending upon a
determination by the Board of Directors that a reverse stock
split in the Board's designated ratio is in the best
APPENDIX A, PAGE 1
interests of the Company and the shareholders. Each holder
of a certificate or certificates which immediately prior to
the Effective Date represented outstanding shares of Old
Common Stock (the "Old Certificates," whether one or more)
shall be entitled to receive upon surrender of such Old
Certificates to the Company's Transfer Agent for
cancellation, a certificate or certificates (the "New
Certificates," whether one or more) representing the number
of whole shares of the New Common Stock into which and for
which the shares of the Old Common Stock formerly
represented by such Old Certificates so surrendered, are
reclassified under the terms hereof. From and after the
Effective Date, Old Certificates shall represent only the
right to receive New Certificates pursuant to the provisions
hereof. No certificates or scrip representing fractional
share interests in New Common Stock will be issued, and no
such fractional share interest will entitle the holder
thereof to vote, or to any rights of a shareholder of the
Company. Any fraction of a share of New Common Stock to
which the holder would otherwise be entitled will be
adjusted upward or downward to the nearest whole share. If
more than one Old Certificate shall be surrendered at one
time for the account of the same shareholder, the number of
full shares of New Common Stock for which New Certificates
shall be issued shall be computed on the basis of the
aggregate number of shares represented by the Old
Certificates so surrendered. In the event that the Company's
Transfer Agent determines that a holder of Old Certificates
has not tendered all his certificates for exchange, the
Transfer Agent shall carry forward any fractional share
until all certificates of that holder have been presented
for exchange such that share issuance for fractional shares
to any one person shall not exceed one share. If any new
Certificate is to be issued in a name other than that in
which the Old Certificates surrendered for exchange are
issued, the Old Certificates so surrendered shall be
properly endorsed and otherwise be in proper form for
transfer, and the person or persons requesting such exchange
shall affix any requisite stock transfer tax stamps to the
Old Certificates surrendered, or provide funds for their
purchase, or establish to the satisfaction of the Transfer
Agent that such taxes are not payable. From and after the
Effective Date the amount of capital represented by the
shares of the New Common Stock into which and for which the
shares of the Old Common Stock are reclassified under the
terms hereof shall be the same as the amount of capital
represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in
accordance with applicable law."
FURTHER RESOLVED, that at any time prior to the filing of the
foregoing amendment to the Company's Certificate of Incorporation
effecting a Reverse Split, notwithstanding authorization of the
proposed amendment by the shareholders of the Company, the Board of
Directors may abandon such proposed amendment without further action
by the shareholders.
THIRD: The Amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: The Board of Directors of the Corporation, by the unanimous written
consent of all members thereof in lieu of a special meeting, pursuant to Section
141(f) of the General Corporation Law of the State of Delaware, duly adopted
resolutions establishing that the Reverse Split should be effected and setting a
ratio of one share for every ____ shares then outstanding.
FIFTH: The Board of Directors of the Corporation, by the unanimous written
consent of all members thereof in lieu of a special meeting, pursuant to Section
141(f) of the General Corporation Law of the State of Delaware, duly adopted
resolutions setting forth a proposed amendment (the "Amendment to Increase
Authorized Shares") to the Certificate of Incorporation of the Corporation,
declaring the Amendment to Increase Authorized Shares to be advisable and
calling for the submission of the Amendment to Increase Authorized Shares to the
APPENDIX A, PAGE 2
stockholders of the Corporation at the annual meeting of stockholders held upon
notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware, and stating that the Amendment to Increase Authorized Shares
will be effective only after adoption thereof by the affirmative vote of a
majority of the issued and outstanding shares of voting Common Stock of the
Corporation.
SIXTH: Thereafter, pursuant to a resolution of the Board of Directors of
the Corporation, the Amendment to Increase Authorized Shares was submitted to
the holders of the issued and outstanding shares of Common Stock of the
Corporation at the Annual Meeting of Stockholders of the Corporation held on
________, 2002, and a majority of the stockholders voted in favor of the
adoption of the following resolutions to amend the Certificate of Incorporation
of the Corporation:
RESOLVED, that Article FOURTH, Section 1 of the Certificate of
Incorporation of this Corporation shall be amended to read in its
entirety as follows:
"Authorized Capital. The total number of shares of all
classes of capital stock which the Corporation has authority
to issue shall be 105,000,000 shares, par value $.01 per
share, consisting of: (i) 100,000,000 shares of Common Stock
par value $.01 per share (the "Common Stock") and (ii)
5,000,000 shares of Preferred Stock, par value $.01 per
share (the "Preferred Stock")."
SEVENTH: The Amendment to Increase Authorized Shares was duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed by Gerald Zarin, its Chairman, this ___ day of _________, 2002.
NUWAVE TECHNOLOGIES, INC.
By:
---------------------------------
Gerald Zarin, Chairman
APPENDIX A, PAGE 3